Synopsis

FAST-DS 2026 prescribes detailed rules for valuing foreign assets, but how should undisclosed foreign income be computed for the ₹1-crore limit? This article examines whether such income should be computed under the Income-tax Act and converted into Indian rupees under Rule 115 and why CBDT clarification would help taxpayers.

The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (FAST-DS 2026) provides an important compliance window for eligible taxpayers with undisclosed foreign income or foreign assets.



However, taxpayers examining their eligibility under the Rs 1-crore limit may encounter an important computational issue. The Rs 1-crore limit applies to the aggregate value of undisclosed foreign assets as on 31 March 2026 and undisclosed foreign income.



For foreign assets, Rule 3 of the FAST-DS 2026 Rules prescribes detailed methods for determining their fair market value as on the valuation date of March 31, 2026, and provide the manner of converting foreign-currency values into Indian rupees. However, the Scheme Rules do not expressly prescribe a corresponding mechanism for determining the value of undisclosed foreign income.

This gives rise to two important questions.



First, should undisclosed foreign income be computed in accordance with the applicable provisions of the Income-tax Act, 1961, or should the restrictions contained in Section 5 of the Black Money Act apply?



Second, where such income was earned in a foreign currency, should it be converted into Indian rupees with reference to the valuation date of 31 March 2026, or by applying the relevant “specified date” under Rule 115 of the Income-tax Rules, 1962?



The answers can directly affect both the taxpayer’s eligibility under the ₹1-crore limit and the amount payable under FAST-DS 2026.



Also read: Foreign bank balance may be small, but its value could be much higher: How FAST-DS 2026 values your foreign assets

The scheme’s own example highlights the computation question

The amount of undisclosed foreign income needs to be determined and aggregated with the value of the undisclosed foreign assets as on 31st March 2026. Where there is no undisclosed foreign asset, the amount of undisclosed foreign income itself becomes relevant both for determining eligibility under the ₹1-crore limit and for computing the amount payable under the Scheme—tax at 30% of such amount together with an additional amount equal to the tax.



Let us understand the issue through one of the illustrations given in Rule 3 of the FAST-DS 2026 Rules.



The illustration assumes that undisclosed foreign income of ₹70 lakh was earned in 2022 and that ₹60 lakh out of this income was used in 2023 to purchase an immovable property outside India. The value of the property as of 31 March 2026 is ₹80 lakh.



The computation broadly works as follows:

Thus, the amount of undisclosed foreign income invested in the foreign asset is reduced while determining the value of that income, thereby avoiding duplication of the same amount in both the foreign income and the foreign asset.



The illustration states that “the value of FI as computed is seventy lakh rupees",but it does not explain how the undisclosed foreign income of Rs 70 lakh was computed in the first place.



Also read: Foreign income disclosed in ITR-U: Why it could still trigger Black Money Act – FAST-DS 2026 Paradox

How should “undisclosed foreign income” be computed?

Section 131(1)(k) of the Finance Act, 2026 defines “undisclosed foreign income” for the purposes of FAST-DS 2026 to mean the total amount of income of an assessee from a source located outside India which was chargeable to tax in India but had not been offered to tax under the Income-tax Act, 1961.



The language of the definition is relevant. It refers to foreign-source “income” which was “chargeable to tax in India” but had not been offered to tax under the Income-tax Act, 1961. Thus, the definition itself links undisclosed foreign income under the Scheme to its chargeability under the Income-tax Act, 1961.



This provides a reasonable basis for interpreting the scheme to mean that, for the purposes of FAST-DS 2026, the amount of undisclosed foreign income should first be determined under the relevant provisions of the Income-tax Act, 1961 applicable to the relevant assessment year.



Depending upon the nature of the income, such as salary, income from house property, business or professional income, dividend, interest or capital gains, the provisions of the Income-tax Act, 1961 applicable to that category of income would therefore become relevant in determining the amount that was chargeable to tax in India but had not been offered to tax.



However, the FAST-DS 2026 Rules and the FAQs issued by the CBDT do not expressly state that undisclosed foreign income is to be computed in this manner. Further, Section 5 of the Black Money Act contains separate restrictions on deductions, allowances and the set-off of losses while computing total undisclosed foreign income and assets, which may give rise to a different interpretation.



Once the amount of undisclosed foreign income is determined, a further question arises if such income was earned or expressed in a foreign currency: at what exchange rate and on which date should it be converted into Indian rupees for the purposes of FAST-DS 2026?



That brings us to Rule 115 of the Income-tax Rules, 1962.



Also read: Foreign Asset Disclosure Scheme 2026: From budget proposal to rollout – what residents and NRIs need to know

How Rule 115 converts foreign income into Indian rupees

Rule 115 of the Income-tax Rules, 1962 provides the statutory framework under the Income-tax Act for such conversion. It requires income accruing, arising, deemed to accrue or arise, or received or deemed to be received in foreign currency to be converted into Indian rupees at the telegraphic transfer buying rate on the applicable “specified date”.



The specified dates for some important categories of foreign income under Rule 115 are summarised below:

Therefore, the conversion mechanism under Rule 115 is different from applying the exchange rate prescribed under the FAST-DS Rules with reference to the valuation date of 31 March 2026. Under Rule 115, the relevant specified date varies depending upon the nature of the income.

Why CBDT clarification is needed

The issue assumes practical significance while filling out Form 1, the prescribed declaration form under the Scheme.



In the case of undisclosed foreign assets, Form 1 seeks information based on the valuation provisions prescribed under the Scheme Rules. In the case of undisclosed foreign income, however, the declarant has to furnish particulars including the relevant previous year in which the income was earned, residential status for that year, type of income, country where the income was earned and, importantly, the amount of such income. The declarant is also required to attach a file supporting the computation of that amount. Yet, neither Form 1 nor the Scheme Rules, as discussed above, expressly explain how the amount of undisclosed foreign income is to be computed.



The CBDT may therefore consider clarifying, preferably through an FAQ supported by suitable illustrations, whether undisclosed foreign income for FAST-DS 2026 is to be computed under the relevant provisions of the Income-tax Act applicable to the relevant assessment year and thereafter converted into Indian rupees in accordance with Rule 115 of the Income-tax Rules, 1962.



Such clarification would remove doubts in the minds of taxpayers considering a declaration of undisclosed foreign income under the Rs 1 crore category of FAST-DS 2026 and provide greater certainty regarding both their eligibility and the amount payable under the Scheme.



The author, O.P. Yadav, is a former IRS officer with over 36 years of experience in tax administration, education, and training. He is presently associated with Prosperr.io as Tax Evangelist. The views expressed are personal.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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