Investors in Gift City Must File ITR Disclosures by July Deadline

Investors in GIFT City Must Report Foreign Assets in ITR to Avoid Penalties

For investors looking to build diversified long-term portfolios, GIFT City is emerging as a favored gateway to access global opportunities. However, tax compliance is also crucial when accessing global markets and dollar-denominated assets. Two areas often overlooked when filing income tax returns (ITR) are reporting foreign assets and tax collected at sources (TCS) on remittances.

Reporting Foreign Assets in ITR

The first area to consider is reporting foreign assets in ITR under Schedule Foreign Assets (FA). Many investors overlook this requirement. GIFT City IFSC investments are treated as foreign assets for income-tax purposes. Resident Indians must report them in Schedule FA every year, without exception. Penalties under the Black Money Act for non-disclosure are severe and not theoretical.

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Failing to disclose foreign income/assets can lead to heavy monetary penalties, scrutiny notices from the tax department, questions about undisclosed foreign holdings, and litigation risk, even where taxes were otherwise paid correctly. Under the Foreign Exchange Management Act (FEMA), 1999, a unit in the GIFT city is considered a person resident outside India (a non-resident) for transactions with residents in the rest of India.

TCS on Remittances

The second area to consider is TCS on remittances above Rs 10 lakh in a financial year. Investment-purpose remittances attract 20 percent TCS in FY 2026-27. This is not an additional tax, but rather a credit, fully adjustable against your final income tax liability when you file. The cashflow hit is real, but the economic cost is zero. However, TCS funds may be locked for a few months, depending on when you are investing.

If the TCS amount is not reflected in your return, you may not get the credit adjusted against your final tax liability, which could mean a delayed refund. Cashflow impact can be significant. For example, suppose an investor remits Rs 25 lakh abroad for a GIFT City-linked offshore investment. Since remittances above Rs 10 lakh attract 20 percent TCS for investment purposes in FY 2026-27, the investor may have to pay Rs 3 lakh as TCS on the excess Rs 15 lakh amount.

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While this TCS amount is fully recoverable as a tax credit while filing the income tax return, the money can remain blocked for months, creating a temporary cashflow impact. Even though the economic cost is effectively zero after adjustment, the liquidity impact is real and must be planned for.