Failed to report US stocks gained via ESOP? Use this one-time Amnesty scheme; Know how it works

Recently, there was a case in ITAT Chennai where an Indian employee faced Rs 10 lakh penalty under the Black Money Act because he failed to report his ESOP shares from his foreign employer in schedule FA.

The unfortunate part of this case is that he had offered these ESOPs for taxation and had also paid the due capital gains tax on them. So it’s not like he was dodging taxes, he had simply failed to report it correctly in his ITR. ITAT Chennai ultimately gave him relief and quashed the Rs 10 lakh penalty.

The Finance Minister is aware of these issues faced by regular employees and others due to simple mistakes. Therefore, the government has introduced a one- time Amnesty scheme during Budget 2026. Moreover, in the earlier Budget, the finance minister had reduced the penalty amount.


Chartered Accountant Gopal Bohra, partner, N. A. Shah Associates LLP, says that to avoid penal consequences and unnecessary litigation, taxpayers holding foreign assets (including ESOPs, overseas brokerage accounts, bank accounts, or fiduciary holdings) should carefully evaluate their past reporting positions in their income-tax return (ITR) and apply for the disclosure scheme introduced under the Finance Act 2026: Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (FAST-DS)

India FAST-DS is a one-time amnesty programme allowing Indian residents and NRIs to voluntarily disclose unreported foreign assets or income.

According to Bohra, in cases where any non-compliance or reporting gaps are identified, and the taxpayer satisfies the prescribed conditions, it is advisable to use the disclosure scheme within the stipulated timeframe.

Bohra says: “Proactive compliance under the scheme can significantly mitigate exposure to stringent penalties and help avoid protracted litigation under the Black Money law.”

Keep reading to learn if this one-time amnesty scheme is suitable for you or if you should take your chances in ITAT and courts.

Also read: Employee fined Rs 10 lakh over lack of ESOP disclosure in ITR; here's why ITAT Chennai cancelled it

Who should opt for the one-time Amnesty scheme and who should move to ITAT and courts?

According to Rahul Jain, Partner at Khaitan & Co, the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 has been introduced to eliminate litigation and undue financial burden on persons who either failed to furnish the tax return (for the year in which they held foreign asset) or failed to report foreign assets in the tax return or in cases where the foreign asset or foreign sourced income has escaped tax assessment.

Jain says that with respect to undisclosed foreign assets and foreign income, an individual can settle under this scheme, only if the aggregate value of such assets and income does not exceed Rs 1 crore, by paying 60% on the aggregate value of such asset and income.

However, if the non-disclosure is regarding a foreign asset that was acquired by an individual from overseas income while he was a non-resident or from income that has been subject to tax in India, the eligibility is linked to the value of such assets not exceeding Rs 5 crore. In this situation, Jain says an individual is required to pay only Rs 1 lakh.

According to Jain, the one-time Amnesty scheme has been designed to resolve the legacy and inadvertent non-compliance by small taxpayers which may include the following:

1. Employees who acquired shares or interest under employee stock option plans.
2. Non-resident individuals who relocated or returned to India but missed reporting any assets outside India (such as insurance policies or bank accounts).
3. Students holding dormant or low value bank accounts set up outside India during overseas education.
4. Assets acquired by Indian residents while deputed overseas for employment or business purposes.
5. Residents who inherited foreign assets but missed reporting in the tax return in India.
6. Expats who were deputed for India for a longer period but did not report their foreign assets and income, as required.

According to Jain, the scheme looks attractive for individuals who acquired the assets from overseas income while they were non-resident or from the income which has been taxed in India, considering the settlement amount is only Rs 1 lakh provided the value of assets does not exceed Rs 5 crore.

Jain says: “Others should assess the position on merits and find out if the aggregate value of asset and income is below the threshold of Rs 1 crore.”

Moreover, the scheme is not applicable for foreign sourced income or assets which represent proceeds of crime and are subject to proceedings under the Prevention of Money-laundering Act, 2002 or for cases where an assessment has been completed under Black Money Act.

Penalty under Black Money Act is levied for multiple years for ROR

An ROR (resident and ordinarily resident) is mandatorily required to file his income tax return in India if at any time during the relevant year he holds beneficial ownership in any asset located outside India or has signing authority in a bank account outside India or a financial interest in any entity based outside India.

According to Jain, Section 43 of The Black Money (Undisclosed Foreign Income and Assets) And Imposition of Tax Act, 2015 enables the tax authorities to levy a penalty of Rs 10 lakh on a ROR individual failing to furnish any information or for furnishing inaccurate details relating to a foreign asset or foreign-source income, in his/her income tax return (ITR).

According to Jain, the requirement to file a tax return is tied to every year that the ROR has foreign assets. The penalty rules under BMA mention that if you fail to provide accurate information or don’t file at all for any of these years, you could technically face penalties for each year you default. So, if you mess up reporting or get it wrong on several returns , you might end up with what’s called a “multi-year penalty”.

Keep in mind that BMA does allow for a penalty exemption if the failure is related to any foreign asset (except for immovable property) valued at no more than Rs 20 lakh. However, based on some interpretations and legal precedents, the penalties are not automatic but need to be assessed based on the specifics of each situation.

The onus of reporting the details of foreign assets in Schedule FA is on the individual who is an ROR, which is determined by the number of days of physical presence in India in the relevant years.

Jain says: “Accordingly, if an ROR holds shares or interest in a foreign entity, acquired under ESOP structure, he is required to report the details thereof in Schedule FA.”

Indian employees with foreign company ESOP shares should also know the rules about US Estate Tax and plan their succession

Hardik Mehta, Lead- Tax, Ionic Wealth, said many Indians who work for US companies (majorly tech. companies) and receive company shares (ESOPs/RSUs) as part of their salary, even if they are working from India, as these shares are listed on US stock exchanges, making them "US assets" under American tax law.

Mehta says that even if these individuals have never lived in the United States, their US-based shares can be subject to US estate tax in case of their death if the total value of their US-situated assets exceeds $60,000 (for non-US citizens/ non-US residents). US laws levy estate tax up to 40% upon death of the holder even where they are non-US residents.

According to Mehta, when someone who owns assets in the United States dies, the IRS imposes a steep estate tax of 40%, which must be paid within 9 months or penalties are incurred. US citizens and legal residents get an exemption of $13.99 million. But if you're a non-resident alien, the estate tax exemption remains just $60,000, meaning your US assets could be taxed at up to 40% if you do not plan accordingly.

So if you are holding such US stocks through ESOPs given by the employer, then factor this into account while succession planning.