Budget 2025 Wishlist: Extend Income Tax Return Filing Deadlines for Residents Earning Foreign Income

Budget season is here again! Alongside speculations about tax slabs and deductions, a critical topic on everyone’s radar is extending income tax return filing deadlines for residents earning foreign income. For those juggling global earnings and foreign tax credits (FTC), this tweak could make a world of difference.

As auditors offering services like Income Tax Return Filing, Foreign Tax Credit Assistance, and ITR Assessment, we understand the unique challenges of managing taxes across borders. Let’s dive into why this adjustment is overdue and how it could benefit taxpayers and the government alike.

Why Residents with Foreign Income Deserve More Time

Managing global income taxes is no walk in the park! Most countries like the US, UK, Australia, and Germany use the calendar year (January–December) as their tax period. Meanwhile, India follows a fiscal year (April–March). This mismatch often creates "Why is this so complicated?" moments for taxpayers.

Residents earning abroad have to file their Indian Income Tax Return (ITR) by July 31. If they need to revise it, they’re stuck with a tight deadline of December 31. Unfortunately, many foreign tax return deadlines extend beyond this, leaving little room for taxpayers to reconcile their foreign income or claim FTC accurately.

If you're someone dealing with such issues, we can help with services like Form 67 Filing for FTC and Expatriate Taxation.

The Key Challenges for Taxpayers with Foreign Income

Here are the most pressing issues taxpayers face:

1. Mismatched Tax Years Create Confusion

While most countries stick to the calendar year for taxes, India’s fiscal year system creates reporting mismatches. This often leads to errors in calculating income and taxes, affecting both the tax liability and FTC claims.

Solution: Extended deadlines could provide breathing room to address these differences and avoid filing amended returns.

2. Short Deadlines for Revised Returns

Since FY 2021-22, taxpayers can only revise their ITR until December 31. However, foreign tax figures are finalized later in the year, leaving many unable to update their Indian returns in time.

Filing an updated return after this date comes with hefty penalties (25%-50%), even if your initial filing was accurate based on available data.

We specialize in helping taxpayers navigate these challenges through services like Updated Return Filing and Tax Planning.

3. Foreign Tax Credit (FTC) Discrepancies

Taxpayers claiming FTC often rely on foreign pay slips to report income and taxes in their Indian ITR. But when foreign tax refunds or additional deductions are finalized later, the earlier FTC claim may no longer match.

This discrepancy can lead to:

• FTC disallowance during ITR processing.

• Additional tax liabilities.

• Penalties and scrutiny assessments.

To avoid such hassles, we offer FTC Assistance and Tax Dispute Resolutions.

Why Budget 2025 Must Step Up

The Budget 2025 wish list for residents earning foreign income is simple: Extend the deadlines for filing and revising ITRs. This would:

• Align Indian returns with final foreign tax figures.

• Eliminate errors, disputes, and penalties.

• Save the Income Tax Department time and resources.

A fair, efficient tax system builds trust and expands the tax base. It’s a win-win for everyone!

How We Can Help

If you’re navigating international taxes, we’re here to simplify the process. From Income Tax Matters & Tax Planning to Global Taxation Compliance, we have your back. Here’s how we can assist:

1. Filing your ITR accurately.

2. Helping you claim the right Foreign Tax Credit (Form 67).

3. Resolving any discrepancies through Tax Dispute Resolution.

Looking Ahead: A Taxpayer-Friendly Budget

With Budget 2025 on the horizon, let’s hope the government acknowledges these challenges and introduces taxpayer-friendly reforms. Extended deadlines for income tax return filing for residents earning foreign income would simplify compliance and reduce unnecessary financial burdens.

As auditors, we’re ready to help you navigate these changes. Stay tuned for more updates, or check out our full range of services to see how we can support you this tax season!