Income tax returns: Disclosure of yachts and more aimed at plugging wealth tax evasion
September, 11th 2013
Rich business persons gearing up to file their income tax returns for fiscal 2013 by the due date of September 30 find themselves saddled with additional disclosure requirements.
They are required to disclose assets — both immovable and movable — held in India in personal capacity as of March 31, 2013. Individuals with taxable income of more than Rs 25 lakh from business or profession (they could be sole proprietors or partners in a firm) have to file their returns in ITR Form 3 or 4. If such assets are held by the proprietary concern or the firm and reflected in its financial statements, no such disclosure is required. Schedule AL prescribed in these tax return forms has an exhaustive list of assets which require disclosure — such as land, buildings, cash, paintings , insurance policies and yachts (see table). Individual taxpayers can also report any liability against these assets — say a loan taken to buy land.
Income tax returns: Disclosure of yachts and more aimed at plugging wealth tax evasion The top individual income taxpayers comprise around 1% of the 3 crore personal taxpayers in India, yet they contribute nearly 60% or more towards the total personal income tax kitty. However, there is a wide gap between the income tax (I-T ) and wealth tax contributions — wealth tax is paid against certain assets that fall within the definition of 'net wealth'. The Finance Standing Committee, in its report, had pointed out this disparity — for fiscals 2010 and 2011, the wealth tax collections were Rs 505 crore and Rs 682 crore, respectively , as against personal income tax collections of Rs 1.32 lakh crore and Rs 1.45 lakh crore, respectively.
Collection of assets details via I-T returns is being perceived as an attempt to bridge this gap. "The I-T Act has inbuilt checks like compulsory quoting of PAN in various transactions and also the mechanism of deduction of tax at source. However, there is no absolute method for collection of data for wealth tax purposes . Disclosures in I-T returns will help collect such data," explains Dilip B DesaiBSE -4.96 %, vice-chairman, DH Consultants. For businessmen and professionals who have to make such disclosures, it does entail more administrative work, followed by perhaps attending to inquiries by the tax department.
"Even those who file their wealth tax returns regularly will face some difficulties in gathering details for disclosure in their I-T returns. The applicable I-T forms require disclosure of certain assets such as archaeological collections, drawings, painting, sculpture or any work of art that currently do not come within the wealth tax ambit.