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Income Tax

Ever increasing disclosure requirements in ITR forms for HNIs

[By Shaleen Shah (Partner), VNCA]

Every year, the additional disclosure requirements in Income Tax Return (ITR) forms, invariably keep increasing.  The increased disclosure requirement creates a huge compliance burden on taxpayers, who will require significant time to collate such information and to ensure proper reporting, besides increasing the risk of making mistake while filing ITR. It also requires disclosure of a significant amount of personal information, encroaching more and more on taxpayer privacy.

The purpose of such detailed disclosure is ostensibly to cross-check information and check tax evasion. Effectively, the burden of disclosure on taxpayers is being increased, and the tax authorities will merely match it with the information they have in their systems, collected from other sources, such as SFT reports.

The following are some additional disclosure requirements for filing Income Tax Return

Foreign Asset disclosure

Resident and ordinarily resident taxpayers are required to disclose their foreign assets whether holding as beneficiary or otherwise while filing their income tax return. Non-compliance would allow extended time period of 16+1 years to the income tax department to initiate the income tax scrutiny if income from such assets is evaded.  Additionally, it will also attract penalty of Rs 10 lakh under the Black Money Act.

Schedule AL – Assets and Liabilities at the end of the year

Taxpayers having total income exceeding Rs 50 lakh are required to disclose the details of movable and immovable assets, including liabilities, while filing the income tax return.  The ITR form requires umpteen disclosures of assets owned by them—full details of all immovable properties (with cost), cost of jewellery and bullion, cost of paintings and artefacts, cost of vehicles, total amount of bank deposits, cost of shares and securities, cost of insurance policies, total loans and advances, and cash in hand.

Disclose all details of share sales

Taxpayers who have sold shares last fiscal will have to fill up finer details of every share sale in their income tax return for assessment year 2020-21 for computing long-term capital gains tax liability.  The ITR Form demands transaction wise finer details of share sales, such as ISIN, share name, quantity, sale and purchase price as well as fair market value at the end of January 2018, in all cases.  The e-filing form does not offer the option of giving the summary or aggregate capital gain figure, which would have avoided the need to fill up details in 13 columns for each item, a hassle in cases where data is voluminous.  This addition in ITR is a big burden on all eligible taxpayers. Imagine people invested under say, a portfolio management scheme, who on their behalf would have done hundreds of sale/purchase during the year, having to enter each and every entry into their tax return manually.

Disclosure of directorship

Directors of the companies are required to disclose inter-alia the name of companies in which he is director.

High value transactions triggering compliance

Compliance is also triggered in case of high value transactions like requiring assessees to furnish details if their cash deposits exceed Rs 1 crore or if they have spent over Rs 2 lakh on foreign travel or their electricity bill is Rs 1 lakh or more in the fiscal, in case they are not otherwise required to file income tax returns.

Where will this end? Would we finally end up having to give details of each and every personal expense that we incur, just because over anxious tax authorities fear failure to detect tax evasion? There certainly has to be a limit to intrusion by tax authorities into honest taxpayers’ personal lives.

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