Income Tax forms return to saral format; foreign travel disclosures not needed

The finance ministry on Sunday revised the tax return forms for different classes of tax payers, dropping the prying questions on foreign travel details and balances in bank accounts that were asked in the forms proposed last month.

According to a ministry statement, the “simplified forms” would bring relief not just to Indian citizens, but also expatriates, who have been spared the obligation of reporting overseas assets acquired before their stint in India, provided these do not yield any income in the year concerned.

This is significant because expatriates who have lived long enough in India and qualify as residents and ordinarily residents’ would have been subjected to prosecution under the recently introduced black money law for non-reporting of overseas assets in their tax returns if the earlier proposals were implemented. India introduced foreign asset reporting requirement from the financial year 2011-12.

To the great relief of those who have income from more than one house property but do not have income from business or profession or capital gain, the department will introduce a new form called ITR2A which does not have detailed sets of questions on capital gains. Besides, the forms for both ITR2 and ITR2A would now contain only three pages and other information would be sought only in schedules which are to be filled only if applicable.

The fact that the return form proposed earlier was of 14 pages had been intimidating most taxpayers. Details of foreign travel such as the countries visited, the number of times visited and the amount spent abroad from own resources in the cases of residents, are dropped from ITR2. The finance ministry statement said that only passport number, if available, would be required in ITR-2 and ITR-2A.

Tax payers have time till August 31 to file returns as per the revised forms. The e-filing software would be ready on the tax department’s website by June 3. That the ministry has proactively come up with clarifications and extended the deadline for filing returns is reassuring for taxpayers, said Amrapal Chadha, Tax Partner, EY. The Undisclosed Foreign Income and Assets (Imposition of Tax) Act, 2015 — the Black Money law—provides for 3-7 years’ rigorous imprisonment for willful attempt to evade taxes and 6 months to 7 years’ rigorous imprisonment for failure to file return of foreign assets and bank accounts.

Sources in the government, however, told FE that the tax authority is likely to obtain the same information from other sources to check evasion. The attempt is to make return forms less intrusive and simultaneously to tap third-party sources, which would yield information of not just tax return filers, but also of people who do not file and are likely to be the real tax evaders. For this, the tax department could approach the ministry of external affairs that runs the consular, passport and visa division, said sources. Foreign travel data of individuals are already available with the government as date of birth, passport number and address of the traveller are captured at the time of travel. Finding the permanent account number (PAN) of an assessee and querying about expenses incurred abroad, if need be, is not a difficult task for the tax department.

In the case of bank accounts, tax payers would not be required to furnish the balance amount at the end of the fiscal as was required in the returns forms issued in April. Instead, only the IFS code and the account numbers of all the current and savings accounts are enough. Details of dormant accounts are not required either. Also, those who have any of the tax exempt income specified in the elaborate section 10 of the I-T Act can file the four-page ITR1 called Sahaj, although it may not be specifically provided for them. ITR4S called Sugam, a presumptive business income tax return, is being simplified.

Finer details of the new reporting requirement would be known when the returns are brought out. “The government is clearly listening to tax payer feedback and is making an earnest attempt at simplifying the returns,” said Rahul Garg, who leads the direct tax practice in PwC India.

The return ITR2 brought out last month had expanded the depth of foreign asset and income reporting as well. In the case of immovable property abroad, for example, the number columns to give additional information was increased to 10 from three in the return for 2014-15 assessment year, giving the impression that the department was relying more on its interrogation skills rather than on any real investigation on the ground.

Similarly, the scope of foreign bank account details to be disclosed in the return for 2015-16 assessment year was widened to include the interest accrued in those accounts and the amount offered to tax in India. In the return for the year before, assessees were asked to disclose only the name of the account holder, account number, bank address and the peak balance. Also, in the case of financial interest in a foreign entity, reporting requirement has been expanded to include the nature of interest, date since it has been held, the income accrued, its nature and the amount offered to tax in India. The same is true in case of trusts set up outside India. The finance ministry statement is silent on whether these would be retained.

Sources said these details could anyway be sought from other countries under bilateral treaties and information exchange agreements in specific cases of evasion, a better option than subjecting all tax payers to the same compliance burden.