Indian residents sent USD 2.61 billion abroad for overseas equity and debt investment between January and August 2026 under the Liberalised Remittance Scheme, up from USD 1.40 billion in the same months of 2025, according to RBI data summarised on 2 November 2026. In August alone, such remittances rose 111.28 per cent from a year earlier, Business Standard reported. Each of these investments will eventually earn income outside India, and for a resident client that income belongs in Schedule FSI, the part of the return that records foreign source income and the relief claimed for tax paid abroad. Returns for tax year 2025-26 from clients whose accounts must be audited are due on 21 November 2026, after the CBDT moved the date from 31 October, All India Radio reported.
For a client with US income, Schedule FSI is where several documents have to agree. Its figures must match the foreign tax credit statement, Schedule TR, Schedule FA and the payer's own records, and when they disagree the relief claimed has nothing consistent to rest on. The guide to US commercial real estate for advisors in India explains the structure that produces this income, and this article follows it into the Indian return.
What Schedule FSI asks a resident client to report
Schedule FSI appears in ITR-2 and ITR-3. A person who has income from any source outside India, or any asset located outside India, cannot use ITR-1, according to the Income Tax Department's guide to which return applies. The schedule is organised country by country. For each country, the client gives the taxpayer identification number used there and then, head of income by head of income, the income earned outside India, the tax paid on it abroad, the Indian tax on the same income and the relief claimed.
Where relief is claimed under a tax treaty, the relevant article of that treaty is named, as filing guides for this year set out. Schedule TR then summarises the tax paid abroad and the total relief, country by country, under section 90 where a treaty applies or section 91 where none does. Because India taxes a resident and ordinarily resident individual on worldwide income, the foreign income is included in total income first, and Schedule FSI shows how much of the Indian tax on it is offset by tax paid abroad.
Why a US property investment produces foreign income
The money leaves India under the LRS, with TCS collected on investment remittances above the threshold, as the guide to TCS on foreign remittance explains. Offshore investors, including Indian clients, typically invest in US property through a US corporation, known as a blocker, that holds the property interest. The blocker pays US corporate tax on its own income, so anything it later pays to investors is a dividend. US tax is withheld from that dividend before the money reaches India.
Article 10 of the India-US tax treaty limits that tax to 25 per cent of the gross dividend for an Indian resident individual. The client claims the treaty rate by giving the payer a Form W-8BEN, the short US form in which a foreign person certifies where they live. The payer then reports the year's dividends and withholding on Form 1042-S, which the IRS instructions for Form 1042-S say must reach the recipient by 15 March of the following calendar year. In Schedule FSI the dividend sits under income from other sources, and the US tax on the form is the tax paid outside India.
How Schedule FSI, Schedule TR and Form 67 work together
Relief does not follow simply because the schedule has been filled in. Rule 128 of the Income-tax Rules, 1962, which still governs returns for tax year 2025-26, makes the credit depend on a separate statement in Form 67 and on proof of the tax paid. Under sub-rule (9), that statement can be furnished up to the end of the assessment year, which for this income is 31 March 2027, provided the return was filed within the time allowed or as a belated return. Even so, the e-filing portal's own help page describes the return due date as the time limit, so filing Form 67 before the return removes any doubt.
The same rule caps the relief. Sub-rule (5) sets the credit at the lower of the Indian tax on the income and the foreign tax paid on it, and Article 25 of the treaty sets the same limit in its own words. The US tax is converted into rupees at the telegraphic transfer buying rate on the last day of the month before the month in which the tax was deducted.
For example, a client receives a dividend from a US corporation in September 2025 equal to ₹4 lakh, and US tax of ₹1 lakh is withheld at the treaty rate of 25 per cent. If the client's slab rate is 30 per cent, Indian tax on that dividend is ₹1.2 lakh before surcharge and cess. Schedule FSI then shows income of ₹4 lakh, tax paid outside India of ₹1 lakh, Indian tax of ₹1.2 lakh and relief of ₹1 lakh, so the client pays the balance of ₹20,000 in India. At a 20 per cent slab rate, the Indian tax would be ₹80,000, the relief would stop at that figure, and ₹20,000 of US tax would not be recovered in India. The figures are illustrative.
Where Schedule FSI and Schedule FA follow different calendars
Schedule FSI follows the Indian tax year, April to March. Schedule FA, where a resident discloses foreign assets such as shares in a US corporation, follows the calendar year, so the return for tax year 2025-26 discloses holdings during calendar 2025. Form 1042-S also runs by calendar year, so the figures agree only after the CA has split each dividend by its payment date. The article on the Form 1042-S foreign tax credit works through that split payment by payment.
The department also has its own view. Data received from other countries under automatic exchange agreements now appears in a Foreign Assets Information report on the compliance portal, enabled by a CBDT order of 8 July 2026, according to a TaxGuru explainer. A Schedule FSI that leaves out income from an asset the department can already see is likely to draw a question.
What advisors should do before the return is filed
None of this paperwork says whether the income will continue. Dividends from a US property investment depend on tenants paying rent, on operating costs and on the property meeting its loan payments, and a sponsor can reduce or stop them. Property values can fall, borrowing adds leverage, the investment is usually illiquid for several years, and currency movements change the rupee value of every payment. A single property concentrates these risks, and capital can be lost.
The advisor's work is mostly about collecting evidence early. Each step relies on the one before it, so the steps run in this order.
- Confirm the client's residential status for tax year 2025-26, because the schedules that follow assume a resident and ordinarily resident individual.
- Collect the 2025 Form 1042-S and the payment-wise statements behind it, and match each dividend to the Indian tax year in which it was paid.
- Convert the US tax at the rate Rule 128 prescribes, and cap the relief at the Indian tax on each item of income.
- File Form 67 with proof of the US tax first, then complete Schedule FSI and Schedule TR from the same figures.
- Check that the shares in the US corporation appear in Schedule FA and agree with the Foreign Assets Information report, then file before the client's due date, which is 21 November 2026 where the accounts must be audited.
Advisors who introduce eligible clients through Raveum's partner page will meet this cycle every year, because a blocker structure produces a Form 1042-S each March and the Indian claim follows months later. Raveum handles the KYC, the agreements and the US tax forms, while the client's Indian tax position stays with the client and their CA.
The LRS figures show more Indian money going abroad each month, and most of the tax conversation happens at the point of investing, when TCS is collected. The harder work comes later, when the income arrives and has to be reported in a schedule most clients have never opened. An advisor who treats the first dividend, rather than the filing deadline, as the moment to start collecting evidence keeps the client's relief intact and the return consistent with what the department already holds. The US commercial real estate guide for advisors sets out the structure behind that income.
Frequently asked questions
What is Schedule FSI in an income tax return?
Schedule FSI is the part of ITR-2 and ITR-3 where a resident reports income earned outside India, country by country and head by head. For each item it records the tax paid abroad, the Indian tax on the same income and the relief claimed, with the treaty article where a treaty applies. Schedule TR then summarises the total relief.
Who needs to fill Schedule FSI?
A resident client who earned income outside India during the tax year, and wants relief for tax paid there, reports it in Schedule FSI. According to the Income Tax Department, a person with income from a source outside India, or an asset located outside India, cannot use ITR-1, so such clients file ITR-2 or ITR-3.
Is Form 67 required to claim relief shown in Schedule FSI?
Yes. For tax year 2025-26, Rule 128 of the Income-tax Rules, 1962 makes the credit depend on Form 67 and proof of the foreign tax. The rule allows the form until 31 March 2027 if the return was filed on time or as a belated return. From tax year 2026-27, Form 44 under Rule 76 replaces it.
What is the difference between Schedule FSI and Schedule FA?
Schedule FSI reports foreign income for the Indian tax year, April to March, together with the tax relief claimed on it. Schedule FA discloses foreign assets, such as shares in a US corporation, for the calendar year ending 31 December. A client with a US holding usually fills both, and the two should describe the same holding consistently.
Can the relief in Schedule FSI be more than the Indian tax on that income?
No. Rule 128 limits the credit to the lower of the Indian tax on the income and the foreign tax paid on it, and Article 25 of the India-US treaty sets the same limit. If the US tax withheld on a dividend is higher than the Indian tax on it, the excess is not recovered in India.
Does a correctly filed Schedule FSI make a US investment less risky?
No. Schedule FSI deals only with tax. A US property investment can still lose value, tenants can leave, borrowing adds leverage, and distributions may be reduced or stopped. Such investments are usually illiquid for several years and their rupee value moves with the currency. Whether one suits a client is a separate decision for the client and their advisers.
This article is for general education and is not tax, legal or investment advice. Rules change and depend on individual circumstances. All investing involves risk, including loss of capital, illiquidity and currency movements. Offerings on Raveum are available to eligible investors only and are not open to the general public.
