Tracking black money: Be extra careful in declaring you foreign assets this year!

Tightening noose on tax evaders, the government and the Income Tax department will keep a closer eye on those with foreign assets and income, which even includes the negligible interest earned on bank deposits, small earnings while on a short trip abroad or even an online project that paid you in foreign currency.

The government is very concerned about uncovering black money this year, therefore a minor mistake or a miss can amount to concealment of information, call for scrutiny and land you in big trouble.

What to do then? It is very simple. Unless you are an non-resident Indian (NRI), all your income earned, including the ones earned outside India, has to be reported in your income tax return and is taxable according to the Indian I-T Act, 1961.

There is a common misconception that if the income has been taxed abroad, it does not have to be declared in India. “However, rule is all the foreign incomes, whether taxed outside India or not, will have to be declared by assessees if they are Indian residents," says Anand Satyapanthi, co-founder Quicko.com, an online tax filing website.

Some taxpayers are also unsure whether they must disclose bank accounts held abroad where low interest is being earned. The new ITR-2 however requires you to declare all foreign bank account's holding including those where they are beneficiaries along with details such as account opening date, interest accrued during the year and schedule and fields number under which the same income is reported.

"In cases of joint holdings, the spouse too needs to report the bank details and file the return in in India even though he or she may not have taxable income," says Kuldip Kumar, Leader (Personal Tax), PwC.

Declaring and claiming deductions: Declaration of foreign income is made under the same heads as income earned in India--salary, property, business and professional income, capital gains and other sources. You merely have to convert it in terms of rupees and add it to the incomes under these heads.

"Conversation into rupees can be done using the SBI telegraphic transfer buying rate (TTBR) of the last day of the month before the month in which income is due. So, for converting salary earned in June 2014, use the TTBR of the relevant currency for May 2014," says Archit Gupta, co-founder and CEO, Cleartax.in.

Relief under DTAA: If a tax has already been deducted on your foreign income, you are allowed to take credit of such taxes under the DTAA treaty . First step is to obtain a TRC or tax residency certificate that certifies your tax residency status.

"Make sure that the correct DTAA ANIMISHA has been applied. You will have to determine that up to what percentage and subject to which provisions the relief is allowed, which can then simply be deducted from your total tax li ability," says Varun Advani, Chief Operations Officer, Makemyreturns.com. Consider taking professional help in case you are confused.

(Image: Indiatimes)