Budget 2026 Introduces Amnesty Scheme for Foreign Asset Disclosure
In a significant move aimed at boosting voluntary tax compliance, the Union Budget 2026 has unveiled a one-time, six-month disclosure window for taxpayers holding undisclosed foreign assets or income. The Foreign Assets of Small Taxpayers—Disclosure Scheme, 2026 (FAST-DS) offers relief from prosecution under the stringent Black Money Act, though it comes with specific financial obligations.
Understanding the FAST-DS Framework
The scheme provides a structured approach for taxpayers to regularize their foreign holdings without facing the severe consequences typically associated with non-disclosure. Under existing tax regulations, all foreign assets must be reported annually in the FA Schedule of ITR-2 or ITR-3, regardless of whether they generate income. Failure to comply can result in a hefty ₹10 lakh annual penalty and potential imprisonment of up to seven years.
The FAST-DS initiative is designed to address legacy cases and smaller taxpayers, offering a more manageable path to compliance. The government has yet to announce the exact start date for the six-month window, but the framework is clearly outlined in the Finance Bill 2026.
Two Categories of Taxpayer Relief
The scheme divides eligible taxpayers into two distinct categories, each with its own set of requirements and penalties.
Category A applies to individuals who have not disclosed foreign income or assets that may not have generated any income. The value of assets eligible for amnesty under this category must not exceed ₹1 crore. Taxpayers in this group must pay 30% of the asset's fair market value (FMV) as of 31 March 2026, or 30% of undisclosed income as tax, plus an additional 30% tax. This effectively results in a total payment of 60% of the FMV or undisclosed income.
Category B is for taxpayers who have paid tax on foreign income but failed to disclose the corresponding assets in Schedule FA. The asset value must be below ₹5 crore, and the penalty is a fixed ₹1 lakh to obtain amnesty. This category is particularly relevant for employees with foreign Employee Stock Ownership Plans (ESOPs) or Restricted Stock Units (RSUs).
Special Focus on Tech Employees and ESOPs
The finance minister emphasized that the scheme aims to assist small taxpayers, including students, young professionals, and tech employees with foreign ESOPs and RSUs, as well as relocated NRIs. For many tech employees, the tax on ESOP or RSU perquisites is typically withheld by their Indian employer at the time of allotment or transfer. Therefore, these stock options do not constitute undisclosed income.
If an employee has merely failed to disclose these holdings in Schedule FA, their case generally falls under Category B, requiring only the ₹1 lakh penalty. This provision offers substantial relief compared to the alternative penalties under the Black Money Act.
Comparative Advantage Over Black Money Act
Despite the significant payments required under Category A, the FAST-DS scheme presents a more favorable option than facing proceedings under the Black Money Act. Under the BMA, a taxpayer could be liable for a ₹10 lakh penalty plus 300% of the tax due, alongside the risk of prosecution and prolonged litigation.
For example, consider an individual holding undisclosed dividend income in the US worth ₹50 lakh. Under Category A of FAST-DS, the total payment would be ₹30 lakh. In contrast, under the BMA, the liability could soar to ₹70 lakh, including tax, penalty, and additional fines.
Eligibility and Strategic Considerations
The disclosure window is available to taxpayers with undisclosed income or assets, provided no proceedings are pending under the Prevention of Money Laundering Act (PMLA) and no assessments are completed under the Black Money Act. Taxpayers who have received summons but not yet faced penalty orders can also utilize the scheme.
Experts advise that even those who have received notices should consider declaring under FAST-DS, as assessing officers will take such declarations into account when finalizing assessments. The scheme is particularly aimed at addressing inadvertent non-compliance and leveraging the Automatic Exchange of Information framework to encourage voluntary disclosure.
In summary, the FAST-DS scheme represents a pragmatic approach to tax compliance, balancing enforcement with facilitation. While it imposes financial costs, it offers a clear path to regularization for taxpayers with foreign assets, especially those in the tech sector with ESOPs, helping them avoid more severe legal and financial repercussions.
