Undisclosed Foreign Assets: What Taxpayers Need to Know under Budget 2026–27

The Union Budget 2026–27 has brought major relief for taxpayers who failed to disclose foreign assets or foreign income in the past. In many cases, these failures were unintentional and resulted from a lack of awareness, a change in residency status, or confusion about foreign asset reporting rules.

With global data-sharing systems like CRS and FATCA now active, the tax department can easily track overseas bank accounts, investments, and income. Even small disclosure mistakes can now result in serious penalties and legal action.

To address this issue, the Government has announced a one-time foreign asset disclosure amnesty scheme for a limited six-month window, allowing taxpayers to correct past mistakes without facing harsh consequences.

Key Takeaways

• Budget 2026–27 introduces a one-time six-month amnesty scheme for undisclosed foreign assets.
• Foreign assets must be disclosed even if they generate no income.
• Non-disclosure can attract tax, penalty, and prosecution under the Black Money Act.
• The scheme offers immunity from penalty and prosecution if conditions are met.
• Returning NRIs and employees with foreign ESOPs should review their past returns urgently.

What Is an Undisclosed Foreign Asset?

An undisclosed foreign asset means any asset or income located outside India that should have been reported in the Indian income-tax return but was not disclosed. Many taxpayers are unaware that disclosure is required even when there is no income from the asset.

Once a person becomes a Resident and Ordinarily Resident (ROR) in India, previously held foreign assets may also require reporting. This applies regardless of when or how the asset was acquired.

Failure to report such assets can lead to action under strict tax laws, even if the omission was accidental.

Undisclosed foreign assets include:

• Overseas bank accounts, whether active or dormant
• Foreign shares, mutual funds, ETFs, or bonds
• ESOPs or RSUs issued by foreign employers
• Foreign pension or retirement accounts
• Immovable property located outside India
• Foreign income not reported in Indian returns

Why Is Foreign Asset Disclosure Important?

India follows a rigorous foreign asset disclosure system under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015. The law focuses on disclosure rather than intent, meaning even genuine mistakes can lead to severe consequences.

The tax department now receives foreign financial data automatically from multiple countries. This makes detection faster and more accurate than earlier manual checks.

Once a foreign asset is detected, the consequences are serious and challenging to reverse.

Non-disclosure can result in:

• Tax at 30% of the value of the foreign asset
• Penalty up to three times the tax amount
• Prosecution with rigorous imprisonment
• Loss of immunity even for unintentional errors

What Has Changed in Budget 2026–27?

To encourage voluntary compliance, the Government has introduced a one-time Foreign Asset Disclosure Amnesty Scheme under Budget 2026–27. This scheme is available only for a limited period and aims to reduce long-term litigation.

The scheme allows taxpayers to disclose previously missed foreign assets and income, pay the required amount, and legally close the matter. It provides a clean exit from future tax and legal risks.

Key features of the scheme include:

• Six-month time limit from the date of notification
• Separate treatment based on asset value and disclosure status
• Full immunity from penalty and prosecution if complied correctly

The scheme divides taxpayers into two categories based on the nature and value of the non-disclosed assets:

Category A: Undisclosed Foreign Asset or Income (Up to ₹1 Crore)

This category applies where the foreign asset or income was never disclosed in any income tax return. The total value of such assets or income should not exceed ₹1 crore.

This provision primarily targets genuine cases in which taxpayers were unaware of disclosure requirements or misunderstood the rules governing residential status.

Once disclosed under this category, the taxpayer can legally regularise past non-compliance.

Relief available under Category A:

• Payment of the prescribed tax
• Complete immunity from penalty and prosecution under tax laws

Category B: Asset Acquired from Disclosed Income but Not Reported (Up to ₹5 Crore)

This category applies when the foreign asset was purchased using disclosed income but not reported on the return’s foreign asset schedule. This is a common error among employees and returning NRIs.

Many taxpayers believed that, since the tax had already been paid, disclosure was not required. The law, however, mandates reporting of such assets.

This category offers a low-cost and straightforward compliance route.

Relief available under Category B:

• Payment of a flat fee of ₹1 lakh
• Full immunity from penalty and prosecution

Who Should Seriously Consider This Scheme?

This scheme is particularly relevant for individuals who have worked, studied, or invested outside India. Many such taxpayers may unknowingly have disclosure gaps in their past returns.

Returning NRIs and global employees are especially exposed due to ESOPs, RSUs, and overseas accounts. Dormant or unused accounts are also commonly missed.

Early review of past tax filings can help avoid future tax notices.

You should evaluate this scheme if you:

• Returned to India after working abroad
• Hold foreign ESOPs, RSUs, or brokerage accounts
• Opened a foreign bank account for studies or employment
• Own overseas property acquired or inherited earlier
• Are unsure whether foreign assets were disclosed earlier

What Happens If You Ignore This Scheme?

Foreign asset detection is now automated through international data exchange agreements. Once the amnesty window closes, enforcement will become stricter.

Tax authorities will rely on CRS and FATCA data to identify undisclosed foreign assets. In such cases, taxpayers will have limited defence options.

Even small-value assets can trigger high penalties after the scheme ends.

After the scheme period:

• No immunity will be available
• Regular assessment and penalty provisions will apply
• Prosecution under the Black Money Act may be initiated

Conclusion

The Budget 2026–27 foreign asset disclosure scheme provides a rare opportunity to fix past foreign asset reporting mistakes without fear of severe penalties. The six-month window is short, and a delay can lead to irreversible consequences.

Correct classification, proper valuation, and timely disclosure are critical to secure immunity under the scheme. Taking professional advice early can help ensure complete and accurate compliance.

For taxpayers with genuine disclosure gaps, this scheme offers peace of mind and long-term compliance certainty.