Income Tax Department Rolls Out Foreign Asset Disclosure Scheme

The Central Board of Direct Taxes notified the Foreign Assets of Small Taxpayers-Disclosure Scheme, 2026, under Chapter IV of the Finance Act, 2026. The scheme provides an online voluntary disclosure window for eligible taxpayers from 16 August 2026 to 31 December 2026.

Scheme framework

The scheme applies to small taxpayers, including former study-abroad students, young professionals, multinational employees holding employee stock option plans, and returned non-residents. Declarations under the scheme must be filed electronically in Form 1 through the income-tax system.

Tax treatment and immunity

Taxpayers who make valid declarations under the scheme receive immunity from further tax demands, penalties, and criminal prosecution under the Black Money Act, 2015. The scheme is designed for disclosure of foreign assets and foreign income that were not reported earlier in income-tax returns.

Valuation and declaration categories

For valuation purposes, the fair market value of declared foreign assets is determined with 31 March 2026 as the cut-off date. Category 1 declarations cover undisclosed foreign assets or income up to ₹1 crore and require a 30% tax and a 30% penalty, which together amount to an effective 60% levy. Category 2 declarations cover assets up to ₹5 crore that were acquired from taxed income or during non-resident status but were not reported in earlier returns, and such cases can be regularised by paying a flat fee of ₹1 lakh.

Important Facts for Exams

• The Central Board of Direct Taxes is the apex direct tax administration body in India under the Department of Revenue, Ministry of Finance.
• The Black Money Act, 2015 deals with undisclosed foreign income and assets held outside India.
• Form 1 is the prescribed electronic form for filing declarations under the scheme.
• Employee stock option plans are a form of employee compensation linked to company shares.

Administrative supervision

The declaration process is supervised by the Principal Director General or Director General of Income-tax (Systems). The scheme was notified on 15 August 2026 and became operational from 16 August 2026.