Foreign income

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ashok bhurani (Querist)
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08 April 2016 How to report foreign income in Indian Income Tax Returns and Indian income in foreign Income Tax Returns when there is difference in the accounting year. In India accounting year is April to March and in foreign countries it is January to December. Will it be sufficient, if foreign income from January to December is reported in Indian Income Tax Returns and Indian income from April to March is reported in foreign income tax returns on the basis of income tax return filed in respective country.

Amol S Joglekar

Amol S Joglekar (Expert)
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08 April 2016 No. That will not be a good disclosure and good governance on your part. You need to prepare the statements as per the respective countries financial years.

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ashok bhurani

ashok bhurani (Querist)
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08 April 2016 Thanks Mr. Joglekar
One more question: If I need to follow the financial year of respective country, then how to quantify the amount of income/net profit. For example, there is fixed assets in Indian Balance Sheet, say upto 31st December which is sold out say between January to March. So as per Indian Income Tax Returns, the entire amount of sale proceeds to be deducted from block of assets. In such a case how the treatment will be given of depreciation amount for the purpose of reporting the Indian Income in foreign income tax returns in which details are to be declared upto 31st December.

Amol S Joglekar

Amol S Joglekar (Expert)
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09 April 2016 In that case, upto 31st Dec, since the asset was not sold, (or rather sold after 31st Dec), depreciation needs to be calculated and accordingly the income shall be reported.
The point to be born in mind is "accountancy" and "income tax" may NOT go hand in hand. One needs to keep the statement of reconciliation ready every year.
Your views please.

ashok bhurani

ashok bhurani (Querist)
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11 April 2016 Thanks Mr. Amol
I talked to my friend about the above issue, and he said just report whatever is there in the financial statement from January to December. Taking the above example of depreciation, he said if there is no depreciation in the financial statement during calender year (as we charge depreciation at year end), do not report the same and during the next financial year, report the depreciation which is debited to profit & loss account in March following next to end of calender year. What is your view on the same.

Amol S Joglekar

Amol S Joglekar (Expert)
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11 April 2016 Size of the organisation might play some role on such issue. But my view is : when INCOME is to be reported in Indian ITR, it should have been computed as per Indian income tax act, whether or not it is foreign income. That is what is expected. IND AS are also aiming at that, so also IFRS.

ashok bhurani

ashok bhurani (Querist)
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11 April 2016 That is OK Mr. Amol. So far as reporting in Indian Income Tax is concerned there is not much issue. My issue is to report the Indian Income for filing returns in US

Amol S Joglekar

Amol S Joglekar (Expert)
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12 April 2016 whatever I have gathered from the experiences of my USA based Indian Clients...... They seem to be under some tension at all the times, while filing the income tax return in USA and reporting Indian income.....
And for the companies having on shore as well as off shore companies....I have seen them making year end twice... on 31st dec(for USA purpose) as well as 31st mar for Indian purpose.
As I said in my earlier reply, the quantum,magnitude of income, size of organisation etc may play a role in NOT doing 2 year ending viz 31st dec and 31st Mar.
But it is a regular practice to prepare the financial statements as on 31st Dec as well as 31st Mar.

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