If you have foreign assets or income, read this
What's the story
In a world where side gigs and global investments are the norm, many Indians are raking in income from foreign sources—whether through overseas jobs, stocks, or real estate. But did you know that failing to disclose offshore earnings could land you in hot water with the Income Tax Department? With strict regulations and hefty penalties, staying tax-compliant is no longer optional—it's a must! This article breaks down the key rules around foreign income disclosure so don't get caught off guard.
Declaration
The basics of foreign asset declaration
Every Indian resident taxpayer must disclose their foreign assets and income on their annual tax return. This applies to income from employment, property, investments, and bank accounts held outside India. Failing to report these assets attracts harsh penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Penalties
Penalties for non-disclosure
The consequences of not declaring foreign income or assets are severe. Undisclosed foreign income/assets: Taxpayers will be liable to a penalty of three times the amount of tax that would have been sought to be evaded on such undisclosed income or ₹10 lakh for non-disclosure of foreign assets, whichever is higher. Plus, there will be a prosecution with imprisonment ranging from six months to seven years.
Compliance
Compliance window opportunity
The government of India sometimes provides a compliance window, enabling taxpayers to declare undisclosed foreign assets without the fear of prosecution, though they will have to pay taxes and a penalty. This is intended to promote voluntary compliance among taxpayers who may have, in the past, neglected or forgotten to disclose their foreign incomes or assets.
Reporting
Special reporting requirement under Schedule FA
Schedule FA in the Income Tax Return asks for a comprehensive lowdown on your foreign assets. These encompass financial interests, immovable property located outside India, and foreign bank accounts. It is super important for taxpayers possessing such assets to accurately complete this section when filing taxes. One should either comprehend these regulations or get professional advice. It is key to ensure compliance and intelligent planning for overseas investments.