Income Tax Disclosure Scheme Opens August 16, Small Taxpayers Can Declare Undisclosed Foreign Assets Until December 31

Mumbai: The Income Tax Department has issued detailed rules for the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026, giving eligible taxpayers a one-time opportunity to disclose certain previously undeclared foreign assets and income.

The scheme opens on August 16, 2026, and will remain available until December 31, 2026. All declarations will be processed electronically, according to FAQs issued by the Central Board of Direct Taxes (CBDT).

Who Can Apply?

The scheme covers residents, non-residents and residents but not ordinarily resident (RNOR), subject to certain conditions.

A key requirement is that the individual must have been a resident of India in the year to which the undisclosed income relates or in the year when the foreign asset was acquired.

Taxpayers can use the scheme if they did not file an income tax return, left out the foreign asset or income from an earlier return, or if such income or asset may otherwise have escaped assessment.

The declaration has to be filed electronically in Form 1.

Two Categories

The scheme divides eligible disclosures into two categories.

The first category covers undisclosed foreign assets or foreign income on which tax was never paid. The total value of such assets and income is capped at Rs 1 crore, based on the value as of March 31, 2026.

Taxpayers will have to pay 30 per cent tax plus an additional amount equal to the tax, taking the effective outgo to 60 per cent.

For example, if a taxpayer has Rs 60 lakh in an undisclosed foreign bank account along with Rs 20 lakh in undisclosed income, the total payment would be Rs 48 lakh.

Rs 5 Crore Limit

The second category covers foreign assets on which tax has already been paid or assets acquired when the individual was a non-resident but which were not reported in the relevant schedule of the income tax return.

The maximum asset value allowed under this category is Rs 5 crore.

Instead of a percentage-based tax, taxpayers will have to pay a fixed fee of Rs 1 lakh. Those holding foreign assets exceeding Rs 5 crore will not be eligible for the scheme under this category.

Payment Timeline

After examining Form 1, the tax authority will issue an order in Form 2 within one month, specifying the amount payable.

The taxpayer will then get two months to make the payment. The deadline can be extended by another two months by paying simple interest of 1 per cent per month.

If payment is not completed within the maximum four-month period, the taxpayer will lose the benefit of the scheme for that declaration.