Schedule FA: disclosing foreign shares and ESOPs in your return

If you are a resident and ordinarily resident holding any asset outside India, you must disclose it in Schedule FA of your return. This obligation does not depend on whether the asset produced income, whether you owe any tax, or how much it is worth. The penalty for getting it wrong is a flat ten lakh rupees for each assessment year, and it has been upheld where the omission was accepted as unintentional.

The people most exposed are not the wealthy. They are salaried employees of multinational companies holding vested shares in a foreign parent, and retail investors holding US stocks through a broking platform. Many do not know the schedule exists.

Who has to file it

Schedule FA applies to a taxpayer who is resident and ordinarily resident for the year. It does not apply to a non-resident, nor to a resident but not ordinarily resident.

So residential status is the first question, not the last. A returning non-resident typically has a window of years as not ordinarily resident before the obligation begins, and crossing into ordinary residence is the moment full disclosure starts. Citizenship is irrelevant. A foreign national on a long posting in India who becomes ordinarily resident is equally bound.

What has to be disclosed

• Foreign bank accounts, including dormant ones and accounts where you merely hold signing authority
• Shares and debt held in foreign entities, including shares vested under an employee stock plan
• Foreign custodial and broking accounts, including balances held with an international investing platform
• Immovable property outside India
• Foreign insurance and annuity contracts with cash value
• Interests in a foreign trust, and being a beneficiary of one
• Any other capital asset held outside India

Note what is not a condition anywhere in that list. Nothing turns on whether the asset paid you anything, or whether you funded it out of income already taxed.

The employee stock plan problem

This is where most inadvertent failures happen, and the sequence is worth setting out because two separate things are going on.

When restricted stock units or options vest, the value is a perquisite and taxed as salary. Your employer usually deducts tax and it appears in your Form 16, so you reasonably assume it is dealt with.

From that moment you also hold shares in a foreign company. Those shares are a foreign asset and must appear in Schedule FA every year you hold them, whether or not you sell, whether or not they pay a dividend, and whether or not tax was already deducted at vesting.

When you eventually sell, there is a capital gain, taxed in India, with foreign tax credit available where the other country taxed it too. Claiming that credit requires Form 67, filed within the prescribed time, and reporting through Schedules FSI and TR.

So one stock plan can touch four parts of your return. Employees who assume the payroll deduction settled everything usually miss three of them.

The threshold that exists, and the one that does not

With effect from 1 October 2024, the Finance (No. 2) Act 2024 raised the threshold below which the ten lakh rupee penalty does not apply, from five lakh rupees to twenty lakh rupees, for foreign assets other than immovable property, taken in aggregate.

Two things about that relief are constantly misread. It removes the penalty exposure. It does not remove the obligation to disclose, which continues regardless of value. And it excludes immovable property entirely, so foreign real estate of any value sits outside the relief.

Separately, undisclosed foreign income and assets can be taxed at thirty per cent under the Black Money Act with further penalty, and wilful failure carries prosecution exposure. The twenty lakh rupee threshold does not touch any of that.

The reporting period catches people out

Schedule FA is not reported for the financial year. It is reported for the calendar year ending on 31 December falling within it. So for assessment year 2026-27 you are reporting the calendar year to 31 December 2025.

Peak balance, closing balance and income figures all follow that calendar period, which means the numbers do not come off your Indian financial year statements. Confirm the period stated in the form you are filing before you populate it.

Why this is being detected now

India receives information about residents' foreign accounts automatically under the Common Reporting Standard, and from the United States under FATCA. Foreign brokers and banks report account holders with an Indian tax residence to their own authorities, who pass it on.

The practical effect is that the department frequently knows about a foreign holding before the taxpayer discloses it, and has been sending communications to taxpayers whose returns show no Schedule FA against holdings it has been told about. Non-disclosure is no longer a quiet omission.

If you have already missed it

Do not leave it. A revised or updated return, depending on how much time has passed, is generally better than waiting to be asked, and the department has at times run specific compliance windows for exactly this situation.

Whether a revision, an updated return or another route fits your circumstances depends on the years involved, the amounts and what has already been filed. That is a conversation with a chartered accountant rather than something to work out from an article, because the consequences of choosing wrongly here are measured in lakhs per year.

Before you file

• Establish your residential status for the year, first
• List every foreign asset, including dormant accounts and signing authority
• Take balances and income for the calendar year ending 31 December, not the financial year
• Disclose vested foreign shares whether or not you sold anything
• File Form 67 within time if you are claiming credit for foreign tax
• Keep the statements you relied on, since foreign statements are harder to retrieve years later
• Disclose even where the twenty lakh rupee relief means no penalty would apply