A former NRI returns to India and later discovers that a foreign bank account or property was missing from an income-tax return. Another taxpayer received foreign income that should have been taxed in India but was never offered to tax. Those are different problems, with very different costs under the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (often called FAST-DS or FADS 2026 on the e-filing portal).
The one-time scheme is in Chapter IV, sections 130–144, of the Finance Act, 2026. CBDT's Notification No. 114/2026 dated 14 August 2026 Official ↗ supplies the rules and Forms 1–4. It commenced on 16 August 2026. An eligible taxpayer must submit the declaration in Form 1 by 31 December 2026; completing the form is only the first stage, because payment and Form 3 follow an order in Form 2.
The key distinction: Undisclosed taxable foreign income or an unexplained foreign asset falls in the ₹1 crore / 30% tax plus an equal amount category. An unreported asset acquired from qualifying explained funds falls in the ₹5 crore / ₹1 lakh fee category. The thresholds are aggregate limits within each category, not a per-asset allowance.
First check whether you are an eligible person
The scheme is not limited to someone who is resident in India today. Section 131 and the Income Tax Department's Form 1 FAQs Official ↗ look at residential status in the relevant previous year. Broadly, it covers a person resident in India in that year; it can also cover someone who is now non-resident or resident but not ordinarily resident (RNOR) if they were resident in the year to which the undisclosed income relates or the year in which the relevant asset was acquired. Work through the exact years and section 6 status rather than assuming current NRI status settles the question.
A declaration may address a failure to file a section 139 return, an asset or income omitted from a return filed before the scheme began, or an item that escaped assessment under section 147. The relevant income or asset must fit the statutory definitions. An undisclosed foreign asset includes a foreign financial interest held in the taxpayer's name or beneficially owned, where the investment source is unexplained or the explanation is unsatisfactory. Undisclosed foreign income is foreign-source income chargeable to tax in India but not offered to tax. A reporting lapse involving a foreign asset paid for from explained sources is a separate category.
The two categories and what you pay
| Category | Eligibility limit and amount payable |
|---|---|
| 1. Untaxed income or unexplained asset | The combined value of undisclosed foreign assets and undisclosed foreign income must not exceed ₹1 crore. Pay 30% tax on the relevant value/income plus an amount equal to that tax: an effective 60%, before any late-payment interest. |
| 2. Explained funds, asset not reported | Foreign assets acquired from income earned abroad while the taxpayer was non-resident and omitted from the relevant return on becoming resident, or acquired from income already offered to tax under the 1961 Act but omitted from the return's relevant schedule. Aggregate value must not exceed ₹5 crore. Pay a flat ₹1 lakh fee. |
Example 1: A qualifying unexplained foreign account valued at ₹60 lakh plus ₹20 lakh of untaxed foreign income totals ₹80 lakh. Tax is ₹24 lakh (30%); an equal amount is payable in addition, making ₹48 lakh. This follows the notification's illustration, assuming no overlapping amount needs adjustment.
Example 2: A foreign property bought from income earned while non-resident, then omitted from the required schedule after becoming resident, has a qualifying value of ₹3 crore. If the conditions are met, the category 2 amount is ₹1 lakh. This is not a general ₹1 lakh settlement of untaxed foreign income.
Mixed case: A foreign shareholding purchased from income already taxed in India may belong in category 2, while dividends that were taxable in India but never offered to tax may belong in category 1. The department's FAQs Official ↗ specifically illustrate this split. Form 1 permits multiple items and categories; review both aggregate thresholds and compute each part separately.
How are foreign assets valued?
The rules set 31 March 2026 as the valuation date. Report values in Indian rupees using the prescribed currency conversion method. The method depends on the asset; a current bank balance or recent property estimate is not automatically the scheme value.
- Foreign bank account: Generally add deposits from opening through the valuation date, excluding qualifying redeposits of withdrawals from the same account. This can be much higher than its 31 March closing balance. The rule has a special method for accounts previously declared under the 2015 Black Money Act with tax and penalty paid.
- Quoted shares or securities: Generally use the higher of acquisition cost and the average of quoted high and low prices on the valuation date; the rule deals separately with a non-trading day.
- Unquoted shares and other investments: Apply their asset-specific formula or market valuation. The treatment of unquoted equity shares is more detailed than a simple valuer estimate.
- Immovable property, jewellery and art: Generally compare acquisition cost with the prescribed market value supported, where relevant, by an appropriately recognised valuation report. The rules provide an indexed-cost treatment where the prescribed valuation is not carried out.
- Transferred or replaced assets: The rules address an asset transferred before 31 March 2026 and reduce the old asset's or bank account's value when its proceeds were invested in a new asset, to avoid counting the same investment twice.
There is a limited 20% valuation-variance protection: for a declared asset other than a bank account, a later valuation difference within 20% of the value declared does not by itself make Form 1 invalid on the specified misrepresentation grounds. It is not permission to omit an asset, misstate its source, or ignore a threshold.
Form 1 to Form 4: the filing sequence
- Build a year-by-year inventory. Gather old ITRs, bank statements, purchase documents, share records, income details and evidence of whether funds were earned while non-resident or had already been offered to Indian tax.
- Check eligibility and values. Work out residential status in the relevant years, category for each item, 31 March 2026 values and both aggregate limits. Obtain supporting valuation reports where applicable. If you claim non-resident status for a declaration year, the Form 1 notes require passport details.
- Submit Form 1 by 31 December 2026. On the income-tax e-filing portal Official ↗, go to e-File → Income Tax Forms → File Income Tax Forms → Forms as per other Acts, select the foreign-assets scheme Form 1, complete the relevant annexures and electronically verify it. The official Form 1 user manual Official ↗ shows the screens and supporting-document requirements.
- Check Form 2. The department communicates the amount payable in an electronic order within one month from the end of the month in which Form 1 was made. Check its figures and record when you received the order.
- Pay and send Form 3. Pay within two months from the end of the month in which you received Form 2. A further period of up to two months is allowed with simple interest at 1% per month or part of a month on the unpaid amount. Submit Form 3 electronically with proof of the payment and any interest within the allowed period. Payments can be made in parts, but the full sum and interest, where applicable, must be settled in time.
- Retain Form 4. The department issues the electronic order certifying the valid declaration and payment within one month from the end of the month in which Form 3 was submitted. Keep the order, acknowledgment and underlying records.
Do not calculate the payment date solely from the date printed on Form 2: section 135(2) measures the initial window from the end of the month of receipt. Missing the outer payment window can make the declaration void and the scheme benefit unavailable.
Limits, exclusions and continuing duties
Section 140 excludes income or assets representing proceeds of crime where proceedings under the Prevention of Money-laundering Act have been initiated or are pending, and items for an assessment year already assessed under the Black Money Act, 2015. Pending assessments under the Income-tax Act or Black Money Act are treated differently: the assessing officer must take a valid declaration into account when completing them.
A valid declaration and payment can give immunity from further tax, penalty and prosecution under the Black Money Act for the income or asset declared, subject to the scheme's conditions. This is not an all-purpose immunity for unrelated transactions or other laws. The amount paid under the scheme is non-refundable; the law also restricts rectification, revision and appeal relief for a completed assessment in relation to the declared item. Examine the consequences before submitting.
For later returns, disclose foreign assets and income in the applicable ITR schedules when the filing requirements and residential status call for it. The scheme does not replace ordinary future reporting.
Before the 31 December deadline
- Reconcile old ITRs with foreign statements, employer equity records, investment documents and tax paid.
- Separate unexplained or untaxed amounts from assets with evidenced, qualifying sources; account for later income from those assets.
- Obtain valuations and currency conversion support early, especially for property, unquoted shares and long-lived bank accounts.
- Check the scheme exclusions and pending proceedings with a qualified adviser before making a non-refundable payment.
- Save the Form 1 acknowledgment, monitor Form 2, and calendar both payment and Form 3 dates using the actual receipt date.
TaxQue can help review the source of funds, prior returns, valuations and the filing timeline. Email info@taxque.in, call 9311256088, or visit TaxQue.
