Choose correct ITR to report foreign assets; 2 lakh such returns filed: CBDT official

As many as two lakh Income Tax Returns (ITRs) containing details of foreign assets and income have been filed during the current assessment year till now, according to the tax department which urged Indian residents for tax purposes to ensure they file the right form and revise their returns if they submitted the wrong form.

The shares obtained and income earned by resident tax Indians from their employers through employee stock options should also be disclosed to the Income-Tax Department by filling foreign assets and foreign source income schedule provided in the relevant ITR, a senior CBDT officer explained.

The tax department and its administrative authority Central Board of Direct Taxes (CBDT) recently launched a campaign to ensure that the select category of taxpayers (Indian residents for tax purposes) report their foreign assets (FA) and foreign source income (FSI) during the 2024-25 assessment year by the deadline of December 31.

The department conducted a ‘Samvaad’ online interaction session on the subject of ‘property disclosure of foreign assets and income by taxpayers’ where the Commissioner (investigation) in the CBDT Shashi Bhushan Shukla explained various provisions of the subject and relevant linked provisions of the anti-black money Act of 2015.

Shukla stated that taxpayers (categorised as tax residents of India in the previous year) should choose the correct ITR to furnish these details to the I-T department. Those who possess such assets or income but have filed either ITR-1 or ITR-4 should file a revised or belated return by December 31 to escape penalty and prosecution prescribed under the anti-black money law, he said.

“ITR-1 and ITR-4 do not have the FA and FSI schedule… I would request those taxpayers who are supposed to declare their foreign assets or income to file a revised return in the relevant ITR and comply with the rules and law,” the officer said. He also said that those taxpayers who got shares and earned dividend (interest) income from shares allotted to them via the employee stock option by their overseas employer are also required to report such information to the Indian tax authorities. If there is a tax payable, then they should pay that tax too, the officer said.

He said holding an asset abroad is reportable in the ITR even if no income is earned by the said taxpayer through such an asset. Such an asset is also reportable to the taxman irrespective of the time of its purchase, the officer said.

If the taxpayer has already paid tax in a foreign jurisdiction (by way of withholding tax) on such assets or income then they should file the ‘tax relief’ schedule in the ITR and claim relief from Indian tax authorities and save themselves from being taxed doubly for the same income, Shukla explained.

India has signed the Double Taxation Avoidance Agreements (DTAAs) for the said purpose with various countries. Apart from these, he said, agreements and mutual exchange treaties like CRS (common reporting standard) with 123 countries and FATCA (foreign account tax compliance) with the US have been signed through which Indian tax authorities annually get information about the foreign assets and income of Indians based abroad.

“As part of the current campaign on this subject, we are sending emails and SMSes to such taxpayers whose information has been received from foreign jurisdictions and they have income beyond a threshold or they have undertaken high-value transactions,” he said.

The officer said such campaigns have led to a steady rise in reporting of foreign assets by taxpayers with about two lakh filings being done during the 2024-25 AY till now, 1.6 lakh during 2023-24 AY, 75,000 ITRs filed during 2022-23 AY amd 60,000 during the AY 2021-22.

Speaking about the “so-called” alleged tax haven jurisdictions like the British Virgin Islands, Vanuatu, Malta, Jersey, Luxembourg, etc., the officer said India was also getting information on the assets held by Indians in such nations via the CRS agreement.

He said the procedure to fill the FA and FSI columns in ITRs is also explained on the department’s e-filing portal.

A foreign asset includes bank accounts, cash value insurance contract or annuity contract, financial interest in any entity or business, immovable property, custodial account, equity and debt interest, trusts in which a person is a trustee, beneficiary of settlor, accounts with singing authority, any capital asset etc., held abroad.

A tax resident of India, as per the I-T law, is a person who spent 182 days or more in the country over the last year or a person who lived a minimum of 365 days in the last four years.