Global Real Estate Transparency and Schedule FA: A New Compliance Reality for Indian Taxpayers

The global tax environment has entered a decisive phase where opacity in offshore wealth holding—particularly foreign real estate—is no longer sustainable. The OECD’s expansion of its transparency framework, aimed at capturing overseas property ownership, has far-reaching consequences for Indian residents, especially High Net Worth Individuals (HNIs) who hold immovable property abroad either directly or through layered ownership structures. When viewed alongside India’s stringent disclosure regime under Schedule FA of the Income Tax Return, this development significantly raises both compliance expectations and litigation exposure.

OECD’s Enhanced Transparency Framework and Real Estate

The Common Reporting Standard (CRS), originally designed to facilitate automatic exchange of information relating to financial accounts, is now being widened to cover non-financial assets, notably overseas immovable property. This initiative addresses a structural gap whereby real estate investments, despite being a major repository of offshore wealth, historically escaped routine information exchange.

Under the expanded framework, tax administrations will receive data relating to ownership, beneficial interest, residency status, rental income, capital appreciation and indirect holdings through entities such as SPVs, trusts or foundations. Importantly, the focus is not merely on legal ownership but on ultimate beneficial ownership, thereby piercing artificial structures designed to conceal the real taxpayer.

Schedule FA – India’s First Line of Defence

India has been ahead of the curve in mandating disclosure of foreign assets through Schedule FA, which applies to all residents (including RNORs in specified cases). Schedule FA requires exhaustive reporting of:
Foreign bank accounts and custodial accounts

Financial interest in foreign entities

Immovable property located outside India

Foreign trusts, insurance contracts and retirement accounts

For foreign immovable property, Schedule FA specifically requires disclosure of location, ownership interest, acquisition date, cost of acquisition and income derived, if any. These disclosures are not merely informational; they form the evidentiary foundation for assessing source of funds, taxability of income and applicability of anti-abuse provisions.

Convergence of CRS Data and Schedule FA

The real impact of the OECD initiative lies in the convergence of CRS-driven information exchange with Schedule FA disclosures. Indian tax authorities will now be in a position to cross-verify:

CRS data received from foreign jurisdictions

Schedule FA disclosures in Indian returns

Foreign tax filings and property registries

Banking trails used for acquisition and maintenance of property

Any mismatch—whether non-disclosure, under-reporting, incorrect ownership characterization or omission of income—may trigger reassessment proceedings under section 147, additions under section 69/69A, or even proceedings under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015.

Residency, Golden Visas and Beneficial Ownership Risks

Overseas real estate investments are often linked with residency-by-investment or Golden Visa programmes, particularly in Europe and Southeast Asia. While such arrangements may confer immigration benefits, they do not override Indian tax residency rules or disclosure obligations.

Tax authorities are increasingly scrutinising whether taxpayers claiming non-resident or treaty benefits continue to retain economic and residential ties with India. Properties held through offshore companies or family members, including minors, will be examined through the lens of beneficial ownership and substance over form.

Documentation and Evidentiary Burden

In the post-transparency era, mere disclosure in Schedule FA may not suffice. Taxpayers must maintain robust documentation to substantiate:

Source of funds used for acquisition

Mode of remittance and banking channels

Ownership structure and beneficial interest

Rental income, expenses and foreign taxes paid

Capital gains computation on eventual disposal

Judicial precedents have consistently held that where foreign assets are disclosed and the taxpayer has demonstrable explained sources, additions on mere suspicion are unsustainable. However, failure to disclose or inability to reconcile disclosures with exchanged information materially weakens the taxpayer’s defence.

Strategic and Compliance Takeaways

The OECD’s real estate transparency push, when read with Schedule FA, marks a paradigm shift from self-reporting to system-verified compliance. Indian taxpayers with overseas property holdings must proactively review their disclosures, align them with global reporting standards and ensure consistency across jurisdictions.

Going forward, tax planning must rest on economic substance, transparency and contemporaneous documentation, as structures built on opacity are increasingly vulnerable to regulatory challenge.

Disclaimer:
This article is intended solely for professional and academic discussion. It does not constitute legal or tax advice. Readers should seek independent professional advice before taking any action based on the contents of this article.