India has opened a one-time disclosure window allowing eligible taxpayers to report certain foreign income and assets by paying a specified tax or fee, with protection from further penalties and prosecution under the Black Money Act.

The Foreign Assets of Small Taxpayers Disclosure Scheme, known as FAST-DS, took effect on Sunday, 16 August. Declarations can be filed until 31 December.

The scheme is aimed at relatively small cases, including overseas bank accounts, employee stock awards, shares, property and income that Indian taxpayers failed to report.

It is not a general waiver for all offshore wealth. The source of the money, the value of the assets, the taxpayer’s residential status and whether the income was already taxed will determine eligibility and the amount payable.

The Central Board of Direct Taxes notified the rules on 14 August, while the Income Tax Department published a detailed set of official FAQs.

There are two main categories. The first covers foreign income that should have been taxed in India but was not reported, along with overseas assets whose source of investment cannot be satisfactorily explained.

The combined value of the undisclosed foreign income and assets cannot exceed ₹1 crore, or about $104,778 at current exchange rates.

A taxpayer using this category must pay tax equal to 30% of the income or the fair market value of the asset. An additional amount equal to that tax is also payable in place of a penalty. The total payment therefore comes to 60% of the declared amount.

If a taxpayer declares a foreign bank account valued at ₹60 lakh and foreign income of ₹20 lakh, the combined amount is ₹80 lakh. The tax is ₹24 lakh, and the additional payment is another ₹24 lakh, taking the total to ₹48 lakh, or about $50,300.

The second category is substantially cheaper because it deals with a reporting lapse rather than untaxed income.

It covers an overseas asset acquired from income that had already been offered to tax in India, or from income earned when the taxpayer was a non-resident, but which was not reported in the foreign-assets schedule after the person became an Indian resident.

The aggregate value of assets under this category cannot exceed ₹5 crore, or about $523,890. The taxpayer pays a flat fee of ₹1 lakh, or about $1,048, and receives immunity from penalty and prosecution in respect of the declared asset.

Consider an Indian citizen who bought a property abroad for ₹2 crore while working there as a non-resident. After returning to India and becoming resident, the person continued to own the property but failed to list it in Schedule FA of the income-tax return.

If the property’s value on 31 March 2026 is ₹3 crore, it falls within the ₹5 crore limit. Subject to the other conditions, the taxpayer can declare it by paying ₹1 lakh.

A similar route is available where an Indian resident bought overseas mutual funds or shares using income that had already been taxed but failed to disclose those holdings in the return.

The limit is tested on the aggregate value of the eligible assets. A person with foreign mutual funds valued at ₹2.5 crore and foreign shares valued at ₹4 crore would have combined assets of ₹6.5 crore and would not qualify under the ₹5 crore category.

Finance minister Nirmala Sitharaman announced the proposal in the Union Budget on 1 February. The government said it was intended to address practical problems faced by students, young professionals, technology employees, returning non-resident Indians and others with relatively small overseas holdings.

The original Budget explanation acknowledged that some taxpayers had paid the correct tax or acquired assets while living abroad but failed to meet India’s separate foreign-asset reporting rules.

Those rules can carry serious consequences. Indian residents generally have to report overseas accounts, shares, property, trusts, signing authority and other financial interests in Schedule FA of their annual returns.

The Black Money Undisclosed Foreign Income and Assets and Imposition of Tax Act, 2015, allows penalties and prosecution for failures involving foreign assets. A reporting mistake can therefore expose a taxpayer to consequences that go well beyond the tax due on the underlying income.

FAST-DS draws a line between unexplained wealth and a disclosure omission. A person who concealed untaxed foreign income pays 60%. Someone who can show that the source was already taxed or was earned while non-resident may be able to regularize the reporting failure for ₹1 lakh.

Eligibility is tied to tax residence in the relevant year, not only the taxpayer’s status today.

A person who is currently resident in India can declare qualifying income or assets. A person who is now a non-resident or resident but not ordinarily resident may also use the scheme if that person was an Indian resident in the year to which the undisclosed income relates or the year in which the asset was acquired.

A declaration may be made where the taxpayer did not file a return, omitted the asset or income from a return filed before the scheme began, or allowed it to escape assessment.

The valuation date is 31 March 2026. In general, assets are valued at the higher of their acquisition cost and the price they would ordinarily fetch in the open market on that date. Where a market valuation is not obtained, indexed acquisition cost may be used under the prescribed rules.

Quoted shares are valued using market prices on the valuation date. If they did not trade that day, the rules use the nearest earlier trading date.

Foreign property, jewelry, artwork and some unquoted securities may require a report from a valuer recognized by the government or a government agency in the country where the asset is located.

How to file the tax

The filing process is electronic. The taxpayer submits Form 1 with details of the assets, income, residential status and supporting documents.

The tax authority must issue Form 2 stating the amount payable within one month from the end of the month in which the declaration was filed.

Payment is due within two months from the end of the month in which the Form 2 order is received. A further extension of up to two months is available, with simple interest of 1% for each month or part of a month of delay.

The taxpayer reports payment in Form 3. Once the payment is verified, the department issues Form 4 certifying the declaration.

A valid declaration brings immunity from further tax, penalty and prosecution under the Black Money Act for the declared asset or income. The declared amount is also not added again to total income under the Income-tax Act or the Black Money Act.