Today, the income tax india twitter handle reiterated that the deadline to file ITR for A.Y. 2023-24 remains July 31,2023, with no indication of an extension.
Indian investors are showing great inclination towards participating in global equity markets and acquiring overseas property. Such foreign investments offer diversification to their portfolios. However, it is crucial for Indian taxpayers to fulfill their reporting and disclosure obligations regarding foreign assets in their income tax returns(ITR).
In the past and even now many individuals remain unaware of the consequences of not disclosing certain financial aspects in their tax returns. These include oversea stock options that have been vested but not yet exercised, ongoing retirement schemes like the US 401(k), and beneficial interests in offshore companies.
Problems arise when people who have participated in 401(k) plans face challenges and do not file returns. The FA schedule in the ITR form has no specific column to report this. The only option given is to report under other “capital assets” but here one needs specific details of the date of the acquisition and amount of total investment. The complexity arrives because 401(k) plans involve regular monthly investments during the individual’s employment in the US, making it impossible to identify a specific acquisition date. Also, what people have at the moment is the fund value and not the amount invested which is not even being reported in the FA schedule and this can have some significant repercussions.
Income Tax Department to take stringent actions against false ITR filings and incomplete informations
Neglecting to declare an asset in the FA schedule, introduced almost a decade ago, could result in a penalty of Rs 10 lakh by the section 43 of the black money and imposition of the tax act 2015 and while not reporting any taxable income could lead to paying 120% of the tax as penalty.
Choosing not to report stock options does not guarantee any secrecy as foreign authorities may share information with the Indian Income Tax Department. Financial entities holding the stock options account have the capability to disclose the names of the beneficiaries, potentially revealing the undisclosed assets.
AVAILABLE OPTIONS FOR TAX FILINGS
If you are a salaried employee and also hold US stocks, it is essential to ensure that you fill out the correct ITR form for filing your taxes. If you have any assets, financial entities and income sources outside India, you cannot use the ITR-1 or the ITR-4 when filing your tax returns. This rule applies when you are opting for the presumptive scheme too.
Therefore, Indians who purchase US stocks through international brokerage platforms must use ITR-2 or ITR-3 form, depending on the nature of their income or the foreign assets they hold. Additionally they must complete the relevant schedule FA to comply with tax regulations.
While filing the appropriate ITR form the individual taxpayer is also expected to fill the schedule CG alongside the schedule FA. schedule FA is filled out to provide details of the foreign assets being held during the accounting period.
On the other hand, schedule CG is necessary for all taxpayers who have transferred any capital asset. It requires taxpayers to report both long term and short term capital gains arising from the sale or the transfer of various types of capital assets and these gains are separated in the schedule CG.
If a taxpayer has received capital gains from the transfer or sale of the capital asset of the same type, they must compute the capital gains in a consolidated manner for all such assets, except for specific types such as the long term/short term gain arising from the sale of immovable property. In such a case computation of capital gains should be done collectively.