1. Introduction.

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (‘Black Money Act’) is purportedly an act to make provisions to deal with the provisions of black money in the form of foreign income and assets. The Act came into force with effect from 01.07.2015 and came with a one-time compliance opportunity of a limited period to afford persons who had undisclosed foreign assets to file a declaration before the specified tax authority followed by a payment of tax at the rate of 30 percent and an equal amount by way of penalty. The one-time compliance opportunity offered that the persons making such declarations would not be prosecuted under the stringent provisions of the new act. The CBDT press release dated 20.03.2015 clarified that the one-time compliance opportunity was not an amnesty scheme as no immunity from penalty scheme was offered. While certain persons took advantage of this scheme, as the implementation of the Act progressed and Assessments started getting framed, it was realised that beneficial ownership in many small foreign assets and incomes such as those generating passive incomes had inadvertently not disclosed by Assessees. Importantly, the scheme is for ‘small taxpayers’. Though the term small taxpayer is not defined in the scheme itself, the implications of the term are made obvious by the monetary ceilings imposed upon the value of the declaration that can be made. The speech of the Hon’ble Finance Minister seems to suggest that this scheme shall run for around six months.

2. The Foreign Assets of Small Taxpayers Disclosure Scheme 2026.
Fast forward to a little more than a decade later, Chapter IV of the Finance bill, 2026 includes “Foreign Assets of Small Taxpayers Disclosure Scheme 2026”. The said scheme is supposed to come into force on a date as the Central Government may notify in the official gazette. The scheme provides for any person to make a declaration with regard to undisclosed asset located outside India or undisclosed foreign income by paying a tax at the rate of 30 percent thereof and an amount equal to 100 percent of the tax determined on the said undisclosed said foreign asset/ income as long as the total value of the undisclosed said foreign asset/ income does not exceed Rs. 1 crore. However, if the asset was acquired outside India by an assessee during a period when he was a non-resident or acquired from income which had been offered to tax under the Income-tax Act, 1961 (‘IT Act’) but not declared in the relevant schedule in the return of income then the same would attract a fee of Rs. 1,00,000 if the value of the assert located outside India does not exceed Rs. 5 crores.

In this scheme undisclosed asset located outside India is defined as an asset (including financial interest in any entity) located outside India, held by the Assessee in his name or in respect of which he is a beneficial owner, and he has no explanation about the source of investment in such asset or the explanation given by him, is in the opinion of the Assessing Officer, unsatisfactory. Undisclosed foreign income is defined as the total amount of income of an Assessee from a source located outside India which was chargeable to tax in India but has not been offered to tax under the IT Act and the value of the asset is defined as the fair market value of the asset determined in the manner as may be prescribed. The declaration can be made on or after the commencement of the scheme but before the last date of the scheme. A declaration for any previous year in respect to the income or asset as explained above where the person had failed to furnish a return under Section 139 of the IT Act or failed to disclose such asset or income in return of income furnished by him before the date of commencement of the scheme or such asset or income has escaped assessment within Section 147 of IT Act.

The declaration to be filed shall have to be complete in all respects and made to the prescribed income tax authority. It shall be made in such form and verified in such manner as may be prescribed. The verification shall be made electronically in order to verify that the Assessee making the declaration is an eligible Assessee and that the declaration of income or assets is in accordance with the provisions of the scheme. However, the declaration shall be deemed to be invalid if any material particular furnished in the declaration is found to be false at any stage or the declarant while its any of the conditions referred to in the scheme. The wording of Section 118 (3) (a) of the Finance Bill 2026 suggests that an honest error that one does not tantamount to a material falsehood would not ipso facto deem the declaration to be invalid.

After the electronic verification of the declaration, the amount payable by the Assessee shall also be communicated electronically within a period of one month from the end of the month in which the declaration was made. The Assessee shall pay the determined amount in the prescribed manner within a period of 2 months from the end of the month in which the order determining the amount payable was received. The scheme also provides for an extension of a further period of 2 months subject to payment of simple interest at the rate of 1% for every month or part of a month on the determined amount. Upon making the payment the Assessee shall intimate the details of the payment to the prescribed authority who shall communicate an order certifying the payment of the determined amount if the payment is in compliance with the order determining the payable amount within one month from the end of the month in which the intimation of such payment is received. It is important to note that the Act provides that above order shall be conclusive as to the matter stated therein and that the scheme also provided that no amount paid under Section 119 in pursuance of the declaration shall be refundable.

In order to ensure that the scheme achieves its intended objectives, it provides that the undisclosed income or undisclosed asset declared shall not be included in the total income of the declarant under the IT act or the Black Money Act if the declarant makes payment within the period prescribed. However, if the payment is not made, no specific provision has been made to protect the declarant against an addition being made based on the declaration filed under this scheme. A declarant making a valid declaration shall also be granted immunity from levy of any further tax or penalty and prosecution under Black Money Act in respect of the income or assets declared for the previous years ending on 31.03.2026 or previous years. It also provides that when such a declaration is made and any assessment proceedings under the Income-tax act or Black Money Act are pending in respect of such income or assets, the assessing officer shall take such declaration into account. The CBDT has also been given the power to issue directions or orders or instructions as it may deem fit if the board is of the opinion that it is necessary in the public opinion to do so. However, no direction or order can be issued by CBDT to require that a particular case should be disposed of in a particular manner.
It is also important to note that the provisions of the scheme would not apply if the undisclosed income or asset represents proceeds of crime in respect of which proceedings have been initiated or are pending under PMLA or proceedings have already been completed under the Black Money Act. Similarly, the declarant shall not be entitled to claim rectification or revision of any assessment made under the Income-tax Act or Black Money Act in respect of asset declared or amount paid thereof or claim any set off or relief in a any appeal, reference or other proceedings in relation to other assessment. The scheme also provides that no amount paid in pursuance of the declaration made shall be refundable. The commencement date as well as the rules for the scheme including those relating to the determination of value of the asset would be notified.

3. Further Amendments in the Act.

In addition to the rationalisation of prosecutions under the IT Act, the Finance Bill 2026 proposes amendments to Section 49 and 50 of the Black Money Act that deal with prosecution for failing to furnish return in relation to foreign income and asset and disclose information about a foreign asset or financial interest in an entity in the return of Income respectively by a resident. These Sections prescribe prosecution including rigorous imprisonment and a fine. As the penalty provisions for non-disclosure of foreign assets in return of income has a threshold of twenty lakh rupees, in order to rationalise prosecution, a provisio each have been proposed to be introduced in Section 49 and Section 50 that exclude the application of prosecution under the said two Sections where the aggregate value of undeclared assets does not exceed twenty lakh rupees.

As per the Memorandum to the Finance Bill, 2026 the above-mentioned changes have been made to align prosecution Sections of the Black Money Act with the penalty Sections in the Black Money Act with threshold specified in Sections 42 and 43 of the Act which deals with penalty upon failure to furnish return of income and to provide relief in cases of minor and inadvertent non-disclosures. and to align the prosecution provisions with the penalty framework under the Black Money Act harmonious.

4. Conclusions.

Looking at the Finance Bill, 2026 from a bird’s eye view it can be concluded that with regard to the Black Money Act, the effort has been to grant relief for smaller tax payers and to allow them to comply with the provisions of the Act without facing the rigours of prosecution with regard to undisclosed foreign incomes and assets. At the same time, the amendments to Section 49 and 50 of the Black Money Act ensure that minor non-declarations of foreign assets and Income in the return of Income which may occur inadvertently or due to an oversight do not attract the full brunt of the penal provisions of the law. The reduction of the rigours of the Black Money Act for smaller offenders is a welcome step in the right direction and shall provide relief to many persons who may have inadvertently missed out in declaring interest in foreign assets and foreign incomes under the 2016 scheme or in their return of Income. Most importantly, these amendments ensure that in the fight between the Government and Black Money, collateral damage to those who have inadvertently run afoul of a technical law is minimised.
[Source : AIFTP Journal February 2026 Volume 28 No. 11]