Surge in Foreign Asset Declarations: Over ₹29,000 Crore Disclosed After CBDT Campaign

In a significant move towards improving tax compliance, the Central Board of Direct Taxes (CBDT) launched a compliance-cum-awareness campaign in November 2024. The initiative encouraged taxpayers to disclose their foreign assets and income in their revised income tax returns (ITRs). According to a recent report, this effort resulted in 30,161 taxpayers voluntarily declaring foreign assets worth ₹29,208 crore for the assessment year (AY) 2024-25.

This campaign marked a shift towards a system-driven and taxpayer-friendly approach, leveraging information obtained through the Common Reporting Standards (CRS) and the Foreign Accounts Tax Compliance Act (FATCA) to ensure greater transparency.

Why Did Taxpayers Choose to Declare Their Foreign Assets?

While the CBDT’s initiative provided a structured pathway for taxpayers to disclose their foreign holdings, tax experts believe that the stringent penalties under the Black Money Act played a crucial role in prompting these declarations. The rising trend of Indians acquiring foreign assets, sometimes as a means to evade taxes, was a key factor behind the launch of this campaign.

To assist taxpayers, the department provided a step-by-step guide for filling out the Schedule Foreign Assets and Schedule Foreign Source Income in ITRs. Additionally, detailed explanatory materials were made available to help taxpayers interpret the information received through international reporting frameworks.

Key Outcomes of the Compliance Initiative

The campaign saw a multi-channel approach, including SMS and email notifications to 19,501 taxpayers with substantial foreign account balances or significant foreign income from sources such as interest or dividends above a specified threshold. The response was notable:

• 24,678 taxpayers reviewed their ITRs.
• 5,483 taxpayers filed belated returns for AY 2024-25, declaring foreign assets worth ₹29,208 crore and additional foreign income of ₹1,089.88 crore.
• 6,734 taxpayers revised their residential status from resident to non-resident.
• Overall, 62% of taxpayers who were nudged responded positively by voluntarily revising their ITRs.

Growing Trend in Foreign Asset Disclosures

The number of taxpayers voluntarily disclosing foreign assets and income has steadily increased over the years. The report indicates that:

• 60,000 taxpayers declared foreign assets in AY 2021-22.
• This number surged to 2,31,452 taxpayers in AY 2024-25.
• A 45.17% year-on-year growth in voluntary disclosures was observed compared to AY 2023-24, largely due to extensive outreach and awareness efforts.

A Shift Towards Trust-Based Compliance

A key aspect of this campaign was the Trust First approach, which prioritised voluntary compliance over strict enforcement measures. Instead of taking immediate verification or intrusive actions, the tax authorities provided ample opportunities for taxpayers to truthfully declare their foreign assets and income.

The success of this initiative highlights the increasing effectiveness of system-driven compliance, reinforcing transparency while fostering a cooperative relationship between taxpayers and the tax authorities.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.