New Tax Laws Put Small Taxpayers Between Immunity and 100% Penalty
The "immunity or 100% penalty" choice that small taxpayers were reported to face on 15 August 2026 comes from the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (FAST-DS 2026). It is a one-time voluntary disclosure window set out in Chapter IV (sections 130 to 144) of the Finance Act, 2026, read with the FAST-DS Rules, 2026. According to the Income Tax Department's FAST-DS 2026 FAQs, the scheme opened on 16 August 2026 and declarations can be filed until 31 December 2026.
The scheme lets eligible taxpayers regularise foreign assets and foreign income that were not reported correctly. The 100% figure in the headline is not a penalty on every small taxpayer: it is the penalty payable under the scheme, equal to the tax, on undisclosed foreign assets or income that are declared. Immunity is what the declarant gets in return.
Two categories, two sets of terms
Section 133 of the Finance Act, 2026 sets out two categories of declaration, and the amount payable depends on which one applies.
| Category | Value limit (aggregate) | Amount payable |
|---|---|---|
| Undisclosed foreign asset, or foreign income not offered to tax | Fair market value up to Rs 1 crore | Tax at 30% of the value of the asset or of the income, plus a penalty equal to the tax paid (effectively 60%) |
| Foreign asset acquired out of income already offered to tax, or acquired while non-resident, but not reported in the return schedules | Fair market value up to Rs 5 crore | Flat fee of Rs 1 lakh |
Fair market value is taken as on 31 March 2026. For assets other than a bank account, a difference of up to 20% between the declared value and the value determined does not make the declaration invalid.
What immunity covers
The FAQs state that a valid declaration gives immunity from any further tax or penalty, and from prosecution, under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The income declared is not included in the declarant's total income under the Black Money Act or the Income-tax Act.
Who cannot use it
The scheme is open to residents, non-residents and those who are not ordinarily resident, subject to the residency conditions in the scheme. It does not cover assets that are proceeds of crime under the Prevention of Money-laundering Act, 2002, or cases where assessment under the Black Money Act has already been completed. Anyone above the Rs 1 crore or Rs 5 crore limits falls outside the scheme.
Filing and payment
- Form 1: the declaration, filed by 31 December 2026.
- Form 2: the order determining the amount payable, issued within one month of the declaration.
- Payment: within two months from the end of the month in which Form 2 is received. A further period of up to two months is allowed with interest at 1% for every month or part of a month.
- Form 3: intimation of payment, filed electronically with proof of payment.
- Form 4: the certificate issued on the declaration after payment.
The e-filing portal's FAST-DS page explains that payment is made through challan ITNS 289 under e-File, e-Pay Tax, with Assessment Year 2026-27 pre-filled by the system. It warns that if the amount is not paid within the prescribed period, including the extended period with interest, the declaration is treated as void and deemed never to have been made.
What small taxpayers should do now
- List every foreign bank account, shareholding, ESOP, property, insurance policy and income stream held at any time, and check whether each was reported in Schedule FA and the relevant income schedules.
- Decide the category first: assets bought from taxed income or during non-residency usually fall under the Rs 1 lakh fee route, not the 30% tax plus penalty route.
- Value each asset as on 31 March 2026 and keep the valuation workings.
- Plan cash for payment within two months of receiving Form 2, since missing the outer limit voids the declaration.
Updated on 27 September 2026: identified the scheme behind the report as FAST-DS 2026 and added its legal basis, value limits, tax, penalty and fee, immunity, exclusions, forms and payment timelines, with links to the Income Tax Department's FAQs and portal guidance.
