A new scheme introduced in the Finance Bill 2026 offers a one-time opportunity for small taxpayers to disclose previously undeclared foreign assets. The scheme aims to facilitate voluntary compliance, particularly for individuals who may have unintentionally overlooked foreign asset disclosure requirements. This includes students, young professionals, tech employees, and Non-Resident Indians (NRIs) who have relocated. Finance Minister Nirmala Sitharaman announced the six-month window during the Budget 2026 speech, emphasizing the government's understanding that many compliance lapses stem from a lack of awareness, complex reporting rules, or short-term overseas assignments rather than deliberate tax evasion.

The scheme caters to two categories of taxpayers. Category A includes individuals who did not disclose their overseas income or assets at all, where the total value of undisclosed income and assets does not exceed ₹1 crore. To gain immunity from prosecution, participants in this category must pay 30% of the fair market value of the asset or 30% of the undisclosed income as tax, along with an additional 30% as income tax in lieu of penalty. Category B covers taxpayers who paid tax on their overseas income but failed to declare the acquired asset, provided the asset value is up to ₹5 crore. This category requires a one-time fee of ₹1 lakh for immunity from both penalty and prosecution.

This initiative provides a chance for taxpayers to correct past errors and become fully compliant. By truthfully declaring undisclosed foreign income or assets and completing the required payments, taxpayers will not face further legal action regarding those assets or income. This protection extends to penalties and criminal prosecution under the Black Money Act, covering income or assets related to the financial year ending March 31, 2026, and earlier years.

Clause 123 of the Finance Bill 2026 reinforces taxpayer confidence by ensuring that voluntary disclosure leads to a final settlement and protection from future legal consequences arising from the disclosed foreign assets or income. Furthermore, Clause 120 ensures that any income or asset declared under the scheme will not be included in the total income of the declarant for any assessment year, provided the required payment is made within the permitted timeframe.

Without such assurance, declarants may hesitate to participate, fearing that disclosure could trigger new reassessment proceedings, exposure to penalties, or investigative scrutiny. The current rules stipulate that failing to disclose or providing false information about foreign assets can lead to severe penalties, including a penalty of up to ₹10 lakhs for each year of non-disclosure and potential imprisonment of up to 7 years for willful tax evasion. The new scheme offers a time-bound, low-stress route for taxpayers to rectify past omissions.

Experts suggest the scheme will likely incentivize the regularization of irregular disclosures, broaden the tax base, and reduce disputes. The six-month window is a critical period for eligible taxpayers to carefully review their foreign income and asset disclosures. Taxpayers are advised to take advantage of this opportunity to regularize their foreign asset holdings and ensure full compliance with tax regulations.