Income Tax Relief: No Legal Action If Foreign Assets Worth Up to ₹20 Lakh Are Not Disclosed in ITR
Indian taxpayers with foreign assets can finally breathe a sigh of relief. The Central Board of Direct Taxes (CBDT) has announced that individuals who fail to disclose overseas financial assets valued up to ₹20 lakh in their Income Tax Return (ITR) will not face penalties or legal proceedings. This decision brings much-needed clarity and relief for professionals who often work abroad and inadvertently miss reporting small-value assets.
Current Law and Punishment for Non-Disclosure
Until now, the law has been stringent about foreign asset disclosure. Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, taxpayers who failed to declare such assets could face a prison sentence ranging from six months to seven years. Additionally, there was a penalty provision of up to ₹10 lakh for nondisclosure or misreporting.
In practice, however, experts note that authorities rarely initiated such severe action against individuals with low-value foreign assets. Chartered Accountants (CAs) explain that although the law was harsh, most small cases involving minor balances in overseas bank accounts or employee stock option plans (ESOPs) were not pursued aggressively. Despite this, the fear of prosecution remained a major concern among taxpayers.
What Has Changed Under CBDT’s New Rule
According to the latest CBDT clarification, failure to disclose foreign assets worth up to ₹20 lakh will no longer invite legal action. This includes balances in overseas bank accounts, pension funds, ESOPs, or other financial assets that professionals often acquire during overseas employment.
For instance, many employees in IT, banking, and multinational corporations are posted abroad for work assignments. During their stay, they may open foreign bank accounts, receive retirement benefits, or be allotted company shares. Once they return to India, they are required to report these assets in their ITR. However, due to lack of awareness or oversight, many individuals fail to do so. The new relaxation ensures that small oversights of up to ₹20 lakh will not attract penalties or prosecution.
Relief Announced in Union Budget 2024
The groundwork for this relaxation was laid in the Union Budget 2024. Finance Minister Nirmala Sitharaman had announced that starting financial year 2024–25, non-disclosure of foreign assets up to ₹20 lakh would not attract the earlier penalty of ₹10 lakh. This budgetary reform has now been reinforced by CBDT’s official notification, providing relief to taxpayers who were anxious about the implications of minor lapses in disclosure.
Why This Matters for Taxpayers
For thousands of professionals who travel abroad for work, this change is significant. Many employees unknowingly keep small balances in their overseas bank accounts or receive company-linked benefits that they forget to declare later. Previously, even these small omissions technically made them liable for penalties or prosecution under Indian tax law.
Experts believe that the new relaxation balances compliance with practicality. While high-value undisclosed foreign assets will continue to be monitored strictly, individuals with smaller holdings will not be subjected to unnecessary legal stress.
Final Word
Tax specialists suggest that while this change offers peace of mind, taxpayers should continue to be cautious and disclose all assets wherever possible. The relaxation up to ₹20 lakh provides a safety net, but deliberate non-reporting of significant foreign assets can still lead to penalties and imprisonment.
In short, if you have overseas accounts, pensions, or ESOPs worth less than ₹20 lakh, you no longer need to worry about harsh punishments. The move reflects the government’s intent to ease compliance for honest taxpayers while continuing its crackdown on black money and large-scale tax evasion.
