Mandatory Disclosures in ITR Filing

The extended income tax return filing due date for FY 2020-21 is near, i.e. 31st of December 2021, and it is not advisable to wait till the last minute to file the return. 

This article will discuss some mandatory disclosures required while filing the return. Let us see them one by one. 

Selection of correct tax regime

Finance Act 2020 introduced a new tax regime under Section 115BAC. If taxpayers choose to file ITR (income tax return) according to the new tax regime, they must forgo significant deductions and exemptions allowed under the existing or old tax regime.

The taxpayers have to select between the regimes in the ITR by choosing yes/no to the question ‘opting for new tax regime u/s 115BAC?’. A taxpayer should select ‘yes’ if they want to file taxes according to the new tax regime and ‘no’ if they want to use all deductions and exemptions allowed under the old tax regime. A taxpayer should be vigilant in this selection as this selection affects the tax calculations. 

Bank account disclosure:

The ITR filing portal now requires the disclosure of all bank accounts held by the taxpayer. 

A taxpayer has to mention the details of all types of accounts like current account, savings account (single and jointly held), all foreign accounts, Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts, accounts held with co-operative banks, etc. However, dormant account details need not be mentioned. To add these accounts, information like the account number, bank name, IFSC code will be required. 

Also, taxpayers will have to choose one of these accounts for a tax refund. For this, make sure that the account details are prevalidated for smooth processing of income tax refund. 

Unlisted stocks disclosure 

If you are holding unlisted shares of any company registered under the Companies Act, 2013, then the details of these shares are to be reported in your ITR filing. The taxpayer’s disclosure of unlisted shares must be made under the ‘Part A- General’ information tab in ITR.  This disclosure is required even if the unlisted shares are held anytime during the financial year. Details like PAN of the company, opening balance of shares, shares acquired and transferred during the year, and closing balance of shares must be reported. 

Please note that you cannot file ITR-1 and ITR-4 if you hold unlisted shares anytime during the year. You can file ITR-2 or ITR-3 in this case. 

This disclosure is mandatory even if these unlisted share details are mentioned under the ‘Foreign Asset (FA)’. 

Also, the finance ministry has widened the scope of Form 26AS to include a few new details like information related to unlisted shares. With this, the income tax department will have details of unlisted shares held by the taxpayers linked to its PAN, and any mismatch in ITR reporting could be questioned. It is advisable to verify Form 26AS or new AIS before ITR reporting. 

Directorship details 

If a taxpayer is a director in any Indian or a foreign company, its disclosure must be made while filing a return of income. 

In this situation, ITR-1 and ITR-4 cannot be filed. The taxpayer can either file ITR-2 or ITR-3. 

The taxpayer will have to mention details like DIN (directors identification number), PAN of such the company, and disclosure whether the shares of such company are listed on the recognised stock exchange or not is to be mentioned. 

Schedule AL (Assets and Liabilities’)

Taxpayers earning more than Rs.50 lakh must provide additional disclosure under Schedule AL (assets and liabilities) in the ITR. The schedule requires disclosure of immovable as well as movable assets. Details of assets like land, building, jewellery and bullion, vehicles, bank accounts, investments in stocks and bonds, insurance policies, etc. and any corresponding liabilities are provided. 

Please note that ITR-1 and ITR-4 are to be filed by taxpayers having income below Rs.50 lakh, and hence they do not have to furnish these details in Schedule AL. 

Schedule Foreign Assets (FA)

Residents are required to disclose the ownership of any foreign assets or beneficial interest held in any foreign assets in Schedule Foreign Assets (FA). 

The foreign assets required to be disclosed foreign custodial accounts, foreign equity and debt interest, foreign depository accounts, shares held in any listed or unlisted foreign company, cash value/surrender value of foreign insurance contract, trusts created under any foreign country laws in which the assessee is a trustee, any other foreign asset.

These amounts should be mentioned after converting them into Indian rupees. 

Remember that this disclosure is required even if the ownership is just for a single day in the entire financial year.

There are huge penalties for not disclosing any foreign assets or income; hence taxpayers should be meticulous in reporting all these transactions. 

For any clarifications/feedback on the topic, please contact the writer at jyoti.arora@cleartax.in