Finance

Published: July 3, 2023
Updated: July 3, 2023

Avoid Tax Troubles: Essential Disclosures to Include in Your Income Tax Returns

As the deadline for filing income tax returns approaches, it's crucial to pay attention to the required disclosures to prevent your returns from being rejected. Failure to provide accurate and complete information can lead to notices from the tax authorities. This article highlights key mandatory disclosures that taxpayers should be mindful of while filing their returns to stay on the right side of the taxman.

Bank Account Details:

Taxpayers must disclose all their bank accounts, including joint accounts, in their income tax returns. This entails providing details such as bank name, account number, and IFSC code. It is important to select one account for receiving any refunds. Neglecting to provide these details may result in a defective filing of the return.

Details of Unlisted Equity Shares:

If you hold unlisted shares of any company, it is essential to disclose relevant information in your income tax returns. This includes the name and Permanent Account Number (PAN) of the company, as well as the number of shares acquired and sold during the year. Remember to report investments in unlisted foreign companies separately, even if they are already included in the foreign assets schedule. Depending on shareholdings, choose the appropriate form (ITR-2 or ITR-3) instead of ITR-1 or ITR-4.

Directorship in Indian or Overseas Companies:

If you hold directorship in any Indian or foreign company, disclose these details in your ITR filing. Provide the Director Identification Number (DIN), company name, type, and PAN, and specify if the company's shares are listed on a recognized stock exchange. Filing in the correct form (ITR-2 or ITR-3) is crucial for directors and selecting the wrong form can result in defective filing.

Schedule Assets and Liabilities:

Individuals with an annual income exceeding Rs 50 lakh must provide specific details of their assets and corresponding liabilities. This includes immovable property, movable assets, financial assets (such as bank deposits, shares, and securities), and cash in hand. If the value of certain assets is challenging to determine, disclose their face value.

Schedule Foreign Assets (FA):

Resident taxpayers must disclose any ownership or beneficial interest held in foreign assets, even if it is for just a single day during the financial year. Failure to report foreign assets accurately may result in severe penalties up to 200 percent of the tax payable on the misreported income.

To avoid complications and potential penalties, taxpayers must ensure they make the necessary disclosures in their income tax returns. By providing accurate details of bank accounts, unlisted equity shares, directorship in companies, assets, liabilities, and foreign assets, individuals can file their returns correctly and minimise the risk of rejection or scrutiny by tax authorities. Keeping these obligations in mind will help taxpayers stay compliant and maintain a healthy relationship with the taxman.