The Income Tax Department has launched its Second Compliance Campaign, issuing SMS and email alerts to taxpayers. This initiative targets individuals whose details, received from foreign jurisdictions under FATCA/CRS, indicate the existence of foreign assets or income during Calendar Year 2024 that were not disclosed in the Income-tax Return (ITR) filed for AY 2025–26.
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Why Have You Received This Alert?
The Income Tax Department receives financial information from over 100 countries under FATCA/CRS. You may have received this alert due to one or more of the following reasons:
- MNC Employees (ESOPs/RSUs):
You hold shares or ESOPs in a parent company located in the US, UK, or Europe. Even if these shares have not been sold, merely holding them is a reportable event. - Business Travelers / Onsite Deputations:
You may have opened a foreign bank account during an overseas assignment or business visit and left it active with a nominal balance. - NRIs with Indian Income:
You filed an ITR in India to report bank interest or rental income, but your residential status may have shifted to “Resident” during the year. - Foreign Investments:
Investments in foreign stocks, mutual funds, or bonds through overseas brokerages. - Foreign Income:
Salary, dividends, or interest earned outside India.
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Is This Applicable to You?
- Applicable:
If you are a Resident and Ordinarily Resident (ROR) in India and hold any foreign assets or have foreign income, you must disclose:- Schedule FA (Foreign Assets)
- Schedule FSI (Foreign Source Income)
- The “Traveler Trap”:
If you stayed in India for 182 days or more during the financial year, you are considered a Resident. Any foreign salary earned or foreign bank account operated during that period must be disclosed. - For NRIs:
Pure NRIs are generally not required to disclose foreign assets. However, if you incorrectly filed your return as a “Resident” (for claiming deductions or otherwise), the system expects disclosure under Schedule FA.
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Recent Relief: Rs 20 Lakh Threshold
The Finance Act, 2024, along with a CBDT Circular (August 2025), has provided significant relief:
- No Penalty or Prosecution:
The Rs.10 lakh penalty and prosecution provisions will not apply if the total value of your movable foreign assets (such as ESOPs or foreign bank balances) does not exceed Rs 20 lakh. - Important Clarification:
This relief applies only to penalty and prosecution, not to disclosure requirements.
Even ₹1 lakh of unreported ESOPs can render your return “defective.”
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What You Must Do Before 31st December
If you hold any foreign assets or income, you should file a Revised ITR (switching from ITR-1 to ITR-2 or ITR-3) before the deadline.
Action Points:
- MNC Employees:
Collect ESOP/RSU vesting statements and brokerage summaries. - Business Travelers:
Obtain the peak balance of foreign bank accounts for January–December 2024. - Valuation Rule:
All foreign values must be converted into INR using the SBI Telegraphic Transfer Buying Rate (TTBR) applicable on the relevant date.
Expert Note
Many taxpayers assume ESOPs are fully compliant because perquisite tax has already been deducted by the employer.
However, asset disclosure under Schedule FA is a personal compliance obligation and is not covered by employer TDS.
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Documents & Information Required
To accurately revise your ITR, please share the following details using the provided Excel template:
- Stock / ESOP Statements:
Number of shares held, vesting dates, and fair market value. - Dividend / Interest Proof:
Required for claiming Foreign Tax Credit (FTC) through Form 67. - Foreign Bank Statements:
Peak and closing balances (January 1 to December 31, 2024). - Foreign Property Details:
(Note: The ₹20 lakh relief does not apply to immovable property.)
Immunity from penalty
In recent decisions such as Vinil Venugopal vs. ITAT (2025), courts have held that penalties should not be imposed for technical or bona fide errors.
Filing a voluntary Revised Return before the deadline remains the strongest evidence of bona fide compliance and significantly reduces litigation risk.
How We Can Help
Team Prakasha & Co. assists Salaried, professionals and NRIs with complex foreign asset reporting, including:
- End-to-end filing of Revised ITR-2 / ITR-3
- Accurate computation and claiming of Foreign Tax Credit (FTC)
- Legal review to ensure compliance within the ₹20 lakh safe harbor
Revised ITR filing fees start from ₹2,000.
Do not let a minor disclosure lapse escalate into a Rs. 10 lakh penalty.
