Foreign Assets Disclosure in Income Tax Return (ITR) – For Salaried and Other Individuals
With increasing global mobility, many Indian taxpayers—including salaried individuals—own assets or earn income from abroad. The Income Tax Act, 1961, mandates the disclosure of such foreign assets and income in the Income Tax Return (ITR). Failure to disclose can attract heavy penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
In this article, we cover everything you need to know about foreign asset disclosure in ITR, especially for salaried taxpayers, with reference to the relevant legal provisions.
📌 Applicability of Foreign Asset Disclosure
As per Section 139(1) of the Income Tax Act, 1961, every person (including salaried individuals) whose total income exceeds the basic exemption limit, or who owns assets located outside India, is required to file an ITR.
However, foreign asset disclosure is mandatory only for individuals who are:
✅ Resident and Ordinarily Resident (ROR)
As per Section 6(1) and 6(6) of the Act:
- RORs must disclose all foreign assets and income.
- NRIs and RNORs are exempt from Schedule FA disclosure.
👨💼 What About Salaried Individuals?
Salaried employees often:
- Hold foreign ESOPs or RSUs
- Maintain foreign bank accounts (for travel, study, etc.)
- Invest in foreign stocks or mutual funds
- Own immovable property abroad (e.g., inherited or purchased)
If you are a salaried ROR, you must disclose these in your ITR under Schedule FA.
📄 Which ITR Form to Use?
| Income Type | Applicable ITR |
|---|---|
| Salaried person with no business income, holding foreign assets | ITR-2 |
| Salaried person with foreign assets + income from business/profession | ITR-3 |
Schedule FA is available only in ITR-2 and ITR-3.
📝 What Needs to Be Disclosed in Schedule FA?
The following categories must be disclosed:
| Type of Foreign Asset/Income | What to Report |
|---|---|
| Foreign Bank Accounts | Country, bank name, account number, peak balance |
| Foreign Deposits | Nature of deposit, amount, details of institution |
| Foreign Shares (ESOPs/RSUs) | Employer name, cost of acquisition, holding details |
| Immovable Property Abroad | Location, address, acquisition cost, ownership type |
| Financial Interest in Entities | Company name, type of interest, investment value |
| Foreign Trusts | Role (trustee/beneficiary), trust name, country |
| Income from Foreign Sources | Nature of income (salary, dividend, etc.) |
👉 All values must be converted to INR using the SBI TT buying rate as on March 31 of the relevant financial year.
🗓️ Period of Disclosure
As per Income Tax Rules, foreign assets must be disclosed for the entire financial year (April 1 – March 31) in which they were held at any time.
💡 Legal Provisions – Section Reference
| Provision | Description |
|---|---|
| Section 139(1) | Mandatory filing of return if holding foreign assets |
| Section 6(1), 6(6) | Residential status determination |
| Schedule FA (under Rule 12 of IT Rules) | Format for foreign asset disclosure |
| Section 90/90A | Relief under DTAA for foreign taxes paid |
| Form 67 | Required to claim Foreign Tax Credit (FTC) |
| Section 3, 4 of Black Money Act | Taxability and definition of undisclosed foreign income and assets |
| Section 50, 55 of Income Tax Act | Capital gains calculation and cost of acquisition |
💰 Tax on Sale of Foreign Assets and Shares
🏢 Sale of Foreign Shares (Including ESOPs/RSUs)
- Short-Term Capital Gain (STCG) (Held ≤ 24 months): Taxed at slab rates
- Long-Term Capital Gain (LTCG) (Held > 24 months): Taxed at 20% with indexation
🧱 Sale of Other Foreign Assets (e.g., Property)
- STCG: Taxed as per slab
- LTCG: Taxed at 20% with indexation under Section 112
📥 Foreign Tax Credit (FTC)
If tax is already paid in a foreign country, you can claim credit by filing Form 67 before filing the ITR. This is allowed under Section 90 or 90A if India has a DTAA with that country.
⚠️ Consequences of Non-Disclosure
As per the Black Money Act, 2015, non-disclosure can lead to:
| Default | Penalty |
|---|---|
| Failure to disclose foreign asset | Flat tax @ 30% of value + 90% penalty |
| Failure to file ITR (when foreign assets held) | ₹10 lakh penalty u/s 43 of the Black Money Act |
| Wilful attempt to evade | Prosecution: 3 to 10 years imprisonment under Section 49 |
Note: The penalties apply even if the asset does not yield any income.
❓ FAQs – Foreign Asset Disclosure
1. Do salaried individuals with RSUs abroad need to disclose them?
Yes, if you’re a ROR, disclose RSUs and foreign ESOPs in Schedule FA, even if not yet vested.
2. Is foreign mutual fund investment reportable?
Yes, any foreign financial interest, including foreign MFs and ETFs, must be disclosed.
3. I received foreign income, but paid tax abroad. Should I still declare it?
Yes. Disclose it under “Foreign Income” and claim foreign tax credit via Form 67.
4. I have a dormant foreign bank account. Is it reportable?
Yes. Even dormant or zero-balance accounts must be reported if held during the year.
5. I sold foreign shares. How is tax calculated?
Use capital gain rules:
- STCG: slab rates
- LTCG: 20% with indexation Convert all amounts using SBI TT buying rate on date of sale.
6. Can I use ITR-1 if I have foreign income or assets?
No. You must use ITR-2 or ITR-3, as ITR-1 does not support Schedule FA.
✅ Final Words
Foreign asset disclosure is not optional. Salaried taxpayers often overlook reporting foreign ESOPs, shares, or bank accounts, but failure to do so can result in serious tax consequences.
To remain compliant:
- Assess your residential status
- Use the correct ITR form (ITR-2/3)
- Disclose all foreign assets in Schedule FA
- File Form 67 for foreign tax credits
Stay updated. Stay compliant. Declare right, and sleep tight. 🛡️
Important Links: Tax Audit in case of Future & Options (F&O), Income Tax Audit, 15CA and 15CB Forms