Income tax department advises taxpayers to carefully review their foreign income, assets in ITR

New Delhi [India], ANI: The Central Board of Direct Taxes (CBDT) has urged Income taxpayers to thoroughly review and accurately report their foreign income and assets in their Income Tax Returns (ITRs). 

In a special edition of its publication Samvad, the Income Tax Department emphasized the importance of proper disclosure of foreign assets and income. The initiative aimed to educate taxpayers on their obligations under the law. 

Shashi Bhushan Shukla, Commissioner (Investigation), CBDT, explained during the session that Indian residents are legally required to declare all foreign assets, including real estate, bank accounts, shares, debentures, insurance policies, or any other financial holdings where they are the beneficial owner. 

He highlighted that the ITR forms include a detailed “Foreign Assets and Income” schedule to guide taxpayers in reporting such details. The rule applies specifically to resident taxpayers, as defined under Section 6 of the Income Tax Act. Shukla clarified that a resident taxpayer is someone who has spent at least 182 days in India during the previous year or 365 days over the preceding four years. Non-residents or individuals classified as “not ordinarily residents” are exempt from this reporting requirement.

Addressing common concerns, Shukla noted that even if a resident taxpayer owns foreign assets that do not generate income—such as property purchased abroad years ago—they are still obligated to declare these assets in their ITR. For instance, a property acquired in 2010 must be disclosed, regardless of whether it generates rental income. Similarly, foreign assets like investment properties or bank accounts must be reported, even if the income earned is below the taxable limit.

Failing to disclose foreign income or assets can result in penalties under the Black Money Act, including fines up to ₹10 lakh. 

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For returning Non-Resident Indians (NRIs) or foreign citizens who have transitioned to residency in India, Shukla clarified that they must disclose their foreign assets and income once they qualify as residents under Indian law. This requirement also applies to income from foreign stocks or investments, such as dividends and capital gains, which should be reported under the relevant ITR schedules.

Shukla also discussed Double Taxation Avoidance Agreements (DTAAs), which India has with several countries to prevent taxpayers from paying taxes twice on the same income. Taxpayers can claim tax credits for foreign taxes paid, ensuring compliance with DTAA provisions. 

Lastly, Shukla emphasized the importance of international tax transparency and cooperation. India has signed the Common Reporting Standard (CRS) agreement with over 120 countries, facilitating the exchange of financial information about foreign assets and income. This global collaboration helps combat tax evasion and enhance compliance.

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