Budget offers one-time amnesty for undisclosed foreign assets held by individuals

Individuals who missed reporting small funds in foreign bank accounts, and other overseas assets like stock options or an apartment in their tax returns can now breathe easy. Under a one-time, six-month mini amnesty window announced in the budget, they can get the taxman off their backs for a fee of Rs 1 lakh for assets up to Rs 5 crore, as long as these were acquired with disclosed earnings. And where the source of funds is not revealed, a person can come clean by forking out 60% of the value of assets up to Rs 1 crore.

Over the years, tax officials have knocked on the doors of hundreds of residents who remitted tax-paid money through banking channels under the Reserve Bank’s liberalised remittance scheme for failing to report overseas assets. Some were pulled up for offshore securities and properties bought when they were working abroad as NRIs. Besides a hefty fine of Rs 10 lakh, the black money law allows the income tax department to initiate prosecution against errant NRIs. While the big fish who stash away hundreds of crores would continue to face the glare of the statute, the Foreign Assets of Small Taxpayers—Disclosure Scheme, 2026 throws a lifeline to smaller violations.

Finance Minister Nirmala Sitharaman said this will address practical issues of small taxpayers like students, young professionals, tech employees, relocated NRIs and others. Under the circumstances, a person unable to explain the source of funds in a bank account or for acquisition of a property with fair market value of Rs 1 crore would be spared against an

outgo of Rs 60 lakh, including 30% tax and 30% penalty.

“The budget offers a relief to many who had invested abroad through legitimate channels,” said Ashish Karundia, founder of accountancy firm Ashish Karundia & Co. An initiative was taken a year ago when the fine was waived for non-disclosure of non-immovable assets worth up to Rs 20 lakh. The budget has given such prosecution immunity to such cases with effect from October 1, 2024. “It will help small taxpayerswho didn’t disclose their social security or assets acquired when they were nonresidents,” said Sandeep Bhalla, partner, Dhruva Advisors.

UPDATED RETURN
Among other measures for helping taxpayers, the budget has proposed that an assessee can respond to a reassessment notice by filing an updated return that factors in a tax liability of extra 10%. Such notices are issued when the tax office suspects income has escaped assessment in a previous year. Once an updated return is filed, it must accept this as part of reassessment. The budget also paved the way for decriminalisation of minor offences like payment of tax-deducted at source. Immunity from prosecution will also be extended to misreporting: Taxpayers will have to pay 100% of the tax amount as an additional income tax, besides tax and interest due.