Over 30,000 Taxpayers Declare Foreign Assets Worth Rs 29,200 Crore in FY25

Foreign Assets

Over 30,000 Taxpayers Declare Foreign Assets Worth Rs 29,200 Crore in FY25

Foreign Assets

In December 2024, the Income Tax Department encouraged taxpayers to voluntarily disclose any previously unreported foreign assets or income by December 31, 2024. The department warned that failure to comply could result in severe consequences, including fines of up to Rs 10 lakh and, in some cases, imprisonment.

According to tax officials, 30,161 taxpayers disclosed foreign assets amounting to Rs 29,208 crore in 2024, along with an additional foreign income declaration of Rs 1,089.88 crore. Voluntary disclosures of foreign assets have seen a substantial rise, increasing from 60,000 in Assessment Year (AY) 2021-22 to 2,31,452 in AY 2024-25—a 45.17% growth from the previous AY.

Strengthened International Data Exchange

In September 2024, India received financial data from over 108 countries under the Common Reporting Standard (CRS) and Foreign Account Tax Compliance Act (FATCA) agreements. The Central Board of Direct Taxes (CBDT) also reached out to 19,501 taxpayers through SMS and email notifications, conducting 30 outreach sessions that engaged more than 8,500 participants.

Foreign Assets

Throughout 2024, 24,678 taxpayers reassessed their Income Tax Returns (ITRs), with 5,483 submitting belated returns and 6,734 updating their residential status to properly declare their foreign assets.

The Income Tax Department reiterated that India has access to detailed financial account information of its residents held abroad. Attempting to conceal foreign wealth is futile, as international data-sharing agreements ensure transparency in tax matters.

How to Declare Foreign Assets

Schedule FA

Taxpayers must disclose any foreign assets or income in Schedule FA (Foreign Asset) of their ITR form and report foreign-sourced income in Schedule FSI (Foreign Source Income). Additionally, they can claim tax relief on taxes paid abroad by filing Schedule TR (Tax Relief). Failure to disclose such assets and income could attract stringent penalties and prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Filing ITR-U

If a taxpayer has not accurately reported foreign income or assets, they must address the issue promptly by filing a revised or belated ITR or an updated ITR-U. However, certain taxpayers may not be eligible to use ITR-U.

For past financial years where the deadline for filing an ITR, revised ITR, or belated ITR has passed, an ITR-U can be submitted to rectify under-reported or unreported income. However, it cannot be used to make new disclosures or corrections. In such cases, taxpayers must file a revised ITR before the deadline.

Foreign Assets

The Black Money Act: An Alternative for Voluntary Disclosure

Taxpayers who wish to disclose foreign income or assets voluntarily but cannot do so through a revised ITR, belated ITR, or ITR-U can consider utilizing the Black Money Act. This legislation allows individuals to declare undisclosed foreign assets and income, potentially reducing penalties and mitigating the risk of prosecution.

However, this option is only available if the taxpayer proactively discloses before the tax authorities identify non-compliance through enforcement actions or international data-sharing agreements such as FATCA and CRS.

Read More: Smart Year-End Tax Planning: Essential Steps Before March 31st

Conclusion

With increasing global financial transparency and strict tax regulations, individuals holding foreign assets must ensure compliance with disclosure norms. The Income Tax Department continues to monitor and act against non-compliance, emphasizing the importance of timely and accurate reporting to avoid penalties and legal consequences. Taxpayers should leverage available reporting mechanisms such as Schedule FA, ITR-U, and the Black Money Act to stay compliant and prevent legal repercussions.

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        Taxation of Cross-Border Transactions in India Under the Income Tax Act, 1961

        Cross-Border

        Taxation of Cross-Border Transactions in India Under the Income Tax Act, 1961

        Cross-Border

        In today’s interconnected global economy, international transactions have become a fundamental aspect of business operations. Companies engage in cross-border trade, foreign collaborations, and overseas investments, necessitating a clear understanding of taxation laws. Navigating the complexities of Indian tax regulations is crucial for compliance and strategic planning.

        Understanding International Transactions

        International transactions encompass a variety of business activities, including:

        • Import and export of goods and services

        • Foreign collaborations for projects

        • Investments in overseas entities

        • Cross-border financial arrangements

        As per Section 92B of the Income Tax Act, 1961, international transactions occur between two or more associated enterprises across international borders, making tax compliance a key consideration.

        cross-border

        Key Taxation Laws and Provisions

        The taxation of international transactions in India is primarily governed by the Income Tax Act, 1961. Some of the key sections relevant to international taxation include:

        • Section 4: General taxability of income

        • Section 90: Application of Double Taxation Avoidance Agreements (DTAAs)

        • Section 91: Relief from double taxation in cases where no DTAA exists

        DTAAs play a crucial role in mitigating double taxation and ensuring fair tax treatment across different jurisdictions.

        Tax Residency and Its Impact

        The tax residency status of an individual or entity determines their tax obligations in India:

        • Individuals are considered tax residents if they meet either of these conditions:

          • Present in India for 182 days or more in the current financial year.

          • Present in India for 60 days or more in the current year and 365 days or more in the preceding four years.

        • Entities incorporated in India are considered residents for tax purposes.

        Taxation of Foreign Source Income

        • Business and Professional Income:

          • Income earned by foreign businesses operating in India is taxable based on the Permanent Establishment (PE) concept.

          • A foreign company with a fixed place of business in India is liable for taxation on income generated in India.

        • Capital Gains:

          • Profits from the sale of foreign assets may be subject to capital gains tax.

          • Long-term capital gains on certain foreign securities may attract lower tax rates.

        • Dividend, Interest, and Royalty Income:

          • Income from foreign sources is generally taxable in India, but relief may be available through DTAAs.

        Withholding Tax and Tax Deduction at Source (TDS)

        International transactions are subject to withholding tax under various sections of the Income Tax Act:

        • Section 195: Governs tax deduction at source on payments made to non-residents.

        • TDS rates vary based on the nature of income, such as interest, royalties, or fees for technical services.

        Maintaining proper documentation and ensuring timely tax compliance is essential to avoid penalties and excess taxation.

        TDS Recovery Mechanism

        Businesses may recover excess withholding tax by filing the necessary forms under relevant DTAAs and the Income Tax Act. Proper documentation is crucial for claiming refunds and ensuring compliance with tax laws.

        Transfer Pricing and Arm’s Length Principle

        The Arm’s Length Principle (ALP) is central to transfer pricing regulations. Transactions between related entities must be conducted as if they were between independent parties to ensure fair taxation.

        Methods for Determining Arm’s Length Pricing:

        • Comparable Uncontrolled Price Method

        • Cost Plus Method

        • Profit Split Method

        These methods align with OECD guidelines and help prevent tax disputes.

        Advanced Pricing Agreements (APA) and Dispute Resolution

        • APAs: Allow businesses to negotiate and agree on transfer pricing methods with tax authorities, reducing the risk of disputes.

        • Dispute Resolution: Taxpayers can appeal international tax disputes through appellate authorities or arbitration mechanisms.

        Cross-Border

        Seeking Professional Tax Advice

        Given the complexities of international taxation, businesses should seek expert guidance to navigate regulatory requirements effectively. Tax professionals assist in structuring transactions, optimizing tax benefits, and ensuring compliance.

        Read More: Review of TDS/TCS Amendments in Budget 2025

        Conclusion

        Understanding tax residency, withholding tax obligations, and transfer pricing regulations is essential for businesses engaged in international trade. Strategic tax planning can help mitigate risks and maximize benefits while ensuring adherence to Indian tax laws.

        Key Takeaways:

        • Stay updated with evolving tax regulations and maintain proper documentation.

        • Utilize DTAAs to minimize double taxation.

        • Seek expert advice for efficient tax planning and dispute resolution.

        With proper planning and compliance, businesses can thrive in the international marketplace while fulfilling their tax obligations under Indian law.

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              Understanding ITR Filing Requirements for NRIs in India

              NRIs

              Understanding ITR Filing Requirements for NRIs in India

              NRIs

              As a Non-Resident Indian (NRI), you might often wonder if filing an Income Tax Return (ITR) in India is necessary. While tax regulations can be complex, this article simplifies the process and answers the key question: “When is an NRI required to file an ITR in India?”

              A. Understanding Your Residential Status for Tax Purposes

              Your residential status is crucial in determining your tax obligations in India. The Income Tax Act classifies individuals as Resident, Non-Resident (NR), or Not Ordinarily Resident (NOR), based on the amount of time spent in India over a year.

              To be considered a Non-Resident Indian (NRI), you must satisfy one of the following conditions:

              • You have stayed in India for less than 182 days during the financial year.
              • You have stayed in India for less than 60 days during the current financial year and for less than 365 days during the preceding four financial years.

              Meeting either of these conditions means you’re classified as an NRI under Indian tax laws.

              NRI

              B. What Types of Income Are Taxable for NRIs?

              Once you determine your residential status, the next step is understanding which of your earnings are taxable in India. The taxability depends on whether you’re considered a Resident or a Non-Resident:

              • Residents in India: All global income (income earned both in India and abroad) is taxable in India.
              • Non-Residents: Only income earned or accrued in India is taxable. Income earned outside India is not subject to tax in India unless it is brought into India or connected to assets or business operations within India.

              Here are examples of income types that may be subject to tax for NRIs in India:

              • Salary Income: Salary received for services rendered in India is taxable, even if paid abroad.
              • Rental Income: Income from properties located in India is taxable.
              • Capital Gains: Profits from selling assets or properties in India are taxable.
              • Interest Income: Earnings from deposits or savings accounts held in India are taxable.

              To simplify: Income earned outside India by an NRI is generally not taxable in India, unless directly received in India or related to assets or business in the country.

              C. Is Filing an ITR Compulsory for NRIs?

              With an understanding of taxable income, the next question is whether NRIs must file an Income Tax Return (ITR) in India. The answer is clear: If your taxable income in India exceeds the basic exemption limit of Rs 2.5 lakhs, you must file an ITR, even if there is no tax due.

              In addition to meeting the basic requirement, there are several other reasons why filing ITR is beneficial for NRIs:

              • Claiming a TDS Refund: If tax has been deducted at source (TDS) from your income, you can file an ITR to claim a refund, particularly if your actual tax liability is lower than the TDS deducted.
              • Reporting Your Residential Status: Filing an ITR ensures that your residential status is officially recorded with the Income Tax Department, minimizing the chances of receiving notices for unreported foreign transactions or remittances.
              • Providing Proof of Income: The ITR acknowledgment serves as legal proof of your income in India, even if no tax is payable.
              NRI
              • Carrying Forward Losses: If you incur capital losses from selling assets, you can carry those losses forward to offset future taxable income. To do so, ITR must be filed on time.
              • Easing Remittances: Regular ITR filings simplify the process of remitting funds out of India by providing necessary documentation (e.g., Form 15CA/15CB).
              • Eligibility for Loans and Credit Cards: Banks and financial institutions often require ITRs as proof of income when processing loans or credit card applications. Filing ITR regularly can improve your chances of approval.
              • Expert Tax Review: Filing ITR consistently allows experts to review your income and deductions, helping you optimize your tax planning and avoid penalties.
              • Meeting Visa Requirements: Many visa applications require ITRs from prior years. Regular filing ensures that these documents are readily available when needed.

              Read More: Understanding Section 80GGC: Political Donation Deduction & IT Department Verification

              Though it might seem like an additional task, filing an ITR in India has several advantages for NRIs, from claiming refunds to facilitating financial transactions. Understanding when and why you need to file can help you stay compliant with Indian tax laws while enjoying the benefits of timely filings. If you’re unsure about your specific situation, consulting a tax professional can help you meet all necessary requirements.

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