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The Indian Income-Tax (I-T) department has initiated a stringent compliance campaign, warning taxpayers of a substantial ₹10 lakh penalty for failure to disclose foreign-held assets or income earned abroad in their Income Tax Returns (ITR). This campaign, characterized as a 'compliance-cum-awareness campaign,' underscores the government's determination to crack down on tax evasion involving offshore holdings. The campaign specifically targets the assessment year (AY) 2024-25, emphasizing the mandatory reporting of all relevant information, irrespective of whether the income falls below the taxable limit or the assets were acquired from declared sources. This decisive action highlights the increasing global focus on transparency in international finance and the concerted efforts to curb illicit financial flows.
The definition of a 'foreign asset' under this campaign encompasses a broad range of holdings, including bank accounts, insurance contracts (cash value and annuity), financial interests in businesses or entities, immovable property, custodial accounts, equity and debt interests, trusts (where the taxpayer is a trustee, beneficiary, or settlor), accounts with signing authority, and any other capital assets held overseas. This comprehensive definition aims to capture the diverse forms in which individuals might hold assets outside of India. The I-T department's advisory mandates that all eligible taxpayers must complete the foreign asset (FA) or foreign source income (FSI) schedule in their ITR, even if their income remains below the taxable threshold. This requirement underscores the principle of complete transparency and emphasizes the importance of accurate reporting, regardless of the tax implications.
The penalty for non-compliance is substantial, amounting to ₹10 lakh under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. This significant financial deterrent serves as a strong incentive for taxpayers to accurately report all foreign assets and income. To further enhance awareness and compliance, the Central Board of Direct Taxes (CBDT), the administrative body of the I-T department, is proactively disseminating informational SMS and email messages to resident taxpayers who have already filed their ITRs for AY 2024-25. These communications target individuals identified through bilateral and multilateral agreements as potentially holding foreign accounts or assets, or having received income from foreign jurisdictions. The CBDT clarifies that the campaign's objective is to remind and guide taxpayers who may have incompletely filled the foreign asset schedules in their submitted ITRs, particularly those involving high-value foreign assets.
The campaign's timing is significant, coinciding with the December 31, 2024, deadline for filing belated and revised ITRs. This provides a final opportunity for taxpayers to rectify any omissions or inaccuracies in their previously submitted returns. The government's multifaceted approach, combining stringent penalties with proactive communication, reflects a strategic effort to both deter tax evasion and improve compliance. The campaign's emphasis on transparency and the significant penalties imposed clearly signal the government's commitment to uncovering and addressing undisclosed foreign assets and income. The broad definition of foreign assets ensures that individuals cannot easily circumvent reporting requirements by employing complex or obscure financial structures.
The success of this campaign will depend on several factors, including the effectiveness of the communication strategy, the accuracy of the information used to identify potential non-compliance, and the willingness of taxpayers to comply with the regulations. The long-term impact will likely be assessed by analyzing the number of revised ITRs filed and the overall increase in the reporting of foreign assets. The campaign's impact could extend beyond immediate compliance, influencing future investment and financial behavior. The strict enforcement of these regulations may encourage greater adherence to transparency guidelines in international financial transactions, leading to a more equitable and efficient tax system in India.
Source: Income tax department warns: ‘Declare foreign assets or pay ₹10 lakh penalty’