The Central Board of Direct Taxes (CBDT) has notified the rules for the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (FAST-DS), giving eligible taxpayers a one-time window to declare certain undisclosed foreign assets and income. The scheme, which came into effect on 16 August, will remain open until 31 December.
FAST-DS is aimed at small taxpayers who have inadvertently missed disclosing foreign assets and income, including returning non-resident Indians (NRIs), individuals with overseas bank accounts or investments, and employees holding foreign employee stock options (Esops) or restricted stock units (RSUs). The scheme is also available to NRIs and resident but not ordinarily resident (RNOR) Indians who acquired foreign assets or income while living in India but failed to declare them.
It covers assets or income from prior years that taxpayers either failed to report in their returns, omitted by not filing a return, or that otherwise escaped assessment. While it’s a voluntary disclosure scheme, it involves steep penalties for taxpayers.
FAST-DS has two categories for disclosures, depending on the nature and value of the assets and income.
Category 1 applies to undisclosed foreign income or assets where the taxpayer cannot explain the source of investment. Eligibility is capped at a combined average value of up to ₹1 crore. For instance, if a taxpayer failed to report ₹50 lakh in foreign stocks and ₹5 lakh in foreign dividend income on their tax return, they can declare both under Category 1 since the total value ( ₹55 lakh) is below the ₹1 crore limit.
However, Category 1 disclosures trigger a 30% tax on the combined value of the undisclosed asset and income, plus an equal penalty of 30%. In the example above, on a total of ₹55 lakh, the taxpayer would owe ₹16.5 lakh in tax and an additional ₹16.5 lakh as penalty, bringing the total payout to ₹33 lakh.
The tax is calculated on the value of the asset itself, not just the omitted income, because the scheme addresses two forms of non-compliance, said Parizad Sirwalla, partner and head of global mobility services (tax) at KPMG in India. “Both failure to disclose a foreign asset under the Black Money Act (BMA) and failure to report foreign income that was taxable in India under the Income Tax Act are being addressed. The scheme consequently provides immunity from further tax, penalties and prosecution under both laws.”
Category 2 carries a significantly lower penalty—a flat ₹1 lakh—but only covers undisclosed foreign assets purchased using already-taxed income, or those acquired while the taxpayer was a non-resident and left unreported after returning to India. It does not cover omitted foreign income, and asset declarations are capped at ₹5 crore.
Category 2 will particularly benefit returning NRIs and employees holding foreign Esops, who often fail to report overseas assets due to a lack of awareness rather than an intent to evade taxes, said Ajay R. Vaswani, founder of Aras & Co., Chartered Accountants.
Under the Black Money Act, failure to disclose foreign assets or income can attract a ₹10 lakh penalty for each year of non-disclosure, apart from a flat 30% tax and a penalty of 300% of the tax payable. In the example above, 30% tax would amount to ₹16.5 lakh, with the 300% penalty taking the total liability to ₹66 lakh. Say the dividend was credited four years ago: the ₹10 lakh penalty for each year would add up to ₹40 lakh. This would take the total liability to ₹1 crore, compared to ₹33 lakh with voluntary compliance under FAST-DS. The Black Money Act also carries the risk of prosecution.
The value of the foreign asset is important not only for calculating the tax payable under FAST-DS, but also for determining whether a taxpayer falls within the scheme’s ₹1 crore or ₹5 crore eligibility limits, as these limits apply to the aggregate value of all assets and not individual asset values.
The CBDT has prescribed different valuation methods for different types of assets, and has set 31 March 2026 as the valuation date.
For assets without a prescribed valuation formula, such as foreign real estate or jewellery, the fair market value (FMV) is defined as the higher of its original acquisition cost or its open-market value as of 31 March 2026. The CBDT recommends supporting this market value with an official valuation report from a recognized authority in the host country. However, recognizing the practical challenges of securing overseas valuations from India, the rules allow taxpayers to use the indexed cost of acquisition as the deemed FMV instead.
The rules, however, do not clearly spell out how this indexation should be applied to a foreign asset. Since the FAST-DS FAQs do not specify a methodology, one reasonable approach is to apply the Indian Cost Inflation Index (CII) to the original cost in foreign currency and then convert that adjusted figure into rupees, said Sonu Iyer, partner and national leader for people advisory services–tax at EY India.
Vaswani agreed, saying that the rules define “indexed cost of acquisition” by referencing Section 48 of the Income Tax Act, making the Indian CII the relevant index. “The CII for FY2025-26 is 376 and it can be used to calculate indexed cost of acquisition. However, a small catch is that Section 48 refers to the CII of the year in which an asset is transferred, but in this case no transfer has been done. While it’s logical to use 376 CII, it’s not expressly stated in the notification.” Both Iyer and Vaswani said the CBDT may release further guidelines on this.