Foreign ESOPs, Bank Accounts & Global Income: Your ITR Is a Compliance Firewall

In an increasingly interconnected global economy, your Indian Income Tax Return (ITR) has evolved beyond a domestic compliance form. It is now a declaration of your international financial integrity. If you own overseas ESOPs, maintain a foreign bank account—even if dormant—or earn global income from rent or investments, your ITR is central to maintaining compliance and shielding yourself from regulatory scrutiny.

Why International Disclosure Matters

With the rise of global data sharing and increased enforcement by Indian authorities, assets and income held abroad are under ever-closer scrutiny. Between July 2015 and March 2025, Indian authorities raised ₹35,105 crore in tax and penalty demands under the Black Money (Undisclosed Foreign Income and Assets) Act. In the same period, 163 prosecution complaints were filed, 1,021 assessments completed, and ₹338 crore recovered in back taxes, penalties, and interest. This underscores the non-negotiable need for full and accurate disclosure—no matter how small or inactive an asset may seem.

“Disclosure isn’t optional—it’s your audit shield. Even dormant accounts or low-value assets attract scrutiny.”

What You Must Disclose for AY 2025–26

Meticulous reporting is required for all kinds of overseas assets and income. Here’s an at-a-glance guide for the assessment year 2025–26:

Tip: Use the SBI Telegraphic Transfer Buying Rate (TTBR) for currency conversion to INR. Always mention the Taxpayer Identification Number (TIN) or passport number for the respective foreign jurisdiction.

Audit-Ready Strategy: Align, Cross-Verify, Narrate

For your ITR to stand up under scrutiny, tell a consistent and complete story. Ensure alignment across these documents:

• Form 26AS and AIS
• HR records and ESOP grant documentation
• Demat/custody statements
• Foreign bank statements and dividend slips
• Rental agreements or sale deeds abroad

Common Triggers for Scrutiny

• Avoid errors that can invite audits or penalties:
• Using ITR-1, even though you have foreign assets or income
• Forgetting to file Form 67 for Foreign Tax Credit (FTC)
• Inconsistent currency conversion methods
• Omitting dormant accounts or unexercised ESOPs from disclosures

Real-World Scenarios

• Priya’s U.S. Dividends: Priya earned $100 as dividends from U.S. stocks, with $10 withheld as U.S. tax. She reported this in Schedule FSI and claimed tax relief via Form 67.
• Anil’s U.K. Rental Income: Anil received £5,000 rent from a property in the U.K., paying £1,000 as tax there. He disclosed this income and taxes in Schedule FSI/FA, and filed Form 67 before his ITR.
• Meena’s Singapore Bank Account: Meena holds a dormant Singapore bank account with a peak balance of SGD 10,000 and earned SGD 200 as interest. Both balances and the income were reported in the appropriate ITR schedules for full compliance.

Legal & Compliance Pro Tips

• Choose ITR-2 or ITR-3: ITR-1 does not support foreign schedules.
• File Form 67 before your ITR to be eligible for Foreign Tax Credit (FTC).
• Grant, vest, hold—declare all, even if no income was earned.
• CRS/FATCA data exchange means the Income Tax Department already has granular account-level information from foreign jurisdictions.

Final Takeaway

Your Indian Income Tax Return is now a global compliance document. Treat every ESOP, account, or income—even if dormant or unvested—with the gravity it deserves. Transparent, strategic, and accurate reporting won’t just protect you from penalties and prosecution—it will make your financial journey smooth, audit-resilient, and future-ready.

Take charge. Make your disclosure your strongest defense.