I have a foreign bank account that I never disclosed in my tax returns, what are the risks

Question

I opened a bank account abroad several years ago while working overseas and never mentioned it in my Indian tax returns after I became a resident again, and I am worried about the consequences now. I would like to understand which provision governs this, what it entitles me to, and how long I have before the remedy lapses. I also want to know whether I need a lawyer for this or can do it myself.

MyVakeel Legal Desk · Accepted Answer

In India, the answer to "I have a foreign bank account that I never disclosed in my tax returns, what are the risks" turns on Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, Section 2(11), Black Money Act, 2015, Section 43 and Black Money Act, 2015, Section 50. The points below set out the position and then what to do about it, in the order it should be done.

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 requires a resident and ordinarily resident individual to disclose all foreign assets and foreign income in Schedule FA of the income tax return, and failure to disclose an undisclosed foreign asset, including a bank account, is dealt with far more severely than an equivalent domestic non-disclosure under the ordinary Income-tax Act.

Section 43 of the Black Money Act imposes a penalty for failure to furnish information or furnishing inaccurate information about foreign assets in the return, set at a specified flat amount per year of default, in addition to which Section 10 allows the tax authority to assess undisclosed foreign income and assets to tax at a flat rate without the benefit of exemptions, deductions or set-off of losses generally available under the Income-tax Act.

Section 50 of the Black Money Act criminalises wilful failure to furnish information about foreign assets or income, or furnishing inaccurate particulars, with rigorous imprisonment and fine, and unlike many offences under the Income-tax Act, prosecution under the Black Money Act does not require the department to first establish a minimum threshold of tax evaded in every circumstance, making even smaller undisclosed accounts a serious exposure.

Individuals who genuinely held a modest foreign account, particularly one opened while they were non-resident and which has since become dormant or been closed, should still take professional advice on regularising past non-disclosure, since options like disclosure under any window the government periodically opens, or voluntary compliance going forward with proper legal advice, are generally far less risky than continued silence once residential status changes to resident and ordinarily resident.

What this means for you: 1) Determine your residential status for each year the foreign account was held; 2) Consult a professional experienced in Black Money Act compliance before doing anything else; 3) Disclose all foreign assets correctly in Schedule FA going forward; 4) Consider available regularisation options for genuine past non-disclosure.

Where the facts are disputed, what usually decides a black money act matter is the paper trail — dated complaints, acknowledgments and written replies under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, Section 2(11). You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in tax law.