The global issue of black money and tax evasion through offshore accounts has been a significant concern for tax authorities. To address this, the Indian government enacted the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, commonly referred to as the Black Money Act. This legislation requires taxpayers to disclose foreign assets and income in their Income Tax Returns (ITRs), promoting transparency and preventing tax evasion in cross-border transactions.
With the final deadline of 31st December fast approaching for filing revised or belated ITRs, the Income Tax Department has intensified its campaign encouraging taxpayers to declare their foreign assets for Assessment Year (AY) 2025. Non-compliance may result in strict penalties, including a ₹10 lakh fine and possible prosecution. Below is an in-depth guide to understanding the rules and implications of foreign asset disclosure in ITRs.
Foreign assets, for Indian residents, encompass:
The disclosure of foreign assets serves multiple purposes:
The Black Money Act, 2015, mandates reporting foreign assets and income in specific ITR schedules:
Failing to report foreign assets attracts a significant penalty of ₹10 lakhs, underlining the need for accurate compliance.
Proper reporting allows taxpayers to claim benefits under Double Taxation Avoidance Agreements (DTAA) and tax credits for foreign taxes paid by filling Schedule TR (Tax Relief).
Disclosure ensures accountability, aids the government in monitoring global income, and upholds taxpayer obligations.
Under the Income Tax Act, 1961, the following individuals must disclose foreign assets:
Foreign assets must be disclosed in Schedule FA of the ITR. Follow these steps:
The regular deadline for filing ITR, including foreign asset disclosures, is 31st July of the assessment year. If details are missed, taxpayers can rectify this by filing a revised or belated return by 31st December without incurring significant penalties.
Failing to disclose foreign assets can lead to:
In a noteworthy judgment, the Mumbai Income Tax Appellate Tribunal (ITAT) upheld penalties under Section 43 of the Black Money Act for failing to disclose foreign assets, even when income from these assets was reported. This underscores the importance of complete and accurate reporting.
In a noteworthy judgment, the Mumbai Income Tax Appellate Tribunal (ITAT) upheld penalties under Section 43 of the Black Money Act for failing to disclose foreign assets, even when income from these assets was reported. This underscores the importance of complete and accurate reporting.
If you failed to report foreign assets for FY 2023-24, file a revised return by 31st December 2024. Ensure all details are accurately filled in Schedule FA to avoid penalties or scrutiny.
Disclosing foreign assets and income in ITRs is not only a legal obligation under the Black Money Act but also essential for avoiding penalties, ensuring transparency, and claiming tax relief. Depending on your income source, use ITR-2 or ITR-3 for these disclosures. Given the complexities of international taxation, seeking professional guidance is advisable to ensure compliance and accuracy.
Q: Is declaring foreign assets mandatory in ITR?
Yes, residents and ordinarily residents must declare foreign assets in Schedule FA under the Black Money Act.
Q: What tax rate applies to undisclosed foreign income?
A flat tax rate of 30% applies, with no exemptions or deductions allowed.
Q: Where are foreign assets reported in ITR?
Foreign assets are disclosed in Schedule FA, covering bank accounts, investments, and signing authority.
Q: What is the penalty for non-disclosure?
A fine of ₹10 lakhs is imposed for failure to report foreign assets.
Q: Is there a minimum threshold for reporting foreign assets?
No, the obligation depends on residential status, not the value of the assets.
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