Recently many non-residents and Indian individuals with assets outside India including commercial and residential properties in the United Arab Emirates (UAE), received an income tax nudge notice from the authorities. This nudge notice was neither an income tax demand notice and nor did it accuse you of doing anything wrong. Rather, this nudge notice alerts you of potential mistakes or issue that you should fix. If you don’t fix them, the tax department may start proceedings against you.
According to The Economic Times, this particular nudge is being sent to UAE property owners (both residential and commercial). The nudge tells you that if you have any undisclosed UAE property or assets, then you should disclose it right away. and You can use the Foreign Assets of Small Taxpayers-Disclosure Scheme, 2026 (FAST-DS), which allows eligible taxpayers to regularise undisclosed foreign assets and income until December 31, 2026. The FAST-DS 2026 scheme forms and all procedures are already available online on the income tax e-filing portal.
FAST-DS 2026 offers eligible taxpayers a one-time opportunity to declare previously unreported foreign assets. For using the FAST-DS 2026 scheme to disclose your undisclosed assets, you need to pay a flat fee of Rs 1 lakh for eligible foreign assets valued up to Rs 5 crore, subject to conditions.
Please note that this nudge communication from the income tax authorities prompts the taxpayer to review their tax position. That means, it does not, by itself, prove that the property was acquired from undisclosed income or that tax has to be paid.
Who needs to act on this Income Tax Nudge communication and what can be done
Chartered Accountant Suresh Surana says that UAE property owners should first assess their Indian residential status for each relevant year and reconcile the property’s legal and beneficial ownership, acquisition date, funding source and supporting documents against the disclosures made in their ITRs.
According to Surana, the review should also cover rental income, any sale or transfer of the property, and related foreign-tax payments or relief claims.
Since the Income Tax Department’s NUDGE guidance addresses foreign-asset reporting generally, the information available through the Income Tax Department may not, by itself, establish the taxpayer’s complete position.
So Surana says that if the review identifies an omission, the taxpayer should determine whether it concerns an asset acquired from explained sources that was not reported, or an asset or foreign income whose source or tax treatment is in question. This distinction may affect eligibility for FAST-DS and the applicable payment.
Eligible taxpayers who want to use the Scheme must submit Form 1 by December 31, 2026, with the prescribed valuation and supporting evidence. If FAST-DS is unavailable or unsuitable, the taxpayer may assess the corrective options available under the applicable law and respond to the Income Tax Department.
Surana says: “The review should establish the taxpayer’s Indian tax-residency status for the relevant years, whether the property is held directly or beneficially, the source and year of acquisition, and whether rental income or gains from the property were correctly reported.”
According to Surana, for a taxpayer who was resident and ordinarily resident in India for the relevant year, a UAE property may need to be disclosed in Schedule FA even if it did not generate income.
Surana says that rental income or gains may also require reporting and tax analysis in India, subject to the applicable rules and any available foreign-tax relief. It is pertinent to note that Schedule FA is not required from non-residents or residents but not ordinarily resident. However, eligibility under FAST-DS depends on the taxpayer’s status in the year the asset was acquired or the foreign income arose, rather than only their status today.
What can happen if you do not use the FAST-DS 2026 scheme to disclose undisclosed assets?
FAST-DS is voluntary, and choosing not to use the scheme does not, by itself, constitute a default. Where the UAE property, its source of investment and related income have been correctly reported, the owner should retain appropriate supporting documentation.
However, if an eligible omission is not resolved, Surana says the following consequences may arise:
- Loss of the disclosure window: A declaration under FAST-DS cannot be filed after 31 December 2026.
- Tax at 30%: If the property or related foreign income is subsequently treated as undisclosed, tax may be levied at 30% under section 3(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
- Penalty equal to three times the tax: Under Section 41 of the Black Money Act, the Assessing Officer may impose a penalty equal to three times the tax computed.
- Separate penalty of Rs 10 lakh: Section 42 allows a penalty of Rs. 10 lakh where a resident and ordinarily resident taxpayer fails to furnish the required return despite holding a foreign asset, being a beneficiary of such an asset or earning foreign-source income. Section 43 permits a penalty of Rs 10 lakh where the ITR is filed but the taxpayer fails to disclose, or furnishes inaccurate particulars of, a foreign asset or foreign-source income. The exemption available for specified foreign assets with an aggregate value not exceeding Rs 20 lakh does not apply to property.
- Possible prosecution: In serious cases involving wilful tax evasion or deliberate non-disclosure, prosecution may also be initiated, subject to the applicable statutory conditions and evidence.
- Loss of protection available under FAST-DS 2026: A valid declaration and payment under FAST-DS can provide protection from further tax, penalty and prosecution under the Black Money Act for matters covered by the declaration. An eligible taxpayer who does not use the scheme will not receive this protection.