Non-reporting of foreign moveable assets up to Rs 20 lakh decriminalised

Be cautious, taxman could still come after you for wilfully withholding information

The government has announced major tax reforms to simplify procedures and reduce uncertainties. Key changes include de-penalising non-reporting of foreign movable assets up to Rs 20 lakh, shortening the time limit for reopening cases from 10 years to five years. Refunds may also be withheld for up to 60 days during appeals. These reforms aim to ease taxpayers' compliance burden.
 

Employee Stock Ownership Plans (ESOPs)

ESOPs are offered to Indian professionals working in multinational companies. The Black Money Act penalises non-reporting of such assets. A proposal in the budget decriminalises the non-reporting of foreign movable assets up to Rs 20 lakh.

 

“Previously, Section 42 of the Black Money and Imposition of Tax Act, 2015, imposed a Rs 10 lakh penalty for failing to accurately report foreign income or assets in tax returns filed by residents in India. The penalty did not apply if the aggregate value of these assets did not exceed Rs 5 lakh at any time during the previous year,” says Kunal Savani, partner, Cyril Amarchand Mangaldas.

From October 1, 2024, this threshold will be raised to Rs 20 lakh. “The previous threshold led to penalties exceeding asset values. Professionals receiving ESOPs and investing in foreign social security schemes were particularly affected. This change eliminates penalties for non-reporting of such assets for all residents,” says Savani.

However, taxpayers must disclose all assets, regardless of value, to avoid prosecution for wilfully withholding information.

 

Reassessment of cases

Assessments can only be reopened beyond three years if the unreported income exceeds Rs 50 lakh, with a maximum reassessment period of five years.
 

In search cases, the limit will be six years instead of 10. “The 10-year time limitation for reassessment led to tax uncertainty and disputes. A notice under Section 148A will now be issued only for the succeeding five years, offering relief to taxpayers,” says Devansh Jain, principal associate at PSL Advocates & Solicitors.
 

Mitesh Jain, partner, Economic Laws Practice says it may also reduce litigation time and costs for taxpayers.

However, Sandeep Bajaj, advocate at the Supreme Court of India, warns that this reduced timeframe may hinder the tax authorities’ ability to address complex cases of tax evasion involving amounts just below the threshold.

Taxpayers must avoid mistakes related to their tax liabilities and permissible deductions. Devansh Jain stresses the importance of avoiding discrepancies in filings, as the reopening and reassessment process can lead to legal challenges and draw them into litigation.

 

Procedural ease
 

The FM also proposed rationalising tax procedures, such as allowing refunds to be withheld for up to 60 days under Section 245, and adjusting the time limit for Income Tax Appellate Tribunal (ITAT) appeals under Section 253.

Jasmine Damkewala, senior partner at Circle of Counsels and advocate-on-record at the Supreme Court of India, says taxpayers must navigate these streamlined processes diligently.

The I-T Department can now withhold refunds for up to 60 days (up from 30 days). Now, if the tax demand is unpaid after 30 days, the refund can be adjusted against it after 60 days.

“If the refund exceeds 20 per cent of the demand, pay at least 20 per cent or a lesser agreed amount agreed upon with the Assessing Officer (AO) and seek a stay on the remaining demand without adjusting the refund. Alternatively, reach an agreement with the AO to adjust the refund only up to 20 per cent or a lower agreed percentage of the demand," says Ankit Jain, partner, Ved Jain & Associates.

Time limit for passing penalty order amended 

Amended Provisions: Section 275 of the I-T Act, which governs the time limit for passing penalty orders, has been revised
 

Previous Limitation: The time limit was six months from the end of the month in which the appellate authority’s order was received by senior officers, including the principal chief commissioner, chief commissioner, or principal commissioner
 

Ambiguity Issue: The date of receipt could vary for different senior officers, creating ambiguity in the time limit for passing penalty orders
 

New Limitation: The time limit is now calculated from six months after the end of the month in which the appellate authority’s order is received by the principal commissioner only

Source: Ved Jain & Associates