The Income Tax Department has clarified that individuals will not face prosecution for failing to disclose foreign financial assets valued up to ₹20 lakh, according to a circular issued by the Central Board of Direct Taxes (CBDT) on August 20, 2025.
Previous Rules: Jail & Penalty for Non-Disclosure
Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, failure to report overseas assets could earlier result in:
- Imprisonment of 6 months to 7 years.
- Penalty of up to ₹10 lakh.
These provisions applied even to employees and professionals with small-value foreign assets, such as bank accounts or retirement funds opened during overseas assignments.
New Threshold: Relief up to ₹20 Lakh
The latest clarification states that prosecution will not apply if penalties under Sections 42 and 43 of the Black Money Act are not imposed or imposable. This relief covers assets other than immovable property, provided the aggregate value does not exceed ₹20 lakh at any point during the relevant year.
👉 Immovable property abroad (such as real estate) remains outside the scope of this relaxation.
Previous Limit Was ₹5 Lakh
Earlier, relief was restricted only to foreign bank accounts valued below ₹5 lakh in a financial year. The new ₹20 lakh threshold represents a significant expansion, covering a broader set of movable foreign assets, including:
- Overseas bank accounts
- Pension accounts
- Employee Stock Option Plans (ESOPs)
- Other financial holdings
Impact on Multinational Employees
The issue has been particularly relevant for:
- Employees of multinational companies
- IT professionals on overseas assignments
Such individuals often acquire foreign accounts and retirement benefits as part of their work packages. Failure to report these in Indian tax returns has previously triggered penalties and prosecution threats.
Budget 2024 Connection
In the July 2024 Union Budget, the finance ministry had already announced relief by removing the ₹10 lakh penalty for non-reporting of movable foreign assets up to ₹20 lakh, effective FY25 onwards.
The new CBDT circular now extends this relief to prosecution provisions, bringing much-needed clarity for taxpayers.
Key Takeaways
- No prosecution for non-reporting of foreign assets valued up to ₹20 lakh (except immovable property).
- Previous limit was ₹5 lakh only for bank accounts — now expanded to other assets.
- Applies to employees & professionals abroad, especially those with ESOPs, pensions, and overseas bank accounts.
- Budget 2024 had already scrapped the penalty; CBDT’s 2025 circular now removes jail-time risk as well.
Disclaimer
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