Report Foreign Bank Accounts in ITR: A Comprehensive Guide for AY 2025-26

Are you an NRI or an Indian resident with financial ties abroad? Understanding how to report your foreign bank accounts in your Income Tax Return (ITR) is not just a compliance step, it’s a critical legal obligation for Assessment Year (AY) 2025-26. Non-disclosure can lead to severe penalties under Indian tax laws.
This guide will walk you through the essentials of reporting foreign bank accounts in ITR, helping you navigate the requirements for seamless compliance.

Why is Reporting Foreign Bank Accounts Important?

For Indian taxpayers, disclosing foreign financial interests, particularly bank accounts, is paramount. This requirement stems from several legal frameworks designed to promote financial transparency and combat illicit funds.

• Legal Obligation: The Income Tax Act, 1961, read with the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, makes it mandatory for residents to disclose foreign assets.
• Avoiding Penalties: Non-compliance or inaccurate reporting can attract hefty penalties, which may include fines up to 300% of the tax payable on undisclosed income or assets, and even imprisonment in severe cases.
• Transparency & Global Compliance: India is part of global initiatives like the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS), which facilitate the automatic exchange of financial information between countries. This means Indian tax authorities often have access to your foreign account details.

Who Needs to Report Foreign Bank Accounts?

Generally, any Indian resident taxpayer holding a foreign bank account is required to report it. This includes:

• Resident Individuals: If you qualify as a ‘resident’ for tax purposes in India for the Financial Year (FY) 2024-25 (AY 2025-26) and hold any foreign bank account.
• Individuals with Signing Authority: Even if you are not the primary account holder but have signing authority over a foreign bank account, you might need to disclose it.
• Former NRIs: If you were an NRI in previous years but have become a Resident Indian in FY 2024-25, any foreign bank accounts held by you must be reported.

It’s crucial to correctly determine your residential status for tax purposes as it dictates your reporting obligations.

What Constitutes a “Foreign Bank Account” for ITR Purposes?

For the purpose of reporting foreign bank accounts in ITR, this typically refers to any bank account held outside India. This includes:

• Savings Accounts
• Current Accounts
• Fixed Deposits (Term Deposits)
• Any other deposit accounts held in a financial institution located outside India.

It’s important to note that NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts are considered Indian accounts as they are held with banks in India. These are not to be reported under the foreign asset schedule (Schedule FA).

Understanding Schedule FA: Your Key to Reporting Foreign Assets

Schedule FA (Foreign Assets) is an integral part of certain ITR forms that taxpayers use to disclose their foreign financial interests.

• What is Schedule FA? It’s a specific schedule within your Income Tax Return form where you provide details of all foreign assets, including bank accounts, held during the relevant financial year.
• Which ITR Forms Require Schedule FA? Typically, ITR-2 and ITR-3 require the reporting of foreign assets, including bank accounts, for individuals and HUFs. If your income structure necessitates filing these forms and you hold foreign bank accounts, Schedule FA is mandatory.
• Key Information Required: When filling Schedule FA for foreign bank accounts, you will need to provide details such as:
  • Name of the country where the account is held.
  • Name and address of the financial institution.
  • Account number.
  • Status of the account (e.g., opened, closed).
  • Peak balance during the accounting period (or highest balance during the year).
  • Accrued income from the account (e.g., interest).

Step-by-Step Guide: How to Fill Schedule FA for AY 2025-26

Filing Schedule FA correctly is vital for reporting foreign bank accounts in ITR. Here’s a simplified guide:

1. Login to E-filing Portal: Access the official Income Tax Department e-filing portal using your PAN and password.
2. Select Correct ITR Form: Choose the applicable ITR form (e.g., ITR-2 or ITR-3) based on your income sources and residential status.
3. Navigate to Schedule FA: Within the chosen ITR form, locate “Schedule FA – Details of Foreign Assets and Income from any Source Outside India.”
4. Enter Foreign Bank Account Details: In the relevant section of Schedule FA, accurately input all the required information for each foreign bank account you held during FY 2024-25. This includes the account number, bank name, country, peak balance, and any income earned.
5. Declare Accrued Income: Even if the income (like interest) from your foreign bank account is reinvested or not repatriated to India, it must be declared and taxed as per Indian tax laws. Ensure this income is also reflected in the relevant income schedules of your ITR.
6. Review and Verify: Double-check all entered details for accuracy before final submission. Any discrepancies can lead to compliance issues.

Common Mistakes to Avoid While Reporting Foreign Bank Accounts

Even with good intentions, taxpayers can make errors. Be vigilant to avoid these common mistakes when reporting foreign bank accounts in ITR:

• Non-disclosure or Partial Disclosure: Failing to report an account, or providing incomplete details. Remember, even dormant accounts or accounts with zero balance during the year might need to be reported if held.
• Incorrect Valuation of Assets: Ensuring the peak balance is correctly converted to Indian Rupees (INR) using the prescribed exchange rates.
• Missing Deadlines: Foreign asset reporting is part of your annual ITR filing, so ensure timely submission.
• Confusing NRE/NRO with Foreign Accounts: As mentioned, NRE/NRO accounts are Indian accounts and should not be listed under Schedule FA.
• Not Reporting Signing Authority Accounts: If you have control or signatory rights over an account, even if it’s not primarily yours, it needs disclosure.

Expert Tips for Seamless Compliance (AY 2025-26)

• Maintain Thorough Records: Keep detailed records of all your foreign bank accounts, including opening dates, statements, and any transactions.
• Understand Your Residential Status: Re-evaluate your residential status for tax purposes each year, as it’s the primary determinant of your reporting obligations.
• Seek Professional Guidance: The intricacies of international taxation and foreign asset reporting can be complex. Consulting with a specialist can prevent costly errors.
• Stay Updated: Tax laws evolve. Keep yourself informed about the latest amendments or seek professional advice.

Navigating the complexities of foreign asset reporting can be challenging, especially for NRIs, salaried individuals, and even MSMEs with international dealings. For expert, personalized assistance with reporting foreign bank accounts in ITR or any international tax compliance, get in touch with CA Sweta Makwana & Associates today. As trusted tax advisors and a leading CA in Mumbai, our firm specializes in helping clients achieve seamless tax compliance.

Explore our NRI Tax Advisory Services and International Taxation Solutions to understand how CA Sweta Makwana & Associates, your compliance specialists for SMEs, startups & NRIs, can support your global financial compliance.
Refer to the notice from the Income Tax Department for further information.