If you are an Indian resident and owning any foreign assets or securities or having any other financial interest outside India then you need to be very careful while filling of your Income tax return.
Khush Dharmeshkumar Trivedi | May 21, 2026 |
Foreign Assets Reporting In ITR for FY 2025-26
INTRODUCTION
If you are an Indian resident and owning any foreign assets or securities or having any other financial interest outside India then you need to be very careful while filling of your Income tax return.
As there are serious statutory obligations on a resident that need to be complied every year.
Let’s decode it
LEGAL BASIS
So, the question is why to report?
Foreign asset reporting in India is governed primarily by two statutes:
Income Tax return (ITR 2 & 3) comprises a specific schedule FA i.e Foreign Assets under which the disclosures regarding foreign assets are made. However, now the authorities also receive data regarding an assessee from international frameworks. Hence it is advisable to report as required.
WHO HAVE TO REPORT
Schedule FA filing is mandatory for all taxpayer who is:
Resident and Ordinarily Resident (ROR) Individuals and HUFs
Any Indian taxpayer whose residential status for the relevant financial year is ‘Resident and Ordinarily Resident’ must disclose all foreign assets and income which includes
Note: Non-Residents (NR) and Not Ordinarily Residents (NOR) are generally not required to report foreign assets in Schedule FA.
Beneficiaries of Foreign Assets
If you are the beneficiary of any asset held in foreign country & the income from that asset has not been included in the income of beneficial owner then Beneficiary has to file the ITR & disclose those assets in Schedule FA.
FOREIGN ASSETS
The scope of Schedule FA is broad as it covers following types of assets which needs to be disclosed
| Category of Asset | Common Examples |
| Foreign Bank Accounts | Savings, current, or salary accounts in banks outside India |
| Financial Interest in Foreign Entity | Shareholding, partnership interest, or ownership stake in a foreign company or firm |
| Foreign Equity or Debt Instruments | US stocks, ETFs, mutual funds, bonds issued by foreign entities |
| Immovable Property Outside India | Residential or commercial property held abroad |
| Foreign Capital Assets | Any capital asset — movable or immovable — held outside India |
| ESOPs / RSUs from Foreign Employers | Stock options or restricted stock units granted by a foreign parent or affiliate company |
| Insurance / Annuity Contracts | Life insurance policies or annuity contracts with foreign insurers |
| Trusts Outside India | Beneficial interest in any trust constituted or established outside India |
| Custodial Accounts | Accounts held with a foreign custodian in which financial instruments are held on the taxpayer’s behalf |
| Signing Authority in Foreign Accounts | Any account abroad in which the taxpayer has signing authority, even without ownership |
STRUCTURE OF SCHEDULE FA
Schedule FA is divided into multiple parts (Tables), each covering a specific category of foreign asset
| Table | Nature of Asset / Disclosure |
| Table A1 | Details of foreign depository accounts (bank accounts held in a foreign country) |
| Table A2 | Foreign custodial accounts (accounts held with foreign custodians holding financial instruments) |
| Table A3 | Equity and debt interests in foreign entities (direct shareholding, bonds, mutual funds, etc.) |
| Table A4 | Foreign cash value insurance contracts or annuity contracts |
| Table B | Details of financial interest in a foreign entity (where you have a beneficial or ownership interest) |
| Table C | Immovable property outside India |
| Table D | Capital assets held outside India (other than immovable property) |
| Table E | Signing authority in foreign accounts |
| Table F | Trusts established outside India |
| Table G | Any other foreign-sourced income not covered in the above categories |
THE CALENDER YEAR ISSUE-CRITICAL COMPLIANCE
The Most common & confusing part of Schedule FA where every taxpayer has a confusion is the reporting requirement for the calendar year as Indian Tax system follows Financial year (April to March) while other countries are following Calendar year i.e. if you are filing ITR for FY 25-26 then you have to fill sch FA for calendar year ended Dec 25
1 January 2025 to 31 December 2025
For Example, if
Hence it is advisable to collect the foreign statements regarding the details to be filled in SCH FA for the above-mentioned period.
Associated Schedules — FSI and TR
Schedule FA handles the reporting of the asset itself. The income earned from that foreign asset must be reported separately:
Schedule FSI: Foreign Source Income
Under this schedule taxpayer has to report every line of foreign income i.e. dividends, interests, capital gains, rental income etc.
Schedule TR: Tax Relief/Foreign Tax Credit
Where tax has been paid in a foreign jurisdiction on income that is also taxable in India, the taxpayer can claim a Foreign Tax Credit (FTC) to avoid double taxation. Form 67 must be filed online before the ITR is submitted to claim FTC under Sections 90, 90A, or 91 of the Income-tax Act.
FAST DS 2026 The One-Time Disclosure Window
Recently budget 2026 has introduced significant relief for the small taxpayers having foreign assets & not disclosed according to the provisions due to inadvertence and lack of awareness.
FAST-DS 2026 is a one-time, statutory voluntary disclosure scheme that offers eligible taxpayers a six-month window (start date to be notified by the Central Government) to declare foreign assets or foreign income that was neither reported nor disclosed in Sch FA to disclose the same additional taxes and fees as applicable instead of penalizing them with heavy penalty & prosecution.
There are two categories of eligibility
| Feature | Category A | Category B |
| Applicable to | Foreign income/assets that were never taxed or reported | Foreign assets from taxed income or NRI-period earnings but not disclosed in Schedule FA |
| Value cap (as on 31 March 2026) | Up to Rs. 1 crore aggregate | Up to Rs. 5 crore aggregate |
| Cost / Payment | 60% of undisclosed value (30% tax + 30% additional levy in lieu of penalty) | Flat fee of Rs. 1 lakh |
| Common use cases | Dormant foreign accounts, old salary income not reported in India, forgotten deposits | ESOPs taxed as salary but foreign account not disclosed in FA; returning NRI assets |
| Immunity granted | Full immunity from BMA penalty, prosecution, and reassessment for disclosed items | Full immunity from BMA penalty and prosecution for the reporting lapse |
Filing Deadline for AY 2026-27
The deadline for filling Sch FA aligns with the due date of ITR
Penalties for Non-Disclosure
The Black Money Act imposes penalties and prosecution provisions that are considerably harsher than the standard income tax penalty
| Nature of Default | Consequence |
| Non-disclosure of foreign asset in Schedule FA | Penalty of Rs. 10 lakh per assessment year |
| Undisclosed foreign income / asset (tax not paid) | 30% tax on fair market value + penalty of 3x that tax = effective exposure of 120% of asset value |
| Wilful evasion/prosecution | Imprisonment of 3 to 10 years, or up to 7 years in certain cases |
| Non-disclosure resulting in loss of DTAA benefit | Relief under applicable tax treaty cannot be claimed |
| Income taxed but asset not reported in FA | Separate Rs. 10 lakh penalty applies — income disclosure is not a substitute for asset disclosure |
CONCLUSION
Keeping above provisions & facts in view for an assessee who is holding any kind of foreign assets should be very careful before filling of ITR hence one should consult a Tax professional before any disclosure in order to avoid penalties & notices.
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