ITR-U vs FAST-DS — Which option is better for disclosing past foreign income or assets?

Indian residents who hold shares in foreign companies, have overseas bank accounts or earn income abroad, are required to disclose these details in Schedule FA of their Income Tax Return (ITR). Failure to do so can lead to hefty penalties and, in some cases, prosecution.

Taxpayers who have missed such disclosures in previous returns now have two routes to rectify the omission: Filing an updated return (ITR-U) or opting for the Foreign Assets of Small Taxpayers - Disclosure Scheme, 2026 (FAST-DS).

Which option is more suitable depends on factors such as the nature and value of the foreign asset or income, the assessment year in which it went unreported and the additional tax liability involved.

FAST-DS vs ITR-U — What's the difference?

While both options allow taxpayers to address past omissions, they differ in eligibility, tax costs and the legal safeguards they offer.

• FAST-DS (2026): This is a voluntary, one-time window meant to address past omissions regarding foreign assets and overseas income. Depending on whether you have undisclosed foreign income or assets or both, you can declare these by paying a penalty. Opting for this scheme can secure immunity from consequences under the Black Money Act (BMA).

• ITR-U (Updated return): Section 139 (8A) of the Income-tax Act allows taxpayers to file their return after they missed it in a particular assessment year. The ITR-U may be filed up to 48 months after the end of the applicable assessment year. This option also comes with a penalty, but the longer you wait, the higher the penalty you may have to pay. Most importantly, ITR-U cannot be used just to declare foreign assets if there is no income and additional tax to be paid.

Is ITR-U route more economical?

Taxpayers who failed to report foreign or dividend income may find ITR-U more economical, particularly if tax has already been paid or deducted overseas. The availability of the Foreign Tax Credit (FTC) can help reduce the tax liability in India by allowing taxpayers to claim credit for taxes paid abroad.

Even after accounting for interest and the additional tax of 25% or 50% applicable under ITR-U, the overall tax outgo may still be lower than the flat 60% tax liability under FAST-DS.

The longer a taxpayer waits, the more expensive this route becomes. If an ITR-U is filed within 12 months from the end of the relevant assessment year, the additional tax is 25% of the tax and interest due. This rises to 50% if it is filed after 12 months but within 24 months, 60% after 24 months but within 36 months and 70% after 36 months but within 48 months. So for ITR relating to AY 22-23, 70% of the due tax plus interest is to be paid as a penalty.

However, if you are filing an ITR-U after a significant delay, the penalty can rise to 60% or 70% of the tax liability, making the FAST-DS route potentially more economical for reporting past foreign assets or income.

The FAST-DS route may also be a more attractive option when the source of funds for a foreign asset is fully disclosed, but the asset was accidentally omitted from Schedule FA while filing the ITR. In such cases, the scheme allows the regularization of assets worth up to ₹5 crore by paying a flat fee of ₹1 lakh, potentially avoiding BMA penalties of up to ₹10 lakh per year of non-disclosure.

Before choosing either route, taxpayers should remember that FAST-DS is a time-bound scheme and will close on 31 December. ITR-U, on the other hand, is a statutory mechanism that can be used within the prescribed 48-month period.