Income Tax Notices: Employees nudged to declare their foreign assets

Foreign assets and income in the ITR

Several multinational corporations (MNCs) operating in India are actively encouraging their employees to declare any undisclosed foreign assets or income. This urgency stems from direct communications received from the Income Tax Department under the Central Board of Direct Taxes' (CBDT) ongoing "NUDGE" campaign, aimed at promoting voluntary compliance.

Who should report foreign assets?

The notices stem from the department’s improved system of matching foreign financial data, which now receives information directly from overseas countries and financial institution.

“Employees holding ESOPs, RSUs or shares in overseas entities are required to disclose the same, irrespective of whether any income has been realised. Further, any income earned outside India, however small, including dividends of a few US dollars, must also be reported in the Return,” Himank Singla, founding partner at SBHS & Associates.

Why you should not neglect filing foreign asset?

"With India being part of the Automatic Exchange of Information (AEOI) under tax treaties, the Indian Income-tax Department regularly receives detailed information about foreign assets and income of Indian residents. Assuming that such disclosures will not come to the notice of the tax authorities is therefore a risky and incorrect assumption,” Singla said.

If the taxpayer has failed to report his/ her foreign assets and income in his/ her original ITR, there is an opportunity to rectify this through filing a revised return. The last date for revising or filing belated return for AY 2025-26 is 31st December 2025

What happens if employees don’t report foreign income?

Employees who do not report foreign income or assets can attract strict action under the Black Money law. The consequences may include a penalty of up to Rs 10 lakh, along with the risk of prosecution in serious cases.

By reporting details in Schedule FA, FSI and TR while filing the Income Tax Return, a taxpayer can:

• Fully and correctly disclose all overseas assets and income

• Steer clear of scrutiny, penalties and legal action arising from non-disclosure

• Claim applicable tax reliefs available under Indian tax laws and Double Taxation Avoidance Agreements (DTAA)

How file a belated ITR?

• Sign in to your account on the income tax e-filing portal.
• Click on ‘e-File’, select ‘Income Tax Returns’, and then choose ‘File Income Tax Return’.
• Choose the relevant assessment year.
• Select ‘Online’ as the filing mode and proceed further.
• Click on ‘Start New Filing’.
• Select the applicable filing status.
• Choose the appropriate ITR form.
• Open the ‘Personal Information’ section and verify that all details are accurate.
• Scroll to the filing details section and select Section 139(4) (belated return).
• Enter income details under the respective heads and complete the process by paying the applicable tax.