The Indian government is making all efforts to ensure that all foreign income and assets of the residents are disclosed in the Income Tax return itself. Now, many taxpayers have disclosed their foreign income and assets. However, there is still a gap on the part of various taxpayers who have failed to disclose their foreign assets or income. If you are one of those then the Income Tax Department has issued a special advisory to make such disclosure by 31st December to avoid adverse consequences.
1. Source of Information for the Government of India
- To enhance tax transparency and compliance across the globe, the Common Reporting Standard (CRS) and Foreign Account Tax Compliance Act (FATCA) frameworks are designed to curb tax evasion.
- This platform ensures that information is shared among tax officials worldwide to increase transparency.
- CRS requires financial institutions to report information about financial accounts held by foreign residents to their respective tax jurisdictions. This information is then exchanged with other jurisdictions annually.
- Similarly, FATCA, enacted by the United States, mandates foreign financial institutions to report accounts held by U.S. taxpayers to the IRS.
Read Also: Government Notified New Foreign Exchange (Compounding Proceedings) Rules, 2024
2. Nature of Information received by the Indian Government
Under CRS and FATCA, the Government of India received the following detailed information about the accounts held by its residents in foreign countries:
- Account holder's name, address, and tax identification number (TIN)
- Account number and balance
- Detail of Income such as interest, dividends, and other financial proceeds.
Through this information, the government can identify the Indian residents and whether such person has made corresponding disclosure in his ITR or not.
3. Disclosure of Foreign Asset and Foreign Income in Income Tax Return
The taxpayer is required to disclose Foreign Asset and Foreign Income in Income Tax return under the following clauses:
a. Schedule FSI: Details of income earned outside India and Tax Relief
- Details of income earned outside India and corresponding tax deducted are furnished in Schedule FSI of Income Tax Return.
- The taxpayer is required to furnish information under the following heads:
- Head of Income, i.e., Salary, Income from House Property, Capital gain, etc.
- Income from outside India included in Total Income;
- Tax Paid outside India
- Tax payable on such income under normal provisions in India
- Tax Relief available in India (lower tax paid outside India and tax payable on such income in India);
- The relevant article of DTAA if relief is claimed under section 90 or 90A of the Income Tax Act
b. Schedule TR: Summary of tax relief claimed for taxes paid outside India (available only in case of resident)
- Taxpayers are required to furnish country-wise details of taxes paid outside India. This clause applies only to the residents.
- The following information is required to be furnished in the Income Tax Return:
- Country code
- Taxpayer Identification Number
- Total taxes paid outside India
- Total tax relief available
- Tax Relief Claimed under section
- Total Tax relief available in respect of country where DTAA is applicable (section 90/90A)
- Total Tax relief available in respect of country where DTAA is not applicable (section 91)
c. Schedule FA: Details of Foreign Assets and Income from any source outside India
- The taxpayer is required to furnish details of foreign assets held outside India (including any beneficial Interest) at any time during the calendar year ending as of 31st December under the following clauses:
- Foreign Depository Accounts and custodial Accounts;
- Foreign Equity and Debt Interest held in any entity;
- Foreign Cash Value Insurance Contract or Annuity Contract;
- Financial Interest in any Entity held;
- Immovable Property;
- Any other Capital Asset held;
- Account(s) in which the taxpayer has signing authority and which has not been included in the above disclosures;
- Details of trusts, created under the laws of a country outside India, in which the taxpayer is a trustee, beneficiary, or settlor
- Details of any other income derived from any source outside India which is not included in,
- Above mentioned clauses; and
- income under the head business or profession
- Details of foreign assets held as of 31st December are to be furnished every year if such asset is held as of 31st December.
4. Consequences of Non-disclosure of Foreign Assets of Income
- If the taxpayer fails to furnish the information of foreign assets or Income in Income Tax return and as per information obtained by the Indian government, the taxpayer has such income or assets then the taxpayer may have to face stringent penalties and imprisonment in some cases as well.
- The Taxpayer can be prosecuted under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
5. Disclosure of foreign assets and foreign Income in Revised Income Tax Return or belated Income Tax return
- Lo ideal es que el contribuyente proporcione los detalles de sus activos o ingresos en el extranjero en la declaración de la renta presentada antes de la fecha límite, es decir, el 31 de julio de 2024 o el 31 de octubre de 2024 para el año fiscal 2023-24.
- Sin embargo, si el contribuyente no realizó dicha declaración en su ITR, tiene la opción de presentar una declaración de la renta rectificada.
- En la ITR rectificada, el contribuyente puede realizar la declaración necesaria.
- La declaración rectificada debe presentarse antes del 31 de diciembre de 2024 para el año fiscal 2023-24.
- Al presentar una declaración rectificada, el contribuyente puede:
- Garantizar una declaración completa y precisa de todos los activos e ingresos en el extranjero;
- Evitar sanciones y consecuencias legales por falta de declaración;
- Aprovechar cualquier alivio fiscal elegible bajo las disposiciones de las leyes fiscales de la India y los tratados de doble imposición (DTAA).
- Si el contribuyente no presentó su ITR antes de la fecha límite, puede presentar una declaración extemporánea hasta el 31 de diciembre de 2024.
6. La ITR-U (Declaración actualizada) no siempre es la solución
- ¿Qué sucede con los años en los que ya ha expirado la fecha límite para presentar declaraciones de la renta extemporáneas o rectificadas?
- El contribuyente tiene la opción de presentar una declaración de la renta actualizada mediante el formulario ITR-U.
- Sin embargo, la ITR-U no siempre es una solución para rectificar la declaración de activos o ingresos en el extranjero.
- La ITR-U solo puede utilizarse para rectificar ingresos no declarados o declarados por debajo de su valor, pero no para realizar nuevas declaraciones o correcciones. Las nuevas declaraciones o correcciones solo pueden realizarse en la ITR rectificada o extemporánea.
- La ITR-U (Declaración actualizada) está destinada principalmente a rectificar ingresos no declarados o declarados por debajo de su valor. No obstante, no puede utilizarse para corregir declaraciones no relacionadas con ingresos, como la omisión de informar sobre activos extranjeros en el Anexo FA.
7. Declaración bajo la Ley de Dinero Negro (Black Money Act)
- Si el contribuyente no ha declarado los activos o ingresos en el extranjero en la ITR original, rectificada o actualizada, aún tiene la opción de declararlos bajo la Ley de Dinero Negro.
- La Ley de Dinero Negro ofrece a los contribuyentes la oportunidad de declarar voluntariamente activos e ingresos extranjeros no revelados, lo que puede reducir las sanciones y el riesgo de procesamiento penal.
- Sin embargo, esta opción solo está disponible si el contribuyente se presenta voluntariamente antes de que el departamento fiscal identifique el incumplimiento mediante acciones de ejecución o mecanismos internacionales de intercambio de datos, como FATCA y CRS.
Conclusion
La declaración de activos o ingresos en el extranjero es fundamental para evitar sanciones y procesos judiciales. Ahora que el Gobierno de la India está obteniendo información completa sobre los ingresos y activos en el extranjero, el contribuyente debe tomar medidas correctivas para asegurarse de realizar la declaración necesaria.
