Budget unveils 6-month voluntary disclosure window for foreign income, assets
What's the story
The Union Budget has introduced a voluntary disclosure scheme for taxpayers with undisclosed foreign income or assets. The initiative is aimed at small taxpayers, including students and salaried employees, who may have foreign assets or income but failed to comply with reporting/tax requirements in the past. The six-month window will be open from a date to be announced by the Central Government.
Asset inclusion
What is covered and what is not?
The voluntary disclosure scheme covers a wide range of foreign assets and income. These include foreign bank accounts, employee stock options (ESOPs), retirement accounts, foreign securities, etc. It is applicable to taxpayers who either completely failed to disclose overseas income/assets or disclosed them but didn't report the assets acquired from such income. However, it doesn't cover proceeds of crime under the Prevention of Money Laundering Act or cases where assessment proceedings under the Black Money Act have already been completed.
Tax structure
The amnesty scheme has 2 categories
The amnesty scheme is divided into two categories. Category A covers cases of complete non-disclosure of foreign income/assets worth up to ₹1 crore, while Category B applies to cases where income was disclosed and tax paid but the foreign asset acquired from explained sources wasn't reported in Schedule FA. The value limit for this category is up to ₹5 crore and includes foreign bank accounts, stocks, ESOPs/RSUs, overseas real estate among others.
Penalty details
Taxpayers will have to pay tax on the value of
Under Category A, taxpayers will have to pay tax at 30% of the value of the undisclosed foreign asset/income as on March 31, 2026. This will be along with an additional amount equal to 100% of such tax. The total outgo comes to 60% of the value of the asset or income. For Category B, disclosure can be regularized by paying a flat fee of ₹1 lakh per asset for first year non-disclosure even if lapse continued over multiple years.
Penalty consequences
What happens if taxpayers fail to declare?
If taxpayers fail to declare within this six-month window, they will be subject to penalties under the Black Money Act. These include a 30% tax on undisclosed income, penalties up to three times the tax amount, and fines of ₹10 lakh per asset per year for non-disclosure. Imprisonment of six months to seven years may also be imposed along with reopening assessments up to 16 years and non-availability of Double Taxation Avoidance Agreement relief.