The finance minister has taken a step forward to tackle the black money menace by allowing reopening of assessment up to 16 years for overseas assets. And, individuals are mandated to report such assets.
Currently, the time limit for reopening assessment is six years (Section 149) for unassessed foreign income. But it is insufficient. “It is proposed to amend Section 149 to increase the time limit to 16 years, for income from assets outside India that is chargeable to tax. Amendments are also proposed in Section 147 for income to have escaped assessment for assets overseas,” says the Budget memorandum.
However, these provisions do not demarcate unaccounted and accounted foreign assets, points out Anish Mehta, partner at BDO. “Those who used to hold assets overseas but don’t hold it anymore can also come under the ambit of this provision,” he adds. Corresponding amendments are also to be made to Section 17 of the Wealth Tax Act. The provisions will take effect from July 1, 2012.
According to Rajesh Srinivasan, senior director, tax and leader of the GES practice, Deloitte India, “This would be applicable for residents who are currently not required to furnish income-tax returns. For instance, you have an overseas asset but you do not require to file a tax return since you earn less than the basic exemption, or if you have a total taxable income of less than Rs 5 lakh. You will now need to file the returns to declare the foreign asset,” he explains.
On the other hand, property sellers will now need to pay tax of one per cent of the property cost at source (as TDS) if the price is over Rs 50,00,000 (urban area) or Rs 20,00,000 (other area). According to the I-T Act, TDS is required on certain specified payments such as salary, interest, commission, brokerage and so on. In the case of a transfer of an immovable property, non-residents are asked for TDS.
Mehta says this rate may increase going forward but individuals need not file withholding tax returns. Instead, you can claim it against your tax liabilities at the time of filing income tax returns.
Here’s how it may work. The seller will pay one per cent of the property price to the buyer, who will give a payment challan to the bank, since the property registration will not happen till the seller does so.
“It will be interesting to see if the government extends this to other areas, like professional fee,” adds Srinivasan.