The Income Tax Department has issued a crucial reminder for Indian taxpayers who may have overlooked declaring their foreign holdings. If you have not disclosed foreign assets or foreign income in your originally filed Income Tax Return (ITR), you have a final opportunity to rectify this by submitting a revised return. The deadline for this corrective action is December 31 of the relevant assessment year.
What Qualifies as Foreign Income and Assets?
Taxpayers must pay careful attention if they hold any assets outside India or earn income from foreign sources. This includes, but is not limited to, immovable property, bank accounts, investments, and insurance policies abroad. Salaried individuals, especially those working for multinational corporations (MNCs), need to specifically declare income from foreign-sourced Employee Stock Options (ESOPs), Restricted Stock Units (RSUs), bonus shares, or other such benefits, as these are fully liable for taxation in India.
Choosing the Correct ITR Form and Required Schedules
A critical step is selecting the appropriate ITR form. The department explicitly warns that the two simplest forms, ITR-1 (Sahaj) and ITR-4 (Sugam), do not contain the necessary Schedule FA for foreign asset disclosure. Taxpayers with any foreign assets or income must avoid these forms and opt for others like ITR-2 or ITR-3 which include the mandatory schedules.
The reporting is done primarily through two key schedules in the ITR form:
Schedule FA (Foreign Assets): This schedule is for detailing all foreign assets held at any time during the calendar year ending December 31. It requires comprehensive reporting across multiple tables:
- Foreign depository and custodian accounts (peak & closing balance).
- Foreign equity and debt investments.
- Foreign insurance or annuity contracts.
- Financial interest in any foreign entity.
- Immovable property located outside India.
- Other capital assets and foreign trusts.
Schedule FSI (Foreign Source Income): This schedule is dedicated to reporting income earned from sources outside India. Key details required include the country code (using ISD code), the Taxpayer Identification Number (TIN) or passport number from that country, and details of any tax paid abroad.
Claiming Tax Relief and Reporting Conversion Rates
If tax has been paid on foreign income in another country, taxpayers can claim relief in India to avoid double taxation. This is done by filing Schedule TR (Tax Relief) along with Form 67 online. The claim must reference the relevant article of the applicable Double Taxation Avoidance Agreement (DTAA).
The IT Department mandates that all values of foreign assets, peak balances, and income must be converted into Indian Rupees using a specific rate. The conversion must use the telegraphic transfer buying (TT buying) rate of the foreign currency as quoted by the State Bank of India on the relevant date (date of transaction, peak balance, or year-end).
Failure to comply with these disclosure norms can lead to serious consequences. The Income Tax Department can initiate assessment proceedings, and stringent penalties and prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 may follow. Taxpayers are strongly advised to utilize the revised return window before December 31 to ensure full compliance and avoid legal repercussions.
