COURTKUTCHEHRY SPECIAL ON HOW NON-DISCLOSURE OF FOREIGN SHARES IN ITR COULD HAVE CONSEQUENCS
Foreign Shares Not Reported in Schedule FA: Legal Consequences, Scenarios, and What Taxpayers Must Do
Non-Disclosure of Overseas Assets Invites Penalties Under Black Money Act, 2015
Case Studies Show How Errors, Omissions, and Concealment Lead to Different Legal Outcomes
By Our Legal Reporter
New Delhi: January 07, 2026:
India’s tax laws require resident and ordinarily resident (ROR) taxpayers to disclose all foreign assets and income in Schedule FA (Foreign Assets) of their ITR. This includes foreign shares, ESOPs/RSUs, overseas bank accounts, property, and other investments.
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Recent reports from Upstox, TaxGuru, and Business Today highlight that many taxpayers fail to disclose foreign shares, either due to ignorance or oversight. The consequences vary depending on whether the omission was inadvertent or deliberate.
This article explores different scenarios, legal implications, and consequences of failing to report foreign shares in Schedule FA, backed by credible sources.
What Schedule FA Covers
- Foreign Bank Accounts
- Foreign Shares/Securities (including ESOPs and RSUs)
- Foreign Property
- Foreign Trusts or Entities
- Any Income Earned Abroad
Disclosure is mandatory even if:
- No money was repatriated to India.
- The asset is not taxable abroad.
- The asset was acquired through employment (e.g., RSUs).
Scenarios and Legal Consequences
Scenario 1: Inadvertent Omission, Later Corrected
- Example: A taxpayer forgets to report RSUs vested abroad.
- Action: Files a revised return before December 31 of the assessment year.
- Consequence: No penalty if corrected in time.
- Legal Basis: Income Tax Department allows revised returns to rectify omissions.
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Scenario 2: Failure to Report, Discovered During Scrutiny
- Example: Taxpayer omits foreign shares, detected during assessment.
- Action: Tax authorities issue notice under Section 143(2).
- Consequence: Penalties under Black Money Act, 2015:
- Tax at 30% of value of undisclosed asset.
- Penalty of 90% of value.
- Prosecution up to 10 years.
Scenario 3: Deliberate Concealment
- Example: Taxpayer knowingly hides foreign shares to avoid tax.
- Action: Detected through CRS/FATCA global reporting system.
- Consequence:
- Severe penalties under Black Money Act.
- Criminal prosecution.
- Possible imprisonment.
Scenario 4: Non-Resident or RNOR Status
- Example: A taxpayer is non-resident or resident but not ordinarily resident (RNOR).
- Action: Not required to disclose foreign assets.
- Consequence: No penalty if status is correctly claimed.
- Risk: Misclassification of residency can still trigger notices.
Case Study: ESOPs and RSUs
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- Employees of multinational companies often receive foreign equity shares or RSUs.
- These must be disclosed in Schedule FA every year until sold.
- Even if taxes are deducted abroad, disclosure in India is mandatory.
- Failure to report can lead to notices and penalties.
Global Reporting Systems
- CRS (Common Reporting Standard): OECD initiative for automatic exchange of financial information.
- FATCA (Foreign Account Tax Compliance Act): US law requiring disclosure of US-linked accounts.
- India participates in both, meaning foreign holdings are traceable.
Expert Opinions
- Chartered Accountants: Stress that ignorance is not an excuse; disclosure is mandatory.
- Tax Lawyers: Warn that Black Money Act penalties are draconian and meant to deter concealment.
- Policy Analysts: Note that global transparency makes hiding assets nearly impossible.
Conclusion
Failing to disclose foreign shares in Schedule FA is a serious compliance lapse. While inadvertent errors can be corrected through revised returns, deliberate concealment attracts severe penalties under the Black Money Act, 2015.
Taxpayers must:
- Identify all foreign assets.
- Use correct ITR forms (ITR-2 or ITR-3).
- File revised returns if omissions occur.
- Seek professional advice for complex holdings.
In today’s globally connected financial system, transparency is unavoidable. The safest path is full disclosure and compliance.
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