Non-disclosure of Foreign Shares & Dividend in Past ITRs – How to Rectify & Report Now?

This query is : Resolved

raghuram (Querist)
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31 July 2025 Dear Experts,
I seek your guidance regarding a client’s foreign investment disclosure issue.
My brother (Resident and Ordinarily Resident) had invested in foreign shares during FY 2021–22 (AY 2022–23) and made further investments in FY 2022–23 and FY 2023–24. However, he did not report these foreign holdings in Schedule FA in the ITRs filed for AY 2022–23 and AY 2023–24.
As of now, he still holds some of those shares and wishes to disclose them correctly in the current ITR for AY 2024–25.
Additional Details:
• Residential Status: Resident and Ordinarily Resident (ROR)
• Years of Investment: FY 2021–22 to FY 2023–24
• Dividend Income: Minimal dividend was received in one or more years (but was not disclosed)
• Total value of shares: Never exceeded ₹1,00,000 in any year
• Current return filing: Planning to file ITR-2 for AY 2024–25
Kindly advise on the following:
1. What are the possible consequences or penalties for non-disclosure of foreign shares and dividend income in earlier years?
2. Can he now disclose only the currently held shares in Schedule FA of AY 2024–25, or is it mandatory to revise or update past ITRs?
3. Is it advisable to file Updated Returns under Section 139(8A) for the previous years even if the dividend income was minimal and tax impact negligible?
4. Will such voluntary disclosure now reduce the risk of scrutiny or penalty under FEMA or the Black Money Act?
Looking forward to guidance from the CA community. Thank you in advance.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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12 August 2025 1. Consequences/Penalties for Non-disclosure of Foreign Shares & Dividend
Income Tax Side:
Non-disclosure of foreign assets/income may lead to penalties under Section 271FA, which can be up to 100% of tax on undisclosed income.
Interest under Section 234A/234B/234C may apply if tax was due and not paid on dividend income.
In cases of concealment, penalty under Section 270A for under-reporting or misreporting can also be levied.
FEMA Side:
Non-disclosure of foreign assets may invite scrutiny or penalty under Foreign Exchange Management Act (FEMA).
Penalties can be monetary fines and/or confiscation of assets.
Black Money Act:
If foreign assets/income were deliberately concealed, it may attract investigation under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
However, the total value of shares was below ₹1 lakh, which is quite minimal and may reduce severity.
2. Disclosure in Current ITR or Past ITRs?
As per Income Tax Rules, Schedule FA requires disclosure of foreign assets held during the relevant financial year.
It is mandatory to disclose foreign shares and dividends for all years they were held/received.
Merely disclosing current holdings in AY 2024–25 would be incomplete and not compliant.
Ideally, your brother should:
File Revised Returns for AY 2022–23 and AY 2023–24 under Section 139(5) to include omitted foreign assets and dividend income.
Disclose full and correct information for all relevant years.
3. Filing Updated Returns under Section 139(8A)?
Section 139(8A) allows filing Updated Return once before the completion of assessment.
If your brother’s return is already processed or assessment initiated, updated return can be filed to correct mistakes.
Given the minimal dividend income and low value of shares, filing revised or updated returns is advisable to avoid penalties and demonstrate good faith.
This voluntary correction can help reduce risk of penalty and prosecution.
4. Effect of Voluntary Disclosure on Risk of Scrutiny or Penalty
Voluntary disclosure, especially before any notice or scrutiny, generally reduces risk of penalty.
It demonstrates transparency and willingness to comply, which is favorably looked upon by tax authorities.
For FEMA and Black Money Act, voluntary disclosure reduces the chance of heavy penalties or prosecution, but compliance must be timely.
It is better to consult a CA or legal expert who can assist with voluntary disclosure schemes or penalty compounding if needed.

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