Chartered accountant Mahesh Nayak of CNK & Associates recently found himself in a situation familiar to many Indian professionals with an international work history. He received an email from the income tax department stating that he held foreign assets in the calendar year 2024 which he had not disclosed. The assets in question are likely Restricted Stock Units (RSUs) allotted to him during his tenure at a major US tech company from 2018 to 2022. This notice necessitates the revision of his Income Tax Return (ITR), raising critical questions about the correct declaration process.
Disclosing Foreign Assets in Schedule FA: A Step-by-Step Guide
For an individual who is a resident and ordinarily resident in India for the Financial Year 2024-25, the disclosure of foreign assets is mandatory. This rule applies even if the assets were acquired during a period of non-residency. Since the RSUs have already vested and the stocks are allotted, they must be reported in the tax return.
The specific place for this disclosure is Table B of Schedule FA. This table requires details of any financial interest held in a foreign entity at any point during the calendar year 2024. The information to be furnished includes the country name and code, zip code, the nature and name of the entity, the nature of the interest (such as legal owner), the date since the asset was held, and the total investment at cost in equivalent Indian rupees.
A crucial point for taxpayers is that only the cost of acquisition needs to be declared in Table B, not the current market value of the shares. Additionally, any income accrued from these assets during calendar year 2024, like dividends, must be mentioned along with the schedule in the ITR where this income is offered for taxation (e.g., Schedule OS for dividends).
Taxation of RSU Vesting and Claiming Foreign Tax Credit
The vesting of RSUs often involves a complex tax event. Typically, the US-based employer sells a portion of the vested shares to cover applicable US taxes. For an Indian resident, this triggers a tax liability in India as well.
You are required to offer the gross value of the RSUs at the time of vesting to tax in India. Furthermore, any capital gains arising from the sale of shares by your employer to settle US tax dues must also be declared. The silver lining is that if this income is taxable in India, you can claim a foreign tax credit for the taxes already paid in the United States.
All these details related to foreign salary and income must be reported in Schedule FSI of the income tax return. This is in addition to the asset disclosure in Schedule FA. For converting foreign currency income, the exchange rate to be used is the State Bank of India's TT buying rate on the last day of the month preceding the month in which the income was received.
Deadline for Filing a Revised Return and Gathering Information
If you have missed declaring foreign assets or the income from them for FY 2024-25, the window for correction is still open. You can file a revised return of income to make the necessary disclosures or offer the income to tax. The deadline for this revision is 31 December 2025.
To ensure accurate filing, gather all relevant documents. This includes the RSU grant documents, vesting statements, details of any shares sold by the employer on your behalf, and proof of taxes withheld or paid in the US. Having this information at hand will streamline the process of correctly filling out Schedules FA and FSI, ensuring compliance and avoiding future notices from the tax department.
