By CA Surekha S Ahuja
In the globalized financial landscape, Indian taxpayers holding foreign assets must navigate mandatory disclosure obligations carefully. Foreign asset reporting in Schedule FA is non-negotiable, and claiming Foreign Tax Credit (FTC) requires Form 67.
While earlier, we highlighted the importance of foreign asset compliance in posts like “Your Last Legal Window to Correct Past Returns – AY 2025–26 and Earlier Years”, this post adopts a strategic, timeline-based approach. It helps taxpayers, boards, and HNWI advisors ensure risk-free compliance, maximize FTC benefits, and mitigate penalties under Sec 271/271B.
Step 1: Identify Your Foreign Assets
Begin with a complete inventory of all foreign holdings:
Bank Accounts: Savings, current, term deposits abroad.
Financial Interests: Shares, bonds, mutual funds, partnerships in foreign entities.
Immovable Property: Land, buildings, commercial property abroad.
Other Financial Instruments: Life insurance policies, crypto assets, trusts overseas.
Board-level insight: Maintain a centralized foreign asset ledger to enable accurate compliance, risk assessment, and proactive tax planning.
Step 2: Determine the Need for Form 67
Form 67 is mandatory only for claiming FTC under Sec 90/91 (DTAA or unilateral credit). Key considerations:
FTC claim for taxes paid abroad.
Attachment of proof of taxes paid abroad.
Filing Form 67 along with revised or original ITR, not separately.
Strategic tip: Even without FTC, Schedule FA reporting is mandatory. Boards and HNWI advisors should verify full disclosure to avoid compliance gaps.
Step 3: Assess ITR Revision Requirement
If foreign assets or FTC were omitted in the original ITR, revision is mandatory under Sec 139(5):
Deadline for AY 2025–26: 31.12.2025.
ITR-U for the last 4 years: If FTC or foreign asset disclosure was missed, taxpayers can file Updated Returns (ITR-U) for prior Assessment Years.
Common scenarios requiring revision:
FTC not claimed previously.
Foreign bank accounts, dividends, or investments omitted.
FX gains/losses missed in earlier filings.
Board-level advisory: Early detection and revision mitigate penalties, interest, and audit risk. Quarterly internal reviews are recommended for multi-entity setups.
Step 4: Filing Form 67
Ensure accurate completion:
Include nature of asset, country, and taxes paid.
Attach supporting proof: bank statements, tax certificates, investment statements.
Cross-verify Form 67 vs revised ITR for consistency.
Pro Tip: Mismatches can trigger department scrutiny, delaying FTC claims.
Step 5: Filing Revised ITR / ITR-U
Select “Revised Return” or ITR-U in the portal.
Cross-check Form 67 vs Schedule FA disclosure.
Claim FTC under Sec 90/91 as per DTAA provisions.
Maintain documentation for audits and future assessments.
Step 6: Timeline for Strategic Compliance
| Step | Applicable Years / Timeline | Key Advisory Insight |
|---|---|---|
| Identify foreign assets | Ongoing | Centralized ledger for HNWI / board-level review |
| Prepare Form 67 | Before filing/revision | Verify taxes paid abroad, ensure proof |
| File ITR-U | Last 4 AYs (if disclosure missed) | Mitigate past non-compliance |
| Revise ITR | AY 2025–26 before 31.12.2025 | Avoid penalties, ensure portal compliance |
| Maintain documents | Continuous | Audit-ready, support FX/FTC planning |
Visual reminder: (Embed infographic showing last 4 years → ITR-U → AY 2025–26 revision → Form 67 → document trail)
Step 7: Strategic & Future-Facing Considerations
Full Disclosure First: Even without FTC, Schedule FA reporting is mandatory.
Document Trails: Maintain all proof for audits or voluntary disclosures.
FX & FTC Planning: Track foreign exchange gains/losses to optimize tax outcomes in subsequent years.
Board-Level Integration: Align foreign asset compliance with treasury, finance, and governance functions.
Penalty Mitigation: Proactive disclosure avoids Sec 271/271B penalties and reduces litigation risk.
Advisory Angle: Form 67 and ITR revisions are not just compliance exercises—they are strategic risk management tools for boards, executives, and HNWI clients.
Conclusion
Timely identification of foreign assets, accurate filing of Form 67, and revision of ITR under Sec 139(5) or ITR-U for past years is critical for compliance and strategic tax management. Integrating this process into a board-level compliance framework transforms it into a forward-looking risk management and tax optimization strategy.
For further guidance, see our earlier post: “Your Last Legal Window to Correct Past Returns – AY 2025–26 and Earlier Years”.
