The Central Board for Direct Taxes (“CBDT”) issued a circular, clarifying the queries raised by individuals and other stakeholders on filing their Income Tax Return (“ITR”) for the assessment year 2019-20.

The circular addresses critical questions such as directorship and holding of shares in a foreign company (along with such other common queries raised by various stakeholders frequently). With regard to directorship and holding of shares in a foreign company, it is clarified by the CBDT that a non-resident or resident but not ordinary residents will also have to provide information about their directorship in the foreign company. CBDT also clarified that the individuals who held shares of a company which were listed on a foreign stock exchange should answer in negative to the question regarding holding of unlisted equity shares in the previous year.

CBDT stated that details of equity shareholding in any entity which is registered under the Companies Act, 2013 and is unlisted is required to be provided in the ITR forms. CBDT clarified that quantitative details of unlisted equity shares transferred by way of gift, will, amalgamation, merger, demerger, or bonus issue is not relevant for the computation of total income tax. The details of unlisted equity shares are required only for reporting purposes. The tax-payers also have to report if they have held the unlisted equity shares as stock-in-trade.

The CBDT further clarified when it comes to reporting transactions involving foreign currency (“Foreign Currency Transactions”), then only those Foreign Currency Transaction relating to business operations in India will need to be reported in Form ITR-6. Form ITR-6 is a form filled by all for-profit companies for claiming exemptions under the Income Tax Act, 1961.

Quick View

The CBDT has issued this circular to clarify frequently as queries of tax-payers regarding filing of their ITR. Although the queries addressed in the circular seems to be straight forward, the tax-payers often face difficulty in understanding the disclosures to be made while filing their ITR. CBDT, upon receiving such queries, has now issued a clarification making the process of filing simpler for the tax-payers.

Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.