Many returning NRIs and former overseas students may have unintentionally left a small amount of money or financial assets abroad without disclosing them while filing their income tax forms in India. Budget 2026 recommended a time-bound method for declaring foreign assets and income. It will be known as the Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026 (FAST-DS 2026).
This could be the result of real oversight rather than deliberate tax evasion. Employees working abroad, for example, may have earned ESOPs that remained overseas even after their return to India. Students who studied abroad may still have dormant bank accounts with small balances that were never formally closed. Similarly, NRIs returning home may have foreign savings accounts, insurance policies, or retirement benefits that were not actively tracked or disclosed.
In many such cases, taxpayers were either unaware of the disclosure requirements, assumed low-value or inactive accounts were not reportable, or believed that income earned abroad in the past did not require reporting after becoming Indian residents again.
The Black Money Act
There are tax laws in place to take care of black money stashed abroad by Indians. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was enacted to address the issue of undisclosed foreign income and assets held by resident taxpayers.
However, the Income Tax Department has observed that non-compliance is particularly prevalent in cases involving legacy or inadvertent non-disclosures for small taxpayers, including holdings arising from foreign employment benefits such as ESOPs or RSUs, dormant or low-value foreign bank accounts of former students, savings or insurance policies of returning non-residents, and assets held by individuals on overseas deputation.
Also, a significant number of PAN holders have not disclosed their foreign income, which the government has come to know from the information received under the ‘Automatic Exchange of Information’ framework, indicating non-disclosure of foreign financial assets by Indians.
Proposal
So as to facilitate voluntary compliance and enable the resolution of such legacy cases of small taxpayers, Budget 2026 proposed to introduce a time-bound scheme for the declaration of foreign assets and foreign-sourced income. It will be called the Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026 (FAST-DS 2026).
The declaration allows for the payment of taxes or fees based on the nature and source of acquisition, as well as limited protection from penalties and punishment under the Black Money Act for the specified matters. However, cases involving prosecution or proceeds of crime are proposed to be excluded under the FAST-DS 2026 scheme.
The proposed FAST-DS 2026 scheme shall form part of the Finance Bill, 2026 and shall come into force from the date to be notified by the Central Government.
The Black Money Penalty Relaxed
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 establishes penalties for residents who willfully do not disclose foreign income and assets. The Act proscribes prosecution, which may include rigorous imprisonment and fines, for those who fail to submit income tax returns or omit foreign assets or income in their disclosures.
To provide relief for minor non-disclosures and align prosecution provisions with the penalty framework under the Black Money Act, it is proposed that these provisions will not apply to foreign assets, excluding immovable property, valued at less than Rs 20 lakh.
These amendments shall take effect retrospectively from the 1st day of October, 2024