I-T Notices: Things To Know About Disclosure Of Foreign Assets In ITR Filings

The Income Tax Department has recently issued notices and emails to several taxpayers regarding inadequate disclosure of foreign assets in their income tax returns, putting the spotlight on the complexities of Schedule FA and related reporting obligations under Indian tax law.

At the heart of the issue is Schedule FA, a section in the ITR that requires detailed reporting of overseas assets, including ESOPs, RSUs, and investments made through legal channels under the Liberalised Remittance Scheme or LRS.

Tax experts warn that even if foreign income or assets have been disclosed elsewhere in the return, they must also appear in Schedule FA with precise details such as date of investment, peak balance, and currency conversion using SBI’s TT rate. Unlike most of the ITR, Schedule FA follows the calendar year, adding another layer of complexity.

“Every year the Indian State plays a version of Hunger Games with its taxpayers,” wrote Neil Borate in a post on X, highlighting how minor errors can trigger penalties under the Black Money Act, even when there is full intent to comply. The Act prescribes penalties of Rs 10 lakh for non-disclosure and, in severe cases, prosecution. While recent relaxations waive penalties for small mistakes (up to Rs 20 lakh), compliance remains daunting.

Industry voices argue that the burden discourages small investors from diversifying globally.

“Encouraging retail investors to invest abroad is not worth it given the reporting obligations and penalties,” said Samir Arora, founder of Helios Capital Management, suggesting that mutual funds be given more overseas investment capacity instead.

Tax professionals advise immediate corrective action. “If you feel you have not adequately reported details, revise your return by December 31, 2025, for AY 2025-26,” posted Sambhav Daga, sharing a checklist for Schedule FA compliance. Updated returns can also be filed for previous years.

Experts call for systemic fixes, such as prefilled Schedule FA using data from foreign jurisdictions, similar to AIS for domestic income. Until then, taxpayers navigating global investments must tread with caution, or risk turning the annual filing season into a survival game.