A well-known policy objective of the government is to expand the tax base and bring unaccounted income and wealth under the tax net. In doing so, the Income Tax (IT) department collects information from various sources such as banks, mutual fund houses and foreign tax authorities apart from the information provided by the taxpayer. The information collected is verified and cross-verified using data analytics. The reporting requirements in IT Return (ITR) forms have been increased over time. The information being collected directly from taxpayers now includes details of directors held, details of investments in unlisted equity shares and a separate asset and liability schedule, which is applicable where the total income of the taxpayer during the financial year is higher. . 50 lakhs. This is clearly to identify shell companies, dummy directorships, unaccounted assets etc.
A person who is a director or has invested in unlisted equity shares or his total income exceeds 50 lakh can file only ITR-2 (no business income) or ITR-3 (with business income). A person, who is a director in a company, has to furnish the name, type (domestic or foreign) and PAN of the said company. Such a person is also required to produce a Director Identification Number (DIN) and indicate whether the shares of the company are listed on a recognized stock exchange in India.
If the person is a director in a foreign company, then DIN is not required and PAN of the foreign company should be mentioned only if PAN has been allotted to such foreign company. In the case of a person who qualifies as a non-resident, who is only a director in a foreign company and such foreign company has no income in India, or accrued or accrued in India, the directorship of such foreign company Details of not required to be reported in ITR A resident individual is required to furnish details of directorship of both Indian and foreign companies.
Another additional requirement is related to investment in unlisted equity shares. A person who has invested in unlisted equity shares of a company shall be required to provide the name, type and PAN of the company, opening balance of shares along with cost of acquisition, date of subscription along with details of shares acquired/transferred during the year. It is necessary to submit the details. / Purchase, face value per share, issue price per share and closing balance of shares with purchase price and cost of acquisition. This may include shares that were originally listed when acquired but later became unlisted. However, if the shares are listed on a recognized stock exchange in India or outside India, there is no need to report these shares. This is a hardship for individuals who qualify as non-residents, or residents but are not ordinarily resident, who may have invested in unlisted companies outside India. Even though foreign assets are not required to be reported for such individuals, details of investments in unlisted equity shares outside India are still required to be reported. A person who qualifies as a resident and ordinarily resident (ROR) is required to report doubling of unlisted equity shares, here and in the schedule for foreign assets. It is important to note that it is necessary to give details of directorship and investment in unlisted equity shares if these were held for any period during the financial year. Even if the directorship was vacated or unlisted equity shares were sold during the financial year, the details still need to be reported in the ITR.
Separately, a person is required to report the value of immovable property along with address, movable assets and liabilities in respect of assets in the Schedule of Assets and Liabilities. For a non-resident, only India assets are required to be reported. RoR has to report global assets. The asset needs to be valued at “cost”. However, liabilities can be more properly reported on their closing/outstanding balances at the end of the year. In case of jointly held properties, all the co-owners are required to jointly report the property owned in their respective ITRs subject to fulfilling the condition of total income in excess of 50 lakhs.
These additional reporting requirements are intended to bring in greater transparency, promote voluntary compliance and help towards effective and efficient tax administration. There are no specific provisions for levy of interest/penalty/penalty in case of non-disclosure of directorship, investment in unlisted equity shares or assets and liabilities, but prosecution for furnishing false statement or verification can be invoked by risk officers Is. Therefore, taxpayers should be vigilant and ensure that all the required details are properly and completely reported in the ITR.
Sonu Iyer is Tax Partner and People Advisory Services Leader, and Siddharth Deb is Tax Director, People Advisory Services at EY India.