India’s Finance Ministry announced a significant 45% increase in foreign asset declarations, a clear sign that the Income Tax (I-T) Department’s crackdown on unreported income is working. This surge highlights growing taxpayer compliance and the effectiveness of the government’s data-driven approach.
Thank you for reading this post, don't forget to subscribe!Key Highlights of the Crackdown
- Massive Disclosures: Nearly 25,000 taxpayers revisited their Income Tax Returns (ITRs), and over 5,400 filed belated returns for the Assessment Year (AY) 2024–25. These disclosures revealed foreign assets worth a staggering ₹29,208 crore and an additional ₹1,089.88 crore in foreign income.
- Data-Driven Approach: This success stems from the I-T Department’s robust data-matching initiative, spearheaded by the Central Board of Direct Taxes (CBDT). This system leverages data received through the Automatic Exchange of Information (AEOI) framework, an international agreement that facilitates financial data sharing among over 100 tax jurisdictions, including Switzerland.
- Targeted Verifications: Since 2018, India has been receiving annual financial data on its residents from various countries. For AY 2024–25, the CBDT meticulously compared this AEOI data with taxpayer declarations. When discrepancies were found—especially unreported foreign income or assets—taxpayers received SMS and email alerts, urging them to rectify their filings.
- Increased Compliance: The impact has been substantial. The total number of taxpayers declaring foreign assets and income in their ITRs for AY 2024–25 jumped to 2.31 lakh, a 45.17% increase from the previous year’s 1.59 lakh. This indicates a growing awareness and willingness among taxpayers to comply.
Swiss Bank Deposits Clarified
Recent reports noted a sharp rise in Indian deposits in Swiss banks, reaching nearly ₹37,600 crore (CHF 3.5 billion) in 2024. However, the Finance Ministry clarified that these figures include various categories—individuals, banks, and corporate entities—and do not necessarily point to undeclared income or tax evasion. It’s important to note that direct customer deposits, typically reflecting individual Indian clients, saw a modest 11% increase, making up only about 10% of the total. The larger surge was primarily due to funds routed through local branches and financial institutions.
Strict Action Against Non-Compliance
This initiative is part of India’s broader strategy to combat offshore tax evasion and enhance financial transparency. The government is urging taxpayers to proactively disclose their foreign holdings and income. Officials confirm that enforcement actions, including searches and surveys, are being pursued against those who remain non-compliant despite repeated outreach.
What happens if you don’t disclose foreign assets? The penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, are severe. This can include a penalty of ₹10 lakh per undisclosed foreign asset for each defaulting year, and even imprisonment for up to 7 years for willful tax evasion. The Income Tax Department also has the power to reopen past assessments up to 16 years back in such cases.
This rigorous, data-driven approach by the I-T Department signals a new era of transparency, making it increasingly difficult for individuals to conceal foreign assets and income.
