Why It is Important ” Foreign Assets & Income to disclose by taxpayers their global income and assets accurately”
Summary: As global investments, income, and expenditures increase, it has become crucial for taxpayers to accurately disclose their foreign assets and income in their Income Tax Returns (ITR) to avoid penalties, legal consequences, and ensure tax compliance. The residential status of an individual determines the tax liabilities across jurisdictions, with tax credits available under international treaties. With advancements in digital transformation, tax authorities can now track global income and assets more effectively, aided by frameworks like the Common Reporting Standard (CRS) by the OECD and the U.S. Foreign Account Tax Compliance Act (FATCA). The Income Tax Act, 1961, mandates the disclosure of foreign assets and income through specific schedules in the ITR. Failure to comply can lead to severe penalties under the Black Money Act. Taxpayers who have not disclosed their foreign income or assets can rectify their returns by filing a revised return, with the deadline for the Assessment Year 2024-25 set for December 31, 2024.
In this Global footprint increasing day by day for investments, income, expenditure also increasing with mandatory requirements of disclosures in residents Income tax returns time to time to avoid negative liability, penalty etc. residential status to decide tax liability of which jurisdictions, location ,which country is eligible for receive tax amount ,what is the tax credit available to the taxpayer under the treaty made between the countries.
After Increasing digital transformation various sources of investments ,income and expenditure capture by the system which scrutinize by the tax authority and other relevant authority.
Recent Income tax departments start Enhancing Tax Transparency on Foreign Assets & Income to disclose by taxpayers their global income and assets accurately
Two types of International framework to share and report financial information of foreign residents
1. CRS (Common Reporting standard) Initiated by OECD required financial Institution to report Financial Information
2. FATCA (Foreign Account Tax Compliance Act (FATCA) FATCA, enacted by the United States, mandates foreign financial institutions to report accounts held by U.S. taxpayers to the IRS.
So the Income tax departments having various Information with respects to financial Income or Assets Abroad .
The Income tax act require to disclosed FA ,Income for a residents
1. Income-tax Act, 1961 require residents to disclose their foreign assets and income in their Income Tax Returns (ITR). Specifically, Schedule FA (Foreign Assets) in the ITR form is meant for reporting foreign assets, and Schedule FSI (Foreign Source Income) is for reporting income from foreign sources.
2. Additionally, taxpayers can claim tax relief on taxes paid abroad by filing Schedule TR (Tax Relief).
3. Failure to disclose foreign assets and income can attract stringent penalties and prosecutions under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. It is crucial for taxpayers to comply with these regulations to avoid legal consequences
Alarm “Revised your Return if Not Disclosed ”
If you have not disclosed your foreign assets and income in your original ITR, there is an opportunity to rectify this through filing a revised return. The Income Tax Department allows taxpayers to correct any omissions or inaccuracies by filing a revised return. For the A.Y.2024- 25 revised return can be filed up to 31.12.2024.
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