As the financial year approaches its close on March 31, taxpayers with overseas financial interests may need to pay close attention to disclosure requirements while preparing for the upcoming income tax return (ITR) filing cycle.
Under Indian tax rules, individuals classified as resident and ordinarily resident (ROR) are required to report foreign assets in Schedule FA (Foreign Assets) of their ITR. These disclosures typically include overseas bank accounts, shares, employee stock options, and immovable property held outside India.
Tax experts say reporting gaps often arise due to misunderstanding of disclosure rules, reporting timelines, and the difference between reporting assets and income.
Not reporting all foreign assets
One common error is assuming that only large overseas holdings need to be disclosed. Tax professionals note that Schedule FA requires taxpayers to report all foreign assets regardless of their value.
“Mandatory disclosure applies to all foreign assets, regardless of value, even minor ones like dormant overseas accounts or small stock holdings,” an tax expert said.
She added that omissions could attract penalties under the Black Money (Undisclosed Foreign Income and Assets) Act, which may extend up to ₹10 lakh.
Using the financial year instead of calendar year
Another frequent mistake relates to the reporting period used in Schedule FA. While most sections of the ITR follow the financial year ending March 31, disclosures of foreign assets are based on the calendar year.
“Schedule FA covers assets held during the calendar year ending December 31, 2025, for the FY 2025–26 return, not the financial year ending March 31,” She said.
Confusing asset reporting with income reporting
Tax experts also highlight confusion between reporting ownership of foreign assets and reporting the income earned from them.
Schedule FA requires disclosure of the assets themselves, such as foreign bank accounts, shares, ESOPs or overseas property. Income generated from these assets — including interest, dividends or capital gains — must be disclosed separately in Schedule FSI (Foreign Source Income), she explained.
Incorrect reporting of ESOPs and RSUs
Employee stock options (ESOPs) and restricted stock units (RSUs) issued by foreign employers can also lead to reporting errors.
According to tax experts, foreign shares obtained through such instruments should be disclosed in Schedule FA from the date they vest, while the perquisite value arising from them must be reported as income in the appropriate section of the return.
Not checking residential status before disclosure
Disclosure requirements for foreign assets apply only to individuals classified as resident and ordinarily resident in India. Non-residents (NR) and residents but not ordinarily resident (RNOR) are not required to report overseas assets in Schedule FA.
Delaying corrections after filing
Tax professionals say taxpayers who later discover that they missed reporting a foreign asset should correct the omission promptly by filing a revised return.
“In case of inadvertent omissions, taxpayers should file a revised return promptly to avoid notices or reassessment,” she said.
