Due Date for Income Tax Compliance (January 2025)

The Central Board of Direct Taxes (‘the CBDT’), in exercise of its powers under section 119 of the Income-tax Act,1961 (‘the Act’), extends the last date for furnishing belated return of income under sub-section (4) of section 139 of the Act or for furnishing revised return of income under sub-section (5) of section 139 of the Act for the Assessment Year 2024-25 in the case of resident individuals from 31st December, 2024 to 15th January, 2025.

Many tax payers received intimation for mismatch of transactions appearing in AIS and income/transactions reported in ITR. Extension will help taxpayer to check if any Income/Transactions is not reported/mis reported in ITR and file revised return.

2.Disclosure of Foreign Asset in the ITR by 31st December now extended to 15th January

All resident taxpayers are required to disclose foreign assets and income under Schedule Foreign Assets (FA Schedule), Schedule Foreign Source Income (Schedule FSI) and Schedule for Tax Relief (Schedule TR), as mandated by the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Foreign assets include, inter alia, foreign bank accounts; foreign cash value insurance, financial interest in any business/entity, immovable property outside India, foreign equity or debt interest, accounts in which an assesse has signing authority and capital interest.

With a view to ensuring transparency in tax returns and avoid unintended legal hassles, an Interactive Session was organised by the Income Tax Department. Summary of important point discussed/emerged from the session are as follows:

1. An updated return cannot be filed only for the purpose of disclosing Foreign Assets (FA) as the legislative intent is to allow updated returns for reporting income, not for FA disclosure. So file revised return by 31st December.
2.  Disclosure of foreign property is mandated irrespective of whether the property generates income.
3. The obligation to disclose foreign assets arises immediately upon an individual transitioning from a non-resident or not ordinarily resident status to a resident status.
4.  If a foreign asset was acquired in earlier years but not reported till date, it can be disclosed in the current year’s ITR, but a penalty will be imposed for default till date. Penalty will be levied from the date of acquisition of the FA until the date it is reported in the ITR (applicable from AY 2016-17 onward).

i. The penalty is, however, not applicable in respect of an asset being one or more foreign bank accounts having an aggregate balance not exceeding an amount equivalent to Rs. 5 lakhs at any time during the previous year.

ii. The Finance Act (Part 2), 2024, added a proviso stating that penalties will not apply if the aggregate value of the foreign asset is less than ₹20 lakhs.
5.  For penalty determination under the Black Money Act, AO will consider the Fair Market Value (FMV) of the undisclosed asset determined in the prescribed manner as laid down in Rule 3 of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015.
6. No credit of Tax withheld outside India will be provided for undisclosed foreign income.
7. The FA schedules also require the reporting of foreign insurance.
8. ESOPs issued to employees should be disclosed as foreign equity in the FA schedule. Additionally, Demat/share accounts associated with these ESOP should also be reported, even if the shares have already been disclosed to avoid any litigation. It is prudent to disclose foreign ESOPs at the time the options are vested, as this marks the point at which the individual acquires a definitive right to the underlying shares.
9.  If an asset is held jointly, it should be disclosed by all the owners in the return, even if the ownership is only beneficially/signatory/holds title only.
10.  Individuals holding foreign assets cannot file ITR-1 or ITR-4, as these forms lack the necessary Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income) for reporting. Instead, they must opt for forms such as ITR-2 or ITR-3 to meet disclosure obligations.

Be sure to disclose your foreign assets correctly by the deadline!

3.Additional FAQs notified on VSV Scheme 2024 CBDT CIRCULAR NO. 19 OF 2024 [F. NO. 370142/22/2024-TPL] Dated 16-12-2024

CBDT has issued additional 26FAQs vide circular 19 of 2024 (dated Dec 16, 2024) and summary of important points are as under:

1. Taxpayer is eligible for Scheme even if appeal pending as on July 22, 2024 was disposed of on merits or withdrawn.
2. In cases where the appeal was filed after Jul 22, 2024 along with the condonation of delay application then such taxpayer shall not be eligible under the Scheme as appeal is not pending on Jul 22, 2024.
3. Cases where search operation is conducted before Apr 1, 2021 and assessments were made u/s 153A or 153C for a year other than search year; all such assessments are specifically barred from Scheme.
4. Where information is received u/s 90 or 90A, however such information is not used for making additions in assessment/reassessment order, the taxpayer can opt scheme.
5. In cases where review petitions are pending before High Courts or Supreme Court, the taxpayer shall not be eligible for the Scheme.
6. In cases where the taxpayers/Department has filed a declaration/application under Section 158A/158AA/158AB (special provision for avoiding repetitive appeal), taxpayer is eligible for the Scheme.
7. Where appeal was fully set aside to ITAT/CIT(A)/DRP and the same is pending on Jul 22, 2024, then such cases are eligible for VSV
8. If additional ground is filed, it shall be considered for the purpose of computing disputed tax under VSV
9. If penalty is filed after filing application under VSV, settlement of tax arrears will include quantum as well as penalty demand.