What happens if you don't declare your foreign investments?

Investing abroad has become as easy as shelling peas. You may thank the Liberalised Remittance Scheme (LRS) and the ease of opening an overseas trading account for democratising foreign investing.

But did you know that you have to declare your foreign assets in India? That's right; if you don't, the taxman can come down on you like a ton of bricks if they uncover the truth. This applies to everyone who has opened a bank account abroad, including NRIs who return to the country, employees who have worked overseas for a while, and students.

In short, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act packs a serious punch for anyone with undisclosed assets outside India.

Let's give you a few examples:

• If the taxman catches wind of any undisclosed foreign income taxable in India, the tax offender will be slapped with a straight-up 30 per cent tax and three times the tax amount as penalty.
  

• If the tax offender fails to reveal their foreign assets, they will receive a Rs 10 lakh penalty and rigorous imprisonment of six months to seven years.
  
• Does an offender get any credit or leniency for paying tax in the foreign country? No.

What you should do

Come out clean.

Although our tax authorities can't track foreign assets as they do with domestic investments, any slip-up, like forgetting to declare foreign assets, could land you in a soup.

So, please make sure that when you file your return, you include the details of any foreign income and assets in the ITR form under the section titled 'Schedule FA (Foreign Assets).

Also read: Things to know before investing directly in foreign stocks

This article was originally published on March 28, 2024.