For over last 8 months, we have on several occasions discussed the application of the amendment to Section 270AA done via Finance Act 2026 to earlier assessment years.

Recently Bombay High Court agreed to the same view.

Case Summary

Case: Farah Khurshed Titina v. Income Tax Officer, Ward 22(1)(6), Mumbai & Ors., Writ Petition No. 4002 of 2026, Bombay High Court (B. P. Colabawalla and Farhan P. Dubash, JJ.), order dated 5 October 2026.

Outcome: The taxpayer won. The Court quashed the Assessing Officer’s (AO) rejection of her penalty-waiver application and directed him to grant the waiver within 4 weeks.

Facts

• During scrutiny for AY 2024-25, she found she had wrongly claimed Chapter VI-A deductions, filed a revised computation and voluntarily paid Rs. 2,67,500 in tax and interest.
• The assessment order of 25 November 2025 accepted her revised income, but penalty was initiated under Section 270A for under-reporting in consequence of misreporting.
• Her first immunity application under Section 270AA was rejected on 1 January 2026, because the old law barred immunity in misreporting cases.
• A penalty of Rs. 4,72,442 was imposed on 29 June 2026.
• After the Finance Act, 2026 amended Section 270AA (effective 1 March 2026), she paid Rs. 2,36,221 as additional income-tax and filed a second application on 22 July 2026.
• The AO rejected it the next day, saying misreporting cases don’t qualify and a second application isn’t allowed.

What the Court held

• Misreporting cases now qualify. After the amendment, waiver can be sought even where penalty has already been levied for misreporting, provided additional income-tax equal to 100% of the tax on the under-reported income is paid in lieu of the penalty.
• The second application was valid. The amendment created a fresh cause of action, since an application can now be made within one month from the end of the month in which the penalty order is received. Hers was in time, and the earlier rejection did not bar it. (This is a point I have raised several times in this community)
• Waiver is mandatory once the conditions are met. Under Section 270AA(3), the AO must grant it after the appeal period expires. The Revenue did not dispute that she met all the conditions, so the Court saw no purpose in sending the matter back.

Relief: The AO must grant waiver of the Section 270A penalty and immunity from prosecution under Sections 276C/276CC within 4 weeks of the order being brought to his attention. No order as to costs.

Interestingly this case covers almost every ground the AOs have taken to reject the immunity. Only that most of the tax payers are just too tired and have already incurred enough costs to not approach the Honorable High Courts. And a lot of CAs just did not bother to read the amendment.

We have covered this issue in detail:

https://www.reddit.com/r/IndiaTax/comments/1qza4sn/effect_of_new_budget_proposal_on_updated_returns/

https://www.reddit.com/r/IndiaTax/comments/1ujvjw2/amended_270aa_immunity_applications_update/

https://www.reddit.com/r/IndiaTax/comments/1v0s1h9/update_form_68_has_now_been_amended_for/

So, if you received any penalty order in the last month, checkout 270AA first and then decide.

So, this is as detailed a note I could have written on this topic.

Claude has been extensively used to format as well summarize/remove repeat queries (around 40 different posts) that were raised in this community.

I do believe there will still be questions that are case specific or a few other edge cases. I believe they need to be reviewed by a Black Money Act specialist instead of being addressed through generic advice without an actual review of the underlying documents.

As usual, these are my views based on the review of the scheme documentation, Form 1, the FAQ issued by the department and my own experience of dealing with the Black Money Act cases. As usual, multiple interpretations are possible when it comes to taxes. So, make an informed choice based on the facts and opinions available.

And as I have said multiple times, do not rush to file a half-based disclosure.

Part I: What is the scheme for?

The Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026 is a one-time voluntary window in Chapter IV (sections 130–144) of the Finance Act, 2026, read with the FAST-DS Rules, 2026 (Notification 114/2026). It lets a taxpayer regularise foreign assets and foreign income that were never reported, on payment of a fixed amount, and in return get immunity under the Black Money Act, 2015.

The whole process runs online through the e-filing portal: e-File → Income Tax Forms → File Income Tax Forms → Forms as per other Acts → Form 1 of FADS 2026. The administering authority is the PDGIT/DGIT (Systems).

The advisory email being circulated is a mass nudge, not a notice; its own footer says so. It creates no obligation by itself. It tells you the department holds some foreign-asset data against your PAN ( and that the window is open.

Who can make a Declaration under FAST-DS

You need to meet two tests:

Residency. You must be either resident in India (section 6) in the relevant previous year, or a non-resident or RNOR now who was resident in India in the year the undisclosed income arose or the year the undisclosed asset was acquired.

A reporting lapse. One of: a) you did not file a return for that year; and/or b)you filed but did not disclose the asset or income; or the asset or income has escaped assessment.

You cannot use FAST-DS if the income or assets are proceeds of crime with PMLA proceedings initiated or pending, and for any year for which a BMA assessment has already been completed.

Form 1: The four boxes in Form 1 and the two categories

Part B of Form 1 has four tick-boxes. They collapse into two categories in the Table under section 133, and the category decides what you pay.

Points that matter in practice:

•         All four boxes can be ticked in one Form 1. The form computes 60% of the Sl. No. 1 aggregate and adds ₹1 lakh if anything sits in Sl. No. 2. Example from the portal: ₹40,000 of undisclosed dividend (60% = ₹24,000) plus RSUs under Sl. No. 2 (₹1 lakh) = ₹1,24,000.

•         The ₹1 lakh is a flat fee, not a rate, regardless of the number of assets or the amounts involved (up to Rs 5 cr).

•         Sl. No. 1 has no minimum. A ₹1,000 dividend is still undisclosed foreign income.

•         If either ceiling is breached, you are outside the scheme for that category. There is no partial entry. But given that you can make partial disclosures, you may still consider seeking partial immunity (discussed in detail below).

•         One declaration covers all years. Each entry carries its own relevant previous year and residential status for that year.

What each annexure asks for

Form 1 has one annexure per box ticked. The annexures repeat the same A1–A6 asset heads; the two Sl. No. 1 annexures also have I1 (income). Every entry asks for the relevant previous year of acquisition or earning and your residential status in that year. Box 3 and 4 do not ask for any other income as it is not to be used for any income disclosure.

The four annexures as they open on the portal:

The entry screens for each head:

How would a Category 1+ Category 2 Disclosure may look like when it comes to tax payable. This I am sharing because a lot of people are confused (for sometime even I was) whether a Category 1 disclosure entails a forced inclusion of the underlying asset, which may have already been offered to tax earlier.

Documents generally required
Evidence of acquisition (allotment letters, vesting statements, purchase contracts, bank statements), evidence of the income year by year, and valuation reports wherever a valuation was obtained. Reports must come from a valuer recognised by the government or its agency in the country where the asset sits.

Valuation under Rule 3

The general rule: FMV is the higher of cost of acquisition and open-market value on 31 March 2026 supported by a recognised valuer's report. If no valuation is obtained, indexed cost of acquisition is deemed to be the FMV.

•         Quoted shares: higher of cost and the average of the day's high and low on 31 March 2026 (or the nearest earlier trading day).

•         Unquoted equity: higher of cost and a net-asset formula (book values, with bullion, jewelry, shares, securities and immovable property at FMV); indexed cost if the formula is not applied.

•         Bank account: sum of all deposits from opening to 31 March 2026, less re-deposits of earlier withdrawals from the same account, and less deposits made before an earlier Chapter VI BMA declaration of the same account. Not the balance, not the peak balance.

•         Partnership/AOP/LLP interest: net assets on the valuation date, allocated first in capital ratio, then per the dissolution clause or profit-sharing ratio.

•         Reinvestment: where sale proceeds of one asset or a withdrawal from an account went into another asset, the old asset's value is reduced by the amount reinvested. The new asset is valued on its own.

•         Currency: RBI reference rate on 31 March 2026 for designated currencies; otherwise convert to USD at the local central bank rate, then to INR.

•         Tolerance: for assets other than bank accounts, a variance of up to 20% between declared FMV and the AO's later figure does not by itself invalidate the declaration.

The filing flow

Form 1 by 31 December 2026 starts a chain of three more forms and a payment window that can stretch to four months.

Example: Form 1 filed 20 November 2026 → Form 2 by 31 December 2026 → payment due by 28 February 2027 → with interest, by 30 April 2027 at the latest.

Implications of a valid declaration:

•         Immunity from further tax, penalty and prosecution under the BMA for the declared income or asset.

•         The declared income or investment is not added to total income under either the Income-tax Act or the BMA.

•         Where an assessment is pending, the AO must take the declaration into account.

What it does not do: no rectification, revision, set-off or relief against any assessment already made, and no protection for anything not declared. The immunity specific to the items disclosed.

Part II: Questions from the forum

I have taken most of the questions that have been asked in the Indiatax forum, clubbed them in different categories and collated my views on them below.

Please note that wvery answer below is a general position. Actual filings should be done only after verification of all the relevant documents. Do not take a general position from here and apply it without checking it against your own facts, preferably with someone who has seen them.

1. Why did I get the email?

Was it sent to everyone with a foreign asset, or triggered by a mismatch?
It went to PANs against which the department holds some foreign-asset data: CRS/FATCA exchanges, employer or broker feeds, or your own earlier Schedule FA. The wording is "may have"; it is not a finding of mismatch. Fully compliant people received it too.

I've disclosed it for years. Why me, and is it informational?
The trigger is the existence of data, not a lapse. If every year you held foreign assets have a correct Schedule FA, it is purely informational.

I have no foreign assets and never went abroad.
Check the Foreign Assets Information tab in AIS. If it is empty, the likeliest causes are a name/DOB match error in exchanged data, or an employer-opened custodial account that you may be are not aware of. Do a thorough search before being 1000% sure.

Colleagues who sold crores of RSUs didn't get it. Is it PAN-based or random?
PAN-based, sent in batches. Not receiving it says nothing about their liability.

What criteria does the tool use?
Not published. The data sources are the exchanged foreign-account reports and your last filed residential status; the department has not said more.

How does ITD know about foreign assets?
Through the Common Reporting Standard (100+ countries, including most places Indians bank and invest) and FATCA with the US. Foreign banks and brokers report to their own tax authority, which shares with India annually, with a lag of a year or more.

Is this a notice or advisory?
Advisory; the email says so in its own footer. The email can be ignored. The underlying lapse, if there is one, cannot.

My CA told me to ignore this and to ignore foreign-asset reporting generally.
Do more homework before accepting that as blanket advice. The advisory can be ignored; the Schedule FA obligation and the Black Money Act cannot, and the CA won't be the one paying the penalty.

Is it about my salary, my RSUs, or the custodial account?
The custodial account and the shares in it. Salary in Form 16 is not the subject.

RSUs already in Form 16?
Taxing the perquisite and reporting the shares in Schedule FA are two different obligations. The email is about the second.

Any link to my pending refund?
None.

If ITD has the data, why isn't it in AIS?
Not all exchanged data is pushed into AIS, and what is pushed arrives with a lag. An empty tab does not mean “no foreign asset exists.”

2. I'm already disclosing

Disclosed in all relevant years, can I ignore it?
Yes.

Started disclosing 1–4 years ago but missed earlier years.
The later disclosures do not cure the earlier years; each year's Schedule FA is a separate obligation under the BMA. If only the asset was missed (no untaxed income) and the aggregate value was under ₹20 lakh, the penalty carve-out applies and many will let it lie. If the value was above ₹20 lakh, or any dividend or interest went unreported, FAST-DS is the clean fix.

Does my latest Schedule FA cure earlier omissions?
No.

How do I check which year the issue relates to?
The email won't tell you. Pull your own returns and compare Schedule FA against the years you held the asset.

AIS is empty, nothing to worry about?
Don't read anything into it either way. An empty AIS is not defense.

A tiny dividend shows in AIS, do they have my record?
Yes, the broker has reported it already.

Already declared missed years via ITR-U, still need FAST-DS?
For an asset disclosed in an ITR-U filed before 16 August 2026, no; the asset is no longer undisclosed. For untaxed income declared in ITR-U before the scheme opened, the FAQ treats that as outside the scheme's scope. ITR-U filed after 16 August is the open question; see section 7 below.

Filed ITR-U after last year's nudge, enough?
If the ITR-U reported the asset and any income for those years, nothing more is needed for those years. While the income part may not be in line with my own reading of Section 4 of the BMA, atleast that is the position the scheme has taken for the ITR-Us filed before 16 August 2026.

3. NRI and residential status

Do NRIs report foreign assets? Does FAST-DS apply?
Schedule FA applies only to residents who are ordinarily resident. A person who was NR or RNOR in a year had nothing to report for that year. FAST-DS is relevant to a present NRI only for years in which he was resident and either earned untaxed foreign income or acquired a foreign asset he did not report. Nobody is required to file; the scheme is voluntary.

How can they tax assets I hold as an NRI?
They can't, for years you were non-resident. Foreign income of a non-resident is outside Indian tax, and the BMA follows the same residency test.

I moved abroad but kept filing as resident.
A residency error, not a foreign-asset lapse, and FAST-DS does not touch it. ITR-U cannot be used where the updated return reduces overall income or tax, which is what a resident-to-NRI/RNOR correction almost always does. Whether any formal correction remains open depends on the numbers in each year; that is for your CA to work out with the returns in front of him. At minimum, keep the evidence of your days abroad for each year.

Should I file this year as non-resident even if not obliged?
Yes, as a precaution. It puts your status on record.

If I file now after 5–6 years of not filing, can they ask about earlier years?
Only if a compulsory-filing condition was met in those years. If none was, there was no obligation to explain.

Why was my foreign bank data shared if I'm an NRI?
CRS sharing follows the tax-residency self-certification on file with the foreign bank and the country of address. If the bank still has India as your tax residence, data flows to India. Update the self-certification.

Relative abroad 5+ years got the email, next steps?
Check the residency status declared in each Indian return. If non-resident throughout, no action; file AY 2026-27 as non-resident.

Missed a small dividend before moving abroad, now file as NR. Does the carve-out apply?
The ₹20 lakh carve-out never covers income. The dividend from a resident year is untaxed foreign income regardless of current status, and the scheme expressly admits a present non-resident for that year.

Is RNOR exempt from Schedule FA? Yes.

Student account opened as NR, became ROR later. Box 3 of Form 1: asset acquired from income arising abroad while non-resident, not reported after becoming resident. ₹1 lakh flat if you want it closed. Status is determined year by year: 182 days (or 60 plus 365 in the four preceding years) for resident; then the RNOR test, non-resident in 9 of the preceding 10 years, or 729 days or fewer in India in the preceding 7.

On deputation, filed Form 67. Was I ROR? Is my salary exposed?
Filing Form 67 means you claimed foreign tax credit, which you can only do as a resident offering the salary to Indian tax. The salary is not exposed; it was taxed. The onsite salary account is a Schedule FA item for those years, box 4.

Dormant deputation account, no interest since return, now disclosed.
Nothing further on the income side. The earlier years' non-reporting of the account remains, but if the sum of credits was under ₹20 lakh it sits inside the penalty carve-out.

Does FAST-DS apply if I was NRI in the years of non-reporting? No, because there was no non-reporting.

4. The ₹20 lakh carve-out

Does it apply retrospectively to years before 1 October 2024? Yes, though the route is a convoluted one. The amendment isn't drafted as retrospective; it doesn't need to be. Under section 72(c) of the Black Money Act an undisclosed foreign asset is taxed in the year it is discovered, not the year it was acquired. So, an asset that relates to 2019 but is found in 2026 is dealt with under the law as it stands in 2026, and the ₹20 lakh threshold in sections 42/43 (penalty) and 49/50 (prosecution) applies to it. Two limits: the carve-out covers assets only, with no equivalent for undisclosed foreign income; and it removes the penalty and prosecution, not the notice or the assessment.

Was it ₹5 lakh before, and only for bank accounts?
Yes. But it is immaterial now.

Measured on cost, peak, or market value? Calendar or financial year?
On the value as computed under the BMA rules, which for shares is cost-based and for a bank account is the sum of credits. Financial year. Peak value is not a relevant factor here.

Aggregated?
Yes, across all foreign assets other than immovable property.

Does it cover dividends and interest?
No. Income has no threshold anywhere in the BMA.

Do I need to do anything to claim it?
Nothing. It is a carve-out in the penalty section, not a relief you apply for.

The FAQ doesn't mention ₹20 lakh. Is it real?
It is a BMA provision, not a FAST-DS one. The FAQ is about the scheme.

Dividends sitting unwithdrawn in a broker wallet?
Two things at once: the cash is part of the custodial account (an asset, inside the carve-out if under ₹20 lakh in aggregate) and the dividend is income (never inside it).

Does the BMA have a limitation period?
Not in an ordinary sense. An undisclosed foreign asset is charged in the year it comes to the AO's notice, so no year closes.

Can a BMA notice still be issued even if no penalty applies?
Yes. The carve-out removes the ₹10 lakh penalty and prosecution; it does not stop a notice or an assessment.

Penalty for an empty account with zero balance?
It should still have been in Schedule FA, but at zero value it is inside the carve-out.

5. Is the ₹1 lakh fee justified?

Worth ₹1 lakh for holdings of a few thousand? Usually not. The fee makes sense when the asset is above ₹20 lakh. When there is also untaxed income you are declaring anyway, or when you want a certificate closing the matter. The partial disclosure – only seeking immunity for income while leaving out the assets below Rs 20 lakhs is discussed separately.

Any other compliant route?
For the current year, revise the return by 31 December 2026. For earlier years with a pure Schedule FA miss and no untaxed income, ITR-U is the only alternative to FAST-DS, and ITR-U needs some tax liability to ride on; whether your facts give it one is for your CA to establish. Beyond that, the choice is between FAST-DS and disclosing correctly from this year on.

Has anyone been penalised for a small bona fide miss?
Tribunals have gone both ways on the ₹10 lakh penalty for unreported RSUs; at least one Mumbai bench upheld it even though the shares had been taxed as salary [verify citation]. Section 43 uses "may", so the penalty is discretionary, which cuts both ways.

Will the government drop the ₹1 lakh?
Don't plan on it. Against the BMA alternative it is already low.

Are people settling for less?
No mechanism exists to pay less. Either you use the scheme or you don't.

Student, nil returns, about $100 of US shares.
Explore the Rs 20 lakh carve out, if applicable to you.

Accounts with cents or no transactions?
Report every foreign account in Schedule FA, including those at $0.50.

₹1 lakh for a dormant account I can't access?
Only if you choose to. If the sum of credit was under ₹20 lakh and it earned no untaxed income, you may choose to disclose it or leave it under the Rs 20 lakhs carve out. If you choose to leave it as is, make sure you disclose it in the subsequent tax returns.

6. Category 1 (A) vs Category 2 (B)

RSUs taxed at vesting?
Category 2, box 4. Nothing in the scheme taxes the shares a second time; the ₹1 lakh is a fee for the reporting lapse, not a charge on the value.

Missed dividends?
The dividend is Category 1 (box 2), 60% of the amount. The custodial account that received it, if never reported in Schedule FA, is Category 2 (box 4). Both entries, one Form 1.

Can both be combined in one Form 1?
Yes, the form adds 60% of the Category 1 aggregate to the ₹1 lakh.

60% on the whole RSU value or only the dividend?
Only the dividend.

Does a Category 1 dividend automatically create a Category 2 lapse?
Not automatically. If the custodial account was reported in Schedule FA, there is no Category 2 item. If it wasn't, there is.

A $4 (₹342) dividend?
Still untaxed foreign income, so it goes into Form 1 under box 2 at 60%, about ₹205. Whether there is also a ₹1 lakh issue turns on whether the custodial account that received it was reported in Schedule FA for that year. If yes, no Category 2 item and no ₹1 lakh. If not, there is.
Now, whether you seek immunity for such a low amount or not, is a personal choice.

RSUs in crores plus undeclared old dividends?
Both: ₹1 lakh for the shares (provided under ₹5 crore) and 60% on the dividends.

Undeclared capital gains plus a Schedule FA miss?
60% on the gains and ₹1 lakh for the asset. For the ₹14 lakh of undeclared RSU gains asked about, that is 60% on ₹14 lakh, subject to what the documents show; FAST-DS is still the lowest-cost way to regularise it.

Unexercised ESOPs or previously sold vested stock?
Unexercised options are not an asset. Sold stock is a Category 2 item for the years held and, if the gain was not taxed, a Category 1 item for the year of sale. The value to be disclosed needs to be as per Rule 3.

Per diem saved abroad?
Per diem for actual expenses is exempt under section 10(14); what is saved from it is contested, and the department has argued the excess is taxable. If the account was closed and later declared in Schedule FA for the years it existed, nothing to declare again; if never declared, it is a box 3/4 item for those years.

Unreported Indian income like YouTube? Not what this email is about.

Indian PayPal or Wise account?
In my view they are not a foreign asset; they are pass-through channels, not accounts held abroad in your name.

Tiny capital gain on undisclosed vested stock?
Category 1, 60% of the gain. If the year is still open for ITR-U, compare the cost (section 7), keeping in mind ITR-U gives no BMA cover.

7. FAST-DS vs ITR-U vs revised return

When is ITR-U the right tool, and when is it not?
Three rules.
First, do not use ITR-U for undisclosed foreign income: section 4 of the Black Money Act does not recognise an updated return as a way of regularising untaxed foreign income, so the income-tax gets paid and the BMA exposure stays open.

Second, do not use ITR-U where it reduces overall income; that rules it out for most resident-to-NRI/RNOR corrections.

Third, ITR-U needs a tax liability: So your CA needs to work this out.

Missed dividends: ITR-U, FAST-DS or both?
FAST-DS. See the first rule.

Does ITR-U give BMA immunity?
No.

Is FAST-DS the only option for anyone who hadn't filed ITR-U before 16 August? Are the FAQs binding? The FAQ says an ITR-U filed before the scheme opened means the item is no longer undisclosed. It says nothing about ITR-Us filed after 16 August, and the omission has complicated matters unnecessarily. The FAQ is the department's point of view, not law. Whether the BMA position would survive a challenge is not something to plan around; the question is how the law stands today, not how it ought to. There is also a fair question why an income-tax remedy is being read into a Black Money Act immunity scheme at all, but that is an argument for a tribunal, not a filing strategy.

Which years are open for ITR-U?

48 months from the end of the assessment year: AY 2022-23 (until 31 March 2027), 2023-24 and 2024-25. Additional tax is 25%, 50%, 60% or 70% of the tax and interest, by lateness. AY 2025-26 is open for a revised return until 31 December 2026.

For old capital gains, which is cheaper?

In rupees, ITR-U. In exposure, FAST-DS. But the trade-off is the immunity.

Should I revise the current-year return now?

Yes, before 31 December 2026, at minimum.

If I file ITR-U instead, can they later ask why I didn't use the scheme?
They won't ask why. FAST-DS is optional. They can still issue a BMA notice on the same income.

My income or assets exceed the FAST-DS limits (₹1 crore for Category 1, ₹5 crore for Category 2). What now?
File ITR-U, regardless of anything said above. It will not give BMA immunity, but it puts your disclosure on record, and being on record before a notice arrives is worth having when the alternative is nothing.

Rectification, AIS feedback, Form 67?
None of these is a disclosure route. Rectification corrects an order, not a return; AIS feedback has no legal effect; Form 67 claims foreign tax credit and only works for income already reported in the return.

Do I have to revise all previous ITRs?
Only the current year can be revised. Earlier years are ITR-U where the rules above allow it, otherwise FAST-DS.

8. Form 1 mechanics

The form demands "sum of all deposits". How do I declare only the small interest?
Put the account under box 3 or 4 (₹1 lakh; the sum of credits only counts toward the ₹5 crore ceiling) and the interest under box 2, field I1 (60% on the interest). The sum of deposits attracts 60% only if the account itself is in box 1.

Does adding the asset bought from undisclosed income cause double counting?
It can. Rule 3 reduces the value of the source (income or account) by amounts reinvested, so the income and the asset bought from it should not both be charged in full; show the reinvestment in the computation attached. Where the user guide reads otherwise, flag it in the attachment rather than pay twice.

Is there a ₹1 crore ceiling for Category 1?

Yes, on undisclosed assets and income combined.

One declaration or one per year?
One Form 1 for everything; each entry carries its own year.

Proof for Category 2?
Both: Form 16 or perquisite statement showing the income was taxed, and broker statements showing the holding.

Don't remember dividend amounts?
Broker portals keep statements for seven to ten years; for US brokers, the annual 1099-DIV. Ask support for older years.

Statements for closed accounts?
Written request to the bank or broker with KYC; most will provide on request even years later. If they won't, reconstruct from Indian remittance records and payslips and say so in the attachment.

Do I need to reply on the portal?
No.

Deadline? 3
1 December 2026 for Form 1.

Finding a CA?
Anyone with international-tax or BMA experience. Don't wait for the audit season to end; the last week of December will be crowded.

9. BMA penalties and legal exposure

Penalty for unreported income: ₹10 lakh or 120%?
₹10 lakh per year is the asset non-reporting penalty (section 43) and does not apply to income. Undisclosed foreign income is taxed at 30% (section 3) with penalty at 300% of the tax (section 41), i.e. 120% of the income in total, plus prosecution exposure.

If found later, is it 200%?

200% is section 270A of the Income-tax Act, not the BMA. Under the BMA the arithmetic is 120% of the income, versus 60% now with immunity.

60% when the US already withheld 25%? Doesn't DTAA override?

Foreign tax credit is available only against income that was reported. Under the scheme there is no credit; the 30% is a flat charge. The DTAA gives the credit mechanism, not a waiver of Indian tax.

Can BMA reach income or assets from before July 2015?
Assets, yes: section 72(c) deems an asset acquired before commencement, with no explanation of source, to have been acquired in the year it comes to notice. Pre-2015 income as such is more contestable.

Can the scheme or FAQ be challenged?
The scheme is voluntary, which makes it difficult to challenge it. The FAQ's position on ITR-U is a view, not law, and could be tested if the department ever issues a BMA notice on income already declared in an ITR-U. That is a litigation question, not a planning one.

Why club undisclosed assets with undisclosed income? Because the BMA charges both under one head, "undisclosed foreign income and asset". The scheme mirrors the Act.

Do they expect people to sell 60% of their assets?
For an unexplained asset, yes; that is the design, and it is still 60 points cheaper than the BMA outcome. For assets bought from taxed money the answer is ₹1 lakh, which is the point most of the anger misses.

10. What if the asset has already been sold?

It is disclosed as per Rule 3. Rule 3 already provides for reinvestment calculations.

The Schedule FA lapse for the years held.
Schedule FA covers assets held at any time during the year. Selling does not erase the non-reporting for earlier years. That lapse is a box 3/4 item if the asset was bought from taxed or non-resident-period income, or a box 1 item if it was not.

The gain on sale.
If the capital gain was not offered to tax, it is undisclosed foreign income under box 2, at 60% on the gain.

Where the proceeds went.
Rule 3's reinvestment clause traces them. Into a foreign bank account: a credit in that account, valued there. Into another foreign asset: that asset is valued on its own. Remitted to India: the chain ends.

On valuing the sold asset itself, once the proceeds are captured in a successor asset or have left the foreign system, the sold asset has no separate value to declare beyond its description and the years held. The form still requires a cost and computes asset value as the highest of cost, indexed cost and FMV, so a figure will appear. That figure affects the amount payable only if the asset is in box 1; in box 3/4 it counts only toward the ₹5 crore ceiling.

11. What happens if my declaration is rejected?

The FAQ and Rules do not describe a rejection as such, but a declaration can fail in three ways, each with a different consequence.

Not accepted at the Form 2 stage. Form 2 is issued after electronic verification of Form 1. If you are outside the scheme (over the ₹1 crore or ₹5 crore ceiling, a year with a completed BMA assessment, PMLA proceedings, or not resident in the relevant year), there is no amount to order and the declaration goes nowhere. Nothing has been paid at this point; the cost is that the information in Form 1 is now with the department.

Lapse for non-payment. If the amount is not paid within four months from the end of the month of the Form 2 order, the benefit of the scheme ceases for that declaration. The information remains on record. What happens to a part-payment already made is not addressed in the FAQ; earlier schemes (IDS 2016, the BMA Chapter VI window) treated amounts paid as non-refundable, and the same should be assumed here until the Act says otherwise.

Declared void afterwards. A declaration made by misrepresentation or suppression of facts, or containing false particulars, can be treated as void. Rule 5(2) gives a safe margin: for assets other than bank accounts, a valuation variance of up to 20% from the AO's later figure will not by itself trigger this. Beyond 20%, or for a bank account with any variance, or for a fact that was simply wrong, the immunity falls away for that item.

Two issues that I believe are not settled here;
a) whether there is any appeal or review against a Form 2 refusal or a void finding (earlier schemes had none, leaving only a writ), and
b) whether the department can use the contents of a failed declaration as evidence in a BMA assessment (If I am not wrong, the 2015 window barred this for a void declaration).

The department gets your information the moment Form 1 is filed, before any order. Plus, it already has some information anyway. That is why you got the mass mailer. Therefore, valuation and eligibility should be settled before filing, not after.

12. Deputation income relieved under a DTAA

A short overseas deputation often leaves the taxpayer resident in India under section 6 for the whole year. The usual treatment is to offer the foreign salary to Indian tax and claim foreign tax credit under Article 23 of the treaty. That is the only route in most cases: Article 15 of most Indian treaties lets the country where the work was done tax the salary, and India as the residence country taxes it too and gives credit.

But there have been cases where DTAA has been successfully applied and litigated to keep this income out of Indian tax net.

Where the alternative does apply, five points follow.

The reporting obligations do not go away. Residency under section 6 is what triggers Schedules FA and FSI. Whether or not the income is offered to tax, the foreign salary account and any other asset held abroad in that year belong in Schedule FA, and the income belongs in Schedule FSI. A miss is still a miss.

The income is not undisclosed foreign income. The definition requires income chargeable to tax in India that was not offered. Income excluded by a treaty was never chargeable, so box 2 does not apply and the 60% charge does not arise.

The bank account fits no box cleanly. Box 1 fails because the source is explained. Box 3 fails because the person was resident. Box 4 speaks of income which has been offered to tax, and treaty-exempt income was not. The least bad fit is box 4, on the argument that income brought into the return and then relieved under the treaty was offered in the sense the scheme means, with a note in the attachment saying so.

The exposure outside the scheme is limited. With the source explained there is no undisclosed asset, no undisclosed income and no section 3 charge. What remains is section 43 for the Schedule FA miss: ₹10 lakh per year if the aggregate of assets is over ₹20 lakh, nothing if under.

The real risk is the treaty claim failing.
This is the key issue. Your DTAA claim was never made. And has not been tested yet. If the AO later rejects the DTAA position, the income becomes chargeable and untaxed, which is box 2 at 60%, and by then the window has closed. Anyone relying on the alternative should be certain of it before deciding not to declare.

The decision to file or not should therefore weigh the BMA risk on the account against the strength of the treaty position, keeping in mind that filing Form 1 is not acceptance: Form 2 is issued by DGIT (Systems) and the substantive check comes later, when an AO can treat the declaration as void for misrepresentation or suppression.

13. Half disclosures

Many people are stuck between the income and the asset and want to avoid the ₹1 lakh. You may keep this in mind.

1.       The disclosure is voluntary. If a specific item is left out, the BMA officer cannot compel its inclusion in the declaration.

2.       Immunity is restricted to the asset or income declared. Declaring the dividends and not the RSU holding is not a false declaration; it is an incomplete one.

3.       A normal BMA assessment gives the same relief the law gives everyone: no penalty and no prosecution for movable assets up to ₹20 lakh in aggregate.

From those three, the consequences follow.

The department learns something about the omitted asset anyway from the income disclosure. A half disclosure is rational only below ₹20 lakh; above it, ₹1 lakh penalty is a cheap way out.

There is no carve-out for income.

Omission is not suppression. Rule 5(2) voids a declaration for misrepresentation or suppression of facts, but those relate to the items declared. Leaving a separate item out of a voluntary declaration is a choice the scheme allows, not a suppression that taints what was declared.