This Guide highlights the increasing importance of tax transparency in a globalized economy, focusing specifically on two key international frameworks—Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA). These frameworks have been established to reduce tax evasion by ensuring that taxpayers disclose their global income and foreign assets accurately to the relevant tax authorities.

CRS, developed by the Organisation for Economic Co-operation and Development (OECD), requires financial institutions across the globe to report financial accounts held by non-resident individuals to their home country’s tax authority. This information is subsequently exchanged annually between tax jurisdictions. FATCA, enacted by the United States, similarly mandates foreign financial institutions to report accounts held by U.S. taxpayers to the U.S. Internal Revenue Service (IRS).

As part of these international initiatives, India receives detailed data about the financial accounts of its residents held in foreign jurisdictions. The information includes:

1. Account holder’s name, address, and Taxpayer Identification Number (TIN)
2. Account number and balance
3. Income details such as interest, dividends, and other financial proceeds

This data helps the Indian Income Tax Department track global income and identify taxpayers who may have failed to disclose their foreign assets and income.

Under the Income-tax Act, 1961, Indian residents are required to declare their foreign income and assets in their Income Tax Returns (ITR). Specific schedules such as Schedule FA (Foreign Assets), Schedule FSI (Foreign Source Income), and Schedule TR (Tax Relief) are used for reporting. Failure to disclose foreign assets and income can lead to severe penalties and prosecutions under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

The guide further outlines the following key points:

Benefits of Transparency in Tax Returns:

Compliance and Good Governance: Transparency fosters trust and ensures taxpayers fulfill their legal obligations.
Legal Security: By fully disclosing foreign assets and income, taxpayers avoid the risk of penalties and legal actions.
Claiming Tax Reliefs: Accurate reporting enables taxpayers to claim tax relief on foreign taxes paid, reducing the risk of double taxation.
Contribution to National Development: Proper tax payment supports the development of public services and infrastructure in the country.
Opportunity to File Revised Returns: Taxpayers who have not disclosed their foreign assets and income in their original ITR can file revised returns to correct any omissions or inaccuracies. For the Assessment Year 2024-25, the deadline for filing revised returns has been extended to 15th January, 2025.

The document also provides a step-by-step guide for taxpayers on how to fill the relevant schedules (FSI, TR, and FA) in their ITR, ensuring accurate and complete disclosure of foreign assets and income. This includes guidance on filling out information such as country code, taxpayer identification number (TIN), details of foreign bank accounts, immovable properties, and financial interests.