Information asked by the Income Tax Officer in case of salaried employees having overseas Income.

I have written many articles on scrutiny assessment by Income tax department. This year I had the opportunity of appearing for scrutiny assessment of salaried employees who had worked for 8 months in India and re-located to USA on employment during the Financial Year 2012-13.

These employees, by virtue of staying over 182 days in India in FY 2012-13, had to declare their global income to Income Tax authorities. The employees have filed their income tax returns showing, both the salary earned in India as well as the salary earned in USA as their Annual taxable Income. They have also claimed as relief u/s 90/91 towards the Federal Tax paid in USA.

The reason for taking up such cases for scrutiny by the Indian tax authorities is – “Large relief claimed u/s 90/91”

During the assessment, the Officer has a list of documents, details or information to be furnished. Here is the list-

  1. Copy of the passport – To ascertain the number of days of stay in India
  2. Details of salary earned in India and abroad during the period 01.04.2012 to 31.03.2013 – TDS certificate (Form 16) for Indian Income and TDS Certificate for overseas income (Form W2 or ITR form 1040 or similar forms)
  3. Copy of Double Taxation Avoidance Agreement (DTAA) – To claim the relief u/s 90/91, such provision must exist in this agreement between India and USA (or other overseas country)
  4. Details of relief claimed u/s. 90/91 along with computation – The overseas income would be in USD or any other currency. So, it has to be converted to Indian rupee taking the exchange rate of appropriate date. This statement will help the department to ascertain the accuracy of calculation of income in Indian Rupees.
  5. Bank statement(s) for the period from 01.04.2012 to 31.03.2013 – To check the credits in bank account.
  6. Credit card statements for 01.04.2012 to 31.03.2013 with sources for payment
  7. Details of share transaction with statement for 01.04.2012 to 31.03.2013 (date of purchase, date of sale, cost and sale price etc.) with sources and proof and D Mat A/c thereon.
  8. Investment in mutual funds for 01.04.2012 to 31.03.2013 with sources and proof – To ascertain any taxable capital gain.
  9. Investments in movables and immovable for 01.04.2012 to 31.03.2013 with sources and proof.
  10. Proof in support of savings made to claim deduction under Chapter VI A (Deduction u/s.80C, 80CCA, 80CCB, etc)
  11. Purchase and sale of property /properties for 01.04.2011 to 31.03.2012 with copy of sale deed and sources with evidence.
  12. Proof in respect of deductions claimed in the return of income including repayment of interest and principle of housing loan.
  13. Deductions claimed in respect of Long term Capital Gains in the Return of Income filed For AY 2013-14 along with supporting documents.
  14. Source with proof in respect of deposits/credits of Rs.50000/- and above in bank accounts.
  15. Sources with proof in respect of cash deposits in Bank accounts.
  16. Nature of transfer from Bank accounts with proof of investments.
  17. Details of Rental income with copy/copies of rental agreement(s), if any
  18. Details of membership(s) in club/Associations.
  19. Copy of Return of Income along with Form No.16 for AY 2010-11, AY 2011-12 and AY 2012-13.

Suggestion – I suggest the resident taxpayers who have income from overseas employer to take the help of Professionals to compute the income correctly. In case taxes are not computed property, you may end up in paying not only taxes but also interest on it.

Secondly, it is advisable to preserve the details listed above in softcopy/hard copy.

Thought for the day

There is no better insurance than the knowledge of how to do something the right way. There is no greater peace of mind than knowing you did it the right way.

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at [email protected]

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