Budget 2026 Introduces Amnesty Window for Undisclosed Foreign Assets
In a significant development for taxpayers with international holdings, the Union Budget 2026 has proposed a groundbreaking one-time disclosure scheme that offers substantial relief from stringent penalties under the Black Money Act. The government has introduced a six-month voluntary declaration window that allows taxpayers to come clean about any previously undisclosed foreign assets or foreign-sourced income without facing prosecution.
Understanding the Foreign Assets Disclosure Requirement
Under existing tax regulations, all Indian residents holding foreign assets must mandatorily disclose these holdings annually in the Foreign Assets (FA) Schedule of their income tax returns, specifically ITR-2 or ITR-3 forms. This requirement applies even when these assets generate no income whatsoever. The compliance burden is substantial, and failure to report foreign holdings can trigger severe consequences under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
The current penalty structure under BMA is particularly harsh: taxpayers face an annual penalty of ₹10 lakh for non-disclosure, regardless of whether there was any actual tax evasion. More alarmingly, the act provides for imprisonment of up to seven years for violations, creating significant legal exposure for those who may have inadvertently failed to comply with reporting requirements.
FAST-DS Scheme: A Welcome Relief Mechanism
The budget has formally introduced the Foreign Assets of Small Taxpayers—Disclosure Scheme, 2026 (FAST-DS), which represents a pragmatic approach to encouraging voluntary compliance. This one-time initiative provides a structured pathway for taxpayers to regularize their foreign asset disclosures from any past assessment years by paying a predetermined additional penalty that is substantially lower than the penalties prescribed under the Black Money Act.
While the government has yet to announce the precise six-month timeline for the scheme's operation, the framework offers two distinct categories of relief tailored to different taxpayer circumstances.
Category-Specific Relief Provisions
Category A taxpayers encompass those who have not disclosed foreign income or assets with a total value not exceeding ₹1 crore. To avail immunity from proceedings under BMA, these taxpayers must pay 30% of the asset's Fair Market Value (FMV) or 30% of the undisclosed income as tax, along with an additional 30% tax component. This structured payment mechanism provides certainty and finality to the regularization process.
Category B taxpayers include those who have already paid applicable taxes on their foreign income but failed to disclose the corresponding assets in Schedule FA of their returns. For this category, the asset value threshold is set higher at ₹5 crore, with taxpayers required to pay a fixed penalty of ₹1 lakh to obtain immunity from BMA proceedings.
Expert Perspectives on the Scheme's Impact
Tax professionals have welcomed the initiative as a balanced approach that addresses practical compliance challenges while safeguarding revenue interests. Sonu Iyer, Partner and National Leader of People Advisory Services at EY, emphasized the scheme's protective value: "This disclosure mechanism will save taxpayers from exorbitant penalties, prolonged litigation, and potential prosecution. Under the existing BMA framework, taxpayers face a ₹10 lakh penalty plus an additional 300% of the tax due, along with criminal prosecution risks. In contrast, FAST-DS enables voluntary declaration with relatively lower financial exposure."
Prakash Hegde, a Bengaluru-based Chartered Accountant, highlighted the scheme's relevance for specific taxpayer segments: "This represents major relief for small taxpayers with foreign Employee Stock Ownership Plans (Esops), students who have returned to India but retain foreign bank accounts, and taxpayers receiving dividends in foreign demat accounts who may have missed tax payments. The scheme addresses genuine oversight scenarios while maintaining compliance integrity."
The FAST-DS scheme reflects the government's recognition of the practical challenges taxpayers face in navigating complex international asset reporting requirements. By providing a time-bound regularization window with predictable outcomes, the initiative aims to boost voluntary compliance while reducing litigation burdens on both taxpayers and the tax administration system.
