This Tax Alert summarizes the recent Notification notifying “The Foreign Assets of Small Taxpayers - Disclosure Scheme Rules 2026” (Rules) issued by the Central Government and 50 Frequently Asked Questions (FAQs) issued by Central Board of Direct Taxes[2] (CBDT), pertaining to “The Foreign Assets of Small Taxpayers – Disclosure Scheme 2026” (Scheme) which was introduced vide Finance Act (FA) 2026[3].
The Scheme is effective from 16 August 2026 and the last date for filing a declaration is 31 December 2026.
The Scheme provides a one-time voluntary disclosure window for eligible taxpayers to declare specified foreign assets and foreign income. The Scheme broadly covers two categories: (i) undisclosed foreign assets or undisclosed foreign income, where the aggregate fair market value (FMV) does not exceed INR10M, on payment of tax at 30% plus an amount equal to 100% of such tax; and (ii) foreign assets which were acquired from income earned while the taxpayer was non-resident (NR) or from income already offered to tax in India, but which were not reported in tax return, where the aggregate FMV does not exceed INR50M, on payment of a fixed fee of INR0.1M.
The valuation date for determination of FMV of foreign asset under reference is 31 March 2026.
The Scheme operates electronically and the Central Government has prescribed various forms for different steps involved i.e. Form 1 for filing declaration, Form 2 for determination of amount payable, Form 3 for proof of payment and Form 4 certifying the declaration.
A valid declaration and payment under the Scheme grant immunity from levy of any further tax or penalty and from prosecution under The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA) in respect of the income or asset declared. The income or amount of investment in such asset will also not be included in total income under the Income Tax Law[4] (ITL)/BMA
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