In a major relief to taxpayers holding foreign assets, Budget 2026 has proposed a one-time six-month window for taxpayers to voluntarily declare any undisclosed foreign assets or foreign-sourced income and obtain amnesty from prosecution under the Black Money Act (BMA).
Under tax laws, all foreign assets must be disclosed annually in the FA Schedule of ITR-2 or ITR-3, even if they generate no income. Failure to report, even though there is no evasion of tax, can attract a ₹10 lakh annual penalty and even imprisonment of up to seven years under BMA.
The budget has introduced a one‑time, six-month Foreign Assets of Small Taxpayers—Disclosure Scheme, 2026 (FAST-DS) that allows taxpayers to disclose foreign assets from any past years by paying an additional penalty, which is lower than the penalties slapped under BMA. The government is yet to announce the six-month timeline.
The relief is provided to two categories of taxpayers. Category A includes those who have not disclosed income or assets with a value of up to ₹1 crore. They can pay 30% of the asset’s Fair Market Value (FMV) or 30% of undisclosed income as tax, and an additional 30% tax, and get immunity from proceedings under BMA. Category B includes taxpayers who have paid tax on foreign income but failed to disclose the same assets in Schedule FA. The asset value should be up to ₹5 crore, and the taxpayer must pay a penalty of ₹1 lakh.
Sonu Iyer, partner and national leader, People Advisory Services, EY, said this scheme will save taxpayers from high penalties, prolonged litigation and prosecution. “Under BMA, the taxpayer has to pay a ₹10 lakh penalty and an additional 300% of the tax due. Over and above, there is also the risk of prosecution. In comparison, this scheme lets them declare voluntarily by paying a relatively lower penalty.”
Prakash Hegde, a Bengaluru-based CA, said this will be a major relief for small taxpayers with foreign Employee Stock Ownership Plan (Esops), students who have returned to India but still hold foreign bank accounts and those taxpayers who get dividends in their foreign demat accounts and miss paying tax on them.
