During this period of time the biggest question in the mind of any individual would be whether they are required to file Income tax return or not.
Many salaried employee believe that since full TDS has been deducted on their salary and has been deposited there is no need for them to file Income tax return.
Here, first we need to understand is Income tax return is not just a tool to pay Income tax, it is a statement or declaration of your total income during the year to the Income tax department.
Further even if you are not liable to pay tax but if you fulfil any of the conditions for the filing of return mentioned in section 139 of the Income tax act you will have to file Income tax return.
One such condition of section 139 which makes it mandatory to file Income tax return even though you are not otherwise required to file Income tax return is as under:
Fourth proviso to section 139 states as under:
“Provided also that a person, being a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6, who is not required to furnish a return under this sub-section and who at any time during the previous year,—
(a) holds, as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India or has signing authority in any account located outside India; or
(b) is a beneficiary of any asset (including any financial interest in any entity) located outside India,
shall furnish, on or before the due date, a return in respect of his income or loss for the previous year in such form and verified in such manner and setting forth such other particulars as may be prescribed:”
Thus, as per the above proviso an ordinary resident who at any time during the previous year holds any asset outside India or has signing authority in any account outside India or is a beneficiary of any asset outside India, he/ she will have to file their return of income whether or not they are otherwise liable to file return or not.
However, as per fifth proviso the beneficiary won’t be required to file income tax return if the beneficial owner has already disclosed the income in his return. Relevant extract is as under:
“Provided also that nothing contained in the fourth proviso shall apply to an individual, being a beneficiary of any asset (including any financial interest in any entity) located outside India where, income, if any, arising from such asset is includible in the income of the person referred to in clause (a) of that proviso in accordance with the provisions of this Act:”
Important points to keep in mind are as under:
1. It is applicable to any person being a ordinary resident.
2. It is applicable if a person holds any asset outside India or has signing authority in account located outside India.
3. It doesn’t matter whether or not you earn any income out of such investment during the year.
4. This proviso is not applicable to Individual beneficiary of any asset located outside India only when the beneficial owner has already declared income from such asset in his return of income.
Thus, many salaried employee in India who are receiving/ holding RSU of stocks listed outside India, because of this proviso becomes liable to file return of income whether or not they are otherwise required to file return.
To read about taxability of RSU CLICK HERE.
To file Income tax return with us CLICK HERE.