Fail to Disclose Foreign assets or income equals to penalty, warns Indian IT department

The Indian Income Tax (IT) Department has issued a stern warning to taxpayers regarding non-disclosure of foreign assets or income in their tax filings. Failure to comply with reporting requirements under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, could result in severe penalties, prosecution, and reputational damage. This development underscores the government’s resolve to clamp down on tax evasion and illicit financial activities involving foreign holdings.

Enacted in 2015, the Black Money Act was introduced to address the challenge of undisclosed income and assets held abroad. The legislation mandates Indian residents to declare their foreign income and assets while filing their Income Tax Returns (ITRs).

Key provisions of the Act include:

Disclosure of Foreign Assets: All foreign bank accounts, investments, immovable properties, and income earned abroad must be disclosed in the taxpayer's ITR.

Penalties for Non-Compliance: Failing to report foreign income or assets attracts penalties, including hefty fines and potential imprisonment.

Assessment Window: The IT Department can assess undisclosed income or assets for up to 16 years retrospectively.
Penalties for Non-Disclosure

The penalties for failing to disclose foreign assets or income are stringent and include, Financial Penalty, which includes a flat 120% of the tax due on undisclosed income or assets can be levied. Additionally, a separate fine of ₹10 lakh is applicable for non-disclosure of specified foreign assets. Offenders could also face imprisonment ranging from 3 to 10 years.

The IT Department’s warning comes amidst enhanced global cooperation for information sharing under agreements like the Automatic Exchange of Information (AEOI) and the Foreign Account Tax Compliance Act (FATCA). These initiatives enable India to receive details of financial accounts held by Indian residents in over 100 countries, making it increasingly difficult for taxpayers to hide foreign income or assets.

The Indian government has been relentless in its efforts to curb black money. Initiatives like demonetization, the introduction of the Goods and Services Tax (GST), and amendments to tax laws reflect this commitment. The focus on foreign asset disclosure aligns with these broader objectives, aiming to increase transparency and accountability in financial dealings.

The IT Department’s warning serves as a reminder for taxpayers to comply with their legal obligations regarding foreign income and assets. As global financial systems become more interconnected and information-sharing mechanisms improve, the room for non-disclosure continues to shrink. Taxpayers are urged to prioritize transparency in their financial disclosures to avoid severe penalties and safeguard their reputation. In a rapidly evolving regulatory landscape, proactive compliance is not just advisable—it’s imperative.

 

 

 

 

 

 

The Income Tax Department has issued a warning to taxpayers, stating that failure to disclosure of foreign assets or income in the Income Tax Return (ITR) may result in a penalty of up to Rs 10 lakh under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The department issued this advisory as part of a new compliance and awareness campaign, launched on November 16, to ensure that taxpayers report their foreign assets and income when filing their ITR for the assessment year (AY) 2024-25.

The advisory clarified that for Indian tax residents, foreign assets include bank accounts, insurance contracts, annuity contracts, equity and debt interests, immovable property, custodial accounts, financial interests in entities or businesses, trusts where the individual is a trustee or beneficiary, and any other capital assets held abroad.

Taxpayers falling under this category are required to fill out the foreign asset (FA) or foreign source income (FSI) schedule in their ITR, even if their income is below the taxable threshold or if the foreign assets were acquired through disclosed sources.

The department highlighted that failure to disclose foreign assets or income could result in a penalty of Rs 10 lakh. It also noted that as part of its campaign, the Central Board of Direct Taxes (CBDT) will send informational SMS and emails to taxpayers, who have already filed their ITR for AY 2024-25. These communications will target those identified through information from bilateral and multilateral agreements, indicating that they may have foreign accounts, assets, or income.

The goal of the campaign is to assist taxpayers in accurately completing the foreign asset schedule in their ITR, especially for those with high-value foreign assets.