Global Investments, Local Taxes: Reporting Foreign Assets in ITR

Investing globally has become seamless—whether it’s buying one share of Apple or diversifying into US ETFs via apps like INDmoney, Vested, or Groww Global. However, while returns may be global, your tax obligations remain local. If you are a Resident and Ordinarily Resident (ROR) in India and have invested or held any asset outside the country, disclosure in your Income Tax Return (ITR) is mandatory.

This article walks through the reporting requirements, compliance nuances, and new relaxations under the law.

1. Disclosure Is Mandatory—Not Optional

If you’re holding any foreign stock, mutual fund, or even a bank account abroad—even if inactive—you are required to disclose it in your ITR. The disclosure is done through the following schedules:

Schedule FA – Foreign Assets

Report details of:

• Foreign brokerage and bank accounts
• Foreign stocks, mutual funds, ETFs, ESOPs, RSUs
• Opening and closing dates of the account or asset
• Highest value during the year, even if the closing balance is nil

Even a dormant Robinhood account or one share of Amazon must be reported.

Schedule FSI – Foreign Source Income

Report income earned from outside India, including:

• Dividends from foreign stocks
• Capital gains on foreign stock sales
• Salary earned abroad
• Interest from foreign bank accounts

Schedule TR – Tax Relief

If tax has been deducted abroad on your income, you may claim foreign tax credit under India’s DTAA by reporting it here. Filing of Form 67 is mandatory to avail the credit.

2. Small Investors Get Penalty Relief—but Not Disclosure Relief

Previously, failure to disclose even one foreign asset could invite a penalty of ₹10 lakh per asset per year under the Black Money Act. However, the Finance Act 2024 (effective from 1 October 2024) has introduced an important relaxation:

• If the total value of all foreign movable assets (such as shares, mutual funds, bank accounts) is ₹20 lakh or less, the heavy penalty will not apply.

Important Notes:

• Disclosure remains mandatory even if the value is under ₹20 lakh.

• This relief does not extend to immovable assets such as property or land located abroad.

3. Common Misconceptions to Avoid

Misconception: “I only have foreign salary, so Schedule FA doesn’t apply.”

Correction: True—Schedule FA applies only when foreign assets or accounts are held, not merely for income earned abroad.

Misconception: “I only invested ₹5,000 in a US stock. That’s too small to report.”

Correction: False—any foreign asset, regardless of size, must be disclosed if you’re ROR.

Also note: Investment platforms provide summaries but do not automatically file Schedules FA, FSI, or TR. You must do this manually or with professional assistance.

4. Missed Reporting in Past Years? Rectify with ITR-U

Suppose you invested in US stocks in FY 2021–22 but failed to disclose them in your ITR. Here’s how to fix it:

• Revised Return: If the due date hasn’t passed (i.e., 31st December of the relevant Assessment Year), file a revised return.
• ITR-U: If the due date has passed, use Form ITR-U (introduced by Finance Act 2025) to voluntarily update your ITR for up to four previous years.

Voluntary disclosure through ITR-U demonstrates good faith and can help avoid future legal complications.

5. Taxation of Income from Foreign Stocks

Foreign stock income is taxed in India as follows:

• Capital Gains:

  • Short-Term (held < 24 months): Taxed at slab rates

  • Long-Term (held ≥ 24 months): Taxed at 20% with indexation benefit

• Dividends:
  Taxed at your applicable slab rate (not at a flat 10% as with Indian equities)

• Foreign Tax Credit:
  You can claim credit for tax paid abroad by filing Form 67—this must be done before or along with the ITR filing. Use the RBI’s reference rate on the last day of the previous month for conversion to INR.

6. Key Takeaways for Global Investors

• Foreign investments may be digital and effortless, but the tax compliance is serious and mandatory.
• The ₹20 lakh relief is a welcome change—but does not excuse non-disclosure.
• Schedules FA, FSI, TR, and Form 67 form the compliance backbone for global investments.
• Use Form ITR-U if you missed earlier disclosures—proactive correction is better than facing penalties.
• DIY platforms simplify investing, but filing tax disclosures correctly still requires professional oversight.
• Final Word

Foreign investing is no longer a niche concept—it’s becoming mainstream. But investors must not treat it as a grey zone. India is part of global information-sharing networks like the Common Reporting Standard (CRS), which allow tax authorities to receive data from foreign brokerages and banks.

Whether it’s dividends from Microsoft or a trial investment in a US ETF, report it in your ITR accurately. Disclose, comply, and avoid unnecessary scrutiny.

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Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Readers are advised to consult a qualified tax professional for guidance tailored to their specific situation.