Schedule FA (Foreign Assets) Disclosure in ITR

In today’s world, people are increasingly diversifying their portfolios through foreign investments to take advantage of global opportunities and reduce the risks associated with fluctuations in regional markets. If Indian residents hold foreign assets or earn foreign income that is not disclosed in their income tax returns, it may result in tax evasion and lack of transparency in financial accounts. To address this, the government has made it mandatory under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, for Indian residents to disclose such holdings in Schedule FA (Foreign Assets) while filing income tax returns.

Applicability of Schedule FA

Schedule FA is mandatory for Resident and ordinarily resident individuals who hold assets outside India.

Schedule FA does not apply to Non-Resident and Resident but Not Ordinarily Resident individuals.

Note: Even if an individual holds foreign assets but does not have any other income, they are still required to file an income tax return and disclose their foreign asset holdings.

Foreign Assets that are Required to Be Declared

A resident assessee must disclose the following foreign assets in Schedule FA:

• Any property or investment held outside India, including shares, bonds, life insurance, real estate, or other valuable assets.
• Income earned from sources outside India, such as dividends, interest, or capital gains.
• Authorization to operate or sign for any account maintained outside India, including bank, custodian, depository, or trading accounts.
• Ownership or financial interest in a foreign entity, such as being a partner in an overseas business or having an interest in a foreign private trust.

If the taxpayer has a beneficial interest in any of the above-mentioned assets, it must also be disclosed in the income tax return. A beneficial owner is an individual who has directly or indirectly provided payment for the asset. Additionally, a person may be considered a beneficial owner when the asset is held for their immediate or future benefit or for the benefit of another person on whose behalf the payment was made.

It should also be noted that all foreign holdings and income must be reported in INR in Schedule FA.

Relevant Period for Reporting

Taxpayers must report their foreign asset holdings for the relevant calendar year, which covers the period from January 1 to December 31.

For example, if a taxpayer is filing an income tax return for Financial Year 2022-23, the foreign holdings as of December 31, 2022, must be reported.

How to Disclose Foreign Assets in ITR

Schedule FA contains 10 tables where taxpayers are required to disclose their foreign assets and income.

Table	Particulars	What to Report
A1	Details of Foreign Depository Accounts held (including any beneficial interest) at any time during the calendar year	Savings or term deposit accounts with foreign banks
A2	Details of Foreign Custodial Accounts held (including any beneficial interest) at any time during the calendar year	Details of funds transferred from a bank account to a demat account in a foreign country
A3	Details of Foreign Equity and Debt Interest held (including any beneficial interest) in any entity at any time during the calendar year	Shares or securities, restricted stock units, and Exchange Traded Funds
A4	Details of Foreign Cash Value Insurance Contract or Annuity Contract held (including any beneficial interest) at any time during the calendar year	Life insurance or annuity contracts held in a foreign country
B	Details of Financial Interest in any Entity held (including any beneficial interest) at any time during the calendar year	Voting rights in foreign companies or partnership interests in LLPs or firms located outside India
C	Details of Immovable Property held (including any beneficial interest) at any time during the calendar year	Buildings or residential properties owned in foreign countries
D	Details of any other Capital Asset held (including any beneficial interest) at any time during the calendar year	Savings or term deposit accounts with foreign banks
E	Details of account(s) in which you have signing authority held (including any beneficial interest) at any time during the calendar year and which has not been included in A to D above	Accounts where you are an authorized signatory or have signing authority
F	Details of trusts created under the laws of a country outside India, in which you are a trustee, beneficiary, or settlor	Trusts where you are a settlor, trustee, or beneficiary
G	Details of any other income derived from any source outside India which is not included in (i) items A to F above and (ii) income under the head business or profession	Other foreign income that is not covered above

Conversion into INR

Information reported in Schedule FA must be provided in INR. Therefore, foreign currency values need to be converted into INR using the applicable conversion rate mentioned below:

Income or Asset	Conversion Rate	Date of Conversion
Peak value	Convert using TTBR	Date of peak value
Initial value	Convert using TTBR	Date on which the initial investment was made
Income received from asset	Convert using TTBR	Closing rate as of December 31

Let’s Understand This With an Example

Shreya, a resident individual, works as an employee at Amazon Inc. She exercised ESOPs on two occasions: September 16, 2022, valued at INR 484, and February 25, 2023. However, because Schedule FA follows the calendar-year reporting period, she only needs to report the ESOPs exercised in September 2022 in her income tax return for FY 2022-23.

During the period from January 2022 to December 2022, the ESOPs reached a peak value of INR 493, while their closing value on December 31, 2022, was INR 346. Therefore, she needs to report these ESOPs under Table A3 of Schedule FA while filing her income tax return. This helps ensure compliance with applicable tax requirements.

Tax on Income from Foreign Assets

Owning foreign assets itself does not result in any tax liability. However, any income earned from these assets is subject to taxation.

If you sell a foreign asset, you may be liable to pay capital gains tax. If you earn other income, such as interest or dividends from these assets, it will generally be classified under Income from Other Sources. Likewise, rental income earned from foreign assets will be taxable under the head Income from House Property.

All such income should be reported under Schedule FSI in the income tax return to avoid penalties.

Penalty for Non-Disclosure of Foreign Assets

Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, taxpayers who fail to disclose their foreign assets or provide incorrect information may be subject to a penalty of INR 10 lakhs, at the discretion of the Assessing Officer (AO). They may also face imprisonment for a minimum period of 6 months, which can extend up to 7 years, along with applicable fines.

Note: The INR 10 lakh penalty applies for each year of non-disclosure. For example, if a taxpayer fails to disclose foreign assets for 3 years, they may be liable for a penalty of INR 30 lakhs.

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