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ITR Filing: Save Yourself From Black Money Crackdown Research Team | Posted On Monday, July 23,2018, 04:12 PM

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ITR Filing: Save Yourself From Black Money Crackdown




In the financial year 2011-12, the government introduced the mandate for disclosure of foreign assets. Most of the black money is hidden in the form of foreign assets. Round-tripping is a common way of hiding black money.

The deadline to file Income Tax Returns is soon approaching. There is still time to avoid paying penalty or receiving tax notices on the grounds of not filing returns. The Income Tax Department has been issuing advertisements to make taxpayers aware of the various occasions on which they become liable to file taxes.

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ITR Filing: Save Yourself From Black Money Crackdown


True, filing tax returns is difficult! You have to be mindful of various sections, schedules and lists while filing tax returns. While, some taxpayers follow the proper procedures of filing ITR, some get aggravated because filing returns requires them to recall and keep track of spending, savings and returns from investments.

Countries like Mauritius have a Double Tax Avoidance Agreement (DTAA) with India. Mauritius has a negligible, almost zero tax regime. Individuals invest black money in tax havens like Mauritius; say in the name of an entity. DTAA allows investors to pay tax in their nation of residence and enjoy tax exemptions in India. Accordingly, corporations/entities pay zero tax in Mauritius and are exempted in India. The same money is then routed through FDI to India. In fact, Mauritius is the country from where most FDI investments flow to India, higher than many other economic superpowers such as the USA.

As such, taxpayers owning any foreign assets should be aware of the compliances for reporting such assets:


Applicability of disclosure of foreign assets:


  • Every resident Indian holding foreign assets must disclose this information in their ITR. This mandate does not apply to a non-resident or a resident but not ordinarily resident.
  • A foreign asset can be: bank accounts held overseas, financial interest in entities outside India, immovable property or any other assets located overseas.


Reporting details of disclosure of various foreign assets:


1. Bank accounts:


In case of bank accounts held overseas, a taxpayer must disclose the following details for every account held outside India, irrespective of multiple accounts in the same bank:

  • Name and code of the country
  • Name and address of the bank
  • Bank account number
  • Name of the account holder
  • Date of account opening
  • Maximum balance maintained during the year
  • Interest earned on them (if any)
  • Interest that has been offered to tax


2. Financial interest:


In cases where taxpayer has a financial interest, the following details have to be disclosed:

  • Name and code of the country
  • Name and address of the entity in which the taxpayer has a financial interest
  • Nature of interest
  • Date of investment
  • Total investment at cost (in INR)
  • Income accrued from investment
  • Income offered to tax in the return


3. Immovable properties:


In case a taxpayer owns an immovable property outside India, the details to be reported are:

  • Name of country and code
  • Address
  • Nature of ownership
  • Date of acquisition
  • Total investment at cost (in INR)
  • Income from the property
  • Amount of such income offered to tax in the return


4. Other Capital Assets:


Similar details as in the case of immovable property need to be disclosed, if applicable.


5. Accounts with Signing Authority:


Disclosure of the following details is mandatory:

  • Name and address of the institution where the account is held
  • Name of account holder
  • Account number
  • Account peak balance
  • Total investment during the year (in INR)
  • Income accrued (if taxable in taxpayer’s hands)


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6. Trusts:


Disclosure of following details is compulsory:

  • Name and code of the country
  • Name and address of the trust
  • Names and addresses of trustees
  • Name and address of settler
  • Names and addresses of beneficiaries
  • Date since when such position is held
  • Income derived (if taxable in taxpayer’s hands)


7. Other Incomes:


To disclose income derived from foreign assets not covered in the above heads, a residual head called ‘Other incomes’ is available. Under this head, the following details are to be given:

  • Name and code of the country
  • Name and address of the person from whom such income is derived
  • Nature of income
  • Amount of income


Reporting in ITR:


  • Foreign Assets must be reported under Schedule FA in ITR 2 or ITR 3, as applicable.
  • Foreign assets must be reported in INR (Indian National Rupees)
  • The value of such foreign assets shall be converted in rupees according to Telegraphic Transfer buying rate of such foreign currency.
  • Jointly held foreign assets need to be disclosed at their full value by each joint owner to whom the reporting requirement is applicable. Income from such assets is taxed based on the respective owner's share.

See Also: How to file exempt income in ITR?

For each foreign asset held, the following details have to be mentioned:

  • Value or cost of foreign assets
  • The income earned from these assets
  • Nature of such income
  • Head of income in the ITR


Consequences of non-disclosure of Foreign Assets:


According to The Black Money Imposition of Tax Act, non-disclosure of Foreign Assets may lead to tax and penal consequences as follows:

  • Undisclosed foreign incomes and assets are taxed at a flat rate of 30%
  • Monetary penalties (up to 300% of the tax)
  • Criminal prosecution


Incorrect disclosure of Foreign Assets:


If a taxpayer reports incorrect information or fails to report any information, they may be subject to a penalty of Rs 10 Lakhs.




Over the years, the Income Tax Department has introduced various processes to ease tax filing and increase compliance. It has undertaken technological initiatives such as e-payment of taxes, simplified tax return forms, e-verification of ITR-V, e-assessments, owing to which there has been a significant increase in the taxpayer base.

So, be vigilant, do your duty by correctly reporting foreign assets, why pay hefty fines?


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