Foreign Assets of Small Taxpayer Disclosure Scheme (FAST-DS), 2026: A Structured Pathway Towards Voluntary Compliance

Foreign Assets of Small Taxpayer Disclosure Scheme (FAST-DS), 2026 : A Structured Pathway Towards Voluntary Compliance

1. Introduction

The Union Budget 2026 introduced the Foreign Assets of Small Taxpayer – Disclosure Scheme (FAST-DS), a taxpayer-friendly initiative aimed at enabling small taxpayers to voluntarily correct past non-disclosures of foreign assets. Recognising that a significant portion of undisclosed foreign assets arise from inadvertence, ignorance, or technical omissions rather than deliberate tax evasion, the scheme offers a structured six-month window during which taxpayers may regularise their position with reduced penalties and immunity from prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (hereinafter “the Black Money Act” or “BMA”).

The scheme is grounded in the principle that voluntary compliance, when incentivised appropriately, is a more effective instrument of tax policy than punitive enforcement alone. By distinguishing between deliberate concealment and technical lapses, FAST-DS introduces a proportionality framework that is both equitable and administratively efficient.

2. Intended Beneficiaries

FAST-DS is designed to benefit a broad cross-section of taxpayers who may have inadvertently failed to comply with foreign asset disclosure requirements under Schedule FA of the Income Tax Return. The scheme is particularly relevant for the following categories of individuals:

• Small taxpayers with limited or low-value foreign assets
• Students and young professionals who received Employer Stock Option Plans (ESOPs) or Restricted Stock Units (RSUs) from multinational employers
• Former overseas students or workers who retain dormant foreign bank accounts
• Returning Non-Resident Indians (NRIs) with undisclosed savings or investments abroad
• Individuals who were non-resident at the time of asset acquisition but have since become resident in India and are now liable to disclose such assets

The common thread across these categories is the absence of deliberate intent to evade tax, making them well-suited to a corrective compliance mechanism of this nature.

3. The Two-Category Framework

The scheme is structured around two distinct categories of non-disclosure, each attracting a different tax treatment and immunity outcome. This differentiation reflects the government’s intent to apply proportional relief based on the nature and degree of the compliance lapse.

3.1 Category A – Non-Disclosure of Foreign Asset or Income

Category A applies to taxpayers who neither disclosed the existence of a foreign asset nor reported the income derived therefrom in their Indian Income Tax Returns. The relevant threshold for eligibility under this category is an undisclosed income or asset value not exceeding ₹1 crore.

Upon opting under Category A, the taxpayer is required to pay tax at 30% of the Fair Market Value (FMV) of the asset, or 30% of the undisclosed income, as the case may be, along with an additional charge of 30% in lieu of penalty. The total financial outgo, therefore, amounts to 60% of the FMV or undisclosed income. Upon making this payment, the taxpayer obtains complete immunity from prosecution under the BMA.

3.2 Category B – Technical Non-Disclosure Despite Prior Compliance

Category B addresses a distinct but equally significant category of non-compliance – cases where the taxpayer had legitimately disclosed their overseas income and paid applicable taxes in India, but inadvertently failed to declare the corresponding foreign asset in Schedule FA of the Income Tax Return. This category is capped at an asset value of ₹5 crore.

Under this category, immunity from both penalty and prosecution is available upon payment of a nominal fee of ₹1 lakh. This is a landmark provision, as it is the first time the government has formally recognised and provided relief for purely technical non-compliance in the context of the BMA regime.

An important supplementary provision extends immunity from prosecution for non-disclosure of non-immovable foreign assets with an aggregate value of less than ₹20 lakh, with retrospective effect from 1 October 2024. No penalty is prescribed for such cases.

Additionally, once a declaration is made under either category and the requisite payment is effected, the disclosed asset shall not be subject to reopening or reassessment in any subsequent year – thereby offering taxpayers complete finality.

4. Comparative Analysis: Standard BMA Regime vs. FAST-DS 2026

The following table illustrates the significant relief available under FAST-DS 2026 compared to the standard provisions of the Black Money Act:

5. Illustrative Case Studies

5.1 Category A – Complete Non-Disclosure: The Case of a Relocated NRI

A taxpayer who was previously a Non-Resident Indian relocated to India and in the process acquired resident status for Income Tax purposes. However, they continued to maintain a foreign bank account in their country of prior residence. Unaware that their global income – including interest earned in the overseas account – became taxable in India upon acquiring resident status, the taxpayer neither disclosed the account in Schedule FA nor offered the interest income to tax in India. This is a common occurrence, and FAST-DS is specifically designed to provide relief in such cases.

5.2 Category B – Technical Non-Disclosure: The Case of a Returning NRI

A returning NRI maintained a foreign bank account that was legitimately funded through the Liberalised Remittance Scheme (LRS). The interest income earned on this account was duly reported and taxed in India. However, the taxpayer inadvertently omitted to declare the account in Schedule FA of the Income Tax Return.

This scenario mirrors the factual matrix considered in Vinil Venugopal v. DDIT (2025), where the Income Tax Tribunal upheld a penalty of ₹10 lakh per assessment year for each year of Schedule FA non-disclosure, despite the underlying funds being entirely legitimate. FAST-DS directly addresses this class of technical non-compliance.

6. Procedural Roadmap and Immunity Framework

Taxpayers intending to avail the benefits of FAST-DS 2026 are required to follow a four-step process within the prescribed six-month window:

Note on Post-Scheme Enforcement: It is important to appreciate that FAST-DS functions as a “Golden Bridge” for eligible taxpayers. The government has signalled that upon closure of the scheme window, it intends to leverage the Common Reporting Standard (CRS) and automatic exchange of financial account information frameworks to intensify enforcement against remaining non-disclosures. Taxpayers who do not avail this opportunity may, therefore, face significantly higher exposure under the standard BMA provisions.

7. Broader Economic and Policy Implications

FAST-DS 2026 reflects a deliberate policy shift from a purely punitive tax enforcement framework to a corrective compliance model, with several significant implications:

• Widening the Tax Base: By encouraging students, young professionals, and returning NRIs to declare small ESOPs, RSUs, and dormant bank accounts, the scheme creates a “clean” pool of compliant taxpayers who are more likely to remain within the formal tax system on an ongoing basis.
• Reducing Litigation: A substantial portion of the Income Tax Department’s enforcement and appellate resources are currently deployed against small taxpayers on technical Schedule FA violations. FAST-DS provides a mechanism to resolve this backlog efficiently.
• Revenue Generation: Notwithstanding the reduced liability compared to standard BMA provisions, the scheme is expected to generate incremental revenue from taxpayers who would otherwise remain outside the system and avoid detection.
• Proportional Justice: The distinction between Category A and Category B introduces a meaningful gradient of relief proportional to the nature of the non-compliance, which is a significant evolution in the architecture of Indian black money legislation.

8. Conclusion

FAST-DS 2026 represents a pragmatic and progressive shift in India’s approach to foreign asset disclosure. By drawing a principled distinction between deliberate concealment and technical or inadvertent omissions, the scheme introduces proportional relief while preserving sufficient deterrence for wilful non-compliance.

For eligible taxpayers – particularly returning NRIs, young professionals with ESOPs or RSUs, and individuals with dormant foreign accounts – the scheme offers a rare combination of financial certainty, immunity from prosecution, and permanent finality. When viewed against the backdrop of a potential 120% liability under the standard Black Money Act, the scheme provides a structured and rational exit route.

It is, however, essential to appreciate that the window of opportunity under FAST-DS is finite. Upon its closure, the government is expected to deploy international tax information exchange mechanisms – including the OECD Common Reporting Standard – to pursue remaining non-disclosures with renewed vigour. Taxpayers with undisclosed foreign assets would be well-advised to seek professional guidance promptly and evaluate whether FAST-DS presents a viable and advantageous path to regularisation.

If implemented effectively, FAST-DS has the potential to meaningfully widen the tax base, reduce the burden of foreign asset-related litigation, and reinforce long-term trust between taxpayers and the tax administration.

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Disclaimer

The information contained in this article is intended solely for academic and informational purposes. It does not constitute legal, tax, or professional advice and should not be relied upon as such. The applicability of any provision of law to a specific fact situation should be assessed by a qualified professional. The views expressed herein are strictly personal to the authors. This article is proprietary and may not be reproduced or disclosed without prior written consent. This article is written using the assistance of AI tools.

About the Authors

Megha Shinde is pursuing the Chartered Accountancy course and is currently completing her articleship with S.M. Suratwala & Co., Chartered Accountants, Pune.

CA Shravan Suratwala is a Partner at S.M. Suratwala & Co., Chartered Accountants. He has over 10 years of post-qualification experience in advisory, litigation, and compliance across Corporate and International Taxation and Assurance. He also has over three years of experience in Internal and Process Audit.

The authors may be contacted at: contact@smsuratwala.com | shravan.suratwala@outlook.com