Tax officials, according to an internal presentation of the department, would contact the HR and payroll cells of these MNCs to inform them about the employees whose names have figured in the lists shared by other countries of Indian residents owning assets abroad. The tax office is inundated with such data from other jurisdictions having ‘automatic exchange of information’ pacts with India.
Non-disclosure of security holdings post exercise of ESOPs, probably often unwittingly, could attract stiff penalty under the Black Money law while using the proceeds later to buy offshore properties or other assets could further complicate matters for taxpayers if the newly acquired assets are not declared in the I-T returns (ITRs).
Since 2012, taxpayers have to disclose their foreign assets -such as offshore bank accounts, properties, beneficial ownerships and trusteeship of foreign trusts, and properties- under the FA schedule of the ITR forms.The present move by the department is part of the drive to tax undeclared overseas assets, with the number of resident Indians having foreign assets having tripled to 1.9 lakh last in 2023-24 from 60,000 in 2020-21.
“There is a myth amongst salaried employees that since their TDS on salary is deducted at source, there is no further tax obligation on them to make any disclosure in respect of assets including foreign assets,” said Siddharth Banwat, partner at the CA firm S Banwat & Associates LLP.
“In fact, there are many startup founders who had initially set up ventures in the US while they were abroad and later returned to India but continued to hold equity which is allotted while they were non-residents. Here, the vesting of shares (or the acquisition of full rights) happens as the startup progresses. In such cases, there are lapses in reporting foreign assets including social security accounts. These are genuine mistakes and steps taken by the tax department to create awareness are welcome,” said Banwat.