Schedule FA – Disclosure of Foreign Assets in ITR

In a recent communication, the Income Tax Department has advised taxpayers to declare details of foreign assets and income earned abroad in their Income Tax Returns (ITR). This requirement is crucial not only for meeting legal compliance but also for supporting financial transparency and national development.

The department has clearly warned that non-reporting of overseas assets or income can result in serious consequences. In November last year, the Income Tax Department launched a targeted campaign stating that failure to disclose foreign assets or income may lead to penalties of up to ₹10 lakh under the Black Money (Undisclosed Foreign Income and Assets) Act.

To ensure proper disclosure, taxpayers must use the relevant schedules in the ITR forms:

• Schedule FA (Foreign Assets): Used for declaring assets held outside India, such as foreign bank accounts, shares, properties, or other financial interests.
• Schedule FSI (Foreign Source Income): Used for reporting income earned from sources outside India, including salary, dividends, interest, or rental income received abroad.

What is Schedule FA (Foreign Assets) in ITR?

Schedule FA (Foreign Assets) is a section of the ITR form where taxpayers are required to disclose foreign assets such as overseas shares, foreign mutual funds, or interests in foreign companies.

In simple terms, all foreign assets held by you—whether as a legal owner, beneficial owner, or beneficiary—must be reported while filing ITR-2 or ITR-3, as applicable.

Filing Schedule FA is mandatory for a resident taxpayer in India if:
(a) they own any asset outside India;
(b) they have signing authority in any overseas account; or
(c) they earn income from a foreign source.

This schedule is not applicable to Non-Residents (NR) or Not Ordinarily Residents (NOR).

Schedule FA requires disclosure of assets located outside India if they were held at any time during the relevant accounting year. Even assets held for a single day during the period must be reported.

The following details must be disclosed:

• Foreign bank, depository, or custodial accounts
• Foreign shares or ETFs (held directly or through platforms such as Interactive Brokers, Vanguard, etc.)
• Foreign immovable properties
• Trusts or other overseas legal arrangements
• Other capital assets or income earned from foreign sources

Additionally, the peak balance, closing balance, and income generated from these assets during the calendar year (1 January to 31 December) must be reported in INR using the State Bank of India’s TTBR exchange rate.

Why Is It Important to File Schedule FA in ITR?

Schedule FA plays a vital role for the following reasons:

Disclosure of Foreign Assets – It enables taxpayers to report foreign assets owned by them, such as overseas bank accounts, shares, properties, mutual funds, and other financial instruments. This helps the Income Tax Department keep an accurate record of residents’ global financial holdings.

Prevention of Black Money – It supports efforts to curb black money cases, such as those exposed in the Panama Papers. Mandatory disclosure discourages concealment of foreign assets and clearly defines penalties for non-reporting.

Avoidance of Double Taxation – Declaring foreign assets ensures that income arising from them is taxed correctly. It also allows taxpayers to claim relief under Double Taxation Avoidance Agreements (DTAA), preventing the same income from being taxed twice.

Who Should Report Foreign Assets?

Reporting foreign assets in Schedule FA is mandatory for individuals and HUFs (Hindu Undivided Families) who are classified as Resident and Ordinarily Resident (R&OR). This requirement promotes transparency in cross-border financial interests and ensures tax compliance. The key provisions and exceptions are outlined below.

Foreign asset reporting is required if you have any of the following:

• Foreign assets of any nature
• Financial interest or ownership in a company located outside India
• Signing authority in a bank or financial account maintained abroad

Beneficial Ownership – Beneficial ownership applies when you receive benefits from assets held in someone else’s name. Beneficial owners are also required to disclose foreign assets in the ITR. However, certain exceptions apply:

• Beneficiary with Income Already Taxed – If you are a beneficiary of a foreign asset and the income from it has already been taxed in the hands of the legal owner, you may be exempt from filing a separate return.
• Foreign Citizens with Specific Visas – Foreign nationals classified as R&OR but holding business, employment, or student visas may be exempt from reporting foreign assets that were acquired during their non-resident period and from which no income is currently earned.

Relevant Period for Disclosing Foreign Assets

Taxpayers must report foreign assets and income relating to the applicable calendar period while filing their Income Tax Returns. For Assessment Year 2025–26, details of foreign assets held and income earned during the period from 1 April 2024 to 31 March 2025 must be disclosed in Schedule FA. Accurate and complete reporting is essential to comply with tax laws and avoid penalties or legal action. Taxpayers should therefore compile all relevant information for the specified period to ensure smooth and compliant filing.

Rate of Exchange for Conversion

Currency conversion charges are generally around 1% of the transaction value. These charges are determined by the ATM network or credit card processing entity and are usually added to the foreign transaction fee paid by the taxpayer.

What Foreign Assets Must Be Disclosed under Schedule FA?

Disclosure of foreign assets in the Income Tax Return (ITR) is mandatory under Schedule FA if you hold any of the following foreign assets:

Table	Description	Examples
A1	Details of Foreign Depository Accounts	Savings accounts, checking accounts, money market accounts held outside India
A2	Details of Foreign Custodial Accounts	Investment accounts with a custodian bank outside India
A3	Details of Foreign Equity and Debt Interest	Mutual funds, stocks, bonds, and other financial instruments in foreign companies, including beneficial ownership of foreign entities
A4	Details of Immovable Property Situated Outside India	Houses, apartments, or land located abroad
A5	Details of Cash and Equivalent Outside India	Physical cash, precious metals, or jewels held outside India
A6	Details of Loans and Advances Given Outside India	Money lent to individuals or entities abroad
A7	Details of Unquoted Equity Shares Held Outside India	Shares in private foreign companies
A8	Details of Investment in Business Outside India	Ownership interest in businesses operating outside India
A9	Details of Any Other Foreign Asset or Financial Interest	Any foreign asset or financial interest not covered above
A10	Details of Income from Foreign Assets	Income from the above assets, such as dividends, interest, or rent

Key Information Required for Reporting Foreign Assets

For each foreign asset or account reported under Schedule FA, you must provide:

• Country name and code
• Name of the foreign entity
• Address and zip code of the foreign entity
• Account number of the foreign repository
• Status of the account and the date of account opening or asset acquisition
• Initial value of the investment
• Highest value of the investment during the accounting period
• Closing value of the investment on the last date of the accounting period
• Gross interest credited in the asset account during the year
• Amount received from sale or redemption of the investment during the year

How to File Schedule FA in ITR

Step 1: Identify the Asset Category – Determine which category your foreign asset falls under and select the relevant asset code while filing the ITR.

Step 2: Provide Asset Details – Enter basic information, including the name, address, zip code, country code, and currency code of the foreign entity.

Step 3: Provide Investment Values – Report the initial value, opening balance, highest balance during the year, and closing balance at the end of the accounting period, in both foreign currency and INR.

Step 4: Report Income and Proceeds – Disclose income or revenue earned during the accounting period in both foreign currency and INR. Include proceeds from the sale or redemption of assets.

Step 5: Claim DTAA Relief (if applicable) – Enter details of any relief claimed under the Double Taxation Avoidance Agreement (DTAA) for income from foreign assets.

Deadline to Report Foreign Assets in ITR

The standard deadline to disclose foreign assets in the Income Tax Return (ITR) is 31st July of the Assessment Year. For FY 2024-25, the ITR filing deadline has been extended to 15th September 2025, which applies to reporting foreign assets as well.

If foreign assets were incorrectly reported or not reported, taxpayers can file a revised or belated return by 31st December of the Assessment Year, although additional penalties may apply.

 

 

Penalty for Not Declaring Foreign Assets in ITR

Failure to report foreign assets or furnishing inaccurate information can attract severe consequences:

• Penalty of ₹10 lakh for each year of non-disclosure.
• Non-reporting is considered willful tax evasion, which may result in imprisonment up to 7 years.
• Non-declaration also revokes the right to claim DTAA relief on foreign income.

How to Declare Foreign Shares in ITR

• Report all foreign investments and stocks in Table A3 of Schedule FA.
• Convert the value of foreign assets into Indian Rupees (INR) before reporting.
• Dividends from foreign stocks must be declared as “Income from Other Sources” in the year they are received.
• Dividends are taxable even if the funds are not brought to India.
• Tax already paid abroad can be claimed as credit under the ITR to avoid double taxation.
• All foreign assets held during the calendar year must be disclosed, regardless of the duration of holding.
• For AY 2025-26, report assets held between 1 January 2024 and 31 December 2024.
• Assets purchased in any month, including March 2024, must be included in Schedule FA for FY 2024-25.
• ITR filing is mandatory if you hold any foreign asset during the financial year, regardless of your income slab.

When & How to File Revised or Belated ITR for Foreign Assets

When reporting foreign assets in Schedule FA, it is important to distinguish between the previous year (PY) and the assessment year (AY). You must report all foreign assets held and income earned during the previous year in the ITR for the corresponding assessment year.

Example: For AY 2025-26 (filing due between July and September 2025), report foreign assets and income from 1 April 2024 to 31 March 2025. Collect all relevant documents for this period, such as bank statements, investment proofs, and property papers, to ensure accurate filing.

Important: The Income Tax Department is sending email/SMS alerts to taxpayers who have not reported foreign income or assets, requesting them to revise their ITR by 31st December to avoid notices or scrutiny.

Filing Belated & Revised ITR through KMG CO LLP

You can file both belated and revised ITRs using KMG CO LLP via two methods:

1. Self ITR Filing

KMG CO LLP simplifies ITR filing with a user-friendly interface and step-by-step guidance.

Steps to File:

1. Visit the KMG CO LLP website and click “File ITR Now”.
2. Select your source of income and click Continue.
3. For salaried individuals, upload Form 16. If unavailable, skip this step.
4. Enter Financial Year, PAN, Aadhaar, employment details, income, deductions (if any), bank details, and prepaid taxes. Select “Revised Return under Section 139(5)” under Filing Type.
5. Review tax computation and click “File My ITR”. Done!

2. CA-Assisted ITR Filing

If unsure, connect with tax experts at KMG CO LLP for accurate filing. They ensure:

• All foreign assets, foreign income, and overseas shareholdings are reported
• Compliance with tax laws
• Correct claim of any tax refunds

Why It Matters:

Transparent reporting of foreign assets, income, and investments ensures compliance, prevents tax evasion, and supports global financial accountability. Filing a revised return promptly helps avoid penalties and legal issues.

Disclaimer: The content on this website is for informational purposes only and does not constitute legal, financial, or professional advice. Please consult qualified experts before acting on any information. K M GATECHA & CO LLP accepts no liability for errors, omissions, or outcomes from the use of this content. This site is not an advertisement or solicitation.