Not many with foreign assets are likely to disclose those, say tax experts. And, all the big four tax companies (Deloitte, KPMG, Ernst & Young and PricewaterhouseCoopers) are facing this issue with their clients. Residents with assets outside India are compulsorily required to file income tax returns, irrespective of whether or not they have any income generated in India.
Such individuals fear hardship on the back of this clause. Explains a tax official with Deloitte: “One has to declare foreign assets even if he/she is holding $100 (Rs 5,000) in some account abroad. There are many holding small amounts may be due to their deputation in that country and have not closed these.” Even if you are not holding any asset today but were holding at some point earlier, you have to disclose those details as the tax authorities can go back 16 years.
Add to that, you have to give additional details. Like, since when have you been holding the asset, what was the peak balance or investment you had/made, joint holders will have to give their details separately. Individuals with low ticket assets want to avoid getting into it.
Industry experts say such individuals are not threatened as they believe no one will come to know if they do not disclose it. A senior official at Ernst & Young recalls how a client told him that until he holds a very valuable asset, or someone leaks his information to tax officials, no one will ever come to know anything.
As a result, tax authorities feel there should be some threshold beyond which disclosing such assets should be mandatory.
A PricewaterhouseCoopers official says there is no country code notified if one had shifted from a country to another in the last 16 years. “Those who are a signatory are also wary of this as they do not own an asset and will have to disclose someone else's details. Importantly, as a partner in a partnership you cannot disclose holding details of the firm. What about them?” In case of expats deputed in India, their spouses will also need to file tax returns whether or not they earn in India.
In the Finance Act, 2012, resident individuals having assets, including financial interest in any entity located outside India are required to furnish tax returns electronically from financial year 2011-12 onwards, giving complete details of such assets.
Industry experts say the tax authority is contemplating catching hold of chartered accounts of those who do not disclose their assets. “How will we know without the client disclosing it to us?” questions the Deloitte official.
The Central Board of Direct Taxes had notified the new tax return forms for assessment year 2012-13, mandating disclosure of foreign assets. In the returns forms ITR 2/3, a new section called ‘foreign assets’. The government has made disclosure of foreign assets mandatory in a bid to trace black money, which has become a big political issue.
