In Finance Bill, 2026, as notified on February 1, 2026, the CG, launched a significant scheme, i.e., Foreign Assets of Small Taxpayers Disclosure Scheme, 2026, which is a major shift towards more transparent financial landscape, and will come into force on such date, as may be prescribed, by the CG. It offers a straightforward path for those with undeclared overseas holdings to voluntarily step forward, trade uncertainty for peace of mind, and secure immunity from prosecution—all while helping build a more compliant and honest tax system.
Key Definitions
The Scheme covers a broad range of individuals and entities, including both residents and non-residents, who may possess undeclared foreign assets or income. Key definitions include:
Assessee
A person being a
- Resident in India within the meaning of section 6 of the Income-tax Act, 1961 in the previous year
- Non-resident or not ordinarily resident in India within the meaning of clause (6) of section 6 of the said Act in the previous year, who was resident in India either:
- In the previous year to which the income referred to in Section 4 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 relates
- In the previous year in which the undisclosed asset located outside India was acquired
Undisclosed Asset
It means 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.
Undisclosed Foreign Income
It means 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.
Applicability?
Eligible to Make Declaration
Who can Take Advantage of Scheme
Eligible Assets/ Income for Disclosure
Note: Provisions of this Scheme is not applicable to:
- Any income or asset representing, proceeds of crime, under the Prevention of Money-laundering Act, 2002
- Any income or asset which is linked to an assessment year whose assessment proceedings have been concluded under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Process for Filing Declaration
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Tax Structure for Undisclosed Foreign Income or Assets
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Undisclosed Asset or Income: When AV of Assets + Income does not exceed Rs. 1 crore
- Tax rate of 30% applies to value of undisclosed foreign assets or undisclosed foreign income.
- Additionally, an amount equal to 100% of the tax determined on such income/assets, to be paid.
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Assets Acquired While Non-Resident:
In cases where assets were acquired during the period when the assessee was a non-resident, the Scheme provides a one-time fee of Rs. 1 lakh, provided the TV of asset does not exceed Rs. 5 crore
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Undisclosed Asset or Income: When AV of Assets + Income does not exceed Rs. 1 crore
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Manner of Filing a Declaration
Declaration to be filed electronically in the prescribed format and the last date along with detailed procedure for filing declaration will be notified by CG separately.
Note: For individuals who have pending assessments under the Income-tax Act, 1961 or the Black Money Act, any declaration made under this Scheme will be taken into account by the Assessing Officer when finalizing the assessment. However, this does not apply to assessments already completed before the declaration.
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Payment Process
- Once a declaration is verified, the amount payable will be communicated to the declarant within a month.
- Assessee has 2 months to make the payment.
- Payment details to be intimated and the tax authorities will issue an order certifying the payment.
- Note: If the payment is delayed, interest at a rate of 1% per month (or part of a month) will be levied.
Important FAQs
A one-time fee will be applicable for the first year of non-disclosure, provided the asset does not change. After that, the asset will be considered disclosed. However, if assets were acquired over multiple years, a fee will be charged for each respective first year when the asset was undisclosed.
A single declaration can encompass multiple instances of undisclosed foreign income or assets, provided it adheres to the financial thresholds and other requirements specified in the Scheme.
The value of an undisclosed foreign asset will be determined based on the valuation rules set out in the Scheme, taking into account the asset’s nature and the applicable valuation date.
Conclusion
The Small Taxpayers Disclosure Scheme 2026 provides taxpayers holding undisclosed foreign assets or income a chance to come forward, ensuring immunity from penalties or legal consequences. Therefore, this scheme, by offering a structured process to declare undisclosed foreign assets, may improve transparency in financial dealings and help the government strictly prohibit the use of overseas assets as a tool for evasion of taxes.
This Scheme will not only benefit the taxpayers by reducing the burden of the penalty but will also assist in the fight against tax evaders and those trying to accumulate ill-gotten wealth.
References
Disclaimer
The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.