ITR deadline in Dec: Report foreign income, assets or you may face penalty of Rs 10 lakh; check details

ITR filing: Taxpayers with foreign income or assets must disclose them by December 31, 2024, to avoid penalties under the Income Tax and Black Money Acts. The Income Tax Department has outlined the necessary steps for taxpayers to meet this obligation.

Previously, the Income Tax Department underscored the significance of reporting assets held overseas or income received from foreign sources to adhere to anti-black money regulations.

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The Income Tax Department has released Frequently Asked Questions (FAQs) along with their corresponding answers regarding the disclosure of foreign income and assets.

Who is required to disclose foreign assets/income?

Any individual residing in India who has foreign income or foreign assets.

Who qualifies as a Resident Indian?

An individual who has spent 182 days or more in India in any previous year, or an individual who has spent 365 days or more in India in the four preceding years, and 60 days or more in the previous year.

What is a Hindu Undivided Family?

A Hindu Undivided Family (HUF), Firm, or Association of Persons (AOP) is considered a resident in India, except when the control and management of its affairs is entirely outside India.

When does a company need to disclose foreign assets/income?

A company that is an Indian company, or a company that has its effective place of management in India, is required to disclose foreign assets/income.

What are Foreign Income and Assets

Included in foreign income and assets are various components, such as Foreign Bank Accounts, Foreign Equity and Debt interest, financial interests in any entity or business, immovable property, other capital assets, beneficial interests in foreign assets, among others.

Foreign income encompasses income from abroad in the form of interest, dividends, gross proceeds, redemptions, and more.

Where to Report

To disclose these foreign income and assets, select the appropriate ITR form (excluding ITR-1 and ITR-4) that aligns with your specific details.

To report foreign assets and income in your Income Tax Return (ITR), you will need to fill out the following schedules:

> Schedule FA: This is where you should provide details of any foreign assets and income from sources outside India.
> Schedule FSI: Use this schedule to provide details of income earned from outside India and any applicable tax relief.
> Schedule TR: Here, you will need to provide a summary of the tax relief claimed for taxes paid outside India.

How to Reporting Foreign Assets and Income

Evaluate all overseas assets: This includes examining bank accounts, investments, and sources of income located outside of your home country.

Utilise the appropriate ITR forms: Avoid using ITR-1 or ITR-4 forms and instead opt for forms like ITR-2 or ITR-3, which contain necessary schedules for reporting foreign assets and income (FA, FSI, TR).

Fill out Schedule FA for assets: Report all overseas assets in Schedule FA. In Schedule FSI, disclose foreign income, and in Schedule TR, include any tax relief obtained through international agreements.

Provide specific information: Ensure to include essential details regarding foreign income and assets, such as acquisition details, generated income, and taxes paid in foreign countries.

Indian tax residents are required to report a variety of assets when disclosing their foreign holdings, including bank accounts, insurance policies, stocks, real estate, and trusts in which they are a trustee or beneficiary. These assets must be declared in the foreign asset (FA) or foreign source income (FSI) section of their income tax return (ITR), regardless of their income level or the source of the foreign assets.

Failure to disclose foreign assets and income may result in severe penalties and legal action under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Section 43 of this Act stipulates a penalty of Rs 10 lakhs for not providing accurate information related to assets held outside India in the income tax return.

"Section 43 of the Black Money (Undisclosed Foreign Income & Assets) & Imposition of Tax Act 2015 imposes penalty of Rs. 10 lakhs for failure to furnish in the income tax return any information or for furnishing inaccurate relating to an asset (including financial interest in any entity) located outside India, held by him as a beneficial owner or otherwise, or in respect of which he was a beneficiary, or relating to any income from a source located outside India, at any time during such relevant year," CA (Dr.) Suresh Surana shared.