Relief for small taxpayers? Union Budget 2026 offers a six-month window to disclose foreign income

Union Budget 2026 has introduced a one-time, six-month foreign asset disclosure scheme designed to help small taxpayers regularise previously undisclosed overseas income or assets. Finance Minister Nirmala Sitharaman announced the measure during her Budget speech in Parliament today, noting it aims to ease compliance burdens for individuals who may have unintentionally missed reporting foreign assets.

The Budget identifies practical compliance challenges faced by specific groups such as students, young professionals, technology employees and relocated non-resident Indians (NRIs). To address these, the scheme allows eligible taxpayers to come forward and disclose income or assets held overseas of a 'certain size', that were not earlier reported.

The foreign asset disclosure scheme covers two categories of taxpayers. Category A includes those who did not disclose any overseas income or assets. For them, the limit of undisclosed income or asset is proposed up to Rs 1 crore. Eligible taxpayers will need to pay 30 per cent of the fair market value of the asset or undisclosed income as tax and an additional 30 per cent in lieu of penalty, and they will receive immunity from prosecution.

Category B applies to taxpayers who declared overseas income and paid due tax but did not declare the asset acquired. For these individuals, undisclosed assets up to Rs 5 crore are covered. They can obtain immunity from both penalty and prosecution by paying a one-time fee of Rs 1 lakh under the scheme.

The introduction of this six-month window reflects a broader effort to encourage voluntary compliance and reduce litigation for minor and unintentional lapses. It acknowledges that complex reporting requirements can sometimes lead to omissions, especially among first-time taxpayers or those with short-term overseas exposure.

The Budget also introduced a rule-based automated system allowing small taxpayers to obtain lower or nil TDS certificates without filing separate applications. Additionally, the deadline for revising returns has been extended from 31 December to 31 March for a nominal fee, simplifying compliance. To further ease processes for investors holding securities across multiple companies, the Budget proposes enabling depositories to directly accept Forms 15G and 15H from taxpayers and transmit them to the relevant companies, reducing paperwork and administrative hurdles.

Additionally, the Budget also proposed to stagger the timeline for filing of tax returns. Individuals with ITR 1 and ITR 2 returns will continue to file till July 31 and non-audit business cases or trusts are proposed to be allowed time till 31st August. TDS on the sale of immovable property by a non-resident is proposed to be deducted and deposited through resident buyer’s PAN based challan instead of requiring TAN.

For individuals with short-term foreign assignments, education abroad or cross-border earnings, the disclosure window offers a structured opportunity to regularise past non-compliance.