Dear Readers,
I hope you’re doing well.
The government has just opened a fresh window for people to come clean on foreign assets and foreign income they haven’t reported — the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (FAST-DS 2026). It’s a one-time scheme, it closes on 31st December 2026, and unlike the Black Money Act route, it’s built specifically for smaller cases: an ESOP nobody got around to reporting, a bank account from a stint abroad, a mutual fund bought years ago and forgotten in Schedule FA.
This piece walks through the scheme in full — who can use it, what it covers, how the tax and the fee are worked out, how assets are valued, and what the filing process actually looks like — drawing on the CBDT’s Rules notification and the accompanying FAQs.
Warm regards,
Samir Mahajan
FAST-DS 2026: The Complete Guide to Declaring Undisclosed Foreign Assets Before December 31
Every year, a number of Indian taxpayers end up with foreign assets or foreign income sitting outside their tax return — sometimes deliberately, more often not. An ESOP from an old US employer that was never reported. A savings account opened during a foreign posting that was simply left open after moving back. A mutual fund bought while working abroad, sitting quietly in Schedule FA’s blind spot. Ordinarily, the consequence of catching up on this later is the Black Money Act, 2015 — undisclosed foreign income and assets taxed at 30%, a penalty of up to three times the tax, and potential prosecution.
FAST-DS 2026 is a narrower, gentler route built for exactly these smaller cases. It was introduced through Chapter IV (Sections 130 to 144) of the Finance Act, 2026, and the CBDT notified the operating Rules — the Foreign Assets of Small Taxpayers – Disclosure Scheme Rules, 2026 — on 14th August 2026, in force from 16th August. Declarations can be filed any time up to 31st December 2026, and everything runs electronically through the Principal Director General (or Director General) of Income-tax (Systems).
Early commentary on the scheme suggests its natural audience is younger professionals with unreported ESOPs and other overseas holdings picked up while working outside India, and NRIs who’ve moved back and simply never closed out — or disclosed — a foreign bank account. Whether that’s you or a client, the mechanics below are worth knowing in full, because the scheme rewards precision: get the category, the threshold or the valuation wrong, and the benefit can evaporate.
Who can declare
The scheme defines an eligible “assessee” as someone who is either:
- resident in India (per Section 6 of the Income-tax Act, 1961) in the relevant previous year, or
- a non-resident, or resident but not ordinarily resident (RNOR), in the relevant previous year — provided they were resident in India either in the previous year to which the undisclosed foreign income relates, or in the previous year in which the undisclosed asset was acquired.
In plain terms: you don’t need to be a current Indian resident to use this scheme. Someone who has since moved abroad and become a non-resident can still declare, as long as they were resident in India in the year the income arose or the asset was bought. RNOR status is expressly recognised too — the declarant simply states their residential status for the relevant year in Form 1.
A declaration can be made on any of three grounds: the assessee failed to file a return under Section 139 for the relevant year; the asset or income was left out of a return that was actually filed, before the scheme commenced; or the asset or income has since escaped assessment within the meaning of Section 147.
The two categories of declaration
This is the part worth getting right first, because the two categories have different thresholds, different amounts payable, and — in effect — serve different situations.
Category 1 — genuinely undisclosed asset or income [Section 133, Table Sl. No. 1]
This covers an undisclosed asset located outside India, or undisclosed foreign income, that was never brought to tax at all. “Undisclosed asset” here means an asset (including a financial interest in any entity) held abroad by the assessee, in their own name or as beneficial owner, where there’s no explanation — or no satisfactory one — for the source of investment. “Undisclosed foreign income” means income from a source outside India that was chargeable to tax in India but was never offered to tax.
The combined value of the undisclosed asset (as on the valuation date) and the undisclosed income must not exceed ₹1 crore. Cross that line and this category isn’t available to you at all — there’s no partial relief for the amount under the threshold.
Category 2 — asset already taxed but not reported, or acquired pre-residency [Section 133, Table Sl. No. 2]
This is a lighter, purely procedural lapse: an asset located outside India that was either already offered to tax in India, or was acquired when the assessee was a non-resident — but which simply wasn’t disclosed in the relevant Schedule (typically Schedule FA) of the return. There’s no tax dodge here, just a reporting gap.
The aggregate value of such assets must not exceed ₹5 crore.
A taxpayer can use both categories in the same Form 1 if their facts call for it — the form’s summary section computes the two aggregates separately, each tested against its own threshold.
What it costs
Category 1 carries a real tax cost. The amount payable is 30% of the value of the undisclosed asset (or 30% of the undisclosed income), plus an additional amount equal to that tax — effectively a 100% penalty on top of the tax, taking the total levy to 60% of the declared value.
Worked example (per the FAQs): an undisclosed foreign bank account valued at ₹60 lakh, plus undisclosed foreign income of ₹20 lakh.
| Item | Value | Tax (30%) | Additional 100% | Total |
| Foreign bank account | ₹60 lakh | ₹18 lakh | ₹18 lakh | ₹36 lakh |
| Foreign income | ₹20 lakh | ₹6 lakh | ₹6 lakh | ₹12 lakh |
| Total | ₹80 lakh | ₹24 lakh | ₹24 lakh | ₹48 lakh |
Category 2 is far lighter — a flat fee of ₹1 lakh, regardless of how large the disclosed assets are, as long as the aggregate stays within the ₹5 crore ceiling. There’s no tax and no penalty component here at all; it’s a fee for regularising the paperwork.
Go over either threshold and the scheme simply isn’t available for that category — the Rules illustrate this with a case of a mutual fund (₹2.5 crore) plus listed shares (₹4 crore) totalling ₹6.5 crore against the ₹5 crore Category 2 ceiling, which fails eligibility outright rather than getting partial relief on the first ₹5 crore.
How assets are valued (Rule 3)
Everything is valued as on the valuation date — 31st March 2026 — regardless of when the declaration is actually filed. The general rule across almost every asset class is the same: fair market value is the higher of cost of acquisition and open-market value on the valuation date, with the open-market value ideally backed by a report from a valuer recognised by the government of the country where the asset sits. Where that valuation exercise isn’t carried out, the indexed cost of acquisition steps in as the deemed FMV — a meaningful concession for anyone who doesn’t want to commission a foreign valuation report.
The specifics vary a little by asset type:
- Bullion, jewellery, precious stones and artistic work (paintings, sculptures, archaeological collections): higher of cost or open-market price per a recognised valuer’s report; indexed cost otherwise.
- Quoted shares and securities: higher of cost or the average of the day’s lowest and highest traded price on an established securities market on the valuation date — or the nearest earlier trading date if there was no trading on 31st March 2026 itself.
- Unquoted equity shares: higher of cost or a prescribed net-asset-value formula that works off the company’s book values, adjusted for the FMV of its own bullion, art, shares, securities and immovable property, and net of specified liabilities (paid-up capital, dividend reserves, tax provisions, contingent liabilities and the like are excluded from the deduction). Indexed cost applies if this valuation isn’t done.
- Unquoted shares/securities other than equity, and immovable property: higher of cost or open-market price per a recognised valuer; indexed cost otherwise.
- Interest in a foreign partnership, AOP or LLP: the entity’s net assets are determined as on the valuation date; the portion equal to capital contributed is allocated in that proportion, and the residue is allocated per the partnership/association agreement, or the profit-sharing ratio if there’s no such agreement.
- Any other/residuary asset: higher of cost (or amount invested) or the arm’s-length open-market price; indexed cost otherwise.
Bank accounts get their own rule, and it’s one of the more counter-intuitive parts of the scheme: the value of a foreign bank account isn’t its balance on the valuation date — it’s the sum of every deposit made into the account from the date it was opened right up to 31st March 2026. Withdrawals that were later redeposited into the same account aren’t counted twice, but a withdrawal that was simply spent, or moved elsewhere, still leaves its earlier deposit counted. If the account (or part of it) was already declared under Chapter VI of the Black Money Act, 2015 and taxed there, only deposits made since that earlier declaration are aggregated now.
Illustration: an account opened in 2010 with deposits of $1,000, $500, $500, $2,500 and $1,000 over the years, and withdrawals of $700, $400 and $500 that were never redeposited — the aggregable value comes to $4,900, converted to rupees at the RBI reference rate on the valuation date. If the same account had already been declared under the Black Money Act as of 1st April 2019, only the deposits from that date onward count — bringing the value down to $3,100 instead.
Avoiding double counting on reinvested assets
Where an asset was sold before the valuation date and the proceeds reinvested into a new asset, the FMV of the old asset (or the bank account it passed through) is reduced by the amount reinvested, so the same value isn’t captured twice. Example: a foreign house bought for ₹20 lakh, sold in 2017 for ₹25 lakh and deposited into a bank account, with ₹30 lakh later withdrawn from that account to buy a second property currently worth ₹50 lakh, and the bank account otherwise worth ₹70 lakh — works out to nil FMV on the first house (fully absorbed into the deposit), ₹40 lakh on the bank account (₹70 lakh less the ₹30 lakh reinvested), and ₹50 lakh on the second property.
Currency conversion
Values in one of the currencies the RBI designates under the Foreign Exchange Management (Deposit) Regulations, 2016 convert straight to rupees at the RBI’s reference rate on the valuation date. Anything else is first converted to US dollars at the rate set by the relevant country’s central bank (or another regulated bank there, if the central bank hasn’t specified one), and the dollar value is then converted to rupees at the RBI rate.
A built-in margin for error
For every asset class except bank accounts, if the value you declare turns out to differ from what the Assessing Officer later determines, a variance of up to 20% of the declared FMV won’t, by itself, be treated as misrepresentation or suppression of facts that voids the declaration. It’s not a licence to lowball valuations, but it does mean a good-faith valuation that turns out to be a bit off isn’t fatal.
Filing the declaration — Form 1 through Form 4
The process runs through four forms, each triggering the next:
Form 1 — the declaration itself. Filed electronically, it captures the declarant’s name, address and PAN (passport details too, if non-resident status is being claimed for any relevant year); the type of asset or income and which Table entry it falls under; the previous year in which it was acquired or earned, and residential status in that year; supporting documents evidencing acquisition; and a category-wise breakdown (bank account, immovable property, jewellery, artistic work, shares and securities, any other asset, or income) with a detailed annexure for each. The form itself totals up the Category 1 and Category 2 values separately and computes the amount payable — 60% of the Category 1 aggregate, plus the flat fee (or nil) on Category 2. It closes with a verification confirming there’s no misrepresentation and that none of the scheme’s exclusions apply.
Form 2 — the department’s order. Once Form 1 is processed, the tax authority issues an electronic order within one month of the end of the month of filing, confirming the amount payable.
Payment, and Form 3 — intimation of payment. The amount must be paid within two months from the end of the month the Form 2 order was received. Missing that isn’t fatal — a further period of up to two additional months is available, but interest at 1% per month (or part of a month) applies on the outstanding amount for that extra window. Payments can be made in parts. Once paid, the payment is reported electronically in Form 3, with challan details and proof of payment.
Illustration: an order for ₹48 lakh is passed on 22nd September 2026 — end of month is 30th September. Paid by 30th November, no interest is due. Paid on 17th December (one month late), interest is 1% of ₹48 lakh, or ₹48,000 — total ₹48,48,000. Paid on 23rd January (two months late), interest is 2%, or ₹96,000 — total ₹48,96,000. Beyond four months from the end of the order month — that is, past 31st January 2027 on these facts — the scheme benefit is lost altogether, and the Form 1 declaration is treated as void, as if it had never been made.
Form 4 — the certificate. Once the Form 3 intimation matches the Form 2 order, the tax authority issues Form 4 within one month, certifying that the declaration is valid for Section 139 purposes and that immunity has been granted from further tax, penalty and prosecution under the Black Money Act, 2015 for the declared income or asset. Forms 1, 2 and 3 are annexed to Form 4 as a single document.
What you actually get — and what you don’t
A valid declaration, once paid in full and certified, brings real protection: immunity from any further tax or penalty, and from prosecution under the Black Money Act, 2015, in respect of the declared income or asset. The declared amount is kept out of the taxpayer’s total income under both the Income-tax Act and the Black Money Act. If assessment proceedings happen to be pending for that year in respect of the declared item, the Assessing Officer is required to take the declaration into account while finalising the order.
What it doesn’t do is reopen the past. The scheme gives no right to rectification or revision of any assessment already completed, and no set-off or relief in any pending appeal or reference relating to that assessment. It’s a clean, forward-looking regularisation — not a mechanism to unwind closed matters.
Where the scheme doesn’t apply at all
Two situations sit outside the scheme entirely, whatever the numbers:
- income or assets that directly or indirectly represent proceeds of crime, where proceedings under the Prevention of Money-Laundering Act, 2002 have been initiated or are pending; and
- income or assets relating to an assessment year for which assessment proceedings have already been completed under the Black Money Act, 2015.
The practical takeaway
FAST-DS 2026 is deliberately scaled for the ordinary, non-adversarial case — the ESOP nobody reported, the account left open after coming home, the mutual fund that fell through the cracks in Schedule FA — rather than for serious concealment. The trade-off for that lighter treatment is precision: the ₹1 crore and ₹5 crore thresholds are hard cut-offs with no partial relief, the bank-account valuation rule can produce a number well above the current balance, and the four-month outer limit on payment is unforgiving once it passes.
Anyone sitting on an unreported foreign asset or foreign income has a window, to 31st December 2026, to work out which category applies, value the asset correctly under Rule 3, and file. Getting professional advice before filing Form 1 — rather than after — is where most of the value in this exercise actually gets protected.
Warm regards,
Samir Mahajan
Samir Mahajan is a Chartered Accountant and Partner at Surinder Mahajan & Associates, where he advises NRI clients on cross-border tax compliance and remittances.
