FOR MANY INDIANS who studied or worked overseas, a foreign bank account is simply a legacy account. It may have been opened to receive salary, scholarship or meet living expenses and may have remained open after he returned to India.
Such accounts can come under the tax department’s radar. The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (FAST-DS), which came into force on August 16, 2026, provides an opportunity to disclose specified foreign assets and income that were not declared in their income tax return (ITR). The last date for making a declaration is December 31, 2026.
Report dormant foreign bank accounts
Foreign assets, including foreign bank accounts, are required to be reported in Schedule FA of ITR-2 or ITR-3. This is separate from whether the account has generated any income or whether there have been transactions during the year.
This is particularly relevant for those who have dormant foreign bank accounts. Non-disclosure can attract a Rs 10 lakh penalty.There is no separate penalty under the Income-tax Act merely for omission of a foreign asset from Schedule FA. However, Section 43 of the Black Money Act provides for a Rs 10 lakh penalty for failure to furnish details of a foreign asset or for furnishing inaccurate particulars. The penalty does not apply where the aggregate value of foreign assets does not exceed Rs 20 lakh.
One-time opportunity
For a foreign asset that was already offered to tax or was acquired when the taxpayer was non-resident but was not disclosed in the return schedule, the FAST-DS offers a one-time opportunity for declaration where the aggregate value of the asset does not exceed Rs 5 crore, against a prescribed fee of Rs 1 lakh. Thus, taxpayers whose foreign assets exceed the Rs 20 lakh threshold may have to weigh the consequences of the existing penalty provisions against the Rs 1 lakh payment and the immunity available under FAST-DS.
For FAST-DS, the value of a foreign bank account is determined based on the aggregate deposits made into the account, when the taxpayer is resident, from the date it was opened up to March 31, 2026. This means that the value for the purposes of the scheme may not simply be the balance lying in the account on March 31, 2026. Taxpayers with old accounts thus need to examine historical bank statements to determine the value under the prescribed methodology. The amount calculated in the foreign currency is then converted into rupees using the prescribed mechanism as on March 31, 2026.
Taxpayers who have already received notices relating to foreign assets should not assume that FAST-DS is irrelevant. The FAQs specifically provide that where assessment proceedings under the Income-tax Act or the Black Money Act are pending in respect of the declared income or asset, the assessing officer is required to take the declaration into account while finalising the assessment.
The writer is founder and managing partner, Nangia & Co LLP
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Investors should assess their financial goals, risk appetite and consult a qualified financial advisor before making investment decisions.
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