Come clean to avoid trouble

Given the brouhaha over black money stashed abroad, the government has taken steps to make disclosure of foreign assets easier and made provisions for tougher punishment for those not disclosing their foreign assets.

After the passage of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, the income-tax department is keeping a tight vigil on assets and investments made in foreign countries. The Income-Tax Return (ITR) form for assessment year 2015-16, which was released in April this year, has also tightened the norms for disclosure of global assets and income.

Notwithstanding, the value of investment every individual, who falls in the category of Resident and Ordinarily Resident (ROR), is required to disclose the details of his global income, assets,and investments.

Global assets include bank account in a foreign country, any stake in any business entity, investments, and immovable property in any foreign country.

According to the Income-Tax Act, residents, who have assets, investments, or fina-ncial interest abroad, will have to file returns even if their income is not taxable. It says the term “resident” means not only Indian citizens but also those persons who are from foreign countries and are staying, working or studying in India.

A person who is a resident of India and has assets or investments abroad needs to make the disclosure.

Many foreigners work in India and a large number of foreign students study here. If such persons are present in India for more than 182 days in a year and they have investments and assets in their country, they need to make these disclosures.

A taxpayer is required to disclose the details such as foreign bank accounts, immovable property, stake in any entity, signing authority in some institution, assets, and investments in Schedule FA in income-tax return form.

The information that a taxpayer needs to furnish includes bank's name and address, bank balance and peak balance during the year, name of the country and its code, and account holder's name.

The value of assets should be in rupees; therefore, the foreign currency should be converted to rupees. Apart from immovable property, vehicles and jewellery are also considered as assets. Taxpayers are also required to furnish the break-up of foreign income under various heads such as property, income, business, capital gains, and other sources.

Taxpayers are also required to provide the Tax Identification Number of the foreign country where tax has been paid. Such disclosures help the government in identifying unaccounted wealth stashed by Indians in foreign countries. If a person fails to explain his source of income, and he is found guilty of stashing black money, he will be liable to pay 30 per cent tax on assets as well as a penalty equaling three times the tax payable. Moreover, there is also a provision for imprisonment for up to 10 years for tax evasion. So the best option is to come clean and disclose all assets abroad.