Do you often look forward to those family vacations when you relax at your holiday home and can sun in the Hamptons or ski down the snowy and beautiful slopes of Aspen? Well, these dreams may soon give you jitters as the Income Tax Department is reportedly keeping an eye on Indians making offshore investments on property.
The I-T department has questioned about 12 people in the last two months for not paying taxes on income from property abroad. Taxmen handling the tax evasion case explained that nine of the 10 Indians either did not know or did not bother about the rule, which says that tax must be paid on offshore properties, whether rented or not.
"Except the one which is self-occupied, a person has to pay tax on the rent or the deemed rental income from all properties he owns. What many don't realise is that this is applicable for local as well as overseas properties," senior chartered accountant Dilip Lakhani told the Economic Times.
"There are many who don't pay tax on deemed rent even from local properties. As far as foreign properties go, most have ignored this provision."
The cases of evasion came to light during scrutiny assessment queries by tax officials who pick returns filed by tax payers at random and study it in detail.
Mitil Chokshi, senior partner at the audit and business advisory firm Chokshi & Chokshi LLP, also told the business daily that a lot of tax payers also do not disclose the actual amount of rent received from these offshore properties.
"There are assessees who disclose a nominal rent which may be lower than the fair market value. To support such nominal rent amount, they obtain quotations from brokers and agents. Today, the (I-T) department is questioning the rationale of these notional rent amounts. But one need not fear if actual rent has been offered for tax," he explained.
Meanwhile, the tax officials are also said to be keeping tabs on people's social media accounts, mostly Instagram and Facebook, in a bid to ensure that a person's tax declarations match with their spending patterns. So in case you are one of those social media users who constantly updates your Instagram and Facebook pages with images of your latest shopping hauls and fancy vacations, it's time for you to be cautious.
This way, the IT department officials will be able to figure out the discrepancies without physically carrying out raids, sources told Bloomberg on condition of anonymity.
While the Finance Ministry has not spoken about the initiative yet, it has been said that keeping tabs on people's social media accounts to learn their spending patterns will reduce chances of tax evasion and may even increase tax collection by up to 30-40 percent.
