Foreign Assets of Small Taxpayers Disclosure Scheme 2026: who qualifies, what it costs and the 31 December 2026 deadline

If you came back to India after years abroad and never listed your overseas brokerage account, house or bank balance in your income-tax return, the Central Board of Direct Taxes has opened a narrow, time-bound window to set the record straight. CBDT Notification No. 114/2026 (G.S.R. 732(E), dated 14 August 2026) notifies the Foreign Assets of Small Taxpayers-Disclosure Scheme Rules, 2026, made under section 143 of the Finance Act, 2026 (4 of 2026). The rules came into force on 16 August 2026, and the last date to use the scheme is 31 December 2026, 61 days from today. The Income Tax Department lists the notification on its latest news page.

What the Section Says

The scheme sits in Chapter IV of the Finance Act, 2026. The Table in section 133 of that Act fixes two categories, and rule 4 of the 2026 rules says the amount payable is whatever column (3) of that Table specifies for your category, subject to the conditions in column (4). Under rule 2(3), the authority is the Pr. DGIT (Systems) or DGIT (Systems), and every step is electronic.

In plain terms, Sl. No. 1 is for money never taxed in India; the effective cost is 60% of the declared value. Sl. No. 2 is for assets with a clean source (earned abroad before you became resident, or already taxed here) that you failed to report; the cost is a Rs 1 lakh fee, up to the Rs 5 crore ceiling.

Rule 5(1) makes the caps strict. Under Sl. No. 1, the aggregate of undisclosed income and undisclosed assets cannot exceed Rs 1 crore; under Sl. No. 2, the aggregate of assets cannot exceed Rs 5 crore. Cross either line and the scheme is not available at all. The rules' own Illustration 3 under rule 4 shows a foreign mutual fund worth Rs 2.5 crore and New York Stock Exchange shares worth Rs 4 crore, a total of Rs 6.5 crore, which the notification says is "not eligible to declare under this scheme".

The four forms and the timeline

Form 1 must be verified under a digital signature if your return of income has to be filed that way, and otherwise through an electronic verification code (rule 9). Note 5 to Form 2 says payments "can be made in parts".

How the value is fixed

Everything turns on fair market value (FMV) on the valuation date, 31 March 2026. Rule 3 generally takes the higher of cost of acquisition and the open-market value on that date, backed by a report from a valuer recognised in the country concerned. If no valuation is carried out, the indexed cost of acquisition under section 48 of the Income-tax Act, 1961 is deemed to be the FMV.

Two valuation rules catch people out:

1. Bank accounts are valued by deposits, not balance. Rule 3(1)(e) takes the sum of all deposits from the date the account was opened to 31 March 2026, ignoring deposits made from earlier withdrawals. The rules' Illustration 1 adds deposits of $1,000, $500, $300, $2,500 and $600 to reach a value of $4,900, even though $1,600 had been withdrawn along the way.
2. Currency conversion uses one fixed rate. Under rule 3(4), a value in an RBI-permitted currency is converted at the RBI reference rate on 31 March 2026. Other currencies are first converted to US dollars at the local central bank rate (rule 3(5)).

Rule 5(2) adds a cushion: if the Assessing Officer later values a non-bank asset differently, the declaration is not void for that reason alone so long as the gap does not exceed 20% of the FMV you declared.

Worked Example

Take Meera (an illustrative taxpayer), a software architect on a salary of Rs 32 lakh a year in Bengaluru. She worked in the United States from 2016 to 2021 as a non-resident and bought US-listed shares out of her American salary. After she turned resident, she never reported them in the foreign-asset schedule of her return. On 31 March 2026, the shares are worth Rs 1.8 crore at the average of the day's high and low prices, which is above their cost.

Because the shares were bought from income earned while she was a non-resident, they fall under Sl. No. 2. Rs 1.8 crore is below the Rs 5 crore cap, so she pays the flat fee of Rs 1 lakh. That is about 0.56% of the asset's value. Her Rs 32 lakh salary is already taxed through TDS and does not enter the scheme; you can check that liability separately on the income tax calculator.

Now take her brother Arjun (also illustrative), a business owner. He has a foreign bank account that the rules' deposit method values at Rs 45 lakh, plus Rs 15 lakh of foreign consultancy income from earlier years that was never offered to tax. The aggregate is Rs 60 lakh, below Rs 1 crore, so he falls under Sl. No. 1.

This mirrors the rules' own Illustration 1 under rule 4, where a Rs 60 lakh account and Rs 20 lakh of income give tax of Rs 24 lakh, penalty of Rs 24 lakh and a total of Rs 48 lakh.

The payment clock. Suppose Arjun's Form 2 order is dated 10 November 2026. The month ends on 30 November 2026, so he can pay Rs 36 lakh without interest up to 31 January 2027. If he pays in February 2027, he adds 1% interest, or Rs 36,000. If he pays in March 2027, interest is 2%, or Rs 72,000, for a total of Rs 36,72,000. The outer limit is 31 March 2027. Miss it and, as Form 2 states, the declaration "shall be treated as void and shall be deemed never to have been made". The rules' Illustration to rule 7 uses a 22 September 2026 order, a 30 November 2026 interest-free deadline and a 31 January 2027 outer limit.

Common Mistakes

Mixing up "resident" years. Form 1, Part B asks for your residential status in the year the asset was acquired or the income earned: Resident, Non-resident or RNOR. If you were already a resident when you bought the asset from untaxed money, Sl. No. 2 does not fit. Read our explainer on residential status before you choose, because the category decides whether you pay Rs 1 lakh or 60% of the value.

Double counting reinvested money. Rule 3(3) reduces the value of an old asset or bank account by the amount reinvested in a new asset. In the rules' example, a Rs 70 lakh account drops to Rs 40 lakh because Rs 30 lakh went into a second house, which is then valued at Rs 50 lakh on its own. Skipping this adjustment can push a borderline Rs 90 lakh case over the Rs 1 crore line.

Treating the scheme as the end of reporting. The scheme covers the past up to 31 March 2026. Your ITR for later years still needs the foreign-asset schedule filled in. Gains on any sale of the assets also remain taxable; you can estimate those on the capital gains calculator.

FAQ

What is the last date for the foreign assets disclosure scheme 2026?

Rule 2(4) of the 2026 rules defines the "last date" as 31 December 2026. Form 1 must be filed electronically by then. Payment can follow the Form 2 order within the windows set by section 135, up to 4 months from the end of the month of the order.

How much does the scheme cost?

Under Sl. No. 1, tax at 30% plus a penalty of 100% of that tax, an effective 60% of the declared value, for aggregates up to Rs 1 crore. Under Sl. No. 2, a flat fee of Rs 1 lakh for aggregates up to Rs 5 crore. Interest at 1% a month applies only to late payment, for at most 2 extra months.

My foreign assets are worth Rs 6 crore. Can I declare part of them?

The rules do not offer that route. Rule 5(1) caps the aggregate at Rs 5 crore under Sl. No. 2, and Illustration 2 under rule 5 marks a Rs 6.5 crore aggregate as "not eligible to declare".

How is a foreign bank account valued?

By adding every deposit from the date the account was opened to 31 March 2026, leaving out deposits that came from earlier withdrawals (rule 3(1)(e)). If the account was declared earlier under Chapter VI of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, only deposits since that declaration count.

Who processes the declaration?

The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), under rule 2(3). That authority issues the Form 2 order and the Form 4 certificate, the latter within 1 month from the end of the month in which you file Form 3.

What happens if the AO later values my property higher?

Under rule 5(2), the declaration is not invalid merely because of a valuation difference of up to 20% of the FMV you declared. The cushion does not apply to bank accounts, which are valued by the deposit formula.

This article explains CBDT Notification No. 114/2026 as published on 14 August 2026. It is general information, not tax advice; check your own facts with a chartered accountant before filing Form 1.