In today’s increasingly global economy, tax transparency has become critical. With individuals and businesses holding assets and earning income across borders, tax authorities worldwide now rely on powerful information-exchange frameworks to curb tax evasion. Two such mechanisms—the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA)—significantly strengthen international cooperation and ensure taxpayers declare their global income accurately.
A. Purpose of CRS and FATCA
CRS, developed by the OECD, requires financial institutions worldwide to share information on accounts held by foreign residents with their respective tax authorities. This data is then exchanged annually between participating countries. Similarly, FATCA, a U.S. law, mandates foreign financial institutions to report financial accounts held by U.S. taxpayers to the IRS.
Both frameworks aim to promote transparency, discourage tax evasion, and help countries identify undeclared foreign assets and income held by their residents.
B. What Information Does India Receive?
India receives extensive financial account data under both CRS and FATCA. This includes:
- Account details: number, type, and closing balance
- Account holder information: name, address, nationality, and TIN (PAN for Indians)
- Income details: interest, dividends, gross proceeds, and redemptions
- Controlling person information (in case of entities), including ownership and residency particulars
This information enables the Income Tax Department to identify discrepancies between reported income and global financial activity.
C. Disclosure Requirements Under Indian Law
Indian residents must report all foreign assets and income in their Income Tax Returns through:
- Schedule FA – Foreign Assets
- Schedule FSI – Foreign Source Income
- Schedule TR – Tax Relief (supported by Form 67)
Non-disclosure can lead to severe consequences under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015, including penalties and prosecution.
D. Why Transparency Matters
- Promotes Compliance & Good Governance
Transparent reporting establishes trust with tax authorities and reduces scrutiny. - Protects Legal Interests
Correct disclosures safeguard taxpayers from penalties and legal actions. - Enables Tax Relief
Accurate reporting ensures taxpayers can claim foreign tax credits and avoid double taxation. - Supports National Development
Fair tax contribution strengthens public infrastructure and national growth.
E. Reporting Foreign Assets in the ITR
By correctly filing Schedules FA, FSI, and TR, taxpayers can:
- Ensure full disclosure
- Avoid assessments and penalties
- Claim eligible tax relief under Indian tax law and DTAA provisions
F. Opportunity to File Revised Returns
Taxpayers who missed reporting foreign assets in the original ITR can file a revised return. For AY 2025-26, revised returns may be filed up to 31 December 2025.
Important: Since ITR-1 and ITR-4 do not contain Schedule FA, taxpayers must choose other ITR forms for foreign asset reporting.
G. Conclusion
The Income Tax Department’s message is clear: residents must fully disclose foreign assets and income reported under CRS and FATCA. Accurate and transparent reporting not only ensures legal compliance but also contributes to national development and taxpayer peace of mind. By understanding and fulfilling these requirements, individuals can stay compliant, avoid penalties, and uphold responsible financial conduct.