The Central Board of Direct Taxes (CBDT) recently introduced the Foreign Assets of Small Taxpayers-Disclosure Scheme (FAST-DS) on August 14, 2026, providing eligible taxpayers with undisclosed foreign assets or income a narrow window to come clean. According to Mint, the declarations must be filed by December 31, 2026, and valued as on March 31, 2026. The scheme offers two distinct tracks with dramatically different costs - undisclosed foreign assets and income under ₹1 crore can attract 30% tax and a matching 100% penalty, effectively resulting in 60% of the total value being gone. However, assets purchased while being a non-resident, or from already taxed income not reported earlier, can incur just a flat ₹1 lakh fee (or nil) if under ₹5 crore. The Income Tax Department prescribes specific valuation methodologies for various classes of foreign assets, with fair market value generally being the higher of the cost of acquisition and the price the asset would fetch in the open market on the valuation date, supported by a valuer recognised by the government of the country where the asset is located.
Recent developments highlight the importance of proper documentation and evidence in foreign asset disclosure cases. A Delhi couple facing a ₹2.25 crore black money tax notice under the Black Money Act successfully challenged the assessment before the Income Tax Appellate Tribunal (ITAT) Delhi. As reported by ETWealth, the couple had concealed details about their foreign bank accounts and companies, but provided evidence that the foreign bank balances were actually loans given to them by V.L. Sharma and Sandip Brahmdev Sharma. The Income Tax Assessing Officer (AO) initially made a total addition of ₹2.25 crore to their income, but the Commissioner of Appeals (CIT A) deleted the additions of income in foreign bank accounts after analyzing the evidence. The ITAT Delhi upheld this relief on August 6, 2026, observing that once the lenders' financial capacity and underlying liabilities were established through documentary evidence, the amounts received by foreign companies could not be treated as undisclosed income of individual taxpayers.
Under the recently introduced Foreign Assets of Small Taxpayers-Disclosure Scheme (FAST-DS), the Income Tax Department prescribes specific valuation methodologies for various classes of foreign assets. According to Mint, the fair market value is generally the higher of the cost of acquisition and the price the asset would fetch in the open market on the valuation date, supported by a valuer recognised by the government of the country where the asset is located. Where no such valuation is carried out, the indexed cost of acquisition can be deemed to be the FMV. The scheme prescribes specific valuation methodologies for gold, jewellery, artwork, listed shares, unlisted shares, property, foreign bank accounts, and other assets. For foreign bank accounts, the value is not the balance on the valuation date but the sum of all deposits made into the account from the date it was opened up to March 31, 2026, with certain exclusions. FMV determined in foreign currency is converted into Indian Rupees using the prescribed RBI reference rate as on March 31, 2026, with separate rules for non-permitted currencies. However, advocate Priyanshi Chokshi warns that if an overseas asset bought for ₹5.25 crore is today worth only ₹3 crore, its value for the scheme may still remain ₹5.25 crore, potentially pushing taxpayers outside the scheme.
The updated return mechanism imposes a tiered penalty structure based on the delay in filing. As reported by Mint, if an ITR-U is filed within 12 months from the end of the relevant assessment year, the additional tax is 25% of the tax and interest due. This rises to 50% if filed after 12 months but within 24 months, 60% after 24 months but within 36 months, and 70% after 36 months but within 48 months. Interest is calculated at 1% per month from the first month of the assessment year to which the income relates. The longer a taxpayer waits, the more expensive this route becomes, making timing crucial for penalty calculations.
For undisclosed assets located outside India or undisclosed foreign income that was not offered to tax, the penalty structure is significantly higher under FAST-DS. The penalty payable will be the aggregate of two components: tax at 30% of the value of the undisclosed asset or income, and an additional amount equal to 100% of that tax. In effect, the total outgo works out to 60% of the declared value. The aggregate value of such assets and income must not exceed ₹1 crore, according to the income tax department. As reported by Mint, FAST-DS offers statutory immunity from prosecution under the Black Money Act for omissions, making it the preferred option for taxpayers seeking complete protection from future legal complications. The scheme permits declaration of foreign assets worth up to ₹5 crore that were acquired using tax-paid money by residents under the liberalised remittance scheme, as well as by returning NRIs who failed to disclose foreign accounts.
Taxpayers with undisclosed income above ₹1 crore are increasingly exploring a combination strategy using both updated returns and FAST-DS to minimize costs. According to The Times of India, taxpayers could save ₹30-40 lakh by first filing an updated return followed by FAST-DS, since tax outgo for updated returns could be higher. The ₹1 crore ceiling has created an incentive to divide undisclosed income between an updated return and FAST-DS, by declaring the amount above ₹1 crore through the updated return and using FAST-DS for the remaining amount. However, as noted by Harshal Bhuta, chartered accountant, this strategy carries significant risks - "one risks the FAST-DS declaration being treated as void on grounds of misrepresentation or suppression of facts, leaving a taxpayer with no recourse in future," making it unsuitable for cases where only foreign assets need disclosure without corresponding income. For assets other than bank accounts, a valuation difference of up to 20% of the FMV declared will not, by itself, invalidate the declaration on grounds of misrepresentation, suppression or false particulars, as noted by RSM India.
