Guidelines to fill Foreign Source Income, Tax Relief and Foreign Assets Schedule in ITR

The Income Tax Department has released the guidelines to fill Foreign Source Income, Tax Relief, and Foreign Assets Schedule in the Income Tax Return. The guidelines enhance tax transparency on foreign assets and income among taxpayers.

Let’s dive into the guidelines and see what these guidelines say.

Purpose of CRS and FATCA

In this globalized economy, tax transparency and compliance have become paramount to ensure that taxpayers disclose their global income and assets accurately. The Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA) are international frameworks designed to combat tax evasion by increasing transparency and cooperation among tax authorities worldwide.

CRS is an initiative of the OECD, requiring financial institutions to report information about financial accounts held by foreign residents to their respective tax jurisdictions. This information is then communicated with other jurisdictions once a year. Similarly, FATCA, enacted by the United States, mandates foreign financial institutions to report accounts held by U.S. taxpayers to the IRS.

Information Received by India

Under CRS and FATCA, India receives detailed information about financial accounts held by its residents in foreign jurisdictions. This includes:

• Account holder’s name, address, and tax identification number (TIN).
• Account number and balance.
• Income details such as interest, dividends, and other financial proceeds.

This information enables the Income Tax Department to determine the global income of its resident taxpayers and to identify individuals who may not have revealed their foreign assets and income.

Disclosure Requirements under Indian Law

The Income Tax Act of 1961 requires people to disclose their overseas assets and income on their Income Tax Returns (ITR). Schedule FA (Foreign Assets) on the ITR form is for reporting foreign assets, while Schedule FSI (Foreign Source Income) is for reporting income from foreign sources. Additionally, taxpayers can claim tax relief on taxes paid abroad by filing Schedule TR (Tax Relief).

Failure to report foreign assets and income can result in severe penalties and prosecutions under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act of 2015. Taxpayers must follow these regulations in order to avoid legal consequences.

Benefits of Transparency in Tax Returns

1. Compliance and Good Governance: Transparency in declaring worldwide income and foreign assets on tax returns demonstrates a taxpayer’s commitment to compliance and good governance. It increases trust with tax officials while avoiding unnecessary inspection.

2. Legal Security: Full declaration of foreign assets and income ensures that taxpayers are not subject to penalties or legal action under applicable legislation.

3. Claiming Tax Reliefs: Accurate reporting enables taxpayers to get tax relief on taxes paid outside of India, avoiding double taxation and optimising tax liability.

4. Contribution to National Development: Paying the correct amount of tax and declaring income from abroad helps to promote national development. It ensures that funds are available for public services and infrastructure development.

Opportunity to File Revised Returns

If you have not disclosed your foreign assets and income in your original ITR, there is an opportunity to rectify this by filing a revised return. The Income Tax Department permits taxpayers to file a revised return to address omissions or mistakes. For the A.Y. 2024-25 date for filing a revised return has been extended to 15.01.2025.

By filing a revised return, you can:

• Ensure complete and accurate disclosure of all foreign assets and income.
• Avoid penalties and legal consequences for non-disclosure.
• Avail any eligible tax reliefs under the provisions of Indian tax laws and DTAA.

This is a proactive move towards ensuring tax compliance and transparency.

Conclusion

The Income Tax Department’s e-campaign is intended to remind taxpayers of their need to disclose overseas assets and income reported under CRS and FATCA. Taxpayers can avoid legal problems, contribute to national progress, and have a clear conscience by following these requirements and ensuring complete transparency in tax returns. Filing a revised return, if necessary, provides an excellent opportunity to give complete and accurate disclosures.

For Official Guidelines Download PDF Given Below: