Question: What are the disclosure requirements for Indian residents who hold foreign assets?Answer by Dr Suresh Surana, Founder, RSM India: 1.0 Applicable Schedule in the ITR:Schedule FA (i.e. Schedule on Foreign Assets held outside India) must be filled by every individual taxpayer who is a resident and ordinarily resident in India and owns or has a beneficial interest in assets abroad or derives income from foreign sources during the relevant calendar year or has signing authority in any account outside India. As such, Schedule FA need not be filled by those having status of either non-residents (NR) or Resident but Not Ordinarily Resident (RNOR). For instance, an Indian investor buying US stocks from international brokerage platforms cannot opt for Form ITR-1 (SAHAJ) or ITR-4 (SUGAM) for filing their ITRs and would be required to file their income tax return in Form ITR-2 or ITR-3, as applicable.

2.0 Some of the important things to be noted while filling Schedule FA are:• This schedule need not be filled up by an individual being non-residents (NR) or Resident but Not Ordinarily Resident (RNOR).• The specified taxpayer has to furnish details of such foreign assets if they were held even for a single day during the relevant calendar year.• The foreign currency should be converted into INR using the telegraphic transfer buying rate (TTBR). TTBR rate would mean such exchange rate adopted by the State Bank of India having regard to the RBI guidelines.

3.0 For which period reporting is to be made – Accounting Year or Calendar Year?• Disclosure in Schedule FA of ITR-2 or ITR-3 needs to made by the resident taxpayers holding any asset including financial interest in any foreign entity and/or has signing authority in any account outside India or earns income from foreign sources. Such reporting was required w.r.t. any foreign assets held at any time during the relevant “accounting period”.• However, the income tax department, with effect from AY 2022-23, has replaced the expression “accounting period” with “calendar year ending as on 31st December” in the ITR Forms notified, which implies that the taxpayer shall furnish the details of all foreign assets held between 1st January and 31st December in returns to be filed for the relevant assessment year.

4.0 Penalty and Prosecution Provision for non-disclosure:• Section 43 of the Black Money (Undisclosed Foreign Income & Assets) & Imposition of Tax Act 2015 imposes penalty of Rs. 10,00,000 on any person, being a resident and ordinary resident in India for failure to furnish in the income tax return any information or for furnishing inaccurate relating to an asset (including financial interest in any entity) located outside India, held by him as a beneficial owner or otherwise, or in respect of which he was a beneficiary, or relating to any income from a source located outside India, at any time during such relevant year.• It is pertinent to note that penalty under this section shall not apply in respect of an asset, being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to Rs. 5,00,000 at any time during the relevant year.• Further, the provisions of Section 276C(1) of the Income-Tax Act may be attracted leading to prosecution (subject to rigorous imprisonment for a period of 6 months to 7 years and/or fine) if the revenue is of the view that non-disclosure of foreign assets in Schedule FA results in willful attempt to evade tax, penalty or interest chargeable or imposable or under reports his income.

This Q&A series is published every week on Thursday.

Disclaimer: The views and facts shared above are those of the expert. They do not reflect the views of financialexpress.com.