I-T Dept nudges taxpayers to disclose foreign assets correctly

• In an explicit nudge to taxpayers citing compliance with global disclosure norms, the Income Tax Department has urged them to disclose details of foreign assets and income correctly in their income tax returns.

Highlights:

• The Income Tax Department has called on taxpayers to accurately disclose details of foreign assets and income in their tax returns. To ensure compliance with global disclosure norms, taxpayers can file revised returns by December 31, 2024, for the assessment year 2024–25 if updates are required.

Key Highlights

E-Campaign for Awareness:

• An e-campaign will be launched to encourage taxpayers to disclose foreign income and assets.
• The campaign targets those who may not have fully disclosed such details but whose information has been obtained through India’s international agreements on data sharing.

Opportunity to File Revised Returns:

• Taxpayers who missed reporting foreign assets or income in their original Income Tax Return (ITR) can file a revised return before the deadline.
• The revised filing aims to rectify inaccuracies and avoid legal complications.

Appeal to Taxpayers:

• The Department emphasized that full transparency in tax returns helps taxpayers:
• Avoid legal issues.
• Contribute to national development.

Global Compliance Mechanisms

• Information Exchange Frameworks:
  • India leverages international frameworks like:
  • Common Reporting Standard (CRS): Facilitates global exchange of financial account information.
  • Foreign Account Tax Compliance Act (FATCA): Ensures transparency in financial accounts held by Indian residents abroad.
  • Details Shared:
  • Account holder’s name, address, and Tax Identification Number (TIN).
• Account details like number, balance, and income (interest, dividends, etc.).
  • Implications for Taxpayers:
  • Increased Transparency: Global cooperation enhances the government's ability to detect undisclosed foreign income and assets.
  • Legal and Financial Ramifications: Failure to disclose foreign assets can lead to penalties and prosecution.
  • Timely Compliance: Filing revised returns by the stipulated date allows taxpayers to regularize their disclosures without facing severe consequences.

Prelims Takeaways

• Foreign Account Tax Compliance Act (FATCA)
• Common Reporting Standard (CRS)
• Tax identification number (TIN)