CBDT Rolls Out NUDGE Drive To Catch Undisclosed Foreign Assets; How To Report Yours Correctly

How To Report Foreign Income:

Starting November 28, 2025, Indian taxpayers who have foreign assets are receiving SMSs and emails from the tax department for voluntary disclosure and file revised ITRs by December 31, 2025, if not done properly. The Central Board of Direct Taxes (CBDT) has launched the second phase of NUDGE (Non-intrusive Usage of Data to Guide and Enable), encouraging taxpayers for voluntary compliance.

According to press release of tax department, analysis of AEOI information for FY 2024-25 (CY 2024) has identified high-risk cases where foreign assets appear to exist but have not been reported in the ITRs filed for AY 2025-26.

Those who fail to comply with and report foreign assets will face penalties. Taxpayers are advised to review

these foreign assets and, where necessary, revise their ITRs by December 31, 2025, to avoid potential penal consequences.

It aims to facilitate the correct reporting in Schedule Foreign Assets (FA) and Foreign Source Income (FSI) in ITRs. Accurate and complete disclosure of foreign assets and income is a statutory requirement under the Income-tax Act, 1961, and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

CBDT advises all eligible taxpayers to utilise this opportunity to ensure complete compliance with statutory reporting requirements. For further information on CRS, FATCA, Schedule FA and Schedule FSI, taxpayers may refer to the official website www.incometax.gov.in.

How to Report Foreign Assets in Your Income Tax Return (ITR)

If you are an Indian resident and you hold any foreign asset, you must report it in your Income Tax Return, even if the asset doesn’t give you any income.

• Foreign assets are reported in Schedule FA (Foreign Assets)
• Schedule FSI (Foreign Source Income).

Know What Counts as a Foreign Asset

You must report if you have:

• Bank accounts abroad (savings, current, NRE/foreign).
• Shares of companies outside India.
• ESOPs from foreign employers.
• Mutual funds or ETFs abroad.
• Real estate/property outside India.
• Crypto or digital assets held on foreign exchanges.
• Insurance policies with foreign insurers.
• Any other financial interest in a foreign entity.
• Money in foreign custodial or depository accounts.
• Even if the asset is jointly held, you still need to report your share.

Which ITR Should You Use?

To report foreign assets, you must use:

• ITR-2 or ITR-3
• ITR-1 and ITR-4 cannot be used if you have foreign assets.

Where to Report?

A. Schedule FA (Foreign Assets)

This schedule captures asset details for the calendar year (January to December), not the financial year.

You must fill:

• Type of foreign asset (bank account, shares, property, ESOP, etc.)
• Country and name of institution (bank name, broker name, company name)
• Account number or unique identifier
• Date of opening/acquiring the asset
• Peak balance/value during the year
• Closing balance/value as on 31 December
• Income derived (if any—interest, dividends, rent, etc.)
• Amount of income offered to tax in India

B. Schedule FSI (Foreign Source Income)

Report income earned from:

• Interest from foreign bank accounts
• Dividends from foreign companies
• Capital gains from sale of foreign shares
• Rent from foreign properties
• ESOP income or salary received abroad

You must mention:

• Nature of income
• Country
• Amount earned
• Tax paid abroad (if any)
• DTAA relief claimed

C. Schedule TR (Tax Relief)

If you paid tax abroad, you can claim relief under:

• Section 90 (countries with DTAA)
• Section 91 (no DTAA)

You need:

• Proof of tax paid abroad
• Tax certificate from the foreign authority/bank

What Happens If You Don’t Report?

Non-reporting of foreign assets can lead to strict penalties under the Black Money Act, including:

• Penalty of Rs 10 lakh per year for undisclosed foreign assets
• Tax @ 30% on value of asset
• Prosecution in severe cases