Received Foreign ESOPs? Disclose in ITR or Risk ₹10 Lakh Penalty
If you’re a Resident and Ordinarily Resident (ROR) in India and have received ESOPs from a foreign company, you must report them in your ITR under the Foreign Asset Schedule. Failing to do so—even if you’re just holding and not selling—can trigger a penalty of up to ₹10,00,000 under the Black Money Act, 2015.
Why Foreign ESOP Reporting in ITR is Mandatory
As per the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, any resident Indian who owns or benefits from foreign assets is legally required to report them in their ITR. This includes:
- ESOP shares in foreign companies
- Foreign bank accounts
- Immovable property abroad
- Stock options or mutual fund holdings abroad
Key Point: Even if there is no capital gain, just holding the asset triggers the obligation to report.
Who Needs to Report?
Only Residents and Ordinarily Residents (ROR) under Indian tax law are required to report foreign assets.
| Category | Foreign ESOP Reporting Required? |
|---|---|
| Resident and Ordinarily Resident | ✅ Yes |
| Resident but Not Ordinarily Resident (RNOR) | ❌ No |
| Non-Resident (NRI) | ❌ No |
Test your status using Section 6(1) and 6(6) of the Income-tax Act.
Penalty for Non-Reporting of Foreign ESOPs
If you fail to disclose foreign ESOPs in your return:
- Penalty of ₹10 lakh per default under Section 43 of the Black Money Act
- No minimum threshold until 30 Sept 2024
- Prosecution possible in extreme cases (rigorous imprisonment up to 7 years)
Even if the ESOPs are unexercised or vesting in future, they still need to be declared.
Finance Act 2024 Update – Relief for Smaller Foreign Holdings
From 1 October 2024, the Finance Act 2024 brings a crucial update:
- If the total value of movable foreign assets (excluding immovable property) is below ₹20 lakh,
- Penalty under the Black Money Act will not apply for non-reporting.
BUT — Reporting obligation still exists. This amendment provides penalty relief, not exemption from disclosure.
How Can You Get Caught?
India participates in CRS (Common Reporting Standard) and FATCA (Foreign Account Tax Compliance Act) agreements.
That means:
- Foreign financial institutions automatically share data with Indian tax authorities
- If your ITR doesn’t match this information, you can be flagged
- Notices are often issued under Section 148 or 133(6) of the Income Tax Act
In 2023, over 2 lakh taxpayers were sent notices for mismatch in foreign asset reporting.
Practical Tips from Efiletax
- Declare ESOPs even if unexercised – Show value as per fair market value
- Use Schedule FA in ITR-2/ITR-3 – Do not file ITR-1 if you hold foreign assets
- Keep supporting documents: grant letter, vesting details, demat statements
- Don’t rely only on HR – They won’t file your tax return
- Consult a CA or ERI if confused — it’s worth it
Expert View: Why Many Taxpayers Miss This
“Most salaried employees think tax is deducted fully by their company. But ESOPs in foreign firms are personal assets. If not declared, it’s seen as concealment—no excuses,” says a senior tax consultant from Efiletax.
Step-by-Step: How to Report Foreign ESOPs in ITR
- Choose ITR-2 or ITR-3 (depending on salary/profession)
- Go to Schedule FA (Foreign Assets)
- Under “Details of Financial Interest,” enter:
- Name of foreign company
- Country of incorporation
- Value at end of year (FMV)
- Date of acquisition
- Disclose any foreign income if applicable
- Double-check values in INR (use RBI reference rates)
Summary
If you’re a Resident and Ordinarily Resident in India holding ESOPs from a foreign company, report them in your ITR’s Foreign Asset Schedule. Non-disclosure attracts a ₹10 lakh penalty under the Black Money Act, 2015—even if there’s no gain. A Finance Act 2024 update exempts assets below ₹20 lakh from penalty, but reporting is still mandatory.
FAQs
Q1. Are ESOPs given by a US parent company taxable in India?
Yes. On exercise, they are taxed as perquisites under salary. On sale, capital gains apply. Additionally, the holding must be disclosed if you’re ROR.
Q2. What if I sold foreign ESOPs and reinvested abroad?
Still report in Schedule FA and declare capital gains. Reinvestment abroad doesn’t waive reporting.
Q3. I didn’t exercise my ESOPs. Do I still report them?
Yes. If they are granted and vested or you hold any rights, declare the value as of 31st March.
Don’t risk penalties. Disclose right.
Use Efiletax to file your ITR with full compliance — including Schedule FA, ESOPs, and foreign asset reporting. Our experts simplify it for you.