Resident & Ordinarily Resident individuals required to report Schedule Foreign Assets
Schedule FA of the Income Tax Return is a mandatory disclosure section for all resident and ordinarily resident taxpayers who hold foreign assets or derive foreign income. The intent is to ensure transparency of overseas investments and comply with the Black Money (Undisclosed Foreign Income and Assets) Act. This reporting is annual, applies even if there is no taxable income, and is independent of whether income is earned, remitted, or taxed abroad.
Who Must Report: Resident & Ordinarily Resident Individuals. They must disclose
- Foreign income (Schedule FSI).
- Any foreign asset held at any point during the financial year.
- Foreign tax credit claimed (Schedule TR via Form 67).
- Key Points: Disclosure is required even for assets held temporarily or briefly. Even if there is no income, the mere existence of the asset triggers reporting. Assets held via foreign platforms (e.g., IndMoney, Vested, and Groww international investments) must also be reported.
When to Report (Timeline Rules)
- Foreign ESOP/RSU—from vesting year to sale year
- Sell-to-cover transactions—year of sale
- Foreign bank accounts—every year until closed
- Foreign shares/brokerage accounts—every year until fully liquidated or repatriated
- Foreign property — every year until sold
- Foreign insurance—every year until maturity/surrender
- Foreign dividends — year of credit (Income from Other Sources)
Correct ITR Forms for Foreign Assets : If any foreign asset exists, taxpayer cannot file ITR‑1 or ITR‑4. The correct forms are ITR‑2 → for salary/capital gains & ITR‑3 → for business income
What Must Be Reported Under Schedule FA : Overall Compliance Guidance
Schedule FA is a disclosure-oriented schedule, not a tax computation schedule. It requires granular information such as peak balance during the year, opening and closing balances, country, ZIP code, and address of institution, nature of income and ownership, date of acquisition/creation of the account, and date of disposal/closure. Schedule FA covers multiple categories of foreign financial interests:
- Foreign ESOPs / RSUs
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- Must be reported every year from the year of vesting until the year of sale.
- Sell-to-cover transactions (where the employer sells some shares to pay tax) must be reported in:
- Schedule CG (capital gains), and
- Schedule FA for remaining shares held.
- Foreign Shares/ETFs/Mutual Funds Include:
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- Stocks purchased on global platforms
- ETFs and mutual funds listed abroad
- Reinvested dividends
- Shares held in foreign brokerage accounts
Report annually until Shares are liquidated, The brokerage account is closed, & Funds are repatriated
- Foreign Bank Accounts
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- Savings, checking, dormant, or low‑balance accounts
- Multi-currency or foreign payroll accounts
Must be disclosed every year until closure—even if not used.
- Foreign Insurance Policies
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- Policies with surrender value (ULIPs, whole-life, endowment, etc.)
- Disclose annually until surrender/maturity.
- Foreign Immovable Property
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- Land or building located outside India
- Must be reported every year until sold.
- Other Commonly Missed Foreign Assets
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- Foreign retirement accounts (401(k), IRA, Roth IRA, Superannuation)
- Beneficial interest in trusts or entities abroad
- Custodial / investment accounts
- Cryptocurrency held on foreign exchanges (if jurisdiction outside India) (Not listed in your sheets but consistent with FA reporting categories.)
Below is a comprehensive breakdown of each reportable category reported under Schedule FA:
- Foreign ESOPs / RSUs : What to Report
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- Vested shares obtained from an employer under ESOP or RSU programs.
- Includes shares that continue to be held, even if they were vested several years ago.
Reporting Timeline: Must be reported every year, starting from the year of vesting until the year of sale.
Where to Report : Schedule FA
- RSU/ESOP Shares Sold via Sell-to-Cover: What This Means :
- When an employer sells part of your vested shares to cover the perquisite tax.
Reporting Requirements : Report in the year of sale/transfer.
Where to Report : Schedule CG – for capital gains, if any & Schedule FA – for balance shares still held at year‑end
- Dividend from Foreign Shares : What to Report : Any dividend credited into a bank account from foreign equities.
Reporting Timeline: Report in the year of credit.
Where to Report: Income from Other Sources (IFOS)
- Foreign Shares/Brokerage Accounts Includes
- Shares held in international trading platforms
- Brokerage accounts (e.g., Interactive Brokers, TD Ameritrade, Charles Schwab)
- Dividend-bearing balances lying abroad
Reporting Timeline : Every year until all shares are sold. The brokerage account is closed & Funds are repatriated to India
Where to Report : Schedule FA
- Foreign bank accounts include savings accounts, Dormant accounts, Inactive or low‑balance accounts, Multi‑currency accounts
Reporting Timeline: Report every year, regardless of activity, until the account is closed.
Where to Report : Schedule FA
- Foreign Insurance Policies with surrender value, for example, ULIPs from foreign insurers & Endowment or whole-life policies with cash value
Reporting Timeline: Report every year until maturity or surrender.
Where to Report: Schedule FA
- Foreign Immovable Property Includes Land, buildings, & Residential or commercial property abroad
Reporting Timeline: Report every year until the property is sold.
Where to Report : Schedule FA
Important Practical Points Reported Under Schedule FA:
Schedule FA is NOT linked to taxability: Reporting is required even if income from these assets is NIL, assets are low balance, dormant, or inactive, & payments were not received in India. Even if income is taxed abroad or exempt in India, disclosure is still required.
- Reporting is mandatory, even if No income was earned, Assets were held for a very short time & The account remained inactive or with a small balance
- Common Triggers for Non‑Disclosure Notices (AY 2025–26) : The tax department cross‑matches foreign asset information received through FATCA (US accounts), CRS—Common Reporting Standard, AEOI—Automatic Exchange of Information, and foreign institutions reporting directly.
- Common mismatches include foreign stocks, funds, ESOPs not reported, dividends credited abroad but unreported, temporary foreign holdings (e.g., IndMoney/vested accounts), dormant foreign bank accounts not declared, foreign retirement plans ignored, & foreign property not reported because “no income was earned.”
- Important: Notices issued in December 2025 are compliance nudges, not penalties, allowing voluntary correction before the deadline (31 December 2025).
- With global tax transparency increasing under FATCA, CRS, and AEOI, Indian taxpayers must ensure complete and accurate foreign asset disclosure. Timely voluntary compliance Avoids penalties, prevents litigation, Provides peace of mind & Enables smooth processing of ITR
Commonly Missed Foreign Assets (Also Reportable in Schedule FA) :
Taxpayers frequently miss reporting the following:
- Foreign mutual funds / ETFs
- Beneficial interest in foreign entities or trusts
- Foreign retirement accounts like 401(k), IRA, Roth IRA & Superannuation accounts
- Foreign custodial or investment accounts
These must be reported even if No contributions/income occurred during the year; They are managed by foreign employers & They are in jurisdictions with tax treaties
Consequences of Non‑Compliance
Schedule FA is disclosure-only and independent of taxability.
Non-disclosure of a foreign asset is treated as a serious offense under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015. High penalties for non‑reporting on FA. Non-disclosure may be treated as an offense under the Black Money Act, attracting heavy monetary penalties & Potential prosecution in severe cases. Failure to disclose even one asset can trigger: High penalties, Scrutiny & Mismatch alerts from CRS/FATCA reporting Penalties Include:
- INR 10 lakh penalty per undisclosed foreign asset: Relaxation: Not applicable if aggregate foreign movable assets ≤ INR 20 lakh
- Immovable property is NOT exempt from penalties, even if the property generates no income
- Additional penalties and tax may apply: Prosecution is possible in severe cases