Foreign Assets and Foreign Income: Which ITR and Schedules Apply?

ITR-2 is used without business income and ITR-3 with business or professional income; Schedule FA and foreign-tax-credit schedules depend on residence and the item.

For related guidance and tools, visit the Income Tax and Salary Hub.

Legal or Computational Framework

Governing rule

Schedule FA generally applies to a resident and ordinarily resident individual for the relevant reporting period. RNOR and NRI scope differs, but Indian receipt and source rules can still tax specific foreign-linked income.

For the connected rule or filing step, see Income-tax undisclosed foreign assets.

Correct workflow

Determine ROR, RNOR or NRI; inventory foreign accounts, shares, property, trusts, pensions and signing authority; map income to the correct head; calculate foreign-tax credit; select ITR-2 or ITR-3; reconcile reporting periods.

For the connected rule or filing step, see Foreign Assets in ITR: Schedule FA Mistakes Residents Must Avoid.

Step-by-step method

1. Determine ROR, RNOR or NRI.
2. inventory foreign accounts, shares, property, trusts, pensions and signing authority.
3. map income to the correct head.
4. calculate foreign-tax credit.
5. select ITR-2 or ITR-3.
6. reconcile reporting periods.

Worked example

An ROR employee holds US RSUs and a foreign bank account and has no business income: ITR-2 with foreign schedules is generally required. If the same person earns freelance income, use ITR-3.

The example is an audit trail, not a substitute for the user's facts. Change one input—residence, payment date, tax year, asset, return form, GST status, employer category or supporting document—and the result can change.

For the connected rule or filing step, see Foreign Assets in ITR: Schedule FA Red Flags.

Edge cases

• Foreign reporting periods can differ from the Indian tax year: record the factual and legal conclusion in the working paper.
• Zero-balance or closed accounts can still be reportable: record the factual and legal conclusion in the working paper.
• RSUs require asset and income analysis: record the factual and legal conclusion in the working paper.
• Foreign pension can have treaty rules: record the factual and legal conclusion in the working paper.
• Foreign tax credit needs prescribed evidence: record the factual and legal conclusion in the working paper.

What Generic Pages Miss

Practical Documentation Checklist

• Foreign bank/broker statements
• Asset inventory
• Residential-status file
• Foreign tax certificate/return
• Currency conversion policy
• Schedule FA/FSI/TR worksheet

See the broader FEMA, NRI & International Tax knowledge hub for related rules and calculators on this topic.

When you are ready for the next step, see Section 80 Recovery, Agreements, Rules And Miscellaneous.

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