By Amarpal S. Chadha
The income-tax department is sending reminders to employees of multinational companies to report undisclosed foreign assets and income by December 31. Voluntarily correcting mistakes and making full disclosures is the safest option as tax authorities can now easily track overseas assets, writes Amarpal S. Chadha
Why foreign assets are under I-T scrutiny
The income tax (I-T) Department is sending urgent reminders to multinational companies (MNC) and their employees as part of its Non-intrusive Usage of Data to Guide and Enable initiative, NUDGE 2.0. Using information received from overseas tax authorities under the Automatic Exchange of Information (AEOI) framework, it has identified cases where foreign income or asset may not have been fully reported or disclosed in Indian income tax returns (ITR).
Accordingly, the Central Board of Direct Taxes (CBDT) is sending text messages and emails to such employees, advising them to review and revise their returns on or before December 31, 2025 to avoid penal consequences. Further, in an effort to reinforce compliance and underscore the seriousness of disclosure requirements, the CBDT has been engaging directly with employers, seeking their support in sensitising employees about the mandatory reporting of foreign assets and overseas income. This follows the success of its first NUDGE campaign in 2024, which led to substantial disclosures of previously unreported overseas assets.
What does the December 31 deadline signify?
December 31, 2025, marks the final deadline for filing a revised/belated income tax return for the financial year 2024-25 (assessment year 2025-26). This date represents the last opportunity for employees to voluntarily correct omissions or inaccuracies, including the non-disclosure of foreign income or foreign assets, under the NUDGE 2.0 initiative.
Once this deadline lapses, employees lose the option to make voluntary disclosures through a revised return (unless the updated return route is opted which is applicable only in certain situations). Any subsequent detection of undisclosed foreign income or assets may result in penalties and other consequences under the Income-tax Act and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (Black Money Act).
Types of foreign assets & overseas earnings to be disclosed in ITR
Under the black money act, those who qualify as resident and ordinarily resident (ROR) have to report a wide range of foreign assets and overseas income in Schedule Foreign Assets (FA) of their ITR, even if these assets do not generate any income.
Reportable assets include foreign bank accounts, financial interests in entities, stocks, employee stock option plans (ESOPs), restricted stock units (RSUs), ownership in overseas companies or partnerships, immovable property, and movable property held outside India.
Additionally, any income earned or received outside India such as foreign salary, rental income, capital gains from foreign assets, dividends, or interest must be disclosed and offered to tax in India, even if tax has already been paid abroad. However, provisions under the Double Taxation Avoidance Agreement are available to ensure that the individual is not taxed twice on the same income.
How one can regularise past non-disclosures
An employee who failed to report foreign assets or overseas income in the ITR for FY 2024-25 can regularise such non-disclosures by filing a revised ITR on or before December 31, 2025. The I-T department has urged individuals identified through Foreign Account Tax Compliance Act (FATCA), Common Reporting Standards (CRS), and other global data-sharing mechanisms to rectify omissions by switching to the appropriate ITR form and completing Schedule FA and Schedule FSI (Foreign Source Income).
In addition, employees may also disclose foreign income by filing an updated return (ITR-U) within 48 months from the end of the relevant assessment year, subject to the applicable conditions and additional tax. Failure to regularise such disclosures may result in penalties and, in certain cases, prosecution under the applicable law.
Penalties for continued non-compliance
Failure by an ROR to disclose, or incorrect disclosure of, foreign income and/or assets may attract these tax and penalty implications. Tax at 30% on the undisclosed foreign income/ value of undisclosed foreign asset and penalty at three times on the tax computed. Failure to furnish complete and accurate information relating to foreign assets or foreign-source income may empower the Assessing Officer to impose a penalty of Rs 10 lakh.
However, this provision does not apply to foreign assets other than immovable property where the aggregate value does not exceed Rs 20 lakh. The message to employees is clear: being transparent is no longer a choice.
Chadha is tax partner, EY India. With inputs from Shanmuga Prasad, director-tax, EY India
