Income Tax Department Launches Foreign Asset Disclosure Scheme for Small Taxpayers with Limit Up to ₹5 Crore

In a significant move aimed at providing relief to small taxpayers, students, young professionals, tech employees, and relocated Non-Resident Indians (NRIs), the Income Tax Department has officially rolled out the Foreign Assets of Small Taxpayers Disclosure Scheme. Effective from Sunday, August 16, this one-time compliance window allows eligible individuals to come clean on their undisclosed foreign assets and income without the fear of severe legal prosecution.

The genesis of this scheme traces back to the FY27 budget speech delivered by Finance Minister Nirmala Sitharaman. Recognizing the practical compliance hurdles faced by ordinary citizens who might have inadvertently held minor overseas assets or accounts without proper documentation, the government proposed a dedicated window to address these issues. The newly launched scheme remains open for declarations until December 31, 2026, providing ample time for taxpayers to review their international financial standings.

According to the detailed Frequently Asked Questions (FAQs) released by the department, an undisclosed asset outside India refers to any financial interest or property held abroad in the assessee's own name—or as a beneficial owner—where the source of investment cannot be satisfactorily explained to the Assessing Officer. Similarly, undisclosed foreign income encompasses any earnings generated from foreign sources that were chargeable to tax in India but left undeclared.

To qualify as a 'small taxpayer' under this framework, specific financial caps have been established. The aggregate value of the undisclosed foreign asset as of March 31, 2026, alongside any undisclosed foreign income, must not exceed ₹1 crore, while the broader aggregate value of total foreign assets must remain under ₹5 crore. Taxpayers opting to utilize this scheme will be subjected to a total payable amount calculated at 30 per cent of the declared asset's value or foreign income, along with an equivalent matching tax payment component as outlined in the operational guidelines.

For instance, if a taxpayer declares an undisclosed foreign bank account valued at ₹60 lakh alongside ₹20 lakh of undisclosed foreign income, the total liability aggregates to ₹48 lakh, breaking down into ₹36 lakh for the bank account and ₹12 lakh for the income. Post-submission, the Income Tax Department is mandated to issue a formal order within a month, granting the assessee a two-month payment window. This deadline can be further extended by another two months, subject to a simple interest charge of 1 per cent for every month or part thereof in case of delays.

Crucially, the scheme extends substantial legal safeguards. Taxpayers who make full declarations under this initiative will receive complete immunity from further tax levies, penalties, and criminal prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Furthermore, the declared amounts and investment values will be exempted from being factored into the total taxable income under both the Income-tax Act, 1961, and the Black Money Act, ensuring a clean slate for participating individuals.

"The rollout of the Foreign Assets of Small Taxpayers Disclosure Scheme is a progressive and pragmatic step by the government. By offering a transparent compliance window and immunity under the Black Money Act, the Income Tax Department is encouraging tech professionals, startup employees, and NRIs to regularize their global footprints without the dread of punitive litigation. For India's evolving startup and corporate ecosystem, where cross-border mobility and global stock options are increasingly common, this initiative removes lingering compliance anxieties. It fosters a culture of voluntary disclosure and financial transparency, ultimately benefiting both compliant individuals and the broader macroeconomic framework as we move toward a more integrated global economy." — Dr. Shishir Gupta, Founder & CEO, StartupLanes