THE FOREIGN ASSETS OF SMALL TAXPAYER DISCLOSURE SCHEME, 2026

Introduction

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was enacted to address the issue of undisclosed foreign income and assets held by resident taxpayers. This is a one-time compliance window was provided from 01.07.2015 to  30.09.2015 to enable voluntary declaration of undisclosed foreign assets acquired up to 31 March 2015, subject to payment of tax and penalty.  The information received under the Automatic Exchange of Information framework indicates non-disclosure of foreign financial assets by a significant number of PAN holders.

It is proposed to introduce a time-bound scheme for declaration of foreign assets and foreign-sourced income, with payment of tax or fee based on the nature and source of acquisition and grant of limited immunity from penalty and prosecution under the Black Money Act in respect of matters covered by the declaration to facilitate voluntary compliance.

The Central Government proposed to introduce ‘The Foreign Assets of Small Taxpayer Disclosure Scheme, 2026’ in the Finance Bill, 2026. It is a time bound scheme.  This scheme shall form part of the Finance Bill, 2026 and shall come into force from the date to be notified by the Central Government.

Undisclosed foreign income

Clause 115(1)(k) defines the expression ‘undisclosed foreign income’ as the total amount of income of an assessee from a source located outside India which was chargeable to tax in India but has not been offered to tax under the Income-tax Act, 1961(‘Act’ for short).

Undisclosed asset located outside India

Clause 115(1)(j) of the Finance Bill, 2026 defines the expression ‘Undisclosed asset located outside India’ as an asset (including financial interest in any entity) located outside India, held by the assessee in his name or in respect of which he is a beneficial owner, and he has no explanation about the source of investment in such asset or the explanation given by him, is in the opinion of the Assessing Officer, unsatisfactory. 

Declaration

Clause 116 of Bill provides that any person may make, on or after the date of commencement of this Scheme but on or before the last date, a declaration, for any previous year, in respect of any income or asset referred to in section 117 of the Act,  where–

• he has failed to furnish a return under section 139 of the  Act;

• he has failed to disclose such asset or income, in a return of income furnished by him under the Act; or
• he has failed to disclose such asset or income, in a return of income furnished by him under the Act before the date of commencement of this Scheme; or
• such asset or income has escaped assessment within the meaning of section 147 of the Act.

Amount payable by the declarant

The declaration may be filed in respect of assets or income as specified as below and in respect of such assets or income, the amount payable by the declarant under this scheme shall be as specified below subject to the conditions mentioned as below-

1. Undisclosed asset located outside India; or
2. undisclosed foreign income.

The amount payable by the declarant in this part is the aggregate of-

(i) tax at the rate of 30% of the value of the undisclosed asset located outside India as on the 31.03.2026;

(ii) tax at the rate of 30% of the undisclosed foreign income; and

(iii) an amount equal to 100%  of tax determined in clauses (i) and (ii).

The condition for this is as below-

• The aggregate value of the undisclosed asset located outside India and the undisclosed foreign income does not exceed Rs. 1 crore.

The asset located outside India acquired from income accruing or arising outside India, by an assessee, during the period in which such assessee was a non-resident, but such assets were not declared by him in the relevant Schedule in the return of income on becoming a resident; or asset located outside India acquired from income which has been offered to tax under the Act by the assessee, but such assets were not declared by him in the relevant Schedule in the return of income.

A fee of Rs.1 lakh is to be paid by the assessee.

The asset located outside India acquired from income which has been offered to tax under the Act by the assessee, but such assets were not declared by him in the relevant Schedule in the return of income.

Verification of the declaration

A declaration shall be made complete in all respects to the prescribed income-tax authority, in such form and shall be verified in such manner, as may be prescribed.  The verification referred to in sub-section (1) shall be made electronically, so as to verify that––

• the assessee making the declaration is an eligible assessee; and
• the declaration of income or assets is in accordance with the provisions of this Scheme.

The declaration made shall be deemed to be invalid, if ––

(a) any material particular furnished in the declaration is found to be false at any stage; or

(b) the declarant violates any of the conditions referred to in this Scheme.

Payment

Clause 119 of the Bill provides that after electronic verification of the declaration as specified in Clause 118, the amount payable by the assessee shall be communicated electronically, within a period of one month from the end of the month in which the declaration is made, by way of an order in such form and manner, as may be prescribed.  

The assessee shall pay the amount within a period of two months from the end of the month in which the order was received by him and the payment shall be made in such manner, as may be prescribed.   If the assessee fails to ay the said amount within the time stipulated time, the assessee may pay such amount within a further period not exceeding two months, along with simple interest at the rate of one per cent. for every month or part of a month on such amount.

The assessee shall intimate the payment particulars within the last date to the prescribed authority within the last date or extended last date.  On the receipt of such intimation the proper officer shall pass an order certifying the payment of the amount as per the declaration, shall be communicated electronically to the assessee, in such form and manner, as may be prescribed, within one month from the end of the month of receipt of such intimation.

 Every order made shall be conclusive as to the matters stated therein. 

 Every order made under sub-section (5) shall be conclusive as to the matters stated therein.

Non application of the scheme

The provisions of this scheme shall not be applicable in the following cases-

• any income or asset which represents, directly or indirectly, proceeds of crime in respect of which proceedings have been initiated, or pending under the Prevention of Money-laundering Act, 2002; or
• any income or asset relating to an assessment year for which assessment proceedings have been completed under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Effect of declaration in respect of pending assessment

Where a declaration of any income or asset is made under this Scheme and assessment proceedings under the Act or the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 are pending in respect of such income or assets, the Assessing Officer shall take such declaration into account while finalising such assessment order.

Grant of immunity

A declarant who makes a valid declaration under this Scheme and pays any amount, whether as tax, fee or otherwise, in accordance with the provisions of this Scheme, shall be granted immunity from the levy of any further tax or penalty and also from prosecution under the said Act in respect of income or asset so declared, for the previous year ending on the 31.03.2026 or any earlier previous year.

No refund

Any amount paid due to the declaration shall not be refunded.