New Income Tax Returns Form: The Changes

By Anaida Kuthiala, Army Institute of Law, Mohali.

In a democracy like India, where the Govt is of the people, for the people and by the people, there rests with the people the right to privacy i.e. the right of non-disclosure, and the liability to inform (along with the right to be informed). In order to strike a balance between privacy and transparency, there is a need for a balanced criteria for reporting the total income earned by an individual resident in India, whose income is taxable. The commitment made by the Government Of India to the people, through the Parliament to provide for diminishing the level of black money transactions and to provide for greater transparency, is satisfied with the introduction of the Undisclosed Foreign Income and Assets (Imposition of Tax) Act, 2015.

The bill for the same was introduced in the Indian Parliament on 20.03.2015. It mainly concentrated to provide for separate taxation of any undisclosed income in relation to foreign assets and income, which, in the predecessor act was not taxable. Consequentially, a comprehensive new law on black money, specifically dealing with the black money stashed abroad, i.e. the new taxation Act, 20151 is introduced which is certain to come into force on the 1st day of April, 2016.

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The Act makes mandatory provisions for reporting undisclosed foreign income and assets of the taxpayers resident in India2, the procedure for dealing with such income and assets and to provide for imposition of tax at a flat rate of 30% on any undisclosed foreign income and assets held outside India, excluding the provision of admissibility of any exemption or deduction or set off of any carried forward losses, which were available under the 1961 Act. However, an individual, who is not an Indian citizen and is in India for business / profession / on student visa, will not be mandatorily be required to report the foreign assets required by him during the time he was a non-resident in the prior years.

With a view to simplify the income tax return Form for different classes of tax payers, the Govt. revised, simplified and reduced the forms from a 14-page comprehensive document to a 3-page concise form, thereby providing a huge relief to the assesses, requiring the disclosure of the passport number only, instead of the extensive details of any foreign trips. Further the liability to give the details of dormant accounts is extinguished as also the taxpayers are spared from disclosing their balance in each bank account, thus providing for the protection of their right to freedom of privacy. There is also the much required rationalization in respect of the return forms notified by the CBDT3 (Central Board for Direct Taxes) to be used by the individuals, wherein individuals have an option to file their returns via Form ITR2 (in case of income of individual / HUF from more than one house or capital gain/business/profession and foreign income/assets), Form ITR2A ( by individuals / HUF having income from more than one house property, but no income from capital gains/business/profession or foreign income/assets), Form ITR1 (taxpayer with exempted income without any ceiling – other than agricultural income exceeding Rs. 5,000-), Form ITR4S (by individuals and Hindu Undivided Families who earn their income through professional work). However, even though the new forms are aimed at simplifying the process of filing income tax returns and a greater disclosure of the income as compared to the earlier tax forms, they are criticised for being complicated and resulting in an increase in the compliance burden and cost of the tax payers. The non-compliance of the provisions of the Act invites various stringent penalties. They have prosecutable offence with rigorous imprisonment up to 10 years.

Thus, the new tax return forms have said to have provided respite to the tax payers, by being in a more simplified and easy form and by simplifying the process of filing the income tax returns. In keeping with the commitment of the Govt. for focussed action on the black money front, a multi-pronged attack is launched to root out the menace of black money qua the promulgation of this Act as this new law is aimed at deterring and curbing the menace of black money stashed abroad by the Indians.

1 Undisclosed Foreign Income and Assets (Imposition of Tax) Act, 2015.

2 Includes Indian citizens and foreign citizens who stayed in India long enough to qualify as ordinary resident.

3 The Apex policy making body of the Income Tax Department.

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