Foreign Pension or Assets? File ITR-2 or Pay Big

If you have a foreign bank account, US 401(k), or overseas pension, you cannot file the simple ITR-1 this year. You must use ITR-2 instead, or face heavy penalties under the Black Money Act.

Here's what happened: For AY 2026-27, taxpayers with foreign assets, overseas retirement accounts like a US 401(k), or foreign income must file ITR-2 — not the simpler ITR-1.. Returning NRIs who became Indian residents but still hold foreign accounts, property, or pensions abroad are required to declare all such assets under Schedule FA in ITR-2.. Failure to report foreign assets — even dormant ones — can attract penalties up to ₹10 lakh under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015..

What you should do: Check your residency status: if you spent 182+ days in India in FY 2025-26 and hold any foreign account or asset, switch from ITR-1 to ITR-2 immediately.. Gather all foreign asset details — account numbers, balance in the local currency converted to INR as of 31 December 2025, and any income earned — to fill Schedule FA accurately.. If you are a returning NRI with a 401(k), PPF-equivalent foreign pension, or overseas property, consult a CA experienced in FEMA and international tax before the July 31, 2025 deadline..

Even a zero-balance foreign bank account must be declared in Schedule FA. Closing it after the financial year ends doesn't remove your reporting obligation for that year.