Resident Indians with foreign income or assets must disclose these in their income tax returns (ITRs) to ensure compliance with the Income Tax Act and the Black Money Act, 2015. Foreign assets include bank accounts, equity shares, property and other capital assets, while foreign income covers dividends, interest and the like sources. Residents, as defined in the Income Tax Act, include individuals who meet specific residency criteria, Hindu undivided families, companies or corporations with Indian management. Disclosures must be made in applicable ITR schedules such as Schedule FA (Foreign Assets), Schedule FSI (Foreign Income) and Schedule TR (Tax Credit). For tax benefits under the Double Tax Avoidance Agreement (DTAA), form 67 must also be submitted.
Timely disclosure before the due date under Section 139(1) is essential to avoid penalties. Delayed or revised returns can be submitted until 31 December 2024, if foreign income or assets have been missed before. Failure to comply could lead to a penalty of Rs 10 lakh on valuable assets or prosecution under the Black Money Act. Disclosure ensures compliance, prevents double taxation and avoids penalties. Taxpayers must provide accurate details of their foreign holdings and income using correct ITR forms and schedules, with guidance available on the Income Tax Department’s portal.
Income Tax Department
The Central Board of Direct Taxes
Explanation of Foreign assets and income
1. Who must disclose foreign assets/income?
- All residents of India, who have foreign income or foreign assets.
2. Who is a resident Indian?
- A person who has stayed 182 days or more in India in any previous year, or An individual who has stayed 365 days or more in India in the previous four years and 60 days or more in the previous year,
- A Hindu Undivided Family (HUF), Firm or Association of Persons (AOP) is resident in India, except where the control and management of its affairs is wholly situated outside India,
- A company which is Indian company or a company which has its place of effective management in India.
3. What is included in foreign income and assets?
- Foreign assets include foreign bank accounts, foreign shares and debt interest, financial interest in an entity/business, real property, any other capital assets, any beneficial interest in any of the foreign assets, etc.
- Foreign income includes foreign income in the form of interest, dividend, gross receipts, redemption, other etc.
4. Where to disclose foreign income and assets?
- By selecting the correct ITR form (other than ITR-1 and ITR-4), as applicable, as per your details.
- ITR-1 and ITR-4 do not have Schedule FA, Schedule FSI and Schedule TR.
5. When to disclose foreign income and assets?
- By declaring in income tax return, applicable, for the assessment year, when the taxpayer is a resident of India in the previous year.
- By filing applicable return of income before due date under Section 139(1) of Income-Tax Act,1961.
6. Where to disclose foreign assets and income in ITR?
- Schedule FA is for providing information about foreign assets and income from all sources outside India.
- Schedule FSI is for providing information about income outside India and tax benefits.
- Schedule TR is for providing details of summary of tax credits claimed for taxes paid outside India.
7. How to disclose foreign income and assets?
- Collect all relevant information about foreign assets (including type of asset, country, address, date of acquisition, present value of asset, cost of acquisition, income generated).
- Collect information on all foreign income (including type of income, amount earned, country, tax paid on foreign income)
- Fill the necessary details in the applicable schedules by referring to the step-by-step guide available at income tax.gov.in
- Apply for a tax benefit under a double tax avoidance agreement, where applicable, by completing form 67, in addition to schedule TR.
8. What should be done if the income tax return is not submitted before the due date?
- If the return is not completed, the delayed return can be completed until December 31, 2024.
- Foreign assets and income must be declared even if the income is below the taxable limit.
9. What do you do if the income tax return is already completed, but foreign assets and income are not declared?
- Revise your return before the revised return due date ie. 31 December 2024.
- Select the correct ITR form while filing revised return (if earlier ITR-1 or ITR-4 filed).
- Enter details of foreign income and assets in Schedule FA, Schedule FSI and Schedule TR.
10. What are the benefits of disclosing foreign assets and income?
- Fulfillment of disclosure requirements under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
- Avoidance of double taxation, in relation to income earned outside, where taxes have already been paid.
- Prevention of penalties related to non-disclosure and misrepresentation under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
11. What are the implications of secrecy for foreign income and assets?
- Assessment proceedings may be initiated under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
- Penalty of Rs.10 lakh can be levied, if the aggregate value of an asset or assets (other than fixed property) exceed twenty lakh Rupees:
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- If a person who has foreign assets and income fails to provide the return of income, according to § 42 of the BMA, 2015.
- If the taxpayer fails to furnish an information or furnishes false information about an asset (including economic interests in any entity) situated outside India in return for income, under section 42 of the BMA, 2015.
- Prosecution can be initiated under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
