Report Foreign Income and Assets in ITR by December 31, 2024, to Avoid Rs 10 Lakh Penalty
Ever since the enactment of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the importance of disclosing foreign income and assets in Income Tax Returns (ITR) has been paramount. The Income Tax Department has made it clear that failing to disclose such details can lead to severe penalties and legal repercussions under both the Income Tax Act and the Black Money Act.
Consequences of Non-Disclosure
Failure to report foreign income or assets can lead to:
- Assessment Proceedings: Initiated under the Black Money Act.
- Penalty of Rs 10 Lakh: If the aggregate value of the undisclosed foreign assets (other than immovable property) exceeds Rs 20 lakh.
- Prosecution Proceedings: Non-disclosure may also attract prosecution under the Black Money Act.
Common Pitfalls
Taxpayers often inadvertently fail to disclose foreign bank accounts opened during overseas assignments or shares received through Employee Stock Ownership Plans (ESOPs) while working with multinational corporations. According to Ramakrishnan Srinivasan, former Chief Commissioner of Income Tax, “Non-disclosure of foreign accounts can lead to penalties, even for salaried individuals who may not be aware of their obligations.”
Mandatory Reporting Requirements
To raise awareness, the Income Tax Department recently released a brochure addressing common questions:
Who Should Disclose Foreign Assets and Income?
- Resident Individuals: Any individual residing in India as per the criteria under the Income Tax Act.
- Hindu Undivided Families (HUFs), Firms, and Associations of Persons (AOPs): If their control and management are not wholly outside India.
- Companies: Indian companies or those with effective management in India.
What Constitutes Foreign Income and Assets?
- Foreign Income: Includes interest, dividends, gross proceeds, redemption, etc.
- Foreign Assets: Includes foreign bank accounts, equity and debt interests, immovable property, beneficial interests, and other capital assets.
Where and How to Disclose?
- Use the appropriate ITR form (other than ITR-1 and ITR-4, as these do not include Schedules FA, FSI, and TR).
- Declare foreign income and assets in:
- Schedule FA: Details of foreign assets and income.
- Schedule FSI: Details of income from outside India and tax relief.
- Schedule TR: Summary of tax relief claimed for taxes paid outside India.
When to Disclose?
- File the applicable ITR for the assessment year within the due date as per Section 139(9).
- For late filers, belated returns can be submitted by December 31, 2024.
Steps to Disclose
- Collect details of all foreign assets (type, country, address, acquisition date, income generated).
- Gather information on foreign income (type, amount, country, tax paid).
- Complete the relevant schedules in the ITR form.
- Claim tax benefits under the Double Tax Avoidance Agreement, if applicable, by filing Form 67 along with Schedule TR.
Revising Previously Filed Returns
If you have already filed your ITR but omitted foreign income or assets, you can:
- File a revised return before December 31, 2024.
- Ensure the correct ITR form is used, and provide all relevant details in Schedules FA, FSI, and TR.
Benefits of Disclosure
- Compliance: Fulfill obligations under the Black Money Act.
- Avoid Penalties: Steer clear of hefty fines and prosecution.
- Tax Relief: Avoid double taxation by claiming benefits under applicable agreements.
Expert Advice
Bimal Jain, founder of A2Z Taxcorp LLP, emphasizes the importance of choosing the correct ITR form and disclosing all foreign assets and income. “Failure to comply results in violations under both the Income Tax Act and the Black Money Act,” he explains.
Act Now
The Income Tax Department’s campaign aims to encourage timely and accurate filing of returns. Ensure compliance by disclosing all foreign income and assets in your ITR before the December 31, 2024 deadline to avoid penalties and legal repercussions.
