Schedule FA in ITR-2: Disclosure of Foreign Assets

Introduction

The Panama Papers leak revealed that over 500 Indians held illegal assets worth more than ₹20,000 crore through offshore entities, bringing widespread tax evasion to light. To curb such practices, the Black Money Act of 2015 was introduced, and Schedule FA became a critical component of the Income Tax Return (ITR) from Assessment Year (AY) 2012–13, corresponding to Financial Year (FY) 2011–12.

Schedule FA requires taxpayers to disclose their foreign assets, including overseas shares, foreign financial interests, and ESOPs of foreign companies. This article explains the purpose of Schedule FA in ITR-2, its significance, the types of foreign assets that must be reported, the correct method of filling it out, and the penalties for non-disclosure.

What is Schedule FA in ITR?

Schedule FA is a section in the Indian Income Tax Return (ITR) form that requires resident taxpayers (including “resident and ordinarily resident”) to disclose their foreign assets and income. It covers overseas investments, bank accounts, ESOPs of foreign companies, mutual funds, stocks, and other financial interests outside India.
The purpose of Schedule FA is to enhance transparency, prevent tax evasion, and ensure proper reporting of global income. Failure to report foreign assets can lead to heavy penalties under the Black Money Act.

When Was Schedule FA Introduced?

Schedule FA was introduced in the Assessment Year (AY) 2012–13, making it applicable for reporting income related to the Financial Year (FY) 2011–12.
Its introduction strengthened disclosure norms and helped curb offshore tax evasion by requiring resident taxpayers to reveal all foreign holdings.

Why is Schedule FA Important?

1. Mandatory Disclosure of Foreign Assets:
Taxpayers must report all foreign bank accounts, stocks, mutual funds, properties, or any other financial interests held during the year. This enables the Income Tax Department to track global financial activities.

2. Prevention of Black Money:
Schedule FA acts as a deterrent against concealing offshore wealth. Non-reporting of foreign assets is treated as a serious violation under the Black Money Act, leading to penalties.

3. Accurate Taxation & DTAA Benefits:
By reporting foreign income, taxpayers ensure correct tax treatment. Additionally, it enables taxpayers to claim relief under Double Taxation Avoidance Agreements (DTAAs), preventing dual taxation on the same income.

Who Should Report Foreign Assets?

The following taxpayers must disclose foreign assets in Schedule FA:

Residents and Ordinarily Residents (R&OR)
Hindu Undivided Families (HUFs) classified as R&OR

You must report if you have:

Foreign assets (bank accounts, shares, properties, financial instruments)
Financial interest in any overseas entity
Signing authority in a foreign account
Beneficial ownership in any foreign asset

Exceptions:

Beneficiaries whose foreign asset income is already taxed in the hands of the legal or beneficial owner.
Foreign citizens who qualify as R&OR but hold business/employment/student visas may be exempt if their foreign assets were acquired while they were non-residents and do not generate current income.

Relevant Reporting Period for Schedule FA

Foreign assets must be reported based on the calendar year, not the financial year.
For example:
When filing ITR for AY 2024–25, you must disclose assets held between 1 January 2023 and 31 December 2023.

Gather all documents—bank statements, investment proofs, property documents—before filing to ensure accurate reporting.

Foreign Assets to be Disclosed Under Schedule FA

Table Section	Description	Examples
A1	Foreign Depository Accounts	Savings, current, or money market accounts abroad
A2	Foreign Custodial Accounts	Investment accounts with foreign custodians
A3	Foreign Equity & Debt Interest	Overseas stocks, bonds, mutual funds (including beneficial ownership)
A4	Foreign Immovable Property	Land, houses, apartments abroad
A5	Cash & Equivalents Abroad	Cash, precious metals, or similar assets overseas
A6	Loans & Advances Given Abroad	Loans provided to foreign entities/individuals
A7	Unquoted Foreign Equity Shares	Shares in private companies located abroad
A8	Investments in Foreign Business	Ownership interest in businesses overseas
A9	Other Foreign Assets	Any foreign financial interest not covered elsewhere
A10	Foreign Asset Income	Interest, dividends, rent, or other income from foreign holdings

Information Required to File Schedule FA

You must provide:

Country name
Institution/entity details (name, address, account numbers)
Dates (acquisition and reporting period)
Opening, peak, and closing balances
Value in foreign currency and INR
Income details (nature, amount, and tax implications)

How to File Schedule FA in ITR?

Step 1: Identify the Asset Category

Select the correct asset category from the dropdown list in ITR-2.

Step 2: Enter Basic Details

Provide the asset’s country, institution name, address, and currency code.

Step 3: Enter Investment Values

Report the:

Initial investment value
Opening balance
Peak value during the year
Closing balance
(All values in foreign currency and INR)

Step 4: Report Income or Sale Proceeds

Declare any income earned (dividends, interest, rent) and proceeds from sale/redemption.

Step 5: Claim DTAA Relief (If Applicable)

If you have claimed Double Taxation Avoidance Agreement benefits, disclose the relevant details.

Consequences of Not Disclosing Foreign Assets

Accurate reporting of foreign assets in Schedule FA is mandatory. Failure to disclose or misreporting foreign holdings can lead to serious repercussions:

1. Financial Penalties
A penalty of ₹10 lakh per year may be levied for each instance of non-disclosure or incorrect reporting of foreign assets. This can result in a substantial financial burden.

2. Risk of Imprisonment
In cases of deliberate concealment, non-reporting may be treated as wilful tax evasion. This is a criminal offence and may attract imprisonment of up to 7 years under the Black Money Act.

3. Loss of DTAA Benefits
Non-compliance may disqualify you from claiming relief under a Double Taxation Avoidance Agreement (DTAA), potentially causing you to pay tax twice on the same foreign income.

Latest Updates

Update 1: Declare Foreign Income in Your ITR Before December 31 to Avoid Penalties

The Income Tax Department has issued a firm advisory: taxpayers must disclose all foreign income and assets by December 31, 2024, to avoid penalties under the Income-tax Act and the Black Money Act.

Key Points:

Penalties: If the total value of foreign assets (excluding immovable property) exceeds ₹20 lakh, a penalty of up to ₹10 lakh may be imposed.
Who Must Disclose: Any resident Indian holding foreign income or assets, including overseas bank accounts, financial investments, or properties.
Where to Disclose: Only in ITR forms that contain the required schedules—ITR-2, ITR-3, and ITR-7. (ITR-1 and ITR-4 do not contain Schedule FA, FSI, or TR.)
Deadline:
- File a belated return by December 31, 2024, if you have not filed yet.
- If already filed but foreign details were missed, file a revised return before the same deadline.
Consequences of Missing the Deadline: Non-disclosure may result in proceedings under the Black Money Act, prosecution for inaccurate reporting, and even double taxation on foreign income.

Key Schedules for Foreign Asset Reporting:

Schedule FA: Disclosure of foreign assets and related income
Schedule FSI: Income earned outside India
Schedule TR: Foreign tax credits claimed under DTAA

Update 2: Important CBDT Guidelines on Reporting Foreign Assets & Income

The Central Board of Direct Taxes (CBDT) has reiterated that all foreign assets must be accurately reported in ITR-2 to avoid penalties. Taxpayers can rectify any errors or omissions by filing a revised return for AY 2024–25 on or before December 31, 2024.

Key Highlights:

Non-disclosure of foreign property may result in a penalty of up to ₹10 lakh per year.
Several high–net-worth individuals (HNIs) owning undisclosed properties—particularly in Dubai—have already received notices.
When purchasing property abroad, compliance with the Foreign Exchange Management Act (FEMA) and the Income-tax Act is essential.
Despite the UAE being a tax-free jurisdiction, money routed informally (e.g., hawala) may trigger scrutiny in India regarding the source of funds.
Indian residents may legally remit up to USD 250,000 per financial year under the Liberalised Remittance Scheme (LRS) for buying foreign property.
- For minors, the remittance must be signed by their natural guardian.

Proper disclosure, adherence to FEMA rules, and accurate ITR reporting help avoid penalties and ensure full compliance with Indian tax laws.

About the Author

Ravi

Ravi is a skilled legal writer who simplifies complex laws into clear, actionable guidance. He helps entrepreneurs understand their legal obligations, enabling them to build confident, compliant, and sustainable businesses.