Hold shares in an offshore company, RSUs or a foreign bank account? Here's what an Indian promoter must file under income tax, FEMA and the Black Money Act in 2026.
Say you run a software company in Gurugram. Three years ago you set up a Delaware parent to raise money from US investors. You also hold 4,000 RSUs from an old employer and a Singapore account with about ₹18 lakh in it. Nobody has ever asked about the foreign side.
That silence means very little. Foreign banks report accounts of Indian residents to India every year, and the department matches that data with your return.
For a promoter, foreign assets bring income tax, foreign exchange law (FEMA) and the Black Money Act into play together. A missed disclosure can cost far more than the tax. Good cross border tax advisory mostly keeps these in step.
At DSRV India, a CA firm in Gurgaon, we review founders' foreign holdings every filing season. This is our checklist, updated for October 2026 and the Income-tax Act, 2025.
Everything hangs on this. Under section 6 (same number in the new Act), you're resident if you spend 182 days or more in India in a year, or 60 days plus 365 days over the four years before it. For Indian citizens visiting India, that 60-day limb stretches to 182 days (120 days if Indian income tops ₹15 lakh).
Residents then split in two. A resident and ordinarily resident (ROR) person is taxed on worldwide income and reports every foreign asset. A resident but not ordinarily resident (RNOR) person, broadly someone non-resident in nine of the last ten years or in India for 729 days or less over the last seven, is taxed mostly on Indian income and skips the foreign asset schedule.
Returning founders often get two or three RNOR years. Use them to tidy up. Once you turn ROR, everything below applies.
An ROR who holds any asset outside India, signs on a foreign account, or benefits from a foreign asset must file a return, even with income below the taxable limit. This was the fourth proviso to section 139(1) of the 1961 Act and is now section 263(1)(a) of the new Act. You'll need ITR-2, or ITR-3 with business income.
Schedule FA (foreign assets) catches more than most promoters expect:
Schedule FA follows the calendar year. For the FY 2025-26 return, you reported holdings from 1 January to 31 December 2025, converted at the SBI telegraphic transfer buying rate. We see this mixed up all the time.
Foreign income (dividends, interest, gains) goes in Schedule FSI (foreign source income) for the financial year, and Schedule TR summarises tax relief claimed. Returns under the new Act, for tax year 2026-27, will be filed in 2027. Those forms aren't out yet, so check the reporting period when they are.
Read More: Tax on Overseas Investments: What Indian Residents Need to Know
If a dividend from your US company has already suffered US tax, you don't pay twice. You claim credit under the tax treaty, or domestic law where there's none, capped at the Indian tax on that income.
The catch is Form 67, filed online with proof of foreign tax paid. Under Rule 128, it can go in up to the end of the assessment year if your return is on time or belated, so 31 March 2027 for FY 2025-26. From tax year 2026-27, the Income-tax Rules, 2026 replace it with Form 44, due within 12 months of the end of the tax year.
We've watched credits get denied purely because Form 67 went in late. It's a painful way to lose money.
Under the Liberalised Remittance Scheme (LRS), a resident individual can send up to USD 250,000 abroad each financial year for permitted purposes. Money you put into your foreign company, foreign shares and property all count towards that one limit.
Banks also collect tax at source (TCS). From 1 April 2026, this sits in section 394 of the new Act (earlier section 206C(1G)). There's no TCS on the first ₹10 lakh in a year. Above that, it's 20% for investments and most other purposes, and 2% for education and medical costs. TCS isn't an extra tax, since you get credit for it in your return. But it blocks cash. Remit ₹1 crore to fund your offshore company and about ₹18 lakh sits with the government until you claim it back.
The Overseas Investment Rules and Regulations, 2022 sort every foreign investment into two buckets. Overseas direct investment (ODI) is any investment in unlisted foreign shares, 10% or more of a listed company, or any stake with control. Overseas portfolio investment (OPI) is listed holdings below 10% without control. Your stake in a Delaware or Singapore parent is almost always ODI.
ODI by an individual has limits. The foreign company must be an operating one outside financial services, and it can't have a subsidiary or step-down subsidiary if you control it. Many "flipped" startup structures trip on this. If a foreign lawyer built yours without anyone checking FEMA, get it reviewed. Fixing it later may need a compounding application with RBI.
Reporting runs through your bank (the authorised dealer). Form ODI goes in when you invest. An Annual Performance Report (APR) on the foreign company is due by 31 December every year, and an exit must be reported within 30 days. For RSUs from a foreign parent, your Indian employer usually files the half-yearly Form OPI. Late filings attract a late submission fee (₹7,500 per APR or OPI return) for up to three years. After that, FEMA penalties. Our FEMA compliance team handles these filings.
Also Read: How Indian Companies Can Invest in Foreign Startups Under ODI
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 has two levels of pain.
If a foreign asset was bought with income never taxed in India, its value is taxed at 30%, with a penalty of three times that tax. That's 120% of the asset's value, before prosecution risk under sections 49 and 50 (six months to seven years in jail).
If the money was already taxed but you simply left the asset out of Schedule FA, section 43 allows a penalty of up to ₹10 lakh for each year. There's relief for small holdings. From 1 October 2024, these penalties don't apply where the total value of your foreign assets, other than immovable property, is ₹20 lakh or less. A CBDT instruction of August 2025 says no prosecution in such cases either, and Budget 2026 proposed writing that relief into sections 49 and 50, backdated to 1 October 2024. Note that a foreign flat gets no such relief, however small.
Don't count on staying unnoticed. Under FATCA (the US agreement) and the Common Reporting Standard (CRS), banks and brokers in over 100 countries send account details of Indian residents to India each year. The department likely already has your Singapore balance.
Act before a notice does. Your options depend on how old the gap is.
FAST-DS deserves a close look. Undisclosed foreign income or assets up to ₹1 crore can be declared at 30% tax plus an equal additional amount (60% in total). Assets bought from taxed money, or in non-resident years, but missing from Schedule FA can be declared for a flat ₹1 lakh fee, up to ₹5 crore in value. Values are taken as on 31 March 2026, and a valid declaration gives Black Money Act immunity. Honestly, for an old RSU account that never reached your return, ₹1 lakh is cheap.
Already holding a notice? Our guide on Section 148 and 148A reassessment notices explains your next steps.
Yes, if you're ROR. Schedule FA has a separate section for accounts where you have signing authority, even if none of the money is yours.
Schedule FA doesn't apply to RNORs. But foreign income received in India, or earned from a business controlled from India, is still taxable, so keep records anyway.
It depends on the stage. The scheme excludes cases where Black Money Act assessment is already complete, and proceeds of crime under money laundering law. Get advice quickly, because the window closes on 31 December 2026.
DSRV India has advised promoters and families on cross-border tax and FEMA since 1987. We're an ICAI-registered, peer-reviewed CA firm in Gurgaon, and we can review your Schedule FA, ODI filings and FAST-DS options in one go. Tell us what you hold abroad. We'll tell you plainly what's missing and what it costs to fix.
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