Taxpayers who qualify as residents for the purpose of income tax in India are required to disclose their foreign income and assets while filing their income tax return (ITR) every financial year. The disclosure is made through Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income).
If a taxpayer fails to accurately report such information, then they can face serious consequences. Non-disclosure of such income and assets can lead to a penalty of ₹10 lakhs, highlighting the seriousness of the tax department in dealing with such transactions.
Who needs to report foreign assets?
As per the income tax law, Indian residents qualified as ‘Resident and Ordinarily Resident’ must disclose their foreign assets and income in their tax return.
While filing ITR, the taxpayer is required to include details about the bank account in a foreign country or the signing authority of the accounts held abroad. Such individuals must also disclose their in real estate, stocks, mutual funds or any other financial instruments, according to a Cleartax report.
What is the deadline for reporting foreign assets?
Since foreign assets and income are required to be disclosed while filing tax return, the deadline is aligned with the regular income tax filing due date. For most taxpayers who do not require an audit, the is July 31 of the relevant assessment year.
However, if your foreign assets were declared incorrectly or not declared at all, a taxpayer can file a revised return by March 31 of the next year. Earlier, the deadline was December 31 of the relevant assessment year or before the tax department completes assessment, whichever is earlier.
However, the latest policy updates have extended this deadline, giving taxpayers a longer window to correct mistakes. Let’s say you file your ITR for FY 2025-26 on July 15 this year but later in September, you discover that you missed reporting your foreign assets or income, then you can simply simply file a revised return until March 31, 2027. This is an advisable route for correcting mistakes instead of waiting for the income tax department to flag it.
One of the biggest advantages of filing a revised return is that the taxpayer is not required to pay any penalties. However if you did not file original return within the due date, then the ITR is treated as a belated return, which comes with extra fees under separate provisions.
A person filing belated return until December 31 of the relevant assessment year will be charged a penalty of ₹5,000 or ₹1,000, depending on their income.
What are the consequences of not declaring foreign assets or income in ITR?
A taxpayer could face severe penalties if they provide incorrect information or fail to disclose details of their foreign assets. The penalties for failing to disclose or misrepresenting foreign assets in schedule FA of the ITR are as follows:
- A penalty of up to ₹10 lakh may be levied for each year in which foreign assets remain undisclosed.
- Failure to report foreign assets in the ITR is treated as willful evasion of tax, potentially attracting imprisonment of up to seven years.
- Non-declaration also revokes your right to claim relief under the Double Taxation Avoidance Agreement for your foreign income.
- Taxpayers who do not disclose foreign income and assets may lose the benefit of claiming relief under applicable Double Taxation Avoidance Agreements ().
- Undisclosed foreign assets can invite scrutiny, notices, and prosecution proceedings under the Black Money Act.
Other than avoiding severe penalties and other consequences, disclosing accurate information about your foreign assets and income also comes with several other benefits for the tax resident.
Accurate disclosure help taxpayers claim tax relief for the taxes paid in a foreign country by filling in Schedule TR (Tax Relief) and taking advantage of a double taxation avoidance agreement.