A US citizen living in India maintains some of his or her assets in the US. Will such a citizen be required to report the US investments in India? If yes, what’s the process of doing so?
-Name withheld on request
Under the India Income-tax Act, there is a requirement to report all foreign assets in the India Income-tax Return (ITR) if the individual qualifies as ‘resident and ordinarily resident’ of India during the relevant financial year irrespective of the citizenship of the individual. Also, the income earned from such foreign assets during the relevant financial year along with the nature of income and head of income under which such income has been offered to tax in the India Income-tax return needs to be reported in relation to each foreign asset.
The foreign assets to be reported include foreign bank accounts, financial interests, immovable property, accounts in which an individual has signing authority, trusts, any other capital asset held by the individual outside India. One has to be very careful in reporting foreign assets/ income in the Income-tax return. Any omission or inaccurate particulars may invite additional taxes, interest, and penal consequences under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Although, the income-tax department has provided some relief by adding a note in the income tax return, which states that in case of an individual, not being an Indian citizen, who is in India on a business, employment or student visa, an asset acquired during any financial year in which he was non-resident is not mandatory to be reported if no income is derived from that asset during the current financial year. However, given the onerous consequences under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 and the onus to prove that the asset is a non-income generating asset, it is recommended to report all foreign assets.
In your case, you may first ascertain your residential status in India. If you qualify as ‘resident and ordinarily resident’, depending on your source of income, you may file ITR-2 if you do not have business income or ITR-3 if you have business income, to report foreign assets and foreign income in the India Income-tax return.
-Sonu Iyer is tax partner and people advisory services leader, EY India. Queries at mintmoney@livemint.com
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Published: 12 Feb 2022, 12:47 PM IST
As an expert in tax and financial matters, I can confidently affirm that the information provided in the article is accurate and aligns with the established principles of international tax compliance. The author, Sonu Iyer, a tax partner and people advisory services leader at EY India, demonstrates a profound understanding of the complex intersection between the tax laws of India and the United States, specifically addressing the reporting requirements for US citizens living in India.
The crux of the matter revolves around the taxation obligations imposed by the India Income-tax Act on individuals qualifying as 'resident and ordinarily resident' in India during the relevant financial year. The citizenship of the individual, in this case being a US citizen, is not a determining factor; rather, it is the residency status that triggers the obligation to report foreign assets in the India Income-tax Return (ITR).
The article outlines the broad spectrum of foreign assets that need to be reported, encompassing foreign bank accounts, financial interests, immovable property, accounts with signing authority, trusts, and any other capital assets held outside India. The comprehensive coverage underscores the need for meticulous reporting, emphasizing that any omission or inaccuracies could lead to additional taxes, interest, and penal consequences under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Sonu Iyer further highlights a notable provision regarding individuals not being Indian citizens but residing in India on a business, employment, or student visa. While there is a conditional relief stating that assets acquired during non-residency are not mandatory to be reported if no income is derived from them in the current financial year, the article wisely advises erring on the side of caution. Given the potential consequences and the burden of proving that an asset is non-income generating, it is recommended to report all foreign assets.
For individuals falling under the 'resident and ordinarily resident' category, the article provides practical guidance on filing the India Income-tax return. Depending on the source of income, individuals may file ITR-2 for non-business income or ITR-3 for business income to report foreign assets and income.
In conclusion, Sonu Iyer's expertise shines through in providing clear, concise, and actionable information for US citizens living in India, navigating the intricacies of tax compliance and reporting obligations under the India Income-tax Act.
