When & for whom reporting is required?

Just computing your taxable income and income tax payable, and paying the correct amount of your income tax liability is not the end of your income tax obligations. You also need to ensure that your return of income is properly filled up and filed on time. One of the crucial aspects of the income tax return that you need to pay attention to is Schedule FA, the disclosures relating to foreign assets.

This schedule is to be filled in by all persons who are residents and ordinarily residents in India during the year. It is not required to be filled in by non-residents or by persons who are residents and not ordinarily resident in India during the year.

Under the watchful eye of the Indian Income Tax Act 1961, Indian residents who have been international players in the fiscal year have a distinct obligation. Each and every foreign bank account, investment, or other type of asset must feature on your ITR.

Not Applicable For—The only individuals who escape this requirement are Non-Resident Indians (NRIs) or residents not ordinarily resident in India.

Notably, Schedule FA is exclusively available in ITR 2 and ITR 3 forms, meaning individuals with foreign assets and income must file their returns using either of these forms.

2. Disclosures required

The following details are required to be disclosed in Schedule FA:

• Any asset held outside India (Shares, Debentures, Life Insurances, Annuity Contract, Immovable Property or any other capital asset);
• Financial or beneficial interest in any overseas entity (partner in an overseas LLP or firm, a beneficiary of a foreign private trust);
• Signing authority in any account located outside India (Trading, Depository, Bank or Custodian Account); and
• Income from any source outside India (Dividend, interest, or capital gain).

Reporting in this schedule is made irrespective of the type of ownership, whether legal or beneficial ownership. However, the reporting is required by a resident person only. No disclosures are required in case of a non-resident or resident but not ordinarily resident person.

3. The relevant period for disclosure

Taxpayers must disclose any foreign assets or income relating to the calendar year 2022 when filing the ITR forms for the assessment year 2023-24. This means that individuals need to report details of any Foreign Assets they held, and Income earned during the period from January 1, 2022, to December 31, 2022, in Schedule FA, while submitting their ITR for the Assessment Year 2023-24.

4. Consequences of Faulty Reporting or Missed Reporting

Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, residents with assets or income from foreign sources must accurately and timely furnish their income tax returns. Failure to do so or providing inaccurate information in Schedule FA can result in a penalty of Rs. 10 lakhs. Additionally, the individuals may face rigorous imprisonment for a term of six months to seven years, along with fines.

Conclusion– It is not the only thing to file your ITR timely, the important thing is whether you have made it in a proper way or not. Disclosure is the thing no one takes seriously, but nondisclosure can take you higher penalties and fines. To avoid it, it’s better to file your return professionally and smartly.

If you still have any doubts, you can get in touch with our professionals for better advice.