Budget 2026: NRIs get relief window to disclose overseas assets under Black Money Act

Budget 2026 has introduced a new Foreign Assets of Small Taxpayers Disclosure Scheme, offering a six-month compliance window for NRIs and residents holding overseas assets to regularise undisclosed foreign income or reporting lapses. The scheme caps total liability at ₹60 lakh, half the earlier maximum of ₹1.20 crore, and provides immunity from prosecution, reducing both financial and legal exposure under the Black Money Act.

The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026, aims to provide a calibrated settlement route for individuals facing potential action under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The proposal allows voluntary disclosure of undisclosed foreign income, foreign assets, or technical reporting errors, while limiting the total liability in eligible cases to ₹60 lakh instead of the earlier higher exposure.

Tax experts say the move comes at a time when enforcement has become increasingly data-driven. O.P. Yadav, former IRS officer and tax expert, wrote in a column that authorities are now relying heavily on global information-sharing systems rather than complaints or manual scrutiny.

Tax scrunity

Scrutiny has intensified through the Common Reporting Standard (CRS), Foreign Account Tax Compliance Act (FATCA), and Automatic Exchange of Information (AEOI) frameworks, under which India receives financial data from multiple foreign jurisdictions. The Income-tax Department has also strengthened analytics-based monitoring and created specialised Foreign Asset Investigation Units (FAIU), leading to a rise in summons and reassessment proceedings under the Black Money Act.

Under the current law, even minor disclosure failures can lead to heavy penalties. A simple omission in the FA or FSI schedule of the income-tax return can result in exposure of up to 120% of the asset value, including 30% tax and a penalty of three times the tax amount. In addition, penalties of up to ₹10 lakh may be imposed for non-reporting of foreign assets, and prosecution provisions may apply in certain cases.

Black Money Act

Sections 3 and 4 of the Black Money Act allow tax authorities to levy tax on the fair market value of undisclosed foreign assets in the year they are detected, rather than the year of acquisition, widening the scope of liability. This has resulted in situations where even technical reporting lapses carry disproportionate financial risk.

The new scheme attempts to address these concerns by allowing voluntary correction within a defined window. It also recognises cases where no undisclosed income exists but reporting errors have occurred, such as failure to file the FA/FSI schedule or omission of foreign asset details. Such lapses could earlier attract a separate ₹10 lakh penalty.

Residents, NRIs, NORs

Eligibility under the scheme extends to residents, non-residents, and Not Ordinarily Residents (NORs), provided the undisclosed income or asset relates to a year when the individual was treated as a resident under the Income-tax Act. This provision is particularly relevant for returning NRIs whose residential status has changed over time.

Declarations can be made for any previous year, subject to the total undisclosed amount not exceeding ₹1 crore as of 31 March 2026, or in cases involving only reporting failures.

Yadav said the scheme offers an important opportunity for taxpayers to close legacy issues.
“The real question is whether a time-bound six-month compliance window should be overlooked,” he said.

The scheme will become operational after the Finance Bill, 2026 is enacted and detailed rules are notified under Section 127. The government’s stated objective is to encourage voluntary compliance, reduce litigation, and provide statutory closure for taxpayers with overseas asset reporting issues.