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Tax Talk: Declare foreign assets in your ITR – Money News
AS PER Section 139 of the Income Tax Act, 1961 (ITA), individuals are mandatorily required to file an income tax return if they hold, as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India. It also includes those who have signature authority over any account located outside India, or are beneficial owners of any asset (including any financial interest in any entity) located outside India.
This requirement applies even if the taxpayer’s income is less than Rs 2.5 lakh, the minimum non-taxable amount. However, it is a little known fact that individuals meeting this condition should not file ITR 1 but ITR 2 or ITR 3, as applicable.
Prevent tax evasion
The FA Schedule was introduced in Income Tax refund for AY 2012-13 to prevent tax evasion through offshore routes by providing taxpayers an opportunity to disclose offshore assets and income in advance. The Schedule requires disclosure of details of foreign deposit accounts, details of foreign custodial accounts, details of foreign capital and debt interest, details of immovable property (land and buildings) situated outside Indiaetc. This schedule is applicable only to residents, and non-residents, including residents who are not ordinary residents (RNOR), are exempt from reporting it. All specified details of foreign assets and income must be disclosed in the FA Schedule along with references to the relevant schedule in the ITR where such taxable income is declared. If you have invested in stocks outside India, you must also reference the corresponding dividend income, if any.
ITR Filing for AY 2024-25
Unlike ITR information, which refers to the period between April and March, details of foreign assets must be provided calendar year, as most countries follow the calendar year, unlike India, which follows the calendar year. financial. For ongoing ITR filings for AY 2024-25, details relating to January 2023 to December 2023 need to be disclosed. Furthermore, for the conversion of foreign assets or income of foreign origin into Indian currency, the exchange rate will be the “telegraphic transfer purchase rate”, i.e. the exchange rate adopted by the State. Bank of India to purchase such currency when it is made available to the bank through telegraphic transfer.
Under Dirty money (Undisclosed Foreign Income and Assets) and Tax Imposition Act 2015, a penalty is provided for a resident taxpayer’s failure to provide or for providing inaccurate details of foreign assets or foreign income in the return. The fine is `10 lakh, with the only exception being a foreign bank account whose balance was less than the equivalent of `5 lakh during the year.
By understanding the requirements and ensuring complete compliance, taxpayers can avoid the pitfalls of non-disclosure and ensure their tax obligations are fully met. Proper reporting not only aligns with legal mandates but also contributes to a transparent and fair taxation system.
The writer is partner, Nangia Andersen India. Contributions by Neetu Brahma