TaxTMI 
TaxTMI 
Clarifications on Tax Compliance for Undisclosed Foreign Income and Assets
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....ome, not chargeable to tax in India, (exempt income) which was deposited in a foreign bank account. The person became resident in India in F.Y. 2013-14 and since then only interest is being credited to the account. Such income including interest income has not been offered to tax in India. In such case what should be the disclosure under the tax compliance? Answer: As stated the person was non-resident for the year F.Y. 2012-13 and earlier years, and the foreign income for such years was not chargeable to tax in India. For the F.Y. 2013-14 and subsequent years, while he is resident in India, the person's global income is taxable in India. Accordingly, the declaration of foreign bank account in this case, which has been made partially out of undisclosed income chargeable to tax, may be made. In this case, the value of undisclosed foreign bank account shall be computed as per rule 3(1)(e) of the Rules and a deduction as per section 5 of the Act shall be allowable. Therefore, the value of such account shall be the sum of all credits in the bank account as reduced by....
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....eable to tax in India. In this case, the person may declare his foreign bank account under Chapter VI of the Act. The valuation for the purpose of declaration shall be the sum of credits into the account from 01.04.2014 onwards. The person is not entitled for any credit of taxes paid, if any, in the foreign country. Question No.4: A private trust was created outside India by a settlor out of undisclosed income chargeable to tax in India. The trust has set up a company holding 100% shares. What are the options for declaration under Chapter VI of the Act in such case? Answer: In this case, the settlor is the beneficial owner of the assets held under the trust. Therefore, declaration under Chapter VI of the Act may be made by such settlor in the capacity of a beneficial owner in respect of the assets of the trust. Alternatively, the trustee of the trust holding assets on behalf of beneficiaries may make the declaration of the assets of the trust in the capacity of a representative assessee. The trustee is eligible for declaration even where he is a non-resident. In respect of the assets declared under Chapter VI of the Act, immunity shall be available to the settlor,....
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.... of facts under section 68 of the Act and such declaration shall be void. Question No.6: A person was a resident in India as well as a foreign country in F.Y. 2011-12. However, after applying the provisions of the Double Taxation Avoidance Agreement (DTAA) under the tie breaker rules the person became resident of the foreign country. Whether such person needs to file a declaration under Chapter VI of the Act in respect of assets acquired/ made out of foreign income earned during F.Y. 2011-12 in which lie was non-resident in India as per the DTAA? Answer: As per section 59 of the Act, a declaration may be made in respect of any undisclosed asset located outside India and acquired from income chargeable to tax under the Income-tax Act for any assessment year prior to assessment year beginning on 01.04.2016. In this case, since the foreign income of F.Y. 2011-12 was not chargeable to tax in India under the Income-tax Act as the assessee was a non-resident as per DTAA, the same is not required to be declared under Chapter VI of the Act. Question No.7: A person has a foreign bank account made out of undisclosed income chargeable to tax in India. Over a past several years,....
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.... in bank account; refer rule 3(3)] = Nil Value of 100 shares of S3 held as on valuation Date = Fair market value of 100 shares of S3 as on valuation date i.e. 01.07.2015 Value of 400 shares of S4 Sold = (Higher of 4000 and 3000) - 3000 [amount deposited in bank account (new asset); refer rule 3(3)] = 1000 Value^ of bank account (BA1) = {10000 + 2500 + 50 + 7000 + 3000} - {4000 + 5000 + 3000 + 4.000} [acquisition of new asset; refer rule 3(3)] - 1500* [transferred to another bank account BA2 (new asset); refer rule 3(3)] = 5050 ^The reduction from the gross deposits in the bank account is available in respect of those withdrawals which have been made for acquisition of a new asset or deposit in another bank account as that new asset/ bank account is being separately declared under Chapter VI of the Act. *The amount of 1500 CSD transferred to bank account (BA2) shall be considered (while adding credits) in the valuation of BA2. Question No.8: A person holds an undisclosed brokerage account in a foreign country which holds within itself shares....
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.... account include such rental income deposited in the account? Answer: If the DTAA entered with any country provides that the rental income 'shall' be taxed only in the country in which the property is situated, then the taxation right in this respect will exclusively be with that country. In such case where property is outside India, the rental income is not chargeable to tax in India as per the Income-tax Act read with DTAA. Thus while working the value of undisclosed foreign bank account the deduction of rental income (in this case it is exempt income) will be made from the value of foreign bank account computed as per rule 3 of the Rules Question No.11: A person has an undisclosed property situated outside India in the name of his spouse. The funds for acquisition of the property were provided by such person. In this case, whether the person can make a declaration under Chapter VI of the Act in his own name? Answer: In this case, the person is treated as a beneficial owner of the property and he may file a declaration of the undisclosed asset in his name, being a beneficial owner. The immunity in respect of the asset declared shall be available to bo....
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....nt of tax by the declarant. Penalty under section 271C of the Income-tax Act will also be attracted unless he proves that there was a reasonable cause for such failure as per the provisions of section 273B of that Act. Question No.16: A person (said, A) has an undisclosed foreign bank account made out of income chargeable to tax in India. From such account he has transferred money to his spouse's/child's (say, B) account from time to time. There are no independent credits into the spouse's account except for such transfers. Whether in this case both the person and the spouse need to declare the undisclosed foreign bank account under Chapter VI of the Act? Answer: In a case where there is only transfer of money from the account of the individual to his spouse or child and there are no independent credits in the account of the spouse or child and the individual has declared the undisclosed foreign bank account under Chapter VI of the Act, the spouse and the child are not required to make any separate declaration in respect of the account in their names. However, if the transfer of money is made as a consideration for supply of goods, services etc. and ta....
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.... a person to a Government of any country or territory outside India but no information has been received upto 30.06.2015 can such asset be declared under Chapter VI of the Act? Answer: Such asset shall not be hit by section 71(d)(iii) of the Act and can be declared if other provisions contained in section 71 are not applicable. Question No. 21: What shall be the exchange rate for the purpose of conversion of foreign currency into Indian currency? Answer: As per rule 3(4) of the Rules, the value of the undisclosed foreign asset may be determined in the foreign currency in accordance with rule 3 of the Rules and the same is to be converted into Indian currency as per the reference rate of RBI for 01.07.2015. Question No. 22: A person maintains an e-wallet/virtual card account online on a website hosted in a foreign country which was initially funded by income chargeable to tax in India on which tax has not been paid. The person plays online games/poker through the fiends lying in the e-wallet/virtual card and has earned some money which was credited to the e-wallet/virtual card account. Can a declaration be made in respect of e-wallet/virtual card? If ye....
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....f a foreign bank account made out of undisclosed income chargeable to tax in India then such account is also required to be declared under Chapter VI of the Act. Question No. 25: A person has an undisclosed foreign asset, being a bank account in joint names, say A and B. Should the disclosure of such account is to be made by both A and B or anyone can make the declaration? Answer: Where the funds in the bank account have been contributed only by A the disclosure is to be made by A. However, where the funds have been contributed by both A and B independently, the declaration is to be made by both A and B in respect of the funds contributed by them into the bank account. Question No.26: As per answer to question no. 23 of Circular No. 13 dated 06-07-2015, a person being a non-resident can file a declaration under Chapter VI of the Act in respect of asset acquired out of income chargeable to tax earned when he was resident in India in the past. However, para 3 of the Explanatory Circular No. 12 dated 02-07-2015 states that a declaration may be filed by a person, being a resid....