There is always a fear that the disclosures made in this year can come back later just to haunt you in the future.
There is a unique problem that a tax consultant with a leading firm is facing. His father nearly 60 years ago purchased a Swiss watch. When a local shopkeeper saw it, he wanted to purchase it by offering a bit of it. The consultant then sent it to the company where it was approximated the cost of repair at $5,000 which is over Rs 3 lakh in Indian currency.
The income tax department searching detailed disclosures of assets like property, bullion, jewellery, vehicles, yachts, aircraft, etc from those with the taxable income of over Rs 50 lakh during 2015-16, tax practitioners have been encountering with a series of queries and clarifications. While the consultant with the Swiss watch is finding it tough to confirm the value, his counterpart at another firm believes that there is no need to provide any details, pointing out to the rules which are released by the income tax department.
Mayur Shah, a tax partner in Ernst & Young said that jewellery is not clearly defined. It can include the diamond-studded or the gold-plated watches. Even garments, furniture or utensils with precious or semi-precious stones or a sari with gold or silver zari border can draw the attention of the tax department.
There were examples where a taxpayer purchased jewellery several years ago and lost the bill or did not even remember the cost. He never even filed the wealth tax return in the past as his taxable wealth was below the threshold. Then in such a situation, at what value does he need to make the disclosure? Now when his income has increased to over Rs 50 lakh a year. Kuldip kumar, a partner in consulting firm Price water house Coopers said that the instructions are silent on this and it requires to be clarified as generally the salaried class taxpayers do not keep old records.
There is a lot of confusion regarding what is to be disclosed, apart from the fear of the taxman pursuing individuals based on the returns. This is the first year after the abolition of wealth tax that the government has hunted the asset disclosure for high net worth for the individuals in the tax returns and the fear is largely confined to people who did not file the wealth tax returns earlier.
The biggest problem is in the case of jewellery. A large part of the jewellery in most of the households is either inherited from their parents and grandparents and several people do not know the actual weight of a necklace, leave alone the value. The rules imposed that value has to be at the cost price or the disclosure made in the last wealth tax returns. In case it is something that was inherited, it has to be purchase cost by the former owner or the value on the date of purchase which could be the day when you got married or on March 31, 2016.
A consultant said that we are asking our clients to disclose all the market value at the end of March. It is easier to do that since most of the people do not even remember when they received it as a gift from their parents or relatives.
Tax Assistis a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.
With the help of Tax Assistand its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.
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