Background
The Scheme is applicable to individual taxpayers who qualified as Resident and Ordinarily Resident (‘ROR’) in India during the relevant tax year irrespective of their current residential status.
Under the Scheme, small taxpayers have a time-bound opportunity to declare ‘undisclosed asset located outside India’ and ‘undisclosed foreign income’ with payment of specified tax or fee.
Undisclosed asset located outside India’ means an asset (including financial interest in any entity) located outside India, held by the taxpayer in his name or in respect of which he is a beneficial owner, and has no explanation about the source of investment in such asset or the explanation given by him is, in the opinion of the Assessing Officer, unsatisfactory.
Undisclosed foreign income’ means the total amount of income of the taxpayer from a source located outside India which was chargeable to tax in India but has not been offered to tax.
Taxpayers making a valid declaration and payment under the Scheme are eligible for immunity from further tax, penalty and prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (‘the Black Money Act’), subject to the prescribed conditions.
The categories of declaration and the amount payable by such small taxpayers shall be as below:
Category | Type of undisclosed Assets or Income | Amount payable |
1 | • Undisclosed asset located outside India or undisclosed Foreign income • Where the aggregate value of the above does not exceed INR 1 crore | Aggregate of: 1. Tax at 30 percent of value of asset located outside India as on 31 March 2026; 2. Tax at 30 percent of the undisclosed foreign income; 3. 100 percent of the amount calculated in (i) and (ii) above. |
2 | • Asset located outside India acquired from income accruing or arising outside India, while being non-resident and not declared on becoming a resident; or • Asset located outside India acquired from income offered to tax in India, but such assets were not declared. • Where the aggregate value of such assets does not exceed INR 5 crores. | A fee of INR 1 lakh |
Key highlights
The Scheme Rules – Key points
Declaration Timeline
- The Scheme is effective from 16 August 2026 to 31 December 2026.
Valuation Date
- The valuation date as prescribed under the Scheme is 31 March 2026.
Valuation Framework for Income / Asset reporting
- The Scheme prescribes detailed Fair Market Value (‘FMV’) determination rules for bullion, jewellery quoted and unquoted shares and securities, immovable property, artistic works, and valuation mechanism for bank account, interest in partnership firm and any other foreign assets.
- As a general rule, the FMV of an asset is the higher of (a) its cost of acquisition; and (b) the price it would ordinarily fetch if sold in the open market on the valuation date, which may be supported by a valuation report from a Government-recognized valuer in the country where the asset is located. Where such a market valuation is not conducted, the indexed cost of acquisition is deemed to be the FMV.
Valuation of foreign bank accounts
- Value is determined based on aggregate deposits from account opening up to the valuation date.
- Redeposits of earlier withdrawals and deposits already disclosed under the Black Money Act are excluded to avoid double counting.
Investment tracing mechanism
Where proceeds of one foreign asset or withdrawals from a foreign bank account are reinvested into another foreign asset, corresponding reductions are permitted to avoid duplication in valuation.
Foreign currency conversion
- Foreign asset values are required to be reported in Indian Rupees.
- The Scheme prescribes conversion methodology based on RBI reference rate on the valuation date.
Electronic filing framework
Declaration is required to be filed electronically in Form 1 along with valuation reports, if applicable, and supporting documents evidencing acquisition of assets or earning of income.
Prescribed forms
- Form 1: Declaration of foreign assets/income
- Form 2: Order by Tax Authorities determining amount payable
- Form 3: Intimation of payment by taxpayer
- Form 4: Order by Tax Authorities certifying validity of declaration and payment
Timeline
Forms | Timeline | Action by |
Form 1 | 16 August 2026 to 31 December 2026 | Taxpayer |
Form 2 | Within one month from the end of the month in which Form 1 is submitted | Tax Authority |
Form 3 | • Within two months from the end of the month of receipt of order in Form 2 • Additional payment period of up to two months is available with simple interest at 1 percent per month or part thereof | Taxpayer |
Form 4 | Within one month from the end of the month in which Form 3 is submitted. | Tax Authority |
Key clarifications provided in FAQs
Clarification on eligibility and declaration
- A Non-Resident (‘NR’) or Resident but Not Ordinarily Resident (‘RNOR’) can make a declaration if he was resident in India in the year to which the undisclosed income relates or in the year in which the undisclosed asset was acquired.
- Declaration may be made where the taxpayer has failed to furnish a return, failed to disclose the asset or income in a return furnished before commencement of the Scheme, or where such asset or income has escaped assessment.
- Declaration can be made for any previous year in respect of income or assets, subject to the monetary thresholds and other conditions of the Scheme.
Clarification on valuation
- Where sale proceeds of one asset or withdrawal from a bank account are used to acquire another asset, the FMV of the earlier asset/ bank account is reduced by the amount reinvested in the new asset.
- For assets other than bank accounts, a variance not exceeding 20 percent of the FMV declared will not by itself render the declaration invalid.
Procedural aspects
- Multiple assets or multiple types of assets/income may be declared in a single Form 1.
Payment-related clarifications
- If payment is not made within four months from the end of the month in which the original payment order in Form 2 was passed, the benefit of the Scheme ceases to be available for that declaration.
Benefits
- Immunity is provided from the levy of any further tax or penalty, and from prosecution, under the Black Money Act, in respect of the income or asset so declared.
- The declarant cannot revise or rectify any completed assessment under the Income-tax Act, 1961 or the Black Money Act under the Scheme. Further, no set-off, relief, or other tax benefit can be claimed in any appeal, reference, or proceeding relating to such assessments.
- Where assessment proceedings are pending, the Assessing Officer is required to take the declaration into account while finalising the assessment order.
Limitations
The Scheme does not apply to income or assets representing proceeds of crime if proceedings have been initiated or are pending under the Prevention of Money-laundering Act, 2002, or to cases where assessment proceedings have already been completed under the Black Money Act.
