You must file an income tax return if you hold foreign assets
Individuals whose taxable income is below the ceiling of the basic exemption must still file their income tax return (ITR) if they hold or receive income from a foreign asset. This income must be declared in Schedule FA in RTI-2 or RTI-3, depending on the taxpayer’s case.
This rule may impact older people who have no taxable income but may be beneficiaries of assets purchased outside India by family members.
Who must declare foreign income? âThe first requirement is that you are tax resident and Ordinary Resident (ROR) in India,â said Archit Gupta, Founder and CEO of ClearTax. You are an MMR if you have lived in India for at least two out of the previous 10 years or for at least 730 days in the previous seven years.
The next step is to determine whether you are the beneficial owner, beneficiary or legal owner of a foreign asset.
“The beneficial owner of an asset means that an individual has directly or indirectly provided consideration for the asset and when that asset is held for the immediate or future benefit of the individual,” said Karan Batra, founder of Charteredclub .com. âThe beneficiary is a person who earns immediate income or will benefit in the future from the asset even though he or she has not directly or indirectly paid for that asset.
What is considered a foreign asset? Assets in this category include the foreign deposit account, custodian account, real estate, cash value insurance contract or annuity contract, and equity and interest on debt and any other income from cash. a foreign source.
Please note that the amount received from a friend or non-relative as defined by income tax rules living outside India will be reported as income from other sources and not as income from a foreign source.
âIf a friend or relative living outside of India deposits money into a bank account that you hold in that country or any other foreign country, it will be considered foreign source income. However, if the remittance is sent to your bank account in India, it will be considered income from other sources or a gift, as the case may be, âGupta explained.
Batra said that if the income from a foreign asset you own is not collected in India, it should still be reported.
âIncome generated or generated outside of India will be taxable even if it is not collected in India during the said fiscal year,â added Batra.
Never miss a story! Stay connected and informed with Mint. Download our app now !!