CBDT notifies taxpayers to report foreign assets and income in ITR. What should you do?

Income Tax Income Tax Notices
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As part of ongoing collaborative efforts to ensure compliance with tax regulations, we have received information concerning foreign assets and income, from the USA, such as Bank account, interest, dividends, etc, that may be associated with you. Our records show that Schedule Foreign Assets has not been filled in your return for AY 2024-25…

This communication has been sent via email to various taxpayers over the past weekend. The email highlights that details of foreign assets such as foreign bank accounts, interest, and dividends may not have been reported in their tax returns.

However, this is not an income tax notice. Instead, it’s part of a compliance and awareness campaign launched by the Central Board of Direct Taxes (CBDT). The aim is to assist taxpayers in accurately reporting their foreign assets in their ITRs.

Why was this communication sent?

The primary objective is to remind taxpayers of their legal obligation to disclose all foreign assets and income in their ITR. Non-disclosure can lead to penalties or prosecution under the Black Money Act.

What should you do next?

  • Check your records: Go through your financial activities for the last financial year. Did you hold or earn any income from foreign assets, like stocks or ESOPs? If yes, ensure these are reported.

  • Revise your ITR: If you missed reporting anything in your original return, file a revised return before December 31, 2024.

  • Fill schedule FA and FSI:

    • Accurately fill Schedule FA (Foreign Assets), which requires details of foreign bank accounts, investments, and other assets.
    • If you sold any foreign assets, report the capital gains in Schedule FSI (Foreign Source Income).

For detailed guidance, refer to the official document on filling Schedule FA and FSI.

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A freelancer exporter of services receives payment from foreign clients via bank transfer and Paypal/Wise. His income is less than 2 lacs which is less than the taxable limit and so did not file ITR.

Is his income “Foreign Source Income” for the above purpose? Does he have to file an ITR now?

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Hey @RockyS

The income received by a freelancer is not classified as “Foreign Source Income” under Indian income tax laws because the services are performed in India, even if the payments come from clients located abroad.

Additionally, filing an Income Tax Return is not mandatory if your income does not exceed the basic exemption limit defined in the Income Tax Act. However, filing your income tax return for compliance is always advisable.

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Thank you! It’s a relief.

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Do we need to declare this for every holding? For example, i hold foreign shares but i am in a loss, invested amount is $121, in addition, i did sell some ESOPs over the last couple of years, but i thought that amount is already taxed and balance transferred to my indian bank account. So currently i hold foreign shares worth only about $105, does this mean i need to re-file my returns? Please advise!

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Hey @Mikedias

Yes, you are required to declare all your foreign shareholdings. If you have sold the ESOPs, you must also disclose them separately in your ITR as capital gains and foreign source income.

It is advisable to revise your ITR to include these shareholding details and the information about the ESOP sales.