Tax Column

Tax Column

Is it mandatory to link PAN with Aadhar?

What will be the consequences if I fail to do so? Every person who is allotted a PAN and who is eligible to obtain an Aadhar card should link both the numbers on or before March 31, 2022. If you fail to do so, the PAN allotted shall be made inoperative after the given date. However, the Income Tax Department will allow you to intimate your Aadhar number even after March 31, 2022 by making a payment of ₹ 500 if you do so between April 1, 2022 and June 30, 2022 and thereafter by paying ₹ 1,000 up to the given time limit. 

If PAN becomes inoperative, it shall be deemed that you have not furnished, intimated or quoted PAN and accordingly you will be liable to the consequences arising thereon. The consequences shall come into effect from April 1, 2023 if you fail to link PAN with Aadhar even within the extended one year timeframe. Thereafter, you may face tax deduction at a higher rate. You may also not be able to file return of income which will result in penalty and prosecution. 

I am an individual. My father died in 2015. In 2019, the Income Tax Department reopened the file for AY 2014-15. I have informed the department regarding my father’s demise. However, they are insistent about reassessment and collection of demand from me given that I am a legal heir. What is the correct legal position? 

It is a settled law that an Income Tax notice cannot be issued on a dead person. If you have already informed the Income Tax Department about the death of your father, then the assessing officer should ascertain who the legal heirs are and if the assets are still not distributed, then he should find out who the executor is. He can issue the notice in the name of a legal heir or executor of the estate of your father. 

If he completes the assessment in the name of your father who is already dead, the assessment is null and void and the appellate authorities would quash the assessment. Therefore, the right action on the part of the assessing officer is to issue the notice in the name of the legal heir and then complete the assessment. Tax demand determined after the reassessment can be collected from the legal heir who has inherited the assets of your late father under Section 159(1) of the Income Tax Act. However, if you have not inherited any asset of your father, you may not be liable to pay the tax demand. 

I am a resident and my husband has been a non-resident for FY 2021-22. While filing the return for AY 2022-23, do both of us have to disclose our foreign assets such as bank balance, investment in shares, receivables, etc.? If so, what is the period for which it should be disclosed? 

Reporting foreign assets is mandatory only for a tax payer who is resident in India. Non-resident as well as resident but not ordinarily resident (RNOR) is not required to disclose his or her foreign assets. Therefore, in your case you have to disclose your foreign assets while it is not required in the case of your husband. The new ITR form has replaced the expression ‘accounting period’ with ‘calendar year ending on December 31, 2021’. Therefore, you have to furnish the details of foreign assets held by you from December 1-31, 2021 in the return to be filed for AY 2022-23. In the amended form, reporting of foreign assets must be as of December 31, 2021. So if you have acquired foreign assets in January 2022, those assets are not required to be disclosed for AY 2022-23 but the same will be disclosed by you in the return pertaining to AY 2023-24. 

I am an old lady who had assets such as jewellery and paintings as well as furniture, fixtures and a car. During FY 2021-22, I sold jewellery for ₹ 10 lakhs and paintings for R₹ 15 lakhs. For furniture and fixtures and car, I received ₹ 15 lakhs. Since all these assets were of personal use, would there be any Income Tax implication? 

Even though jewellery and paintings were for your personal purpose, yet both these assets fall within the definition of capital assets as defined in Section 2(14) of the Income Tax Act. Therefore, any surplus that has been acquired on the sale of these two assets will be subject to Capital Gain Tax. Since you were holding these assets for a long time, the capital gain will be long term. 

However, you will be entitled to deduction of purchase cost of these assets or if the assets were acquired by you prior to April 1, 2001, the fair market value as of that date will be considered as the deemed cost. You will also be entitled for indexation and would be required to pay tax at 20 per cent plus surcharge on the net amount i.e. the sale price minus indexed cost. The furniture and fixtures and car used for personal purpose are outside the purview of definition of capital asset and therefore there will no tax implication.

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