The Central Board of Direct Taxes (CBDT) issued on Thursday evening a circular in the format of an FAQ to make it easier for taxpayers to file their income tax (I-T) returns. The replies largely address taxpayers who are also shareholders in companies, including overseas companies.

One of the new requirements in ITR-2 and ITR-3 forms was that taxpayers who held unlisted equity shares had to provide the PAN number of the concerned company. A challenge arose owing to vanished companies — those that were previously listed, but on delisting disappeared without a trace. CBDT has clarified that in such cases, the PAN of the company may be furnished if it is available. If it is not available, the taxpayer can enter a default value in place of PAN as ‘NNNN0000N’.

Unlisted shares of a foreign company are also required to be reported — this is in addition to the requirement of disclosing all foreign shares (including listed) in another schedule of the I-T return, clarifies CBDT. As co-operative banks for credit societies are not registered under the Companies Act, taxpayers holding unlisted equity shares in such entities are not required to report it.

Individuals who incurred long-term capital gains (LTCGs) or who met other criteria such as having two houses had to use ITR-2. Businessmen and professionals use ITR-3. The due date for filing of the I-T return has been extended by a month to August end for certain categories of taxpayers, including the salaried, professionals and business persons who do not have to get their accounts audited. 

In its edition of July 18, TOI had pointed out the problem of entering PAN of vanished companies. “In the absence of this clarification, the fear was that if PAN is not available and is not filled in the I-T return, the return itself would be treated as defective. Further, there was a likelihood that the taxpayer could be regarded as concealing information and be subject to penal consequences. Permitting quoting of a dummy PAN takes care of this issue,” explains Ameet Patel, chairperson of the taxation committee at Bombay Chartered Accountants’ Society (BCAS), which had made a representation in this regard.

Several of the FAQs deal with reporting of unlisted shares. If unlisted equity shares are acquired as a gift or under a will, or on amalgamation, merger, demerger, bonus issue, etc, the CBDT clarifies that the cost of acquisition may be filled in as zero. It adds that such details are required only for the purpose of reporting and are not relevant for computation of the total income of the taxpayer.

CBDT has also clarified that it is not mandatory to provide scrip-wise computation of LTCGs arising on sale of listed shares and equity linked mutual funds. This also required disclosure of ISIN details of the companies and MFs, leading to problems for taxpayers. The FAQ mentions that, alternatively, taxpayers can themselves compute the aggregate long-term gain or loss manually and input the same directly in the schedule. A section of chartered accountants feels it would have been ideal if CBDT permitted scrip-wise computation without seeking the ISIN details of the relevant companies or MF whose securities were sold.

Queries of non-residents have also been addressed. For instance, if the taxpayer identification number (TIN) is not allotted in the residence country, the passport number can be mentioned instead. However, some requirements are perplexing. “Why should a non-resident need to give details of his foreign company directorship in an I-T return filed in India? It serves no purpose for Indian taxation,” said Patel.

Source : https://timesofindia.indiatimes.com/business/india-business/tax-relief-for-unlisted-vanished-cos-shares/articleshow/70612719.cms