31st December Deadline: Mandatory ITR Filing for Foreign Income and Assets

The Central Board Of Direct Taxes, Ministry Of Finance (CBDT) has recently launched a campaign to remind taxpayers about their obligation to disclose foreign assets and income in their Income Tax Returns (ITR). This initiative is aimed at ensuring greater compliance with the Income Tax Act, particularly for Indian residents holding foreign assets or earning income from foreign sources.

Who Needs to File?

As per the Income Tax Act, every person, who is?a resident in India for the purpose of taxation under the Income Tax Act and:

• Owns foreign assets,
• Earns income from foreign sources, or
• Holds financial interests abroad,

is mandatorily required to fill the ITR, regardless of whether the total income is below the basic exemption limit and required to furnish information in the Schedule FA/FSI.?

Why Is This Disclosure Important?

The inclusion of foreign assets and income in ITR is a measure to curb tax evasion and ensure transparency. Ignorance or non-compliance can attract severe penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. It’s important to note that this disclosure is mandatory even if:

1. The foreign assets are acquired from disclosed sources,
2. Your total income does not cross the taxable threshold.

What Qualifies as Foreign Assets?

The scope of foreign assets includes:

• Foreign bank accounts,
• Financial interests in foreign entities,
• Foreign custodial accounts,
• Immovable properties abroad,
• Foreign equity and debt interests, and
• Trusts where you are a trustee, settlor, or beneficiary.

Why Now? The 31st December Deadline

For the Assessment Year 2024–25, the last date to file belated and revised returns is 31st December 2024. The campaign emphasizes that even a single instance of holding foreign assets or income during the financial year 2023-24 necessitates the filing of ITR and filling out the relevant schedules.

Key Takeaways for Taxpayers

1. Choose the Correct ITR Form Ensure that you use the appropriate ITR form. Forms ITR-1 and ITR-4 are not applicable in cases involving foreign assets or income.
2. Disclosure Is Not Optional Even if your total income is below the basic exemption limit, disclosure is mandatory.
3. Avoid Penalties Non-disclosure can lead to penalties or prosecution. Filing accurate returns is a safeguard against unnecessary legal complications.

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