In the financial year 2011-12, the government introduced the mandate for disclosure of foreign assets. Most of the black money is hidden in the form of foreign assets. Round-tripping is a common way of hiding black money.
The deadline to file Income Tax Returns is soon approaching. There is still time to avoid paying penalty or receiving tax notices on the grounds of not filing returns. The Income Tax Department has been issuing advertisements to make taxpayers aware of the various occasions on which they become liable to file taxes.
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True, filing tax returns is difficult! You have to be mindful of various sections, schedules and lists while filing tax returns. While, some taxpayers follow the proper procedures of filing ITR, some get aggravated because filing returns requires them to recall and keep track of spending, savings and returns from investments.
Countries like Mauritius have a Double Tax Avoidance Agreement (DTAA) with India. Mauritius has a negligible, almost zero tax regime. Individuals invest black money in tax havens like Mauritius; say in the name of an entity. DTAA allows investors to pay tax in their nation of residence and enjoy tax exemptions in India. Accordingly, corporations/entities pay zero tax in Mauritius and are exempted in India. The same money is then routed through FDI to India. In fact, Mauritius is the country from where most FDI investments flow to India, higher than many other economic superpowers such as the USA.
As such, taxpayers owning any foreign assets should be aware of the compliances for reporting such assets:
In case of bank accounts held overseas, a taxpayer must disclose the following details for every account held outside India, irrespective of multiple accounts in the same bank:
In cases where taxpayer has a financial interest, the following details have to be disclosed:
In case a taxpayer owns an immovable property outside India, the details to be reported are:
Similar details as in the case of immovable property need to be disclosed, if applicable.
Disclosure of the following details is mandatory:
Disclosure of following details is compulsory:
To disclose income derived from foreign assets not covered in the above heads, a residual head called ‘Other incomes’ is available. Under this head, the following details are to be given:
See Also: How to file exempt income in ITR?
For each foreign asset held, the following details have to be mentioned:
According to The Black Money Imposition of Tax Act, non-disclosure of Foreign Assets may lead to tax and penal consequences as follows:
If a taxpayer reports incorrect information or fails to report any information, they may be subject to a penalty of Rs 10 Lakhs.
Over the years, the Income Tax Department has introduced various processes to ease tax filing and increase compliance. It has undertaken technological initiatives such as e-payment of taxes, simplified tax return forms, e-verification of ITR-V, e-assessments, owing to which there has been a significant increase in the taxpayer base.
So, be vigilant, do your duty by correctly reporting foreign assets, why pay hefty fines?
Be Wise, Get Rich.
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