ITR 2024: Declare foreign assets by Dec 31 or face Rs 10 lakh fine

Declare your foreign assets or pay Rs 10 lakh penalty! The Income Tax Department on Sunday warned taxpayers that failure to disclose foreign assets or income earned abroad in their income tax return (ITR) could result in a Rs 10 lakh penalty under India’s anti-black money law. The deadline to submit revised or belated ITRs is December 31.

 

What does foreign asset include?

 

For tax residents of India, a "foreign asset" encompasses a broad range of holdings outside India, including:

Bank accounts

Financial interests in entities

Cash value insurance policies

Annuity contracts

Immovable property

Custodial accounts

Equity and debt interests

 

Trustee or beneficiary roles in trusts

Signing authority over accounts

Other capital assets

 

When must taxpayers declare foreign assets?

 

According to the Income Tax Department, any individual holding foreign assets, even if acquired through disclosed sources or if the income is below the taxable threshold, is "required to fill out the foreign asset (FA) or foreign source income (FSI) schedule in their ITR." An official advisory states, “Failure to disclose foreign asset or income in the ITR can attract a penalty of Rs 10 lakh under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.”

 

Who is required to report foreign assets?

 

Chartered Accountant Akshat Rastogi explained the obligations, saying, “Residents, individuals, and Hindu Undivided Families (HUFs) classified as residents and ordinarily resident (R&OR) are mandated to declare foreign assets in Schedule FA. This ensures transparency in international financial interests and maintains compliance with tax laws.”

 

Rastogi elaborated further:

Schedule FA filing requirement: R&OR individuals and HUFs must file Schedule FA if they hold assets or financial interests abroad or have signing authority in foreign accounts. This requirement applies to individuals holding foreign assets as either beneficial owners or beneficiaries.

 

Fourth Proviso to Section 139(1): This mandates ITR filing for residents holding overseas assets as beneficial owners or those with signing authority over accounts abroad. Beneficiaries of foreign assets are also covered.

 

Fifth Proviso to Section 139(1): Certain exemptions exist for beneficiaries of foreign assets, provided that the asset's income is already included in the income of the beneficial or legal owner.

 

Are there exemptions for foreign citizens?

 

Foreign citizens classified as R&OR but residing in India on a business, employment, or student visa have certain exemptions from disclosing foreign assets in Schedule FA, according to Rastogi. Assets acquired when the foreign national was a non-resident of India do not require reporting, provided no income was derived from these assets during the current financial year.

 

What is Schedule FA in ITR?

 

Schedule Foreign Assets (FA) is a specific section in the ITR where individuals must detail their foreign assets, including foreign shares, mutual funds, or stock options (ESOPs) from foreign companies. As per the Income Tax Act of 1961, residents and ordinarily resident Indians are required to report foreign assets and income sources in the FA schedule, regardless of whether they are subject to taxation in India.

 

Filing Schedule FA: Steps involved

 

For individuals holding foreign assets, completing Schedule FA requires:

1. Identifying asset category: Choose the foreign asset type and its code from a list in the ITR form.

2. Providing asset details: Include information like the asset’s name, address, zip code, country code, and currency.

3. Recording financials: Enter initial investment value, opening balance, peak balance during the year, and closing balance, in both foreign currency and INR.

4. Income and sales details: Provide income generated from the asset and proceeds from asset sales or redemptions during the financial year.

5. Claiming DTAA relief: If applicable, declare reliefs claimed under Double Taxation Avoidance Agreements for income from foreign assets.

 

CBDT’s campaign on undeclared foreign assets

 

In a move to assist taxpayers, the Central Board of Direct Taxes (CBDT) launched a Compliance-Cum-Awareness Campaign on Saturday for the 2024-25 Assessment Year. CBDT’s campaign targets resident taxpayers, reminding them of their responsibilities in declaring foreign assets and income in their ITR.

 

CBDT’s statement confirmed that messages will be sent via SMS and email to those identified through information shared under international agreements, indicating potential foreign assets or income. The messages intend to nudge taxpayers towards accurately completing Schedule FA and Schedule FSI, especially where high-value foreign assets are involved.