Not disclosing foreign bank, pension accounts or other assets held abroad can trigger I-T notices | Simply Save

June 15 – the deadline for employers and banks to issue Form-16 – is nearly here.

Though the due date for filing income tax returns for the financial year 2023-24 (assessment year 2024-25) is July 31, it is best to complete the exercise as soon as you can.

Salaried tax-payers can choose between two forms – ITR-1 and ITR-2. The former is a simple form, applicable to individuals with salary/pension income of less than Rs 50 lakh, one house property, income from other sources such as fixed and savings deposits and agricultural income of less than Rs 5,000. ITR-2 is for individuals with more complex income structures and income over Rs 50 lakh, but not for those earning income from business or profession.

For instance, if you are a director in a company, your income is over Rs 50 lakh, or you own foreign assets, more than one house property, unlisted shares, have made capital gains on sale of shares and mutual funds and so on.

Also read:  Your one-stop guide to filing income tax returns for FY 2023-24 (assessment year 2024-25)

Choosing the right ITR form is crucial as a failure to do so could render your return ‘defective’. Also, non-disclosures will invite notices from the income tax department.

To understand the nitty-gritties of the process and the mistakes tax-payers must avoid Moneycontrol’s Preeti Kulkarni spoke to Mousami Nagarsenkar, Partner, Deloitte India. Here are the key takeaways:

-    Not using the correct form could mean failure to make the disclosures that are needed. For example, if you have made capital gains but file returns using ITR-1 instead of ITR-2, you could get a notice for non-disclosure from the income tax department. Selecting the wrong form could also render your return ‘defective’.

Also read: Income tax returns: Claiming tax deductions without proofs can backfire, warn CAs

-  If you maintain foreign bank accounts or pension accounts or any assets held abroad, irrespective whether it generates income or not, you have to use ITR-2. Many tend to believe Indian authorities do not have access to details of assets held abroad, but they do receive such details under information exchange agreements with other countries.

-   If you own ESOPs allotted to you by a multinational employer, you will have to use ITR-2 by disclosing details under schedule FA (foreign assets). ITR-1 will not ask for any foreign asset details. So, if you use ITR-1 when you should have used ITR-2, this could trigger notice for non-disclosure of foreign assets.

Calculate your income tax for FY 2024-25

-    If you are claiming benefit under double tax avoidance agreement (DTAA) between India and claim credit on taxes paid in other countries. Any one who is claiming such credit needs to file Form 67. Not filing this form or incorrect filing could again trigger I-T notices.

-  Annual information statement (AIS) and Form-26AS have history of the tax-payers’ transactions. If you fail to report, say, sale of shares or mutual fund units, you will get a notice for non-disclosure when the I-T department processes your returns.

-  Every deduction or exemption – such as life insurance premium payment, housing principal repayment – needs to be backed by documentary evidence.