Global investing is the theme of the year, and the taxman wants a piece of the action. Every foreign asset, including stocks, exchange-traded funds (ETFs), brokerage and bank accounts, and property, must be reported in your income tax return (ITR) under Schedule FA (foreign assets). This disclosure is mandatory regardless of whether the asset was sold during the year or generated taxable income.
Every resident has to disclose foreign assets held at any point during the year in Schedule FA, so that the tax department has visibility into overseas wealth. All foreign assets declared in Schedule FA fall under the Black Money Act.
Assets needed to be reported include demat and brokerage accounts opened directly with foreign brokers like Interactive Broker or through third-party platforms like Vested or Indmoney registered in Gift City, foreign bank accounts, stocks, Esops or restricted stock units (RSUs) granted by a foreign company, bank deposits, insurance policies, immovable property, and any foreign account where the individual has signing authority, even without ownership.
The tax department receives information on foreign assets held by Indian residents from overseas banks, brokerages and other financial institutions, through automatic exchange of information agreements with other countries, including the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (Fatca), said Prakash Hegde, a Bengaluru-based chartered accountant (CA).
These agreements give the tax department greater visibility into the data. If it identifies foreign assets that a taxpayer has not disclosed, the case may be referred to the Foreign Asset Investigation Unit (FAIU) for further investigation. Failing to disclose such assets can attract scrutiny under the Black Money Act.
Experts say the key to filing Schedule FA is full disclosure over accurate reporting.
How to report in Schedule FA
Foreign assets are declared based on the calendar year, not the financial year. So, in the current ITR filing window, all assets held from January to December 2025 must be disclosed.
Schedule FA splits foreign holdings across 10 tables, but for taxpayers with foreign stocks, stock options, or a brokerage account abroad, reporting occurs in three tables—A1, A2, and A3.
Table A1—foreign depository accounts—covers bank accounts and brokerage accounts. Table A2—foreign custodial accounts—also asks for the same information as Table A1. Experts say there's no clarity on the difference between a foreign depository account and a custodial account. “Based on the language, ‘depository accounts’ should cover bank and demat accounts, but the next table refers to custodial accounts, and a demat account could arguably fit there too," Hegde said.
In the absence of any guidance from the Central Board of Direct Taxes (CBDT) on how to split foreign brokerage accounts between Table A1 and Table A2 of Schedule FA, chartered accountants use their own discretion. Several CAs Mint spoke to said returns disclosing the same type of account under either table have gone through without being questioned so far.
Dividend payouts, cash balances in brokerage accounts, and interest earned on those balances must be declared in A2.
Table A3 covers the actual foreign equity or debt held in that account–the shares, Esops, RSUs or bonds, entity by entity, with a separate row for each date of acquisition. For example, an investor who bought the same company's shares in February, July and October will need to fill three separate rows, each with its own initial value and own peak value computed only for the period that tranche was actually held. (See graphic)
When trading in foreign shares
This tranche-by-tranche requirement becomes tricky for investors with a high volume of transactions, as it would mean digging out the peak price, which is the highest trading value of a share in a year, for each share. That’s not all.
Bhawna Kakkar, founder and CA of Kakkar & Co., Chartered Accountants, said all the values in Schedule FA have to be filled in after converting to rupees using the buying rate of the State Bank of India (SBI), and not in the foreign currency of the country where you are invested. This would mean finding the SBI telegraphic transfer (TT) rate as of the peak balance date or the investment date for all shares or ETFs.
"If someone has been holding shares from the start of the calendar year, there could be 240-odd trading sessions to check for the peak price. Also, once the number of transactions goes beyond five or ten, it becomes very difficult to map which shares were bought when,” Hegde said. “In practice, I would advise applying one uniform peak price across all tranches once the number of transactions is high, rather than computing it for each acquisition date separately.”
The larger idea, according to Hegde, is to disclose every foreign asset held in one's name, regardless of its value. Where exact tranche-wise calculations are not feasible, reporting reasonable approximations is better than omitting the asset because the numbers can't be pinned down.
Kakkar said SBI doesn't archive rates, so taxpayers can pick rates from officialforexrates.com. “This website has been archiving rates for USD, EURO, GBP and JPY for FA filing purpose since 2022. For other currencies, like SGD, HKD, etc., rates can be taken from Xe.com. It's not strictly SBI rates, but generally acceptable.”
Disclosure matters even more for joint holders of foreign accounts, particularly those added purely for survivorship rights and who don’t contribute anything to the account. "The tax department has issued notices in several such joint holder cases. The joint holder should declare the entire account, since that's typically the amount reported against their name by foreign authorities under Fatca or CRS (Common Reporting Standard)," said Ashish Karundia, founder of CA firm Ashish Karundia & Co., Chartered Accountants.
Disclose all income
Disclosing income, including dividends, interest, and capital gains, earned on foreign holdings is even more complex, as it needs to be reported in two places—in Schedule FA against the asset itself and again under the respective income heads where the actual tax is calculated. Dividends and interest go under Income from other sources (Ifos), and capital gains in the Capital Gains schedule, with the corresponding foreign income and any tax credit reported separately in Schedule FSI (Foreign Source Income) and Schedule TR (Tax Relief).
Dividend income is taxable and must be reported in Ifos, even if it is not repatriated to India or reinvested, said Kakkar. “Taxpayers need to be extra cautious with dividends as these can be small payouts that go unnoticed or are reinvested as per their direction to the broker,” she said.
Similarly, when an employee exercises Esops or RSUs, the foreign company sells some of the shares to cover the perquisite tax. Since this sale happens in the employee's name, the resulting capital gains must be reported in ITR. Although the gains are usually negligible because the shares are sold on the same day they are exercised, they still need to be disclosed.
Most countries, withhold tax at source on dividends paid to non-residents. The US withholds 25% under the India-US tax treaty. This tax doesn't need to be paid again in full in India because, under the Double Taxation Avoidance Agreement (DTAA) between India and the US, investors can claim a tax credit for the tax already withheld abroad against their Indian tax liability on the same income. "The credit is restricted to the lower of the tax paid abroad or the tax payable on that income in India. You can't claim a refund for the excess if the foreign tax rate is higher," Karundia said.
The dividend must still be reported under 'Income from other sources' in the Indian return, while the US tax withheld can be claimed as a foreign tax credit through the DTAA. Similar relief is available for taxes deducted on interest or certain capital gains in other countries as well, where a treaty applies.
Foreign tax credit
To claim this credit, taxpayers need to file Form 67 before filing their ITR, disclosing the foreign income and the tax already paid on it. Missing this form is a common reason investors end up paying tax twice on the same dividend, once abroad through withholding, and again in India, since the credit isn't automatically applied without it. Details of the dividend and tax withheld are typically available in the annual statement or tax form, such as Form 1042-S for US brokerages, issued by the foreign broker or bank.
The goal of Schedule FA is to fully disclose your overseas wealth, and not to reconcile all values. For accurate filing, ensure that you disclose all holdings, convert every figure using the SBI TT rate and report income both against the asset and under the applicable income head.