Reporting Foreign Assets and Income in ITR-2: Complete Guide for FY 2024-25
- Rashmita Choudhary
- Nov 20, 2025
- 8 min read
Reporting foreign assets and income in ITR-2 is mandatory for taxpayers classified as Resident and Ordinarily Resident (ROR) under the Income Tax Act, 1961. Every ROR who owns or earns from overseas accounts, investments, or properties must disclose these details in Schedule FA of ITR-2. This disclosure ensures compliance with Indian tax laws and prevents penalties under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015. For FY 2024-25 (AY 2025-26), the Income Tax Department requires full transparency about any foreign holdings, regardless of value or income generation, helping curb offshore tax evasion and improve global financial reporting compliance.
Table of Contents
Understanding the Obligation to Report Foreign Assets and Income
The Indian Income Tax Act requires residents to disclose all foreign assets and income in their income tax return, specifically in ITR-2. This rule applies to Indian residents who hold overseas investments, own property abroad, or earn income from foreign sources. The purpose of this disclosure is to ensure transparency, prevent tax evasion, and comply with global standards such as FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard). The details are reported under Schedule FA, which captures information about foreign bank accounts, financial interests, immovable properties, and other assets held outside India.
Who Must Report Foreign Assets in ITR-2?
Only individuals classified as resident and ordinarily resident (ROR) in India are required to report their foreign assets and income. Non-residents (NR) and residents but not ordinarily residents (RNOR) are exempt from this requirement. Salaried individuals, professionals, or business owners who meet the ROR criteria must disclose details of foreign assets, even if they were acquired when the person was residing outside India. The obligation remains as long as they hold these assets, irrespective of whether any income is earned during the year.
What Types of Foreign Assets Should Be Declared?
Foreign assets that must be declared include:
Bank accounts held in foreign countries
Financial interests in any foreign entity (shares, mutual funds, partnerships)
Immovable property such as land or buildings located abroad
Any trusts or insurance policies held with foreign entities
Other capital assets such as bonds, debentures, or retirement accounts abroad
It is essential to provide complete details such as the country name, address, zip code, nature of the asset, date of acquisition, and closing balance or value as of the end of the financial year.
Schedule FA in ITR-2: Key Reporting Requirements
Schedule FA is a dedicated section in ITR-2 for disclosing foreign assets and related income. The information must be reported in Indian rupees as per the prescribed format. The schedule requires taxpayers to provide details such as account type, institution name, account number, ownership interest, and whether the asset was acquired or sold during the year. Even dormant accounts or zero-balance assets must be reported to ensure full compliance.
How to Report Foreign Income in ITR-2 Using Schedule FSI
Foreign income is disclosed under Schedule FSI (Foreign Source Income). Taxpayers must specify the nature of the income (salary, business, dividend, interest, etc.), the country of origin, and the tax identification number if applicable. Income should be converted into Indian rupees based on the average telegraphic transfer buying rate (TTBR) issued by the State Bank of India. If taxes were paid in the foreign country, details should be included to claim relief under the Double Taxation Avoidance Agreement (DTAA).
Currency Conversion Rules for Foreign Asset Reporting
When reporting foreign income or assets, values must be converted to Indian rupees using the telegraphic transfer buying rate (TTBR) as on the last day of the relevant financial year. The TTBR is published by the State Bank of India and must be consistently applied for all conversions. This ensures uniformity in reporting and helps prevent discrepancies during assessment or cross-verification by tax authorities.
Deadlines for Filing ITR-2 and Reporting Foreign Assets
Taxpayers required to report foreign assets must file ITR-2 before the due date prescribed under Section 139(1). For most individual taxpayers, the deadline is July 31 of the assessment year unless extended by the government. Filing after the due date may result in penalties, interest, and loss of the right to carry forward certain losses. Moreover, delayed reporting of foreign assets can raise red flags during scrutiny.
Penalties for Non-Disclosure or Misreporting
The penalties for non-disclosure of foreign assets are severe under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. If a taxpayer fails to report foreign assets or income, they may face a penalty of up to ₹10 lakh per undisclosed asset, in addition to prosecution. Misreporting or providing incomplete details can also attract reassessment, interest, and penalties under the Income Tax Act. Full disclosure helps maintain compliance and avoid such consequences.
Relevance of ITR-2 for Taxpayers with Overseas Income
ITR-2 is the prescribed return form for taxpayers with income from abroad or ownership of foreign assets. It is mandatory for residents with capital gains, foreign income, or multiple residential properties. Salaried individuals with shares or deposits outside India must also use ITR-2 instead of ITR-1. Using the correct ITR form ensures accurate representation of global income and reduces the likelihood of notices or rejections during processing.
Practical Example: How to Fill Schedule FA in ITR-2
Consider a taxpayer who holds a savings account in a U.S. bank and owns shares in a foreign-listed company. They must enter the bank account details, including institution name, account number, and closing balance in Indian rupees under Schedule FA. For shares, details of the company, acquisition cost, and closing value are required. If dividends were received, these must also be shown in Schedule FSI as foreign source income. TaxBuddy’s filing interface simplifies this by automatically mapping these details from uploaded documents.
Importance of Accurate Reporting and Common Mistakes to Avoid
Accurate reporting of foreign assets ensures transparency and prevents future disputes. Common mistakes include failing to disclose dormant accounts, using incorrect exchange rates, or misclassifying foreign mutual funds. Another frequent error is not declaring income accrued but not yet received. Double-checking entries before submission and using professional tools or expert-assisted platforms like TaxBuddy minimizes the risk of such mistakes.
Simplify Foreign Asset Disclosure with TaxBuddy
TaxBuddy helps taxpayers accurately report foreign income and assets through guided data entry and real-time validation. It ensures correct classification of assets, automatic currency conversion, and error-free mapping of Schedules FA and FSI. Its expert-assisted filing feature also verifies compliance with DTAA provisions and FATCA norms, helping individuals avoid penalties or notices for non-disclosure.
Conclusion
Reporting foreign assets and income in ITR-2 is a critical compliance requirement for Indian residents with overseas interests. Transparency in disclosure not only ensures legal compliance but also builds a clear financial record for future use, such as visa applications or global investments. Platforms like TaxBuddy simplify this process by providing AI-driven accuracy checks, expert reviews, and automated form completion.
For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Who needs to report foreign assets and income in ITR-2? All individuals who qualify as Resident and Ordinarily Resident (ROR) under Indian tax laws must disclose their foreign assets and income in ITR-2. This requirement applies even if there was no income generated from those assets during the financial year. The disclosure ensures transparency and compliance under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015.
Q2. Which ITR form should be used for declaring foreign assets? Foreign assets and income can only be reported using ITR-2 or ITR-3, depending on the taxpayer’s income type.
ITR-2 applies to individuals and HUFs who do not have business or professional income.
ITR-3 applies to individuals and HUFs earning income from a business or profession. The Schedule FA (Foreign Assets) in these forms captures complete details of overseas holdings, including foreign bank accounts, shares, immovable properties, and trusts.
Q3. Do NRIs or RNORs need to disclose their overseas assets? No. Non-residents (NRIs) and Residents but Not Ordinarily Residents (RNORs) are not required to disclose their foreign assets or income earned outside India. Their tax liability in India is limited to income earned or received within India. Only those classified as ROR must make such disclosures.
Q4. How is foreign income converted for reporting? Foreign income must be reported in Indian rupees using the Telegraphic Transfer Buying Rate (TTBR) published by the State Bank of India on the last day of the relevant financial year. This conversion rate standardizes the value of foreign income for tax reporting purposes. It is important to use the correct TTBR to avoid discrepancies between reported values and official AIS/TIS data.
Q5. What happens if foreign assets are not disclosed? Failure to disclose foreign assets can lead to severe consequences under the Black Money Act, including:
A penalty of ₹10 lakh per undisclosed asset.
Prosecution with imprisonment ranging from 6 months to 7 years. In addition, the taxpayer may face reassessment and loss of trust with authorities, making voluntary and accurate disclosure essential.
Q6. Are dormant or zero-balance foreign bank accounts to be reported? Yes. Even dormant, inactive, or zero-balance foreign bank accounts must be disclosed under Schedule FA in ITR-2. The Income Tax Department requires reporting of all accounts held during the year, regardless of balance or activity, to ensure complete transparency of global financial holdings.
Q7. Can income earned abroad and taxed there be exempt in India? If the income has already been taxed in a foreign country with which India has a Double Taxation Avoidance Agreement (DTAA), the taxpayer can claim a credit or exemption to prevent double taxation. The relief can be claimed under Section 90 or 91 of the Income Tax Act by submitting Form 67 before filing the ITR.
Q8. Is there a specific due date for reporting foreign assets? Yes. The details of foreign assets must be reported within the ITR filing due date, which is typically July 31 of the assessment year for individuals (unless extended by the government). Late filing or omission may trigger penalties and potential scrutiny under the Black Money Act.
Q9. How can one claim relief for taxes paid abroad? Relief for taxes paid abroad can be claimed under Schedule FSI (Foreign Source Income) and Schedule TR (Tax Relief) in ITR-2 or ITR-3. The taxpayer must provide the following:
Details of the foreign country and nature of income.
Amount of tax paid abroad.
Documentary proof such as tax receipts or foreign tax certificates. TaxBuddy helps calculate the eligible relief amount as per DTAA provisions to ensure full compliance.
Q10. What are common mistakes made in Schedule FA? Common reporting errors include:
Forgetting to declare minor or inactive accounts.
Using incorrect currency conversion rates.
Failing to mention disposal or closure of foreign assets.
Not aligning foreign asset disclosures with AIS or Form 26AS data. These mistakes can trigger mismatches and potential notices from the tax department.
Q11. Can TaxBuddy assist in reporting foreign income and assets? Yes. TaxBuddy’s expert-assisted plans ensure accurate classification, conversion, and reporting of foreign assets and income. The platform automatically populates Schedule FA, FSI, and TR based on user inputs and validates every entry for compliance with Indian tax and DTAA requirements, ensuring an error-free ITR filing experience.
Q12. What should be done if a previous ITR missed reporting foreign assets? If a taxpayer has failed to disclose foreign assets in a previously filed return, a revised return should be filed immediately with the correct information. TaxBuddy’s experts can assist in preparing and submitting the revised return under Section 139(5), minimizing penalties and ensuring compliance with the Black Money disclosure requirements.
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