NRI Guide: Foreign Income Reporting & Tax Relief

Schedule FSI and Schedule TR are specific sections within the ITR-2 form utilized when a taxpayer has paid taxes on foreign earnings and intends to claim relief in India. FSI denotes Foreign Source Income, requiring the declaration of earnings originating outside India. Concurrently, Schedule TR is used to summarize the tax relief sought against taxes paid abroad. This guide details the process for FSI and TR Schedules in income tax returns.

2024 Budget Update regarding Penalties

The 2024 Budget introduced a relaxation regarding the Black Money Act. Penalties of Rs. 10 lakhs under Sections 42 and 43 will not be levied on movable assets if the total value remains under Rs 20 lakhs.

Understanding Schedule FSI for NRIs

While resident Indians must submit the FSI Schedule, Non-Resident Indians (NRIs) are typically exempt from reporting foreign income in ITR-2. However, income accruing in India is taxable. If an NRI’s Indian income exceeds Rs. 2.5 lakhs, filing a return is mandatory. NRIs must complete Schedule FSI and Schedule TR specifically when foreign income is taxable in both jurisdictions and tax relief is being claimed in India.

Steps to Complete Schedule FSI

To claim relief, report income from outside India in the Schedule FSI section of the ITR-2 form following these guidelines:

• Column C: Specify the tax amount paid in the foreign country on the respective income.
• Column D: Indicate the amount of tax relief being claimed.
• Country Code: Input the International Subscriber Dialing (ISD) code of the relevant nation.
• TIN: Provide the Taxpayer Identification Number issued by the country where the tax was paid. If a TIN is unavailable, your passport number may be used.

Understanding Schedule TR for NRIs

Taxpayers who have paid taxes abroad can seek Tax Relief (TR) in India by reporting it in Form ITR-2. Under the Income Tax Act, individuals claiming such relief must disclose foreign assets and liabilities within the FSI, TR, and TA schedules. Consequently, NRIs paying foreign taxes can file Schedule TR if that income source attracts tax liability in India.

Steps to Complete Schedule TR

Access the official e-filing portal and choose Form ITR-2. Follow these steps to complete the TR Schedule:

1. Input the details of taxes paid in the foreign jurisdiction corresponding to the income listed in Schedule FSI.
2. Enter the applicable country code (ISD code) along with your Taxpayer Identification Number (TIN).

Note: If you do not possess a TIN, providing your passport number is an acceptable alternative.

3. Enter the tax relief amount claimed under Section 90, 90A, or 91 of the Income Tax Act in the appropriate fields.

Once all data is entered, proceed to submit and verify the ITR-2 return to receive the acknowledgement.

Penalty Relief for Small Taxpayers

Previously, ordinary residents failing to report details in Schedule FSI and TR faced a penalty of Rs. 10 lakhs under the Black Money Act. The recent budget has softened these rules; penalties are no longer applicable if the total value of undisclosed assets does not exceed Rs. 20 lakhs.

Conclusion

NRIs earning from foreign sources should verify their taxable income slabs to determine filing liability. Submitting Schedules FSI and TR is necessary for an NRI only when income is taxed in both India and the foreign country, and they wish to claim credit for taxes paid abroad.