Who has to declare Foreign Assets in Indian Tax Returns?
The details of Foreign Assets and Income from any sources outside India have to be declared in Indian Income Tax Return (ITR) by Resident Indians only.
Non-Resident Indians (NRI)s or OCI Cardholders or Foreigners are not required to report their assets held outside India.
What type of Information has to be declared in ITR by Resident Indians?
Assets owned, namely
- Foreign Depository Accounts (like mutual funds)
- Foreign custodian Accounts (like beneficial interest)
- Foreign Equity and Debt interest
- Foreign cash value of insurance contract or annuity contract
- Financial interest (like holding shares) in any entity outside India (employees holding ESOPs have to report in Indian ITR)
- Any immovable property outside India
- Any other capital assets held outside India
In all the above accounts, the initial value of the investments, the peak balance, closing balance, gross interest earned/credited, gross proceeds from the sale or redemption of investment are to be disclosed after converting the same into Indian currency.
Further, the details such as Country Name, Country Code, Name of the financial institution, address, ZIP Code, Account Number, Account opening date are to be mentioned in ITR.
For the purpose of this Schedule, the rate of exchange for conversion shall be the ―telegraphic transfer buying rate of the foreign currency as on the date of peak balance in the account or on the date of investment or the closing date of the accounting period
Signing Authority or a beneficiary
- Any other account located outside India in which you are a signing authority (Like a Bank Account where you are a signing authority)
- Trust created outside India in which you are a trustee, a beneficiary or settlor
- Any income from abroad
- Any other income derived from any foreign source
In a nutshell –Resident Indians have to mandatorily fill the details of all foreign assets or accounts in respect of which they are a beneficial owner, a beneficiary or the legal owner, in the Schedule FA of ITR.
Before I conclude, one important question – Whether say, Mr. Radhakrishna, a Resident Indian (re-located from the USA and became a Resident in India), who is not having any taxable income in India, but has mutual fund and equity investments, pension funds in the USA is required to file Income Tax Return? The answer is YES. Any Resident Indian who has Foreign Assets, even though not having any taxable income in India, is obliged to file Income Tax Return.
What if the Foreign Assets are not disclosed in ITR?
There are penal provisions under the Income Tax Act and The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 for non-disclosure of Foreign Assets in Income Tax Return.
The penalty of Rs.10 Lakhs can be imposed for non-disclosure of foreign income or assets. Similarly, for concealment of income and assets, a penalty of up to 300% of tax sought to be evaded can be levied. Failure and concealment also attract rigorous imprisonment for a term of 6 months to 7 years.
So, the suggestion – disclose the accounts in ITR. If your accounts are straight, there is nothing to lose by disclosing the assets. You can also get an incentive. No, the department is not giving, but you can earn an incentive in the name of ‘peace of mind’!
Please read my next article Who has to declare Assets and Liabilities held in India in the Income Tax Return? here