AUGUST - INCOME TAX UPDATE

INCOME TAX UPDATE:

Notification No. 114/2026 dated 14 August 2026 — Key Points

Subject: Foreign Assets of Small Taxpayers – Disclosure Scheme Rules, 2026
01

Key Points

  • Effective date: The Rules come into force from 16 August 2026.
  • Purpose: Provides the procedural framework for the Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026, introduced under Chapter IV of the Finance Act, 2026.
  • Valuation date: Foreign assets/income are generally valued with reference to 31 March 2026.
02

Eligibility / Thresholds

  • Undisclosed foreign asset + undisclosed foreign income: Aggregate value must not exceed ₹1 crore.
  • Certain undisclosed foreign assets: Aggregate value must not exceed ₹5 crore.
  • The ₹1 crore and ₹5 crore limits are aggregate thresholds, not asset-wise limits.
03

Assets covered

The declaration can cover:

  • Foreign bank accounts
  • Immovable property
  • Jewellery
  • Artistic works
  • Shares and securities
  • Other foreign assets
  • Undisclosed foreign income
The Form also specifically covers assets acquired while the assessee was a non-resident but not disclosed after becoming resident, and assets acquired from income already offered to tax in India but omitted from the foreign asset schedule.
04

Important Valuation Rules

  • Jewellery / bullion / precious stones: Higher of acquisition cost or open-market value as on 31 March 2026.
  • Quoted shares: Generally based on the average of the highest and lowest quoted prices on the valuation date.
  • Unquoted equity shares: Specific NAV-based formula is prescribed.
  • Immovable property: Higher of acquisition cost or open-market value.
  • Foreign bank account: Value is generally based on the aggregate deposits, subject to adjustments for redeposits/previously declared amounts.
  • If valuation is not carried out, indexed cost of acquisition is deemed to be FMV in the specified cases.
05

Currency Conversion

  • Permitted foreign currencies are converted into INR using the RBI reference rate on 31 March 2026.
  • Other currencies are first converted into USD using the applicable foreign-country rate and then into INR using the RBI reference rate.
06

Amount Payable

  • For the ₹1 crore category, the Form 1 specifies payment at 60% of the aggregate value.
  • For the ₹5 crore asset category, the prescribed amount is a fee of ₹1 lakh.
  • The notification's illustration shows the ₹1 crore category effectively involves 30% tax + 100% penalty, resulting in 60% of the relevant value.
07

Procedure

1
Form 1 – Declarant electronically files the declaration with details of assets/income and valuation.
2
Form 2 – Income-tax authority determines the amount payable.
3
Payment – Amount is to be paid electronically.
4
Form 3 – Intimation of payment, along with proof of payment, is filed electronically.
5
Form 4 – Authority certifies validity of declaration and payment.
08

Time limit for payment

  • Payment is normally required within 2 months from the end of the month in which Form 2 is received.
  • Delay attracts 1% interest per month or part thereof.
  • The additional period is limited to two further months under the payment provisions reflected in Form 3.
  • Failure to pay within the permitted period makes the Form 1 declaration void.
09

Protection / Immunity

Once the prescribed amount and applicable interest are paid and Form 4 is issued:

  • The declaration is treated as valid for the relevant purposes.
  • The declarant receives immunity, subject to the statutory conditions, from further tax/penalty and prosecution under the Black Money Act, 2015 in respect of the declaration.

Comments

Post a Comment

Popular posts from this blog

Image
Benefits of Filing an ITR — CoralMetrix Issue 15 CoralMetrix Issue 15 Benefits of Filing an Income Tax Return (ITR) More Than Just Tax Compliance Pathikonda Shivani Sreenath Direct Tax, CoralMetrix An Income Tax Return (ITR) is a document through which a taxpayer reports income earned during a financial year, claims eligible deductions, computes tax liability, and pays any tax due — or claims a refund. In India’s self-assessment system, taxpayers voluntarily disclose income in accordance with the Income-tax Act, 1961. With online filing, pre-filled forms, AIS, and TIS, the process is now faster and more transparent than ever. Who Should File an ITR? Individuals whose income exceeds the basic exemption limit Companies, firms, and other entities under the Act Taxpayers claiming refund of excess TDS/TCS paid ...
Read more
Image
Foreign Asset Schedule FA Disclosure – CoralTax.ai CoralTax.ai TAX MADE SIMPLE INTERNATIONAL TAXATION · COMPLIANCE GUIDE Foreign Asset Schedule Disclosure: Everything Indian Residents Need to Know A complete walkthrough of Schedule FA, why it exists, who must file it, what the law says under the Income Tax Act 1961 and the Income Tax Act 2025, and the court cases that have shaped how it is enforced today. Ashrith Bharath Finance Intern, CoralTax.ai Published on CoralTax.ai  ·  8 minute read  ·  Reviewed for accuracy Schedule FA — India's framework for reporting foreign assets held by resident taxpayers E very year, lakhs of Indian residents open bank accounts abroad, invest in foreign stocks, hold shares from employee stock plans of overseas employers, or simply inherit a property in another country. Most assume that as long as the income from these assets is ...
Read more
Court Room Series Court Room Series: IN THE HIGH COURT OF KARNATAKA AT BENGALURU Instakart Services Pvt. Ltd. Versus Union of India Writ Petition No. 4917 of 2021 (T-RES), decided on 9-2-2026 Facts: The petitioner, Instakart Services Private Limited, is engaged in logistics and warehousing services for sellers operating through the e-commerce platform of Flipkart Internet Private Limited. The company challenged the constitutional validity of: Section 16(2)(c) of the CGST/KGST Acts Rule 36(4) of the CGST/KGST Rules. Issues: Constitutional validity of Whether Section 16(2)(c) CGST/KGST Act and Rule 36(4) are violative of Article 14(Equality), Article 19 (1) (g) (Freedom of Trade), Article 265 (No tax except au...
Read more