Foreign Asset Disclosure Scheme: Income Tax Department Notifies Rules, Window Opens August 16

The Income Tax Department has notified detailed rules for a new one-time disclosure mechanism aimed at taxpayers who have certain foreign assets or income that were not properly reported in their income-tax returns. The Foreign Assets of Small Taxpayers–Disclosure Scheme (FAST-DS), 2026, will open on August 16, giving eligible taxpayers an opportunity to regularise specified past omissions.

The scheme is particularly relevant for individuals who may have overseas bank accounts, investments, property or other foreign holdings that were either not disclosed in their tax returns or were linked to income that had not been properly reported. The Central Board of Direct Taxes (CBDT) has also released FAQs explaining how the mechanism will operate.

Two categories of disclosure

FAST-DS distinguishes between foreign assets or income that were never offered to tax and foreign assets that were acquired from income that was already taxed but were subsequently left out of the required disclosure in the income-tax return.

For the first category, the scheme covers undisclosed foreign assets and income within an aggregate value of up to ₹1 crore. Taxpayers using this route will have to pay tax at 30%, along with an additional amount equivalent to the tax payable. This effectively results in a total payment of 60% of the amount declared.

For example, if a taxpayer has an undisclosed foreign asset worth ₹60 lakh and ₹20 lakh of undisclosed foreign income, the combined value would be ₹80 lakh. Such a declaration would fall within the ₹1 crore ceiling applicable to this category.

The second category is intended for cases where the underlying income or asset was already taxed, but the foreign asset itself was not reported in the relevant disclosure section of the income-tax return. Here, the aggregate value of eligible foreign assets can be as high as ₹5 crore. Instead of the 60% payment applicable to undisclosed income and assets, the taxpayer has to pay a flat fee of ₹1 lakh.

Who can use the scheme?

The disclosure facility is available in specified situations, including where a taxpayer did not file a return, filed a return without reporting the relevant foreign asset or income, or where the income or asset subsequently escaped assessment.

The scheme was introduced with small taxpayers in mind, including individuals who may have accumulated foreign holdings or income but failed to meet the applicable disclosure requirements. Earlier information on the scheme indicated that it was designed to address situations involving taxpayers such as students, young professionals and people who had relocated or held foreign financial interests.

However, eligibility depends on the nature and value of the foreign asset or income and the circumstances surrounding the original omission. Taxpayers therefore need to establish which category applies before making a declaration.

Disclosure process to be online

The entire declaration process will be handled electronically. Eligible taxpayers will have to submit their declaration through the prescribed online system administered by the Principal Director General or Director General of Income-tax (Systems).

The prescribed procedure requires taxpayers to file Form 1 along with relevant supporting documents. Depending on the type of asset involved, a valuation report may also be required. Multiple eligible foreign assets or income items can be included in a single declaration.

The valuation date specified for foreign assets under the scheme is March 31, 2026. The rules provide different methods for determining the value of assets such as overseas bank accounts, shares and securities, jewellery and immovable property. The resulting values have to be converted and reported in Indian rupees.

Why the August 16 opening matters

The disclosure window provides taxpayers with a defined opportunity to address earlier reporting failures without relying on the ordinary tax-compliance process alone. The financial consequences depend heavily on whether the foreign asset or income was itself undisclosed for tax purposes or whether the tax was already paid but the asset was omitted from the required reporting.

That distinction makes it important for taxpayers to review their historical returns, overseas holdings and supporting records before filing a declaration. Incorrectly categorising an asset or failing to meet the scheme's eligibility conditions could affect the outcome.

The FAST-DS framework follows the government's broader effort to encourage voluntary compliance concerning overseas assets while creating a specific route for smaller-value cases. The scheme is a one-time facility, making the prescribed window particularly significant for taxpayers who believe they have qualifying omissions.

With the rules now notified, taxpayers who potentially qualify can begin reviewing their foreign asset records, previous income-tax returns and tax-payment history before deciding whether to make a declaration under FAST-DS.