CBDT crackdown on unreported foreign assets and income: What is it and how to avoid penalty?

CBDT crackdown on unreported foreign assets and income

The central board of direct taxes (CBDT) is geared up for the second round of a nationwide campaign to identify foreign assets and income of taxpayers that was not reported on the Income Tax Return (ITR) filing for the assessment year (AY) 2024-25.

CBDT will be sending SMSs and emails to taxpayers who’ve been identified as not disclosing foreign income and assets. The tax authority has advised citizens receiving such a notice from the tax department to review and revise their returns filing before the year ends.

“Analysis of the automatic exchange of information (AEOI) for FY 2024-25 (CY 2024) by the CBDT has identified high-risk cases where foreign assets appear to exist but have not been reported in the ITRs filed for AY 2025-26,” the official release from the Ministry of Finance reads.

The initiative by CBDT is part of their campaign, Non-intrusive Usage of Data to Guide and Enable (NUDGE). The first round launched on November 17, 2024, had identified 24,678 taxpayers as having disclosed returns from foreign assets worth Rs 29,208 crore, and income of Rs 1,089.88 crore for the assessment year (AY) 2024-25.

“Taxpayers with foreign assets and income have been identified after the department analyzed data from multiple sources— such as TDS statements, property purchases, high-value transactions, stock market activity, foreign remittances, and information from other countries —and, compared with the income reported in the ITR,” said Rajarshi Dasgupta, Executive Director (Tax) at Aquilaw.

How to report foreign assets and foreign-source income online

CBDT has issued seven guidelines for taxpayers to help them disclose their foreign assets and income, which has been outlined on their official website. Report of such income has to be made under Schedule Foreign Assets (FA) and Foreign Source Income (FSI) in ITRs, and is mandatory under the Income-tax Act, 1961, and Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

The CBDT guideline is self-explanatory, and assists taxpayers to fill the Foreign Source Income (FSI), Tax Relief, and Foreign Assets (FA) Schedule in the ITR Form. The guideline is helpful to get details on the following points:

Understand foreign assets and income disclosure
Selecting the appropriate ITR Form
Schedule FSI: Details of income from outside India and Tax relief
Schedule TR: Summary of tax relief claimed for taxes paid outside India
Schedule FA: Details of foreign assets and income from any source outside India
Currency conversion and valuation guidelinesImportant clarification

According to CBDT,  ITR form should be selected that includes a specific category reporting on Schedule FA (Foreign Assets), except for ITR-1 or ITR-4 as these forms lack the necessary reporting schedules for foreign disclosures.

Detalis of such disclosure should contain country code, taxpayer identification number (TIN), tax relief and double taxation avoidance agreement (DTAA) details, and Form 67 requirements.

Taxpayers can also get help from chartered accountants (CAs) or tax experts to get help in reporting foreign assets and income before the deadline ends on December 31, 2025.