FM introduces 6 month foreign asset disclosure scheme for taxpayers. Here's what you must know

A time-bound six-month foreign asset disclosure window signals that the government wants better compliance and data visibility before tightening enforcement

• Six-month foreign asset disclosure scheme announced for taxpayers
• Declare undisclosed assets, pay lower penalties, and avoid prosecution.
• Scheme targets small taxpayers, students, and those with genuine oversight

Did our AI summary help?

Finance minister Nirmala Sitharaman on Sunday announced a six-month foreign asset disclosure scheme for taxpayers, saying the move is aimed at encouraging voluntary compliance and giving relief to individuals who failed to report overseas assets due to genuine oversight.

Presenting the Union Budget in the Lok Sabha on February 1, she said the window would allow taxpayers to come forward, declare undisclosed foreign assets and regularise their tax position without facing prosecution.

The FM said, this proposal is made with respect for small taxpayers, especially students, young professionals, salaried employees and individuals who have recently relocated. Many of them may have made genuine mistakes due to a lack of awareness.

Nirmala Sitharaman said in her speech, "To address practical issues of small taxpayers like students, young professionals, tech employees, relocated NRIs, and such others, I propose to introduce a one-time 6-month foreign asset disclosure scheme for these taxpayers to disclose income or assets below a certain size."

Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, said, "This is a pragmatic clean-up move rather than a revenue grab. A time-bound six-month foreign asset disclosure window signals that the government wants better compliance and data visibility before tightening enforcement."

For taxpayers, especially those with legacy overseas holdings, ESOPs, inherited assets, or small foreign accounts, this lowers the cost of coming clean without immediate punitive action. From a markets perspective, the signal matters more than the collections. It reduces uncertainty around retrospective scrutiny and aligns India with global information-sharing regimes, which improves credibility with foreign investors.

The government has introduced a six-month disclosure scheme for taxpayers with undisclosed foreign income or assets. The scheme covers two categories:

This scheme would be applicable for two categories of taxpayers namely, (A) who did not disclose their overseas income or asset and (B) who disclosed their overseas income and/or paid due tax, but could not declare the asset acquired.

For category (B), asset value is proposed to be up to 5 crore rupees. Here, immunity from both penalty and prosecution will be available with the payment of fee of 1 lakh rupees," per FM Speech.

Category A: Previously non-disclosing taxpayers

"For category (A), the limit of undisclosed income/asset is proposed to be up to 1 crore rupees. They need to pay 30 percent of Fair Market Value of asset or 30 per cent of undisclosed income as tax and 30 per cent as additional income tax in lieu of penalty and would thereby get immunity from prosecution," said FM in her speech.

"These are taxpayers who failed to disclose any foreign income or assets. Those with undisclosed foreign assets or income up to 1 crore rupees are eligible to participate. They must pay: 30% of the asset's fair market value or undisclosed income as tax. An additional 30% as a penalty substitute in return, they receive immunity from prosecution," said Tanvi Kanchan, Associate Director & Head - NRI Business, Anand Rathi Share and Stock Brokers Limited.

The FM said that the focus should be on encouraging voluntary compliance rather than criminal action. There should be no interest liability for the period covered by the scheme, and penalties should be waived for first-time or technical defaults.

Category B: Partially compliant taxpayers

"For category (B), asset value is proposed to be up to 5 crore rupees. Here, immunity from both penalty and prosecution will be available with the payment of fee of 1 lakh rupees," said FM in her Speech.

These are taxpayers who disclosed some foreign income and paid taxes on it, but failed to declare certain acquired assets. Those with assets valued up to 5 crore rupees can participate. They need only pay a one-time fee of 1 lakh rupees and will receive immunity from penalties and prosecution. "This scheme provides a window for taxpayers to regularise their foreign financial positions with reduced penalties in exchange for full disclosure," said Rathi.

"The real test will be what follows the window. If enforcement becomes sharper and automated after six months, compliance behaviour will structurally change. If not, disclosures risk being one-off housekeeping rather than a durable shift," added Srivastava.