A one-time window to regularise unreported foreign assets closes on 31 December 2026. DSRV India explains eligibility, the two cost categories, the valuation rule that catches people out, and five real scenarios.
For a decade, forgetting to report a foreign bank account carried a punishment wildly out of proportion to the mistake. Tax at 30 per cent of the asset's value. A penalty of three times that tax. A further ₹10 lakh for every year you did not disclose. And the possibility of prosecution on top.
The Government has now opened a one-time window to fix it. The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026, came into force on 16 August 2026 and closes on 31 December 2026. No declaration can be filed after that date.
This guide explains what the scheme does, who can use it, what it costs, and through five worked examples what it looks like in practice. Everything here follows the CBDT's own frequently asked questions on the Scheme and Rules.
If you hold or have ever held an asset outside India that never made it into Schedule FA, read this now rather than in December. The work that decides the outcome takes weeks.
Eligibility has three limbs. All three must be satisfied.
An eligible assessee is a person who is resident in India under section 6 of the Income-tax Act, 1961 in the relevant previous year. It also covers a person who is now a non-resident, or resident but not ordinarily resident, but who was resident in India either in the year the undisclosed foreign income relates to, or in the year the foreign asset was acquired.
That second limb is easily missed and it matters enormously. If you have since emigrated and are a non-resident today, you can still declare, provided you were resident when the income arose or the asset was acquired. The same applies to an RNOR. This scheme is not limited to people currently living in India.
If you are unsure which category you fall into for a given year, work through residential status and its impact on taxability before anything else, and if you returned to India after a long spell abroad, check the position on taxation for a resident but not ordinarily resident as well.
You can declare where you failed to furnish a return under section 139, or furnished a return before the scheme commenced but did not disclose the asset or income in it, or where the asset or income has escaped assessment within the meaning of section 147.
A declaration can be made for any previous year, subject to the monetary thresholds. There is no cut-off year.
The scheme does not apply to any income or asset which directly or indirectly represents proceeds of crime where proceedings have been initiated or are pending under the Prevention of Money-laundering Act, 2002. Nor does it apply to any income or asset relating to an assessment year for which Black Money Act assessment proceedings have already been completed.
Much of the commentary published before the rules were notified assumed the scheme would shut out anyone whose foreign account had already been reported to India under the Common Reporting Standard or FATCA. It does not.
There is no exclusion for prior receipt of information under a tax treaty, a tax information exchange agreement or the automatic exchange framework. There is no exclusion for having received a NUDGE communication. There is no exclusion for an entry appearing in your Annual Information Statement.
Nor does a pending proceeding shut you out. A declaration may be made even where the income or asset has escaped assessment, and where an assessment is already pending, the Assessing Officer must take the declaration into account in finalising it.
Only a completed Black Money Act assessment for the relevant year closes the door, along with PMLA proceeds-of-crime proceedings. So if you received a departmental message about foreign assets and assumed that disqualified you, it does not. You are precisely the person this scheme was designed for. If a notice has already arrived, our guide on handling disputes under the Black Money Act explains what the proceeding looks like if you choose not to declare.
Everything turns on one question: was the money behind the asset ever taxed in India?
The CBDT's own worked example for Category 1: a foreign bank account valued at ₹60 lakh and undisclosed foreign income of ₹20 lakh. Tax at 30 per cent is ₹18 lakh and ₹6 lakh, a total of ₹24 lakh. The additional amount is a further ₹24 lakh. Total payable, ₹48 lakh.
Now set that against the alternative. Under the Black Money Act the same facts attract tax of 30 per cent plus a penalty of three times the tax, so 120 per cent of value, together with a flat ₹10 lakh for each year of non-disclosure and exposure to prosecution. Sixty per cent, once, with immunity, is a very different proposition. Our note on black money and non-residents sets out how that regime operates.
This is the single most important practical point in the scheme, and most people get it wrong.
The value of a foreign bank account is the sum of all deposits made into it from the date it was opened up to 31 March 2026. Not the balance. Not the peak balance. The cumulative total of every credit.
Two exclusions apply. Where the account was declared earlier under Chapter VI of the Black Money Act, 2015 and tax and penalty were paid, only deposits since that declaration count. And deposits made out of the proceeds of a withdrawal from the same account are excluded, so money going round in a circle is not counted twice.
The consequence is stark. A salary account opened in 2011, through which ₹8 lakh a year passed for twelve years, has a value close to a crore even if the balance today is ₹3 lakh. That value is what gets tested against the ₹1 crore Category 1 ceiling.
Reconstruct the deposit history of every foreign account before you assume you are within the threshold. This is the calculation that decides eligibility for a large number of people, and it is not the calculation most of them will instinctively make.
For everything else, assets are valued as on 31 March 2026 at the higher of cost of acquisition and open market price, supported by a report from a valuer recognised by the government of the country where the asset is located. Where no such valuation is carried out, the indexed cost of acquisition is deemed to be the fair market value.
Two further points worth knowing. Where the proceeds of one asset were used to buy another, a property sold, the money banked, part of it used to buy a second property, the value of the first asset is reduced by the amount reinvested, so the same money is not taxed twice. And all values are reported in rupees, converted at the Reserve Bank reference rate on the valuation date.
There is also a genuine safe harbour. Rule 5(2) provides that for assets other than a bank account, a variance not exceeding 20 per cent between the value you declare and the value the Assessing Officer later determines will not, by itself, invalidate the declaration on grounds of misrepresentation or false particulars. That is real protection when valuing an overseas property or unquoted shares. It does not apply to bank accounts, where the deposit-sum calculation is arithmetic rather than judgement.
The outer limit is what matters. Payment must be made within a maximum of four months from the end of the month in which the Form 2 order was passed. Miss that and you lose the benefit of the scheme for that declaration, by which point you have already made a signed, detailed disclosure of a foreign asset to the Department.
Arrange the funds before you file, not after.
These are the situations we see most often. Figures are illustrative.
An engineer in Gurugram works for the Indian arm of a US technology group. Between 2019 and 2025 restricted stock units vested each year. The perquisite was taxed through payroll and appears in every Form 16. When she sold a tranche in 2023 she declared the capital gain and paid the tax. She has never completed Schedule FA, because she did not know that vested shares of a foreign parent are a foreign asset. The holding is worth ₹45 lakh as on 31 March 2026, and the brokerage account holding it is a separate reportable asset.
Category. Category 2. The money behind the asset was taxed in India, as a perquisite on vesting and as a capital gain on sale. The only failure is the Schedule FA reporting.
Within the ceiling? Yes. ₹45 lakh is well inside ₹5 crore.
What she pays. A flat fee of ₹1 lakh.
The alternative. A penalty of ₹10 lakh under section 43 of the Black Money Act for each assessment year the disclosure was missed. Across six years that is a theoretical ₹60 lakh, on shares worth ₹45 lakh, where not a rupee of tax was lost. This is exactly the exposure described in our guide on what happens if you do not disclose foreign income in your ITR.
What to gather. Grant and vesting statements, Form 16 for each year showing the perquisite and TDS, the plan administrator's holding statement, and the capital gains computation for the 2023 sale.
An engineer worked in the UAE from 2014 to 2022 and was a non-resident throughout. His salary was not chargeable to tax in India. He returned permanently in 2022, became resident and ordinarily resident from 2024-25, and still holds his Dubai bank account. He has never reported it. Total deposits from opening to 31 March 2026 come to ₹1.9 crore, although the balance today is around ₹22 lakh.
Category. Category 2. The account was acquired and funded while he was a non-resident, out of income not chargeable in India. It is not undisclosed income, it is an unreported asset. The distinction rests on how foreign source income of a resident is taxed.
Within the ceiling? Yes, ₹1.9 crore is within the ₹5 crore Category 2 limit. Note that had this fallen in Category 1, the ₹1 crore ceiling would have shut him out entirely. Which is why getting the category right is worth real effort.
What he pays. A flat fee of ₹1 lakh.
The point to notice. The account is valued at ₹1.9 crore of cumulative deposits, not the ₹22 lakh balance. That does not change what he pays here, because Category 2 is a flat fee. It would change everything if the funding source could not be evidenced and the asset fell into Category 1.
What to gather. The UAE employment contract and payslips, evidence of non-resident status for each year with passport pages and a day-count computation, full bank statements from account opening, and the residential status computation for the year of return.
A consultant resident in India has invoiced overseas clients since 2020 and asked them to pay into an account he opened abroad. The income was never offered to tax in India and the account was never reported. Cumulative deposits to 31 March 2026 are ₹62 lakh. Foreign income earned in the year not offered to tax is ₹14 lakh.
Category. Category 1. This is genuinely undisclosed foreign income and an undisclosed foreign asset. Nothing was ever taxed.
Within the ceiling? Yes, but only just. ₹62 lakh plus ₹14 lakh is ₹76 lakh, inside the ₹1 crore ceiling. Another two years of the same activity would have taken him outside the scheme.
What he pays. Tax at 30 per cent on ₹76 lakh is ₹22.8 lakh. The additional amount is a further ₹22.8 lakh. Total ₹45.6 lakh.
The alternative. Under the Black Money Act, 120 per cent of value, roughly ₹91 lakh, plus ₹10 lakh for each year of non-disclosure, plus exposure to prosecution under sections 49 to 51.
The wider point. For this taxpayer the scheme is not a saving of a few lakhs. It is the difference between a manageable one-time cost and a liability exceeding the value of the asset, with a criminal exposure attached.
A resident inherited a flat in London in 2019 from a parent who had been a non-resident for thirty years. The property is worth ₹2.4 crore on a recognised valuer's report as on 31 March 2026. It produces modest rent, remitted to the parent's old account and never declared in India. It has never appeared in Schedule FA.
Category. Split. The property was acquired by inheritance from a non-resident and falls in Category 2. The rental income, which was chargeable in India and never offered, is undisclosed foreign income in Category 1 and must be declared separately.
Within the ceilings? The property at ₹2.4 crore is within the ₹5 crore Category 2 limit. The rental income is tested against the ₹1 crore Category 1 limit and will comfortably be within it.
What she pays. ₹1 lakh flat fee for the property, plus 60 per cent of the aggregate undisclosed rental income under Category 1.
Why the scheme matters here specifically. The separate relief introduced by the Finance Act, 2026, which excludes prosecution under sections 49 and 50 where non-immovable foreign assets are within ₹20 lakh, does not extend to immovable property. For an unreported overseas property, the scheme is the only route to prosecution immunity.
What to gather. The will or succession document, the parent's non-resident status, the property title, a valuation report from a valuer recognised by the UK government or its agency, and the rental history.
A young professional studied in Canada from 2018 to 2021, kept a student bank account and a small brokerage account, and returned to India. Cumulative deposits into the bank account are ₹11 lakh. The brokerage holding is worth ₹6 lakh. Nothing was reported in Schedule FA. Everything was funded by his parents out of taxed money remitted under the Liberalised Remittance Scheme.
Category. Category 2 on the face of it, acquired from already-taxed income and while he was a non-resident.
Cost under the scheme. ₹1 lakh flat fee.
But consider the alternative. His aggregate non-immovable foreign assets are ₹17 lakh, below ₹20 lakh. The ₹10 lakh penalty under sections 42 and 43 of the Black Money Act does not apply below that threshold. Prosecution under sections 49 and 50 is excluded below the same threshold, with retrospective effect from 1 October 2024. And the Tribunal has consistently held the section 43 penalty to be discretionary and not leviable for a genuinely inadvertent lapse.
The honest advice. Paying ₹1 lakh to regularise an exposure that may already be close to nil is not obviously the right answer. A revised or updated return disclosing the assets in Schedule FA may achieve the same practical result at no cost, and our note on which ITR form NRIs should use covers the Schedule FA and FSI mechanics.
What tips the balance. Whether the funding source can be evidenced. If the LRS remittances and the parents' tax position can be documented, the ordinary route is likely sufficient. If they cannot, the asset risks being characterised as undisclosed, Category 1, 60 per cent, and the certainty of the scheme becomes worth paying for.
This is the part most likely to be glossed over in general coverage, and it can be expensive.
The immunity is confined to the Black Money Act. A valid declaration gives immunity from further tax, penalty and prosecution under the Black Money Act, 2015, and the declared income or investment is not included in total income under the Income-tax Act, 1961 or the Black Money Act. It confers no immunity under FEMA, the Prevention of Money-laundering Act, the Benami law or general criminal law.
FEMA is the real gap. Section 4 of FEMA prohibits a resident from holding foreign exchange, foreign securities or immovable property outside India except as permitted. Section 6(4) protects assets acquired while resident outside India, and the Liberalised Remittance Scheme covers permitted remittances, but an asset acquired outside both routes is a contravention attracting a penalty of up to three times the sum involved and seizure of an equivalent Indian asset under section 37A.
A FAST-DS declaration is a signed, detailed, documented admission that the asset was held. Where the exchange control position is doubtful, a compounding application should be considered alongside the declaration, not afterwards. Our note on benefits to NRIs under FEMA and the Income Tax Act explains where the two definitions of residence diverge, which is often where the problem starts.
You cannot reopen the past. In respect of the income or asset declared, or any amount paid, you cannot claim rectification or revision of an assessment already made, and cannot claim any set-off or relief in any appeal or other proceeding relating to that assessment.
The declaration must be accurate. The immunity is conditional and can be rendered invalid if material particulars are found to be false. The 20 per cent safe harbour in Rule 5(2) protects a good-faith valuation difference. It does not protect an incomplete disclosure.
Reconstructing account histories, classifying each asset between the two categories, obtaining overseas valuations and settling the exchange control position all take time you will not have in December. We advise on eligibility, prepare and file declarations in Form 1, handle the valuation and documentation, and assess the parallel FEMA position. If you hold or have held assets outside India that were not reported, get the position reviewed now. Contact CA Sanjay Kumar Agrawal at sanjay@dsrvindia.com.
Disclaimer: This article is for general information and business awareness only and does not constitute professional or legal advice. Statutory provisions, notifications and judicial precedents referred to should be verified as on the date of use, and positions must be tailored to the facts of each matter. For advice on a specific notice or proceeding, please contact DSRV & Co. LLP.
The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026, a one-time voluntary disclosure scheme under Chapter IV, sections 130 to 144 of the Finance Act, 2026, read with the FAST-DS Rules, 2026. It lets eligible taxpayers declare certain undisclosed foreign assets, undisclosed foreign income or undeclared foreign assets on payment of a specified tax or fee, with immunity from further tax, penalty and prosecution under the Black Money Act, 2015.
31 December 2026. The scheme came into force on 16 August 2026 and nothing can be filed after the last date.
A person resident in India in the relevant previous year, and also a person who is now a non-resident or RNOR but who was resident in India either in the year the undisclosed foreign income relates to or the year the foreign asset was acquired. There must also be a qualifying default: no return filed, the asset or income not disclosed in a return already filed, or the income or asset having escaped assessment.
No. There is no exclusion for information received under the Common Reporting Standard, FATCA, a tax treaty or a tax information exchange agreement, and no exclusion for having received a departmental compliance message. The only two exclusions are proceeds of crime with pending or initiated PMLA proceedings, and an assessment year for which Black Money Act assessment proceedings have already been completed.
For an undisclosed foreign asset or income never offered to tax, 30 per cent of the value or income plus an additional amount equal to that tax, so 60 per cent in all, where the aggregate does not exceed ₹1 crore. For a foreign asset acquired from already-taxed income or while a non-resident but not reported in the return, a flat fee of ₹1 lakh where the aggregate value does not exceed ₹5 crore.
At the sum of all deposits made into the account from the date it was opened up to 31 March 2026, not the closing balance. Deposits made out of the proceeds of a withdrawal from the same account are excluded, and where the account was declared earlier under Chapter VI of the Black Money Act, only deposits since that declaration count.
No. The immunity is confined to the Black Money Act, 2015, together with exclusion of the declared amount from total income under the Income-tax Act. Exchange control, money laundering and Benami exposure are unaffected, and a FEMA compounding application should be considered separately.
The amount must be paid within two months from the end of the month the Form 2 order is received, with a further period of up to two months on payment of simple interest at 1 per cent per month. Beyond an outer limit of four months from the end of the month the order was passed, the benefit of the scheme is lost for that declaration.
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