The Income Tax Department has enabled online Form 1 filing for the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (FADS 2026). The scheme offers eligible taxpayers a time-bound route to regularise specified foreign assets or foreign income under Chapter IV of the Finance Act, 2026.
Two routes, with very different costs
Previously untaxed asset or income
For undisclosed foreign assets or foreign income, the aggregate limit is ₹1 crore. The amount payable is 30% tax plus an amount equal to that tax—effectively 60% of the declared value or income.
Income taxed, asset not reported
For a foreign asset acquired from income already offered to tax, or acquired while non-resident but omitted from the relevant return schedule after becoming resident, the limit is ₹5 crore and the fee is ₹1 lakh.
The limits are conditions of eligibility, not deductions. Exceeding the applicable aggregate limit takes the declaration outside that category of the scheme.
Who may qualify?
The scheme covers a person who was resident in India in the relevant previous year. A person who is now non-resident or resident but not ordinarily resident may also qualify if they were resident in the year to which the foreign income relates or the year in which the foreign asset was acquired.
A declaration may relate to a failure to file a return, a failure to disclose the asset or income in a return filed before the scheme commenced, or income or assets that escaped assessment. The scheme is unavailable for proceeds of crime where specified money-laundering proceedings have begun or remain pending, and for a year already assessed under the Black Money Act.
Valuation is not simply the current balance
The valuation date is 31 March 2026. The rules prescribe asset-specific methods. As a general principle, many assets use the higher of acquisition cost and open-market value; if a prescribed market valuation is not carried out, indexed acquisition cost may apply.
A foreign bank account is treated differently: its value is broadly the aggregate of deposits up to the valuation date, with specified relief against double counting, including qualifying redeposits of withdrawals. Foreign-currency amounts must be converted into rupees using the prescribed exchange-rate method. A simple statement balance can therefore be the wrong starting point.
Form 1 to Form 4: the process
- File Form 1 online. Use e-File → Income Tax Forms → File Income Tax Forms → Forms as per Other Acts. The final filing date is 31 December 2026.
- Receive Form 2. The Income Tax Department determines the amount payable within one month from the end of the month in which Form 1 is submitted.
- Pay through ITNS 289. The normal payment period is two months from the end of the month in which Form 2 is received.
- If payment is delayed: a further period of up to two months is available with simple interest at 1% for every month or part of a month. Missing the outer limit makes the declaration void.
- Submit Form 3. Upload the payment intimation and proof. If verified, the authority issues Form 4 certifying the valid declaration and payment.
The portal warns that a payment made under an incorrect ITNS 289 minor head cannot be corrected or refunded. Corporate PANs use minor head 115 and non-corporate PANs use minor head 116; the portal should populate the relevant head automatically.
What to do now
- Prepare a year-wise inventory of overseas bank accounts, shares, retirement accounts, property, beneficial interests and foreign-source income.
- Match each item against past returns, Schedule FA disclosures, residential status and the source of acquisition funds.
- Classify the item into the correct scheme category before applying the ₹1 crore or ₹5 crore aggregate limit.
- Collect statements, acquisition records, passport and residency evidence, tax returns, income computations and any valuation report required by the rules.
- Obtain case-specific advice before filing. A declaration affects rights under the Income-tax Act and Black Money Act, and amounts paid under the scheme cannot later be reclaimed through rectification, revision, set-off or appeal relief for the declared matter.
Reviewed on 20 October 2026. This is a general explanation of FADS 2026, not a recommendation to make a declaration or case-specific tax or legal advice.