ITR Filing: What should be the ‘relevant accounting period’ for reporting of foreign assets in Schedule FA?

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September 3, 2020 3:46 PM

Taxpayers are required to disclose in Schedule FA the details of foreign assets etc. held at any time during the relevant accounting period.

ITR Filing, income tax return filing, relevant accounting period, reporting of foreign assets, Schedule FA, Income Tax Act 1961, CBDT, NR, NORThe term ‘Accounting Period’ is not defined under the Income-Tax Act, 1961. However, CBDT’s instructions provide the meaning of the term accounting period for the Assessment Year 2019-20.

Taxpayers are required to disclose in Schedule FA the details of foreign assets etc. held at any time during the relevant accounting period. Thus, reporting in Schedule FA (Foreign Assets) is mandatory for a taxpayer who is a resident in India and holds any asset outside India or have signing authority in any account located outside India or have income from any source outside India. It 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 only 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,” says Naveen Wadhwa, DGM, Taxmann.

The term ‘Accounting Period’ is not defined under the Income-Tax Act, 1961. However, CBDT’s instructions provide the meaning of the term accounting period for the Assessment Year 2019-20. These instructions can be used mutatis-mutandis for the Assessment Year 2020-21. Thus, the relevant accounting period for the assessment year 2020-21 shall be as follows:

“If a taxpayer, thus, has held the foreign assets in the relevant accounting period as applicable to the foreign jurisdiction, reporting of such assets is mandatory in the ITR forms,” says Wadhwa.

For example, Mr A, an Indian Resident, acquired a flat in the USA in May 2019 and sold the same in October 2019. The USA follows calendar year for accounting and tax filings. Hence, the period of 01-01-2019 to 31-12-2019 is the accounting period for the Assessment Year 2020-21. Thus, Mr A is required to report details of such flat in Schedule FA for the ITR applicable for Assessment Year 2020-21.

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