The boundaries between nations have blurred as have the identity of an individual. One is no longer. It is not difficult for someone to have a foreign asset as one can easily settle down in countries other than their own. One can shift based due to several reasons such as employment, family, better life, etc.

Wherever a person goes it is always mandatory for each and everyone to pay the taxes of the place accordingly. If Indians work abroad there are income tax return filing that they have to file. There have been provisions to bring about a better understanding of the taxation system.

What is the taxation policy on Foreign assets?

Under the taxation policy of India, any foreign asset held by any individual is to be declared under the Schedule - FA of the Income Tax Return. This is only applicable for the individuals who qualify as residents and ordinarily residents in India. Individuals who qualify under non-residents and not ordinary residents do not need to report their foreign assets.

The taxation is a bit complicated as the individuals who qualify as residents and ordinarily, residents in India need to report their foreign assets. This includes accounts in foreign banks, trusts, any other forms of a capital asset held by the individual outside India. This is to be reported irrespective of the value and these values are to be reported only in Indian Rupees.

The case for the individuals who qualify as “not ordinarily resident” is quite different. They on the other hand are required to disclose all their assets in India. This includes all their bank accounts in India, shares, property, insurances, loans, etc. They also need to disclose if they have any income more than 50 lakhs in India that is legally taxable under the normal circumstances.

Why is it important to disclose foreign assets?

The need to report foreign assets was first started in the year 2015-16. It was aimed at curbing the practices of evading Income Tax Return on assets. It helped reduce the accumulation of Black Money. The Black Money Act was passed to punish the practices of tax evasion through hiding assets.

The Black Money Act brought undisclosed foreign income and assets under a tax of 30%. This will, however, also have a monetary punishment of 300% of the tax along with criminal prosecution. The failure to provide information regarding inaccurate information will also attract a fine of around 10 Lakhs.

Conclusion

Every income that a person makes is taxable in India. One needs to file all their taxes on time to avoid confusion at a later stage. The need to disclose the income from foreign assets needs to be disclosed under the income tax laws. All the income needs to be categorized while filing for the tax return.

In short, if a person owns foreign assets or has income from foreign assets, they have to disclose all the necessary information in the Income Tax Return. Even when the tax laws do not require the person to disclose the income from a foreign source. It is mandatory under the law that one disclose the foreign source of income. This applies to one and all who do not have a taxable income but benefit from foreign assets.