Demonetisation – meaning for a salaried individual
The Financial Express
Tax partner & India Mobility leader, EY India
Salaried people with other sources of income should ensure that the cash deposits in banks till December 31 has an appropriate source and taxes have been paid. Salaried individuals should take all precautionary steps to ensure they are compliant as far as salary income is concerned. (PTI)
The effect of demonetisation is comparatively less on the salaried class as they receive salary after tax. However, one should be mindful of other sources of income where taxes may not have been deducted or deducted at a lower rate, such as for income from family business, from sale of property, rental income, etc.
Salaried people with other sources of income should ensure that the cash deposits in banks till December 31 has an appropriate source and taxes have been paid. Salaried individuals should take all precautionary steps to ensure they are compliant as far as salary income is concerned.
Tax on foreign income
Employees who travel abroad on assignments need to be aware of the rules governing taxability of foreign salary income in India, when they qualify as a resident in India. There could be situations where taxes are not deducted by the Indian employer on the foreign salary received. In such a situation, it would be the responsibility of the employee to ensure that he/she is compliant with the tax laws. Although in some cases, one can avail the benefit of double taxation avoidance agreements in place between various countries, there is an obligation for an individual qualifying as a resident to report the foreign income or assets in the return of income.
While some companies ensure that their employees on overseas assignment are tax compliant, by providing tax preparation assistance as a part of their foreign assignment, it is also the responsibility of the individual to ensure that they are tax compliant.
Some of the key takeaways from the demonetisation drive for a salaried individual are:
Ensure that all income/assets are disclosed to the tax authorities. If an individual has gone on a foreign assignment, depending upon his/her residential status in India, the foreign income/assets may be required to be reported in the tax return.
Ensure that taxes are paid or deducted at source on other sources of income like house rent, capital gains and bank interest.
Maintain sufficient documents or proofs with respect to income or assets and also taxes paid or deducted. For example, if an individual has let out property, it would be appropriate to keep the copies of rental agreement, housing loan certificate (if applicable) and in case of bank interest income, copy of interest certificate, TDS certificate, Form 26AS, etc.
Keep invoices/ proof of purchase of high value expenditure, for example, jewellery, expensive watches, etc.
To substantiate investments made in cash, keep record of the source like drawings from bank, gifts and payments received in cash.