Disclosure of Foreign Asset in ITR

What is a Foreign Asset?

A Foreign Asset refers to any asset located outside India or any financial interest you hold in a foreign entity or account. It can include both tangible and intangible assets.

Under Indian Income Tax Law, particularly for the purpose of Schedule FA (Foreign Assets) in ITR, foreign assets must be disclosed by Residents and Ordinarily Residents (ROR).

FAQs for Foreign Income and Asset Disclosure in Indian ITR

Q1. What is the due date for filing ITR with foreign income or foreign asset disclosures?

A: The due date is generally 31st July for individuals. However, if the assessee is required to file ITR under Section 139(1) and has foreign income or assets, and a tax audit is applicable, the due date may be 31st October. Late filing may attract penalties and interest, and more importantly, non-disclosure of foreign assets could lead to prosecution under the Black Money Act.

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Q2. Is disclosure in Schedule FA mandatory even if the foreign income is exempt or not taxable in India?

A: Yes. Schedule FA is about disclosure of foreign assets, not taxation. Even if the income is exempt under the Double Taxation Avoidance Agreement (DTAA) or otherwise, disclosure is still mandatory if you are a resident and ordinarily resident (ROR) in India.

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Q3. Should dormant or zero-balance foreign bank accounts be reported?

A: Yes. Even if the foreign bank account has a zero balance or has been inactive, it must still be disclosed in Schedule FA if it was held at any time during the relevant financial year.

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Q4. I have ESOPs or RSUs from a foreign company. Do I need to disclose them?

A: Yes. Foreign ESOPs/RSUs (Employee Stock Option Plans / Restricted Stock Units) need to be disclosed in Schedule FA under the "Details of Financial Interest in any Entity outside India". Also, upon vesting/exercise/sale, the related income may be taxable in India and should be appropriately declared under the income head.

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Q5. What if I have investments in foreign mutual funds or ETFs through international platforms like Vested, INDmoney, or Groww?

A: These should be disclosed under "Details of Investment in Immovable Property and Other Capital Assets located outside India" in Schedule FA. Even if the investment is routed via an Indian platform, if the underlying asset is foreign, disclosure is required for ROR individuals.

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Q6. Do I need to disclose cryptocurrencies or virtual digital assets held in foreign exchanges?

A: Yes. Cryptocurrencies or other virtual digital assets (VDAs) held in wallets or exchanges outside India need to be disclosed in Schedule FA. As there is no specific category yet, it’s advisable to disclose them under ‘Other Capital Assets’ until further clarification from the CBDT.

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Q7. I am an NRI who became a resident in India during the financial year. Do I need to disclose foreign assets?

A: Disclosure is required only if you qualify as a Resident and Ordinarily Resident (ROR). If you are a Resident but Not Ordinarily Resident (RNOR) or Non-Resident (NR), you are not required to disclose foreign income or assets (unless such income is derived from India or received in India).

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Q8. Is foreign rental income taxable in India?

A: Yes, for ROR individuals, global income is taxable. Foreign rental income is taxed under the head Income from House Property. You can claim foreign taxes paid as credit under Section 90/91 if DTAA exists.

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Q9. Do I need to report foreign credit cards or digital wallets (e.g., PayPal, Revolut)?

A: Yes, if the foreign digital wallet or credit card was held or used during the year and the account is maintained abroad, it should be disclosed in the bank account section of Schedule FA.

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Q10. Can foreign assets be disclosed voluntarily if omitted earlier?

A: Yes, but consequences depend:

• Voluntary disclosure may reduce risk of prosecution but penalties may still apply.

• No specific immunity under Income Tax Act unless covered under a special scheme

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Q11. Is disclosure required for foreign assets inherited or received as gift?

A: Yes. Even if not acquired directly, inherited or gifted foreign assets must be disclosed if you are an ROR. However, gift/inheritance itself may be exempt from tax depending on Section 56(2)(x), but future income from such assets will be taxable.

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Q12. What are the consequences of non-disclosure or incorrect disclosure of foreign income/assets?

A: Non-disclosure or incorrect disclosure can attract:

• Penalty of ₹10 lakh per default under Black Money Act

• Prosecution with imprisonment up to 10 years

• Interest and additional tax liability

• Scrutiny or reassessment under Income Tax Act
  

  
  

So, what can you do to avoid any such Notices from Income Tax Department?

• Always keep track of foreign investments, bank statements, and tax returns in other countries.

• Use the DTAA to avoid double taxation, but make sure to disclose even if income is not taxable in India.

• Maintain documentary evidence (statements, agreements, emails, etc.) related to foreign income or assets.

Any doubts can be dropped in the comments section below.