Introduction
With globalization, many taxpayers in India hold assets or earn income outside the country. To ensure tax transparency and prevent tax evasion, India participates in international information-sharing systems such as the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA). Through these systems, the Income Tax Department automatically receives details of financial accounts held by Indian residents abroad.
Because of this, full and accurate disclosure of foreign assets and income in the Income Tax Return (ITR) has become extremely important. Non-reporting can lead to penalties under Indian tax laws, including the Black Money Act.
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⭐ Crux: What Information Does India Receive?
Under CRS and FATCA, India receives detailed information about overseas accounts held by Indian residents, which may include:
· Account holder’s name, address, nationality
· Tax Identification Number (PAN/TIN)
· Account number and type
· Account balance and peak financial value
· Payments such as interest, dividends, proceeds from sale/redemption
· Details of controlling persons (in case of entities)
This data helps tax authorities identify foreign income or assets that taxpayers may have failed to declare.
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Most Important Part: Disclosure of Foreign Assets & Income in the ITR
Reporting foreign income and assets correctly is mandatory for all resident taxpayers. The Income Tax Return has three key schedules for this:
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1. Schedule FA – Foreign Assets (Most Critical Section)
This is where taxpayers must report any and all foreign assets held at any time during the calendar year (Jan 1 – Dec 31).
You must disclose assets if you are: ✔ Legal Owner ✔ Beneficial Owner ✔ Beneficiary
Who must fill Schedule FA? Only resident taxpayers. (Not required for Non-Residents or RNOR.)
What must be disclosed?
Schedule FA covers many categories of foreign assets, such as:
· Foreign bank/depository accounts (A1)
· Custodian accounts (A2)
· Foreign shares, bonds, mutual funds (A3)
· Foreign insurance/annuity policies (A4)
· Financial interest in any foreign entity (Table B)
· Immovable property abroad (Table C)
· Other foreign capital assets (Table D)
· Accounts where you only have signing authority (Table E)
· Trusts outside India (Table F)
· Any other foreign-source income (Table G)
Important Points for Schedule FA
· You must disclose peak balance, closing balance, and income credited.
· Values must be converted into INR using the TT buying rate of SBI.
· Even if already disclosed in Schedule FA, foreign assets must also be reported in Schedule AL, if applicable.
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2. Schedule FSI – Foreign Source Income
Here, taxpayers report income earned from outside India. This includes:
· Salary from a foreign employer
· Interest/dividend from foreign investments
· Capital gains from sale of foreign assets
You must provide:
· Country code
· TIN or passport number (if TIN not available)
· Exact nature of income
· Foreign tax paid
· Article of DTAA (if claiming relief)
· Amount taxable in India
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3. Schedule TR – Tax Relief for Foreign Taxes Paid
This is a summary of the tax relief claimed under:
· Section 90 – DTAA countries
· Section 90A – Specified agreements
· Section 91 – No-DTAA countries
It must match the information reported in Schedule FSI.
🔹 Form 67 must be filed before ITR filing to claim foreign tax credit.
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Revised Return Opportunity
If a taxpayer forgot to report a foreign asset or income in their original return, they can still correct it by filing a revised return.
For AY 2025-26, revised returns can be filed up to 31 December 2025.
Important
ITR-1 and ITR-4 do NOT have Schedule FA. So taxpayers with foreign assets/income must use ITR-2 or ITR-3.
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Benefits of Proper Foreign Disclosure
1. Compliance & Good Governance Builds trust with tax authorities and avoids scrutiny.
2. Avoids Penalties Non-reporting attracts strict fines under the Black Money Act.
3. Claiming Tax Relief Correct reporting allows claiming foreign tax credit.
4. Supports National Development Paying correct taxes strengthens the economy.
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Conclusion
CRS and FATCA have made foreign income and asset information fully transparent worldwide. Since India receives this data automatically, taxpayers must ensure complete disclosure in their ITR. Filing Schedule FA, FSI, and TR accurately helps avoid legal consequences, ensures smooth assessments, and reflects responsible financial behaviour.
Correct reporting is not only a legal obligation but also a powerful step toward maintaining transparency, peace of mind, and long-term financial integrity.
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