Latest news with #Form67
Mint
6 days ago
- Business
- Mint
Substance over form: If tax authorities can invoke it, why can't the common taxpayer?
The 'substance over form' principle in tax law means that what really happens in a transaction matters more than how it looks on paper. It empowers tax authorities to look past legal documents to understand the true purpose and effect of a deal. Tax authorities often invoke this doctrine when it helps them deny benefits, disregard sham transactions or expose tax avoidance. However, when it comes to the taxpayer—who may miss a form, a checkbox, or falter on minor procedural compliance—the same tax authorities often rigidly insist on 'form over substance'. This inequity is starkly evident in several recent compliance frameworks. Consider Form 10-IEA, which taxpayers engaged in a business or profession are required to file in order to opt out of the default new personal tax regime. The legislature offers taxpayers a choice between a lower tax rate regime without exemptions and the traditional regime with deductions. Yet, a delay or omission in filing Form 10-IEA, even if the tax computation and return filing clearly reflect the taxpayer's intention, is deemed fatal. The Centralised Processing Centre routinely defaults such taxpayers to the regime not opted for, disregarding the economic substance of the filing and enforcing strict adherence to the procedural form. A similar rigidity is seen in the treatment of Form 67, which is required for claiming a foreign tax credit. Many resident taxpayers having foreign income like dividends, interest or freelancing fees, pay taxes on such incomes in foreign jurisdictions and are entitled to relief in India. However, technical issues such as failure to upload Form 67 within the return filing timeline—even where all tax has been paid abroad and disclosed in the return—lead to denial of credit and consequent double taxation. Courts have begun to intervene in such cases, but the department's stance remains largely formalistic, prioritizing portal-driven validations over genuine tax neutrality. The issue extends to the income tax return forms itself. In several cases, tax authorities have issued notices or denied exemptions on the grounds of procedural omissions such as missing disclosures in exempt income schedules, unreported asset schedules even when such assets are otherwise declared fully accounted for, or unchecked declaration boxes. These are instances where the taxpayer has not suppressed any income or wilfully violated the law, yet substantive compliance is ignored in favour of hyper-technical scrutiny. Take another example of Forms 15G and 15H. Senior citizens and small investors are permitted to submit these self-declarations to avoid tax deducted at source (TDS) if their income falls below the taxable limits. But if these are not submitted on time, or the deductor fails to process them despite receipt, TDS is still deducted. The taxpayer then goes through the hassle of filing a return and waiting months for a refund. Isn't this a classic example where form trumps substance? In the realm of joint investments—whether in immovable property, mutual funds or securities—tax departments often insist on procedural proof of PAN linkage or nominee declarations. Even where ownership is legally shared and income attributable to each co-owner is proportionate and disclosed, revenue authorities have, in practice, demanded conformity with form-based validations, ignoring the substantive evidence available. The Goods and Service Tax (GST) framework presents another dimension. While GST rightly taxes supplies of goods and services, it does so on expenditure made from already taxed income. This creates an indirect double taxation, especially for individuals and small businesses, with no real relief available. Here again, the economic substance—that the expenditure is out of post-income-tax resources—is overlooked in favour of a transactional, form-based levy. The fundamental concern is this: if the tax department routinely invokes substance over form to protect revenue and curb abuse, is it not equitable to permit taxpayers the same benefit to claim reliefs, exemptions or credits where their intent and substance are compliant, even if procedural lapses exist? Tax policy must balance administrative convenience with fairness. Procedural forms serve a purpose, but they must not override substantive rights. The taxpayer's intent, supported by documentation, should matter more than their navigation of a labyrinth of forms. Particularly in a digital and artificial intelligence-driven tax ecosystem, where technical errors are increasingly common and often unintentional, a more nuanced and equitable approach is needed. Taxpayers' substantive reliefs shouldn't be sacrificed at the altar of technicality. After all, tax compliance should be about paying what is due—not more, not less—and certainly not losing relief for ticking the wrong box. Mayank Mohanka is founder, TaxAaram India, and a partner at S.M. Mohanka & Associates.
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Business Standard
30-07-2025
- Business
- Business Standard
Have money abroad? IT dept's new guide spells out what & how to report
To help taxpayers correctly report overseas income and assets, the Central Board of Direct Taxes (CBDT) has released a detailed guide explaining how to fill the foreign assets (FA), foreign source income (FSI), and tax relief (TR) schedules in the income tax return (ITR). These steps align with international obligations under the Common Reporting Standard (CRS) and the US-led foreign account tax compliance act (FATCA), aimed at curbing offshore tax evasion. Why CRS and FATCA matter CRS, developed by the OECD, and FATCA, enacted by the United States, are global frameworks that require financial institutions across countries to share details of foreign financial accounts with respective tax authorities. India receives such data annually, covering account balances, interest income, and more, which helps the Income Tax department detect unreported foreign assets or income held by resident taxpayers. What needs to be reported Indian residents must declare: All foreign financial accounts and assets (under Schedule FA) Income from any foreign source (under Schedule FSI) Tax relief for taxes paid overseas (under Schedule TR and Form 67) Failure to do so can trigger steep penalties under the Black Money Act, 2015. How to file: A quick overview Schedule FSI-reporting foreign income -Mention income from outside India under the correct head (e.g., salary, capital gains). -Use ISD codes for countries and provide TIN or passport details. -Claim tax relief under the applicable Double Taxation Avoidance Agreement (DTAA) article. -Ensure you also file Form 67 to claim credit. Schedule TR- tax relief claimed -Summarise tax paid overseas (as reported in FSI) country-wise. -Mention tax relief claimed under Sections 90, 90A or 91. Schedule FA-foreign assets disclosure Report all foreign assets held during the calendar year ending 31 December 2024, including: -Depository, custodian and insurance accounts -Foreign equities, immovable properties, trusts, and other capital assets -Signing authority in any foreign account Convert all amounts into Indian currency using SBI's telegraphic transfer buying rate as on the relevant date. Why this matters Transparent and accurate foreign asset disclosure: -Ensures legal compliance and avoids scrutiny -Helps claim tax credits and avoid double taxation -Reflects good governance and contributes to national development Final word The Income Tax department urges all resident taxpayers to disclose foreign assets and income fully and accurately in their ITRs. With automatic exchange of data under CRS and FATCA, concealment is riskier than ever. Timely and transparent disclosures are key to staying on the right side of the law.
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Business Standard
17-06-2025
- Business
- Business Standard
Paid taxes abroad as an Indian resident? Here's how to claim tax credit
If you're an Indian resident earning income overseas and have already paid tax on that income abroad, you may be eligible for a foreign tax credit (FTC) while filing your tax returns in India. However, experts caution that to successfully claim it, careful documentation and timely filing are critical. Who can claim foreign tax credit in India? Any Indian resident, individual or entity, who has paid taxes in a foreign country on income that is also taxable in India, can claim the foreign tax credit. 'FTC can be claimed whether or not there is a Double Taxation Avoidance Agreement (DTAA) between India and the foreign country,' said SR Patnaik, partner (head-taxation), Cyril Amarchand Mangaldas. 'The credit is allowed in the year in which the corresponding income is taxed in India,' he added. According to Abhishek Nangia, senior associate at SKV Law Offices, 'FTC helps avoid double taxation and can be claimed under Section 90 or 91 of the Income Tax Act. The credit is limited to the lower of the foreign tax paid or the Indian tax payable on that income.' Documents needed to claim foreign tax credit The experts suggest that filing Form 67 before submitting your income tax return is a mandatory requirement. This should be accompanied by: A statement of foreign income taxed in India Proof of foreign tax payment (such as bank challans, tax certificates) Nature and amount of income Tax Residency Certificate (TRC) from the foreign country (recommended, especially when claiming DTAA relief) In some cases, Form 10F and a No Permanent Establishment declaration 'A self-declaration along with proof of tax deduction or payment abroad is also necessary,' noted Suresh Surana, chartered accountant. Common mistakes to avoid while claiming foreign tax credit All three experts agree that filing Form 67 late or with incomplete details is a major reason for rejections. Errors in reporting foreign income, mismatches with Form 26AS, or claiming FTC on income that is exempt in India also trigger scrutiny. 'Disputed foreign taxes cannot be claimed unless resolved, and penalties or interest paid overseas are not eligible for credit,' Nangia added. Surana warns that 'claiming more credit than allowed under Indian tax rates or without proper documents may attract notices or disallowance.' How credit is calculated The credit allowed is the lower of the foreign tax paid or Indian tax payable on that same income. 'If the foreign tax is higher, you only get credit up to Indian rates; the rest is your loss,' said Nangia. Patnaik clarified that Rule 128 governs this, and DTAA provisions apply if beneficial to the taxpayer, except where GAAR is invoked. In DTAA cases, Surana said, credit may be given under the exemption or credit method, and if no DTAA exists, unilateral relief is allowed under Section 91 of the Income Tax Act. Bottom line: Claiming foreign tax credit is not difficult, but missing even a single step can cost you. To stay on the right side of the tax department, stick to timelines, maintain thorough documentation, and consult a tax professional if needed.
