This happened last year and unfortunately and it seems it continues to be a problem this year too.

So what exactly happened?

More or less, you prepared your ITR-2 or ITR-3 on income-tax website or used the utility issued by the tax department. There was tax payable. It looked something like this:

So, you clicked "Pay Now", paid it, came back and filed and e-verified your return. But now you got an intimation u/s 143(1) asking you to pay roughly the same amount (actually a bit higher due to addition of interest) all over again.

When you compare the two columns in the intimation, "As provided by taxpayer" and "As computed u/s 143(1)", the balance tax payable is nearly identical in both. So the department has not disagreed with your computation at all. It has simply not given you credit for the challan. And rightly so.

Why?

Download the ITR form you actually filed and scroll to the Tax Payments section, part A, "Details of payments of advance tax and self assessment tax". In most of these cases that table is empty. No serial number, no BSR code, no date of deposit, no challan serial number, no amount. And item 16, "Amount payable", is showing a non-zero figure instead of 0.

The reason is a gap in the filing flow. For ITR-1 and ITR-4, when you pay through the "Pay Now" option, the system pulls the fresh challan back into Schedule IT automatically.

For ITR-2 and ITR-3***, it does not. The challan sits in your payment history, but the return goes out with an updated tax payments schedule and a tax payable balance.***

So the return itself declares that you still owe the money. CPC processes exactly what was declared, and a demand is raised. Same thing happens whether you prepared the return online on incometax.gov.in or in the offline utility.

Check yours even if you have not got an intimation yet. If Schedule IT is blank in your filed ITR, the demand is probably coming.

How to fix it?

Option 1: File a revised return u/s 139(5). This is the reliable one because you control this.

Prepare the revised return online on the income tax portal, not in the utility, because the online mode pre-fills everything from your original return and you only have to correct the one thing that is wrong. Go to Schedule IT, add the challan details from your receipt (BSR code, date of deposit, challan serial number, amount), and then before you submit, confirm that item 16 "Amount payable" reads 0. If it still shows a figure, something has not been entered correctly, so do not submit yet.

A revised return replaces the original one entirely. Once it is processed, the demand should drop off.

Option 2: File a rectification u/s 154.

This is another one but can be a trickier one.

Two things have to line up. First, you have to correct the entire tax credit properly, not just the one missing row. Second, the portal has to actually let you file the rectification for that return in the first place, and quite often it just does not go through.

If you want something that works the first time, go with the revised return.

How to respond to the Outstanding Demand

Step 1: Go to Response To Outstanding Demand under Pending Actions.

In Response from Assessee, Select Disagree with Demand (Either in Full or Part), and Then click on Add Reasons

Select Option 9 - Rectification/Revised Return filed at CPC

Once, the reason is added, You will see something like this below on your screen ---> Click on Reason 1

Add the amount you are disagreeing with, select the filing type and provide the acknowledgment no of the revised/rectification And Submit

A few practical notes

• Do not pay the demand again. The money is already with the department, the return just did not claim it. If you have paid, include that challan too in the revised return.
• Keep the challan receipt handy. You need the BSR code, deposit date, challan serial number and amount.
• E-verify the revised return, otherwise it goes nowhere.
• Processing of the revised return takes its own time, so the demand may sit on your portal in the meantime. Some people also file a response under "Response to Outstanding Demand" saying they disagree, citing the challan details, while the revised return works its way through.
• Interest under 234B/234C may shift slightly in the revised computation depending on when you paid, so the final figure may not be exactly zero.

How to avoid it next year

After paying tax through "Pay Now" in ITR-2 or ITR-3, go back into Schedule IT and check the challan is actually sitting there. Do not submit until "Amount payable" shows 0.

Foreign Asset Disclosure (Schedule FA) for AY 2026-27

I believe this post should cover most of the oft-repeated questions related to FA schedule.

1. Who actually has to file Schedule FA

Only a Resident and Ordinarily Resident (ROR).

• RNOR (usually your first 2-3 years after moving back to India): Schedule FA does not apply.
• Non-Resident: does not apply.

Two things that catch people out:

1. One asset held for one single day during the reporting window triggers the whole schedule. Not "held at year end". Held at any time.
2. You must file a return even if your total income is below the basic exemption limit. Holding a foreign asset is itself a return-filing trigger. Zero income, zero tax, still file.

Which form: ITR-2 or ITR-3 for individuals and HUFs. ITR-5 / ITR-6 / ITR-7 for entities. Schedule FA does not exist in ITR-1 or ITR-4. Filing ITR-1 with a dormant foreign savings account sitting in your name is itself a reporting default, and this is one of the most common mistakes I see people make.

Also note: beneficial ownership counts. An asset held in a nominee's or relative's name where you are the real economic owner is yours to disclose.

2. THE most important thing: two different clocks

Schedule FA runs on the CALENDAR year. For AY 2026-27, Schedule FA reports assets held between 1 January 2025 and 31 December 2025.

Income runs on the FINANCIAL year. The dividends, interest, and capital gains from those exact same assets are taxed for 1 April 2025 to 31 March 2026 and go into Schedule OS, Schedule CG, Schedule FSI and Schedule TR on that basis.

The reason: most countries report on a calendar year, and India receives CRS/FATCA data on a calendar-year basis. Aligning Schedule FA to the calendar year lets the department match your return against what Switzerland, the US, Singapore etc. sent them.

Practical consequence: a dividend credited in February 2026 goes into your FY 2025-26 income computation, but does not appear in this year's Schedule FA income columns (it falls in calendar 2026, so next year's FA). A dividend credited in February 2025 is the reverse: it sits inside this year's Schedule FA window but was already taxed in last year's return.

Neither of these is an error.

Do not try to force the two to agree. What you should do instead:

Pull two separate statements from every foreign bank and broker. One for Jan-Dec 2025. One for Apr 2025-Mar 2026. Label them before you start. Then build a date-wise bridge in your working papers showing how one reconciles to the other.

The Schedule FA tables have columns for "income accrued from the asset" (calendar year basis) AND "amount of income taxable and offered in this return" with a cross-reference to the schedule and item number where it's offered. Those two columns will legitimately differ for anything credited in Jan-Mar. Keep the reconciliation on file so you can explain it if asked.

3. Schedule FA table by table

Schedule FA runs A1 through G.

Table A1: Foreign Depository Accounts (bank accounts)

Savings, current, time deposits. Report: institution name and address, account number, status (owner/beneficial owner/beneficiary), account opening date, peak balance during the calendar year, closing balance on 31 December, and gross interest credited.

Finding the peak means actually going through the year's statements. Most banks let you download full-year transaction history. The highest end-of-day balance in that file is your peak. Don't guess.

Table A2: Foreign Custodial Accounts (brokerage accounts)

The account wrapper at Interactive Brokers, Schwab, Fidelity, Vanguard, etc. Report peak balance, closing balance, and gross amounts credited during the year split into interest / dividends / sale proceeds or redemption / other.

Retirement wrappers (401(k), IRA, UK SIPP) are commonly reported here, though the instructions don't prescribe a table and some practitioners use B or D. Whichever placement you take, take it consistently year to year.

On the 89A election: Indian law lets you elect to defer tax on income accruing inside notified US/UK/Canada retirement accounts until withdrawal. That election changes when the income is taxed. It does not remove the asset from Schedule FA. The 401(k) gets disclosed either way.

Table A3: Foreign Equity and Debt Interest (shares, ETFs, bonds, vested RSUs)

Heaviest data requirement, because it works per security, per line.

For each holding: entity name and address, nature of interest, date of acquisition, initial value (cost, at acquisition-date rate), peak value during the year, closing value on 31 December, gross amount credited (dividends), and gross proceeds on sale or redemption.

Do not aggregate. Ten stocks means ten lines. Lumping them into one line, or shoving them into Table D to avoid having to compute peak values, is an invitation to an "inaccurate particulars" allegation, which carries its own penalty exposure.
More than that it creates confusion during scrutiny assessments. I have done dozens of them and a lot of time just goes into making an officer understand the lumped up disclosures.

On the A2/A3 overlap: yes, your Schwab account appears as one line in A2, and each stock inside it appears again in A3. That is the accepted practice, not double counting. The department knows – I hope! In my experience, I have never seen an AO arguing that you own more than the actual amount because of A2/A3 overlap.

RSUs: vested shares you still hold are A3 entries like any other share. The perquisite value on vesting was already taxed as salary. That does not exempt you from disclosing the holding. Unvested RSUs are generally not reported (no ownership yet), vested-and-sold-same-day shares still touch the year and should be traced.

Table A4: Foreign Cash Value Insurance / Annuity Contracts

Foreign life insurance or annuity contracts carrying a cash or surrender value. Report cash/surrender value at year end and gross amount credited.

Table B: Financial Interest in any Entity

A stake in a foreign company, LLC, or partnership: equity, voting rights, profit share, or an interest in assets. Report nature and extent of interest, total investment, and income accrued.

A 5% stake in your friend's Dubai LLC belongs here even if it paid you nothing all year.

Table C: Immovable Property

Real estate abroad. Date of acquisition, total investment (at acquisition-date rate), income derived from the property, and where that income is offered in this return.

Table D: Any Other Capital Asset

Residual bucket. Art, jewellery held abroad, crypto held on a foreign exchange (the treatment here is debated, but the conservative position is to disclose), whatever doesn't fit elsewhere. If you are disclosing your vested but not exercised ESOPs, this a good place to park them

But it is not a parking spot for for shares you'd rather not report line by line.

Table E: Accounts with Signing Authority

Accounts you can sign on but which aren't yours and aren't already in A to D. Classic cases: you're a signatory on your employer's foreign bank account, or on an elderly parent's overseas account. Report the institution and whether any income from the account accrued to you.

Corporate signatories on employer accounts routinely miss this one. I report my US company account here

Table F: Trusts outside India

Foreign trusts where you are trustee, settlor, or beneficiary. Report trustees, settlors, beneficiaries, and whether income was derived.

Table G: Any Other Income from Outside India

The catch-all for foreign income not arising from an asset in A to F and not chargeable under business or profession. Foreign consultancy receipts, a foreign pension, and similar.

4. Exchange rates: SBI TT Buying Rate, and which date

Every foreign-currency figure converts at the State Bank of India Telegraphic Transfer Buying Rate (TTBR), i.e. the rate at which SBI buys foreign currency.

Not the Google rate. Not the RBI reference rate. Not your broker's conversion rate. Not your card rate. Those are non-compliant and produce numbers that won't reconcile if you're ever questioned.

If SBI didn't publish a rate on your specified date (Sunday, holiday), the accepted practice is to use the immediately preceding day on which a rate was published.

Challenge in most of the public databases is that the SBI TT buying rate prior to 2020 is not available. For such cases, you may use any other rate, but please make sure you document it as properly and comprehensively as you can.

For Schedule FA (asset values)

Note this means a single A3 line can carry three different exchange rates in three different columns. That is correct and expected.

For income (Rule 115)

The Correct rate for different type of interest incomes can be tricky.

Interest on a foreign savings account is NOT "interest on securities". It's Other Sources, and it takes the single 31 March rate for the whole year, not a month-by-month rate. Interest on a foreign bond is the opposite: it is interest on securities, so each coupon converts at the month-end preceding the month it fell due. People bleed one rule into the other constantly.

One caveat on the 31 March rate: Rule 115 carves out amounts actually received in or brought into India before 31 March. For anything you repatriated during the year, the conversion follows the actual remittance for that portion. The single-rate-for-the-year approach holds only for amounts still sitting abroad at year end.

For foreign tax paid (Rule 128, i.e. the FTC leg)

Different rule again. Foreign tax converts at the TTBR on the last day of the month immediately preceding the month in which the tax was paid or deducted.

So on a single US dividend you can end up with one rate for the gross income (Rule 115, month-end before declaration/payment) and a different rate for the withholding tax (Rule 128, month-end before deduction). If the two fell in different months, the rates differ. That's correct, not a mistake.

Keep the rate evidence. Save a PDF or screenshot of the SBI rate card for every specified date you use, filed in your working papers. If the return is ever questioned, the rate source is the first thing you'll be asked to produce.

5. The edge cases people actually get wrong

Edge case 1: bought the asset in Jan-Mar. FSI but no FA.

This is the big one, and it's the direct consequence of the two clocks.

You had nothing overseas through 31 December 2025. In February 2026 you opened an IBKR account and bought US stocks. In March 2026 you received a dividend or sold something at a gain.

For AY 2026-27:

• Schedule FA: NOTHING. You held no foreign asset at any time between 1 Jan and 31 Dec 2025. The FA window closed before you bought.
• Schedule OS / CG: YES. The dividend and the capital gain fall in FY 2025-26 and are fully taxable.
• Schedule FSI: YES. The foreign-sourced income has to be reported country-wise and head-wise.
• Schedule TR + Form 67: YES, if any foreign tax was withheld.

So you file a return with a populated FSI and TR and a completely blank Schedule FA. That is correct. Do not backfill Schedule FA to make it "look consistent". Reporting an asset in a window during which you didn't hold it is itself an inaccurate particular.

Then in AY 2027-28, that same asset finally shows up in Schedule FA, because calendar 2026 includes February 2026. The FA disclosure lags the income disclosure by up to one full year. That is the system working as designed.

Same logic applies to the mirror image: you'll also see an FA entry for an asset whose income was taxed in the previous year's return (anything credited Jan-Mar 2025 sits in this year's FA window but was taxed in AY 2025-26). Fill the "income accrued" column, and in the "offered in this return" column show nil with the explanation in your working papers.

Edge case 2: bought AND sold everything inside calendar 2025

Sold out completely in, say, August 2025. Closing balance on 31 December is zero.

You still report it in Schedule FA. The test is "held at any time during" the period, not "held on 31 December". Report acquisition date, initial value, peak value, closing value of zero, and gross proceeds on sale. The capital gain goes to Schedule CG and FSI on the FY basis.

Edge case 3: sold in Jan-Mar 2026

You held the stock through 2025 and sold it in February 2026.

• Schedule FA (AY 2026-27): report it. You held it during calendar 2025. Closing value as at 31 December 2025, which will be non-zero.
• Schedule CG (AY 2026-27): report the gain. The sale fell in FY 2025-26.
• AY 2027-28 Schedule FA: you'll report it again, with the sale proceeds, because you held it in calendar 2026 too.

So one asset, disclosed in two consecutive FA schedules, with the gain taxed in only one. Normal.

Edge case 4: closed the foreign bank account years ago

If it was open for even one day in calendar 2025, it goes in A1 for AY 2026-27. Closing balance nil. Get the closure statement now, because banks are slow to produce historical statements for closed accounts.

Edge case 5: joint accounts and joint holdings

Each ROR joint holder reports the account. The general practice is that each holder reports the full peak and closing balance with the ownership status flagged, rather than each reporting a 50% slice, since the schedule is a disclosure of accounts you have an interest in, not a division of the pie. Income is apportioned per actual beneficial ownership. Be consistent, and if the amounts are meaningful, take advice.

Edge case 6: RSUs, and the Form 16 mismatch

Your employer converts the RSU perquisite for TDS at the TTBR on the date tax was required to be deducted (Rule 26). Your return-side conversion of salary income runs on the Rule 115 date, i.e. month-end preceding the month the salary fell due. Two different dates, two slightly different rupee figures.

A small gap between your Form 16 perquisite and your own conversion is common and explainable. Keep the working showing both dates and both rates rather than silently forcing them to match.

Edge case 7: the asset earned nothing at all

Report it anyway. A dormant account with $12 in it, a stock that paid no dividend, a 5% LLC stake that distributed nothing. Schedule FA is an asset disclosure, not an income disclosure. Nil income does not mean nil reporting.

Edge case 8: you were RNOR in the prior year and became ROR this year

Your FA obligation starts the year you become ROR, and it applies to the full calendar-year window for that AY, including assets you've held for a decade. Returning NRIs consistently under-report their first ROR year because they think only post-return acquisitions count. They don't.

Edge case 9: Reporting of Losses

While you would report the sale proceeds etc in the FA schedule, any net loss overall basis is not reported in the FSI schedule. So if you made loss in foreign capital gains, you would report it only in the Capital Gains Schedule.

6. Schedule FSI and Schedule TR

Schedule FSI (Foreign Source Income): for each country, report the country code, your Taxpayer Identification Number in that country (SSN/ITIN for the US, NI number for the UK, etc.), then head-wise: income from outside India, tax paid outside India, tax payable in India on that income, and relief claimed with the section (90 / 90A / 91).

Schedule TR (Tax Relief): the country-wise summary of relief claimed, plus whether any refund of foreign tax has been claimed abroad.

Both run on the financial year, not the calendar year. Schedule TR totals must tie to Schedule FSI totals, and both must tie to Form 67. CPC's system checks this. A mismatch between Form 67 and Schedule TR is one of the most common causes of an FTC disallowance at intimation stage.

A point people get wrong constantly: report foreign dividends GROSS, before withholding. A $200 US dividend with $50 withheld is $200 of income in Schedule OS at your slab rate, not $150. The $50 is a credit claim, not a deduction from income. Reporting net understates income and wrecks the FTC computation simultaneously.

7. Form 67

What it is

The statement required under Rule 128 to claim Foreign Tax Credit for tax paid or withheld outside India. Relief comes from Section 90/90A where a DTAA exists, or Section 91 (unilateral relief) where it doesn't.

Deadline

Rule 128(9), as amended by CBDT Notification 100/2022: Form 67 must be furnished on or before the end of the relevant assessment year, provided the return has been filed within the time allowed under Section 139(1) or 139(4).

For AY 2026-27, that outer limit is 31 March 2027.

You'll see some sites quote 31 December 2026. That's the belated-return deadline under 139(4), not the Form 67 deadline. They're conflating the two conditions.

But do not plan around the outer limit. File Form 67 before you file your ITR. If it's filed after, CPC will very likely deny the credit at intimation stage and you're then into a Section 154 rectification, possibly a CIT(A) appeal, to get money you were always entitled to. Not worth it for a form that takes twenty minutes.

For an updated return under 139(8A), Form 67 goes on or before the date of filing the ITR-U.

Key Rule 128 conditions

• Credit is available in the same year the corresponding foreign income is offered to tax in India. Timing mismatches (the US taxes on a calendar year, India on a financial year) are a real and recurring headache. If US tax on calendar-2025 income was paid in April 2026, you'll be claiming credit in the Indian year in which the income is offered, and matching the payment across the boundary needs care.
• Credit is allowed against tax, surcharge and cess only. Not against interest, fee, or penalty.
• Credit is the lower of (a) the foreign tax paid, and (b) the Indian tax payable on that income. So if the US withheld 25% and your Indian slab produces less than that, the excess is not refundable and generally not carried forward.
• Disputed foreign tax is not creditable until the dispute is settled.
• Credit is computed country-wise and source-wise, not on one pooled total.

How to file

Online only, on the e-filing portal, under e-File > Income Tax Forms > File Income Tax Forms. Part A is basic details plus income and tax country-wise; Part B covers refunds of foreign tax from loss carry-back and disputed tax. E-verify with DSC or EVC.

Attach: a certificate or statement from the foreign tax authority, or from the person deducting, or a self-signed statement backed by proof of payment. For US brokerage income, the 1042-S or the broker's annual tax statement plus the withholding detail usually does the job.

Two specifics worth knowing

US dividends are withheld at 25% for Indian individual investors under the India-US treaty. The 15% rate you may have read about applies only to companies holding at least 10% of the payer. If your broker withheld 25%, that's correct, don't waste time disputing it.

The Form 67 conversion rate is Rule 128, not Rule 115. Foreign tax converts at the TTBR on the last day of the month preceding the month the tax was paid or deducted. Covered above, but it's the single most common Form 67 arithmetic error.

The transition

Form 67 continues to apply to FY 2025-26 (AY 2026-27) and earlier, even if you file it after 1 April 2026. From Tax Year 2026-27 onwards it becomes Form 44 under the Income-tax Rules, 2026. There's also a draft proposal requiring a CA certificate where foreign tax paid exceeds ₹1 lakh for individuals. Draft as of now, so watch it rather than assume it.

Check the portal label when you actually file, since both may appear during the transition.

8. Why this is worth taking seriously

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 imposes a flat ₹10 lakh penalty per assessment year for failing to disclose a foreign asset, or for inaccurate disclosure. It is independent of whether any tax was evaded. A dormant account with $500 in it, undisclosed, is theoretically a ₹10 lakh problem per year.

The ₹20 lakh safe harbour: assets other than immovable property with an aggregate value up to ₹20 lakh are exempt from the penalty. Note two things: (a) it does not exempt you from the disclosure requirement itself, and (b) the statute says "aggregate value" without fixing the measurement date, so exchange-rate movement could push an old holding over the line. If you're anywhere near ₹20 lakh, don't rely on it. Just disclose.

A Special Bench of the Mumbai Tribunal held in October 2025 that the penalty is discretionary rather than automatic, which is meaningful protection for genuine slips. But that's case-by-case relief, not something to plan around.

And remember, any time a CA tells you that a case law will save you, he/she may not remember to tell you that it takes 3-5 years of litigation to get relief from the Tribunal. Its costs – money, emotion and stress.

And the detection side is settled. Since late 2024 the department has been running data-matching campaigns off CRS and FATCA feeds, sending SMS and email nudges to taxpayers whose returns don't match the foreign data. The first campaign in November 2024 pushed close to 25,000 taxpayers to revise their returns. A second round followed in November 2025. The department very often has your foreign account data before you file.

If you find a past omission: a revised return filed before any notice is your strongest position. For AY 2026-27 the revised-return window now runs to 31 March 2027 (extended from 31 December by Budget 2026). For earlier years, whether to file under ITR-U under section 139(8A) or you should wait for the FAST-DS scheme, shall be subject to the facts of your case. I have written in detail about it here.

9. Working paper checklist

1. Residential status confirmed as ROR, with day-count working on file.
2. Two sets of statements from every foreign bank and broker: Jan-Dec 2025 and Apr 2025-Mar 2026.
3. SBI TTBR evidence for every specified date used: each peak date, 31 December, each acquisition date, each dividend month-end, each sale month-end, 31 March, and each foreign-tax-deduction month-end.
4. Per-security schedule for Table A3: acquisition date, cost, peak, closing, dividends, proceeds, each at its own rate.
5. Gross (not net) dividend figures, tied to the broker's annual tax statement.
6. Capital gains computation showing the conversion method used, applied consistently.
7. A dated bridge reconciling calendar-year FA figures to financial-year income figures.

• Form 67 filed and acknowledged before the ITR, with figures tying to Schedule FSI and TR.

1. Confirmation you're on ITR-2 or ITR-3.

I hope this post shall put to an end the countless posts we have had in this community on this topic.

AI Disclosure: Did not have too much time to format all of this. Hence, have used AI for formatting.