Foreign Assets of Small Taxpayers Disclosure Scheme: Rules 2026

Key facts

Why was the scheme introduced?

The Union Finance Minister, Smt. Nirmala Sitharaman, announced it in the Budget Speech of 1 February 2026 (paras 111 and 112) “to address practical issues of small taxpayers like students, young professionals, tech employees, relocated NRIs, and such others”, as a “one-time 6-month foreign asset disclosure scheme” for income or assets “below a certain size”.

Two groups are named: those who did not disclose overseas income or assets, and those who disclosed income or paid tax but did not declare the asset.

Which law does the scheme sit in?

Neither the Black Money Act, 2015 nor the Income-tax Act, 2025. It is a self-contained scheme in Chapter IV of the Finance Act, 2026 (sections 130 to 144). Section 130(2) brings it into force on a date the Central Government appoints; section 143 allows Rules.

• Finance Act, 2026, Chapter IVWho may declare (ss 131, 132), what is payable (s 133 Table), process and effect (ss 134 to 141).
• Black Money Act, 2015Section 139: immunity under that Act from further tax, penalty and prosecution for the year ending 31 March 2026 or earlier, on a valid declaration and payment.
• Income-tax Act, 1961Supplies residence (s 6) and return concepts (ss 139, 147). Tax years up to 2025-26 stay under this Act.
• Income-tax Act, 2025Applies from 1 April 2026 (tax year 2026-27); here it only defines terms the scheme leaves undefined (s 131(2)).

The Taxation and Other Laws (Amendment) Act, 2026 amends section 3 of the Finance Act, 2026, not Chapter IV.

What does the scheme change, and who can use it?

our reading Before, unreported overseas assets or income were dealt with through the ordinary return and assessment process and the Black Money Act. The scheme adds an optional, time-limited route at a fixed price, open under section 132 to a person who did not file a return, did not disclose the item in a return, or whose item has escaped assessment.

Section 140 excludes proceeds of crime under pending Prevention of Money-laundering Act, 2002 proceedings, and years with completed Black Money Act assessments.

How is the amount worked out?

For most assets, rule 3 takes the higher of cost and the price the asset would fetch on 31 March 2026; without a valuation, the indexed cost of acquisition is deemed its value. A bank account is valued at the sum of deposits since opening, not the balance, and a deposit made out of an earlier withdrawal is not counted. Rule 4 gives this case:

Under rule 5(2), a declared value (other than a bank account) is not invalid for misrepresentation merely because an inquiry finds a different value, if the variance is within 20%.

From when, and in what order?

The Rules came into force on 16 August 2026. Every step is electronic, before the Principal Director General or Director General of Income-tax (Systems) (rule 2(3)).

1. 16 Aug to 31 Dec 2026Form 1: declarationOn the e-Filing portal.
2. Within 1 monthForm 2: orderAmount payable (s 135(1); rule 6).
3. 2 months, plus up to 2PaymentTwo months from month-end of receipt; then up to two more at 1% a month or part (s 135(2), (3)).
4. With paymentForm 3: intimationPayment details with proof.
5. Within 1 monthForm 4: certificateCertifies declaration and payment (rule 8); conclusive (s 135(6)).

For an order passed on 22 September 2026, payment without interest is due by 30 November 2026 and the extended period ends on 31 January 2027 (rule 7). The portal pre-fills assessment year 2026-27 on challan ITNS 289, whatever the year of acquisition. Amounts paid are not refundable (s 138).

What could affected taxpayers and their advisers do now?

These are our suggestions, not requirements of the Rules.

1. Sort each holding into serial 1 or serial 2.The route turns on how the asset was funded and whether the income was offered to tax.
2. Add values the right way.Serial 1 combines assets and income against ₹1 crore; serial 2 counts assets alone against ₹5 crore (rule 5(1)).
3. Work bank accounts from deposit history.Rule 3(1)(e) adds up deposits since opening, so statements from the opening date are needed.

What to watch for

Rule 9 leaves data structure, standards and verification procedure to the Principal Director General of Income-tax (Systems), so the portal user manuals are the operational reference. our reading The Rules give employers and banks no role, though returning staff may ask HR about overseas ESOP holdings.

Frequently asked questions

Sources (official, verified 17 October 2026)

1. Scheme Rules, G.S.R. 732(E), Gazette No. 668, 14 August 2026 https://egazette.gov.in/WriteReadData/2026/275490.pdf
2. Finance Act, 2026, Chapter IV https://egazette.gov.in/WriteReadData/2026/271439.pdf
3. Taxation and Other Laws (Amendment) Act, 2026 https://egazette.gov.in/WriteReadData/2026/275521.pdf
4. Budget Speech 2026-27, paras 111 to 112 https://www.indiabudget.gov.in/doc/Budget_Speech.pdf
5. e-Filing portal: scheme help page https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/foreign-assets-small-taxpayers-disclosure-scheme-2026
6. e-Filing portal: Form 1 user manual https://www.incometax.gov.in/iec/foportal/newdownloads/form%201%20of%20fads-um

• CBDT
• Finance Act 2026
• Foreign assets
• Disclosure scheme
• Black Money Act
• FAST-DS
• India

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