[FAQs] Income Tax Returns (ITR) | Reporting in Schedules in ITR

Reporting in Schedule FA (Foreign Assets) is mandatory for a taxpayer who is a resident in India and:

• He holds any asset outside India;
• He has signing authority in any account located outside India; or
• He has income from any source outside India.

This schedule is not required to be filed by a taxpayer who is a non-resident (NR) or Not ordinarily Resident (NOR).

Schedule FA requires reporting of assets held outside India. Such reporting is required if those assets are held at any time during the relevant accounting period. Reporting is required even if the asset is held for a single day during the relevant accounting period.

The ITR Forms notified for Assessment Year 2023-24 have replaced the expression “accounting period” with “calendar year ending as on 31^st December 2022”. This change implies that the assessee shall furnish the details of all foreign assets held between 01-01-2022 and 31-12-2022 in return to be filed for the assessment year 2023-24. Irrespective of the fiscal year followed in the foreign country (like, Australia follows July to June, Costa Rica follows October to September, etc.), the reporting is to be made if the specified foreign assets are held on 31-12-2022. This change removes all scope of misunderstanding or miscalculating the reporting period.

Example 1

The assessee is required to furnish the details of Google LLC’s share in ITR applicable for Assessment Year 2023-24 even if he has not held the foreign asset in the relevant previous year.

Example 2

The shares of Google LLC were acquired within the previous year but after the end of the relevant calendar year. Thus, the assessee is not required to furnish the details of Google LLC’s share in ITR applicable for Assessment Year 2023-24. The disclosure requirement for such investment shall only arise in the Assessment Year 2024-25.

If an assessee has paid tax in any foreign country or specified territory outside India, he shall be allowed a credit for the same by way of deduction or otherwise. The credit shall be allowed in the year in which the assessee offered such income to tax or assessed to tax in India. Rule 128 of Income-tax Rules 1962 lays down broad principles and conditions for the computation and claim of foreign taxes paid in overseas countries by the resident taxpayers.

A statement of foreign income offered to tax and the foreign tax deducted or paid on such income is required to be submitted in Form No. 67. The statement specifying the nature of income and foreign tax deducted or paid is required to be furnished as per the due dates mentioned below:

The form is required to be furnished electronically through the e-filing portal of the Income-tax department. Further, the details of tax relief claimed for taxes paid outside India are required to be reported in ‘Schedule TR’ of ITR form.

A taxpayer wishing to opt for an alternative tax regime must file a specified form on or before the due date of filing an income tax return (ITR).

Notes:

• Filing Form 10-IE is mandatory only if an individual or HUF has income from a business or profession. If an individual or HUF has income other than income from a business or profession, an alternative tax regime can be opted in the ITR form itself while filing the returns of income.
• Once an alternative tax regime is opted for, it cannot be withdrawn for the same or any other previous year. However, the alternative tax regime opted by filing Form 10-IE can be withdrawn only once for a previous year other than the year in which it was exercised.

To keep a check on the investment in closely held companies, a new table has been inserted in ITR forms [ITR-2, ITR-3 & ITR-5] to seek the following details in respect of unlisted equity shares held at any time during the previous year by an assessee:

• Name of the company;
• PAN of the company;
• and cost of acquisition of shares held at the beginning of the year;
• of shares, face value, issue price (or purchase price), and date of purchase of shares acquired during the year;
• and sale consideration of shares transferred during the year; and
• and cost of acquisition of shares held at the end of the previous year.

If the ‘cost of acquisition’ or ‘sale consideration’ of unlisted shares is not ascertainable because those shares were received under a gift, will, amalgamation, etc., then the assessee may enter zero or the appropriate value in respective fields.

The details furnished in this table are required only for reporting and are not relevant for the computation of income or tax liability¹.

Instructions to ITR Forms clarified that if a person has held shares of a company during the previous year, which are listed in a recognised stock exchange outside India, then the same shall not be required to be reported in ITR.

Schedule AL in Income-tax returns form (ITR 2 and ITR 3) requires individuals/HUFs to declare the value of assets and liabilities if their total income exceeds Rs. 50 lakhs. Further, Schedule FA requires reporting of assets held outside India. Reporting in Schedule FA is mandatory for a taxpayer who is a resident in India. It is not required to be filed by a taxpayer who is a Non-resident (NR) or a Not-ordinarily Resident (NOR). Though both the schedules require reporting yet, they serve different purposes. Schedule FA seeks details of foreign assets and income from any source outside India. An assessee has to enter details of foreign assets if they were held even for a single day during the relevant accounting period. On the other hand, Schedule AL seeks details of assets and liabilities the assessee holds at the end of the previous year. Therefore, details of foreign assets are to be reported in schedule AL if the assessee holds the same at the end of the previous year.

Explanation 4 to Section 139(1) of the Income-tax Act 1961 defines the meaning of ‘beneficial owner’. As per the Explanation, a beneficial owner means an individual who has provided, directly or indirectly, consideration for the asset. Further, if such asset is held for the immediate or future benefit of the individual providing the consideration or any other person.

As per the instructions to ITR forms, financial interest would include, but is not limited to, any of the following cases:

(a) The resident assessee is the owner of record or holder of legal title of any financial account, irrespective of whether he is a beneficiary or not; or

(b) The owner of record or holder of the title in one of the following:

• • • An agent, nominee, attorney, or a person acting in some other capacity on behalf of the resident assessee with respect to the entity;
    • A corporation in which the resident assessee owns, directly or indirectly, any share or voting power;
    • A partnership in which the resident assessee owns, directly or indirectly, an interest in partnership profits or an interest in partnership capital;
    • A trust of which the resident assessee has beneficial or ownership interest; or
    • Any other entity in which the resident assessee owns, directly or indirectly, any voting power, equity interest or assets or interest in profits.

The assets and liabilities disclosed in the balance sheet of the business in Part A-BS of ITR are not required to be reported in Schedule AL.

The Finance Act 2021 has amended Sections 10(11) and 10(12) to provide that no exemption shall be allowed in respect of interest income accrued during the previous year in the recognised and statutory provident fund to the extent it relates to the contribution made by the employee exceeding Rs. 2,50,000 in any previous year on or after 01-04-2021.

The interest income accruing in respect of the employee’s contribution over Rs. 2,50,000 shall be taxable under the head of “income from other sources”. However, if such a person has contributed to a fund in which there is no contribution by the employer, the limit of Rs. 2,50,000 shall be increased to Rs. 5,00,000. The method for the computation of such interest income has been prescribed in Rule 9D.

ITR forms seek separate reporting of interest accrued on Provident Fund to which no exemption is available.

Virtual Digital Asset (VDA) covers cryptocurrencies, Non-Fungible Tokens (NFTs), and any other notified digital asset. It does not cover Indian currency, CBDCs, Foreign currency, and notified digital assets. If you generate any income from the transfer of VDAs, it must be reported in Schedule VDA in the ITR form. The income generated from the transfer of virtual digital assets will be subject to taxation at a rate of 30% and applicable surcharge and cess. It is important to note that you cannot avail deductions for any expenses, except for the cost of acquisition, if applicable, when calculating such income.

Schedule VDA requires details such as the acquisition date, transfer date, category of income for taxation, acquisition cost in case of a gift, and consideration received. If you have income from VDA, you cannot file ITR-1 or ITR-4. Instead, such income can be reported in ITR 2 or ITR 3. Such income can be taxed either under the head of business income or capital gains.

If you have taken employment with more than one employer during the financial year, it is necessary to report salary income from all employers in ‘Schedule S’. You should obtain Form 16 from each employer to help you file a return.

A Standard Deduction of Rs. 50,000 is an absolute and unconditional deduction allowed to an employee, and it does not require any supporting evidence or investment. This deduction can be claimed only once per year, regardless of the number of job changes during that period. Therefore, you cannot claim the deduction of Rs. 50,000 twice for the salary received from both employers.