Sometimes, even prominent media players misinterpret current developments.

A few days ago a story broke about NRIs being required to share the details of their foreign bank accounts with the Income-tax (I-T) Department. This seems to have created some confusion even among the finest news reporters and tax experts.

Some background...

For the purpose of taxation, if you stayed in India for less than 182 days in a financial year or more than 60 days in a year, but not more than 365 days over the earlier 4 financial years, you are classified as Non-Resident. As per I-T rules, Indian residents have to disclose their foreign bank accounts to the taxman. However, it's now believed that even non-residents too have to reveal details of accounts held abroad.

What leads to such interpretation?

In the Income Tax Return (ITR)-1 and ITR-2; there's an additional column this time that requires NRIs to provide details about the accounts they hold outside India. It's noteworthy that, there's no official circular from the I-T Department, Finance Ministry, or RBI either that makes it compulsory for NRIs to disclose their foreign accounts.

Assessees with non-business income below Rs 50 lakh (i.e. income from salary, one house property and other income) use the ITR-1. While individuals having income from other streams or above the limit mentioned above, along with Hindu Undivided Families (HUFs) use ITR-2.

A senior Chartered Accountant was prompt to express his disapproval, “Many foreigners or non-residents who are working in India may not be willing to share their bank accounts in their home countries. The (tax return) form has been amended without any change of rules or notification. Also, why should Indian tax department seek details of bank accounts whose interest income it cannot tax?”.  

Some experts also believe this move has been initiated considering the commonly held perception that black money has swiftly shifted from havens such as Switzerland to Dubai, Singapore, and Hong Kong.  In the recent past, many older tax-havens have shown their willingness to share information on perennial tax evaders with India.

Some experts distance themselves from such stark views. On the contrary, they see this more as a procedural move, especially in the absence of any formal mandate in this regard.

Ms Neeru Ahuja of Deloitte believes, "Earlier those who had only foreign accounts were not able to submit these forms as banking details were to furnished to file it. So, they added another layer to enable submission of forms". Going one step further she also said that, “If income tax officers want they can always seek details of foreign accounts at the time of scrutiny.”

PersonalFN is of the view that, in the absence of any official announcement, NRIs will have an option to not reveal information about their foreign bank accounts— unless they have a bank account in India.

That being said, any income originating from India will be taxed here, and NRIs shouldn’t try to dodge their responsibility to pay their tax dues on such income.

Nowadays, the I-T department is tightening the reins around taxpayers to shore up revenues in the aim of making India a tax-compliant society. So, be careful!

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