Summary: The Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026, introduced through Chapter IV of the Finance Act, 2026 and operationalised by CBDT Notification No. 114/2026 dated 14 August 2026, provides a time-bound route for eligible taxpayers to regularise specified foreign-asset and foreign-income defaults. Form 1 can be filed from 16 August to 31 December 2026. Broadly, the Scheme has two routes: specified undisclosed foreign assets/income up to aggregate ₹1 crore, with an amount payable effectively equal to 60% of the qualifying amount; and specified foreign assets up to ₹5 crore whose source is foreign income earned while non-resident or income already offered to tax but omitted from the relevant return disclosure, for a flat ₹1 lakh fee.
- Foreign Assets of Small Taxpayers Disclosure Scheme 2026 – Complete Guide
- Legal Framework
- Declaration Window
- Two Routes Under Section 133
- Category 1: Undisclosed foreign asset/income
- Category 2: Explained-source foreign asset omitted from return disclosure
- Who Can Use the Scheme?
- Valuation
- Form 1 to Form 4
- ITNS 289 and Payment
- Immunity and Validity
- Exclusions and Risk Areas
- Schedule FA Reconciliation
- Practical Checklist
- FAQs
- Key Takeaways
Foreign Assets of Small Taxpayers Disclosure Scheme 2026 – Complete Guide
Legal Framework
The Scheme is contained in sections 130 to 144 of the Finance Act, 2026. CBDT notified the Rules through Notification No. 114/2026 dated 14 August 2026, effective 16 August 2026. See FAST-DS Rules, 2026 and Foreign Assets of Small Taxpayers Disclosure Scheme, 2026.
Declaration Window
The official Form 1 manual states that declarations can be filed from 16 August 2026 to 31 December 2026. Taxpayers with overseas bank accounts, securities, ESOP/RSU holdings, property or foreign-source income should reconcile historical Indian return disclosures promptly.
Two Routes Under Section 133
Category 1: Undisclosed foreign asset/income
Subject to the Scheme’s aggregate ceiling of ₹1 crore, the amount payable comprises tax at 30% of the qualifying asset value/foreign income plus an additional amount equal to 100% of that tax, producing an effective 60% burden.
Category 2: Explained-source foreign asset omitted from return disclosure
This covers specified foreign assets acquired from income accruing/arising outside India while the assessee was non-resident but not disclosed after becoming resident, or from income already offered to tax in India but where the asset was not disclosed. The aggregate asset-value ceiling is ₹5 crore and the amount payable is a flat ₹1 lakh fee. See Foreign Assets Income Tax Notice: Schedule FA & Black Money Act.
Who Can Use the Scheme?
The official manual covers a person resident in India in the relevant previous year and also specified persons currently non-resident/RNOR where the statutory historical-residence conditions are met. Residence must therefore be tested year by year.
Valuation
The Rules prescribe valuation methods with 31 March 2026 as the central valuation date. Different asset classes have specific methods and foreign-currency amounts require prescribed conversion. Taxpayers should not simply use current market value or acquisition cost without applying Rule 3.
Form 1 to Form 4
| Form | Purpose | Timeline |
|---|---|---|
| Form 1 | Declaration | 16 Aug–31 Dec 2026 |
| Form 2 | Order determining amount payable | Within one month from end of month of Form 1 |
| Form 3 | Payment intimation | Within four months from end of month of Form 2 |
| Form 4 | Validity/payment certificate | Within one month from end of month of Form 3 |
ITNS 289 and Payment
The Department has introduced ITNS 289 for Scheme payment after a valid Form 1. Its current FAQ warns that payment under an incorrect minor head cannot be corrected or refunded. AY 2026-27 is pre-filled for Scheme payments irrespective of the acquisition/income year.
Immunity and Validity
A valid declaration followed by prescribed payment and completion of the process can provide the statutory immunity contemplated by the Finance Act, 2026, subject to conditions. Form 1 filing alone should not be described as completing immunity. For background, see Impact of Black Money Act on Foreign Assets & Income.
Exclusions and Risk Areas
The Scheme contains statutory exclusions, including specified proceeds-of-crime/PMLA situations and cases where assessment under the Black Money Act has already been completed for the relevant year. A pending enquiry should not automatically be equated with a completed assessment; the precise stage must be checked. See Received FAST-DS Email? Check AIS Before 31 December 2026.
Schedule FA Reconciliation
Prepare an asset-by-asset chronology covering acquisition date, source of funds, residential status, income-tax treatment, foreign income, Schedule FA disclosure history and current/disposal status. See Disclosure of Foreign Assets & Income in Income Tax Return.
Practical Checklist
- Reconcile historical ITRs, Schedule FA and foreign-income schedules.
- Review AIS and available CRS/FATCA-linked information.
- Prepare a complete foreign-asset inventory.
- Determine historical residential status.
- Trace source of investment for each asset.
- Separate genuinely undisclosed items from explained-source reporting omissions.
- Apply Rule 3 valuation and INR conversion.
- Test ₹1 crore and ₹5 crore ceilings correctly.
- Check statutory exclusions and proceedings.
- Preserve bank, broker, employment/ESOP and valuation evidence.
- After Form 2, pay under correct ITNS 289 head and file Form 3 in time.
FAQs
1. Last date for Form 1?
31 December 2026.
2. Is ₹1 crore an exemption?
No. It is an eligibility ceiling for the relevant Category 1 aggregate.
3. Is ₹5 crore an exemption?
No. It is the Category 2 asset-value ceiling.
4. Effective Category 1 payment?
30% tax plus an additional amount equal to that tax, effectively 60% of the qualifying amount.
5. Does an asset bought from taxed income necessarily become undisclosed wealth?
No. Source and disclosure are distinct; Category 2 addresses specified explained-source reporting omissions.
6. What AY is used in ITNS 289?
AY 2026-27 is pre-filled under the Department’s current FAQ.
7. Can an incorrect ITNS 289 minor head be corrected?
The current official FAQ warns it cannot be corrected or refunded.
8. Does Form 1 alone guarantee immunity?
No. Validity, eligibility, correct particulars, valuation, payment and completion of the process matter.
Key Takeaways
- FAST-DS 2026 is open until 31 December 2026.
- Category 1: specified undisclosed foreign assets/income up to ₹1 crore, effective 60% payment.
- Category 2: specified explained-source but unreported foreign assets up to ₹5 crore, ₹1 lakh fee.
- Rule-based valuation, historical residence and source evidence are central.
- Forms 1–4 and correct payment complete the process.
Disclaimer: This article is for general informational and educational purposes only and does not constitute tax, legal, accounting, financial or professional advice or a recommendation to make or refrain from a declaration. Eligibility, valuation, residence, source-of-funds analysis, exclusions, tax/fee and immunity depend on individual facts and current law. Readers should verify Chapter IV of the Finance Act, 2026, Notification No. 114/2026, FAST-DS Rules and current official FAQs/user manuals and obtain professional advice. TaxGuru, its owners, management, editors, authors, employees and associated persons accept no responsibility or liability for any tax, penalty, prosecution, loss, consequence, decision or action arising from reliance on this article.
