Resident Indians must disclose all foreign income and overseas assets, including foreign bank accounts, equity holdings, foreign retirement accounts and employee stock ownership plans in their income tax returns (ITR). Even minor omission of assets with zero taxable income can attract a standard penalty of Rs 10 lakh per year.
For assessment year (AY) 2026-27, Resident and Ordinarily Resident (ROR) taxpayers with foreign income or assets cannot use ITR-1. Instead, they have to file ITR-2, provided they do not have any income from business or profession, and make detailed disclosures in Schedule FA (foreign assets). Those with business or professional income should file ITR-3.
Unlike the information in the ITR, which pertains to the period between April and March, details of foreign assets must be furnished calendar year-wise, as most countries follow the calendar year, unlike India, which follows the financial year. For ongoing ITR filings for AY 2026-27, details pertaining to January 2025 to December 2025 need to be disclosed.
Reporting foreign assets
Reporting foreign assets has become an important consideration due to severe anti-evasion laws like the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act (BMA).
Before filing the return, taxpayers should reconcile overseas financial records, ensure correct reporting in Schedule FA and verify that any foreign income and tax credit claims are consistent across the return. They should cross-verify disclosures with their foreign brokerage statements and overseas bank certificates before filling out Schedule FA. Careful reporting can help avoid notices, penalties and prolonged scrutiny.
Sandeep Sehgal, partner, Tax, AKM Global, says taxpayers must adopt a substance-over-form approach to verify all global financial interests. “To prevent inadvertent mistakes, taxpayers should map every foreign equity vest, bank account, and retirement fund explicitly into the ITR,” he says.
Tax on foreign income, assets
For a ROR individual, global income is taxable in India. So, foreign salary is taxed under ‘income from salary’, rental income under ‘income from house property’, and interest income under ‘income from other sources’. “Schedule FA requires taxpayers to report specified foreign assets along with a reference to the relevant schedule where the related income has been offered to tax,” says Neeraj Agarwala, senior partner, Nangia and Company.
To mitigate double taxation, the taxpayer may claim a Foreign Tax Credit (FTC). The availability and quantum of such relief are governed by the provisions of the applicable Double Taxation Avoidance Agreement (DTAA) entered into by India or, where no DTAA exists, the provisions relating to unilateral relief.
The foreign income should be disclosed under the relevant schedules of Form ITR-2, and the corresponding foreign taxes paid should be reported in Schedule TR (Tax Relief) to claim the eligible foreign tax credit.
For conversion of foreign assets or foreign-sourced income into Indian currency, the rate of exchange will be the ‘telegraphic transfer buying rate’, i.e., the rate of exchange adopted by State Bank of India for buying such currency where such currency is made available to the bank through a telegraphic transfer.]
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