It is a one-time voluntary disclosure scheme contained in Chapter IV (sections 130 to 144) of the Finance Act, 2026.

This Scheme allows eligible taxpayers to declare:

1. Undisclosed foreign assets or foreign income that was not offered to tax, and
2. Foreign assets acquired from explained sources, such as income earned while the taxpayer was non-resident or income already offered to tax in India but omitted from the relevant schedule of the income tax return.

The Scheme has been operationalised through the Foreign Assets of Small Taxpayers–Disclosure Scheme Rules, 2026, notified through CBDT Notification No. 114/2026, F. No. 370142/18/2026-TPL, G.S.R. 732(E), dated 14 August 2026.

As per section 131 of the Finance Act, 2026, the Scheme broadly covers:

1. A person who was resident in India under section 6 of the Income-tax Act, 1961 for the relevant previous year, or
2. A person who is non-resident or resident but not ordinarily resident (RNOR) but was resident in India – 
   1. in the previous year to which the undisclosed foreign income relates, or 
   2. in the previous year in which the undisclosed foreign asset was acquired.

Accordingly, the residential status needs to be seen for the year in which the income arose, or the asset was acquired must be examined and not on the date of declaration. 
 

Under section 132 of the Finance Act, 2026, a declaration may be made where the taxpayer:

• Failed to furnish a return under section 139 of the Income-tax Act, 1961; or
• Furnished a return before commencement of this scheme but failed to disclose the relevant foreign asset or income; or
• Has income or an asset that escaped assessment within the meaning of section 147 of the Income-tax Act, 1961.

As per section 140 of the Finance Act 2026, Foreign Assets of Small Taxpayers - Disclosure Scheme does not apply to:

• Income or assets directly or indirectly representing proceeds of crime where proceedings have been initiated or are pending under the Prevention of Money laundering Act, 2002; or
• Income or assets relating to an assessment year for which assessment proceedings have already been completed under the Black Money Act, 2015.

Where assessment proceedings are pending under the Income-tax Act or Black Money Act, section 141 provides that the Assessing Officer must take the declaration into account while completing the assessment.

• Commencement of Scheme: 16 August 2026
• Last date for filing declaration in Form 1: 31 December 2026

(No declaration can be filed after this date)
 

The valuation date is 31st March 2026. The fair market value of assets proposed to be declared must be computed as on this date.

An asset (including a financial interest in any entity) located outside India, held by the assessee in his own name or in respect of which he is the beneficial owner, where he has no explanation about the source of investment, or the explanation given is, in the opinion of the Assessing Officer, unsatisfactory. 

The total amount of income of an assessee from a source located outside India, which was chargeable to tax in India, but which has not been offered to tax. 

The aggregate value of the undisclosed asset located outside India (as on 31st March 2026) and the undisclosed foreign income must not exceed ₹1 crore.

The aggregate value of the assets located outside India must not exceed ₹5 crore.

Prescribed Forms & Timelines:

Steps for Filing Form 1: 

Log in to e-filing portal >> Go to e-file > >Income Tax Forms > >File Income Tax Forms >> Under 'Forms as per other Acts’, select 'FOREIGN ASSETS OF SMALL TAXPAYERS' DISCLOSURE SCHEME 2026 (Form 1 of FADS 2026)' and click 'File Now'.
 

Form 1 can be resubmitted only until Form 2 is issued. On resubmission, the earlier Form 1 becomes non-actionable and the latest submission is treated as valid. Once Form 2 is issued, Form 1 cannot be resubmitted.

The Scheme contains two fundamentally different categories under the Table in section 133.

Categories of Declaration in Form 1 and Amount Payable:

Ctg.    Type of Undisclosed Assets or Income    Amount Payable
1    Untaxed foreign asset or income
This category covers:
•       An undisclosed asset located outside India; or
•    Undisclosed foreign income that was chargeable to tax in India but was not offered to tax.

The aggregate of:
•    The value of the undisclosed foreign assets as on 31 March 2026; and
•    The undisclosed foreign income
must not exceed ₹1 crore.    The total amount payable would be the aggregate of – 
(i)    tax of 30% of the value of the undisclosed asset located outside India or 
30% of the undisclosed foreign income declared; and 
(ii) amount equal to the tax paid in (i)-The effective payment is therefore 60% of the declared value or income.

2    Explained asset but reporting lapse:

This category covers a foreign asset:
•    Acquired from foreign income earned while the taxpayer was non-resident, but not reported in the relevant schedule after becoming resident; or
•    Acquired from income already offered to tax under the Income-tax Act, 1961, but not reported in the relevant schedule of the return.
The aggregate value of such foreign assets must not exceed ₹5 crore.
    A flat fee of Rs 1 lakh
 

• The shares will fall under Category 2, attracting the ₹1 lakh fee
• The untaxed dividend will fall under Category 1, attracting ₹2.4 lakh as tax [30% tax plus an additional amount equal to that tax].

The Rules and Form 1 permit multiple assets and income items to be included in the declaration. 

If the value of the assets is more than Rs 5 Cr, the assessee will not be eligible to avail this scheme.

For FADS purposes, the value of a foreign bank account is not merely its closing balance on 31 March 2026. Rule 3 (1) (e) of the FADS Rules, 2026 generally requires aggregation of deposits made from the date the account was opened up to the valuation date. However:

• Deposits representing a redeposit of money withdrawn from the same account are excluded to avoid double counting; and
• If the account was previously declared under Chapter VI of the Black Money Act, 2015 and tax and penalty were paid, only qualifying deposits made after that declaration are considered.

Rule 3 of FADS Rules, 2026 prescribes asset specific methods for the valuation. Broadly:

• Quoted shares and securities: Higher of acquisition cost and the average of the lowest and highest price of such shares and securities quoted on any established securities market on the valuation date. If there was no trading on that date, the nearest preceding trading date is considered.
• Unquoted equity shares: Higher of acquisition cost and value under the prescribed net asset formula as per Rule 3(c )(ii)(II). Where the prescribed valuation is not carried out, indexed cost may become the deemed value.
• Immovable property: Higher of acquisition cost and open market value on valuation date supported by a report from an appropriately recognised overseas valuer. If such valuation is not undertaken, indexed cost is generally deemed to be the fair market value.
• Jewellery, precious stones, art and specified residuary assets: Generally, the higher of cost and prescribed open market value on valuation date, with indexed cost consequences where the market valuation is not undertaken.
• Interest in a foreign partnership, LLP or association: Determined by allocating the entity’s net assets in accordance with the prescribed capital and profit-sharing methodology.

FMV is the higher of its cost of acquisition/amount invested and the price it would fetch if sold in the open market on the valuation date in an arm’s-length transaction; if such valuation is not carried out, the indexed cost of acquisition shall be the FMV.

All values are to be reported in Indian Rupees. For conversion of foreign currency: -

•  Where the currency in which the value is expressed is one of the currencies designated by the Reserve Bank of India under the Foreign Exchange Management (Deposit) Regulations, 2016, it is converted into Indian Rupees at the RBI’s reference rate on the valuation date. 
• If it is not such a designated currency, it is first converted into US Dollars at the rate specified by the central bank (or, failing that, another regulated bank) of the country where the asset is located, and the US Dollar value is then converted into Indian Rupees at the RBI reference rate on the valuation date.

As per sections 137 and 138 of the Finance Act 2026  -

• Amounts paid under this Scheme are non-refundable,
• The declarant cannot claim rectification or revision of a completed assessment concerning the declared income or asset, and
• No set-off or relief can be claimed in an appeal, reference or other proceeding concerning such assessment.

The commercial and legal evaluation should therefore be completed before Form 1 is submitted.

Yes, multiple selections are allowed under Part B.

Yes. A Form-1 can include multiple assets and/or income types. The relevant sections in the form and annexure can be repeated to capture all applicable details in one submission.

Yes, Form -1 requires upload of valuation report wherever valuation is carried out (e.g. immovable property, jewellery, artistic work, unquoted shares and securities, or any other asset).

After submission of Form -1, the Income Tax authority communicates the amount payable by way of an order in Form - 2, within one month from the end of the month in which the declaration was made.

The amount must be paid within two months from the end of the month in which the order is received. 

Yes, the amount shall be paid within a further period not exceeding two months along with simple interest at 1% for every month or part of a month of delay.

The delayed payment is allowed for a further period of up to two months with simple interest at 1% for every month or part of a month of delay, computed on the amount due. 

Yes, the maximum period allowed is four months from the end of the month in which the order in Form 2 was passed.  If the payment is not made within this outer limit, the benefit of the Scheme ceases to be available for that declaration.

The payment is to be reported by furnishing an intimation of payment, together with proof of payment (including interest, if any), electronically in Form 3, to the Income Tax authority, within the period allowed for payment. 
 

After Form 3 is submitted, the Income Tax authority will issue a certificate under Form 4 within one month from the end of the month in which Form 3 is received.

No. In respect of the income or asset declared, or any amount paid, the declarant cannot claim rectification or revision of any assessment already made under the Income-tax Act, 1961 or the Black Money Act, 2015, nor claim any set-off or relief in any appeal, reference or other proceeding relating to such assessment. 

Immunity is provided from the levy of any further tax or penalty, and from prosecution, under the Black Money Act, 2015, in respect of the income or asset so declared. Further, the income or amount of investment in the asset declared under this scheme shall not be included in the total income of the taxpayer under the Income-tax Act, 1961 or the Black Money Act, 2015.