ITR filing: The Income Tax Department has brought in some updates in the Annual Information Statement (AIS). As per the updated details, now AIS have to report the financial transactions in a given financial year. Banks have been asked to separately report total foreign exchange (forex) spends, including all transactions made using credit, debit, or forex cards.
This has been done to keep a tab on international travel expenses, online purchases from foreign websites, remittances abroad, and direct purchases of foreign currency. Before this, forex transactions were reported under the broad category of credit card spends.
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While the precise limit for documenting these transactions has not been defined, it is apparent that substantial expenditures, for instance, Rs 10 lakh or above for shopping while traveling abroad with an Indian credit card, are being conspicuously highlighted, according to experts.
What are the changes
If you have traveled internationally and utilised your credit, debit, or forex card, made purchases from foreign websites, sent money overseas, or exchanged currency, it is crucial to reconcile the information recorded in your Accounting Information System (AIS) with the real transactions. This verification is necessary because any disparities between your Income Tax Return (ITR) and the data in the AIS could lead to inquiries from the tax authorities, requiring you to provide an explanation for the discrepancies.
According to experts, transactions made using debit, credit, or forex cards are recorded in your Accounting Information System (AIS) through two primary sources of information: Tax Collected at Source (TCS) filings related to Liberalized Remittance Scheme (LRS) transactions, and Specified Financial Transactions (SFT) filings submitted by different reporting entities.
Threshold limits for TCS on foreign transactions
Dr. Suresh Surana told the Economic Times that foreign transactions falling under LRS shall be subject to TCS, which would be reflected in the AIS.
Nature of Transaction Threshold for Collection
> LRS for the purpose of educational loan obtained from financial institution mentioned under section 80E
Up to Rs 7 lakh- nil
Above Rs 7 lakh- 0.5%
> LRS for the purpose of education other than the purpose mentioned in serial number 1 and for medical treatment
Up to Rs 7 lakh- nil
Above Rs 7 lakh- 5%
> Any other LRS remittance other than above
Up to Rs 7 lakh- nil
Above Rs 7 lakh- 20%
> Purchase of overseas tour program package
Up to Rs 7 lakh- 5%
Above Rs 7 lakh- 20%
Filing ITR for foreign transactions
Mere capture of financial information in the AIS does not warrant that you file an ITR. This is because ITR filing depends on earning an income above the basic exemption limit or conducting certain specified transactions in the respective financial year.
“If you have made foreign transactions using an Indian credit card, these transactions will be recorded in the AIS. The AIS will capture these transactions, but the requirement to file an ITR is mainly based on your income level or if you have conducted certain specified transactions,” Isha Jaiswal, a professional Chartered Accountant, told ET.
When should one file ITR for foreign transactions
Dr Surana said some of the specified transactions where you have to file ITR irrespective of income level:
> If the taxpayer has incurred aggregate expenditure in excess of Rs 2 lakh for himself or any other person for travel to a foreign country, or
> If a taxpayer has any foreign assets or
> If the taxpayer is enrolled as a signing authority in any account located outside India.
What should taxpayers note
1. Before submitting the Income Tax Return (ITR), taxpayers should review their Annual Information Statement (AIS) thoroughly.
2. It is essential for taxpayers to ensure that all credit card and currency transactions are accurately disclosed in the AIS, and that they have appropriately reported any high-value transactions in their ITR.
3. This proactive approach will help to prevent discrepancies between the information provided in the ITR and the data available in the AIS.
4. In the event of any discrepancies between the financial records and the AIS, it is crucial for individuals to promptly reconcile the differences.
5. If reconciling the facts presents challenges, taxpayers are advised to seek assistance from a qualified tax expert to address any issues effectively.