How to report foreign income in ITR: Types of foreign income you need to report in ITR, which ITR form to use

The Schedule FA was introduced to combat tax evasion and money laundering and has been a crucial component of the ITR forms since FY 2011-12 (AY 2012-13). In this section, individuals (who are usually resident in India) are required to furnish details about their foreign assets and income, irrespective of whether the income is taxable in India. Non-resident individuals (NRIs) or individuals who are not-ordinarily resident individuals (NOR) are not obliged to disclose any information in this Schedule.

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Income from any source outside India, such as dividend, interest, or capital gain; Any asset held outside India, including shares, debentures, life insurances, annuity contracts, immovable property such as a house property or other capital asset; Financial or beneficial interest in any overseas entity (For instance, if you are a partner in a partnership or firm located overseas or if you are a beneficiary of a private trust based in another country); Signing authority in any bank or trading account located outside India; Reporting in this schedule is mandatory regardless of the asset’s ownership type, whether legal or beneficial.

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When you file your tax return for the FY 2023-24 (AY 2024-25), you should report any foreign assets or income from the calendar year 2023 (January 1, 2023 to December 31, 2023). It’s important to note that while the disclosure in Schedule FA is for the calendar year, the taxable income will be calculated based on the financial year. This means that the income earned in the financial year 2023-24 (April 1, 2023 to March 31, 2024) will be subject to tax. However, for the purposes of disclosure in Schedule FA in the ITR for the FY 2023-24, the calendar year 2023 should be used.

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The Black Money Act, 2015 requires Indian residents to disclose foreign assets and income in their ITR. Under the Black Money Act, if you have assets or income from foreign sources, you must accurately and promptly file your ITR.

Failure to provide accurate information in Schedule FA can result in a penalty of Rs 10 lakh. Additionally, the individual may face imprisonment for six months to seven years, along with fines. The Mumbai Tribunal, in the case of Shobha Harish Thawani v. Joint CIT, has upheld the levy of a penalty of Rs 10 lakh for each assessment year for non-disclosure of foreign assets in the ITR Schedule FA for the assessment years 2016-17 to 2018-19.

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