Individuals whose taxable income is below the basic exemption limit still need to file their income tax return (ITR) if they hold or earn income from any foreign asset. Such income needs to be reported under Schedule FA in ITR-2 or ITR 3, as applicable to the taxpayer.
This rule may affect senior citizens who do not have taxable income but can be beneficiaries in property purchased outside India by their family members.
Who should report foreign income? Archit Gupta, Founder and CEO, ClearTax, said, “The first condition to be met is that you must be a Tax Resident and Ordinary Resident (ROR) in India.” You are a RoR if you have been residing in India for at least two years. Out of the last 10 years or for at least 730 days in the last seven years.
The next step is to determine whether you are the beneficial owner, beneficiary or legal owner of any foreign assets.
Karan Batra, Founder, CharteredClub.com said, “Beneficial owner in relation to an asset means a person who has, directly or indirectly, provided a consideration for the property and where such property is for the immediate or future benefit of the person.” has been laid.” “Beneficiary is a person who receives immediate income or will receive benefit from the property in future, even if he has not paid directly or indirectly for that asset.”
What Qualifies as Foreign Property? Assets under this category include foreign deposit account, custodian account, immovable property, cash value insurance contract or annuity contract and capital asset equity and debt interest and any other income derived from foreign source.
Note that amount received from a friend or non-relative resident outside India, as defined by the Income Tax Rules, will be reported as income from other sources and not as income from any foreign source.
“If a friend or relative resident outside India deposits an amount in your bank account or in any other foreign country, it will qualify as income from a foreign source. However, if the remittance is sent to your bank account in India, it will qualify as income from other sources or gift, as the case may be,” Gupta explained.
Batra said that even if the income from any of your foreign assets is not received in India, it will have to be reported.
“Income earned or arising outside India shall be taxable even if it is not received in India during the said financial year,” Batra said.
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