A new disclosure scheme gives eligible taxpayers until 31 December 2026 to report certain overseas assets or income, with payments ranging from ₹1 lakh to 60% of the declared value.
India’s new Foreign Assets of Small Taxpayers Disclosure Scheme, 2026, offers a brief and tightly defined route for eligible taxpayers to regularise certain overseas holdings before the year ends. According to the text of the scheme, the filing window opened on 16 August 2026 and closes on 31 December 2026, with valuations taken as of 31 March 2026.
The scheme is aimed at people who have either undisclosed foreign assets or foreign income, or who failed to report an overseas asset in the correct income-tax schedule even though the underlying money had already been taxed or the asset was acquired while they were non-resident. The distinction matters because the payment burden is very different depending on which category applies.
For undeclared foreign assets and income together, the aggregate value must not exceed ₹1 crore. In that bracket, the payable amount is steep: 30% tax plus an additional amount equal to the tax, which effectively means 60% of the declared value. By contrast, where an overseas asset was already taxed or was acquired during a period of non-residency but was simply omitted from the return schedule, the ceiling rises to ₹5 crore and the payment is a flat ₹1 lakh.
The scheme also makes clear that not every taxpayer can use it. Eligibility extends to residents in the relevant previous year, as well as non-residents or residents but not ordinarily resident, provided they had been resident in India in the year the foreign income arose or the year the asset was acquired. That relaxation means some people who are no longer resident in India may still qualify if the historical residency conditions are satisfied.
Valuation rules are central to the process. The scheme uses fair market value as at 31 March 2026, generally taking the higher of the acquisition cost and the amount the asset would fetch on the open market. For overseas property, the rules call for valuation support from a recognised valuer where relevant. For quoted shares, the framework relies on market prices, while unquoted holdings follow a prescribed formula or other market-based valuation methods.
Foreign bank accounts receive especially detailed treatment. The value is generally built from deposits made from the time the account opened up to the valuation date, but withdrawals redeployed from the same account are excluded to avoid double counting. The rules also seek to prevent the same money being taxed twice where funds move from one foreign asset to another, such as when sale proceeds from one property are later used to buy another.
The filing process is electronic and runs through a series of forms. Taxpayers submit Form 1 with documents showing acquisition, income and valuation, if needed. The tax office then issues Form 2 setting out the amount payable, usually within one month from the end of the month in which the declaration is made. After payment, the taxpayer files Form 3 with proof of payment, and Form 4 is the certificate confirming that the declaration has been accepted and paid for in accordance with the scheme.
The payment timetable is also strict. The normal deadline is two months from the end of the month in which Form 2 is issued, although a further two months may be allowed with simple interest of 1% a month or part of a month. If payment is not completed within the maximum permitted period, the benefit of the scheme falls away.
Once a declaration is validly made and paid, the taxpayer gets significant protection. The declared amount is shielded from further tax, penalty and prosecution under the Black Money Act, 2015, and it is not included again in total income under the Income-tax Act, 1961 or the Black Money Act, subject to the scheme’s conditions. But the disclosure route is not a way to reopen old assessments to claim a refund or other relief, and it does not apply to proceeds of crime or to cases where Black Money Act assessments have already been completed.
For taxpayers with old foreign-asset omissions, the scheme is less a loophole than a short-lived compliance window. Its appeal lies in certainty: a fixed deadline, clear valuation rules and an end-point for bringing small overseas holdings into the formal tax system. The challenge is that foreign asset cases often require old bank records, residency checks and valuation evidence, so waiting until the final weeks could leave too little time to assemble the paperwork.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
