How to Report Foreign Income and Assets in ITR-2
- Asharam Swain
- Nov 3
- 10 min read
Taxpayers classified as Resident and Ordinarily Resident (ROR) in India are required to disclose all foreign income and assets in their Income Tax Return (ITR-2). This includes overseas bank accounts, shares, properties, and other financial interests held during the relevant calendar year. The reporting must be done in Schedule FA, covering assets and income from January 1 to December 31 of the previous year. The disclosure is mandatory even if such income is not taxable in India. These measures aim to promote global transparency and prevent tax evasion under the Black Money Act of 2015.
Table of Contents
Understanding the Obligation to Report Foreign Income and Assets
Under Indian tax law, individuals classified as Resident and Ordinarily Resident (ROR) must disclose all foreign assets and income in their Income Tax Return. This requirement is enforced through Schedule FA of ITR-2, which mandates reporting of financial interests held outside India during the relevant calendar year. The intent is to ensure tax transparency and curb the concealment of offshore wealth, as part of India’s global commitment to information exchange under FATCA and CRS agreements. Non-compliance attracts severe penalties, making it crucial for taxpayers to correctly report every foreign holding and income source, irrespective of its taxability in India.
Who Must File ITR-2 for Foreign Asset Disclosure
ITR-2 applies to individuals and Hindu Undivided Families (HUFs) who are Resident and Ordinarily Resident in India and have income from foreign assets or overseas sources. Non-resident Indians (NRIs) and Resident but Not Ordinarily Resident (RNOR) taxpayers are exempt from such disclosure unless they hold an asset jointly or have signing authority in a foreign account. For the assessment year 2025-26, all details pertaining to the calendar year 2024 (January 1 to December 31) must be declared. This requirement remains irrespective of whether the income has been taxed abroad or repatriated to India.
Detailed Overview of Schedule FA in ITR-2
Schedule FA is a dedicated section in ITR-2 designed to capture the details of all foreign assets and income earned during the year. It includes multiple sub-sections for each asset type, requiring taxpayers to provide information such as the country name, institution, account or asset identification, opening or acquisition date, peak and closing balances, and income generated. The income reported under Schedule FA must also be reflected under the relevant heads in the main ITR form—such as income from house property, capital gains, or other sources. This dual disclosure ensures that all global income is properly accounted for under Indian tax regulations.
Categories of Foreign Assets Reportable in ITR-2
The Income Tax Department classifies foreign assets into several categories that must be reported under Schedule FA. These include:
Foreign bank accounts, including joint or signing authority accounts
Shares and securities held in foreign companies
Financial interests in entities or trusts outside India
Real estate or immovable property situated abroad
Foreign custodial accounts and annuity contracts
Any beneficial interest in offshore assets or entities
Each asset requires detailed information on value, income, and ownership status. Even dormant or zero-balance accounts must be disclosed to maintain compliance.
How to Report Foreign Bank Accounts in ITR-2
Reporting foreign bank accounts is a critical component of Schedule FA. Taxpayers must specify the bank name, country code, account number, date of account opening, and the peak and closing balance for the year. They must also disclose whether they hold the account as an owner, beneficiary, or have only signing authority. If the account generated income, such as interest or dividends, it must be declared under the relevant income head in ITR-2. In cases where tax was already deducted abroad, the taxpayer should provide the foreign Taxpayer Identification Number (TIN) and claim relief under the Double Taxation Avoidance Agreement (DTAA).
Reporting Foreign Income in ITR-2 (Interest, Dividends, Property & Salary)
All foreign income must be reported in ITR-2, even if it has already been taxed abroad. This includes interest on foreign bank deposits, dividends from overseas companies, rent from foreign properties, capital gains on asset sales, and salary earned for services rendered abroad. Each income type must be reported under its respective head—Income from Salary, House Property, Capital Gains, or Other Sources. The corresponding details should also be reflected in Schedule FA. This comprehensive reporting ensures that the total global income is considered for tax purposes, and eligible foreign tax credits can be accurately claimed.
Claiming Foreign Tax Credit via Form 67
To avoid double taxation, taxpayers can claim credit for taxes paid in foreign countries by submitting Form 67 before filing their ITR. This form captures information such as the foreign country, nature of income, tax paid, and reference to the applicable DTAA article. The credit is granted under Section 90 or 91 of the Income Tax Act, depending on whether India has a tax treaty with that country. Accurate filing of Form 67 ensures that the taxpayer is not taxed twice on the same income and that foreign tax paid is offset against Indian tax liability.
Currency Conversion and Valuation Rules for Reporting
When reporting foreign assets, their value must be converted to Indian Rupees using the Telegraphic Transfer Buying Rate (TTBR) as of March 31 of the relevant financial year. The TTBR is published by the State Bank of India and represents the rate at which foreign currency is purchased. For income reporting, the exchange rate applicable on the date of receipt or accrual is used. This ensures consistency and accuracy in valuation. All foreign holdings, whether in dollars, pounds, or euros, must be converted accordingly before being entered into Schedule FA.
Penalties for Non-Disclosure under the Black Money Act 2015
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 imposes stringent penalties for failing to report foreign assets or income. A penalty of ₹10 lakh per assessment year applies for each unreported asset. In cases of willful concealment, imprisonment ranging from six months to seven years may be imposed. The law does not specify a monetary threshold—meaning even low-value assets must be disclosed. Additionally, undisclosed foreign income is taxed at 30%, with no exemptions or deductions allowed. These provisions underline the government’s zero-tolerance stance on offshore tax evasion.
Common Mistakes While Filling Schedule FA in ITR-2
Several errors commonly occur when taxpayers fill Schedule FA. These include using the wrong reporting period, failing to convert currency properly, omitting dormant or joint accounts, and entering incomplete asset details. Some also mistakenly report foreign income only under the income head but forget to include it in Schedule FA. Inaccurate or missing details can lead to compliance notices and penalties. It is advisable to review all entries carefully, ensure correct period coverage (January to December), and retain supporting documents such as bank statements and property ownership proofs.
How TaxBuddy Simplifies Foreign Asset and Income Reporting
TaxBuddy simplifies the complex process of foreign income and asset reporting through its AI-driven tax filing platform. It automatically identifies the applicable schedules, prompts users for missing details, and validates entries to prevent errors. Expert-assisted plans allow users to consult with professionals who handle cross-border disclosures and foreign tax credit claims with accuracy. The platform also provides real-time updates on compliance rules and integrates currency conversion tools for accurate reporting. By using TaxBuddy, taxpayers can ensure seamless, compliant, and stress-free ITR filing, even when dealing with multiple overseas accounts or income streams.
Conclusion
Accurate reporting of foreign income and assets in ITR-2 is crucial for maintaining tax compliance and avoiding severe penalties. Schedule FA ensures transparency and helps the government track global financial interests of residents. By declaring all foreign holdings and income, taxpayers align with India’s international tax commitments while safeguarding themselves from legal risks. For a streamlined experience, it’s wise to rely on digital filing platforms like TaxBuddy, which provide both AI-guided and expert-assisted options for error-free reporting. For anyone looking for assistance in tax filing, it is highly recommended to download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? TaxBuddy offers both self-filing and expert-assisted options to suit the needs of different taxpayers. The self-filing plan is designed for individuals who prefer to manage their own returns with guided automation, step-by-step prompts, and built-in error checks. The expert-assisted plan, on the other hand, connects users with certified tax professionals who review income details, handle complex disclosures such as foreign assets, and ensure compliance with the latest tax laws. This dual approach ensures flexibility for users, whether they prefer a DIY experience or professional guidance.
Q2. Which is the best site to file ITR? Among the various platforms available, TaxBuddy stands out as one of the best online platforms for income tax filing in India. It offers AI-based tax preparation tools, automatic data import from Form 16 and AIS, and expert-assisted options for individuals with complex income structures such as foreign assets or capital gains. Its user-friendly dashboard, post-filing support, and prompt refund tracking make it a preferred choice for both salaried and self-employed taxpayers. Additionally, it prioritizes data security and compliance with Income Tax Department protocols.
Q3. Where to file an income tax return? An income tax return can be filed either through the official Income Tax e-filing portal or via trusted private platforms authorized for online filing. TaxBuddy provides a simpler and more guided alternative to the government portal by integrating AI automation and professional support. Users can upload their Form 16 or link their AIS data to auto-fill most of the required details, ensuring accuracy and efficiency. The platform also offers reminders, tax summaries, and support for revised or updated returns, making it an all-in-one filing solution.
Q4. What is Schedule FA in ITR-2? Schedule FA is a section in the ITR-2 form that requires Resident and Ordinarily Resident (ROR) taxpayers to disclose all foreign assets and income. This includes bank accounts, shares, real estate, trusts, or any beneficial interest held outside India. The schedule demands details such as the country name, institution, account number, acquisition date, peak balance, closing balance, and income earned. These details ensure transparency and compliance under global tax reporting frameworks like FATCA and CRS. Non-disclosure of any foreign holding can lead to penalties and prosecution under the Black Money Act, 2015.
Q5. Who is required to file ITR-2 for reporting foreign assets? The requirement to file ITR-2 applies specifically to individuals and Hindu Undivided Families (HUFs) who are classified as Resident and Ordinarily Resident in India. They must report all foreign assets and income, even if no tax is payable in India. Non-Resident Indians (NRIs) and Resident but Not Ordinarily Resident (RNOR) individuals are exempt from such disclosures unless they hold joint ownership or signing authority in foreign accounts. This classification is determined by the number of days the taxpayer resides in India, as outlined in Section 6 of the Income Tax Act.
Q6. What details must be disclosed for a foreign bank account? When declaring foreign bank accounts in Schedule FA, taxpayers must furnish comprehensive information such as the bank’s name, country code, account number, date of opening, and the peak and closing balances for the reporting year. They must also specify whether they are the account owner, joint holder, or have only signing authority. Additionally, income generated from these accounts, such as interest, must be declared under the appropriate income head in ITR-2. If tax has already been paid abroad, the foreign taxpayer identification number (TIN) and country of taxation should also be mentioned.
Q7. How is foreign income taxed in India? Foreign income is taxable in India based on the taxpayer’s residential status. If an individual qualifies as a Resident and Ordinarily Resident (ROR), their global income—including foreign salary, rent, dividends, or interest—is taxable in India. However, if taxes have already been paid in the foreign country, relief can be claimed under the Double Taxation Avoidance Agreement (DTAA). Income is categorized and taxed under the respective heads—salary, house property, capital gains, or other sources. Non-residents are only taxed on income earned or received in India, not on global income.
Q8. Can foreign tax paid be adjusted against Indian tax liability? Yes, taxpayers can claim a Foreign Tax Credit (FTC) for taxes paid outside India to prevent double taxation. This is done by filing Form 67 before submitting the ITR. The form captures key details such as the foreign country, nature of income, tax paid, and DTAA provisions. The credit is available under Sections 90 and 91 of the Income Tax Act, depending on whether a tax treaty exists between India and the foreign country. It ensures that the same income is not taxed twice and encourages global income transparency without penalizing taxpayers for compliance.
Q9. What is the penalty for not reporting foreign assets? Failure to disclose foreign assets or income invites severe penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. A penalty of ₹10 lakh per assessment year is levied for each undisclosed asset, regardless of its value. In cases of willful concealment, imprisonment ranging from six months to seven years may be imposed. Moreover, undisclosed foreign income is taxed at a flat rate of 30% without any exemptions or deductions. The law also allows authorities to initiate prosecution for deliberate suppression of offshore holdings.
Q10. What is the reporting period for AY 2025-26? For the assessment year 2025-26, taxpayers must report all foreign assets and income related to the calendar year 2024—from January 1, 2024, to December 31, 2024. This differs from the standard Indian financial year, which runs from April to March. The calendar-year reporting format is aligned with global tax reporting standards and ensures consistency with foreign financial records. Taxpayers should collect all relevant bank statements, investment reports, and property documents for this period to ensure accurate disclosure in Schedule FA.
Q11. How are currency values converted for foreign asset reporting? Currency conversion for reporting foreign assets must follow the Telegraphic Transfer Buying Rate (TTBR) published by the State Bank of India as of March 31 of the relevant financial year. The TTBR reflects the exchange rate at which the bank buys foreign currency through telegraphic transfer. For income reporting, the conversion rate applicable on the date of accrual or receipt is used. This ensures uniformity in valuation and prevents discrepancies during audits. All figures, including balances, asset values, and income amounts, must be reported in Indian Rupees after conversion.
Q12. Can TaxBuddy help in handling notices related to foreign asset disclosure? Yes, TaxBuddy provides comprehensive post-filing support for handling income tax notices, including those related to foreign asset disclosure or mismatched information in Schedule FA. The platform’s experts review the notice, draft responses, and prepare documentation to ensure timely and compliant submissions. In complex cases, they analyze transaction data to reconcile discrepancies between Indian and foreign reports. This professional assistance helps taxpayers resolve compliance issues effectively and minimizes the risk of penalties or further scrutiny by the Income Tax Department.
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