If you have a high profile income which exceeds Rs. 50 lakh per annum then you got to hold all your valuable assets tightly. As the Finance Ministry published a gazette order indicating that-

People with an income of more than Rs 50 lakh per annum and having the pleasure of owning a yacht, aircraft or valuable jewellery will now have to disclose these costly assets with the IT department notifying a new set of Income Tax Return (ITR) forms for assessment year 2016-17.

 

Government has notified the new forms with the onset of the new financial year i.e., 1^st April, 2016.

The Finance Ministry published a gazette order in this regard on March 30 and taxpayers can file their ITRs till the stipulated deadline of July 31.

 

In regard to this order and the new forms notified, it is important to note the following:

 

• ITR-1- The simplest ITR-1 (Sahaj) for individuals having income from salaries, one house property or other sources, now features an additional column to mention the Tax Collected at Source (TCS) and the form now has 7 pages as compared to the earlier five.

 

• ITR-2A– This Form is to be filled by those individuals and HUFs who do not have income from either business, profession or by way of capital gains and do not hold foreign assets. For such individuals and HUFs, the new Form has the new column called Pass Through Income (PTI). This seeks details from business trust or investment fund as per section 115UA and 115UB of the Income Tax Act (investments made in a venture capital company) which pertains to emerging companies or startup firms.

 

The ITR-2, used by similar category of entities but who own foreign assets, also features the new PTI column. 

• ITR-2– The department has introduced a fresh reporting column in the new ITRs (ITR-2 and 2A) called ‘Asset and Liability at the end of the year’ which is applicable in cases where the total income exceeds Rs 50 lakhs.

Individuals and entities coming under this income bracket will also have to mention the total cost of such assets. So, while immovable assets like land and building have to be furnished under the new ITR regime, movable assets like cash in hand, jewellery, bullion, vehicles, yachts, boats and aircraft will also have to be disclosed to the taxman.
The entity reporting these high-value possessions will also have to describe their “Liability in relation” to these items.

 

• ITR-4S– A new section has been added to the ITR- 4S seeking code, nature and description of the three main businesses–activities or products that you earn from. This section earlier existed in only ITR-4 only, a much lengthier form compared to ITR-4S. Moreover, the new ITR-4S can now be filed by partnership firms too. All they have to declare is the salary and interest paid to the partners.

ITR-4S now with three additions -specifying nature of business, salary and interest paid to partners (applicable only to firms) and schedule AL. this will be extra burden for taxpayers opting this Form.

 

• Startup India Standup India– For the first time, the ITRs, keeping in spirit the government’s flagship agenda of promoting startup businesses has brought out a separate column for earnings made from this sector.

Finance Minister Arun Jaitley had announced in the recent Budget that startups will get 100 per cent tax exemption for three years.

 

• A total of nine such ITRs have been notified which include the Sahaj (ITR-1), ITR-2, ITR-2A, ITR-3, Sugam (ITR-4S), ITR-4, ITR-5, ITR-6, ITR-7 and an acknowledgement form called the ITR-V.

 

• The department has not made any changes in columns seeking declaration of foreign assets and income by entities and individuals and smart features like providing Aadhaar number, personal mobile phone number and email id have been retained.

 

• Furnishing of Passport details has not been made mandatory this time too.

 

• The requirement of furnishing total number of savings and current bank accounts held by the individual or entity, at any time during the previous year, (excluding dormant accounts) has been continued this time too.

 

• The income limit for disclosing of assets in ITR 2 and 3 have been increased from Rs 25 lakh to Rs 50 lakh

 

• Under this order assets have been classified under two categories — movable and immovable. One will have to declare any land or building (includes house property) under immovable assets. Movable assets list includes cash in hand (money in your savings account), vehicles (including yacht, boats and aircraft), jewellery, bullion and other valuable metals. Liabilities will include any outstanding loans you have.

 

“The new reporting mechanisms for people earning over Rs 50 lakh per annum are made to check tax evasion by high-net worth individuals and entities. While their income returns used to cover this in a way till now, a new exclusive column was essential to keep the taxman informed,” a senior official said.

Post the Vijay Mallya incident, the income tax department is being extra careful while tracking individuals who have income above 50 lakhs per annum. They should now disclose the details and cost of their immovables and movable assets such as jewellery, vehicles, yachts, boats and aircrafts. This move may aid the income tax department to track tax evasion by high net worth individuals.

 

To track the wealth held by individuals and entities, the information regarding the assets which are currently required to be furnished in wealth tax return will be captured in the Income Tax returns. This will mainly apply to those who were required to file wealth tax returns. 99.5 per cent taxpayers are not affected by this requirement. Only the ultra-rich will have to give this information in their I-T Returns. This will ensure that the abolition of wealth tax does not lead to escape of any income from the tax net.

 

But as always there will always be some issue with the order of the Department. The order does not clarify on how to value assets. Taxpayers will find it challenging to value their assets themselves, especially jewellery and vehicles. Salaried individuals do not usually maintain fair market value of jewellery owned or written down allowance (depreciation) of vehicles owned by them.

 

To file your return visit taxmantra.com.

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