Tax Authorities want Non Resident Indians to disclose foreign bank details

Non Resident

Non Resident Not ‘Devo Bhavah’!

The tax department has dropped a bombshell on Non Resident Indians (NRIs) and Foreign Nationals quietly.
Non residents, who avoided disclosure of their income parked outside India by maintaining the status of Non Residents will not be able to do so now onwards. As per existing laws, income earned outside India are not taxable in the hands of a Non Resident. Neither is the NR required to disclose his foreign source assets in his tax return.

What has been done?

The tax return forms (ITR 1 & ITR 2) are showing a new section, which asks all NRIs  to disclose their bank account details that are outside India. There has not been any amendment in the tax laws or rules yet. The changes are applicable for Assessment Year 2017-18 (Financial Year 2016-17). That means you need to disclose this in the return to be filed before July 31. It is to be noted that this happened secretly. Man, scary enough?

What will be the effect?

Nothing new that the government is on a wild hunt to catch tax evaders and money launders. They will face enormous difficulties in evading taxes. However, genuine non residents and foreign nationals, who are innocent will also have to face difficulties in reporting their financial details. It’s like entire class in school will face punishment just because few students were talking and making noise. Ouchh! It hurts.

There are also concerns regarding privacy and security of data being shared, amidst all the speculation about the security of Aadhaar database.

What can be done?

It is to be noted that sections for disclosure of bank account details have been introduced, but it is not mandatory this time for a non resident to disclose foreign bank accounts. He can file the return without filling this information. But, traffic signal is yellow, and it can get red anytime. India has signed bilateral information agreements with several tax havens and other countries, which means that our tax authorities will be getting this information very soon from these countries. If any irregularities are detected in the disclosures made by you and data collected by the government, tough punishments await you with open arms.

Step by step, with GST introduced, bilateral agreements with other countries, amendments in tax laws, the government is getting very aggressive in plugging the loopholes that were used to evade taxes.

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