Summary of this article
Report all foreign assets and income in Schedule FA, FSI and TR—whether or not they earned income.
If you receive a CBDT alert, verify authenticity, review the flagged item, and gather supporting documents.
Correct omissions by filing a revised or updated return and paying any additional tax with interest.
Non-disclosure can trigger penalties up to 3x tax under the Black Money Act, so timely correction is essential.
As the Central Board of Direct Taxes (CBDT) has identified thousands of taxpayers for possible non-disclosure of foreign assets and income, many individuals are beginning to receive SMS and email alerts warning them of mismatches in their tax filings for FY2024-25.
Against this backdrop, accurate reporting of foreign assets has become critical - not just to avoid penalties under the Income-Tax Act but also serious consequences under the Black Money Act.
Disclosing Foreign Assets And Income In ITR
Foreign assets and foreign income must be reported in the income tax return under the dedicated Schedule FA and Schedule FSI/ TR, regardless of whether the account or asset generated income during the year.
“Schedule FA requires disclosure of ownership or signing authority in foreign bank accounts, financial interests, equity holdings, immovable property abroad, ESOPs/ ESPPs/ RSUs, cryptocurrency, trusts and any other foreign custodial or investment assets. Separately, income from foreign sources such as dividends, capital gains, interest, ESOPs, rental income or business income must be reported in Schedule FSI and tax relief claimed under tax treaty in Schedule TR, where applicable,” says Sandeepp Jhunjhunwala, Partner, Nangia Group.
Full and accurate disclosure is mandatory for all resident taxpayers, including resident but not ordinarily resident (to a more limited extent), and non-reporting could trigger penalties under the Black Money Act.
Steps To Take When CBDT Flags Unreported Foreign Assets
According to tax experts, a taxpayer should first verify the authenticity of the communication by checking the sender domain and cross-checking the notice in the e-filing portal.
Once confirmed, the taxpayer must review the foreign asset or income information flagged often sourced from data exchanges under CRS/ FATCA, foreign intermediaries, or domestic banks handling remittances. The taxpayer should gather all relevant documentation such as bank statements, investment reports, Form 16/ ESOP statements, and overseas tax papers to understand whether the omission is genuine. If the asset or income was indeed missed, the taxpayer should act promptly by revising the ITR or filing an updated return, depending on eligibility, to correct the omission.
Timely action is vital as non-disclosure carries significant consequences. Section 43 of the Black Money Act prescribes a penalty of Rs 10 lakh for failing to report foreign assets or income, except where the total value of foreign assets (other than immovable property) does not exceed Rs 20 lakh. If an asset is classified as an undisclosed foreign asset, Section 41 of the Black Money Act empowers the Assessing Officer to levy a penalty equal to three times the tax, in addition to the 30 per cent tax under Section 3 of the Black Money Act,” informs Jhunjhunwala.
Under the Income-Tax Act, 1961, Section 270A further imposes a penalty of 50 per cent of the tax on under-reported income and 200 per cent where the non-reporting amounts to misreporting. Prompt voluntary correction can substantially mitigate these exposures and reduce the risk of prosecution.
Correct Procedure For Revising An ITR
The taxpayer should file a revised tax return with complete and accurate details in the relevant schedules, and retain all supporting documents as backup. Further, in case any additional taxes are payable, such amount should be duly deposited along with applicable interest before filing of the revised tax return.
Taxpayers with any foreign assets or income should not file using ITR-1 or ITR-4, as these forms lack the necessary reporting schedules for foreign disclosures.
“While there is no limit on the number of times a tax return can be revised, such revisions must be made by 31 December 2025 (for FY 2024-25). Taxpayers should also keep all the relevant documents of assets and income from the source country to ensure complete and correct disclosure,” advises Rohinton Sidhwa, Partner, Deloitte India.
