Schedule Foreign Source Income: How to Fill FSI & TR Schedule for NRI
- Dipali Waghmode
- Jul 10
- 6 min read
Many people all over the world profit from liberalism's tenets, which enable them to earn money from a variety of sources. But this scenario of generating wealth globally raises concerns regarding the ways in which taxes are implemented in various countries. When completing your income tax returns (ITRs), you should disclose any overseas assets you may have. Income taxpayers must accurately fill out the FSI (Foreign Source Income), TR (Tax Relief), and FA (Foreign Assets) schedules in their ITR if they have foreign bank accounts, foreign income, or other assets outside of India. In this article, we will discuss these concepts in detail and explain the steps for filling out Schedule FSI and TR for NRIs.
Table of Contents
What are Schedule Foreign Source Income and Tax Relief?
Schedule FSI (Foreign Source Income): When submitting an Indian tax return, a resident who receives income from a foreign nation must pay taxes on it and disclose it under Schedule FSI. However, under this timetable, no losses need to be reported.
Schedule TR (Tax Relief): When an Indian person earns money abroad, they must pay taxes in both nations. This results in double taxation as the same income is taxed twice. Such taxpayers need to submit the ITR-2 form to claim tax relief (TR) in India.
India has signed a Double Taxation Avoidance Agreement (DTAA) to prevent double taxation, and taxpayers can use the following methods to get relief from dual taxation:
Tax Credit: In this approach, the income is not taxed in the nation of residence but is taxed in both countries.
Exemption Method: In this approach, a person's overseas income is exempt in one jurisdiction and subject to taxation in another.
Schedule Foreign Source Income Instructions for NRI
Resident Indians who receive income from outside sources must file an FSI Schedule with their ITR 2. However, non-resident Indians, or NRIs, are exempt from reporting their foreign-sourced income on ITR-2. However, any income received by an NRI from India is taxable. Regardless of residential status, anyone making more than Rs. 2.5 lakh must file income taxes. Therefore, an NRI is required to file ITR if their income in India exceeds the limit of Rs. 2.5 lakhs. If an NRI's overseas income is taxable in both India and another nation and they have claimed any tax relief in India, they must complete Schedules FSI and TR.
How to Fill Out Schedule Foreign Source Income and Claim Relief
You must enter the specifics of any income received from a nation other than India in the Schedule FSI section. The following guidelines must be adhered to while submitting the ITR 2 form:
The amount of taxes you have paid outside of India on income earned abroad must be listed in column C.
Indicate the tax relief amount in column D if you are requesting tax relief under FSI.
Enter the country's ISD code as the country code.
The Taxpayer Identification Number (TIN) for the nation in which you made your tax payment must be entered. You can use your passport number if you aren't given a TIN.
Schedule Tax Relief Instructions for NRI
Tax relief (TR) can be claimed in India by those who pay taxes outside of the country, but they have to record it on the ITR-2 form. Indian non-residents who earn money from sources subject to Indian taxation must file an ITR. If a person has claimed tax relief, they are required under the Income Tax Act to record their overseas assets and liabilities on the ITR 2 form under the FSI, TR, and TA Schedules. Therefore, if their income source is taxable in India, NRIs who pay taxes overseas may submit the TR Schedule.
How to Fill Out Schedule Tax Relief and Claim Relief
You must go to the returns filing area and choose ITR-2 after you have visited the Income Tax Department's official e-filing portal. See the guidelines below for filling up the TR Schedule in ITR 2:
The tax information you paid in a foreign nation must be mentioned. You should pay this tax on the income listed on Schedule FSI.
Enter your TIN (Taxpayer Identification Number) and the ISD code as the country code. You can also provide your passport number if you are not given a TIN.
In the designated columns, enter the tax relief (TR) that you have claimed under Sections 90, 90A, or 91 of the Income Tax Act.
You can submit the ITR-2 return once you have filled out the form with all the necessary information. To obtain the acknowledgement form, be sure to continue with the verification.
Conclusion
You now understand how to submit Schedule FSI and TR for Indian non-residents. NRIs who get income from outside sources can determine if they must file an ITR by looking up the minimum taxable income slab. An NRI is only required to submit Schedule FSI and TR if their income is taxable in both countries but they have already claimed relief for taxes paid abroad in India.
Frequently Asked Questions
Q1. Do NRIs need to disclose foreign income?
In their income tax return, residents must reveal all income received from different sources and nations, and they must also pay taxes on such income within India. Conversely, non-resident Indians are only required to pay taxes on income that has been earned or accumulated within India.
Q2. Is foreign income taxable in India?
Depending on your resident status, foreign income may or may not be taxable in India:
All income, both foreign and domestic, for residents is subject to taxes in India. To prevent double taxation, you can, however, claim credit for foreign taxes paid.
In India, foreign income of NRIs is typically exempt from taxes. However, there are a few exceptions, such as interest income received from NRO accounts.
Q3. Who needs to file Schedule FSI and TR?
Regardless of whether they are claiming any credit for taxes paid outside of India, anyone receiving income from a foreign source is expected to record their information in Schedule FSI. They must also state the specifics of any tax relief they have claimed in India.
Q4. What is the time period for reporting foreign income in ITR?
For the financial year in question, which runs from April 1 to March 31, taxpayers must record their overseas income.
Q5. What is the deadline to file ITR for NRIs?
If not extended, the deadline is July 31st.
Q6. Is schedule FSI mandatory for NRI?
Unless they earn taxable income from India, NRIs do not to file income tax returns in India mandatorily. They are only required to complete the FSI schedule in ITR 2 if their overseas assets that are taxable in India or if they earn income from a foreign source.
Q7. Is schedule FSI not applicable for non-residents? Since this schedule is exclusively applicable to residents, non-residents are exempt from reporting their foreign source income on ITR 2. They may, however, occasionally be required to fill out schedule FSI if their source of income is taxable in India.
Q8. Is schedule TR mandatory for NRI?
No, NRIs need not fill out Schedule TR. They do, however, occasionally request tax breaks for taxes to be paid outside of India. NRIs are required to submit Schedule FSI and TR in these situations.
Q9. Will there be a penalty if I do not fill the details under Schedule FSI & TR?
Yes, as per the 2015 Black Money Act, there will be a penalty.
Q10. My income is solely from my salary in India and I get dividends from investments in US stocks. Which ITR form am I required to file?
You must submit an ITR-1 if they get income from salaries and other sources in India. Additionally, you must file an ITR-2 if they have additional income from sources outside of India.
Q11. Am I required to fill schedule FSI and TR if I have income from foreign sources but have not paid any tax on foreign income and also have not claimed tax relief?
Taxpayers can record the specifics of their foreign income, including the country-by-country breakdown of taxes, income, and tax relief, using Schedule FSI in ITR-2. Tax relief is reported on Schedule TR. You do not need to complete these schedules if you have overseas income but are not claiming any tax relief or intend to do so. Nonetheless, the primary portions of the ITR-2 form require you to disclose your whole income.
Q12. What is the tax relief for foreign source income for small taxpayers? The Black Money Act imposed a penalty of Rs. 10 lakhs on ordinary tax residents of India who failed to provide information under Schedule FSI and TR. The penal rules have been loosened in this budget, and if the total amount of non-disclosure does not reach Rs. 20 lakhs, there would be no penalty.
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