New rules making it obligatory everyone to file returns came into effect from April 1, 2013
People availing treaty benefits will now be required to file a return of their income in India even if it is not liable to tax here. The government has changed the Income Tax Rules, making it mandatory for certain class of assesses, including those covered under bilateral tax treaties, to file their return in India.
Earlier, a person not paying any tax in India because of the provisions under Double Taxation Avoidance Agreement (DTAA) between India and his country of origin was not required to file the return in India. The new rules making return filing obligatory for these assesses came into effect from April 1, 2013.
“A person claiming any relief of tax under Section 90 or 90A or deduction of tax under Section 91 of the Income Tax Act, shall furnish the return for assessment year 2013-14 and subsequent assessment years,” the Central Board of Direct Taxes said in a notification.
The move will specifically impact a majority of investors coming from Mauritius who were claiming treaty benefits and not filing a return on the pretext that their income was not taxable in India.
Experts said though this would increase the compliance burden on assesses, the government would have a lot of information to assess whether treaty relief claimed by a person is valid or not.
“By making it mandatory the government is trying to make compliance norms more stringent for these assesses. It is mainly for disclosure purposes,” said Divya Baweja, Senior Director, Deloitte.
Taxpayers will now be required to report their overseas income separately under a new schedule. They will have to bifurcate the foreign income to which provisions of tax treaty apply and quote Tax Identification Number (TIN) where the tax has been paid in a foreign country. If the TIN is not allotted by that foreign country, the assesse would be required to furnish his passport number.
For instance, if a taxpayer has earned income from interest on bank deposits in India as well as overseas, he would have to mention separately the interest earned on foreign income.
Taxpayers have the choice to claim tax benefits under a tax treaty or the Income Tax Act, whichever is more beneficial. However, in Finance Act 2012 the government said a Tax Residency Certificate (TRC) would be required to prove that the taxpayer is resident of the tax treaty country. It said TRC would be a necessary but not sufficient condition for availing treaty benefits.
In Finance Bill 2013, the provision was brought under the Act, but after a sharp reaction from investors the government later said that submission of TRC would be a sufficient proof to for residency and in case of Mauritius claim benefits as well. But, for other countries, other documents could also be asked to prove ownership of investment, depending on provisions of DTAAs.
The new rules have also made it mandatory for taxpayers with total income above Rs 25 lakh to declare their domestic assets, including land, building, bank deposits, shares, insurance policies, loans, jewellery, bullion, drawing, painting, yacht, boat etc at cost.
Assesses are now also required to indicate their foreign bank account number and details of trusts in which they are trustees as part of overseas asset reporting.
Source:http://www.business-standard.com/article/economy-policy/now-file-return-even-if-your-income-isn-t-taxable-in-india-113050800779_1.html
Earlier, a person not paying any tax in India because of the provisions under Double Taxation Avoidance Agreement (DTAA) between India and his country of origin was not required to file the return in India. The new rules making return filing obligatory for these assesses came into effect from April 1, 2013.
“A person claiming any relief of tax under Section 90 or 90A or deduction of tax under Section 91 of the Income Tax Act, shall furnish the return for assessment year 2013-14 and subsequent assessment years,” the Central Board of Direct Taxes said in a notification.
The move will specifically impact a majority of investors coming from Mauritius who were claiming treaty benefits and not filing a return on the pretext that their income was not taxable in India.
Experts said though this would increase the compliance burden on assesses, the government would have a lot of information to assess whether treaty relief claimed by a person is valid or not.
“By making it mandatory the government is trying to make compliance norms more stringent for these assesses. It is mainly for disclosure purposes,” said Divya Baweja, Senior Director, Deloitte.
Taxpayers will now be required to report their overseas income separately under a new schedule. They will have to bifurcate the foreign income to which provisions of tax treaty apply and quote Tax Identification Number (TIN) where the tax has been paid in a foreign country. If the TIN is not allotted by that foreign country, the assesse would be required to furnish his passport number.
For instance, if a taxpayer has earned income from interest on bank deposits in India as well as overseas, he would have to mention separately the interest earned on foreign income.
Taxpayers have the choice to claim tax benefits under a tax treaty or the Income Tax Act, whichever is more beneficial. However, in Finance Act 2012 the government said a Tax Residency Certificate (TRC) would be required to prove that the taxpayer is resident of the tax treaty country. It said TRC would be a necessary but not sufficient condition for availing treaty benefits.
In Finance Bill 2013, the provision was brought under the Act, but after a sharp reaction from investors the government later said that submission of TRC would be a sufficient proof to for residency and in case of Mauritius claim benefits as well. But, for other countries, other documents could also be asked to prove ownership of investment, depending on provisions of DTAAs.
The new rules have also made it mandatory for taxpayers with total income above Rs 25 lakh to declare their domestic assets, including land, building, bank deposits, shares, insurance policies, loans, jewellery, bullion, drawing, painting, yacht, boat etc at cost.
Assesses are now also required to indicate their foreign bank account number and details of trusts in which they are trustees as part of overseas asset reporting.
Source:http://www.business-standard.com/article/economy-policy/now-file-return-even-if-your-income-isn-t-taxable-in-india-113050800779_1.html
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