Income Tax Return filing: Which ITR Form to choose for disclosing foreign income, assets?

The last day to submit an income tax return (ITR) without incurring a late fee for the financial year 2022–23 (AY 2023–24) is July 31, 2023. A taxpayer must submit the ITR in the relevant assessment year for income earned between April 1, 2022, and March 31, 2023, including gains from foreign equities.

The assessment year is when you file your returns and declare your investments for tax assessment for the previous fiscal year. For taxpayers looking to file ITR now, the assessment year would run from 1 April 2023 to 31 March 2024 for income earned during the FY, in this case, FY 2022-23.

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For taxpayers having gains or losses from foreign stocks, choosing the right Income tax return (ITR) form for the AY 2023-24 is important. Equally important is to report and disclose the gains and losses and the investments held in foreign stocks.

Alok Agrawal, Partner, Deloitte India says, “Individuals who qualify as “Resident and Ordinary resident” for India tax purposes are required to report their global income in the India tax return (ITR) for the assessment year (AY) 2023-24, which is due by 31 July 2023.”

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Choosing the ITR form for disclosing foreign income will depend on the nature of the taxpayer’s income under different heads. Here is what Agrawal says about picking the right ITR form:

For reporting gains/losses from foreign stock, Individual taxpayers have to file their tax return in “ITR 2” form (assuming they do not have any income from business/profession or income as a partner from a partnership firm for whom ITR 3 may be applicable).

Further, such Individuals need to report gains/ losses from foreign stocks in ITR 2 as below:

Gains/ losses on the sale of foreign shares are to be reported under “Schedule CG”

Stocks held by the taxpayer in foreign companies along with corresponding gains/losses need to be reported under “Schedule Foreign Assets (FA)”

Investment held by the taxpayer in foreign stocks also needs to be disclosed in “Schedule Assets and Liability (AL)” if the total taxable income exceeds Rs 5 million.

Finally, it is critical for such taxpayers to file their tax return in time in case they have capital losses to be carried forward (for set-off against capital gains in future years). Else, such losses will not be considered by the Revenue authorities.