In this era of globalisation and economic integration, overseas investments by Indians have been growing rapidly. It is therefore incumbent on the taxpayer that these investments and their underlying incomes are appropriately disclosed in their Indian tax filings, as specified.
Reporting of foreign assets in the Indian income-tax returns, was made mandatory effective Financial Year (FY) 2011-12 [i.e. Assessment Year (AY) 12-13]. A person who qualifies as a Resident and Ordinarily Resident (ROR) in India in any FY and holds specified foreign assets, must file a tax return in India to report these assets, irrespective of whether or not she/he has taxable income in India during the relevant FY. The reporting requirement does not apply to those resident individuals who qualify as Not Ordinarily Resident (NOR) or Non-Resident in India.
Individuals holding foreign assets are required to report these assets in Schedule FA and Schedule AL (if applicable) of their tax return using ITR-2 or ITR-3 as relevant. It is not only important to report all the foreign assets but equally important to make proper disclosure of income earned from such foreign assets in tax return. Over the last decade, lot of changes have been made to the schedule to widen its coverage. Following are few of the important points one needs to be mindful of while filling the details of the foreign assets in ITR form:
when to report
Assets held at any time during the Indian FY as also the relevant accounting period of the foreign country, are required to be reported. Accounting period may vary basis the period adopted by the relevant foreign country for closing their accounts and tax filings i.e. i) 1st January to 31st December where calendar year is adopted or ii) 1st April to 31st March where FY is adopted or iii) That period of 12 months, which ends on any day succeeding 1st April, 2020 (applicable for FY 2020-21), where a different period of 12 months is adopted (for e.g. U.K., Australia etc.).
Exchange rate for conversion of the peak balance or value of investment or the amount of foreign sourced income in INR shall be the rate adopted by State Bank of India ‘telegraphic transfer buying rate’ of the foreign currency as on the date of peak balance in the account or on the date of investment or the closing date of the accounting period as relevant or any other date for reporting of income as prescribed.