The deadline for filing an income tax return form is nearing, and an extension of the last date for filing an ITR seems unlikely. For the assessment year 2024-25, the ITR filing deadline remains July 31, unless the government extends it. More than 5 crore ITRs for AY 2024-25 have already been received on the Income Tax Department’s e-filing platform as of July 26, 2024, 8% more than the ITRs filed in the previous year.
Indians are increasingly investing in foreign assets like shares and properties for diversification and potentially higher returns due to foreign exchange fluctuation. Indian residents’ global income is subject to taxation. If a person stays in India for 182 days or longer within a financial year (FY), they are deemed a resident of India for that financial year.
1. Individuals holding assets outside India, as beneficial owners or financial interests, must file an income tax return under Section 139 of the Income Tax Act, 1961. In addition to your income generated within India, if you have overseas income and assets in foreign countries, you need to be careful when reporting them while filing an ITR. To properly declare overseas investments and receive applicable tax credits, Indian investors must file Form 67 and their tax returns in India precisely.
2. If the shares are kept for longer than 24 months, selling them will result in a long-term capital gain (LTCG). Other assets, such as ETFs and mutual funds, would be considered long-term if held for more than 36 months prior to disposal. LTCG is taxed at 20%, plus any relevant surcharges and cess. Short-term capital gains are taxable at the slab rates applicable to individuals.
3. If you are a salaried employee filing the ITR 1 form but also own US stocks or other foreign assets, you may be filling out the incorrect ITR form. You cannot opt for Form ITR-1 (SAHAJ) or ITR-4 (SUGAM) for filing your ITRs and would be required to file your income tax returns in Form ITR-2 or ITR-3 depending on the nature of your income or foreign assets held by them and to fill out the relevant Schedule FA (Schedule on Foreign Assets held outside India).
4. Additionally, Schedule CG is required for all taxpayers who transfer any capital asset they own. Schedule CG requires taxpayers to record both long-term and short-term capital gains resulting from the sale or transfer of various types of capital assets.
5. Indian tax residents’ foreign asset investments are taxable in India unless specifically exempted under the Indian Income-tax Act, and may also be taxed according to domestic laws. However, the Act allows for credit of foreign tax paid against Indian tax liability to reduce double taxation of the same income.
6. Indian residents investing abroad must report foreign assets in Schedule FA of annual income tax return and furnish Form No. 67 for foreign tax credit claim. Schedule FA was added to the 2012-13 income tax return form to prevent tax evasion through offshore routes, allowing taxpayers to disclose offshore assets and income upfront. Salaried employees who have ESOPs in overseas companies must additionally complete Schedule FA and provide information about the stocks they have.
7. The income tax department has updated the ITR Forms (with effect from AY 2022-23) to include details of foreign assets held between January 1st and December 31st in returns for the relevant assessment year. ITR filings for AY 2024-25 require details of foreign assets to be furnished calendar year-wise, unlike India’s financial year, which follows the financial year. While filing your ITR form for AY 2024-25, make sure you include information from January 2023 to December 2023.
8. Dividends from foreign shares are taxed under “income from other sources,” and are included in the taxpayer’s total income at the individual taxpayer’s applicable rates. Indian taxpayer investors can claim a credit for tax withheld or paid in a foreign country under the applicable tax treaty, subject to certain restrictions. Rental income derived from abroad immovable assets would be taxed in India in the same way that income from house property is.
9. Non-payment of tax on global asset income can lead to penalties of up to 200% of the tax payable, as per tax laws. The department may initiate prosecution under the Income Tax Act for tax evasion, with a potential 7-year punishment for evasion exceeding Rs 25 lakhs, and other penalties for non-compliance with information and documents.