The New Rule
Till now a huge amount of Indians were saving tax by depositing their unrevealed income outside India through a different method. They were keeping away from notifying these incomes to the Indian tax authorities under the status of being a non-resident (NR). Now all the NRs will not be able to do this because of a new section which is going to be introduced in income tax return.
These changes are going to be made in tax return forms for Annual Year 2017-18. They are also relevant for Financial Year 2016-17.
The Income Tax(IT) Department has lately announced a new section on income tax return forms, which is, Income Tax Return (ITR 1) & Income Tax Return( ITR 2). It asks all the NRIs to reveal details of their bank accounts outside India Non-resident includes foreign nationals also.
Income Tax Expert Speaks:
Chetan Chandak, Head of Tax Research, India says, “This change has raised the eyebrows of many taxpayers as well as tax professionals as this is a surprising & sudden move. More so as this amendment in tax form is not having any precedent either in the tax laws or rules. Further, as per the existing tax laws, an NR is not required to pay any taxes on any income earned outside India nor is he required to notify his foreign source assets on his tax return. Considering this it is an obvious question for many as to what is the purpose of introducing this new section in tax return”.
He adds, “It is interesting to observe that currently it is not compulsory for a nonresident taxpayer to notify these foreign bank account & he can still e-file his tax return without filling up this information. We all know that the Indian government is signing bilateral information agreements with many of the tax havens & other countries. It is very likely that this information will flow to the tax authorities very soon. The taxpayer may be subjected to severe consequences if any irregularities are detected at a later point in time”.
What do people think about this change?
Some people feel that this change may help an NRI in claiming a tax refund. But this argument does not seem to be in line with the changes made in the tax norms. There is still no option to select a foreign bank account for the tax refund.
Others feel that the government is trying to grab the Indian NRIs who have deposited their unrevealed income outside India & who regularly keep away from notifying it to Income tax officials.
With adding this new section requirement tax debt have put many real non-residents & foreign nationals in a circumstance where they will have to needlessly notify all their financial information even when they are not at fault. These individuals also have a valid interest in maintaining the security & privacy of data shared.
We think that it’s a good move to know about black money circulating overseas. Having said that, we also feel that this will make genuine people living overseas come into the scanner unnecessarily along with the faulted ones.
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