Reporting Foreign Stocks in ITR: Clarification Needed

Different Reporting Periods and Tax Collection Discrepancies

Taxpayers in India are required to report foreign investments in their income tax return (ITR) according to the calendar year, unlike other disclosures that follow the financial year. However, this has created confusion and discrepancies when it comes to claiming refunds for tax collection at source (TCS) on foreign stocks.

Need for Proper Reporting and Refund Claims

For the assessment year 2023, taxpayers should have declared foreign investments made between January 1, 2022, and December 31, 2022, in their ITR. However, individuals like Akhil (no last name provided) encountered issues when claiming a refund on the TCS deducted from stocks purchased in February of the following year. The discrepancy arose because the reporting is based on the calendar year, while the TCS is reflected in Form 26AS based on the financial year.

Time-Limited Refund Claims and Revised ITR

To avoid lapsing of credit, taxpayers must claim the refund for transactions made by March 31 of the current year. It is necessary to report and disclose foreign stocks bought from January onwards in the next assessment year. Akhil’s chartered accountant revised the ITR to include those stocks that were missed out initially to rectify the situation.

Separating TCS from Income

Experts like Mayank Mohanka and Prakash Hegde emphasized that TCS on foreign remittance should not be linked to income from foreign assets. Claiming a refund on TCS deductions does not require declaring the expenditure in the ITR, similar to claiming a refund on TCS deducted on personal use items like cars. The same principle applies to TDS deducted on employee stock option plans (ESOPs) received from foreign parent companies.

Recommendations and Intimations from Tax Department

While acknowledging this as a genuine irregularity, it is advisable for taxpayers with foreign investments not to revise their returns unless they receive an intimation from the tax department. Gautam Nayak suggests that some of these intimations could be erroneous, citing previous instances of mistaken notices sent to taxpayers regarding Section 80P deductions.

It is crucial for taxpayers to seek clarification from authorities and follow the proper reporting guidelines to ensure accurate tax compliance and refund claims.

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