CBDT Advisory: Taxpayers Must Disclose Foreign Assets and Income Under CRS & FATCA for Transparency

CBDT Advisory: Taxpayers Must Disclose Foreign Assets and Income Under CRS & FATCA for Transparency

India Strengthens Global Tax Cooperation to Curb Offshore Evasion

Non-Disclosure of Overseas Assets May Lead to Penalties Under Black Money Act

By Our Legal Correspondent

New Delhi: November 25, 2025:

In a major step towards strengthening tax transparency and combating offshore tax evasion, the Central Board of Direct Taxes (CBDT) has issued an advisory reminding taxpayers to fully disclose foreign assets and global income in their Income Tax Returns (ITRs). The advisory, titled “Enhancing Tax Transparency on Foreign Assets and Income: Understanding CRS & FATCA”, underscores India’s participation in international frameworks such as the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA).

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This move is part of India’s broader effort to align with global standards and ensure that taxpayers cannot hide income or assets in foreign jurisdictions.

What Is CRS and FATCA?

• CRS (Common Reporting Standard): An initiative of the OECD, requiring financial institutions to report information about accounts held by foreign residents. This data is exchanged annually between jurisdictions to prevent tax evasion.
• FATCA (Foreign Account Tax Compliance Act): A U.S. law mandating foreign financial institutions to report accounts held by U.S. taxpayers to the IRS. India has signed agreements to comply with FATCA, ensuring cross-border transparency.

Together, CRS and FATCA create a global network of information exchange, making it harder for individuals to conceal offshore wealth.

CBDT Advisory Highlights

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• Mandatory disclosure: Taxpayers must disclose all foreign assets and income in their ITRs under Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income).
• Global cooperation: India is part of CRS and FATCA frameworks, which involve automatic exchange of financial information with partner countries.
• Penalties for non-compliance: Failure to disclose foreign assets may attract severe penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
• Awareness campaign: CBDT has launched compliance-cum-awareness initiatives, sending SMS and email reminders to taxpayers about disclosure requirements.

Why This Matters

• Transparency: Ensures that taxpayers cannot hide income in offshore accounts.
• Compliance burden: Taxpayers must carefully maintain records of foreign investments, bank accounts, and income.
• Global credibility: Strengthens India’s reputation as a responsible participant in international tax cooperation.
• Deterrence: Acts as a deterrent against tax evasion and money laundering.

Industry Reaction

• Chartered accountants say the move will improve compliance but warn that individuals with complex foreign holdings may face challenges in reporting.
• Legal experts highlight that the advisory reinforces the Black Money Act, which already mandates disclosure of foreign assets.
• Policy analysts believe the advisory will encourage voluntary compliance and reduce litigation.

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Broader Context

• India has signed multilateral agreements with over 100 countries under CRS.
• FATCA compliance ensures cooperation with the United States in tracking offshore accounts.
• The Black Money Act of 2015 already provides for stringent penalties, including imprisonment, for non-disclosure of foreign assets.

By issuing this advisory, CBDT is reminding taxpayers that global cooperation makes concealment nearly impossible.

How Taxpayers Can Comply

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• Identify foreign assets: Bank accounts, shares, mutual funds, real estate, or any other holdings abroad.
• Report in ITR: Use Schedule FA and Schedule FSI to disclose details.
• Maintain documentation: Keep records of account statements, investment contracts, and proof of income.
• Seek professional help: Consult tax advisors for complex holdings to avoid errors.

Expert Commentary

• Transparency: Linking disclosures with CRS and FATCA ensures that India receives information from foreign jurisdictions.
• Fraud prevention: Authorities can detect and prevent misuse of offshore accounts.
• Ease of monitoring: The government can track compliance more effectively, reducing tax evasion.

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However, experts also caution that taxpayers must be given adequate support to comply, especially those with legitimate overseas investments.

Conclusion

The CBDT advisory on enhancing tax transparency under CRS and FATCA is a critical compliance requirement for taxpayers. By mandating disclosure of foreign assets and global income, India is reinforcing its commitment to international cooperation and curbing offshore tax evasion.

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Failure to comply could lead to severe penalties under the Black Money Act, making it essential for taxpayers to act promptly. The advisory underscores the importance of transparency, accountability, and fairness in India’s taxation system, while also highlighting the need for businesses and individuals to stay vigilant in compliance matters.

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