Painful paperwork for holders of foreign assets

Even joint owners and trustees have to maintain records for past 16 years

While declaring that reporting of foreign assets will be made more stringent, former finance minister, Pranab Mukherjee, had categorically said the idea was not to make life difficult for individuals.

But, it may turn out just that way. The new form, ITR 234, requires individuals, joint holders, nominees and signatory authorities (including trustees) to provide reams of information. The worst part, the tax department can go back and seek this information for the past16 years, even from professionals on deputation who may have maintained small sums such as $100 (Rs 5,200) in bank accounts, say experts. A tax official with Deloitte says: “Many may be holding small amounts due to their foreign deputation. They might not have closed the accounts and may not even remember now. How fair is it to term them offenders?”

The government wants details such as the time since when a person has been holding an asset, what has been the peak balance or investment made in the past few years and so on. In all probability the person may not be using this account frequently. In that case, are these details really needed? It may have made sense to check if a person has been known to be earning much more than he has been reporting. If you are a joint holder of any asset abroad, you will have to give the same details separately.

It is worse for a person who is or was a nominee to somebody else’s assets. For example, if your father has assets abroad and you are the nominee, there are chances you wouldn’t be aware about this until there is a will in place. Is it fair then to pull you up for it? No, it isn’t, say tax experts.

Even if you were a nominee and the asset had been sold off, you could be penalised if this had happened anytime in the past 16 years. Unfortunately, those with signing powers could also be meted out a similar treatment. In the last two instances, how do you even know how much was held in an account that you did not even hold.

A PricewaterhouseCoopers official had earlier told Business Standard there was no country code notified if one had shifted from a country to another in the last 16 years. “So, even if you moved the assets to India, the tax authorities could come checking on you,” he said.

“Those who are signing authorities for assets held abroad are the most unhappy. And, in many cases, these are the elderly who have signing powers for their children’s assets. They don’t own the assets but will need to declare the details. Importantly, as a partner in a partnership, you cannot disclose holding details of the firm. What about those?” the PricewaterhouseCoopers official asks. In case of expats deputed in India, their spouses will also need to file tax returns, even if they do not earn in India.

Hence, the government could do away with penalising regular taxpayers until they earned large salary or had more than one source of income. It would make more sense to put a threshold amount of foreign income and keep a check on high net worth individuals and ultra high net worth individuals who have a higher chance of owning huge assets abroad.