Have Foreign Income Or Crypto Gains? Filing ITR Just Got More Complex

For most salaried people, filing an income tax return (ITR) is a July ritual - upload Form 16, confirm pre-filled data, and submit. However, if you have foreign income or crypto gains, that routine does not apply to you. This year, compliance on both fronts has tightened in ways that catch people off guard.

Foreign Income: Disclosure Is Not Optional

If you are a resident Indian earning a foreign salary from abroad, dividends from overseas stocks, interest in a foreign bank account, or rent from property outside India, every rupee of it must be reported back home.

“ITR-1 will not do. You need ITR-2 or ITR-3, and three schedules must be filled out without exception: Schedule FSI for foreign income, Schedule FA for assets held abroad, and Schedule TR to claim credit for tax already paid in that country. Skip even one and your return is incomplete in the eyes of the law,” says Parag Jain, tax head at 1 Finance, a personal finance platform.

Aakash is an IT professional in Pune who returned from the US three years ago. He still holds a US brokerage account that pays roughly $900 in dividends each year. Every July he files ITR-1, telling himself the amount is too small to worry about. It is not. India now receives financial data from over 100 countries under the Common Reporting Standard. His US account has already surfaced in that data. His ITR carries no matching disclosure. Under the Black Money Act, the penalty for each undisclosed foreign asset can reach Rs 10 lakh.

“One thing many returning professionals miss: residential status is determined by days physically spent in India, not by bank account labels or passport stamps. Cross the threshold and global income reporting kicks in automatically, regardless of what you assumed,” says Jain.

Crypto Gains: Strict Rules, Little Room For Error

Crypto profits are taxed at a flat 30 per cent, irrespective of your income bracket or how long you held the asset. The only permitted deduction is your cost of acquisition, no transaction fees, no exchange charges, nothing beyond the purchase price.

Losses from one crypto asset cannot be set off against gains from another, or against any other income. Made Rs 5 lakh on Bitcoin and lost Rs 8 lakh on Ethereum in the same year? You still owe tax on the full Rs 5 lakh.

Shraddha is a 35-year-old lawyer in Mumbai who traded across three platforms last year - two Indian exchanges and one foreign wallet. After mentally netting gains against losses, she landed at a net loss of Rs 3 lakh. She plans to report that figure under Schedule VDA and move on.

Says Jain: “Two things will go wrong. Losses cannot be netted this way. Each profitable trade is taxed at 30 per cent on its own, regardless of what happens elsewhere in the portfolio. And her foreign wallet holdings are foreign assets, which belong in Schedule FA. Leaving that out exposes her to the same Rs 10 lakh penalty as any other foreign asset non-disclosure. Filing ITR-1 to avoid these schedules entirely will have the system flag her return as defective.”

Steps Before Your ITR Filing

Confirm your residential status first. It decides which schedules apply. For foreign income, pull statements from every overseas account and convert figures to INR using the telegraphic transfer buying rate on the last day of the financial year. If you paid tax abroad, file Form 67 before your ITR deadline to claim that credit in India.

For crypto, download full transaction histories from every exchange and wallet, including foreign platforms. Calculate gains trade by trade. Swapping one crypto for other counts as a taxable transaction, not a portfolio adjustment.

The Income Tax Department is cross-referencing exchange data, CRS feeds, and ITR filings more actively than before. Clean disclosure, filed on time, is the only way to stay clear.