The Foreign Assets of Small Taxpayers (FAST) Disclosure Scheme, 2026: A Lifeline for Legacy Non-Compliance

The Foreign Assets of Small Taxpayers (FAST) Disclosure Scheme, 2026: A Lifeline for Legacy Non-Compliance

The Finance Bill, 2026 has introduced a specialized compliance framework titled "The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026". This initiative targets a specific demographic of resident taxpayers—small taxpayers, employees with foreign ESOPs, and former students—who may have inadvertently failed to report foreign assets.

Stemming from the rigorous provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA), non-disclosure of foreign assets usually invites severe financial penalties and criminal prosecution. Recognizing that many small taxpayers face disproportionate punitive consequences for legacy or inadvertent non-disclosures, this Scheme offers a one-time avenue for regularization.

Open and Close Date for the Declaration: Both dates will be notified by the Central Government in the Official Gazette.

The Scheme categorizes non-compliance into two distinct situations—Situation A (Undisclosed Assets) and Situation B (Reporting Failures)—offering tailored resolutions for each.

Situation A: Undisclosed Foreign Assets or Income

This category covers cases where the asset or income was chargeable to tax but was never disclosed or offered to tax.

1. Scope and Eligibility

• Coverage: (a) Undisclosed asset located outside India; or (b) Undisclosed foreign income.
• Condition: The Scheme is available only if the aggregate value of the undisclosed asset and the undisclosed foreign income does not exceed ₹1 crore (one crore rupees).

2. Financial Liability (The Cost of Compliance)

To regularize these assets, the declarant must pay an aggregate amount calculated as follows:

1. Tax: 30% of the value of the undisclosed asset (as on 31st March 2026) or the foreign income.
2. Penalty: 100% of the tax determined above (i.e., another 30% of the value).
3. Total Cost: 60% of the value of the asset or income.

3. Analysis for Situation A

Situation B: Technical Reporting Failures (Legitimate Source)

This category targets "technical" non-compliance where the source of the asset was legitimate (either acquired when the person was a non-resident or acquired from tax-paid income), but the asset was simply not reported in the Income Tax Return (Schedule FA).

1. Scope and Eligibility

The declaration can be filed for:

• (a) Legacy Assets from Non-Resident Period: An asset located outside India acquired from foreign income while the assessee was a non-resident, but not declared in the relevant Schedule (Schedule FA) upon becoming a resident.
• (b) Assets from Taxed Income: An asset located outside India acquired from income which has already been offered to tax under the Income-tax Act, 1961, but not declared in the relevant Schedule (Schedule FA).
• Condition: The Scheme is available if the value of the asset located outside India does not exceed ₹5 crores (five crore rupees).

2. Financial Liability (The Cost of Compliance)

• Fee: A fixed fee of ₹1,00,000 (One Lakh Rupees).
• Tax/Penalty: No additional tax or penalty on the value of the asset, as the source is presumably explained or tax-paid.

3. Analysis for Situation B

General Benefits and Immunities (Applicable to Both A and B)

1. Immunity from BMA: Notwithstanding the provisions of the Black Money Act, 2015, a valid declarant is granted immunity from the levy of any further tax, penalty, or prosecution under the BMA for the declared assets/income.
2. Exclusion from Total Income: The income or asset declared will not be included in the total income of the declarant for any assessment year under the Income-tax Act, 1961, provided the payment is made.
3. Finality: The declaration implies closure. The declarant cannot claim rectification, revision, or set-off in appeal regarding the declared amount.

Summary Comparison

Important Note: The Scheme does not apply to assets representing proceeds of crime where proceedings are pending under the Prevention of Money-laundering Act, 2002, or where BMA assessment proceedings have already been completed. So, even in cases where, BMA proceedings are pending, the assessee can opt for the Scheme.

Further, the Govt. will notify the rules of valuation of assets, forms, payment process etc in due course.

Conclusion - A Final Opportunity for Compliance: The Foreign Assets of Small Taxpayers (FAST) Disclosure Scheme, 2026, represents a pivotal shift from a purely punitive approach to a more empathetic, compliance-oriented framework. For many resident Indians, the complexities of the Black Money Act have long been a source of anxiety, often due to technical errors in Schedule FA or forgotten accounts from time spent abroad.  By providing a clear roadmap—distinguishing between intentional evasion and technical omissions—the Government has offered a genuine "exit gate." With the 60% total liability for undisclosed assets and a mere ₹1 Lakh flat fee for reporting failures, the financial cost of the Scheme is a small price to pay for total legal peace of mind and immunity from prosecution.  As the notification for the declaration window approaches, eligible taxpayers should review their foreign holdings, including ESOPs, bank accounts, and properties, to ensure they don't miss this one-time regularization window. In the era of global tax transparency and automated information exchange, remaining non-compliant is no longer a viable option.