In case you are an NRI, or a returning NRI, you must be cognizant of the foreign assets disclosure rule for NRIs. It is quite common that many are confused on what to report, when to report and the impact of it on ITR filing. This is a guide that tells you all in simple language so you do not make any mistakes which would lead to becoming entirely uncompliant.
What is the Foreign Asset Disclosure Rule for NRIs?
The foreign assets disclosure rule for NRIs stipulates that an individual should disclose all foreign assets upon becoming a resident and ordinarily resident under the Indian tax laws. This is reported in ITR filing at a separate section known as Schedule FA. You do not tend to abide by this rule in case you are yet an NRI or an RNOR. This rule will be activated only after your tax status will change to ROR.
Which Assets Need to Be Declared?
According to the foreign assets disclosure rule for NRIs, you are required to disclose all foreign assets which you owned as at any time of the financial year. These include:
- Foreign bank accounts
- ESOPs, shares, overseas mutual funds.
- Property abroad
- Foreign company, trust, partnership interest.
- Foreign pension/insurance plans.
- Crypto or the digital assets located beyond India.
The mere fact that these assets were not making money means that they must be disclosed upon the filing of ITR.
When Does the Rule Apply?
It will be debased on your residential status:
| NRI or RNOR | No |
| ROR | Yes |
Most NRIs fail to notice when they are already ROR. This varies according to the total days spent in India not on whether you are an NRI in your bank or not.
After turning into ROR, the disclosure of a foreign asset rule in relation to NRIs is obligatory.
Why Does This Rule Matters?
Violence in disregarding this rule can be disastrous. These include:
- Heavy penalties
- Tax on foreign undisclosed income.
- Scrutiny as per the Black Money Act.
- Prosecution that might occur in exceptional instances.
- ITR of a defective or invalid nature.
Proper disclosure at the time of filing ITR makes you safe in the future. It maintains your financial account as well.
How to Follow the Foreign Asset Disclosure Rule for NRIs During ITR filing?
Here is a simple method:
- Affirm that you are tax-resident during the year.
- Prepare a list of all foreign assets that you ever had.
- Make Schedule FA correctly with all the details.
- State foreign income, where any, in the proper divisions.
- Retain supporting material such as statements, purchase history and valuations.
- Filing of ITR is complete and has not omitted any information.
This can seem like a tedious process but it is easy when you keep proper records.
Key Points to Remember
- The NRI foreign asset disclosure rule is only applicable on becoming ROR.
- All overseas assets should be reported even when they do not have income.
- In this case, schedule FA is required.
- Missing, or incorrect, information at the time of ITR filing can cause significant problems.
- Efficient disclosure will help you to avoid fines and lawsuits.
Conclusion
To sum it up, being conversant with the foreign assets disclosure rule for NRIs and adhering to it while ITR filing will ensure that you remain compliant with it and are not stressed. Once you are able to monitor your foreign assets in a proper manner and report them in time you are able to escape penalty and have a neat financial record. Being conscious of your residential status and submitting the appropriate details is all that you need to have the smooth sail on tax compliance every year.
FAQs
Q1. I am an NRI. Should I disclose my foreign bank accounts?
No, in case you are still NRI or RNOR. Upon becoming ROR, the foreign asset disclosure rule of NRIs should be fully reported.
Q2. My foreign mutual funds are nonexistent with no income. Do I still need to disclose?
Yes. The disclosure should be made in the case that the asset does not yield any income.
Q3. I moved back to India. What makes me know whether or not I need Schedule FA?
Check your days of stay. If you become an ROR, you must disclose your foreign assets when filing your ITR.
Q4. What will be the consequences of the failure to report foreign property?
It can result in the punishment and issues in regard to the Black Money Act. Disclosure is always safer.
Q5. I am an NRI whose only income is that of India. Is this rule something that I should be concerned about?
No, as long as you are not ROR. The rule on foreign asset disclosure applies only to NRIs who are taxpayers in the ROR.
In case you need any further guidance with regard to online ITR filling, please feel free to contact us at 8881-069-069.
Now you can also Download E-Startup Mobile App and Never miss the latest updates relating to your business.