Avoid Penalties for Failing to Disclose Foreign Investments When Filing an ITR


Indian investors invested in US equities to maintain diversification of their portfolios across geographies. These investors should be aware of tax laws when investing overseas. As an Indian taxpayer, it is important not only to pay taxes on gains and dividends earned, but also to properly disclose foreign investments. Taxpayers may end up paying a penalty for failing to disclose foreign assets when filing a tax return.

Annex FA of the ITR form is an important provision in which to provide details of foreign assets or income from any source outside India. This schedule does not need to be completed if you are not an ordinarily resident or non-resident.

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Dr. Suresh Surana, Founder – RSM India shares the importance and consequences of non-disclosure of foreign investment.

In accordance with income tax laws, every Indian investor is required to disclose details of capital gain and dividend transactions in “Schedule CG” and “Schedule OS” respectively in his tax return in India. In addition, resident and ordinarily resident investors must also provide details of such foreign shares in “Schedule FA” of their tax return.

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The tax authorities, on the non-disclosure of foreign investments in the respective schedules, could issue a notice to the assessed with an affirmation of undisclosed assets and income and also treat this tax return as a defective declaration u / s 139 (9) of the Computer Law.

Apart from this, “The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Taxation Act, 2015 (“BMA”)” imposes a stricter penalty of Rs. 10 lakhs for non-disclosure of a foreign asset in Schedule FA.

Thus, it is very important for Indian investors who invest in securities listed in the United States to know the disclosure requirements and the consequences of not disclosing them in their tax returns. Investors should exercise caution when filing their returns and diligently disclose all necessary details of foreign investments in Schedule FA.


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