Tax Column

Tax Column

I am an individual. I filed my return of income for assessment year 2020-21 within the permissible time. However, in that return I have not disclosed certain income which I can’t correct now. Similarly, for assessment year 2021-22 I failed to file the return before March 31, 2022. Can you explain what to do in this matter?

The Finance Act 2022 has introduced a new concept of updated return by inserting a new Sub-Section 8A to Section 139 which allows a person to file an updated return of income. The provision of updated return is effective from April 1, 2022 and the time limit provided for filing an updated return is 24 months from the end of the relevant assessment year. Therefore, in the current financial year 2022-23 you can file an updated return for assessment year 2020-21 and 2021-22.

The CBDT has already notified new Rule 12AC and a new form, ITR-U. You can now file updated return by disclosing additional income for assessment year 2020-21 and pay additional taxes along with applicable interest. Similarly, for assessment year 2021-22 you can also file the return in form ITR-U and pay tax along with applicable interest. Note that you will not be able to update your return if it is of loss or enhancement of loss. Further, if the concerned assessment year is subject to search and seizure proceedings, then also you will not be allowed to update your return. You can mention the reasons for updating the income such as return previously not filed or income not reported correctly, etc. You can refer to Section 139(8A) of the Income Tax Act read with Rule 12AC.

I am an individual. I received a gift of shares of a closely held company from my aunt (my father’s real brother’s wife). Similarly, my other brother also received a gift of ₹ 1 crore from another aunt (my mother’s real brother’s wife). Are both these gifts exempt in our hands or taxable?

Gift received by you as well as your brother are not taxable in your hands under Section 56(2)(x) of the Income Tax Act read with the definition of relative given in Explanation (e)(i) Clause (D) read with Clause (G) to Section 56(2)(vii) of the Income Tax Act. The definition of relative include spouse of brother of either parents i.e. father and mother. Since you received the gift from a relative specified in the IT Act, the gift is exempt in your hand. Similarly, your brother also received a gift from the spouse of the bother of your mother which also enjoys exemption. Hence, gifts received by you and your brother from aunts are outside the purview of Section 56(2)(x) of the Income Tax Act.

I am a non-resident and own a residential flat in Mumbai. I have given that flat on a monthly rent of ₹ 1.5 lakhs. Is the tenant liable to deduct withholding tax and if yes, at what rate? Will I be allowed to transfer the rent amount to my foreign account? And do I have to file my tax return in India? Rental income arsing in India is taxable in India in case of a non-resident. Therefore, your rental income is subject to tax in India. Further, such rental income is subject to withholding tax and since you are a non-resident the withholding tax rate is 30 per cent plus applicable surcharge under Section 195 of the Income Tax Act. However, you can approach the Income Tax Department with a request for lowering the rate of withholding tax. You can transfer rental income from your Indian bank account to your foreign overseas account. However, a certificate from a chartered accountant in form 15CB has to be obtained where he will confirm about payment of withholding tax. If you have only rental income in India and on which withholding tax at full rate has been deducted, then there is no need to file tax return in India. However, if you have other income, then you have to file tax return in India disclosing rental income also. The credit for withholding tax can be claimed in your tax return.

I am an individual working with a multinational company which is a listed company. The company has given ESOP to certain employees. Can you please let me know how ESOP is taxable in my hand?

It is very common for companies to give ESOPs to its employees as a part of incentive and retention policy. When you exercise the option of acquiring the ESOP, the difference between the fair market value of shares on the date of exercising the option and the actual consideration paid (if any) will be considered as taxable income in that year. The company will deduct withholding tax. When you sell the shares subsequently at a higher price, then you can claim the deduction of fair market value as on the date of exercising the option as deemed cost from the ultimate sale price received by you on actual sale. If you are holding the shares for more than one year, then the gain will be long-term capital gain.

Jayesh Dadia
Chartered Accountant

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