NRIs to Disclose All Foreign Accounts
The Income Tax Department of India has recently regulated that all Non-Resident Indians (NRIs) will be required to disclose details of all bank accounts outside India under their name. This is expected of all non-resident Indians irrespective of how long they have been out of the country as long as they file tax returns in India to cover their incomes from properties, sale of stocks and bonds, and any other fixed income instruments like bank deposits.
This disclosable information should include account numbers of overseas bank accounts, name of the banks and countries thereof as well as the Swift codes and International Bank Account Numbers (IBAN). These would assist the income tax department in identifying cross-border wire transfer of funds between banks as well as those that make or receive international payments.
This came in to account for money being deposited and moved out of Swiss accounts to now being deposited in banks across Dubai, Singapore, Hong Kong, etc. So far NRIs could claim money in offshore bank accounts as lawful income earned abroad and not have to declare it to the tax authorities. However, now a new provision in the tax return form (ITR2) expects declaration of such details which an assessing officer may evaluate for a potential tax claim in India. Aimed at tracing untaxed funds, an inability to explain assets and fund movements is considered a violation of the Foreign Exchange Management Act and exposes a person to penalty.
To be noted, that only income earned in India can be taxed by the government. And this declaration is a requirement only if the account holder is seeking tax refunds and doesn’t have an account in India. As for the remaining, the following two conditions can be considered as income earned in India –
- It is directly or indirectly received in India; or
- It accrues in India or the law construes it as having accrued in India.
Some examples of income earned in India are:
- income from business as a result of any business connection in India (refer Chapter X)
- income from salaries if the services are rendered in India. If you are on a project in U.S. earning salary for the rest period/leaves, the salary will be regarded as earned in India and is taxable
- income from dividend paid by an Indian company even if you get paid outside India
- income from property in India, for example, rent from an apartment you own in India
- income from any asset or source if such asset or source is in India;
Taxation laws can be a new labyrinth to explore for NRIs. Path2usa.com has relevant information explaining tax rates and exemptions that can act as a guide for NRIs to keep up with the new rules and regulations pertaining to taxation in India.