The Central Board of Direct Taxes (CBDT) has notified rules allowing taxpayers to disclose certain foreign assets that were not reported in their income-tax returns, including assets acquired while they were non-residents but not disclosed after they became residents in India.

The disclosure has to be made by December 31, 2026.

The rules deal with two different kinds of cases. One is where the foreign income or asset itself was undisclosed. The other covers certain foreign assets that were not disclosed in the income tax return, even though they were acquired from income earned while the taxpayer was a non-resident or from income proposed to be taxed in India.

The Foreign Assets of Small Taxpayers–Disclosure Scheme Rules, 2026, came into force on August 16, 2026.

The Rules provide two categories with separate value limits. For undisclosed foreign income and undisclosed foreign assets, the combined value cannot exceed ₹1 crore.

For certain foreign assets that were not disclosed in the relevant schedule of the return, the aggregate value cannot exceed ₹5 crore. The declaration has to be filed electronically in Form 1.

The first category covers an undisclosed foreign asset or undisclosed foreign income. The Rules illustrate this with an undisclosed foreign bank account valued at ₹60 lakh and undisclosed foreign income of ₹20 lakh. The combined value is ₹80 lakh, within the ₹1 crore limit.

Tax at 30% on the bank account works out to ₹18 lakh, while tax on the undisclosed foreign income is ₹6 lakh. The total tax is ₹24 lakh. An equal penalty is payable, taking the total amount payable to ₹48 lakh.

The second category includes a foreign asset acquired from income earned abroad while the taxpayer was a non-resident, where the asset was not disclosed after the taxpayer became resident in India. The Rules give the example of a plot of land outside India acquired in 2015 from such income.

The taxpayer later became a resident in India but did not disclose the land in the relevant schedule of the return. The property is valued at ₹3 crore on the valuation date. Since it falls within the ₹5 crore limit, the amount payable is a ₹1 lakh fee.

The Rules also cover a foreign asset acquired from income proposed to be taxed under the Income-tax Act, 1961, where the asset was not disclosed in the relevant schedule of the return.

The ₹5 crore ceiling applies to the combined value of assets declared under this category. The Rules give an example involving foreign mutual fund units valued at ₹2.5 crore and foreign shares and securities valued at ₹4 crore. Their combined value of ₹6.5 crore exceeds the ₹5 crore limit, making the taxpayer ineligible to make a declaration under this category.

March 31, 2026 is prescribed as the valuation date. The Rules set out different methods for calculating the fair market value of bullion, jewellery, artwork, shares and securities, immovable property, bank accounts, partnership interests and other assets.

For a bank account, the value is generally based on the total deposits made from the date of opening up to the valuation date. A separate method applies where the account had previously been declared under the Black Money Act and tax and penalty had been imposed. Deposits made from withdrawals from the same account are excluded while calculating the value.

For assets other than bank accounts, a declaration will not be treated as invalid merely because the tax authorities subsequently determine a different fair market value. This protection applies where the difference does not exceed 20% of the value declared.

The taxpayer has to file Form 1 (declaration of foreign assets or income) electronically with details of the asset or income and documents showing its acquisition or receipt. The Income-tax Authority will then issue an electronic order in Form 2 (specifying the amount of tax, penalty or fee payable).

After payment, the taxpayer has to submit the payment intimation, along with proof of payment and interest, if any, electronically in Form 3 (intimation of payment). The Income-tax Authority will subsequently issue an order in Form 4 (certifying the validity of the declaration and payment).

The Form 4 order has to be passed within one month from the end of the month in which the payment intimation is submitted electronically. The Rules define December 31, 2026 as the “last date” for the scheme


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