In our globalised economy, financial transparency is a cornerstone of compliance with international tax laws. The Common Reporting Standard ( CRS ) and the Foreign Account Tax Compliance Act ( FATCA ) are two international frameworks designed to fight tax evasion and develop better cooperation among tax authorities worldwide. What Are CRS and FATCA? CRS Introduced by the Organisation for Economic Co-operation and Development (OECD), CRS facilitates the automatic exchange of financial account information across member jurisdictions. Financial institutions report information about accounts held by foreign residents to their respective tax authorities.
This data is then exchanged with the jurisdictions where the account holders reside. FATCA A U.S. initiative enacted in 2010, FATCA mandates foreign financial institutions to disclose information about accounts held by U.S. taxpayers to the U.S. Internal Revenue Service (IRS). While primarily a U.S. law, its implications extend globally as participating countries, including India, share relevant account details. How CRS and FATCA Impact Indian Taxpayers? India, as a signatory to CRS and FATCA, receives detailed information from financial institutions in foreign jurisdictions. The data includes: Account details: Name, address, Taxpayer Identification Number (TIN), and account number. Financial transactions: Balances, interest income, dividends, and other proceeds. Raise Funds Smarter – Your Guide to SME IPO Success- Click here to enroll This information equips the Income Tax Department with a first-hand view of foreign-held assets and income streams of Indian residents, enabling stricter enforcement of tax compliance.
The Income Tax Act, 1961, makes it mandatory for Indian residents to declare their global income and foreign assets in their ITRs. Income Tax Schedules for Foreign Assets and Income Disclosure Filing accurate disclosures under CRS and FATCA requires meticulous attention to detail. Schedule FSI: Reporting Foreign Income Report income accrued from foreign sources, such as interest, dividends, and capital gains. Provide details like country code, TIN, and tax relief under applicable DTAA provisions. Raise Funds Smarter – Your Guide to SME IPO Success- Click here to enroll Link this income to the respective head of income in the ITR. Schedule TR: Claiming Tax Relief Summarises taxes paid abroad and the relief claimed. Specify the tax provisions (sections 90, 90A, or 91) under which the relief is claimed. Ensure that Form 67 is submitted as part of the filing process. Schedule FA: Declaring Foreign Assets Include details of all foreign-held assets, such as: Bank accounts (peak and closing balances). Immovable properties. Trusts where the taxpayer is a trustee or beneficiary. Any other capital assets or accounts not covered elsewhere. Convert values into Indian currency using the Telegraphic Transfer Buying Rate. Step-by-Step Guide to Filling FSI, TR, and FA Schedules in ITR Schedule FSI – Details of Income from Outside India and Tax Relief Schedule FSI is applicable to taxpayers who are residents in India. This schedule captures details of income accruing or arising from foreign sources.
Raise Funds Smarter – Your Guide to SME IPO Success- Click here to enroll Steps to Fill: 1. Report Income Details: Specify the income source and ensure it is also separately reported under the relevant head of income in the ITR. 2. Provide Country Code: Use the International Subscriber Dialing (ISD) code of the country. 3. Fill in Taxpayer Identification Number (TIN): If TIN is unavailable, mention the passport number. 4. Declare Tax Paid and Relief Claimed: If claiming tax relief for taxes paid abroad, mention the applicable article under the DTAA. Raise Funds Smarter – Your Guide to SME IPO Success- Click here to enroll 5. Submit Form 67: Ensure foreign tax credit details are reported in Form 67 to claim credit. Schedule TR – Summary of Tax Relief Claimed for Taxes Paid Outside India This schedule lists the tax relief claimed under sections 90, 90A, or 91 of the Income Tax Act. Steps to Fill: 1. Specify Country Code and TIN: Use the ISD code for the country and the TIN. If TIN is unavailable, use the passport number.
2. Enter Tax Details: Column (c): Mention the tax paid outside India as declared in Schedule FSI. Column (d): Indicate the tax relief available. Column (e): Specify the provision of the Income Tax Act under which relief is claimed. Schedule FA – Details of Foreign Assets and Income from Foreign Sources Indian residents must furnish details of foreign assets or accounts held during the calendar year ending December 31. Assets to Declare (Tables A1–G): 1. Table A1: Foreign depository accounts (e.g., savings or checking accounts). 2. Table A2: Foreign custodian accounts (e.g., brokerage accounts). 3. Table A3: Foreign equity and debt interests. Raise Funds Smarter – Your Guide to SME IPO Success- Click here to enroll 4. Table A4: Foreign cash value insurance or annuity contracts. 5. Table B: Financial interest in entities outside India. 6. Table C: Immovable property outside India. 7. Table D: Other capital assets outside India. Raise Funds Smarter – Your Guide to SME IPO Success- Click here to enroll 8. Table E: Foreign accounts with signing authority (not covered in Tables A1–D). 9. Table F: Trusts created outside India where you are a trustee, beneficiary, or settlor. 10. Table G: Any other income from foreign sources not reported in Tables A1–F.
Detailed Guide for fillingTables – Table A1–A2: Report peak and closing balances for the calendar year, and gross income credited (convert to Indian currency). Mention income type (interest, dividends, etc.). – Table A3: Specify initial investment, peak value, closing value, gross income, and redemption proceeds. – Table A4: Declare cash or surrender value of insurance or annuity contracts and gross income credited. – Table B: Include financial interest details and income accrued, specifying taxable amounts in India and the relevant ITR schedule. Raise Funds Smarter – Your Guide to SME IPO Success- Click here to enroll – Table C–D: Mention investment value, income accrued, and taxable amounts in India. Link to the appropriate ITR schedule. – Table E: Provide peak balances for accounts where you have signing authority but are not the owner. – Table F: Detail trusts set up abroad and income derived if taxable in India. – Table G: Disclose other foreign source income and taxable amounts. Key things to Note 1. Calendar Year: For AY 2024–25, this refers to January 1, 2023, to December 31, 2023. 2. Currency Conversion: Use the “telegraphic transfer buying rate” as specified by the State Bank of India on the relevant dates.
Raise Funds Smarter – Your Guide to SME IPO Success- Click here to enroll 3. Reporting in Schedule AL: Even if foreign assets are reported in Schedule FA, they must also be declared in Schedule AL if applicable. 4. Beneficial Owner: An individual who provides direct or indirect consideration for an asset held for their immediate or future benefit. 5. Beneficiary: An individual benefiting directly or indirectly from an asset where the consideration is provided by another person. Notably, Foreign assets held during the previous year and duly reported in Schedule FA must still be declared again in Schedule AL (if applicable). These disclosures ensure that taxpayers are transparent about their foreign income and assets, allowing the government to monitor compliance effectively. Non-Disclosure Penalties The consequences of failing to report foreign assets or income are severe.
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 imposes stringent penalties, including: Financial Penalty: ₹10 lakh for non-disclosure of foreign assets, irrespective of whether the income was generated from disclosed or undisclosed funds. Prosecution: In cases of intentional evasion, legal action may be initiated, leading to imprisonment and fines. Opportunity to File Revised Returns For taxpayers who inadvertently missed reporting their foreign assets or income, the Income Tax Department allows revisions to ITRs. The deadline to file a revised return for Assessment Year (AY) 2024-25 is December 31, 2024. Advantages of Full Disclosure 1. Legal Security Avoid penalties and legal actions, ensuring peace of mind. 2. Tax Relief Accurate reporting allows taxpayers to claim credit for taxes paid abroad, preventing double taxation. 3. Good Governance Reflects the taxpayer’s commitment to compliance, building a positive rapport with authorities. Raise Funds Smarter – Your Guide to SME IPO Success- Click here to enroll 4. Contribution to National Development Accurate tax payments enhance public service funding and infrastructure development.
CRS and FATCA have significantly strengthened India’s ability to monitor global income and assets. By receiving information from over 100 jurisdictions, the Income Tax Department is well-positioned to enforce compliance and curb tax evasion, which the ITR filers need to be mindful of. Conclusion Taxpayers must recognize the importance of CRS and FATCA in the broader context of global tax compliance. By disclosing foreign assets and income in their ITRs, individuals not only avoid hefty penalties but also contribute to a fairer and more transparent tax system. The opportunity to file revised returns until December 31, 2024, offers a chance to rectify omissions and ensure full compliance. Adhering to these guidelines fosters trust with tax authorities, mitigates legal risks, and supports the nation’s development through accurate tax contributions. Transparent disclosure of foreign assets and income is not just a regulatory requirement—it’s a vital step towards building a robust and equitable global economy.