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Relief for Foreign Asset Lapses

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 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 `1 lakh for assets up to `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 `1 crore. Over the years, tax officials have knocked on the doors of hundreds of residentswho remitted tax-paid moneythrough banking channels underthe Reserve Bank’s liberalised remittance scheme for failing to report overseas assets. Some werepulled up for offshore securitiesand properties bought when theywere working abroad as NRIs.

Besides a hefty fine of `10 lakh,the black money law allows the income tax department to initiate prosecution gainst errant NRIs. While the big fish whostash away hundreds of crores would continue toface 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, techemployees, relocated NRIs and others.Under the circumstances, a person unable toexplain the source of funds in a bank accountor for acquisition of a property with fair market value of `1 crore would be spared against an outgo of `60 lakh, including 30% taxand 30% penalty. “The budget offers arelief to many who had investedabroad through legitimate channels,”said Ashish Karundia, founder of accountancy firm Ashish Karundia &Co.

An initiative was taken a year agowhen the fine was waived for non-disclosure of non-immovable assetsworth up to `20 lakh. The budget hasgiven such prosecution immunity tosuch cases with effect from October 1,2024. “It will help small taxpayerswhodidn’t disclose their social security orassets acquired when they were nonresidents,” said Sandeep Bhalla, partner, Dhruva Advisors.

UPDATED RETURN

Among other measures for helpingtaxpayers, the budget has proposedthat an assessee can respond to a reassessment notice by filing an updatedreturn that factors in a tax liability ofextra 10%. Such notices are issuedwhen the tax office suspects incomehas escaped assessment in a previousyear. Once an updated return is filed,it must accept this as part of reassessment. The budget also paved the wayfor decriminalisation of minor offences like payment of tax-deducted t source. Immunity from prosecution will alsobe extended to misreporting: Taxpayers will ave to pay 100% of the tax amount as an additional income tax, besides tax and interest due.

 

-The Economic Times 02nd February,2026

 

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