The Income Tax Department has extended the deadline for filing revised and belated Income Tax Returns (ITRs) for the Assessment Year 2024-25 to January 15, 2025. This extension provides resident individuals additional time to accurately report their foreign assets and income, ensuring compliance with the Income-tax Act, 1961.
Government’s Access to Foreign Account Information:
The Indian government obtains detailed information about financial accounts held by Indian residents in foreign countries through two primary international frameworks:
- Foreign Account Tax Compliance Act (FATCA):
- Enacted by the United States, FATCA mandates foreign financial institutions to report accounts held by U.S. taxpayers to the Internal Revenue Service (IRS). India, as a participating country, reciprocates by sharing information about accounts held by U.S. persons in Indian financial institutions.
- Common Reporting Standard (CRS):
- An initiative of the Organisation for Economic Co-operation and Development (OECD), CRS requires financial institutions to report information about financial accounts held by foreign residents to their respective tax jurisdictions. This information is then exchanged among participating countries annually, enhancing global tax transparency.
Information Collected Includes:
- Account holder’s name, address, and tax identification number (TIN).
- Account number and balance.
- Details of foreign income such as interest, dividends, and other financial proceeds.
Mandatory Disclosure Requirements:
Indian residents are required to report their foreign assets and income in their ITRs:
- Schedule FA (Foreign Assets): To disclose details of foreign assets.
- Schedule FSI (Foreign Source Income): To report income from foreign sources.
- Schedule TR (Tax Relief): To claim tax relief on taxes paid abroad.
Failure to disclose foreign assets and income can attract stringent penalties and prosecutions under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Implications of Non-Compliance:
Non-disclosure of foreign assets or income can lead to severe penalties, including a fine of ₹10 lakh under the Black Money Act. Additionally, the government’s access to international financial data through FATCA and CRS means undisclosed foreign assets are likely to be detected, leading to further legal complications.
Conclusion:
Taxpayers are advised to utilize the extended deadline to ensure all foreign assets and income are accurately reported in their ITRs. Compliance with these requirements not only avoids legal penalties but also contributes to global efforts in enhancing tax transparency and combating tax evasion