REPORTING OF FOREIGN ASSETS AND FILING INCOME TAX RETURN
Individuals who have taxable income below the basic exemption limit still need to file their income tax return (ITR) if they hold or earn an income from a foreign asset. Such incomes need to be reported under schedule FA in ITR-2 or ITR-3, as applicable to the taxpayer.
This rule may impact senior citizens who do not have taxable income but may be beneficiaries in assets bought outside India by their family members.
Who should report foreign income?
“The first condition to meet is that you should be a tax resident and ordinarily resident (ROR) in India," said Archit Gupta, founder and chief executive officer, ClearTax. You are an ROR if you have lived in India for at least two out of 10 previous years or for at least 730 days in the preceding seven years.
Reporting of Foreign Assets and Income in Income Tax Return
1. In order to report foreign assets and income from a source outside India in Income tax return, firstly you have to determine the residential status of the assessee which is mentioned below in the table along with who is required to report :
a. Resident and ordinarily resident (ROR)
i. Income received or accrues or arises or is deemed to be received or accrues or arises India during the previous year.
ii. Income which accrues or arises outside India even if it is not received or brought into India during the previous year.
2. In order to report in Income tax return, you have to select Yes in S. No. 19 of Part B – TTI Computation of tax liability of total Income as demonstrated below which asked whether you at any time during the previous year :-
a. hold, as beneficial owner, beneficiary or otherwise, any asset (including financial interest in any entity) located outside India or
b. have signing authority in any account located outside India or
c. have income from any source outside India?
3. After selecting Yes as mentioned in point 2, you have to fill Schedule FA : Details of Foreign Assets and Income from any source outside India.
4. In Item no. A1 under schedule FA, assessee have to give details of Foreign Depository Accounts held (including any beneficial interest) at any time during the relevant account period in the following format by giving certain details
5. In Item no. A2 under schedule FA, assessee have to give details of Foreign Custodial Accounts held (including any beneficial interest) at any time during the relevant account period in the following format by giving details as mentioned above in Item no. A1.
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