Ahmedabad: Centre’s new one-time income disclosure scheme could provide relief to small taxpayers seeking to regularise unreported foreign assets, but tax experts warn that participation may not shield them from action under foreign exchange laws.The Central Board of Direct Taxes (CBDT) notified the Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026 (FAST-DS) on Aug 16, opening an online voluntary disclosure window until Dec 31. The scheme covers foreign bank accounts, employee stock options (ESOPs), restricted stock units (RSUs), mutual fund and immovable property investments.FAST-DS provides immunity from prosecution and penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. However, experts said the scheme does not provide protection under the Foreign Exchange Management Act (FEMA), creating a potential risk for resident Indians who acquired foreign assets without the required Reserve Bank of India approval.International tax expert Mukesh Patel said the gap was significant as a taxpayer could disclose an asset under FAST-DS and still face FEMA proceedings. Under Section 13(1) of FEMA, contraventions can attract penalties of up to 300% of the asset’s value. Additional consequences include a daily penalty of Rs 5,000 after 180 days and confiscation of Indian assets worth up to three times the value of the foreign asset.“The govt has announced immunity for income tax and the Black Money Act. However, FEMA immunity is not given. This means that even if a resident Indian discloses his foreign asset under the scheme, he may face FEMA action,” he said.However, he said the scheme could be useful for returning non-resident Indians, provided they assess their FEMA exposure before opting for disclosure.Chartered accountant Karim Lakhani said FAST-DS has two categories based on the nature of the non-disclosure. “Category A covers foreign income or assets never disclosed and on which no Indian tax was paid. Assets valued up to Rs 1 crore as of March 31, 2026 can be disclosed under this category by paying a 60% levy — 30% tax and 30% additional penalty on fair market value,” he added.Category B covers assets purchased from already tax-paid Indian income, or assets acquired while the taxpayer was a non-resident but omitted from ITR disclosures after becoming a resident. Assets up to Rs 5 crore can be regularised by paying a flat fee of Rs 1 lakh.
