The time for filing Income Tax Return (ITR) is going on. In such a situation, a big question in the minds of Indians living abroad (NRIs) and taxpayers having foreign assets is whether it is mandatory for every NRI to disclose their foreign assets in ITR? According to tax experts, the answer is ‘no’. It is not necessary to fill Schedule FA (Foreign Assets) just because you are an NRI. It entirely depends on what was your tax residency (Residential Status) in the concerned financial year.
Who has to fill Schedule FA?
According to Income Tax Law, only those taxpayers who fall in the category of Resident and Ordinarily Resident (ROR) are required to fill Schedule FA in ITR. In this schedule, information about bank accounts, shares, mutual funds, immovable property, stake in trusts and other foreign assets located abroad has to be given.
Whereas, if a person falls in the category of NRI (Non-Resident Indian) or RNOR (Resident but Not Ordinarily Resident), then under normal circumstances he is not required to fill Schedule FA. Therefore, it is very important to determine your residential status correctly before filing returns.
What information is required to be given about foreign assets?
Taxpayers to whom Schedule FA applies are required to provide full details of foreign bank accounts, custody or depository accounts, shares of foreign companies, mutual funds, bonds, foreign real estate and other financial interests. In many cases, the maximum balance of the account (peak balance) and the value of investment also have to be mentioned. If there is income from any foreign property, then it is mandatory to give its information in the income tax return.
Giving wrong information may prove costly
Experts say that hiding information about foreign assets or giving wrong details is considered a serious matter. In such cases, there can be investigation, heavy fine and other legal action under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015. Therefore, people to whom this rule applies should give correct information with utmost care.
It is also important to choose the right ITR form
Taxpayers filing Schedule FA cannot use ITR-1 or ITR-4, as these forms do not have the option to give details of foreign assets. In such cases, usually ITR-2 or other related ITR forms have to be filled.
Tax experts advise that before filing ITR, you should properly check your residential status, foreign income and status of foreign assets. This will not only help in filing the returns correctly, but will also reduce the possibility of any notice or legal trouble from the Income Tax Department in future.
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