ITAT Overturns ₹10 Lakh Penalty for Non-Disclosure of ESOPs in Income Tax Returns
ITAT cancels employee's ₹10 lakh penalty for non-disclosure of ESOPs in ITR. Here's how you can avoid the same mistake
Mint
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Kishore Kumar Rajagopal was fined ₹10 lakh for failing to disclose employee stock options (ESOPs) in his income tax returns for AY16-17. The Income Tax Appellate Tribunal (ITAT) Chennai overturned the penalty, citing accidental omission rather than deliberate concealment. Taxpayers can avoid similar mistakes by correctly reporting foreign assets in their returns.
- 01Kishore Kumar Rajagopal faced a ₹10 lakh penalty for not disclosing ESOPs in his income tax returns.
- 02The ITAT Chennai ruled in his favor, stating the omission was accidental.
- 03Taxpayers must disclose foreign assets, including ESOPs, in their income tax returns.
- 04A proposed scheme allows taxpayers to declare undisclosed foreign assets with reduced penalties.
- 05The six-month window for compliance under the new scheme has yet to be announced.
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Kishore Kumar Rajagopal was penalized ₹10 lakh by the Income-Tax department for failing to disclose employee stock options (ESOPs) from his employment with a UK subsidiary. He challenged this penalty, arguing that the omission was accidental and not a deliberate attempt to evade taxes. The Income Tax Appellate Tribunal (ITAT) Chennai ruled in favor of Rajagopal, emphasizing that he had paid tax deducted at source (TDS) on the ESOPs and declared capital gains in subsequent years, indicating that the transaction was within the tax net. The ITAT noted that the omission stemmed from confusion rather than intentional concealment. To prevent similar issues, taxpayers must accurately report all foreign assets, including ESOPs, in the Schedule FA of their income tax returns. Furthermore, Finance Minister Nirmala Sitharaman announced a proposed scheme allowing taxpayers to voluntarily disclose any undisclosed foreign assets or income, offering amnesty from prosecution under the Black Money Act. This scheme, known as the Foreign Assets of Small Taxpayers—Disclosure Scheme, 2026 (FAST-DS), aims to simplify compliance for taxpayers with undisclosed income or assets.
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This ruling clarifies the importance of accurately reporting foreign assets, which can prevent significant penalties for taxpayers.
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