Declaring foreign assets in tax returns form: What Indians must know

Taxpayers who are resident and 'ordinarily resident' have to disclose their offshore accounts and assets

Taxpayers who earn income from foreign sources or hold overseas assets must disclose details, including salary, interest, dividends, rental income, and capital gains. They also have to disclose their foreign assets like bank accounts, properties and financial interests.

 

It is mandatory for Indian residents to disclose their foreign assets and income in their Income Tax Return (ITR). Specifically, Schedule FA (Foreign Assets) in the ITR form is meant for reporting foreign assets, and Schedule FSI (Foreign Source Income) is for reporting income from foreign sources.

 

The Income Tax department has urged taxpayers to promptly disclose any foreign assets or income in Schedule FA (Foreign Asset) of the ITR form and Schedule FSI (Foreign Source Income). Furthermore, taxpayers can claim relief for taxes paid abroad by completing Schedule TR (Tax Relief).

 

The Central Board of Direct Taxes (CBDT) last month launched a Compliance-Cum-Awareness Campaign for Assessment Year (AY) 2024-25 to assist taxpayers in accurately completing Schedule Foreign Assets (Schedule FA) and reporting income from foreign sources (Schedule FSI) in their Income Tax Returns (ITR).

 

What income must be disclosed?

 

Taxpayers who are resident and ordinarily resident (ROR) are required to disclose their offshore account/ assets, including financial interest in an entity outside India, as beneficial owner or otherwise, including

 

Foreign equity and debt investments

 

Foreign custodian accounts

 

Foreign depository accounts

 

Immovable property outside India

 

Cash and equivalent

 

Jewels or metals convertible to cash held outside India

 

Loans and advances given

 

Unquoted equity shares held in private companies.

 

Investment in business outside India

 

Any other foreign asset or financial interest.

 

Passive income from above foreign assets.

 

Tax authorities have the power to frame assessments for undisclosed foreign income and assets under Section 10 of the Black Money Act after taking into account information received in respect of such foreign assets,” said Ankit Namdeo, managing partner, ANK Advisors.   

“The authorities have the power to collect documents/ evidence during the enquiry and thereafter determine the sum payable by the taxpayer. Where the taxpayer fails to comply with the notice shared by the authorities, they may proceed to frame the assessment to the best of their judgment,” he said.

 

“Taxpayers must provide the nature of income, country of origin, taxes paid abroad, and account details for claiming relief under the Double Tax Avoidance Agreement (DTAA). A tax residency certificate (TRC) and Form 67 are mandatory for claiming foreign tax credits,” said Pallav Pradyumn Narang, partner at CNK (chartered accountant firm).

 

“Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, non-disclosure of foreign assets or income would attract a hefty penalty of Rs 10 lakh and might also lead to imprisonment of up to seven years. Therefore, it is imperative for taxpayers to adequately and timely make disclosures of the foreign assets and income,” said Kunal Savani, partner at law firm Cyril Amarchand Mangaldas.