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The Central Board of Direct Taxes (CBDT), in its latest initiative, asked taxpayers to disclose their foreign assets and income voluntarily by sending emails and text messages.
Through Non-intrusive Usage of Data to Guide and Enable (NUDGE) initiative, the tax department is targeting about 25,000 high-risk cases. That is, not all taxpayers, but only those who intentionally or inadvertently missed or did not disclose their assets situated outside India or income received from abroad in their returns filed recently.
Accurate reporting and complying with Schedule Foreign Assets (Schedule FA) and Foreign Source Income (Schedule FSI) in income tax returns is mandatory under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Non-compliance will invite stringent penalty provisions and unforeseeable circumstances. Let us look at the last opportunity, which taxpayers should avail by December 31, 2025, to disclose accurately, and come clean.
What is a foreign asset and income?
For the black money law, the following are scheduled as foreign assets – foreign bank accounts, foreign depository accounts, foreign equity and debt interest, foreign cash value insurance contracts or annuity contracts, trusts outside India, in which a taxpayer is a trustee, beneficiary or settlor, financial interest in any entity or business, accounts in which a taxpayer is/was having/had signing authority, immovable property or other capital assets outside India, and foreign custodial account.
Who should disclose?
Technically, only a resident taxpayer, that is, who is residing in India for 182 days or more during the previous year; or 60 days or more during the previous year; and 365 days or more during the previous four years immediately preceding the relevant previous year, should disclose those assets held abroad / income earned from foreign source, at any time during the calendar year 2024. Even if his/her income is below the taxable limit, and such assets were acquired from disclosed sources already.
How to disclose?
The taxpayers who have received or are yet to receive an email and text message in the coming days should immediately revise their recently filed returns and provide mandatory details in the Schedule FA and Schedule FSI in ITR 2 or ITR 3 by filing a revised return, accurately.
Other taxpayers, though not having received such an email and text message, but themselves believe that there was an omission of reporting their foreign assets and/or income, also should do it now by filing a revised return or even updating their last four assessment years’ returns filed during the previous years.
In any case, if a taxpayer missed the extended due date for filing his/her return, that is, September 16, 2025, and yet to file his/her current assessment year’s return, can still file a ‘Belated Return’ with applicable interest, late fee, and disclose the above assets or income, if he/she was in possess. By filing a revised or belated, or updated return, as the case may be, a taxpayer can escape the department’s wrath and avoid severe consequences that follow later.
What are the consequences for non-disclosure?
Failure to comply in disclosing a foreign asset held abroad or income earned in foreign shores in the return will invite a penalty of Rs 10 lakh.
Non-compliance can also lead to rigorous imprisonment from six months to seven years, but only in serious cases. The penalty/prosecution will come into picture only when the aggregate value of those assets — other than immovable property — exceeds Rs 20 lakh. Recently, the Income Tax Appellate Tribunal’s Mumbai Bench in Vinil Venugopal v. DDIT (Inv) held that the penalty for non-disclosure of foreign assets in Schedule FA is not mandatory.
The tax department receives information relating to foreign financial assets of Indian residents from other tax jurisdictions through the Common Reporting Standards (CRS) and from the United States under the Foreign Account Tax Compliance Act (FATCA) arrangements.
Last year, the tax department’s same initiative yielded positive results. A total of 24,678 taxpayers had revised their originally filed income tax returns and disclosed foreign assets amounting to Rs 29,208 crore and foreign income of Rs 1,089.88 crore.
Coincidently, the Union Finance Minister is likely to apprise the Lok Sabha about the black money brought back and taken out from the country during the last 10 years today. Today, the first day of the Winter Session, the finance minister’s written reply will be tabled in the House.
(The writer is Founder & CEO, Shree Tax Chambers)