Manager - Direct Tax
With increasing global financial scrutiny, the disclosure of foreign assets has become a critical part of tax compliance in India. Failure to report such assets in the income tax return can lead to heavy penalties, interest and even prosecution under Indian tax laws. This article explores the key consequences of non-disclosure and why it’s essential for taxpayers to stay compliant.
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In an increasingly globalized world, it’s common for individuals to hold assets and earn income across borders. To ensure tax compliance and curb illicit financial flows, governments have introduced stringent regulations regarding the disclosure of foreign income and assets.
In India, residents and ordinarily resident (ROR) are mandated to report their overseas holdings in their Income Tax Return (ITR). Failure to do so can trigger serious consequences under the Income Tax Act, 1961 and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, commonly known as the Black Money Act (BMA). Non-disclosure may result in hefty penalties, interest charges and even criminal prosecution, underscoring the importance of complete and accurate reporting.
Only individuals who are classified as “Resident and Ordinarily Resident (ROR)” under Indian tax law are required to disclose foreign assets. This includes:
Under Indian Tax Law (BMA & Income Tax Act):
Yes, if the non-disclosure was unintentional or due to oversight, you may be able to remedy it:
Non-disclosure of foreign assets in an income tax return is a serious matter, not a mere technical slip. With the advent of the Black Money Act, Indian tax authorities are taking a tough stance against unreported foreign wealth.
Ensuring accurate disclosure is not just about avoiding penalties and prosecution—it’s also about promoting transparency and integrity in the financial system. Voluntary compliance, informed decision-making and professional guidance can save you from legal troubles and offer peace of mind.
Fact I :
The appellant/assessee, a Private Discretionary Trust, filed its return of income for the assessment year 2023-24, declaring income of Rs. 4.85 lakhs. In terms of the provision contained under section 164 read with section 2(29C), the assessee paid tax at the ”maximum marginal rate.
While processing the return of income filed by the assessee, the Centralized Processing Centre (CPC) levied the highest rate of surcharge on the maximum marginal rate at which the tax was computed.
On appeal, the Commissioner (Appeals) held that in terms of the definition of ”maximum marginal rate”, the highest rate of surcharge would be applicable on the tax computed at the maximum marginal rate.
Held I:
it is held that in case of Private Discretionary Trusts, whose income is chargeable to tax at maximum marginal rate, surcharge has to be computed on the income tax having reference to the slab rates prescribed in the Finance Act under the heading “surcharge on income tax” appearing in Paragraph A, Part 1, First Schedule, applicable to the relevant assessment year.
In Favour of: The Assessee
Penalty – For failure to answer question, sign statements (Sub-section (1)(d)) – Assessment year 2020-21 – Assessing Officer levied penalty under section 272A(1)(d) in respect of non-compliance of notices issued under section 142(1) – However, in subsequent assessment order passed under section 143(3), Assessing Officer had expressed satisfaction with compliances made by assessee – Whether since Assessing Officer himself had deemed to have condoned non-compliance by assessee on earlier occasions, penalty under section 272A(1)(d) could not be imposed.
Fact II :
Held II:
From the records, it is found that the penalty in the present case has been levied in respect of non-compliance with notices issued under section 142(1) dated 4-8-2022 and 11-8-2022. However, it is found that in response to the subsequent notices, the assessee made necessary compliances and accordingly, assessment was completed under section 143(3) dated 21-9-2022. Hence, it can be seen that the Assessing Officer himself has deemed to have condoned the non-compliance by the assessee on earlier occasions, because subsequently the necessary replies containing information and evidence were furnished by the assessee to assist the Assessing Officer in completing of assessment. Since the assessment in the present case was completed under section 143(3), therefore penalty under section 272A(1)(d) cannot be imposed. [Para 5]
Therefore, considering the facts of the present that the assessee while filing reply dated 15-9-2022, along with necessary information/evidence to the subsequent notice dated 12-9-2022, has specifically mentioned that the reply is being filed in respect of all the earlier notices and has thus assisted the Assessing Officer in completion of the assessment. Moreover, the assessment order in the present case was passed under section 143(3) and not under section 144, which means that the Assessing Officer had expressed his satisfaction with the compliances made by the assessee. [Para 6]
Therefore, in view of above discussion and also keeping in view the principles laid down in the decision of Coordinate Bench of Tribunal in the case Bhavana Modi v. ITO [2025] 170 taxmann.com 236 (Raipur – Trib.), the levy of penalty of Rs.20,000 under section 272A(1)(d) in the present case is invalid. Hence, considering the ratio of law followed in various judicial decisions as discussed above, it is appropriate to set aside the order of the Commissioner (Appeals) and direct the Assessing Officer to delete the penalty and it is ordered accordingly. Thus, all the above grounds as raised by the assessee stand allowed. [Para 7]
Consequently, the appeal filed by the assessee is allowed. [Para 8]
In Favour of: The Assessee
The e-filing portal has been launched in the Income-tax Appellate Tribunal (ITAT) for facilitating the electronic filing of appeals, applications, petitions and documents, by the stakeholders. The e-filing portal continues to gain the acceptance of the stakeholders. Over 26,000 appeals and applications were filed electronically through an e-filing portal before various benches of ITAT during the year, up to 28-2-2025. The provision of free and high-speed internet at various benches has been provided through Optical Fiber Cable (OFC), for access by all stakeholders. The courtrooms at the new office premises of the ITAT, Delhi and Lucknow benches have also been equipped with a state-of-the-art video conferencing infrastructure to provide a better hybrid/virtual hearing experience to the stakeholders. The upgradation of infrastructure, including the installation of the latest equipment, is also being enabled continuously to facilitate uninterrupted virtual/hybrid hearings.
In compliance with the directions of the Hon’ble Supreme Court of India, ITAT has implemented hybrid/virtual hearings at all Benches, in letter and spirit, which facilitates litigants to attend a hearing of their cases virtually. The benches of the ITAT are not declining the requests of the parties for virtual hearings. For the period from July 2023 to December 2024, a total of 1,22,302 hearings of appeals have been conducted through video conferencing before various Benches of ITAT.
This information was given by the Minister of State (Independent Charge) of the Ministry of Law and Justice and Minister of State in the Ministry of Parliamentary Affairs, Shri Arjun Ram Meghwal, in a written reply to a question in the Rajya Sabha today.
PRESS RELEASE, DATED 03rd April, 2025
INCOME-TAX (NINTH AMENDMENT) RULES, 2025 – AMENDMENT IN RULE 114
In exercise of the powers conferred by sub-section (2A) of section 139AA, read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:
Short title and commencement
NOTIFICATION NO. 25/2025 [G.S.R. 217(E)/F. NO. 370142/1/2025-TPL], DATED 3-4-2025
Global Minimum Tax Implementation
The Organisation for Economic Co-operation and Development (OECD) reports that nearly 90% of multinational enterprises (MNEs) with revenues exceeding €750 million will be subject to a 15% global minimum tax by 2025. This initiative, part of the OECD’s two-pillar solution, aims to ensure a minimum level of taxation across jurisdictions.
Canada’s Digital Services Tax
Canada’s Digital Services Tax (DST) Act, effective from June 28, 2024, imposes a 3% tax on revenues from digital services provided to Canadian users. Companies with global revenues over €750 million and Canadian digital services revenues exceeding $20 million are required to comply. The first payments are due by June 30, 2025, with the tax being retroactive to January 1, 2022.
S. Tariffs Impacting Allies
The U.S. administration has imposed a 10% tariff on imports from allies like Singapore and Australia, despite existing free trade agreements. This move has raised concerns among these nations, as they are also strategic defense partners of the U.S. The tariffs are seen as part of a broader strategy to pressure allies into supporting more aggressive trade policies.
