Last reviewed: 16 August 2026. CBDT Notification No. 114/2026, issued 14 August 2026 and effective from 16 August 2026, introduces the Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026 — a structured window for taxpayers with relatively modest undisclosed foreign holdings to come forward, pay the determined amount, and seek immunity from further tax, penalty and prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Given how severe Black Money Act exposure normally is — a flat 30% tax plus penalty up to 300% of the tax, and prosecution that can extend to imprisonment — this is a meaningful opportunity for anyone sitting on an old foreign bank account, an inherited property abroad, or shares that were never reported in the Schedule FA of an ITR. This guide sets out who qualifies and how the process works, based on the notification as currently available.
Why a scheme like this exists
The Black Money Act, 2015 is deliberately harsh: undisclosed foreign assets and income attract a flat 30% tax with no deductions or set-offs, a penalty of up to three times the tax (300%), and criminal prosecution with imprisonment of up to ten years for wilful concealment. For someone with a genuinely small, often inherited or long-forgotten foreign holding — an NRE-era bank account, a flat left behind by a relative, a handful of foreign shares from an old ESOP — that exposure is wildly disproportionate to the amount involved. The 2026 scheme creates a defined, lower-friction path to regularise exactly this category of case, rather than leaving small holdings to be caught by the same enforcement machinery built for large, deliberate concealment.
Who qualifies — two categories
| Category | Threshold | What's included |
|---|---|---|
| Category 1 | Aggregate undisclosed foreign assets and income not exceeding ₹1 crore | Broadest category — foreign bank accounts, property, investments and any related undisclosed income, valued together |
| Category 2 | Aggregate specified undisclosed foreign assets not exceeding ₹5 crore | A defined list of specified asset types — foreign bank accounts, immovable property, jewellery, artwork, and quoted/unquoted shares and securities |
Fair market value for both categories is determined as of 31 March 2026 — not the date of declaration and not the original acquisition value. Getting this valuation right, particularly for property or unquoted shares, is one of the more technical parts of preparing a declaration.
The four-form process
| Form | What it does |
|---|---|
| Form 1 | Electronic declaration of the foreign assets and/or income being disclosed, filed by the taxpayer |
| Form 2 | The tax authority's order determining the amount payable on the disclosed assets |
| Form 3 | Intimation of payment made, with proof, against the Form 2 order |
| Form 4 | Final validation certificate confirming completion and granting immunity |
Once Form 2 is issued, payment is due within two months from the end of the month in which the order is received — a firm deadline worth diarising the moment Form 2 lands, since missing it risks losing the benefit of the scheme for that declaration.
What immunity actually covers
On completion of the process and issuance of Form 4, the taxpayer receives immunity — described in the scheme as "subject to the applicable statutory provisions" — from further tax, penalty and prosecution under the Black Money Act in respect of the disclosed assets. Two things this does not mean: first, it does not waive the amount determined as payable under Form 2 — that has to be paid; second, the "subject to applicable statutory provisions" language suggests carve-outs may apply in specific fact patterns (for instance, where other proceedings are already underway, or the source of funds itself involves separate offences). Anyone considering this scheme should have their specific facts reviewed before filing Form 1, since a declaration cannot easily be walked back once made.
Worked example — an old NRI-era bank account
Consider a hypothetical taxpayer who returned to India from an overseas assignment several years ago and became a resident, but never closed — or reported — a foreign bank account that had accumulated modest interest income over the years. The account balance plus accumulated undisclosed interest comes to roughly ₹40 lakh, comfortably within the Category 1 threshold. Under the scheme, this taxpayer would value the account as of 31 March 2026, file Form 1 declaring it, receive a Form 2 order for the tax due on the account and any related income, pay within the two-month window, and receive Form 4 confirming immunity — a materially cleaner outcome than being identified later through automatic exchange-of-information data and facing the full Black Money Act exposure.
Before you file Form 1
- Gather complete account statements, property valuations and any documentation establishing when and how the asset was acquired.
- Reconcile against any past ITR Schedule FA (Foreign Assets) filings, if the asset was partially disclosed before — the scheme's treatment of partial prior disclosure needs to be checked against the specific facts.
- Get the 31 March 2026 fair market value professionally computed, particularly for property, unquoted shares or jewellery, where valuation approach materially affects the amount payable.
- Take advice before filing — once Form 1 is submitted and the authority issues a Form 2 determination, that process runs on the scheme's timeline, not one you control.
Frequently asked questions
Is this the same as the 2015 one-time compliance window under the Black Money Act?
No — that was a separate, one-time window shortly after the Black Money Act itself was enacted in 2015. This is a new scheme notified in August 2026, with its own eligibility categories, valuation date (31 March 2026) and four-form process. Anyone who missed the 2015 window, or whose foreign holdings only became relevant since then, is a distinct case this new scheme is designed to address.
Does the scheme cover crypto assets held abroad?
The categories described in the notification list foreign bank accounts, immovable property, jewellery, artwork, and quoted/unquoted shares and securities as the specified assets for Category 2, alongside the broader Category 1 covering assets and income generally. Whether a specific crypto holding fits within these categories depends on how it is structured and held — this is worth confirming for your specific facts before filing.
What if I already disclosed part of a foreign asset in an earlier ITR?
The scheme is aimed at undisclosed assets and income, so partial prior disclosure needs to be reconciled carefully against what is being declared now — filing a declaration that overlaps with something already on record, or leaving out something that should have been included, both create complications. This is exactly the kind of case worth a professional review before filing Form 1.
Does filing Form 1 automatically trigger scrutiny of my other tax filings?
The scheme is specifically structured around the disclosed foreign asset or income and the amount determined payable on it — it is not framed as a general scrutiny trigger. That said, any voluntary disclosure to a tax authority is worth going into with your overall tax position reviewed and consistent, rather than assuming the two are entirely walled off from each other.
What happens if I don't use the scheme and the asset is discovered later?
The scheme exists precisely because the alternative is severe — full Black Money Act exposure includes a flat 30% tax with no deductions, a penalty of up to 300% of the tax, and potential prosecution with imprisonment. With automatic exchange of financial account information between India and most major jurisdictions now well established, the risk of an undisclosed foreign asset surfacing through official channels rather than voluntary disclosure is real and rising.
Can I use this scheme if I am an NRI, not a resident Indian?
The Black Money Act's disclosure obligations, and by extension this scheme, are generally relevant to persons who are 'resident and ordinarily resident' in India for the relevant year — an NRI's foreign assets are typically outside the scope of the underlying disclosure requirement in the first place. Residential status is a threshold question worth confirming before assuming either way.
We review eligibility under the Foreign Assets Disclosure Scheme, help compute the 31 March 2026 fair market value correctly, and prepare the Form 1 declaration and supporting documentation. Getting this right the first time matters, since a filed declaration is not easily withdrawn.
Income Tax Notice Management NRI Tax Advisory Talk to usThis article summarises CBDT Notification No. 114/2026 (issued 14 August 2026, effective 16 August 2026) as reported as of 16 August 2026. Operational guidance and clarifications on this scheme are still emerging — verify current procedural details and confirm your eligibility with us before filing any declaration.