Connect with us 
The Income Tax Department has increased its focus on the reporting of foreign assets and overseas income in Income Tax Returns. Many taxpayers are now receiving SMS and email alerts asking them to review foreign bank accounts, investments, properties and other overseas holdings before filing their ITR for Assessment Year 2026–27.
The alerts follow a new facility introduced on the Income Tax portal, where taxpayers can view certain foreign asset and income information through their Annual Information Statement, or AIS. This information is received from other countries under international financial information-sharing arrangements.
For taxpayers with overseas connections, this is an important reminder: foreign assets may need to be reported even when they have not generated income or do not appear in the AIS.
Table of Contents
- Why is the Income Tax Department sending these alerts?
- Which taxpayers need to complete schedule FA?
- What Foreign Assets may need to be reported?
- AIS Information May Not Be Complete
- How can taxpayers check Foreign Asset Information in AIS?
- Choosing The Correct ITR Form Is Important
- What can happen if foreign assets are not disclosed?
- What should taxpayers do if they discover an omission?
- Conclusion
- How Mercurius Can Help
Why is the Income Tax Department sending these alerts?
India receives financial information about its tax residents from more than 100 partner jurisdictions through the Automatic Exchange of Information framework, including reporting under CRS and FATCA.
The information may include:
- Foreign bank and custodial accounts
- Overseas investments
- Interest and dividend income
- Shares and securities held outside India
- Certain financial interests in foreign entities
- Other specified foreign financial income
The CBDT has now made part of this information available to eligible taxpayers through the AIS. It has also started issuing SMS and email reminders asking taxpayers to disclose their foreign assets and income correctly in their ITR. The government has clarified that this facility is intended to support voluntary compliance and reduce reporting errors, rather than automatically indicate an investigation.
Which taxpayers need to complete schedule FA?
Schedule FA is the section of the Income Tax Return used to report foreign assets and income from sources outside India.
It generally applies to taxpayers who qualify as resident and ordinarily resident in India during the relevant year. A non-resident or a person classified as resident but not ordinarily resident generally does not need to complete Schedule FA.
Residential status must therefore be checked carefully. It is determined under Indian tax law and does not depend only on citizenship, nationality or possession of an Indian passport.
For example, a returning NRI may become resident in India but still qualify as resident but not ordinarily resident for a limited period, depending on the applicable conditions. The disclosure requirement should be evaluated based on the taxpayer’s correct residential status.
What Foreign Assets may need to be reported?
Foreign asset reporting is wider than many taxpayers realise. Depending on the facts, Schedule FA may cover:
- Overseas bank accounts, including dormant or old accounts
- Foreign brokerage and custodial accounts
- Shares of foreign companies
- Employee stock options, RSUs and other overseas securities
- Foreign immovable property
- Financial interests in foreign businesses
- Foreign insurance or annuity contracts
- Beneficial interests in overseas trusts
- Accounts held jointly with a spouse or another person
- Foreign income such as interest, dividends or rental income
The asset may still require disclosure even when no income was earned from it during the year. Similarly, an old bank account should not be ignored merely because the balance is low or the account is no longer actively used.
Common mistakes highlighted in recent cases include failure to disclose joint accounts, foreign ESOPs, US retirement accounts and forgotten overseas bank accounts belonging to returning NRIs.
AIS Information May Not Be Complete
Taxpayers should not assume that everything appearing in the AIS is the complete record of their overseas assets.
The CBDT has clarified that the information shown in AIS is limited to data received from partner jurisdictions. It does not provide a complete or exhaustive list of every foreign asset or item of foreign income owned by a taxpayer. Therefore, an asset may still need to be reported even when it does not appear in AIS.
At present, foreign asset information received for calendar years 2022, 2023 and 2024 has been displayed. Information for calendar year 2025 is expected to be displayed after it is received around September or October 2026.
Taxpayers should therefore compare AIS data with their own records rather than copying the AIS information directly into the return.
How can taxpayers check Foreign Asset Information in AIS?
Foreign asset details can be accessed through the following process:
- Log in to the Income Tax e-Filing portal.
- Open the Annual Information Statement.
- Continue to the Compliance Portal.
- Select Reports.
- Click Foreign Assets Information.
- Select the relevant calendar year and download the report.
The report should be compared with foreign bank statements, brokerage reports, ESOP records, property documents, tax statements and previously filed ITRs.
Where the information shown is incorrect, taxpayers should retain supporting documents and take the appropriate steps to explain or correct the mismatch.
Choosing The Correct ITR Form Is Important
Taxpayers with foreign assets or overseas income should pay particular attention to the ITR form they select.
ITR-1 and ITR-4 do not contain Schedule FA. Therefore, taxpayers who are required to disclose foreign assets or income should not use these forms merely because they appear simpler. Depending on the taxpayer’s income sources, ITR-2 or ITR-3 may be applicable.
Foreign income may also need to be reported under:
- Schedule FSI: For income arising from sources outside India
- Schedule TR: For tax relief claimed in India on taxes paid overseas
- Form 67: Where foreign tax credit is being claimed, subject to the applicable rules
Foreign income should also be included under the relevant income head, such as salary, house property, capital gains, business income or income from other sources.
What can happen if foreign assets are not disclosed?
Incorrect or incomplete reporting can result in serious consequences.
Under Section 43 of the Black Money Act, a resident taxpayer—other than a resident but not ordinarily resident—who fails to provide information or provides inaccurate details about certain foreign assets or foreign income may face a penalty of ₹10 lakh.
The provision currently contains an exception for foreign assets other than immovable property where the aggregate value does not exceed ₹20 lakh. However, the exception and valuation rules must be applied carefully to the facts of each case.
Apart from penalties, a mismatch may lead to notices, enquiries and additional documentation requirements. Wilful concealment can carry more serious legal implications than an accidental reporting error.
What should taxpayers do if they discover an omission?
A taxpayer who discovers an omitted foreign account, asset or income should not ignore it.
The first step is to reconcile:
- The AIS foreign asset report
- Previous ITR disclosures
- Foreign bank and investment statements
- Residential status for each relevant year
- The source of funds used to acquire the asset
- Foreign taxes already paid
- FEMA compliance, wherever applicable
Where legally available, filing a revised or updated return may be considered after professional review. However, simply reporting an overseas asset in an ITR does not automatically resolve a separate violation under the Foreign Exchange Management Act. Income-tax and FEMA compliance must be examined independently.
Conclusion
The availability of foreign asset information in AIS shows that tax authorities now have greater visibility of overseas financial accounts and investments. However, AIS should be treated as a compliance aid—not as a complete record.
Taxpayers with any overseas connection should review their residential status, foreign accounts, investments and income carefully. Correct reporting in the appropriate ITR schedules can help prevent mismatches, penalties and unnecessary tax notices later.
How Mercurius Can Help
Foreign asset reporting can become complicated when it involves changing residential status, overseas investments, ESOPs, retirement accounts, foreign tax credits or past-year omissions.
Mercurius can assist taxpayers with:
- ITR Filing
- Reviewing AIS and foreign asset information
- Determining residential status
- Identifying the correct ITR form
- Completing Schedules FA, FSI and TR
- Evaluating foreign tax credit claims
- Reconciling overseas income and investment records
- Reviewing past disclosure gaps
- Examining related FEMA compliance requirements
Quick Connect
