From the Desk of: Navneet Shukla

Non-disclosure of overseas ESOPs by Indian employees of foreign companies / MNCs in the Income-tax Return, particularly in the Foreign Assets Schedule can have serious consequences.

Failure to report such foreign assets may attract penalty up to 10 lakh and even prosecution under the Black Money (Undisclosed Foreign Income and Assets) Act.

Employees holding ESOPS, RSUs or shares in overseas entities are required to disclose the same, irrespective of whether any income has been realised. Further, any income earned outside India, however small, including dividends of a few US dollars must also be reported in the Return.

With India being part of the Automatic Exchange of Information (AEOI) under tax treaties, the Indian Income-tax Department regularly receives detailed information about foreign assets and income of Indian residents.

Assuming that such disclosures will not come to the notice of the tax authorities is therefore a risky and incorrect assumption.

It is also important to note that the Black Money Act does not prescribe any time limitation for initiation of proceedings. Consequently, action may be taken at any stage once the information is acted upon.

It is also important to note that the Black Money Act does not prescribe any time limitation for initiation of proceedings. Consequently, action may be taken at any stage once the information is acted upon.

Employees are strongly advised to disclose foreign assets and income by filing a revised or updated return at the earliest, before any notice or proceedings are initiated.

Timely compliance can significantly mitigate penal and prosecution risks.