Income Tax Notices on Foreign Assets (2025): What Employees Must Declare

In 2025, the Income Tax Department of India has intensified its focus on foreign asset and foreign income disclosures, especially for employees of multinational companies (MNCs).

Thousands of salaried individuals are receiving emails, SMS alerts, and portal intimations nudging them to review and correct their Income Tax Returns (ITRs) where foreign assets or income may not have been properly disclosed.

These communications are part of the department’s NUDGE (Non-intrusive Usage of Data to Guide and Encourage) campaign, aimed at promoting voluntary compliance before initiating formal proceedings.

This WonderTax guide explains:

• Why these notices are being issued

• Who is impacted

• What must be disclosed

• How to respond safely and correctly

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Why Are Income Tax Notices Being Sent for Foreign Assets?

1. Global Data Sharing (CRS, FATCA & AEOI)

India participates in international data-sharing frameworks such as:

• CRS (Common Reporting Standard)

• FATCA

• Automatic Exchange of Information (AEOI)

Under these, foreign banks, brokers and employers share details of:

• Overseas bank accounts

• Shares, ESOPs & RSUs

• Foreign dividends & interest

• Capital gains from foreign securities

This data is now being matched with Indian ITR filings.

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Who Is Most Affected?

Income tax notices are largely being sent to:

• Employees receiving RSUs / ESOPs from foreign parent companies

• Individuals with foreign bank accounts (even dormant)

• Residents who worked abroad earlier

• Returning NRIs

• Taxpayers who filed ITR-1 instead of ITR-2

👉 WonderTax has seen a sharp rise in notice cases for salaried professionals in IT, fintech, consulting and MNC roles.

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What Exactly Must Be Declared?

Schedule FA – Foreign Assets

You must disclose all foreign assets, even if:

• No income was earned

• The account is dormant

• Asset is jointly held

Schedule FSI – Foreign Income

All foreign income must be reported, including:

• Salary from foreign employer

• Dividends from foreign shares

• Interest from foreign accounts

• Capital gains on overseas investments

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Common Mistakes Triggering Notices

• Not reporting RSUs received from foreign employer

• Ignoring dormant foreign bank accounts

• Declaring foreign income but missing asset disclosure

• Wrong ITR form selection

• Assuming “tax paid abroad = no reporting needed”

⚠️ Disclosure is mandatory even if income is exempt or taxed abroad.

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What Should You Do If You Receive Such a Notice?

Step 1: Do Not Ignore It

These are early-stage nudges. Ignoring them can escalate the issue.

Step 2: Review Your ITR Thoroughly

Check:

• Schedule FA

• Schedule FSI

• ITR form used (ITR-2 vs ITR-1)

Step 3: File a Revised / Updated Return

If disclosures were missed, file:

• Revised Return OR

• Updated Return (ITR-U) within permitted timelines

Step 4: Claim Foreign Tax Credit (if applicable)

File Form 67 to avoid double taxation under DTAA.

👉 WonderTax assists end-to-end in reviewing, correcting and filing revised returns safely.

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Penalties for Non-Disclosure

Failure to disclose foreign assets can attract:

• Penalty up to ₹10 lakh under Black Money Act

• Tax reassessment

• Interest & prosecution in severe cases

Early correction significantly reduces risk.

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Internal Links (WonderTax)

• Foreign Asset Reporting & Schedule FA Guide
  https://wondertax.in/schedule-fa-itr2

• Income Tax Notice Handling Services
  https://wondertax.in/services/income-tax-notice-handling

• NRI & Foreign Income Taxation
  https://wondertax.in/nri-taxation

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FAQs

Is Schedule FA mandatory even if there is no income?
Yes. Asset disclosure is mandatory irrespective of income.

Can I still correct my return?
Yes, within timelines using Revised Return or ITR-U.

Will this automatically lead to penalty?
No, if corrected proactively.

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Conclusion

The tax department already has the data. The current wave of notices is a chance to correct mistakes, not a punishment — yet.

Acting now ensures:

• Peace of mind

• Clean tax record

• No future litigation

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CTA – WonderTax

👉 Received a foreign asset notice or unsure about compliance?
WonderTax experts can help with:

• ITR review & correction

• Schedule FA & FSI reporting

• Notice handling & representation

🔗https://wondertax.in