Global Diversification: Tax Rules for Foreign Assets (Schedule FA)

Investing globally is no longer just for the super-rich. Maybe you bought Apple or Tesla shares through a phone app like Vested or IndMoney. Maybe your son in Canada sends you money, or you kept a small bank account open after returning from a customized on-site project in London. Perhaps you even bought some Cryptocurrency on a foreign exchange.

If any of this sounds like you, you need to know about Schedule FA (Foreign Assets).

In this detailed guide, I will explain everything you need to know in simple, “leh man” language—just like a trusted uncle sitting across the table. I will tell you exactly what to do so you can sleep peacefully without worrying about tax notices.

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What is Schedule FA?

Think of Schedule FA as a “declaration form” inside your Income Tax Return (ITR). It is where you tell the Indian government: “Yes, I live in India, but I own these assets in other countries.”

Many people think, “I did not earn any profit, so I don’t need to report it.” This is wrong.

According to the Income Tax Department’s official instructions for ITR-2, if you are a resident Indian, you must report foreign assets even if you have zero income from them. Furthermore, as per the same ITR instructions, you must report foreign bank accounts even if the account has a zero balance or was not used during the year.

Schedule FA is not about taxing you (that happens in other sections). It is about transparency. The government wants to track financial footprints abroad to prevent black money hoarding.

Who Must File It? (The “Resident” Rule).

This is the most critical check. You only need to fill Schedule FA if you are a Resident and Ordinarily Resident (ROR).

Let’s break this down simply:

Resident and Ordinarily Resident (ROR): You live in India permanently. You likely spent more than 182 days here last year. As per Section 139 of the Income Tax Act, residents holding foreign assets as beneficial owners or beneficiaries MUST fill Schedule FA.
NRI (Non-Resident Indian): You live abroad. You do NOT need to fill this schedule.
RNOR (Resident but Not Ordinarily Resident): This is a special status (usually for people who just returned to India after many years abroad). As per Section 6(6) of the Income Tax Act, if you are RNOR, you are exempt from filing Schedule FA and do not need to report foreign assets.

Uncle’s Tip: If you just moved back to India, check if you qualify as RNOR. It can save you from a lot of paperwork for 1-3 years!

What Assets Must You Report?

You cannot just say “I have foreign assets.” You have to categorize them precisely. As per the Schedule FA structure in ITR-2/ITR-3 Forms, here is a detailed breakdown of what goes where:

Table	Asset Type	Detailed Examples & Explanations
A1	Foreign Bank Accounts	Your savings or checking account in Wells Fargo, HSBC UK, etc. As per Table A1 instructions, report this even if there is zero balance or if the account is dormant.
A2	Custodial Accounts	Accounts that hold financial assets for you. Example: A global brokerage account (like Vested, Interactive Brokers, or Charles Schwab) where your US stocks are held.
A3	Foreign Equity & Debt	Direct shares of Apple, Google, Microsoft. Bonds issued by foreign companies. Note: ESOPs and RSUs (once vested/owned) usually go here.
A4	Insurance Policies	Life insurance or annuity plans bought abroad that have a “cash value” (surrender value). Pure term insurance with no surrender value usually does not need reporting.
B	Financial Interest	If you are a partner in a firm abroad or have a controlling stake in a foreign family business.
C	Immovable Property	A flat in Dubai, a house in London, or a piece of land in Singapore. This applies even if the property is empty.
D	Other Assets	Anything else valuable: Paintings, expensive jewellery kept in a foreign locker, and increasingly, Virtual Digital Assets (Crypto) if held in foreign wallets.
E	Signing Authority	As per Table E instructions, report accounts where the money isn’t yours, but you have the power to sign cheques (e.g., a corporate account for your employer).

The “Calendar Year” Trap (Do Not Miss This!).

This is where 90% of mistakes happen. In India, we are used to the Financial Year (April 1 to March 31). But for Schedule FA, as per the Notes in the ITR-2 Form, you must follow the Calendar Year (January 1 to December 31) of the foreign country.

Why? Because most countries (like the USA) follow the Jan-Dec tax year. It makes it easier for India to verify data with them.

Comparison Table: FY vs CY

Your Income Tax Return (ITR)	Your Schedule FA Data
Period: April 1, 2024 to March 31, 2025	Period: January 1, 2024 to December 31, 2024
What to report: Salary, Business Income, Interest earned in India.	What to report: Foreign assets held during this specific Jan-Dec window.

Example:

If you bought US stocks in February 2025, you do not report them in this year’s Schedule FA. You will report them next year.
If you sold all your US stocks in February 2024, you still must report them because, as per the Calendar Year rule, you held them for part of 2024.

How to Fill Schedule FA: Step-by-Step Examples.

Let’s look at the specific columns you need to fill. It can look scary, but it is simple if you have your statement ready.

Scenario 1: You own US Stocks (Table A3).

Many salaried Indians get RSUs (Restricted Stock Units) or buy stocks via apps.

Country Name & Code: Select “United States” (Code: 213).
Name of Entity: The company name, e.g., “Apple Inc.” or “Microsoft Corp.”
Address of Entity: Use the registered office address (find it on Google or your broker statement).
Initial Value of Investment: The amount you originally spent to buy the shares (converted to INR).
Peak Value: As per ITR instructions, find the highest value your portfolio reached during Jan 1 – Dec 31, 2024. If you bought 10 shares at $100, and they touched $150 in June, your peak value is based on $150.
Closing Balance: The value on December 31, 2024.
Total Gross Amount Paid/Credited: Did you get a dividend? If yes, report the gross amount here. If you sold shares, report the sale proceeds here.

Scenario 2: You have a Bank Account Abroad (Table A1).

Name of Institution: e.g., Chase Bank, HSBC.
Account Number: Your full IBAN or account number.
Peak Balance: Look at your monthly statements from Jan to Dec 2024. Find the day with the highest balance. Report that figure in INR.
Closing Balance: The balance on Dec 31, 2024.

Scenario 3: Employee Stock Options (ESOPs).

Important: As per tax rules, ESOPs are only considered “assets” once they vest (i.e., you have the right to exercise them). Unvested options generally do not need reporting. Once you exercise them and get shares, report them in Table A3.

Calculating the Value (The SBI TT Rate Rule).

You cannot just use Google’s exchange rate. According to Rule 26 of the Income Tax Rules, you must use the State Bank of India (SBI) Telegraphic Transfer (TT) Buying Rate.

Which date’s rate do I use?

For Peak Balance: Best practice is to use the rate on the exact date of the peak. If unavailable, use the month-end rate (consult your CA).
For Closing Balance: As per Rule 26, use the SBI TT Buying Rate as of December 31, 2024.
For Investment Value: Use the rate on the date of original investment.

Where to find it? Search for “SBI TT Buying Rate historical data” on the official SBI website.

Penalties: The Scary Part vs. The Good News.

The law governing this is the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

The Danger:
If you hide foreign assets (non-disclosure) or give wrong info (inaccurate particulars), as per Sections 42 and 43 of the Black Money Act, you face:

Penalty: A flat Rs 10 Lakh per year.
Tax: 30% tax + 90% penalty on the undisclosed value.
Jail: Prosecution which can lead to imprisonment from 6 months to 7 years.

The Relief (Good News for Small Investors):

Recently, the government realized that small investors were getting hurt. According to the amendment in the Finance (No. 2) Act, 2024, if the total value of your foreign assets (excluding property) is less than Rs 20 Lakh, you will not face the Rs 10 Lakh penalty or prosecution for minor reporting errors.

Warning: This relief applies to “movable” assets like bank accounts and shares. As per the Black Money Act provisions, this relief does not apply to immovable property (houses/land). If you have a house abroad, you must report it, no matter how cheap it is.

Important ITR Forms and Deadlines.

You cannot file ITR-1 (Sahaj) or ITR-4 (Sugam) if you have foreign assets.

Mandatory Forms: As per CBDT Notification on ITR Forms, you must use ITR-2 (if salaried/retiree) or ITR-3 (if you have business income).
Original Deadline: July 31, 2025.
Belated/Revised Deadline: As per Section 139(5), the last date to file a revised return is December 31, 2025.

What if you missed it?
If you already filed your return but forgot Schedule FA, file a Revised Return immediately before Dec 31, 2025. It is free and can save you from a notice.

Common Mistakes to Avoid.

Thinking “Tax Deducted” Means “Reporting Done”: Even if you paid tax in the US (e.g., 25% on dividends), you MUST report the asset in Schedule FA. As per Rule 128, you can claim the tax back using Form 67 (Foreign Tax Credit), but reporting the asset remains mandatory.
Forgetting Zero Balance Accounts: “Uncle, I closed that account 3 years ago!”—Ensure it is actually closed. If it is dormant but open, report it.
Joint Owners: As per Schedule FA instructions, if you are a joint holder in your NRI son’s bank account, you must report it too as a “Beneficial Owner”.
Crypto Assets: If you hold Crypto on a foreign exchange (like Binance), it is safer to report it in Table D (Other Assets) or Table A2 depending on the nature of custody. Indian exchanges do not require Schedule FA reporting.

Final Advice.

Friends, the Income Tax Department gets data from over 100 countries automatically via the Common Reporting Standard (CRS) treaty. They know about your US stocks and your UK bank account. Do not try to be “smart” by hiding it.

If you have assets < Rs 20 Lakh: As per the Finance Act 2024 update, you are safe from the big penalty, but please still report it to build a clean white-money record.
If you have assets > Rs 20 Lakh: It is dangerous to miss this.

Take 30 minutes this weekend. Log in to your foreign apps, download the statements for Jan-Dec 2024, and send them to your CA. It is better to be safe than sorry!

Frequently Asked Questions (FAQs) on Schedule FA & Foreign Assets.

Is it mandatory to report foreign assets if I have zero income from them?

Yes. According to the Income Tax Department, if you are a Resident and Ordinarily Resident (ROR), you must report all foreign assets (bank accounts, stocks, property) in Schedule FA even if you have earned zero income from them or if the account has a zero balance.

What is the penalty for not filing Schedule FA?

Under the Black Money Act, 2015, the penalty for non-disclosure or inaccurate disclosure is Rs 10 Lakh per year. However, a recent relief in 2024 states that no penalty will be levied if the total value of foreign assets (excluding immovable property) is less than Rs 20 Lakh.

Can I file ITR-1 if I own US stocks or foreign assets?

No. Taxpayers holding foreign assets cannot use ITR-1 (Sahaj) or ITR-4 (Sugam). You must mandatorily file ITR-2 (for salaried/retirees) or ITR-3 (for business income) to access Schedule FA.

Which exchange rate should I use for reporting values?

You must use the State Bank of India (SBI) Telegraphic Transfer (TT) Buying Rate. For the “Peak Balance,” use the rate on the date of the peak. For the “Closing Balance,” use the rate as of December 31st of the reporting period.

Do I need to report unvested ESOPs in Schedule FA?

Generally, no. Unvested options are not considered an “asset” yet because you do not own them. However, once they vest (you get the right to exercise) or you exercise them to buy shares, they must be reported in Table A3 of Schedule FA.

I forgot to file Schedule FA. What should I do?

If you have already filed your ITR but missed Schedule FA, you should file a Revised Return immediately under Section 139(5). The deadline for filing a revised return for the current Assessment Year is usually December 31st.

Do I report based on Financial Year or Calendar Year?

Schedule FA follows the Calendar Year (January 1 to December 31). Even though your Indian ITR covers April to March, your foreign asset reporting must cover the period from Jan 1 to Dec 31 of the previous year.

Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Tax laws are subject to change. Readers are advised to consult a qualified Chartered Accountant (CA) for specific guidance regarding their tax filings.

Trusted Authorities & References

To ensure this information is authentic and verified, please refer to the official government sources below:

Income Tax Instructions: Official ITR-2 and ITR-3 Instructions (Income Tax India)
Black Money Act 2015: The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (India Code)
Exchange Rates: SBI Telegraphic Transfer (TT) Rates (State Bank of India)
Recent Amendments: Finance (No. 2) Act, 2024 – Budget Documents (Union Budget)
Tax Filing Portal: e-Filing Home Page (Income Tax Dept)

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C.K. Gupta

Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.