CBDT Issues Advisory on Enhancing Tax Transparency in Foreign Assets and Income under CRS & FATCA
The CBDT advisory highlights India’s commitment to global tax transparency and urges taxpayers to disclose all foreign assets and income accurately.
The Central Board of Direct Taxes (CBDT) has issued an advisory titled “Enhancing Tax Transparency on Foreign Assets and Income: Understanding CRS & FATCA”. The Board has called on taxpayers to ensure full and accurate disclosure of their overseas assets and global income in their Income Tax Returns (ITRs), underscoring India’s participation in global information exchange frameworks and its commitment to curbing offshore tax evasion.
The Common Reporting Standard (CRS) is an initiative undertaken by the Organisation for Economic Co-operation and Development (OECD and the Foreign Account TaxCompliance Act (FATCA) enacted by the United States, are international systems designed to enhance tax transparency between jurisdictions through automatic exchange of financial information.
How does the Framework Aid Fiscal Accountability?
Under these frameworks, financial institutions report details such as account holders’ names, tax identification numbers, balances and income to their respective tax authorities. The data is then exchanged among countries annually to verify tax records and filings.
For India, this enables the Income Tax Department to identify residents who may not have disclosed their foreign income or assets.
The advisory reiterates that the Income Tax Act, 1961 requires residents to report all foreign holdings and overseas income in their ITRs. Schedule FA (Foreign Assets) is designated for reporting foreign accounts and investments, Schedule FSI (Foreign Source Income) for declaring income earned abroad and Schedule TR (Tax Relief) enables assessees to claim relief on taxes paid in other countries to avoid double-taxation.
Non-disclosure may invite severe penalties and prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
The document further advises on filing revised returns in the event that assesses omitted to or inaccurately filed their foreign income or assets in their original returns.
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Additionally, the CBDT’s release features a comprehensive step-by-step guide to help taxpayers correctly fill Schedules FSI, TR, and FA in their ITR forms. The guide provides detailed instructions on entering country codes, specifying the nature of foreign income, linking overseas tax relief claims and ensuring accuracy in foreign asset reporting.
Essentially, the advisory encourages taxpayers to uphold transparency, utilize the revised return window if necessary, and consult the detailed guidance provided in the official document to ensure proper and complete reporting of all foreign income and assets.
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