Income Tax Foreign Assets Disclosure Scheme 2026: Who Can Declare Undisclosed Overseas Assets, Tax Rates and Deadlines
· Free Press Journal
The Income Tax Department has notified detailed rules for the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026, ahead of the one-time disclosure window opening on August 16.
According to a report by Moneycontrol, the scheme allows eligible taxpayers to come forward with certain undisclosed foreign assets or income by paying the prescribed tax or fee.
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The scheme is available to residents, non-residents and resident but not ordinarily resident (RNOR) taxpayers, provided they were resident in India in the relevant year of income or when the asset was acquired.
Declarations can be made where a taxpayer failed to file a return, omitted foreign assets or income from a filed return, or where the income or asset could otherwise be treated as having escaped assessment.
Lower, Nil TDS Applications To Go Online, New Income-Tax Rules Coming SoonTwo categories of foreign asset disclosures
Taxpayers must submit Form 1 electronically between August 16 and December 31. The scheme divides eligible disclosures into two categories.
The first covers foreign assets or income that were never disclosed or offered to tax. The aggregate value of such assets or income must not exceed Rs 1 crore, measured as of March 31, 2026. A tax of 30% along with an equal additional amount applies, resulting in an effective levy of 60%.
The second category covers foreign assets that were already taxed but were not reported in the relevant return, as well as assets acquired when the taxpayer was a non-resident but subsequently omitted from the required disclosure. This category has a higher ceiling of Rs 5 crore and attracts a flat fee of Rs 1 lakh. Taxpayers with foreign assets exceeding Rs 5 crore cannot avail themselves of the scheme.
Valuation, payment and immunity
The rules generally determine fair market value as the higher of the acquisition cost and the open-market value on March 31, 2026. A recognised valuer's report may be used where available.
Foreign bank accounts will be valued based on deposits made since the account was opened, with certain amounts excluded to prevent double counting.
After verification of Form 1, the tax authority will issue Form 2 within a month, specifying the amount payable. The taxpayer gets two months to make the payment, with a possible extension of another two months at 1% monthly simple interest.
Failure to pay within the maximum four-month period will result in the declaration losing the scheme's benefit.
A valid declaration followed by payment provides immunity from further tax, penalty and prosecution under the Black Money Act, 2015, and the declared amount will not be included in total income.
However, the scheme does not provide relief for assessments that have already been completed and excludes assets or income linked to proceeds of crime under investigation or assessment years already closed under the Black Money Act.