Indian expatriates owning property in the United Arab Emirates are being urged to review their foreign asset disclosures as the Indian Income Tax Department intensifies scrutiny ahead of a key compliance deadline this year. The department has contacted selected taxpayers suspected of having undeclared overseas holdings, particularly residential and commercial real estate in the UAE, ahead of the December 31, 2026, deadline under the Foreign Assets of Small Taxpayers–Disclosure Scheme (FAST-DS).

According to sources within India's Finance Ministry, approximately 1,100 taxpayers have applied for the scheme so far. However, officials emphasize that owning property in the UAE does not automatically create a tax liability in India. Whether an individual must disclose such assets depends on their residential status, source of funds, and previous reporting history.

The Income Tax Department’s outreach targets individuals who may have purchased property abroad but possibly failed to report this information in their Indian tax filings. Recipients of these notices are advised to verify their records against the department’s communication, including ownership documents, funding proofs, and prior tax returns. Authorities caution that receiving a notice does not imply that tax is due or that the foreign property was acquired using suspicious funds.

Clarification from the department indicates that overseas assets must be disclosed by residents ordinarily resident in India; non-residents or residents not ordinarily resident typically have no such obligation. This distinction is significant for expatriates who purchased foreign property while classified as non-resident but later return to India, potentially triggering reporting requirements once their residential status changes.

The FAST-DS aims to encourage voluntary disclosure of foreign assets by providing two categories for compliance:

1. Undisclosed assets or untaxed income: This category covers eligible foreign income or assets not previously disclosed or taxed in India. The aggregate value of these assets must not exceed Rs10 million. Taxpayers under this category face a payment consisting of 30% tax plus an equal additional amount, effectively totaling 60% of the asset value.

2. Explained assets omitted from returns: This applies to foreign assets acquired using income already subjected to Indian taxation or income earned abroad while non-resident but omitted from filing requirements. The asset value limit here is Rs50 million, with a fixed compliance fee of Rs100,000.

Declarations must be submitted via Form 1 by December 31. After assessing the declaration, the tax department issues Form 2 specifying the amount payable. Taxpayers must confirm payment through Form 3 within four months following the month when Form 2 is issued. The valuation of assets for this scheme is pegged as of March 31, 2026, following prescribed valuation norms.

Failure to comply or misreport can lead to significant penalties. Under Section 41 of the Black Money Act, a penalty up to three times the tax amount on undisclosed foreign income and assets may apply, in addition to tax dues. Other reporting violations can attract fines up to Rs1 million under Sections 42 or 43. Notably, the Rs2 million exemption threshold for certain assets does not extend to immovable property.

The department’s initiative reflects ongoing efforts to improve transparency and tax compliance among Indian residents with overseas holdings, especially in jurisdictions with close economic ties like the UAE. Taxpayers with foreign property are advised to carefully assess their reporting duties ahead of the December deadline to avoid penalties.