ITR filing 2026: Made foreign investments? Follow this checklist to avoid tax scrutiny

The mandatory disclosure of foreign assets and foreign income applies only to individuals who qualify as Resident and Ordinarily Resident (ROR) in India. The rule applies irrespective of nationality or whether the foreign income is taxable in India. There is no minimum threshold, all foreign assets must be reported if you are an ROR.

ROR individuals with foreign assets or income should file ITR-2 if they do not have business or professional income. Those with business or professional income, including partners in firms, must file ITR-3. ITR-4 cannot be used if you have any foreign assets or foreign income.

Schedule FA is mandatory if you hold assets such as foreign bank accounts, overseas stocks, ETFs, mutual funds held directly, RSUs/ESOPs from a foreign employer, foreign brokerage accounts, financial interests in foreign entities, immovable property abroad, foreign insurance policies with cash value, or GIFT City investments with direct foreign exposure.

Indian-domiciled international mutual funds do not require disclosure in Schedule FA because the investment is in an Indian mutual fund, even if it invests overseas. However, directly held foreign mutual funds or ETFs, such as Vanguard or Fidelity funds, are foreign financial assets and must be reported in Schedule FA. Indian international mutual funds must still be disclosed in Schedule AL if total income exceeds Rs 1 crore.

Investors holding US or other foreign shares through overseas brokerage platforms must disclose them in Schedule FA, including brokerage accounts and foreign equity holdings. Assets held at any time during the calendar year ending December 31, 2025 must be reported, even if sold before the end of the financial year. Values should be converted into rupees using the applicable telegraphic transfer (TT) buying rate.

If you hold foreign stocks or brokerage accounts, keep your annual brokerage/custodian statement (January-December 2025), transaction history, dividend tax withholding certificates (such as US Form 1042-S), corporate action records, and Dividend Reinvestment Plan (DRIP) statements, as every reinvestment is treated as a fresh acquisition. For RSUs/ESOPs, keep your vesting schedule and certificates, exercise records, sale transaction slips, employer TDS/perquisite valuation documents, and proof of any foreign tax deducted at source.

Foreign dividend income must be reported under Schedule OS (income from other sources). If foreign tax has been withheld, taxpayers can claim a Foreign Tax Credit (FTC) by reporting the income in Schedule FSI(Foreign Source Income), claiming the credit in Schedule TR, and filing Form 44 along with proof of withholding.