Black Money Act: who it reaches, which year it charges, what it costs

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 is a short statute with a long reach. Eighty-eight sections charge tax at a flat rate on undisclosed foreign income and assets, impose penalties that exceed the value of the asset, and create offences carrying rigorous imprisonment of up to ten years. It operates outside the Income-tax Act and brings almost none of that Act’s machinery with it. There is no “reason to believe” threshold before a notice issues, no approval requirement, no limitation on when the notice may be issued, and no equivalent of section 148A.

Eleven years after enactment the law under it is still forming. The first High Court decision on the year in which a pre-2016 foreign asset may be charged was delivered on 16 September 2026. It conflicts with a line of Tribunal orders decided in Kolkata over the preceding eight months, and neither set of decisions refers to the other. The provision that decides most of these disputes, section 72(c), sits in a chapter headed “Removal of doubts” and was drafted as a transitional footnote to a declaration window that closed in 2015.

This is a working account of the whole Act: who it reaches, what it charges, in which year, what it costs when it applies, and what can still be done about it. References in this note to the Income-tax Act are to the Income-tax Act, 1961, which is how the Black Money Act itself defines the expression, and the consequences of the 2025 Act for that definition are taken up at the end. One thing needs saying at the outset, because it has a date on it. A disclosure window is open and closes on 31 December 2026.

Key points

• The Act charges tax at a flat thirty per cent under section 3, for every assessment year beginning on or after 1 April 2016. No deduction, no set off of any loss, and no surcharge or cess machinery anywhere in the statute.
• It reaches only a person within the definition of assessee in section 2(2). That turns on residential status under section 6 of the Income-tax Act, never on nationality, and a person outside it cannot be assessed at all.
• Which previous year an undisclosed foreign asset falls in is genuinely unsettled. Section 72(c) points to the year of the section 10 notice; the proviso to section 3(1) points to the year the asset came to the Assessing Officer’s notice. A High Court and a line of Tribunal orders now disagree.
• On either view the assessment year is the year after the previous year so identified, and an assessment framed for the wrong year is without jurisdiction and not curable under section 81.
• Exposure is one hundred and twenty per cent of the asset’s value once the section 41 penalty is added to the tax, plus ten lakh rupees under section 42 or 43 for the reporting default, plus prosecution.
• Sections 42, 43, 49 and 50 now carry a twenty lakh rupee threshold. It is an aggregate test and it does not cover foreign immovable property.
• The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 gives immunity from tax, penalty and prosecution for qualifying declarations, and closes on 31 December 2026.

What does the Black Money Act actually charge?

Section 3(1), the charging provision, reads:

There shall be charged on every assessee for every assessment year commencing on or after the 1st day of April, 2016, subject to the provisions of this Act, a tax in respect of his total undisclosed foreign income and asset of the previous year at the rate of thirty per cent. of such undisclosed income and asset:

Provided that an undisclosed asset located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer.

Each feature of that charge differs from the Income-tax Act, and each generates its own disputes.

The rate is fixed by the Act itself at thirty per cent, not by an annual Finance Act. Nothing in the statute provides for surcharge or for health and education cess, and the annual Finance Act levies those on income-tax charged under the Income-tax Act, which by section 4(3) this income is not. The conclusion that no surcharge and no cess apply follows from the structure of the Act rather than from any express provision, and it is worth stating that way rather than as a sourced proposition.

The charge is on the previous year, and the first assessment year is AY 2016-17. That floor holds whichever commencement date is taken, and it is the reason the Act cannot simply tax income of 2009 as income of 2009.

The charge bites on two different things. Undisclosed foreign income is charged as income of the year it arose. An undisclosed foreign asset is charged on its value, and the proviso moves the year in which that value is brought to charge. That distinction, between charging income and charging the value of an asset, is the hinge of the whole temporal problem and is examined below.

Section 5 removes every softening feature of ordinary income computation. No deduction for expenditure or allowance, and no set off of any loss, is allowed, “whether or not it is allowable in accordance with the provisions of the Income-tax Act”. What section 5 does allow is a credit: income already assessed under the Income-tax Act, or assessable or assessed under this Act, is reduced from the value of the asset, provided the assessee produces evidence that the asset was acquired from that income. For immovable property section 5(2) prorates the credit, and Parliament supplied a worked example in the section itself:

A house property located outside India was acquired by an assessee in the previous year 2009-10 for fifty lakh rupees. Out of the investment of fifty lakh rupees, twenty lakh rupees was assessed to tax in the total income of the previous year 2009-10 and earlier years. Such undisclosed asset comes to the notice of the Assessing Officer in the year 2017-18. If the value of the asset in the year 2017-18 is one crore rupees, the amount chargeable to tax shall be A-B=C where, A=Rs.1 crore, B=Rs. (100 x 20/50) lakh= Rs.40 lakh, C=Rs. (100-40) lakh= Rs.60 lakh.

The illustration repays study. It shows Parliament contemplating an asset bought in 2009-10 and charged on its 2017-18 value, which confirms that the temporal decoupling is deliberate. It also shows the credit operating on a proportion of value rather than on rupees of historical cost, so appreciation on the taxed portion is itself relieved. The base for the credit is stated precisely in section 5(2): the deduction bears to the value of the asset as on the first day of the financial year in which it comes to the notice of the Assessing Officer the same proportion as the assessed foreign income bears to the total cost of the asset. That is not quite the same base as the charge under section 3, which is fair market value in the previous year in which the asset comes to notice, and the difference should be worked through rather than assumed away. Assessment orders routinely give credit for the twenty lakh rupees of cost rather than for the forty lakh rupees the section actually directs, and the difference is worth taking.

Is the Black Money Act retrospective?

The question is asked far too broadly. There are four distinct questions inside it and they have different answers.

Did advancing the commencement date make the Act retrospective? No. Section 1(3) as enacted set commencement at 1 April 2016. The Central Government, by a Removal of Difficulties Order under section 86, Notification No. 56/2015, S.O. 1790(E) dated 1 July 2015, substituted 1 July 2015. Because that was an order and not an amendment by Parliament, printed copies of the bare Act still carry 1 April 2016 in section 1(3), which is the source of an enduring confusion. The Delhi High Court, at an interim stage in Gautam Khaitan v. Union of India (2019) 415 ITR 99, took the view that the Government could not exercise the power before the Act was in force and that the effect was to make the Act retrospective. The Supreme Court disagreed, in Union of India v. Gautam Khaitan, Criminal Appeal No. 1563 of 2019, decided 15 October 2019 and reported at (2020) 420 ITR 140. The Court held that “the High Court was not right in holding that, by the notification/order impugned before it, the penal provisions were made retrospectively applicable”. The date, it said, “has been changed only for the purpose of enabling the assessee(s) to take benefit of Section 59 of the Black Money Act”, the declaration window, which had to open before the charge began. Note the precise scope of that holding: it is directed at the proposition that the penal provisions had been made retrospective, not at the reach of the Act at large.

Two things about Gautam Khaitan are commonly overstated. It was an appeal against an interim order, and the Court remitted the writ petition to be decided on its merits. It therefore did not finally adjudicate the vires of the notification, did not decide whether the Act may constitutionally reach pre-commencement assets, and said nothing about which year the charge falls in. It should be cited for what it decided, which is that the change of commencement date did not itself make the Act retrospective.

Can the Act reach an asset acquired before it existed? On the charging side, yes, and this is now the working position. It does so not by taxing an old year but by two devices that bring the asset into a later year: section 72(c), which deems the asset acquired in the year the section 10 notice issues, and the proviso to section 3(1), which charges the asset on its value in the year it comes to the Assessing Officer’s notice. That reasoning was accepted in Rashesh Manhar Bhansali v. ACIT, BMA Nos. 3 and 5/Mum/2021, decided 2 November 2021 and reported at [2021] 132 taxmann.com 20, where the Mumbai Bench upheld an assessment in respect of accounts that had been closed in 2008 and 2011, on the footing that what matters is when the foreign asset becomes known to the Assessing Officer after the Act commenced, and not the year in which the asset came into existence.

Can it reach a pre-2015 return on the criminal side? This is genuinely contested and is examined in the prosecution section below. The short position is that the Calcutta High Court has allowed a prosecution where the failure to disclose occurred in a return filed after commencement, the Karnataka High Court has quashed prosecutions founded on returns for years well before the Act commenced on Article 20(1), and the Supreme Court has stayed the operative part of the Karnataka reasoning.

Was the charging mechanism itself validly enacted? That remains open, and is under challenge in more than one High Court. Writ petitions challenging the prosecution provisions on retrospectivity and Article 20 grounds are reported to be pending before the Bombay High Court, where interim protection against coercive action was granted in one of them in June 2026 with a direction that the constitutional issues be heard together. The Delhi High Court has recorded, in the Revenue’s appeal in Jatinder Mehra, that the constitutional validity of the Act is under consideration in related writ petitions before it. Until those are decided the vires question should be preserved on the record in any matter where it could matter, not argued as settled either way.

Who is an assessee under section 2(2)?

This is the first question in every matter and it is missed more often than any other. If the person before the Assessing Officer is not an assessee within section 2(2), there is no jurisdiction over him and nothing else in the Act applies.

The definition was substituted by the Finance (No. 2) Act 2019, Act 23 of 2019, with retrospective effect from 1 July 2015, by what was clause 195 of the Finance (No. 2) Bill 2019. As substituted it reads:

(2) “assessee” means a person,

(a) being a resident in India within the meaning of section 6 of the Income-tax Act, 1961 in the previous year; or

(b) being a non-resident or not ordinarily resident in India within the meaning of clause (6) of section 6 of the Income-tax Act, 1961 in the previous year, who was resident in India either in the previous year to which the income referred to in section 4 relates; or in the previous year in which the undisclosed asset located outside India was acquired:

Provided that the previous year, in case of acquisition of undisclosed asset outside India, shall be determined without giving effect to the provisions of clause (c) of section 72;

The consequences are these, and the last is the one that wins cases.

Nationality is irrelevant. The definition works entirely through section 6 of the Income-tax Act. A foreign citizen who is resident in India in the relevant previous year is an assessee. An Indian citizen who is non-resident is not, unless limb (b) catches him. Practitioners should be alert to assessments framed on foreign nationals on the unstated assumption that holding an Indian address, or being married to a resident, supplies the status. It does not.

The pre-2019 formula is no longer the law, and is still widely quoted. As originally enacted, section 2(2) reached only “a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6”, which excluded an RNOR outright. Free sources of the bare Act still serve that superseded text. Anyone relying on a reproduction of section 2(2) should confirm it carries the 2019 substitution, because the two versions produce different answers for exactly the population most likely to hold foreign assets.

The proviso switches section 72(c) off. When identifying “the previous year in which the undisclosed asset located outside India was acquired” for limb (b), the deeming fiction in section 72(c) must be ignored. Parliament has therefore itself declared that the fiction is not to be used to manufacture a year of acquisition, and so cannot be used to manufacture residence in that year. This is a powerful textual point and it is under-used. It also sits awkwardly with the wider reading of section 72(c) discussed below: if the fiction were as self-executing and all-purpose as it is sometimes said to be, the proviso would not have been necessary.

The Kolkata Bench applied the definition decisively in Vijendra Kedia, BMA Nos. 5 and 6/KOL/2025, decided 12 January 2026. The assessee was non-resident across most of the relevant years and not ordinarily resident in FY 2017-18, the year of the section 10 notice. The Bench held he was not covered by the definition of assessee in section 2(2), and quashed the notice under section 10(1) and the assessment under section 10(3) as without jurisdiction. The penalty went with them, because a defect of jurisdiction over the person destroys everything built on it.

There is an unresolved tension in the drafting worth flagging. Limb (a) as substituted refers to a resident “within the meaning of section 6”, the whole section, rather than to a resident other than not ordinarily resident within the meaning of section 6(6). Read literally, limb (a) would then catch an RNOR directly, which would leave limb (b)’s reference to an RNOR largely redundant. The Tribunal in Vijendra Kedia proceeded on the footing that an RNOR is outside limb (a). That is the assessee-friendly reading and it is the one the only decision in point has adopted, but it is not the literal one, and the question should be expected to return.

Does the Act reach a spouse, or the family of a searched person?

In practice a very large proportion of Black Money Act proceedings begin with a search under section 132 of the Income-tax Act on one person and end with notices to several. The Act itself supplies no power of search. The information travels across through section 10(1), which allows the Assessing Officer to act “on receipt of an information from an income-tax authority under the Income-tax Act”, and through section 83, which makes income-tax papers available for the purposes of this Act.

Hind Sennoun v. Union of India, WP No. 16540 of 2021, decided by the Karnataka High Court on 16 September 2026, is the clearest recent illustration of the pattern. The petitioner was a Moroccan citizen, the wife of an Indian resident. Two immovable properties in Morocco were acquired under registered sale deeds dated 26 August 2015 and 28 February 2016. A search on her husband on 25 January 2017 extended to the matrimonial residence in Bengaluru. Seven notices under section 10 followed between 4 December 2018 and 25 March 2021, an assessment order was passed on 31 March 2021, and a show cause notice under section 46 read with section 41 followed on 5 May 2021. The Court quashed the assessment, but on the assessment year point alone. It did not decide whether a foreign national who is the spouse of an Indian resident can be an assessee at all, and the judgment should not be cited as though it had.

The Tribunal decisions supply the substance. The recurring question is not whether a spouse or a family member can be assessed, which plainly they can if they satisfy section 2(2) and are beneficial owners, but whether the Department has established anything beyond the family relationship and a name on a document.

Jatinder Mehra, BMA No. 01(Del)/2020, decided 7 July 2021 and reported at (2021) 190 ITD 611, is the strongest authority against the reflex of assessing the head of the family. The assessee’s name appeared on trust and company documents, but the son had provided every rupee of consideration, had been non-resident for over two decades, and the British Virgin Islands company was itself non-resident under section 6(3) and so outside section 2(2) altogether. A memorandum of family arrangement recorded that the assessee and his spouse would not be involved in the functioning, management or control. The Tribunal held that a name entered out of “love and respect” does not create beneficial ownership, and deleted an addition of about five crore sixty-six lakh rupees. The Revenue’s appeal against that order is pending before the Delhi High Court as ITA 150/2022, so it should be cited as persuasive rather than as settled.

Srinjoy Bose, B.M.A. No. 3/KOL/2022, decided 2 February 2023, succeeds by a different route, and the distinction is instructive. The insurance policies stood in the assessee’s own name, and he had funded the initial premiums himself, but he did so while he was non-resident in Dubai and out of income earned outside India; the later premiums came from his non-resident father. The Tribunal held that he had successfully explained the source of investment, so the second limb of section 2(11) was not satisfied and the asset was not an undisclosed asset. It also noted that the surrender value had in any event been offered to tax. The case is authority on explained source, not on absence of ownership.

The Department’s default is to notice everyone whose name appears. That is not by itself improper, since section 2(11) reaches an asset held “in his name or in respect of which he is a beneficial owner”. What it does mean is that the substantive contest in family cases is almost always about who provided the consideration, and that the answer has to be built out of bank trails, remittance records and the account opening documents, not out of assertion.

What makes an asset an undisclosed asset located outside India?

Section 2(11) defines it:

“undisclosed asset located outside India” means an asset (including financial interest in any entity) located outside India, held by the assessee in his name or in respect of which he is a beneficial owner, and he has no explanation about the source of investment in such asset or the explanation given by him is in the opinion of the Assessing Officer unsatisfactory;

The definition has two limbs and both must be satisfied. There must be holding, either in name or as beneficial owner, and there must be an absence of explanation about the source of investment, or an explanation the Assessing Officer finds unsatisfactory. An asset that is held but fully explained is not an undisclosed asset within the section, however badly it was reported. That matters, because the reporting default is dealt with separately and far more cheaply by sections 42 and 43. Conflating a Schedule FA omission with an undisclosed asset is the single most common error in assessment orders under this Act, and it converts a ten lakh rupee penalty into a demand of one hundred and twenty per cent of the value of the asset.

The Kolkata Bench made the point squarely in Addl. CIT v. Mita A Patel, BMA No. 10/Kol/2025, decided 16 June 2026, holding that section 4(1)(c) and section 72(c) apply solely to assets of unexplained origin, and that once an asset is declared and its source shown it cannot be treated as undisclosed. The same Bench in ACIT v. Ajay Kumar Patel, BMA No. 4/Kol/2025, decided 20 January 2026, held that inherited foreign bank deposits of explained origin were not undisclosed assets at all, and that historic interest income of earlier years was assessable, if anywhere, under the Income-tax Act.

Who is a beneficial owner, and does a name on a document decide it?

The Act uses the expression “beneficial owner” in section 2(11) and nowhere defines it. That gap is the root of a substantial part of the litigation.

The Board supplied a working distinction in Circular No. 13 of 2015, the FAQ circular on the declaration window, at question 31. A beneficial owner is an individual who has provided, directly or indirectly, the consideration for the asset. A beneficiary is a person who derives benefit from the asset but did not provide the consideration. The declaration facility was available to the beneficial owner and not to a mere beneficiary. The same distinction is embedded in the Income-tax Act through Explanations 4 and 5 to section 139(1), which is where Schedule FA takes its vocabulary from, and Schedule FA itself requires the filer to state in which capacity the asset is held.

The tribunals have not settled how far the Income-tax Act definitions may be imported. In Jatinder Mehra the Delhi Bench quoted Explanation 4 and tested beneficial ownership against it, and against the Benami Property Act and the controlling-interest test under the Prevention of Money-laundering Act. Since the Black Money Act supplies no definition of its own, the safer approach is to argue the substance, which the authorities are consistent on: consideration and control decide beneficial ownership, and a name on a document decides nothing.

The cases fall into a recognisable pattern.

Where the assessee funded the asset and controlled it, the defence fails however the title is arranged. In Rashesh Manhar Bhansali one account stood in the assessee’s own name and another in the name of a British Virgin Islands corporation, but he had signed the account opening forms and the beneficial owner declarations, and had himself accepted that he was the beneficial owner of the corporate account. In Elangovan Malarmangai, BMA Nos. 7 to 11/CHNY/2024, decided 30 April 2025, a claim to hold as trustee was rejected on facts that were against it at every point: the property was registered in her sole name, the housing loan was in her name, repayments came from her own Singapore account, and the trust deed was unregistered and unwitnessed.

Where the assessee neither paid nor controlled, the addition does not stand. Jatinder Mehra is set out above, and Srinjoy Bose succeeds on explained source. Krishna Das Agarwal, BMA Nos. 1 to 5/JP/2022, decided 13 April 2023 and reported at [2023] 150 taxmann.com 290, is worth citing for a narrower proposition and should not be overstated: the assessee’s own appeal was only partly allowed and the substantive addition was not deleted. What the Jaipur Bench did decide, and decided clearly, is that once a substantive addition is made in the year the asset comes to notice, the separate protective additions made in the respective earlier years are not maintainable. The Revenue’s appeals on those protective additions were dismissed. The fiduciary-capacity argument, that the accounts were held for a separate legal person, was treated as substantial but was left to the lower authorities rather than decided. In Akil Abbas Rassai, BMA Nos. 1 to 7/M/2025, decided 30 April 2025, penalties under section 43 across seven years were deleted where the policy had been bought and funded by a brother-in-law and the assessee was neither payer nor ultimate beneficiary.

For trusts and offshore structures the position is broadly that a discretionary class beneficiary who contributed nothing is not the owner of the trust’s assets. That was the reasoning in Yashovardhan Birla, BMA No. 01/Mum/2021, decided 3 September 2021, where the section 10(1) notice was quashed, and it was affirmed when the Revenue returned: in Addl. CIT v. Yashovardhan Birla, BMA No. 35/Mum/2025, decided 9 January 2026, the Mumbai Bench dismissed the Revenue’s appeal, holding that a discretionary beneficiary of an offshore trust who contributed nothing to it has no more than a hope that the trustees will exercise their discretion in his favour, and that an assessment under section 10(3) cannot stand without a valid initiating notice. But a reporting obligation can exist without beneficial ownership: Part F of Schedule FA requires disclosure of trusts created outside India in which the person is trustee, beneficiary or settlor. A taxpayer can therefore be outside section 2(11) and still exposed under section 43, which is a distinction worth explaining to clients who assume that winning on ownership disposes of everything.

How does an assessment under section 10 work, and what constrains it?

Section 10(1) permits the Assessing Officer, on receipt of information from an income-tax authority or any other authority, or “on coming of any information to his notice”, to serve a notice requiring production of accounts, documents or evidence. Sub-section (3) allows him to assess or reassess after considering the material; sub-section (4) allows a best judgment assessment where the notice is not complied with. The words “or reassess” and “or reassessment” were inserted by the Finance (No. 2) Act 2019 with retrospective effect from 1 July 2015.

What is absent from section 10 is as important as what is in it, and the contrast with the reassessment machinery of the Income-tax Act is stark.

There is no “reason to believe” and no recorded satisfaction. There is no approval requirement of any kind, so nothing corresponding to section 151, and none of the mechanical-approval jurisprudence that has proved so productive under section 153D transfers across. There is no procedure corresponding to section 148A, so no show cause and no consideration of the assessee’s reply before the notice issues. Most strikingly, there is no limitation on the issue of a notice under section 10(1). The Act limits only the completion of the assessment, not its initiation.

That absence of front-end control is precisely why the back-end controls carry so much weight. In practice the four points that dispose of section 10 assessments are the identity of the assessee under section 2(2), beneficial ownership under section 2(11), the assessment year, and limitation under section 11. Each is jurisdictional. None of them requires the assessee to prove anything about the merits of the addition.

A further constraint deserves attention because it has succeeded. A section 10(1) notice that does not specify the financial year or assessment year to which it relates is defective. The Kolkata Bench so held in Ajay Kumar Patel, observing that the notice dated 13 April 2018 did not mention the relevant financial year or assessment year. Given that the whole dispute under this Act is frequently about which year is in issue, a notice that fails to identify the year leaves the assessee unable to answer it, and the objection should be taken at the first opportunity rather than saved for appeal.

What is the time limit for completing an assessment?

Section 11(1) is the operative rule:

No order of assessment or reassessment shall be made under section 10 after the expiry of two years from the end of the financial year in which the notice under sub-section (1) of section 10 was issued by the Assessing Officer.

Two years, running from the end of the financial year of the notice, not of the search, the information or the assessment year. Sub-section (2) gives two years from the end of the financial year in which an order under section 18 setting aside an assessment is received, and sub-section (3) gives the same period for assessments made to give effect to a finding or direction in an appellate, revisional or court order.

Explanation 1 excludes three periods: time taken in reopening the proceeding, any period of court stay, and the period from the making of a reference for exchange of information under section 90 or 90A of the Income-tax Act or section 73 of this Act until the information is received or one year, whichever is less. The proviso extends the remaining period to sixty days where the exclusion leaves less than that. The exchange-of-information exclusion is the one that is invoked most often and scrutinised least. It is capped at one year, it runs from the date of the first reference, and it requires a reference by a competent authority under an agreement. Where the Department relies on it, the dates of the reference and of receipt should be called for, because the exclusion is frequently asserted rather than evidenced.

There is a second limitation question with real practical consequences. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 extended a range of income-tax time limits during the pandemic. Whether that legislation, and the notifications under it, extended limitation under section 11 of this Act is contested. The argument that it did not is a strong one on the face of the notifications, which are directed at specified Acts and compliances. Where an assessment under this Act was completed in reliance on a pandemic extension, the point is worth taking, and the specific notification relied on by the Department should be called for and read.

Limitation interacts with the assessment year question in a way that is easy to miss and often decisive. If the correct year is a year later than the one the Department assessed, the Department is not simply wrong about a label. It has to begin again, and section 11 runs from the end of the financial year in which the section 10 notice was issued, not from the date the wrong assessment was quashed. Where the original notice is old, a quashing on the assessment year point may leave nothing that can be reassessed in time.

Which previous year is an undisclosed foreign asset charged in?

This is the central contested question under the Act today, and it is worth setting out slowly, because two provisions point in different directions and the authorities have now split.

The two provisions. The proviso to section 3(1) says an undisclosed asset located outside India “shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer”. Section 72(c), in the chapter headed “Removal of doubts”, says:

where any asset has been acquired or made prior to commencement of this Act, and no declaration in respect of such asset is made under this Chapter, such asset shall be deemed to have been acquired or made in the year in which a notice under section 10 is issued by the Assessing Officer and the provisions of this Act shall apply accordingly.

The triggers are different. The proviso turns on the asset coming to the notice of the Assessing Officer. Section 72(c) turns on the issue of a notice under section 10. Those are separate events and are frequently years apart: the Department may learn of a foreign account through an exchange of information in 2016 and issue a section 10 notice in 2019. The Board’s own FAQ circular of 2015 blurred the two at question 14, paraphrasing section 72(c) as deeming the asset acquired in the year it comes to the notice of the Assessing Officer, which is the language of the proviso rather than of the section.

The Karnataka High Court view: the notice year governs. In Hind Sennoun the Court gave section 72(c) its full effect. Two conditions attract the section: the asset must have been acquired before the Act commenced, and no declaration must have been made under Chapter VI. Both were satisfied. The Court held the fiction to be “self-executing and conclusive in its operation”, not contemplating any further inquiry into the actual date of acquisition, and to be carried “to its logical and juridical conclusion”. It then took the step that gives the decision its practical force: the deemed acquisition pertains to the previous year, and so the assessment falls in the assessment year immediately succeeding. The first section 10 notice having issued on 4 December 2018, the asset was deemed acquired in FY 2018-19, the assessment year was 2019-20, and the assessment framed for AY 2018-19 was “ex-facie illegal, arbitrary and without jurisdiction”. The order was quashed.

One limitation on the decision needs to be stated, because it matters a great deal to how far it travels. The Court expressly declined to decide the contentions on section 3 and on the proviso to section 3(1), recording that they were left open to be dealt with in appropriate proceedings. Hind Sennoun is therefore not authority that section 72(c) prevails over the proviso. It decides only that, where section 72(c) applies, the year of the notice is the previous year and the assessment falls in the following year.

The reasoning rests on the architecture of the statute rather than on any authority. Section 2(4) defines the assessment year simply as “the period of twelve months commencing on the 1st day of April every year”. Section 2(9) defines the previous year in four limbs, of which the residual one, for cases outside business set-up, a new source and discontinuance, is the twelve months commencing on 1 April “which immediately precedes the assessment year”. Read together with the charge in section 3(1) on the total undisclosed foreign income and asset “of the previous year”, the scheme proceeds sequentially: the asset is acquired, or deemed acquired, in one year, and it is assessed in the next. An asset cannot be assessed in the very year it is acquired. The Court cited no precedent, and did not refer to the Tribunal decisions going the same way or to those going the other way.

The Tribunal decisions to the same effect. Two benches had already reached the same conclusion. The Mumbai Bench in Anandi Kaushik Laijawala, reported at [2025] 172 taxmann.com 121 and decided in February 2025, held that a section 10 notice dated 27 April 2018 fell in FY 2018-19 and could trigger an assessment only for AY 2019-20, so that the assessment for AY 2018-19 was void for want of a valid notice. The Chennai Bench in Elangovan Malarmangai, decided 30 April 2025, held that “the date of issue of notice u/s.10(1) of the BM Act ought to be considered as the relevant date”, that a notice of 21 March 2020 produced AY 2020-21, and that the assessment for AY 2017-18 was bad in law. It added the point on which the whole argument depends practically: the defect is jurisdictional and cannot be cured by section 81, because the assessment is “in substance and effect, not in conformity with or according to the intent and purpose” of the Act.

The Kolkata view: section 72(c) cannot displace the charging provision. The Kolkata Bench has taken a materially different route. In Ajay Kumar Patel it held that the proviso to section 3(1) “merely determines the year of chargeability in cases of undisclosed foreign assets” and “does not create any new or independent charge”, introducing “a limited retrospective mechanism only for valuation purposes”, and that “the deeming fiction [in section 72(c)] cannot override the charging provision to shift the charge to the year of issue of notice”. On the facts, the accounts had come to the Department’s notice in FY 2016-17, so the only permissible year was AY 2017-18, and an assessment for AY 2019-20 built on a notice of 13 April 2018 could not stand. The same Bench repeated the reasoning in Mita A Patel, pronounced on 16 June 2026. The Ranchi Bench followed it in Mohan Kumar Agarwal, B.M.A. No. 02/RAN/2024, decided 5 August 2026, deleting an addition of about sixty-three lakh rupees because the information had come to the Department’s notice in FY 2017-18 and the assessment had been framed for AY 2019-20.

Where that leaves the question. There is no decision holding that the assessment year is the same year as the section 10 notice, which is what Assessing Officers have repeatedly done and what has been quashed in every reported instance. So one proposition is now firm: whichever previous year is identified, the assessment year is the one after it.

Beyond that, the divergence is real and unresolved. It is not a conflict about outcomes so much as about which provision fixes the year, and the practical difference can be substantial. Where the Department learned of the asset long before it issued the notice, the section 3(1) proviso produces an earlier year than section 72(c), which is usually better for the assessee because limitation under section 11 will often have expired. Where the notice followed swiftly on the information, the two converge.

Two further observations, neither of which appears in the commentary. Hind Sennoun is a High Court decision and carries correspondingly greater weight, but it was decided without reference to the Kolkata line, which was already on the books. A decision reached in ignorance of contrary authority is not thereby wrong, but it has not engaged with the argument, and that is relevant to how it will be received elsewhere. And the proviso to the substituted section 2(2) is a strong textual argument against the widest reading of section 72(c). Parliament there switched the fiction off expressly for the purpose of identifying the year of acquisition. That it needed to do so at all suggests the fiction was not understood to be the universal, all-purpose rule that the “self-executing and conclusive” formulation implies.

How to argue it. In a matter where both routes help, take both, and take them in the alternative rather than choosing. Establish the date of the section 10 notice from the notice itself, and establish the date the asset came to the Department’s notice from the information trail, the exchange-of-information correspondence, the panchnama or the earlier assessment record. Whichever is earlier will usually be the better foundation. Then check limitation under section 11 against the year contended for, since the combination of a wrong year and an expired limitation is what actually ends these proceedings.

How is the value of an undisclosed foreign asset determined?

Section 3(2) defines the value of an undisclosed asset as its fair market value, determined in the manner prescribed, and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015 supply the machinery. The valuation question is separate from the year question but closely tied to it, because the proviso to section 3(1) charges the asset on its value in the relevant previous year, not on its cost. An asset bought for fifty lakh rupees in 2009 and worth three crore rupees when it surfaces is charged on three crore rupees, subject only to the section 5 credit.

This has practical consequences. The valuation date moves with the year, so a successful argument that the correct previous year is an earlier one will often reduce the charge as well as defeat the assessment. And where part of the investment came from income already taxed, the section 5(1)(ii) credit has to be claimed with evidence, and for immovable property the section 5(2) proportion applies to current value rather than to cost. Both are routinely computed against the assessee.

What penalties does the Act impose?

Chapter IV contains five distinct penalties and they operate independently of one another. Four of them attach to the substance of the default; the fifth, section 45, deals with obstruction.

Section 41, penalty in relation to undisclosed foreign income and asset, is the heavy one:

The Assessing Officer may direct that in a case where tax has been computed under section 10 in respect of undisclosed foreign income and asset, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum equal to three times the tax computed under that section.

Three times the tax, on a thirty per cent charge, is ninety per cent of the value of the asset. With the tax itself the total is one hundred and twenty per cent. There is no threshold, no proviso and no discretion as to quantum, only the discretion implied by “may direct”. The arithmetic is not theoretical: in Elangovan Malarmangai the section 41 penalty on additions of about twenty crore rupees was a little over eighteen crore rupees.

Section 42 imposes a flat ten lakh rupees where a resident who at any time during the previous year held a foreign asset as beneficial owner or otherwise, was a beneficiary of a foreign asset, or had foreign income, fails to furnish the return before the end of the relevant assessment year.

Section 43 imposes the same ten lakh rupees where the return was furnished but the assessee fails to furnish information, or furnishes inaccurate particulars, about a foreign asset. This is the Schedule FA penalty and it is the provision most taxpayers actually meet. It does not require any undisclosed income, any unexplained source or any assessment under this Act. A fully taxed, entirely legitimate foreign holding left out of Schedule FA attracts it.

Section 44 imposes a penalty equal to the tax arrear on an assessee in default, and expressly provides that paying the tax before the penalty is levied does not remove the liability.

Section 45 deals with other defaults, principally failure without reasonable cause to answer a question, to sign a statement, or to comply with a summons under section 8, with a penalty of not less than fifty thousand rupees and up to two lakh rupees.

A structural oddity is worth noting, and it runs wider than the penalty sections. Sections 42 and 43 still use the pre-2019 formula, applying to “a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6”, and so do the prosecution provisions in sections 49, 50 and 51(1). The Finance (No. 2) Act 2019 widened the definition of assessee in section 2(2) but left the personal scope of those sections where it was. So a person who is now an assessee under limb (b) of section 2(2), and therefore chargeable under section 3, may nonetheless fall outside sections 42, 43, 49, 50 and 51(1) on their own terms. The asymmetry appears to be unintended, but it is there on the face of the statute and it should be taken where it arises.

Procedurally, section 46 requires a show cause notice and an opportunity of being heard, requires a section 41 penalty to be initiated during the pendency of proceedings under the Act for the relevant year, and requires a section 45 penalty within three years of the end of the financial year of the default. Approval of the Joint Commissioner or Joint Director is needed where the penalty exceeds one lakh rupees and the authority is an Income-tax Officer, or five lakh rupees where the authority is an Assistant or Deputy Commissioner or Director. Section 47 bars a penalty order after one year from the end of the financial year in which the section 46 notice was issued, and allows a penalty to be revised or revived within six months of the appellate order where the assessment is revised.

When does the twenty lakh rupee threshold apply?

The Finance (No. 2) Act 2024 substituted the proviso to both section 42 and section 43, with effect from 1 October 2024. In each section it now reads:

Provided that this section shall not apply in respect of an asset or assets (other than immovable property), where the aggregate value of such asset or assets does not exceed twenty lakh rupees.

What it replaced was much narrower: a carve-out for bank accounts alone, where the aggregate balance did not exceed a value equivalent to about five lakh rupees at any time during the previous year. The substitution is therefore both a widening and a narrowing, and the narrowing is missed in most commentary.

The relief now extends to all classes of foreign asset, not merely bank accounts, so foreign depository and custodial accounts, shares, insurance and investment-linked policies and other capital assets all qualify.

It excludes immovable property entirely. A foreign flat or plot of any value, however modest, attracts the full ten lakh rupee penalty with no de minimis relief at all. Given that overseas immovable property is among the most commonly under-reported items in Schedule FA, this exclusion does a great deal of work.

It is an aggregate test, not a per-asset test, so a taxpayer with several small holdings must add them together.

And it is confined to sections 42 and 43. Section 41 carries no threshold. A finding that the asset is undisclosed within section 2(11) takes the case out of the ten lakh rupee world and into the one hundred and twenty per cent world, whatever the value.

The Finance Act 2026 has now aligned prosecution with penalty. Section 160 of that Act inserted the same twenty lakh rupee carve-out, in the same words and with the same exclusion of immovable property, into section 49 as a further proviso and into section 50 as a first proviso, and did so retrospectively with effect from 1 October 2024. So the threshold now runs across the penalty provisions for the reporting default and the corresponding offences, but still not across section 41 and not across section 51.

Does a penalty survive when the assessment is quashed?

The answer differs by penalty, and the distinction is a clean one grounded in the text.

A section 41 penalty is available only “in a case where tax has been computed under section 10”. It is therefore parasitic on the assessment, and when the assessment goes the foundation of the penalty goes with it. Section 47(2), which provides for a penalty to be revised or revived in line with the appellate outcome on the assessment, confirms that Parliament treated the two as linked.

Penalties under sections 42 and 43 are not linked to any assessment under this Act at all. Their trigger is a default in relation to the return under the Income-tax Act: not filing it, or filing it without the foreign asset information. That default is complete whether or not an assessment is ever made under this Act, and whether or not any assessment made is later set aside.

Elangovan Malarmangai demonstrates both halves on a single set of facts and in a single order. The Chennai Bench quashed the assessment for AY 2017-18 for being framed in the wrong assessment year, and in consequence deleted the interest under section 40 and the section 41 penalty of about eighteen crore rupees as infructuous. In the same order it dismissed the appeals against the section 42 penalty for AY 2016-17 and the section 43 penalty for AY 2017-18, confirming ten lakh rupees on each, notwithstanding that the assessment for AY 2017-18 had just been annulled.

There is one situation in which everything falls together, and it is worth identifying because it is the best outcome available. Where the defect is want of jurisdiction over the person, rather than over the year, nothing built on it survives. That is what happened in Vijendra Kedia: the assessee was outside section 2(2), so the notice, the assessment and the penalty were all quashed. A person who is not an assessee under this Act cannot be penalised under it either.

The practical conclusion is that a section 43 penalty has to be met on its own ground. The arguments that work are that there was no reportable asset in the year, that the assessee was not a resident required to report, that he was neither owner nor beneficial owner nor beneficiary, or that the asset had ceased to exist before the reporting obligation arose. Akil Abbas Rassai is a good example of the last: a policy that had lapsed in 2014, before the provisions applied from AY 2016-17, generated no disclosure obligation at all.

What are the prosecution provisions?

Chapter V is severe and is drafted to stand on its own feet.

Section 49 punishes wilful failure to furnish the return by a resident who held a foreign asset or had foreign income, with rigorous imprisonment of not less than six months and up to seven years, and with fine. A proviso protects a person who furnishes the return before the expiry of the assessment year.

Section 50 punishes wilful failure to furnish, in a return that was filed, information relating to a foreign asset, with the same punishment. This is the criminal counterpart of the section 43 penalty.

Section 51 punishes a wilful attempt to evade tax, penalty or interest with rigorous imprisonment of not less than three years and up to ten years, and with fine. A separate and lesser offence in sub-section (2), for a wilful attempt to evade payment, carries three months to three years. Sub-section (3) defines wilful attempt to include false entries or statements, wilful omission of relevant entries, and causing any other circumstance to exist that has the effect of enabling evasion.

Sections 52 and 53 punish a false statement in verification and abetment respectively, each with six months to seven years and fine. Section 58 raises the floor for a second or subsequent conviction to three years, up to ten years, with a fine of not less than five lakh rupees and up to one crore rupees.

Section 54 presumes a culpable mental state, and requires the accused to prove its absence, with the further provision that a fact is proved only when the court believes it to exist beyond reasonable doubt. That is a significant reversal of the ordinary burden.

Section 55 requires the sanction of the Principal Commissioner, Commissioner or Commissioner (Appeals) before a person is proceeded against for an offence under sections 49 to 53.

Section 56 deals with offences by companies, and contains a definition that takes practitioners by surprise: for this purpose “company” means a body corporate and includes an unincorporated body and a Hindu undivided family, with “director” correspondingly including an adult member of an HUF. Where the punishment is imprisonment and fine, the company is punished with fine and the individuals are proceeded against separately.

Section 80 provides that no court inferior to a metropolitan magistrate or a magistrate of the first class shall try an offence under the Act.

Whether these offences are cognizable is not settled. The Act contains no provision declaring them non-cognizable, and section 84, whose list of applied Income-tax Act provisions was last extended by the Finance (No. 2) Act 2019 to bring in section 144A, does not import section 279A of the Income-tax Act, which performs that function there. On the ordinary principle, classification would then fall to be determined by the general criminal law by reference to the maximum punishment, which would make the principal offences cognizable and non-bailable. Against that, prosecutions to date appear to have proceeded by complaint after sanction, which is consistent with the Department not treating them as police-investigable. No decision on the point has been traced, and it is better treated as open than asserted either way.

Can a prosecution continue after the assessment falls?

Section 48(2) is the starting point and it is emphatic:

The provisions of this Chapter shall be independent of any order under this Act that may be made, or has not been made, on any person and it shall be no defence that the order has not been made on account of time limitation or for any other reason.

There is nothing like that in the Income-tax Act, and nothing in this Act corresponding to section 279(1A), which bars an income-tax prosecution where the penalty has been reduced or waived. On the text, therefore, a prosecution under this Act does not abate merely because an assessment has been set aside, or never made, or made out of time.

No decision under this Act has tested the proposition, so the answer has to be built from general law, and two Supreme Court decisions frame it.

In Radheshyam Kejriwal v. State of West Bengal (2011) 3 SCC 581 the Court laid down seven propositions on the relationship between adjudication and prosecution. Adjudication and prosecution may be launched simultaneously and are independent; a decision in the adjudication is not a precondition; and an adverse finding in the adjudication does not bind the criminal court. The two propositions that matter here are the last: where the exoneration in the adjudication is on a technical ground and not on the merits, the prosecution may continue, whereas where the exoneration is on the merits and the allegation is found not sustainable at all, the prosecution cannot be allowed to continue.

In K.C. Builders v. ACIT (2004) 265 ITR 562 the Court held that once penalties are cancelled on the footing that there was no concealment, “the quashing of prosecution under Section 276C is automatic”, and that the Tribunal’s finding is binding on the criminal court.

Applying that framework, and treating it as analysis rather than as decided law under this Act, the line falls where the assessment failed. An assessment quashed because it was framed for the wrong assessment year, or because limitation had expired, is a technical exoneration and leaves the prosecution standing, reinforced by section 48(2). An assessment quashed because there was no undisclosed asset, because the source of investment was explained, or because the assessee was not the beneficial owner, is an exoneration on the merits, and on Radheshyam Kejriwal and K.C. Builders the prosecution should not survive it. A quashing for want of jurisdiction over the person under section 2(2) is a strong case for the same conclusion, since the foundation of the criminal liability under sections 49, 50 and 51, which all begin with residential status, is then absent as well.

The practical consequence is that where a prosecution is in contemplation it is worth more to win the assessment on the merits than to win it on the year. Counsel should be alert to the temptation, otherwise sound, of taking only the jurisdictional point because it is quicker.

Can a prosecution reach a return filed before the Act existed?

Here the High Courts have divided, and the Supreme Court has intervened.

The Calcutta High Court allowed the prosecution to proceed in Shrivardhan Mohta v. Union of India, W.P. No. 568 of 2018, decided 14 February 2019. The writ was dismissed and the sanction upheld. The Court’s reasoning on retroactivity turned on the facts: the petitioner had been required to file a return after the search and seizure proceedings, and had had opportunities to disclose after the Act came into force, in returns, after the search, and in Settlement Commission proceedings, and had failed at each. The failure relied on was therefore a post-commencement failure, and applying the Act to it was not retroactive. The Court also read section 71 restrictively, holding that it bars only Chapter VI, the declaration window, and does not prevent recourse to Chapter V, so a prosecution under section 50 read with section 55 was available notwithstanding pending proceedings under section 153A of the Income-tax Act. On double jeopardy it held that where an act constitutes an offence under two enactments the offender may be prosecuted under either, the bar being on punishment twice rather than on trial.

The Karnataka High Court went the other way in Dhanashree Ravindra Pandit v. Income Tax Department, Criminal Petitions Nos. 101368 to 101375 of 2019, decided 7 June 2024 and reported at [2024] 163 taxmann.com 695. The prosecutions were under sections 50 and 52 in respect of non-disclosure in returns for years well before the Act commenced, the allegations pertaining to 2009-10 and to an offshore company incorporated in March 2008. Relying on Rao Shiv Bahadur Singh v. State of Vindhya Pradesh, AIR 1953 SC 394, the Court held that for Article 20(1) the law must actually have been in force at the date of the offence and not merely deemed to be in force, that section 72(c) could not be used to create criminal liability retroactively, and that “the criminal law cannot be set into motion against the petitioners in the aforesaid facts of the case, as it cannot pass muster of Article 20 of the Constitution of India”. The complaints were quashed.

The Supreme Court has stayed that reasoning. On 23 August 2024, in SLP (Crl.) No. 11016 of 2024, the Court granted leave, recorded that the criminal petition before the High Court had contained no challenge to the validity of section 72(c), and directed that the paragraph containing the Article 20 finding “will remain stayed”. The matter became Criminal Appeal No. 3557 of 2024, a connected petition was tagged to it, and interim relief was directed on 10 January 2025 to continue pending final disposal. No decision has been traced since. The position should be re-checked before the point is argued.

Two propositions can safely be stated. First, the Karnataka decision is not a ruling on the constitutional validity of section 72(c), because no such challenge was before the Court, and it should not be described as one. Second, Mohta and Dhanashree are reconcilable on their facts: Mohta concerns a failure to disclose in a return filed after commencement, Dhanashree a failure in returns filed years before it. The distinction between a continuing post-commencement default and a completed pre-commencement one is the line to argue on, and it is a good deal more secure than relying on either decision as a general proposition.

The question is live elsewhere. Petitions challenging the prosecution provisions on Article 20 and retrospectivity grounds are reported to be pending before the Bombay High Court, where interim protection against coercive action was granted in one of them in June 2026, and the Delhi High Court has recorded that the constitutional validity of the Act is under consideration in writ petitions before it. Anyone arguing the point should check the current position in both courts.

Are offences under this Act compoundable?

There is no power to compound. Chapter V contains nothing corresponding to section 279(2) of the Income-tax Act, and section 84 does not import section 279 into this Act. What section 84 does import is instructive: section 280, on disclosure of particulars by public servants, and sections 280A, 280B and 280D, which are part of the Special Court machinery, but neither the sanction and compounding provision, nor section 279A on cognizability, nor section 280C, which provides for trial as a summons case. Sanction under this Act is governed by its own section 55, which confers no compounding power.

The Board’s compounding guidelines are, by their own title, guidelines for compounding of offences under the Income-tax Act, 1961. Those guidelines mention this Act, in the context of requiring higher approval where an income-tax compounding application involves a person also implicated under it, and that reference should not be read as conferring a power to compound an offence under this Act. Anyone advising on the point should read the guidelines themselves rather than a summary of them.

What functionally replaces compounding at present is the disclosure scheme described next, which grants statutory immunity from prosecution, and which has a deadline.

Is a disclosure window open now?

Yes, and it closes on 31 December 2026.

The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026, known as FAST-DS, was enacted as Chapter IV, sections 130 to 144, of the Finance Act 2026. The Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026 were notified on 14 August 2026 and the scheme commenced on 16 August 2026. It is not an amendment to the Black Money Act. It is a self-contained scheme in the Finance Act that confers immunity under that Act.

Who may declare. A person who is resident in India under section 6 of the Income-tax Act in the relevant previous year, or who is non-resident or not ordinarily resident but was resident either in the year to which the undisclosed foreign income relates or in the year the foreign asset was acquired. The eligibility test deliberately mirrors the substituted section 2(2) of the Black Money Act. The grounds are the familiar three: failure to furnish a return under section 139, failure to disclose the asset or income in a return furnished before the scheme commenced, or escapement of assessment.

The two categories. Both are tested on aggregate fair market value as at the valuation date of 31 March 2026.

Category	Ceiling	Amount payable
Undisclosed foreign asset or undisclosed foreign income not offered to tax	Aggregate value up to Rs 1 crore	Tax at 30 per cent of value, plus an amount equal to that tax. 60 per cent in all
Foreign asset acquired out of income already taxed, or out of income earned while non-resident, but not reported in the return	Aggregate value up to Rs 5 crore	Flat fee of Rs 1 lakh. No tax, no penalty

The second category is the one most often overlooked, and it is the more valuable of the two for the great majority of taxpayers. A person whose overseas holding was funded entirely from taxed income, or from earnings while he was non-resident, and whose only failure was to leave Schedule FA blank, faces a ten lakh rupee penalty under section 43 for each year of default, and potentially prosecution under section 50. Under this category the entire exposure closes for one lakh rupees, provided the aggregate value is within five crore rupees.

What the immunity covers. Immunity from the levy of any further tax or penalty, and from prosecution, under the Black Money Act in respect of the income or asset declared. The declared income, or the amount invested in the declared asset, is not included in total income under the Income-tax Act or under the Black Money Act.

What it does not cover. The scheme does not apply to income or assets that directly or indirectly represent proceeds of crime in respect of which proceedings under the Prevention of Money-laundering Act have been initiated or are pending, or to an assessment year for which assessment proceedings under the Black Money Act have already been completed. Nor does a declaration allow rectification or revision of an assessment already made, or any set off or relief in an appeal or other proceeding. The immunity is confined to the Black Money Act, so exposure under other statutes is unaffected.

Mechanics. The process is entirely online. Form 1 is the declaration, Form 2 the authority’s order determining the amount payable, Form 3 the intimation of payment with proof, and Form 4 the confirming certificate. The Form 2 order is to issue within one month from the end of the month in which the declaration is filed; payment is due within two months from the end of the month in which Form 2 is received; a further two months is available with simple interest at one per cent per month; and failure to pay forfeits the benefit of the scheme entirely.

Valuation. Fair market value is the higher of cost and open market price on 31 March 2026, with asset-specific rules. One of them deserves emphasis because it is counter-intuitive and can produce a very large number: a foreign bank account is valued at the sum of all deposits made to the valuation date, not at the closing balance, though amounts redeposited out of earlier withdrawals and amounts already declared under the Black Money Act are excluded. An account through which modest sums were cycled repeatedly can therefore have a declared value far exceeding anything it ever held. The rules also provide a tolerance for non-bank assets, under which a variance not exceeding twenty per cent of declared value does not by itself render the declaration invalid.

The advice this calls for. For any client with an unreported foreign asset and no proceedings yet on foot, the scheme has to be evaluated properly and now, against the alternative of waiting. Against the sixty per cent cost in the first category must be set the one hundred and twenty per cent that tax and a section 41 penalty produce, plus ten lakh rupees a year under section 43, plus prosecution exposure, plus the cost and duration of litigation. Against that again must be set the real prospect, on the case law surveyed above, of defeating an assessment on the assessment year or on section 2(2). Which way that calculation falls depends on the facts, above all on whether the Department already has the information. It is a calculation that has to be done, in writing, before 31 December 2026, and the second category in particular should be considered for every client whose only failing is a reporting one.

How does the Income-tax Act, 2025 affect the Black Money Act?

The Income-tax Act, 2025 came into force on 1 April 2026 and repealed the Income-tax Act, 1961. The Black Money Act has not been repealed or subsumed. It continues as a separate enactment and remains listed as such by the Department.

That creates a drafting problem which, so far as is publicly discoverable, has not been addressed. The Black Money Act is stitched to the 1961 Act at many points. Section 2(6) defines “Income-tax Act” to mean the Income-tax Act, 1961. Sections 2(2) and 2(10) determine residential status by reference to section 6 of that Act. Section 4 refers to section 139. Section 6 takes its tax authorities and their jurisdiction from sections 116, 118 and 120. Section 11 refers to sections 90 and 90A. Section 40 imports interest under sections 234A to 234C. Sections 42, 43, 49 and 50 all refer to section 139. And section 84 applies a long list of Income-tax Act provisions to this Act.

No consequential amendment substituting those references has been traced. The Income-tax Act 2025 contains no schedule of consequential amendments to other enactments that touches this Act, and its repeal and savings provision in section 536 contains nothing directing how references in other laws to the 1961 Act are to be read. The Taxation and Other Laws (Amendment) Act 2026 does not touch this Act. The Finance Act 2026 touches it only through section 160, the prosecution thresholds, and through the separate disclosure scheme. The Board’s transition FAQs do not mention this Act at all. This is a negative conclusion drawn from searching rather than an express statement by Government, and it should be stated that way.

The gap is presumably bridged by section 8 of the General Clauses Act, 1897, under which a reference in any other enactment to a provision of a repealed enactment is construed, unless a different intention appears, as a reference to the re-enacted provision. That reads comfortably onto the Black Money Act’s references to particular sections: its references to section 139 will be read as references to the corresponding return provision of the 2025 Act, and the section 84 list will be read correspondingly. It is a harder fit for section 2(6), which is not a reference to a provision at all but a definition of an Act by its short title and year.

In practice the Revenue will apply section 8, and an assessee who raises the point as a standalone objection is unlikely to succeed on it. But it should be recorded where the identification of the corresponding provision actually affects the outcome, and it is worth watching for a consequential amendment or a circular. For the wider question of which Act governs which proceeding after 1 April 2026, see which Act governs your appeal.

What was the 2015 declaration window, and why does it still matter?

Chapter VI, sections 59 to 72, created a one-time compliance window. Section 59 allowed any person to declare an undisclosed foreign asset acquired from income chargeable to tax for any assessment year before AY 2016-17, where the person had failed to file a return, had failed to disclose the asset in a return filed before commencement, or where the asset had escaped assessment. Section 60 charged the declared asset at thirty per cent of its value on the date of commencement, and section 61 added a penalty of one hundred per cent of that tax, so sixty per cent in all. The declaration had to be made by 30 September 2015 and the tax and penalty paid by 31 December 2015. Section 63(3) provided that a declarant who failed to pay in time was treated as never having made the declaration at all.

Section 71 excluded several categories from the window: persons detained under COFEPOSA, persons facing prosecution under specified statutes, persons notified under the Special Court Act, and, importantly, assets in respect of which a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act was pending, or a search or survey had been carried out and the time for such a notice had not expired, or information had been received under an international agreement. Mohta establishes that section 71 excludes only Chapter VI, and gives no immunity from Chapter V.

The window closed in September 2015, so why does it matter? Because section 72(c) is drafted by reference to it. The fiction applies where an asset was acquired before commencement “and no declaration in respect of such asset is made under this Chapter”. Every pre-2016 asset that was not declared in that window therefore carries the fiction with it permanently, and the whole year-of- charge problem examined above is a consequence of a transitional provision attached to a window that is long shut. It also means the failure to declare in 2015 is itself a condition of the charge, which is worth checking: where a declaration was made and accepted, section 72(c) does not apply at all, and where a declaration was made but the tax was not paid in time, it is section 72(b) and not section 72(c) that governs, charging the value in the year the declaration was made.

What appeals lie under the Act?

The appeal structure is self-contained and the limitation periods differ from those under the Income-tax Act, which catches people out.

Forum	Section	Limitation	Condonation	Fee
Commissioner (Appeals)	15	30 days from service of the notice of demand, or from intimation of the order	Sufficient cause, delay not exceeding one year	Rs 10,000, Form 2
Appellate Tribunal	18	60 days from communication of the order; cross-objections 30 days	Sufficient cause, delay not exceeding one year	Rs 25,000, Form 3
High Court	19	120 days from receipt of the order, on a substantial question of law	On sufficient cause	Not prescribed
Supreme Court	21	On a certificate of fitness from the High Court under section 19	Not applicable	Not applicable

Two features catch people out. The condonation power at both the first and second appellate stages is capped at one year, unlike the open-ended “sufficient cause” discretion under the Income-tax Act. And section 25 provides that notwithstanding an appeal to the High Court or the Supreme Court, the tax shall be paid in accordance with the assessment made under the Act.

Revision is available both ways. Section 23 is the analogue of section 263, and differs from it in one significant respect: a revision order under section 23(4) may enhance or modify the assessment but “shall not be an order cancelling the assessment and directing a fresh assessment”. The familiar set-aside-and-redo order is therefore not available to the Commissioner under this Act. Section 24 is the analogue of section 264, on the assessee’s application, with a one-year limitation and condonation up to two years.

What should be done on receiving a notice under section 10?

Take the jurisdictional points first and in this order. Each is capable of ending the proceeding without any inquiry into the merits, and each depends on a document rather than on argument.

Establish the date of the section 10 notice. Not the date of the search, not the date of any earlier section 8 notice, and not the date of any Income-tax Act proceeding. On the Karnataka High Court’s construction that date fixes the previous year, and the assessment must be framed in the following assessment year. Where seven notices issued over three years, as in Hind Sennoun, it is the first that counts.

Establish when the asset came to the Department’s notice. From the exchange-of-information correspondence, the panchnama, the appraisal report, or the earlier assessment record. On the Kolkata Bench’s construction that date fixes the year instead. Where it is earlier than the notice, it will usually be the better case, because limitation will more often have run.

Check limitation under section 11 against whichever year is contended for. Two years from the end of the financial year of the section 10 notice. Call for the particulars of any exchange-of-information reference relied on to extend it.

Test residential status in every relevant year against section 6 of the Income-tax Act and against both limbs of section 2(2) as substituted in 2019, remembering that the proviso requires the year of acquisition to be identified without section 72(c). Nationality is irrelevant. A person outside section 2(2) cannot be assessed, and the penalty falls with the assessment.

Test beneficial ownership under section 2(11). Who provided the consideration, and who controls the asset. Gather the account opening documents, the remittance trail and any declaration of beneficial ownership signed at the bank, because those are what the Department will produce.

Check whether the asset is undisclosed at all, in the sense of section 2(11). An asset whose source is explained is not an undisclosed asset, however defective the Schedule FA reporting was, and the exposure is then ten lakh rupees under section 43 rather than one hundred and twenty per cent of value.

Check whether a declaration was made in 2015, because section 72(c) applies only where none was.

Object to a notice that does not specify the year, at once and in writing.

And then, in parallel with all of that, evaluate the disclosure scheme against the litigation, while the window is open. The answer will not always be to declare. But the calculation has to be made before 31 December 2026, and it has to be made on paper.

Related reading: after an income-tax search, from panchnama to block notice on how search material is generated and travels; section 153C: satisfaction note, block period and the 2021 sunset on the parallel route by which a third party’s search becomes your assessment; and when a penalty notice must specify the limb on the discipline required of penalty proceedings generally.

This note is general commentary on the law as at 27 September 2026 and is not advice on any matter. The position in a particular case depends on its own facts.