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ITR Filing: What are the disclosure requirements for Indian residents who hold foreign assets?

Indian residents holding foreign assets are required to make specific disclosures in their Income Tax Return (ITR) filing, specifically in Schedule FA of ITR-2 or ITR-3. This applies to residents who possess any asset, financial interest in a foreign entity, have signing authority in an overseas account, or earn income from foreign sources. The schedule must be filled by individuals who are residents and ordinarily residents in India, having ownership, beneficial interest, or income from foreign assets during the relevant calendar year.

Detailed Reporting Requirements

Details of foreign assets, even if held for a single day during the calendar year, must be provided. The conversion of foreign currency into Indian Rupees (INR) should be based on the telegraphic transfer buying rate (TTBR) adopted by the State Bank of India in line with RBI guidelines. The reporting is for assets held at any time during the calendar year, and salaried employees with ESOPs in foreign companies must also comply.

Replacement of “Accounting Period” with “Calendar Year”

The Income Tax Department, from Assessment Year 2022-23 onwards, replaced the term “accounting period” with the “calendar year ending as on 31st December” in the ITR Forms. This change mandates taxpayers to furnish details of all foreign assets held between January 1 and December 31 in the returns filed for the relevant assessment year.

Penalties and Prosecution for Non-Disclosure

Penalties under Section 43 of the Black Money (Undisclosed Foreign Income & Assets) Act can amount to Rs. 10,00,000 for residents failing to disclose or furnishing inaccurate information about foreign assets. However, this penalty doesn’t apply if the aggregate balance in one or more foreign bank accounts does not exceed Rs. 5,00,000. Additionally, Section 276C(1) of the Income-Tax Act may lead to prosecution if non-disclosure of foreign assets in Schedule FA is considered a willful attempt to evade tax, penalty, or interest.


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