Budget 2026: A Six-Month Window to Disclose Foreign Assets

A Second Chance for Tax Compliance

In a significant move to ease compliance for small taxpayers, Finance Minister Nirmala Sitharaman, in the Union Budget 2026, announced a one-time, six-month foreign asset disclosure scheme. This initiative provides a limited window for individuals who may have inadvertently failed to report overseas income or assets to regularise their tax affairs. The scheme is specifically targeted at addressing the practical challenges faced by students, young professionals, tech employees, and relocated Non-Resident Indians (NRIs) who often navigate complex international tax laws.

The Rationale Behind the Scheme

The government has acknowledged that many instances of non-disclosure, particularly among globally mobile citizens, stem from a lack of awareness or genuine mistakes rather than an intent to evade taxes. Holding a foreign bank account while studying abroad, receiving stock options during a brief overseas work assignment, or earning small amounts from part-time work can create foreign assets that are often overlooked in Indian tax filings. Under existing laws, such omissions can attract severe penalties and prosecution. This scheme offers a structured, low-stress pathway to become fully compliant.

Who Can Benefit from the Disclosure Window?

The scheme is structured into two distinct categories to cater to different types of non-compliance:

Category A: For Complete Non-Disclosure This category is for taxpayers who did not disclose their overseas income or assets at all. To be eligible, the total value of the undisclosed income or asset must not exceed ₹1 crore. Individuals opting for this route will be required to pay a total of 60% on the value of the asset or income. This is composed of:

• 30% tax on the fair market value of the asset or the undisclosed income.
• An additional 30% tax, which serves in place of a penalty.

Upon successful payment, the taxpayer will be granted complete immunity from prosecution under the relevant tax laws.

Category B: For Partial Disclosure This category is designed for individuals who had disclosed their overseas income and paid the due taxes but failed to declare the specific asset that was acquired from that income. This applies to assets with a value of up to ₹5 crore. To regularise their filings, these taxpayers need to pay a nominal one-time fee of ₹1 lakh. In return, they will receive immunity from both penalty and prosecution.

Summary of the Foreign Asset Disclosure Scheme

Feature	Category A	Category B
Eligibility	Taxpayers who did not disclose foreign income or assets	Taxpayers who paid tax on income but did not declare the asset
Asset/Income Limit	Up to ₹1 crore	Up to ₹5 crore
Payment Required	30% tax + 30% additional tax	Flat fee of ₹1 lakh
Immunity Granted	From prosecution	From both penalty and prosecution

Additional Relief for Minor Holdings

Complementing the one-time scheme, the Budget also provides permanent relief for very small holdings. The Finance Minister announced that non-disclosure of non-immovable foreign assets with an aggregate value of less than ₹20 lakh will not attract prosecution. This measure is being applied retrospectively from October 1, 2024, offering significant relief to individuals with minor overseas assets who may have missed reporting them.

A Calibrated Approach to Tax Enforcement

These relief measures are part of a broader, balanced strategy on tax compliance. While offering a chance to correct past mistakes for small taxpayers, the Budget also tightened oversight in other areas. For instance, it was announced that Tax Deducted at Source (TDS) will now be applicable on the sale of immovable property by non-residents, using the buyer's PAN-based challan. This move aims to improve transparency and tax collection in cross-border property deals. Together, these measures signal a policy that distinguishes between inadvertent errors and deliberate evasion, fostering a climate of voluntary compliance.

What Should Eligible Taxpayers Do?

The six-month window is a critical, one-time opportunity. Individuals who have studied, worked, or lived abroad should carefully review their financial history to identify any foreign assets or income streams that may not have been reported correctly in their Indian tax returns. This includes bank accounts, stock options (ESOPs/RSUs), and any other financial interests. Seeking professional tax advice is recommended to navigate the process correctly and ensure full compliance before the window closes. The scheme represents a clear signal from the government to encourage taxpayers to clean up their records without the fear of harsh legal consequences.