BW Communities

Disclosing Black Money

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[The Government of India has been grappling with the issue of tracking unreported income, rightfully belonging to India, but held overseas. The last two years have witnessed a spate of information exchange agreements being signed off by India with various sovereign states.  Finance Act 2012 mandated return filing for residents having assets or signing authority in any account outside India, who, otherwise may not be required to file an India tax return.  Towards this direction, for detecting unreported income, Indian tax authorities have modified the tax return forms to capture information on assets and financial interests held overseas. Consequently, resident individuals would have to provide details of overseas bank account together with the peak balance during the year, details of bank accounts wherein they are signatories in their official capacity, immovable property/other assets held outside India with investment cost, financial interest in an overseas entity,etc. Asset reporting requirement is applicable only for ordinarily resident tax payers and the details are to be disclosed only by way of an electronic tax return.  Further, It may be interesting to note that the Finance Act 2012 has also enhanced the time limit available to the tax authorities for reopening a tax case, from 6 years to 16 years in case if there are any income on overseas assets that had escaped Indian taxation.  The disclosure requirements will provide firsthand information to Government of India on details of overseas asset held by Indian residents.India is not the only country to seek these details from its resident tax payers.  With US in the lead, similar regulations are in vogue in Japan, Italy, Ireland, Korea, Canada, Brazil, Israel and Kazakhstan.  However, many of these countries have well-defined rules clarifying the assets that are to be disclosed, and applicability.Further, the regulations therein also prescribe minimum threshold exemption limits for disclosure. For example – in the USA, specified individuals must report interests in specified foreign financial assets that have an aggregate value in excess of $50,000.  In the case of Italy, the requirement for reporting will arise only when the aggregate value exceeds €10,000. For a law abiding resident, this new reporting requirement in India, will only remind his/her responsibility to include income (if any) earned from these overseas assets.  In case of expatriates working in India, this reporting of tax filing and information disclosure to the Indian tax authorities would apply even to their resident spouses and resident family members. Given this, may be its time for India to consider joint filing of tax returns, which will minimize the compliance costs and time. (Sudhakar Sethuraman is Senior Manager, Deloitte Haskins & Sells)