The Income Tax Department has revealed that approximately two lakh Income Tax Returns (ITRs) have been filed during the current assessment year, including details of foreign assets and income. The department has urged Indian residents for tax purposes to ensure they file the correct form and revise their returns if they have submitted the wrong one.
A senior official from the Central Board of Direct Taxes (CBDT) explained that Indian tax residents who receive shares or income through employee stock options from foreign employers must report these under the foreign assets (FA) and foreign source income (FSI) schedule in the relevant ITR. This requirement applies whether the income is earned directly or through investments abroad.
The tax department has launched an awareness campaign to ensure that Indian tax residents report their foreign assets and income accurately during the 2024-25 assessment year. The deadline for submission is December 31, and taxpayers are encouraged to comply to avoid penalties and prosecution under the Anti-Black Money Act of 2015.
Shashi Bhushan Shukla, Commissioner (Investigation) in the CBDT, conducted an online session titled ‘Property Disclosure of Foreign Assets and Income by Taxpayers’ as part of this initiative. During the session, Shukla explained the various provisions regarding the reporting of foreign assets and income, including the relevant sections of the Anti-Black Money Act. He specifically advised taxpayers to choose the correct ITR form when filing such returns. Those who had filed ITR-1 or ITR-4 but possess foreign assets or income are required to file a revised return by December 31, 2024.
“It is essential that taxpayers choose the correct ITR form to declare their foreign assets and income,” Shukla said. “ITR-1 and ITR-4 do not include the FA and FSI schedule. If you are supposed to declare such information, I would strongly advise you to file a revised return using the correct form and comply with the law,” he added.
Moreover, the official stated that individuals who have received shares or earned income from employee stock options (ESOs) granted by their foreign employers must report these details to the Indian tax authorities. If there is a tax liability on these foreign earnings, taxpayers are expected to pay the requisite tax to the government.
Shukla also clarified that foreign assets must be reported on the ITR even if no income is generated from them. Whether the assets were acquired recently or in the past, they still need to be disclosed. If the taxpayer has already paid taxes in a foreign jurisdiction, they can claim relief under the ‘tax relief’ schedule in the ITR, provided they meet the requirements under the Double Taxation Avoidance Agreement (DTAA). This ensures they are not taxed twice on the same income.
India has entered into DTAA agreements with various countries to provide tax relief to taxpayers. Additionally, the country has signed mutual exchange treaties such as the Common Reporting Standard (CRS) with 123 countries and the Foreign Account Tax Compliance Act (FATCA) with the United States. These agreements allow Indian tax authorities to access information on foreign assets and income held by Indian residents abroad.
As part of the ongoing awareness campaign, the tax department is sending emails and SMS alerts to taxpayers whose information has been shared by foreign jurisdictions. These taxpayers, who have income above a certain threshold or have made high-value transactions, are encouraged to file accurate returns and report foreign income and assets accordingly.
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The reporting of foreign assets has been steadily increasing, with approximately two lakh filings made during the 2024-25 assessment year, compared to 1.6 lakh filings in the 2023-24 year, 75,000 filings in 2022-23, and 60,000 in 2021-22. This increase in compliance is attributed to the awareness campaigns and the active monitoring of foreign assets through international agreements like CRS.
Shukla also addressed concerns about “tax haven” jurisdictions such as the British Virgin Islands, Vanuatu, Malta, Jersey, and Luxembourg. He assured taxpayers that information regarding assets held in these countries is also being obtained by the Indian tax authorities through the CRS agreement.
The CBDT has provided clear guidance on how to fill out the FA and FSI sections of the ITR on the department’s e-filing portal. A foreign asset includes bank accounts, insurance contracts, equity and debt interests, immovable property, and any other capital asset held abroad.
A tax resident of India, according to the Income Tax law, is an individual who spends 182 days or more in India during the previous year or at least 365 days in the past four years.
The CBDT’s campaign aims to ensure greater transparency and compliance in reporting foreign assets, urging taxpayers to file their returns correctly to avoid legal complications.
