Schedule FA for NRIs and Returning NRIs: 401(k), RSU, US Stocks — Peak vs 31-Mar Valuation

Yes, you must declare your foreign 401(k), RSUs and US stocks in your Indian ITR — but only once you are a Resident and Ordinarily Resident (ROR). Schedule FA of the ITR is mandatory for ROR individuals only; NRIs and RNORs are exempt from the foreign-asset schedule. Returning NRIs must begin disclosing foreign assets from the first ROR year, declaring the peak value of financial accounts during the year (not the 31-March closing value alone), with a ₹10 lakh penalty per asset per year under s.43 of the Black Money Act for non-disclosure.

Who Must File Schedule FA

The exemption is the reason a returning NRI's disclosure obligation starts exactly at the ROR sunset year — the same year foreign income becomes taxable. If you became ROR in FY 2024-25, your first Schedule FA is in the ITR for that year.

What Schedule FA Covers

Schedule FA is divided into parts that map to asset types. For a typical returning NRI, the relevant parts are:

Peak vs 31-March Valuation

The most misunderstood rule: Schedule FA does not ask for just the 31-March balance.

For a bank or brokerage account, you report the peak balance even if the year-end balance is much lower. For shares and RSUs, you report the investment at cost (the INR value of the FMV at which they were acquired). The peak balance rule is what catches people who think "my account was empty on 31 March, so I have nothing to declare."

401(k) and RSU-Specific Points

401(k): A US employer 401(k) is declared as a retirement fund under Part A5 (financial interest — retirement funds) with its peak balance during the year. If the entire balance is unvested (employer contributions not yet vested and no employee contributions), the reportable value may be NIL — but the account is still declared.

RSUs: Vested RSU shares held at year-end are declared in Part B at cost — the fair market value on vesting date converted to INR — not at peak market value. Shares that vested and were sold during the year are still declared, with the sale shown in the income column.

Worked Example: Priya's First ROR-Year Schedule FA

Priya returned to India permanently in April 2024 and became ROR in FY 2024-25. Her first Schedule FA is filed for AY 2025-26 (covering FY 2024-25, 1 Apr 2024 – 31 Mar 2025). This example is Priya's second ROR-year Schedule FA — for AY 2026-27 (covering FY 2025-26, 1 Apr 2025 – 31 Mar 2026). (Schedule FA disclosure period is the Indian financial year, with peak balance during the FY and closing balance on 31 March — not the calendar year.) Her foreign assets and the disclosures:

Why the peak matters: Priya's Chase account hit $12,000 in July 2025 but ended the year at $8,000. If she reported only the closing $8,000, she would understate the peak balance the form requires. The same applies to her brokerage cash swing.

The penalty math: If Priya omitted her 401(k), the failure to disclose attracts a penalty of ₹10,00,000 per asset per year under s.43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 — an amount that dwarfs the tax on the underlying income. Omission is penalised even where every rupee of income was reported and taxed.

AY 2026-27 disclosure period. Schedule FA disclosure covers the Indian financial year — FY 2025-26 (1 Apr 2025 – 31 Mar 2026). Peak balance is measured during the FY; closing balance is as on 31 March 2026. The commonly heard "calendar year 2025" framing is wrong for the Indian ITR — that period applies to Schedule TR foreign-tax-paid disclosures for some jurisdictions on a per-country basis, not to Schedule FA asset disclosure. Confirm the exact period in the current year's ITR instructions before filing.

Common Errors in Schedule FA

• Filing as NRI/RNOR past the sunset year — the exemption ends at ROR, and foreign assets must be declared from the first ROR year.
• Reporting only 31-March balances — peak balances during the year are required for accounts.
• Omitting sold shares — RSU shares that vested and were sold during the year are still declared.
• Using market value instead of cost for equity interests in Part B.
• Ignoring the 401(k) / retirement fund — a common omission because the funds are locked away.
• Understating the peak by checking the account only at year-end — the form asks for the highest point, which requires reviewing the full year's statements.

FAQ

Q1: Do I need to declare my foreign 401(k) in my Indian ITR?
Yes, once you are ROR. A 401(k) is a foreign retirement fund declared in Schedule FA Part A5 (financial interest — retirement funds) at its peak balance during the year. If the balance is fully unvested, the reportable value may be NIL, but the account is still declared.

Q2: Are NRIs required to file Schedule FA?
No. Schedule FA applies to ROR individuals. NRIs and RNORs are exempt from the foreign-asset schedule. The obligation starts in the first year you become ROR.

Q3: What is the difference between peak balance and closing balance in Schedule FA?
Peak balance is the highest balance in the account during the relevant period; closing balance is the balance on the year-end date. For bank and custodial accounts, Schedule FA asks for both — reporting only the closing value understates the disclosure.

Q4: How are RSU shares valued in Schedule FA?
Vested and unsold RSU shares are declared in Part B at investment at cost — the FMV on vesting date converted to INR — not at peak market value. Shares vested and sold during the year are still declared, with the sale reported in the income column.

Q5: What is the penalty for not disclosing a foreign asset?
Under s.43 of the Black Money Act, failure to disclose or furnishing inaccurate particulars of a foreign asset attracts a penalty of ₹10 lakh per asset per year, in addition to tax on any undisclosed foreign income.

Q6: I became ROR in FY 2024-25. Which Schedule FA do I file first?
Your first Schedule FA is in the ITR for FY 2024-25 (AY 2025-26), covering assets held in that year. From then on, file it every year, including foreign income in the return.

Q7: Do I declare foreign shares I sold during the year?
Yes. If you held the shares at any point during the year, they are declared in Schedule FA for that year even if you no longer hold them at year-end, with the sale reflected in the income column.

Use our Schedule FA Assistant to organise the asset-by-asset details before you file.

Sources

• Schedule FA, ITR-2 / ITR-3 — foreign assets and foreign source income disclosure.
• Section 43, Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 — ₹10 lakh per-asset penalty.
• Sections 5(1), 5(2), 6(1), 6(6), Income-tax Act 1961 — scope of income and residential status driving Schedule FA applicability.
• CBDT ITR instructions on Schedule FA valuation (peak balance for accounts, cost for equity interests).

Get the Schedule FA right from your first ROR year — the penalty for an omission is far larger than the tax it hides. Book a consultation at harunraaj.com.

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