- CBDT notified Foreign Assets Disclosure Scheme Rules, 2026, effective 16 August
- Scheme covers undisclosed foreign assets, income, and assets from non-residency periods
- Declarations capped at Rs 1 crore or Rs 5 crore depending on asset category and eligibility
The Central Board of Direct Taxes (CBDT) has notified the Foreign Assets of Small Taxpayers-Disclosure Scheme Rules, 2026, giving small taxpayers a window to declare undisclosed foreign assets and income, with relief ranging from full immunity to a 100% penalty depending on the value and nature of the disclosure. The rules come into force on 16 August.
Who qualifies
The scheme covers four categories of foreign holdings: undisclosed assets located outside India, undisclosed foreign income, assets acquired abroad during a period of non-residency but not declared on becoming resident, and assets bought from already-taxed income but left out of the relevant schedule in the income tax return.
Eligibility is capped at two thresholds. Declarations combining undisclosed foreign income and undisclosed assets cannot exceed Rs 1 crore in aggregate fair market value. A separate category, covering assets acquired during non-residency or from disclosed income but not reported, is capped at Rs 5 crore. Taxpayers exceeding either threshold are ineligible to declare under the scheme.
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The cost of disclosure
For the Rs 1 crore bracket, declarants must pay 30% tax on the value of undisclosed assets and income, plus a 100% penalty on that tax, taking the effective payout to 60% of the aggregate value. For the Rs 5 crore bracket, the scheme levies only a flat fee, nil for smaller declarations or Rs 1 lakh, with no tax or penalty component.
Declarants who complete payment within the prescribed timeline get immunity from further tax, penalty and prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, once the declaration is certified as valid.
Valuation and deadlines
Fair market value is to be computed as on the valuation date of 31 March 2026, based on rules covering bullion, jewellery, artwork, quoted and unquoted shares, immovable property and bank accounts. For bank accounts, value is based on the sum of all deposits since the account was opened, or since a prior Black Money Act declaration if one was made. Foreign currency values are to be converted to rupees using the RBI's reference rate on the valuation date.
Declarations must be filed electronically in Form 1 by 31 December 2026, the last date fixed under the rules. Once the income tax authority, the Principal Director General or Director General of Income-tax (Systems), passes an order determining the payable amount in Form 2, the declarant gets two months to pay without interest. A further two-month window is available with interest at 1% per month on the outstanding amount, after which the scheme's benefit lapses and the declaration is treated as void.
Tolerance for valuation gaps
The rules also build in a buffer for genuine valuation disputes. If the fair market value declared in Form 1 differs from what an assessing officer determines during assessment or inquiry, the declaration will not be treated as invalid solely on that ground, provided the variance does not exceed 20% of the declared value.
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