Navigating income tax can be complex, especially when you have assets outside India. If you are a Resident and Ordinarily Resident (ROR) taxpayer, you are required to disclose your foreign assets and income in your Income Tax Return (ITR) for Assessment Year (AY) 2025-26. This is done through Schedule FA of the ITR.
Who Needs to Report?
The rule applies to individuals who are considered a Resident and Ordinarily Resident (ROR). You are an ROR if you have been a resident in India for at least two out of the last ten years and have stayed in India for 730 days or more in the preceding seven years.
- Who is Exempt? If you are a Resident but Not Ordinarily Resident (RNOR) or a Non-Resident (NR), you are not required to disclose foreign assets, unless the income from them is earned in India.
Which ITR Forms to Use
If you have foreign assets, you cannot use ITR-1 (Sahaj) or ITR-4 (Sugam). You must file your return using a form that includes Schedule FA, such as:
- ITR-2
- ITR-3
- ITR-5
- ITR-6
What to Disclose in Schedule FA
Schedule FA requires you to report foreign assets held at any time during the calendar year ending December 31, 2024. This is a key point—the reporting period is the calendar year, not the financial year.
The following asset categories must be disclosed:
- Foreign Bank Accounts: Overseas depository and custodial accounts.
- Foreign Investments: Equity and debt interests, as well as financial interests in any foreign entity.
- Immovable Property: Any land or property you own abroad.
- Other Assets: This includes cash value insurance contracts, jewelry, paintings, vehicles, or any other capital assets held overseas.
- Interests in Trusts: Disclose any trusts created outside India where you are a settlor, beneficiary, or trustee.
For each asset, you must provide specific details like the country, name of the institution, account number, date of acquisition, and the value or peak balance during the year.
Penalties for Non-Disclosure
Failure to disclose your foreign assets can lead to serious consequences under the Black Money Act, 2015. The penalties can be severe:
- A tax of 30% on the value of the undisclosed foreign asset.
- A penalty equal to three times the tax amount.
- Potential prosecution, with a prison sentence of up to 10 years.
Key Dates for AY 2025-26
- Non-Audit Cases: The due date for filing your ITR is September 15, 2025.
- Audit Cases: The deadline is October 31, 2025.
To ensure accurate reporting, it is crucial to maintain detailed records of all your overseas financial statements and investment reports. This will help you comply with the law and avoid heavy penalties.