Call ITRs for NRI- Why you should report foreign assets and bank accounts correctly!
Introduction
In today’s globally connected economy, Non-Resident Indians (NRIs) often hold financial interests across borders. Whether it’s a bank account abroad, foreign property, or investments in overseas entities, these assets are common among NRIs. However, with increased international cooperation on tax matters, underreporting or non-disclosure of foreign assets can have serious consequences.
The Indian Income Tax Department, leveraging global frameworks like the Common Reporting Standard (CRS) and Foreign Account Tax Compliance Act (FATCA), receives detailed information about foreign financial holdings. Hence, accurate and complete reporting of foreign assets and income in Income Tax Returns (ITRs) is not just a legal obligation—it’s a necessity.
Understanding CRS & FATCA: The International Net
CRS, an initiative by the OECD, and FATCA, a law enacted by the United States, are designed to curb global tax evasion. They require financial institutions across participating countries to report account details of foreign residents to the respective tax authorities. This means:
- If you’re a resident in India holding an account abroad, India will likely know about it.
- Under these agreements, India receives your name, address, TIN, account balance, interest, dividends, and other income details from foreign financial institutions.
This automatic exchange of information gives the Income Tax Department deep insight into the global financial footprint of resident taxpayers.
What Are Your Disclosure Obligations?
Under the Income-tax Act, 1961, resident taxpayers are required to report their foreign income and assets through the following ITR schedules:
- Schedule FA (Foreign Assets): Details of all foreign assets held anytime during the calendar year.
- Schedule FSI (Foreign Source Income): Income earned from sources outside India.
- Schedule TR (Tax Relief): Tax reliefs claimed under Double Taxation Avoidance Agreements (DTAAs) for taxes paid abroad.
Non-disclosure is no small matter—it can lead to stringent penalties and even prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Why Correct Reporting Matters
Here are four compelling reasons why accurate disclosure is critical:
1. Legal Compliance and Good Governance
Transparent reporting reflects a taxpayer’s commitment to tax compliance and integrity. It minimizes the risk of scrutiny, notices, or audits by tax authorities.
2. Avoiding Penalties
Failure to report foreign assets can invite harsh penalties, including 100% to 300% of tax evaded and even prosecution. Disclosure provides legal security and peace of mind.
3. Claiming Legitimate Tax Relief
Correct filing enables you to claim tax credits for taxes paid abroad under DTAAs, helping avoid double taxation. This can significantly reduce your overall tax burden.
4. Contributing to Nation Building
Paying your fair share of taxes and reporting global income ensures funds are available for public welfare and infrastructure development—your part in national progress.
Quick Tips: How to Fill Schedules FSI, TR, and FA
- Schedule FSI: Report foreign income country-wise, mention your TIN or passport number, the relevant DTAA article, and ensure income is also reported under the correct ITR head.
- Schedule TR: Summarizes the relief claimed. Match tax paid and tax relief data with FSI.
- Schedule FA: Mandatory for residents (not NRIs or RNORs) – report foreign bank accounts, properties, trusts, and investments held any time during the calendar year (Jan–Dec), along with ownership details and valuation in INR.
Conclusion
Increased global tax transparency means it’s no longer possible—or wise—to ignore foreign assets when filing ITRs. With India actively participating in CRS and FATCA information exchange, the Income Tax Department has access to global financial data of residents.
If you’re an NRI who has returned or a resident with global income or assets, take compliance seriously. Ensure accurate reporting in your ITR to avoid penalties, claim rightful tax relief, and support a fair tax system.
Stay transparent, stay compliant, and stay worry-free.