Foreign Asset Reporting: Must for NRIs (ROR)

As more Non-Resident Indians return to India—or maintain financial footprints across borders—the intersection of foreign assets, domestic tax laws, and global reporting standards has become a critical compliance zone. Yet, in my conversations with returning NRIs, entrepreneurs, and even seasoned finance professionals, I often notice a pattern:

They confuse Foreign Asset Reporting (FA Schedule) with Black Money (Undisclosed Foreign Income and Assets) Act, 2015.

Let us explore this topic from practical perspective:

1. Why Foreign Asset Reporting Has Become So Important

Over the last decade, India has significantly strengthened its global tax transparency efforts. With FATCA, CRS, and automatic exchange of information between countries, the government receives data on offshore accounts, investments, corporate holdings, trusts, and insurance products.

This means one thing:

Your foreign financial footprint is visible to the Indian tax system the moment you become a resident again.

So the FA Schedule is not a mere formality—it is a declaration that brings clarity and avoids suspicion.

2. FA Schedule — What Exactly Is It?

The FA (Foreign Assets) Schedule is part of the India Income Tax Return (ITR) that must be filed by individuals who qualify as:

Resident and Ordinarily Resident (ROR)

If you are:

• Non-resident (NR), or
• Resident but Not Ordinarily Resident (RNOR)

…you do not have to file the FA Schedule.

This distinction is often misunderstood by returning NRIs.

3. What must be reported in the FA Schedule?

Every foreign asset held at any time during the previous year:

• Foreign bank accounts
• Financial interests (shares, ESOPs, mutual funds)
• Foreign companies or LLCs
• Foreign trusts
• Immovable property abroad
• Insurance policies with investment components
• Cryptocurrency or digital assets held overseas
• Any other income-generating foreign asset

Even if the asset does not generate income, it must be reported.

4. What happens if you skip it?

Skipping or misreporting this Schedule may not immediately trigger penalties under the Income Tax Act, but—and this is crucial—it strengthens any future allegation under the Black Money Act.

FA Schedule is compliance. Black Money Act is enforcement.

This is where people mix up the two laws.

Black Money Act — with scary Consequences

The Black Money (Undisclosed Foreign Income and Assets) Act, 2015 (BMA) was introduced to tackle undisclosed offshore assets.

Who does it apply to?

BMA applies only to residents (ROR). It does not apply to NRIs or RNORs.

4. What is an “undisclosed foreign asset”?

Three elements make an asset undisclosed:

• Owned by a resident, either directly or beneficially
• Located outside India
• Not reported in the ITR (FA Schedule)

This third element is where FA Schedule becomes critical.

Penalties under Black Money Act are harsh:

• Flat 30% tax on the value of the asset
• Penalty of 90%
• Prosecution up to 7 years
• No limitation period—cases can be reopened even decades later

Yes, unlike normal tax cases, there is no time bar.
That is why proper disclosure is non-negotiable.

FA Schedule vs. Black Money Act — The Core Difference

Here’s how I explain it to clients in one line:

FA Schedule is where you disclose your foreign assets; the Black Money Act punishes you if you don’t.

But compliance is not that simple. Let’s map the differences clearly:

• The Practical Reality for NRIs — Where Problems Actually Arise

In practice, the biggest risk for NRIs lies during transition years—especially when they return to India.

Many individuals become ROR without realising it.

All it takes is:

• A long stay in India due to health, remote work, family reasons, or
• A mistaken assumption that “NRI status under FEMA” equals “NRI under Income Tax” (it does NOT)

And suddenly, a person becomes liable for:

• Global income taxation
• FA Schedule reporting
• Exposure to Black Money Act

Here are the most common real-world red flags I see:

• Real Mistakes that Trigger Problems (And How to Avoid Them)

Mistake 1: Not recognizing the shift to ROR status

Many returning NRIs assume they remain non-resident for years.

Solution:
Every year, calculate residential status under the Income Tax Act separately.

Mistake 2: Thinking “I didn’t earn income from my foreign assets, so I don’t have to disclose them.”

Wrong.

Even a dormant account must be disclosed.

Mistake 3: Holding ESOPs/RSUs abroad but not reporting them

Foreign employer equity is one of the most commonly missed items.

Mistake 4: Not reporting beneficial ownership

If you are a beneficiary of a foreign trust, or hold shares in a foreign company through another entity—you must disclose it.

Mistake 5: Not keeping documentation

Banks abroad often archive or purge old statements.

But for Indian compliance, you may need:

• Old balance confirmations
• Purchase documents
• Portfolio histories

Maintain a digital archive. It is worth the effort.

Mistake 6: Relying solely on foreign tax advisors

Foreign advisors do not consider Indian FA reporting or BMA compliance.

You need India-specific advice.

• The Practical Approach — What NRIs Should Actually Do

Here is a simple framework I use with clients:

Step 1: Determine Residential Status Correctly

This is foundational.

If you are:

• NR or RNOR → FA Schedule not required
• ROR → Full reporting mandatory

Step 2: Prepare a Global Asset Inventory

List every foreign holding:

• Bank accounts
• Investments
• Trust interests
• Property
• Pension funds
• Crypto exchanges
• Employer stock plans

Once you list everything, the reporting becomes easy.

Step 3: Segregate Assets Into Reportable Categories

The FA Schedule requires disclosures category-wise:

• Bank accounts
• Financial interests
• Immovable property
• Trusts
• Others

This step avoids omissions.

Step 4: Link Foreign Income to Indian Tax Return

If any foreign income:

• Interest
• Dividends
• Capital gains
• ESOP/RSU vesting income

…is taxable in India, ensure it is reported correctly and claim Foreign Tax Credit wherever applicable.

Step 5: Maintain Trail of Ownership and Valuation

Especially important for:

• Inherited foreign property
• Foreign partnerships
• Shares in offshore companies
• Trust structures

Step 6: File FA Schedule Accurately

Ensure:

• No omissions
• No inaccuracies
• No mismatching jurisdiction details
• Consistency year-on-year

The FA Schedule is your strongest defence under BMA.

Step 7: Review Re-Entry Year Carefully

When returning to India:

• Plan repatriations
• Evaluate ESOP timing
• Consider liquidating non-strategic foreign accounts
• Document the transition

Transitions create the highest compliance risks.

• Why This Matters — Beyond Compliance

Foreign asset reporting is not only about tax or penalties.

It is about:

• Peace of mind
• Clean financial records
• Avoiding future scrutiny
• Ensuring family clarity
• Protecting your global footprint

In today’s world of automatic information sharing between tax authorities, transparency is your best shield.

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In case you have any concern and queries or need any support regarding FA Schedule Reporting and issues under Taxation, you may like to contact us.

Abhinarayan Mishra, FCA, FCS; Managing Partner, KPAM & Associates, Chartered Accountants, Dwarka, New Delhi;  +9910744992, ca.abhimishra@gmail.com