The numbers of India’s super rich individuals with declared income of `50 lakh a year, which have risen by over 180% over the past five years, may well hit a speed bump this year. Reason? The new disclosure norms that were introduced in this year’s income tax return form, which come into force for the assessment year 2016-17.
The norms, which were notified on March 30, require persons with income over `50 lakh to disclose assets such as cash in hand, jewellery, bullion, yacht, vehicles, aircraft and immovable property such as land and buildings.
The I-T department introduced the new norms in the wake of the abolition of wealth tax.
Financial sector experts said this can adversely impact declarations, as people would prefer not to disclose their assets and try to limit their declared income below the `50-lakh bracket to circumvent the new rules.
“Not many were disclosing wealth tax earlier, and by disclosing less than `50 lakh of annual income would not leave any trail for the department to catch hold of assets, which these people would not want to declare,” said Amarpal Chadha, tax partner, people advisory services at EY.
There are practical challenges with the current norms. “For example, there may be situation where taxpayers may gift jewellery to their children, on their marriage for instance,” said Kuldip Kumar, partner and leader, personal tax, PwC.
Such transfers may go unreported under the new norms also. At present, the norms do not require reporting of gifts and assets.
According to income tax data, about 50,000 declarations each were made in the income bracket of `50 lakh-`1 crore and `1 crore plus during April 2010–March 2011. The number increased to about 159,000 and 119,000 respectively in April 2015-March 2016.
The government has also tightened norms for quoting the permanent account number (PAN) in transactions, and the dual move was expected to help tax authorities track the movement of wealth and prevent accumulation of unaccounted wealth.
“It will not be the salaried people who will try to evade disclosures as they are under a proper channel of income and salary is being paid. Those who have business income or are self employed are the ones who will skip disclosure,” Chadha said.