November 21, 2024

Declare Foreign Assets in Your ITR or Face ₹10 Lakh Penalty: A Compliance Guide for AY 2024-25

The Income Tax Department of India has launched a compliance awareness campaign urging taxpayers to declare foreign assets and income in their Income Tax Returns (ITR) for Assessment Year (AY) 2024-25. This move is a significant reminder of the legal obligations under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, with a hefty ₹10 lakh penalty for non-compliance.

What Are Foreign Assets?

Foreign assets, as defined by the Income Tax Department, encompass a wide range of holdings abroad, including:

Bank accounts held outside India
Cash value insurance contracts or annuity contracts
Financial interests in entities or businesses
Immovable property such as real estate
Custodial accounts
Equity and debt interests in companies
Trusts where you are a trustee, beneficiary, or settlor
Accounts with signing authority
Capital assets

Taxpayers must report these assets even if:

Their income is below the taxable limit.
The assets were acquired from disclosed income sources.

Key Penalty Highlights

Failure to disclose foreign assets or foreign-sourced income in the ITR can result in a ₹10 lakh penalty under the Anti-Black Money Law.
Non-compliance can lead to further scrutiny and potential legal action, as the law is designed to deter tax evasion through undisclosed foreign holdings.

Mandatory Compliance for AY 2024-25

Taxpayers filing their ITR for AY 2024-25 must ensure that the Foreign Asset (FA) and Foreign Source Income (FSI) schedules are filled out accurately. This requirement applies even if your total income is below the taxable threshold or the foreign assets were purchased using disclosed funds.

Who Will Receive Compliance Reminders?

The Central Board of Direct Taxes (CBDT), through its campaign, will send informational SMS and emails to taxpayers identified through bilateral and multilateral agreements with other countries. These communications are targeted at individuals:

Who may hold foreign accounts or assets.
Who might have received income from foreign jurisdictions.
Whose ITR submissions for AY 2024-25 are incomplete in the FA or FSI schedules.

Deadline to Rectify ITR Filing

The last date to file a belated or revised ITR for AY 2024-25 is December 31, 2024. Taxpayers who have missed reporting any foreign assets or income are advised to act promptly to avoid penalties.

Why This Campaign Matters

India’s participation in global tax information exchange agreements enables authorities to access data about citizens’ foreign holdings. This campaign ensures compliance and encourages transparency in financial disclosures.

Takeaway: Stay Compliant

If you hold foreign assets or earn income from abroad, ensure that you accurately declare these in your ITR. Ignoring this obligation not only attracts heavy penalties but can also lead to complications with the Income Tax Department.

For further guidance on reporting foreign assets and ensuring compliance with NRI taxation, consult tax professionals or reach out to us at Dinesh Aarjav & Associates.