Undisclosed foreign assets trigger IT Dept emails; revise ITR before Dec 31 deadline

The Income Tax Department has begun sending bulk emails to taxpayers seeking disclosure of foreign assets and income for the calendar year 2024. These communications are based on information received from overseas jurisdictions under global data-sharing frameworks such as the Common Reporting Standard (CRS), the Foreign Account Tax Compliance Act (FATCA) and the Automatic Exchange of Information (AEOI).

The emails, delivered via the income-tax portal and registered email IDs, have unsettled many salaried employees and investors who hold foreign stocks, ESOPs, RSUs or overseas bank accounts. Taxpayers flagged in this exercise have been asked to revise their Income Tax Returns (ITRs) for Assessment Year (AY) 2025-26 and disclose relevant foreign assets or income by December 31, 2025.

Under Indian tax law, resident taxpayers with overseas financial exposure are required to disclose foreign assets and foreign-source income, regardless of value. This compliance drive is part of the Central Board of Direct Taxes’ (CBDT) data-led enforcement strategy under the NUDGE 2.0 initiative, which relies on international information matching to flag gaps.

In November 2025, the Income Tax Department said it had identified “high-risk” cases involving non-disclosure of foreign assets in ITRs filed for AY 2025-26. It announced that SMS and email alerts would be sent from November 28, advising taxpayers to revise returns by December 31 to avoid penalties. Similar targeted communications were issued last year for AY 2024-25 under the AEOI framework.

Chartered Accountant Chirag Chauhan said the department is urging taxpayers with undisclosed foreign assets to act before the deadline. “Non-disclosure can attract a Rs 10 lakh penalty under the Black Money Act. However, no penalty applies if undisclosed assets—excluding immovable property—are valued at Rs 20 lakh or less,” he noted.

CA Shefali Mundra, Tax Expert at ClearTax, said resident and ordinarily resident (ROR) taxpayers must disclose all foreign assets and income under India’s global income reporting norms. This includes overseas bank accounts, foreign shares or securities, immovable property abroad, signatory authority in foreign accounts and beneficial interests in foreign entities. These must be reported under Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income).

She clarified that ITR-1 and ITR-4 are designed for simple domestic income and do not permit foreign disclosures. “Even a single foreign holding makes these forms invalid, requiring taxpayers to switch to ITR-2 or ITR-3,” Mundra said, adding that authorities are increasingly flagging unreported ESOPs, dormant foreign accounts and small foreign income detected through CRS and FATCA data.

CA Jigar Suba, founder of JC Suba & Associates, told The Economic Times that reportable foreign assets include overseas immovable property, foreign bank accounts (including dormant ones), joint or co-owned assets, insurance policies outside India, signatory authority in foreign accounts, foreign shares and mutual funds, RSUs and ESOPs, pension or retirement accounts, crypto or other digital assets, foreign trusts and other capital assets.

He cautioned that while the Black Money Act, 2015 does not prescribe a separate disclosure format, failure to report foreign assets in the ITR—and inability to explain the source—can result in such assets being treated as undisclosed foreign assets, triggering severe penalties.

What taxpayers should do

Taxpayers who have missed reporting foreign assets or income must first shift to the correct ITR form. Individuals without business or professional income should file ITR-2, while those with such income must use ITR-3. Revising ITR-1 or ITR-4 alone will not activate the mandatory foreign disclosure schedules.

After selecting the correct form, taxpayers must provide complete details of each foreign asset, including asset type, country, currency, peak balance or valuation, and related income. Disclosures under Schedule FA and Schedule FSI must align with total income figures and foreign tax credit claims under Schedule TR to avoid system mismatches.

Chauhan advised taxpayers to carefully read the intimation, review all foreign holdings—including RSUs or ESOPs taxed through salary—and gather supporting documents such as broker statements and bank records. “Timely revision before December 31 usually resolves the issue and prevents future scrutiny,” he said.