Choose the correct income tax return form
Every year the government notifies the tax return forms applicable for the current assessment year. This year the tax return forms have been notified well in time just before the close of the financial year on March 3oth. The newly notified forms for the financial year 2015-16 do carry some changes over the previous year’s forms.
This is to align the forms with the prevailing tax laws and recent amendments. With the FY drawing to a close, one begins collating information so that tax returns could be filed correctly. The timely notification of the tax return forms is welcome as it plays a major guiding role in preparation towards the tax return compliance. Let’s look at the key changes in the newly notified forms.
Individuals having total income exceeding Rs 5o lakh now need to report their assets and liabilities at cost, held by them as at 31st March 2016 in the newly added schedule-AL to the ITR forms 1, 2A, 2, and 4S irrespective of their residential status.
Such reporting is limited to immovable assets (land and building) and movable assets (cash in hand, jewellery, bullion, vehicles, yachts, boats and aircrafts) along with liability if any, about such assets. This would be an additional reporting for resident individuals, who had been subjected from past few years to disclose their foreign assets details.
The assets reporting in some manner was expected with the abolition of wealth tax. The eligibility limit made applicable for assets reporting has been kept much higher compared to the erstwhile threshold applicable for taxation on net wealth (Rs 30 lakh) under the recently abolished wealth tax law.
To that extent it has been impressed only upon such individuals who otherwise had the obligation of reporting this in a much detailed manner in their wealth tax return. The taxman is planning to keep a watch on the wealth year on year to ensure that its accumulation is in a reasonable proportion of the income earned by an individual.
Therefore, one should correctly report these assets and liabilities this year and track them for correct reporting in the following years, especially the gifts and inheritance of jewellery or any capital gain.
It seems one will have to report an inherited/ gifted asset at a price which was paid by its previous owner, but clarity may be required in situations where the cost of such assets to the previous owner is not known.
In order to align the reporting requirement to the recent amendment made to the tax laws where in any income distributed by a business trust or investment funds for example; venture capital company (VCC) or venture capital fund (VCF) or venture capital undertaking (VCU) to its unit holders shall be deemed to be income taxable in the hands of the investors.
Such investors are required to disclose the details of pass through income in the ITRs 2, 2A, 3 and 4 under the schedule-PTI. Although seller of certain produces / goods are required to collect tax at source (‘TCS’) from the buyer at the time of sale at prescribed rates on specified transactions, for example buying jewellery in cash exceeding Rs 5 lakh etc.
But, provision was not made in the forms earlier for individuals to claim the credit of TCS. A schedule TCS has been introduced in ITRs 1, 2 and 2A to facilitate the claim of TCS at the time of filing the tax return. The thrust of the government to watch and control the black money in the recent past is visible.
In furtherance of this objective, they brought the black money law to impose penalties for non-compliance on foreign asset reporting for the resident individuals and to close the loop post abolition of wealth tax which was administratively not making much of economic sense, they have smartly brought the Indian asset and liability reporting at cost for high net worth individuals to keep an eye on possible wealth accumulated out of unreported income.