Foreign Assets Under Greater Scrutiny in India: What Indian Taxpayers with Foreign Assets Should Know

Two developments are particularly relevant.

Greater Foreign Asset Visibility Through AIS

Foreign financial information received by the Indian tax authorities under the Automatic Exchange of Information framework, including CRS and FATCA, can now be viewed by taxpayers through AIS.

Depending on the information received, this may include details relating to foreign bank accounts, custodial accounts, financial investments and associated income.

This increased visibility can help taxpayers identify potential differences between information available with the tax authorities and information previously reported in their Indian tax returns.

Importantly, taxpayers should not assume that AIS represents a complete record of everything that may be required to be disclosed. CBDT's general AIS guidance specifically states that AIS contains information presently available with the Income Tax Department and that taxpayers remain responsible for reporting complete and accurate information in their tax returns.

Foreign assets and foreign income should therefore continue to be reviewed independently against the applicable Indian tax and disclosure requirements, including the individual's residential status for the relevant period.

FAST-DS provides eligible taxpayers with a one-time opportunity to disclose specified foreign assets and foreign income that were either not taxed or not appropriately reported.

The declaration window is available from 16 August 2026 to 31 December 2026.

Subject to the conditions and exclusions of the Scheme, a valid declaration followed by the prescribed payment can provide immunity from further tax, penalty and prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 in respect of the income or assets covered by the declaration.

The immunity relates specifically to matters validly covered by the declaration and should not be treated as a general immunity from other tax, regulatory or legal obligations.

The Scheme broadly provides two categories of disclosure.

Category 1 – Undisclosed Foreign Assets or Foreign Income

This category can cover:

• Undisclosed assets located outside India; and
• Undisclosed foreign income that was chargeable to tax in India but was not offered to tax.

The aggregate value covered under this category must not exceed INR 1 crore.

The amount payable is:

• Tax at 30% of the value of the undisclosed foreign asset or the undisclosed foreign income declared; plus
• An additional amount equal to 100% of the tax.

Accordingly, the aggregate payment is effectively 60% of the relevant value or income determined under the Scheme.

Category 2 – Specified Foreign Assets Not Previously Reported

This category can cover certain foreign assets:

• Acquired from income accruing or arising outside India while the individual was non-resident, but not reported in the relevant return schedule after becoming resident in India; or
• Acquired from income that had already been offered to tax in India, but where the foreign asset itself was not reported in the relevant return schedule.

The aggregate value of foreign assets covered under this category must not exceed INR 5 crore.

A fixed fee of INR 1 lakh applies under this category.

The Scheme therefore does not treat every historic foreign asset reporting issue in the same way. Eligibility, valuation, the source from which an asset was acquired and the individual's residential status during the relevant period can all affect the appropriate treatment.

Eligibility is not limited only to individuals who are currently resident in India.

Subject to the conditions of the Scheme, it can include a person who:

• Is resident in India for the relevant previous year; or
• Is currently non-resident or resident but not ordinarily resident (RNOR), but was resident in India in the relevant year in which the undisclosed foreign income arose or the undisclosed foreign asset was acquired.

This can be particularly relevant for internationally mobile individuals whose tax residence has changed over time.

Foreign asset and income reporting can become particularly complex when an individual's tax residence changes or their financial interests extend across multiple jurisdictions.

Potentially affected individuals may include:

• Globally mobile employees
• Returning expatriates
• Employees holding overseas ESOPs or RSUs
• Individuals maintaining foreign bank or custodial accounts
• Individuals holding shares, securities or other overseas investments
• Individuals receiving foreign interest, dividends or other income
• Individuals who acquired foreign assets while living abroad and retained those assets after returning to India

The Government's own explanatory material specifically identifies situations involving foreign employment benefits such as ESOPs and RSUs, dormant foreign bank accounts, returning non-residents and overseas deputations as examples of cases where foreign asset reporting issues can arise.

In some circumstances, the underlying income used to acquire an asset may have been legitimately earned overseas or may already have been offered to tax in India, while the corresponding foreign asset disclosure was overlooked.

Foreign asset compliance is therefore not simply a question of whether the appropriate tax has been paid. Separate disclosure obligations can apply depending on the individual's residential status and the applicable return requirements.

Individuals with international financial interests should consider reviewing the following areas.

Foreign Bank and Custodial Accounts

Review overseas bank, brokerage and custodial accounts and determine whether they were appropriately reported during periods in which the applicable Indian disclosure requirements applied.

Investments and Securities

Review foreign shares, mutual funds, securities and other overseas investment holdings, including investments retained after returning to India.

ESOPs and RSUs

Employees participating in overseas equity plans should review whether relevant foreign equity interests and related income have been appropriately reflected in their Indian tax filings, where reporting requirements applied.

Foreign Income

Review overseas interest, dividends, capital gains and other foreign-source income against the applicable Indian tax and disclosure requirements.

Assets Acquired While Non-Resident

Individuals who acquired foreign assets while non-resident and subsequently became resident in India should examine whether those assets became subject to Indian disclosure requirements after the change in residential status.

This is particularly relevant under FAST-DS because specified assets acquired from foreign income while an individual was non-resident may fall within the Scheme where the required disclosure was subsequently omitted.

Tax Residence

Residential status is fundamental to the analysis.

The treatment of foreign assets and foreign income can depend on whether an individual was resident and ordinarily resident, resident but not ordinarily resident, or non-resident during the relevant period.

The timing of when the asset was acquired, when income arose and when the individual's residential status changed should therefore be reviewed carefully.

Foreign asset disclosure is primarily the individual's tax responsibility. However, employers with internationally mobile workforces should also consider the employee impact.

Employees returning from overseas assignments or participating in global equity programmes may not always appreciate how a change in Indian tax residence can affect foreign income and asset reporting.

Businesses may therefore consider whether their global mobility processes provide appropriate opportunities for affected employees to obtain tax guidance, particularly in connection with:

• Repatriation to India
• Commencement or completion of overseas assignments
• Changes in tax residence
• Global ESOP and RSU programmes
• Overseas payroll arrangements
• Foreign bank or investment accounts maintained after relocation

Providing appropriate tax guidance at these transition points can help internationally mobile employees identify reporting obligations before they become historic compliance issues.

Individuals who believe they may have historic foreign asset or foreign income reporting gaps should consider:

1. Reviewing foreign assets and foreign income held or earned during relevant periods.
2. Confirming their Indian tax residential status for each relevant year.
3. Reviewing previously filed Indian income-tax returns and applicable foreign asset schedules.
4. Comparing previous disclosures with available financial records and information appearing in AIS.
5. Identifying potential omissions, mismatches or inconsistencies.
6. Establishing when and how each foreign asset was acquired and the source of funds used.
7. Assessing whether the applicable FAST-DS eligibility conditions and monetary thresholds are satisfied.
8. Gathering bank statements, investment records, equity-plan documents, valuation information and other supporting documentation.
9. Filing the required Form 1 declaration by 31 December 2026, where the Scheme is applicable.

The 31 December 2026 deadline applies to filing the declaration. Payment is subsequently made based on the amount determined in Form 2.

Under the prescribed process, the amount specified in Form 2 is generally payable within two months from the end of the month in which Form 2 is received. An additional period of up to two months is available subject to interest at 1% per month or part thereof. Failure to pay within the permitted period can result in the declaration becoming void.

The appropriate treatment will depend on each taxpayer's individual circumstances.

With taxpayers now having greater visibility through AIS over certain foreign financial information available with the Indian tax authorities, and the FAST-DS declaration window remaining open until 31 December 2026, this is an appropriate time to review whether applicable foreign asset and income reporting is complete.

Historic reporting issues should be assessed carefully rather than assuming that the payment of tax, the legitimate overseas source of an asset or the absence of information from AIS means that no further disclosure obligation exists.