Why taxpayers need to take stock of their foreign assets now
It is mandatory for taxpayers who hold foreign assets or earn an income from such assets to file Income Tax Return (ITR).
Foreign assets include foreign immovable property, bank accounts (both depository and custodian), debt or equity interest, other capital assets, cash value insurance contract, annuity contract and accounts or financial interest in any entity where the taxpayer is a beneficiary, signing authority or settlor.
Foreign assets are reported in schedule Foreign Asset or FA of ITR -2 or ITR-3, as applicable to the taxpayer.
Until now, these assets had to be reported for the relevant ‘accounting period’, as defined by the foreign country, in which they were acquired.
For assessment year 2022-23, the accounting period has been replaced by the calendar year (ending 31 December 2021) for jurisdictions that follow the calendar year such as the US. This means all foreign assets held between 1 January 2021 and 31 December 2021 should be declared in this year’s ITR. So, say, you bought shares of X company, which is located outside India, in February 2022. You don’t need to report them in the current assessment year’s ITR though it was bought during the previous financial year. Information regarding X’s shares will have to be disclosed in assessment year 2023-24.
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