Government announces new tax provision for NRIs
To stop money laundering, the government has released a new provision which directs NRIs to submit their overseas bank account details..
Since a long time, Indians fear to pay taxes to the government. The people have found numerous possible ways to hide from such tax paying. One of which is, many Indians stay 182 days out of the country every year and declare themselves as ‘non-resident’. The status of a non-resident Indian or NRI allows them to claim such refunds by stating their income as earned abroad. But from now on, this won’t be easy.
A few days earlier, income-tax authorities have added a new provision in the tax return form (ITR2) which will require all non-resident to disclose details of their bank accounts outside India. Most NRIs, even those who have been away for years, file tax return in India in order to cover their income from stocks, properties and fixed income instruments like bank deposits and bonds. Till now only Indian residents were required to disclose overseas bank accounts in their tax returns.
From the beginning of this year, NRIs will have to share their account numbers of their overseas bank accounts, name of the banks, countries where the bank offices are located as well as the Swift codes and International Bank Account Numbers (IBAN).
A senior chartered accountant Dilip Lakhani said, “But this could also have some unintended consequences. For instance, many foreigners or non-residents who are working in India may not be willing to share their bank accounts in their home countries. The (tax return) form has been amended without any change of rules or notification. Also, why should Indian tax department seek details of bank accounts whose interest income it cannot tax”?
The new clause has been incorporated amid a widely-shared perception that many Indians have moved money from jurisdictions like Switzerland to newly opened bank accounts in destinations such as Dubai, Singapore, and Hong Kong.
Mitil Chokshi, senior partner at Chokshi & Chokshi said, ” However, the Income Tax Act clearly places taxability based on the residential status of an assessee. Since NRIs are subjected to tax claim only on income earned in India, some could take an alternative view on the new provision as it is not backed by a circular. It would mean, the disclosure of bank account in India or outside for operative purposes like tax payments and processing refund”.
The new provision has come into action, as in the past few years black money and secret Swiss accounts have emerged as a major political issue. Most tax practitioners believe that the declaration of the new rule is aimed to track the untaxed funds. From now onwards these citizens are obliged to provide information though they are not a resident Indian from Tax or FEMA perspective.
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