Small incomes to overseas assets: Why missing them in ITR can cost big

Your ITR isn't just about salary. From small dividends to foreign holding, ESOPs and even low-balance accounts need disclosure or you risk heavy penalties.

Taxpayers, at times, mention their salary and big investments in their income tax returns (ITRs) but miss smaller income or foreign holdings. Experts caution that such omissions, even unintentional, can attract penalties by tax authorities.

 

Commonly missed income and assets

According to Shefali Mundra, chartered accountant & tax expert at ClearTax, slip-ups often include unreported reinvested dividends, bank or fixed deposit interest, peer-to-peer lending income, and exercised ESOPs or RSUs issued by foreign parent companies.

 

“A frequent blind spot is mixing up brokerage platforms, gains booked via one broker are declared, but holdings via another are overlooked,” she noted.

 

On foreign assets, Mundra stressed that even small overseas bank or brokerage accounts, foreign ETFs, or crypto held abroad must be disclosed.

 

She pointed to a Mumbai Tribunal ruling where a taxpayer was fined Rs 10 lakh per year under the Black Money Act for failing to report a foreign fund investment, despite eventually disclosing it.

 

Aashwyn Singh, senior associate at SKV Law Offices, added that taxpayers also under-report capital gains from equities, real estate transactions involving cash, and crypto holdings. He cited income tax notices already sent to over 44,000 taxpayers for not reporting virtual digital asset income despite mandatory Schedule VDA disclosures.

 

How and where to disclose

Experts stressed that Resident and Ordinarily Resident (ROR) individuals must report foreign assets in Schedule FA of their ITRs, and income in Schedule FSI, with relief claimed in Schedule TR. Crypto assets are additionally reported under Schedule VDA.

 

“Reporting must align with the calendar year, not the April-March financial year,” Mundra explained.

 

Suresh Surana, chartered accountant, clarified that disclosures extend to foreign bank accounts, equities, annuity contracts, immovable property, and even signing authority in foreign accounts.

 

Failure to report can invite penalties of up to Rs 10 lakh per year per asset, Surana warned, with prosecution leading to jail terms of six months to seven years.

 

Rising detection risk

Detection risk is rising sharply. Singh said India receives detailed data from over 100 countries under the Common Reporting Standard (CRS) and FATCA with the US, which is algorithmically matched against ITRs.

 

“Even low-balance or dormant accounts are flagged,” he said.

 

How to stay compliant

 

Experts recommend simple checks:

• Track all income, including small bank interest, rental income, or gifts. 
• Reconcile Form 16, 26AS, AIS, and TIS before filing. 
• Maintain records of foreign assets, year-end balances, and conversion rates. 
• File updated or revised returns if something was missed, and keep documents for at least six years.

“Taxpayers often assume only salary matters, but interest, dividends, rental income and even certain gifts must be tracked and reconciled with Form 26AS, AIS and TIS before filing,” said Ritika Nayyar, partner at Singhania & Co. 

“Compliance is about discipline,” Mundra summed up. “Even minor omissions can trigger disproportionate consequences.”