Hiding foreign assets? Black Money Act provisions carry heavy penalties

Tax department warns of penalties, details how to revise returns by December 31 deadline

The Central Board of Direct Taxes (CBDT) has identified over 25,000 taxpayers who failed to disclose foreign assets and income in their tax filings for the financial year 2024–25. It has begun sending SMS and email alerts advising them to revise their returns by December end.

 

Disclosing foreign assets and income in ITR

 

Residents and ordinarily residents must report all foreign assets in Schedule FA, including overseas bank or custodial accounts, foreign equity or debt interests (including ESOPs), immovable property, trusts, and any asset where the taxpayer is a legal owner, beneficial owner or beneficiary.

 

“Even assets held for a single day or those that generated no income must be disclosed, with no minimum threshold. All foreign-sourced income must be reported in Schedule FA or FSI (foreign source income). Taxes paid abroad must be disclosed in Schedule TR (tax relief) to claim foreign tax credit,” says Rohinton Sidhwa, partner, Deloitte India.

 

Schedule FA and FSI disclosures

 

Every foreign account, including dormant, closed, joint or inherited accounts, must be reported. Details such as acquisition dates, peak balances and ownership percentages must be accurate.

 

“Assessees should not estimate values, skip low-balance accounts or combine the value of multiple assets. Schedule FA must follow the calendar year, not the financial year. In Schedule FSI/DTAA, income type, country code and tax credit details must be filled carefully and match Form 67 and foreign tax deduction certificates,” says Sandeep Jhunjhunwala, partner, Nangia Group. 

 

How to respond to an alert

 

Taxpayers should first verify the authenticity of the alert through the e-filing portal. “Once confirmed, they must review the flagged foreign asset or income and collect supporting documents such as bank statements, investment reports, Form 16, ESOP records and overseas tax papers to check for omissions. If something was missed, they should promptly revise the ITR or file an updated return, as applicable,” says Jhunjhunwala.

 

How to revise ITR

 

A missed foreign asset or income can be corrected through a revised return under Section 139(5) until December 31 or before assessment is completed.

 

“The revised ITR must correctly update Schedules FA, FSI and TR. If this window has closed, an updated return under Section 139(8A) can be filed within 48 months, subject to certain restrictions for foreign assets. Form 67 must be filed if foreign tax credit is claimed,” says Jhunjhunwala.

 

Additional tax and interest must be paid before filing the return. Sidhwa adds that taxpayers who have foreign assets or income should not use ITR-1 and ITR-4. A return may be revised multiple times until December 31, 2025, provided assessment has not begun.

 

Mistakes to avoid

 

Common errors while filing Schedule FA include reporting only income-generating assets, reporting holding status as on March 31 instead of December 31, and relying solely on AIS or Form 26AS, which often omit foreign income and holdings.

 

“Errors also arise from using incorrect exchange rates instead of the prescribed State Bank of India (SBI) telegraphic transfer buying rate, misclassifying residential status — particularly resident but not ordinarily resident (RNOR) versus resident — and overlooking the implications of the Black Money Act,” says Gaurav Bhuddi, senior manager, direct tax division, Dewan P N Chopra & Co.

 

Tax and penalties

 

Undisclosed foreign income is taxable at normal slab rates with interest, and penalties of up to 200 per cent for under-reporting or misreporting.

 

Bhuddi observes that the Black Money Act imposes a tax of 30 per cent on undisclosed foreign assets (without deductions or set-off), along with a penalty of three times the tax. Additional fixed penalties include Rs 10 lakh for non-filing of returns, and Rs 10 lakh per year for inaccurately reporting or failing to furnish details in Schedule FA.

 

If you do not have foreign assets

 

Those receiving a CBDT alert despite having no foreign holdings must respond promptly via the compliance portal or as instructed.

 

“Individuals should verify their AIS or TIS on the online tax portal and file a rectification request via the e-Nivaran portal if the information is incorrect,” says Deepashree Shetty, partner–global employer services, tax and regulatory services, BDO India.

 

Shetty adds that taxpayers should maintain supporting documents such as bank statements and investment proofs.

Key provisions you should be aware of

• Sections 139(1)&139(5): Mandatory reporting of foreign assets; non-reporting cannot be corrected once time for revision has lapsed
• Sections 147/148: Reassessment can be initiated for escaped foreign income or unreported foreign assets
• Section 270A: Penalties for under-reporting or misreporting of income
• Sections 276C, 276CC & 277: Prosecution for wilful attempt to evade tax, failure to furnish returns, or for making false statements

 

The writer is a Delhi-based independent journalist