The Government has introduced the Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026 to provide a specific mechanism for certain taxpayers to disclose eligible undisclosed foreign assets or foreign income and comply with the applicable tax requirements.
The rules were notified by the Central Board of Direct Taxes (CBDT) on 14 August 2026 and came into force from 16 August 2026. The rules also prescribe the forms, valuation method, payment process and other requirements for making a declaration.
For taxpayers who have foreign bank accounts, overseas property, foreign shares, securities, jewellery or other foreign assets that were not properly disclosed, understanding the scheme and applicable conditions is important.
This article explains the scheme in simple language, including eligibility, valuation, limits, forms, payment and important dates.
What is the Foreign Assets of Small Taxpayers Disclosure Scheme 2026?
The Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026 provide the procedural framework for declarations covered under the relevant provisions of the Finance Act, 2026.
The scheme covers specified cases involving undisclosed foreign assets or income and certain foreign assets that were not disclosed in the relevant income tax return schedule.
The declaration is required to be made electronically in Form 1, subject to the conditions and limits prescribed under the scheme.
In simple terms, the scheme provides an opportunity for eligible taxpayers falling within the prescribed limits to make a declaration regarding specified foreign assets or income and complete the prescribed payment and certification process.
Who Can Use the Scheme?
The prescribed Form 1 provides different categories of assets and income that may be covered.
These include:
- Undisclosed assets located outside India
- Undisclosed foreign income
- Foreign assets acquired from income earned outside India while the taxpayer was a non-resident, where the asset was not declared after becoming resident
- Foreign assets acquired from income that was offered to tax in India but were not disclosed in the relevant schedule of the income tax return
The form specifically requires details such as the relevant previous year, residential status during the year of acquisition or earning of income and supporting documents, wherever applicable.
Therefore, taxpayers should first identify the nature and history of the foreign asset or income before deciding whether the scheme applies to them.
What Types of Foreign Assets Can Be Declared?
The scheme provides categories for reporting different types of foreign assets.
These include:
- Foreign bank accounts
- Immovable property
- Jewellery
- Artistic work
- Shares and securities
- Other assets
- Foreign income
These categories are specifically provided in Form 1 and its annexure.
For example, a taxpayer may need to examine the position if they have an overseas bank account, property outside India, foreign shares or another foreign investment that was not properly disclosed.
What is the Limit Under the Scheme?
One of the most important aspects of the scheme is the prescribed value limits.
For the relevant category covering undisclosed assets and foreign income, the combined value must not exceed Rs.1 crore.
For another category involving specified foreign assets, the aggregate value must not exceed Rs. 5 crore.
The notification provides examples to explain these limits.
For instance, an example involving a foreign bank account valued at Rs.55 lakh and foreign income of Rs.25 lakh results in an aggregate value of Rs.80 lakh. Since this is within the Rs.1 crore threshold, the example is shown as eligible.
On the other hand, where the combined value is Rs.1.20 crore, the example falls outside the ₹1 crore limit.
Similarly, for the Rs.5 crore category, foreign assets with an aggregate value of Rs.4.5 crore are shown as within the prescribed limit, whereas assets aggregating to Rs.6.5 crore are outside the limit.
The limit should therefore be checked carefully before preparing the declaration.
How is the Foreign Asset Valued?
Valuation is an important part of the scheme because eligibility and payment can depend on the value of the foreign asset or income.
The rules prescribe different valuation methods depending on the nature of the asset.
Foreign Bank Account
For a foreign bank account, the value is generally determined based on the deposits made into the account from the date of opening up to the valuation date, subject to the specific rules.
The notification also provides an illustration where deposits and withdrawals in a foreign bank account are considered for determining the value.
Foreign Immovable Property
For foreign immovable property, the fair market value is the higher of the cost of acquisition and the price the property would ordinarily fetch in the open market on the valuation date, subject to the prescribed valuation rules.
If the specified valuation is not carried out, the indexed cost of acquisition is treated as the fair market value in accordance with the rule.
Foreign Shares and Securities
Different methods are prescribed for quoted shares, unquoted equity shares and other unquoted shares and securities.
For quoted shares and securities, the rules refer to market prices on an established securities market.
For unquoted equity shares, a prescribed formula based on the value of assets, liabilities and paid-up equity capital is provided.
Jewellery and Artistic Work
For jewellery, precious stones and artistic work, the rules generally consider the higher of acquisition cost and the applicable open-market value on the valuation date, subject to the prescribed methodology.
How Will Foreign Currency Be Converted Into Indian Rupees?
Foreign assets may be denominated in currencies other than Indian Rupees.
The rules provide that the fair market value of an asset in a permitted currency is converted into Indian currency using the reference rate of the Reserve Bank of India on the valuation date.
Where the asset is denominated in a currency that is not a permitted currency, the prescribed conversion mechanism involves conversion into US dollars and then into Indian currency using the applicable reference rate.
This makes the valuation date and applicable exchange rate important when preparing the declaration.
What Forms Are Required?
The scheme provides four main forms.
Form 1 – Declaration
Form 1 is the declaration made by the taxpayer.
It requires basic information such as:
- Name
- Address
- PAN
- Passport details, where applicable
- Details of the foreign asset or income
- Relevant previous year
- Residential status
- Supporting documents
- Fair market value
- Amount payable
The declaration is to be submitted electronically.
Form 2 – Order by Income Tax Authority
Form 2 is the order issued by the income-tax authority specifying the amount payable by the declarant.
The form contains details of the declared asset or income, fair market value and aggregate amount payable.
Form 3 – Intimation of Payment
After the order, Form 3 is used for furnishing the prescribed payment information.
It includes details such as the amount payable, initial due date, amount paid and, where applicable, additional interest.
Form 4 – Certification
Form 4 is the order certifying the validity of the declaration and payment.
The rules provide for certification of the declaration and payment after the prescribed process is completed.
What is the Payment Process?
Once the income-tax authority issues the order, the declarant has to make the payment electronically and furnish the payment intimation with proof of payment.
The rules provide that payment is generally required within two months from the end of the month in which the order is received.
Where payment is made after the initial period, additional interest at 1% per month or part thereof may apply, subject to the prescribed additional period.
The notification also provides that payments under the scheme can be made in parts.
Taxpayers should therefore maintain proper records of the order, payment challans and other supporting documents.
What is the Last Date?
The rules define the “last date” as 31 December 2026.
However, taxpayers should not wait until the last date to review their foreign assets and documents.
Foreign asset information can involve bank statements, property documents, investment statements, valuation reports, acquisition records and details of the source of funds. Collecting and verifying these documents may take time.
What Documents Should a Taxpayer Keep Ready?
Before preparing a declaration, a taxpayer should organise the relevant records.
Depending on the nature of the asset, these may include:
- Foreign bank statements
- Foreign property purchase documents
- Property valuation documents
- Share or securities statements
- Investment records
- Jewellery purchase documents
- Details of acquisition cost
- Details of foreign income
- Passport and residential-status information
- Relevant income tax return details
- Documents supporting the acquisition or earning of income
Form 1 specifically requires relevant documents showing proof of acquisition of the asset or earning of income, where applicable.
Why Professional Tax Assistance Can Be Useful
Foreign asset disclosure can involve several connected areas of taxation, including residential status, valuation, documentation and income tax return reporting.
A small mistake in identifying the relevant category or calculating the value can affect the declaration.
A Chartered Accountant can assist in reviewing the taxpayer’s records, identifying the relevant category, checking valuation calculations, organising supporting documents and preparing the applicable forms.
For taxpayers, professional assistance can also help in coordinating the foreign asset details with existing income tax records and past return information.
Key Points to Remember
The Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026 introduce a prescribed process for eligible cases involving specified foreign assets and income.
The important points are:
- The rules were notified on 14 August 2026.
- The rules came into force on 16 August 2026.
- The valuation date is 31 March 2026.
- Specific categories of foreign assets and income are covered.
- A Rs.1 crore aggregate threshold applies to one category.
- A Rs. 5 crore aggregate threshold applies to another category.
- Form 1 is used for the declaration.
- Form 2 contains the order determining the amount payable.
- Form 3 is used for payment intimation.
- Form 4 certifies the validity of the declaration and payment.
- The prescribed last date is 31 December 2026.
- Valuation and supporting documents are important parts of the process.
Final Words
The Foreign Assets of Small Taxpayers Disclosure Scheme 2026 is relevant for taxpayers who have certain foreign assets or foreign income falling within the prescribed categories and limits.
The process involves more than simply declaring the asset. The taxpayer needs to identify the correct category, determine the applicable value, check the prescribed threshold, prepare the required documents and complete the electronic filing and payment process.
If you have a foreign bank account, overseas property, foreign shares, securities, jewellery or other foreign assets that were not properly disclosed, it is advisable to review your records before taking any action. Chartered Accountants, can assist taxpayers and businesses with income tax compliance, foreign asset disclosure, tax planning and related documentation in Gurgaon and Delhi NCR.
