Background
This alert is in continuation to our GES Alert dated 31 March 2012 on the release of new tax forms mandating disclosure of foreign assets by ordinarily residents. The Central Board of Direct Taxes [CBDT] has updated the instructions to individual tax return [ITR-2] and clarified certain open issues on the disclosure requirements.
Highlights of the instructions
Financial interest
Financial interest is defined to include but not limited to the the below categories:
Any financial account wherien the resident taxpayer is a owner of record or holder of legal title,irrespective of beneficial ownership
An entity with respect to which the resident tax payer deals through an agent, nominee, attorney or a person acting in some other capacity on his behalf
a corporation in which the resident owns, directly or indirectly, any share or voting power
a partnership in which the resident taxpayer owns, directly or indirectly, an interest in partnership profits or an interest in partnership capital
a trust of which the resident has beneficial or ownership interest
any other entity in which the resident owns, directly or indirectly, any voting power or equity interest or assets or interest in profits
With respect to disclosures related to financial interests, immovable property, other assets and accounts where the assessee has a signing authority, the peak investment/balance during the year would need to be reported.
Exchange rate for disclosure of foreign assets
Foreign assets are required to be reported in Indian rupees in India tax return. It is now clarified by the CBDT that telegraphic transfer buying rate adopted by State Bank of India is to be used to determine such value. The instructions also provide that the rate of exchange used should be of the date of peak investment/balance in the case of such assets or bank accounts respectively.
Source : Instructions for filling out Form ITR-2
This alert is in continuation to our GES Alert dated 31 March 2012 on the release of new tax forms mandating disclosure of foreign assets by ordinarily residents. The Central Board of Direct Taxes [CBDT] has updated the instructions to individual tax return [ITR-2] and clarified certain open issues on the disclosure requirements.
Highlights of the instructions
Financial interest
Financial interest is defined to include but not limited to the the below categories:
Any financial account wherien the resident taxpayer is a owner of record or holder of legal title,irrespective of beneficial ownership
An entity with respect to which the resident tax payer deals through an agent, nominee, attorney or a person acting in some other capacity on his behalf
a corporation in which the resident owns, directly or indirectly, any share or voting power
a partnership in which the resident taxpayer owns, directly or indirectly, an interest in partnership profits or an interest in partnership capital
a trust of which the resident has beneficial or ownership interest
any other entity in which the resident owns, directly or indirectly, any voting power or equity interest or assets or interest in profits
With respect to disclosures related to financial interests, immovable property, other assets and accounts where the assessee has a signing authority, the peak investment/balance during the year would need to be reported.
Exchange rate for disclosure of foreign assets
Foreign assets are required to be reported in Indian rupees in India tax return. It is now clarified by the CBDT that telegraphic transfer buying rate adopted by State Bank of India is to be used to determine such value. The instructions also provide that the rate of exchange used should be of the date of peak investment/balance in the case of such assets or bank accounts respectively.
Source : Instructions for filling out Form ITR-2
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