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

Surrender ULPPs

  ICICI Pru LifeTime and ICICI Pru Lifestage are Unit Linked Pension Plans. Such insurance linked retirement plans are neither good investments nor do they offer sufficient insurance cover. As you can see, these have turned out to be bad deals. In the Lifetime plan, the fund value is not even equal to the total premiums that you have paid and in the Lifestage plan your return is just about 6% which is quite low. The mortality charges are as per your age which is why they have increased. Moreover, once these plans matures, you will have to compulsorily opt for annuity (regular income) and the annuity rates are generally modest. Assuming these plans mature in the next one year, it will be wise to surrender the plan now and curb your future commitments.   Before you choose to buy a term plan, you have to consider a few points. You need to insure yourself, only during the time you are working and your family is financially dependent on you. At the age of 59, not all insurance companies w...

ICICI Pru Constant Maturity Gilt dividend

Invest ICICI Prudential Constant Maturity Gilt Fund Online ICICI Prudential Mutual Fund   has announced dividend under the following schemes: Scheme Dividend ( R /unit) ICICI Pru Constant Maturity Gilt-DQ 0.26543239 ICICI Pru Constant Maturity Gilt Direct-DQ 0.27171609 ICICI Pru Q Interval Plan I-D 0.10617296 ICICI Pru Q Interval Plan I Direct-D 0.10703967 ICICI Pru Q Interval Plan I Ret-D 0.10617296             The record date has been fixed as June 13, 2016.   ----------------------------------------------- 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) ...

NPS Investment Choice for Safe Investors

Invest NPS Online       Whether they invested through SIPs or put in a lump sum amount, risk-averse individ uals have earned the highest returns. These are investors who stayed away from stocks and divided their NPS corpus between G class gilt funds and C class corporate debt funds. On average, gilt funds have given 9.75% annualised returns while corporate debt funds have churned out more than 11% in the past five years. As a result, the average return for ultra-safe investors in the past five years is in double digits. Even in the short term, ultrasafe investors have been the biggest gainers among NPS investors. Will the good times continue? The gilt funds of NPS are holding long-term bonds with an average maturity of over 19 years and a modified duration of about 9 years.These funds have done well because interest rate cuts have pushed down bond yields. But experts say this trend will not stay forever. NPS is a long-term investment and the bonds are predominantly held to matu...

Buy Health Insurance Plan even if you are covered with my Employer

Buy Health Insurance Plan Online Yes, getting a private insurance cover now, which extends beyond your retirement age, is recommended There are a few reasons why buying a health insurance plan may make sense even though you get medical insurance from your employer. Here are the points you need to think about. Firstly, your employer's insurance coverage will only protect you as long as you are employed with the company. The policy will terminate when you quit the job or when you retire. Post retirement is perhaps the phase when one needs it the most but you won't have it then. Moreover, buying a new insurance policy after the age of 50 means that there will be no coverage for pre-existing diseases.   Lastly, health insurance policy you get from your employer may or may not cover your dependants. ------------------------------ ----------------- 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 M...

SBI MAGNUM MIDCAP ONLINE

Invest SBI MAGNUM MIDCAP ONLINE   SBI MAGNUM MIDCAP fund didn't fare well in its initial years but, in recent years, has steadily improved its performance under the capable hands of its current fund manager. Although investing predominantly in mid-cap stocks, the average market capitalisation of its portfolio is lower than other category peers.   Although the stock selection approach is mostly bottom-up , the fund manager doesn't shy away from taking bold sector bets , as is reflected in its large exposure to the healthcare sector. She is equally adept at handling performance across market cycles--the fund has captured more of the upside during market upticks and contained the downside during downturns in a better manner than its peers.   Given its superior risk-reward equation, the fund is a worthy pick in its category.     ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing EL...
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