If you don’t make these 8 disclosures, your ITR may be treated as defective

Sujit Bangar, founder of TaxBuddy.com, recently shared a list of eight disclosures you need to make when filing an income tax return (ITR). If you don’t, your ITR could be marked as defective ITR. A defective ITR is treated just like not filing any ITR at all. So, if you have to file an ITR or or before the deadline and you did, but it gets classified as defective, it’s as if you have never filed one in the first place.

Here’s the list of eight disclosures you should make to ensure your ITR gets approved without being flagged as defective:

● Schedule FA:

[1] Schedule FA (Foreign Assets)

• Residents (RORs) must disclose overseas assets such as bank a/cs, securities, funds, insurance/ESOPs, immovable property and signatory rights
• Non-disclosure may lead to a Rs 10 lakh penalty & imprisonment of 6-months to 7-years.
• Penalty & Imprisonment not applicable if the aggregate value of asset (other than immovable property) does not exceed Rs 20 lakh.

Source: Sujit Bangar

Also read: Father shows only Rs 1,690 income in ITR after selling house worth Rs 67 lakh, wins case in ITAT Ahmedabad; Know how

[2] Schedule FSI (Foreign Source Income)

• Report country-wise foreign income with nature, amount and tax paid
• Non-disclosure may lead to a Rs 10 lakh penalty and imprisonment of 6-months to 7-years
• Penalty & Imprisonment not applicable if the aggregate value of asset (other than immovable property) does not exceed Rs 20 lakh.

Also read: Have foreign income or income from equity? Know how to report this in ITR form for AY 2025-26

[3] Schedule VDA (Crypto/NFTs)

• Report each transfer: acquisition date, sale date, sale value, cost.
• No set-off of losses allowed under Section 115BBH.

Also read: Extend income tax audit deadline due to ITR portal glitch, enhanced reporting needs: BCAS

[4] Unlisted Equity Shares

• If you held unlisted shares anytime during the year, give company-wise details (buy/sell dates, quantity, face value, cost)
• If you tick “held unlisted equity”, the schedule becomes mandatory.

Also read: Inherited property taxation: Know how to save capital gains tax on sale of inherited property or land

[5] Directorship Details

• If Director = “Yes”: disclose DIN, company name, PAN, listed/unlisted status.
• All company details need to be mentioned.

Also read: Father receives Rs 4 lakh as cash gift in son’s marriage and wins income tax case of unexplained income; ITAT Ahmedabad ruling explained

[6] Schedule AL (Assets & Liabilities)

• If total income is over Rs 1 crore: disclose immovable property, jewellery, vehicles, shares/MFs, cash, loans/advances, and liabilities
• Keep values consistent with Capital Gains (CG) schedules and portfolio statements.

Also read: No income tax for lady who sold land for Rs 4.5 crore; Know how a 1955 circular and established case laws saved the day for her

[7] Schedule IF (Partner in Firm) – ITR-3

• Disclose each firm: name, PAN, status, % share and remuneration/interest terms
• Cross-tally with the firm’s ITR-5 numbers to avoid variance notices.

Also read: No income tax for son who sold late mother’s flat for Rs 1.45 crore to buy seven houses; how a minor language error helped him

[8] Bank Account & Verification

• Pre-validate refund bank a/c; ensure correct IFSC & nature.
• E-verify within 30 days—otherwise the return isn’t treated as filed.

Also read: Wife pays no income tax after selling two houses for Rs 6 crore gifted by her husband, wins case in ITAT Mumbai; here’s how it happened

Who is required to disclose all foreign assets?

Chartered Accountant Mohit Gupta, partner, PNAM and Co, LLP, says:

• Residents and ordinarily residents (RORs) in India are required to disclose all foreign assets and income in their Income Tax Return (ITR) by filling out Schedule FA.
• This covers overseas bank accounts, shares, ESOPs, immovable property, trusts, and even dormant or low-balance accounts, irrespective of whether they generate taxable income in India.

Also read: Taxpayer wins Rs 69-lakh unexplained investment income tax case in ITAT Mumbai on these technical grounds

What can be the consequences of not disclosing all foreign assets?

Gupta says that non-disclosure of foreign assets by those mandated is viewed seriously under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015, and can render the ITR defective.

Gupta explains: “It may also attract a penalty of Rs 10 lakh per asset per year under Section 43, along with prosecution under Sections 49 and 50 that could lead to imprisonment of up to seven years in cases of willful concealment.”

Gupta also says that in the Finance Act, 2024 there was a major relief for those who mistakenly missed this foreign asset disclosure.

Gupta says: “In a major relief, the Finance (No. 2) Act, 2024 (effective from 1 October 2024) provided that non-disclosure of movable foreign assets such as bank accounts, investments, and retirement funds with an aggregate value up to Rs 20 lakh would not invite penalty, provided there was no intent to hide. Building on this, the CBDT clarified on 18 August 2025 that where penalty is not leviable, prosecution too shall not be initiated. Importantly, this relaxation does not extend to immovable foreign assets such as overseas property, where any concealment continues to attract both penalty and prosecution.”

Also read: Select black money holders to get relief: Income tax dept. to not not apply penalty and prosecution in these situations