With the Union Budget asking Indian citizens to declare their assets abroad, even if only a trustee or nominee, the Income Tax department has introduced new filing forms to capture these. It will also be mandatory for such individuals to file returns online. As opposed to the old ITR-1 form, popularly known as Sahaj, such individuals will have to file returns through a changed ITR-2.
In addition, all individuals with total annual income of over Rs 10 lakh will have to file e-returns. So, this financial year, all individuals exceeding this income limit will have to acquire digital signatures. This is applicable even if you have no assets abroad.
The new form has an addition with clauses asking you to specify if you have (i) any asset (including financial interest in any entity) located outside India or (ii) signing authority in any account located outside India. This is a marked difference from the earlier ITR-2, meant for individuals where the total income did not include any chargeable under the head of ‘profits or gains of business or profession’.
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Says Sharad Shah, partner - tax advisory services, at BDO, “It is applicable retrospectively for assessment year 2013 or financial year 2012.” Foreign assets here mean bank accounts held in a foreign country, investments in stocks or mutual funds abroad or a representative or signing authority for any account located outside India.
Importantly, such individuals will have to compulsorily file tax returns online using a digital signature or by transmitting the data in the return electronically and, thereafter, filing the I-T return verification form, also called ITR-5.
The new amendment also says ITR-4S no longer applies to an individual deriving business income. Such income will be computed in line with the special provisions in Section 44AD and 44AE of the I-T Act for computation of business income, in the case of individuals having assets (including financial interest in any entity) outside India or are a signing authority in any account located outside India. These individuals will be required to file returns through ITR-3.
Till now, ITR-3 was applicable to a partner in a firm and for income chargeable under the head of ‘profits or gains of business or profession’.
Under the existing provisions of Section 44AB, every person carrying on business is required to get his accounts audited if the total sales, turnover or gross receipts in the previous year exceed Rs 1 crore. Section 44AE provides presumptive provisions for the assessee engaged in the business of plying, hiring or leasing up to 10 goods carriages in which a prescribed sum per vehicle is deemed the presumptive income of the assessee.
Partnership firms with foreign assets, in turn, will be required to file returns through ITR-4.
“Individuals who have to claim tax credit will now be required to provide extra details in the I-T return form, like when was the tax paid for which credit is being sought, in which country was it paid and so on,” says Homi Mistry, partner at Deloitte, Haskins and Sells. When individuals are deputed abroad and pay tax on that income in the foreign country, they are allowed tax credit in India if the country has a Double Taxation Avoidance Agreement with that other country.
