ITR Filing: Do you have foreign accounts, assets, or income? Here's why you need to mention this information in your income tax return filing

With the globalisation of the economy, it's not uncommon for Indian taxpayers to find themselves juggling finances across borders. These multi-country ventures, while lucrative, can complicate the ordinary task of filing an Income Tax Return (ITR). From foreign bank accounts to international investments, every asset needs careful and lawful handling on your ITR. 

Declaring foreign assets and income

Under the watchful eye of the Indian Income Tax Act 1961, Indian residents who have been international players in the fiscal year have a distinct obligation. Each and every foreign bank account, investment, or other types of assets must feature on your ITR. The only individuals who escape this requirement are Non-Resident Indians (NRIs) or residents not ordinarily resident in India. 

This vital information finds its home in a section called the Foreign Asset Schedule, or Schedule FA to its friends. Think of Schedule FA as the government's detective agency, dedicated to thwarting tax evasion and money laundering via offshore channels.

Taxation norms on foreign assets

Don't worry, it’s not all about declaring your assets and leaving them to the mercy of multiple tax systems. Enter the Double Taxation Avoidance Agreement (DTAA), India's pact with several countries to save you from being taxed twice. By playing the honesty card and accurately disclosing foreign assets and income, you're eligible for the benefits of DTAA. 

What to include in Schedule FA

When it comes to Schedule FA, it's all about the nitty-gritty. For each foreign asset or account, be prepared to provide the name and code of the country, the foreign entity's name, address, zip code, and account number. It's also important to state the status and opening date of the account, the initial investment value, the highest and closing values for the fiscal period. 

Income isn't off the hook either. From gross interest credited during the fiscal year to amounts received from sale or investment redemption and dividends, every penny needs to be declared in your ITR. If you've claimed relief under the DTAA, don't forget to disclose that too.

Dodging the taxman? the price you will pay

Tempted to brush some foreign assets under the carpet? Think again. Non-disclosure or even inaccurate representation of foreign assets can trigger severe penalties under the Black Money Act. We are talking monetary penalties up to Rs 10 lakh, loss of DTAA benefits, and even a hefty penalty of up to 300% of the tax evaded. Not to mention, non-declaration throws any claims for relief under DTAA for foreign income right out the window.

Tips for reporting foreign assets and income

The intricacies of declaring foreign assets and income in your ITR can make even the best of us a tad nervous. That’s why getting professional help might be a smart move. Try to provide exhaustive information about the foreign assets, including investment values, peak balance, closing balance, interest earned, and proceeds converted to Indian currency using the State Bank of India's Telegraphic Transfer Buying Rate (TTBR).

Remember, regardless of the tax slab you fall under, if you've got your fingers in foreign pies during the fiscal year, filing an ITR is a must. The clock is ticking with the last date for filing the ITR for the Assessment Year 2023-24 looming on July 31, 2023. Stay compliant, avoid penalties, and keep your tax affairs squeaky clean.