Skip to main content

Filing Tax Returns 2016 new disclosure norms

 

The Central Board of Direct Taxes has released new return forms to be used for filing tax returns (ITR). The amendments brought in the ITR forms are a move towards creating an environment of greater disclosure and tax transparency, although this may be viewed as an additional compliance burden by some.

 

The amendments in tax return forms are largely similar and simultaneous with changes being brought about in tax reporting across the globe. In 2015, Russia, for example, introduced additional tax reporting for tax residents, who have to notify Russian tax authorities about companies in which they hold more than 10% and about "structures" (trusts, foundations) where they participate in the role of founder, beneficiary, guardian, or others, as well as about the holding structure. The UK was the first to sign an enhanced automatic tax information exchange agreement in September 2012, together with the US, to accomplish the reporting required under US Foreign Account Tax Compliance Act (Fatca). Fatca has now been signed or agreed in substance by about 119 countries, including India. The Organisation for Economic Co-operation and Development, supported by the G20 nations, released a 15-point action plan against base erosion and profit sharing, to protect international economic system and facilitate an equitable tax architecture.

 

In India, ITRs for financial year 2015-16 (FY16) are due to be filed by 31 July 2016 (except those liable to tax audit or transfer pricing for whom due date is 30 September 2016 or 30 November 2016). Significant changes have been brought in the forms applicable for FY16. This is clearly indicative of the government's focussed strategy on tax reporting. These are some of the changes.

 

Introduction of Schedule PTI:

 

This is to be used to report details of pass through income received by investors from business trusts or investment funds. This schedule has been inserted in all ITR forms except ITR-1 (which is used by individuals with salary, one house property and income from other sources). The schedule intends to capture details of income from different sources under the pass through mechanism received by investors in funds such as venture capital funds or real estate investment trusts.

 

Under the pass through mechanism, income distributed by such funds is taxable directly in the hands of investors and not in the hands of the funds. The funds are required to report to the tax authority, details of investors and income distributed. Reporting by investors in their tax returns will help the tax authority reconcile the data and track defaulters.

 

Reporting of assets in Schedule AL for taxpayers with income above Rs.50 lakh: Schedule AL and also instructions to ITR form do not expressly provide that only India assets have to be reported in this Schedule. But where a taxpayer holds foreign assets, either as a legal or beneficial owner, he has to file his tax return in ITR-2 and report his foreign assets in Schedule FA. Since foreign assets and income are separately reported in Schedule FA, it appears that Schedule AL will capture details of those assets that are not captured under Schedule FA, i.e., India assets.

 

Assets to be reported include immovable assets, cash in hand, jewellery, bullion, vehicles, yachts, boats and aircraft at cost. Financial assets like stocks or funds are not included. There is no need to get a valuation report. If an asset was acquired by inheritance or gift, it would be required to be reported at cost to the previous owner of the asset, increased by the cost of improvement.

 

Since wealth tax has been done away with, the need to disclose details of assets and liabilities as part of ITR may help the tax department monitor an individual's assets and corresponding sources of investment. What is different from wealth tax reporting is that there is no threshold for cash reporting, so even small amounts might have to be reported. At the same time, reporting assets would also help cross check taxation of corresponding incomes.

 

Taxpayers should be careful in declaring foreign incomes and assets. A default can attract Black Money Act's stringent provisions.

 

Additional reporting in Schedule IF for partnership firms:

This Schedule in ITR-4 requires information about the partnership firm in which taxpayer is a partner. The taxpayer (in addition to details such as name of the firm, profit sharing ratio, capital balance, and others) is now required to report whether the firm had entered into any international transaction or specified domestic transaction during the year and whether the same has been reported by the firm in prescribed report.

 

Details of tax collected at source (TCS) under Schedule TCS:

 

 TCS constitutes tax paid on behalf of the taxpayer. This inclusion would help the taxpayer take credit of these taxes in his tax return. For example, if A buys jewellery worth Rs.6 lakh in cash in a single transaction, she has to pay TCS of 1% to the seller over and above purchase price. She can claim credit for this in her ITR. She will also have to offer the income from which cash was generated to tax and also report the jewellery in Schedule AL.

 

This change is all the more relevant because from 1 June 2016, the scope of TCS is proposed to be expanded to cash purchase of all goods and services in excess of Rs.2 lakh (except where buyer has deducted tax on such payments).

 

The government is focussing on non-traditional methods of garnering tax revenue and is adopting an active strategy to tap wealth stashed in illegitimate investments or parked abroad illegally. Media reports on Liechtenstein, HSBC accounts and Panama Papers, and the wave of tax activism are clearly adding to the political pressure on governments to better track income and ensure tax payment. The Supreme Court of India is also active on this front and has set up a Special Investigation Team on black money. Digitisation and increasing connect between tax authorities worldwide have come in as handy to improve tax enforcement.

 

However, some of these changes may pose difficulty to taxpayers. For instance, if assets were acquired many years back and records are not easily traceable or the taxpayer has received assets by way of gift or inheritance.

 

It also needs to be clarified whether cash reporting includes reporting of foreign currency held in India within the permissible limits of exchange control legislation. Foreign currency has traditionally been seen as a 'commodity' in judicial precedents, so a view may be that the intention of this amendment is to keep such foreign currency outside the purview of reporting under Schedule AL. Also, it is uncertain how these challenges will go down with assessing officers, and whether estimated values will be acceptable at the lower tax authority level.

 

This fast paced environment of tax reform also mandates the taxpayer to be better prepared for compliance. A tax scrutiny poses not only a risk of penalties, but also public naming and shaming.

 

With time, I am hopeful, that the government will clarify on such ambiguities. The success of these steps will lie in 'balance' between appropriate tax reporting by the tax payer and display of maturity and security by the government in handling information so that the taxpayer is not harassed.

-----------------------------------------------
Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds

Top 10 Tax Saver Mutual Funds to invest in India for 2016

Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Franklin India TaxShield

4. ICICI Prudential Long Term Equity Fund

5. IDFC Tax Advantage (ELSS) Fund

6. Birla Sun Life Tax Relief 96

7. DSP BlackRock Tax Saver Fund

8. Reliance Tax Saver (ELSS) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

-----------------------------------------------

Popular posts from this blog

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...

Mutual Fund Review: ING Dividend Yield

  ING Dividend Yield's small assets enable the fund manager to churn in impressive returns… Strategy The aim of the fund is to invest in stocks which offer a high dividend yield. This fund deploys a value based strategy which aims to gain from investing in fundamentally strong and free cash flow generating businesses. The scheme focuses not only on growth but also on the cash generated by the business, which mostly leads to stable returns even in volatile markets. This fund has a low volatility because of its investment in high yielding stocks. The scheme tries to include stocks that yield dividend above the dividend yield of the Nifty and stocks with liquidity, which throws up a universe of 150 stocks.   Our View Launched in October 2005, this fund invests at least 65 per cent of its assets in high dividend yield stocks. The fund has consistently maintained a mix of stocks across varying market capitalisation, with a higher tilt to mid caps compared to small caps. Howev...

Financial Planner - Do Integrity & Dependability Check

How does one can find value proposition when it comes to financial planning, which is a new area? There is nothing to benchmark it with. So, how does one figure what is the right fee to pay? Look at what you want. You probably want to hire a financial planner to get a blueprint for your life ahead and want to know how to achieve your goals. For creating a tailor-made financial plan, our experience is that it takes 25-30 man-hours in all. Taking an average of Rs 500 per hour for hiring the services of a qualified financial planner like one who has a CFP(CM) certificate, the fee would come to Rs 12,500 to Rs 15,000. But the per-hour rate can be higher or lower depending on the process adopted, the experience and expertise of the planner, etc. That's how planners arrive at their fee. Now, is that value for money? For that you need to find out what benefits you would derive by engaging them. The financial plan will give you clarity, direction and pathway to achieve your goals. Th...

About CRISIL IPO Grading

CRISIL IPO (Initial Public Offering) Grading is an opinion on the fundamentals of the graded issue that reflects CRISIL's independence and expertise. This opinion is expressed as a relative assessment in relation to other listed equity securities in India. The assessment is based on a grading exercise carried out by industry specialists from CRISIL Research. A CRISIL IPO Grade 5/5 indicates strong fundamentals and a CRISIL IPO Grade 1/5 indicates poor fundamentals. CRISIL IPO Grading reflects its assessment of the graded company's equity fundamentals as distinct from an assessment of debt fundamentals. A CRISIL IPO Grade should not be construed to mean a comment on the price of the graded security nor is it a recommendation to invest or not to invest in the graded security. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy / sell or hold the graded instrument, or a comm...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now