Shares from an Employer's Overseas Parent: The Indian Income-tax Treatment

Published: September 14, 2026 · Position stated as at 18 September 2026

By CA Kiren Kumar K

It's common that employees working for an Indian company are paid partly in shares - not of the company that employs them, but of its parent overseas. The plan may be called an Employee Stock Option Plan (ESOP), a Restricted Stock Unit (RSU) plan or an Employee Stock Purchase Plan (ESPP). This is a "specified security" (a term that expressly includes an employees' stock option) allotted or transferred to an employee, free or at a concession, by the employer or a company connected with it [Explanation to section 17(2)(vi) of the Income-tax Act, 1961 (ITA 1961); Section 17(1)(d) of the Income-tax Act, 2025 (ITA 2025)]. The employer is Indian; the asset is foreign. Both facts matter under Indian income-tax.

1. Why the shares are taxed in India at all

A person who is resident and ordinarily resident in India is taxed on income arising anywhere in the world, not only on what reaches an Indian bank account [Section 5 of ITA 2025; Section 5 of ITA 1961]. Therefore, a foreign share appears in an Indian income-tax return.

The first taxable moment is when the shares are allotted or transferred to the employee. Section 17(1)(d) of ITA 2025 (section 17(2)(vi) of ITA 1961) treats "the value of any specified security or sweat equity shares allotted or transferred ... free of cost or at concessional rate" as a perquisite, which is salary income [Section 17(1)(d) of ITA 2025; Section 17(2)(vi) of ITA 1961]. The value of the perquisite is the fair market value on the date the option is exercised, less anything the employee paid [Section 17(4)(h) of ITA 2025; Clause (c) of the Explanation to section 17(2)(vi) of ITA 1961]. For a share not listed on a recognised stock exchange, fair market value is whatever a Category I merchant banker registered with the Securities and Exchange Board of India (SEBI) determines [Rules 15(6)(d) and 15(8)(g) of the Income-tax Rules, 2026 (IT Rules 2026); Rule 3(8)(iii) of the Income-tax Rules, 1962 (IT Rules 1962)]. The rules borrow the Securities Contracts (Regulation) Act's definition of a recognised stock exchange [Rule 15(8)(i) of IT Rules 2026]; on that definition an exchange recognised in India is meant, so a share quoted only overseas is valued by the merchant-banker route. That valuation may be dated up to 180 days before the exercise date [Rule 15(8)(l) of IT Rules 2026; Rule 3(8)(iv)(e) of IT Rules 1962].

A note on wording. The valuation provisions speak of "the date on which the option is exercised", language written for a stock option. Restricted stock units (RSUs) usually involve no option to exercise; they vest and the shares are delivered. The charging clause in section 17(1)(d) (section 17(2)(vi) of ITA 1961), noted above, is broader - it applies to shares "allotted or transferred" - and therefore RSUs are taxed when allotted. In our understanding, in practice the vesting date is generally taken as the relevant date for valuation; the rule's wording does not expressly address a security that vests without an option being exercised.

Tax on this perquisite is collected through the employer. Section 392 of ITA 2025 (section 192 of ITA 1961) requires deduction of tax at source on salary, and allows the employer to pay the tax on a non-monetary perquisite itself rather than deduct it from cash pay [Section 392(1) and (2)(a) of ITA 2025; Section 192(1) and (1A) of ITA 1961]. Where the employer does pay the tax, ITA 1961 treats the tax so paid on a non-monetary perquisite as exempt in the employee's hands, so that it is not itself a further perquisite [Section 10(10CC) of ITA 1961], and denies the employer a deduction for it [Section 40(a)(v) of ITA 1961]. ITA 2025 carries the employer-side rule in section 35(a)(ii), which disallows "tax paid by employer referred to in Schedule III (Table: Sl. No. 10)"; that reference places the employee-side exemption, the successor to section 10(10CC), at Sl. No. 10 of the Table in Schedule III of ITA 2025 [Section 35(a)(ii) of ITA 2025; Section 40(a)(v) of ITA 1961]. That entry exempts "income in the nature of a perquisite" of "an employee, being an individual" on two conditions: the perquisite "is not provided for by way of monetary payment, within the meaning of section 17(1)", and "the tax on such income [is] actually paid by his employer, at the option of the employer, on behalf of such employee" [Sl. No. 10 of the Table in Schedule III to ITA 2025; Section 10(10CC) of ITA 1961]. The 1961 and 2025 positions are therefore the same.

2. What else becomes taxable once the shares are held

Two further streams follow, each separate from the salary perquisite and from each other.

Dividends are generally income from other sources and are taxed under the normal provisions of the Act at the individual's applicable rates [Section 92(2)(a) of ITA 2025; Section 56(2)(i) of ITA 1961].

Gains on sale are capital gains [Section 67 of ITA 2025; Section 45 of ITA 1961]. Three rules do the work. First, the cost of acquisition is the value already taxed as a perquisite, so only the appreciation after that date is taxed again, and this time as a gain rather than salary [Sl. No. 4 of the Table in section 73 of ITA 2025; Section 49(2AA) of ITA 1961]. Second, the twelve-month holding period for long-term treatment applies only to a security listed on a recognised stock exchange in India; for any other share, including one quoted only overseas, the share is long-term once held for more than twenty-four months [Section 2(101) of ITA 2025; Section 2(42A) of ITA 1961]. That period has applied to an unlisted share since 1 April 2017: the Finance Act 2016 inserted a proviso under which, for "a share of a company (not being a share listed in a recognised stock exchange in India)", the then general period of thirty-six months was read as twenty-four months, and the Finance (No. 2) Act 2024 then made twenty-four months the general period with effect from 23 July 2024, leaving the figure for such a share unchanged [Third proviso to section 2(42A) of ITA 1961, as inserted by the Finance Act 2016; Notes on Clauses, Finance (No. 2) Bill 2024]. For a transfer before 1 April 2017 the period was thirty-six months. Third, for a transfer on or after 23 July 2024 a resident's long-term gain is taxed at 12.5% with no indexation, and there is no separate rate for unlisted shares in a resident's hands [Section 197 of ITA 2025; Section 112 and the second proviso to section 48 of ITA 1961]. Foreign-currency cost and sale price are converted at the telegraphic transfer buying rate on the last day of the month before the month of transfer [Rule 206 of IT Rules 2026; Rule 115 of IT Rules 1962].

One point applies where a sale is not at arm's length. Where an unquoted share is transferred for less than its fair market value, the fair market value is treated as the sale consideration. Both the 1961 provision and its 2025 successor read "share of a company other than a quoted share", without limiting the company to an Indian one [Section 50CA of ITA 1961; Section 79 of ITA 2025]. The valuation rule for this purpose - Sl. No. 4 of the Table in Rule 57 of IT Rules 2026 (Rule 11UA of IT Rules 1962) - values an unquoted equity share on the net-asset method from the company's balance sheet: book value of assets (with prescribed adjustments) less liabilities, multiplied by the paid-up value of the shares being valued and divided by the total paid-up equity capital [Sl. No. 4 of the Table in Rule 57 of IT Rules 2026; Rule 11UA of IT Rules 1962].

3. Disclosure: three schedules, whether or not tax is due

Reporting a foreign asset and being taxed on it are different duties. A resident and ordinarily resident individual reports foreign assets in Schedule FA (Foreign Assets) of the return form and foreign-source income in Schedule FSI (Foreign Source Income); relief claimed for foreign tax goes in Schedule TR (Tax Relief) [Step-by-Step Guide to Schedules FSI, TR and FA, p.1]. In a note of 17 July 2026 on the display of information received under the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA) in the Annual Information Statement (AIS), the Central Board of Direct Taxes (CBDT) put the duty in one sentence: taxpayers "are required to correctly and completely report all foreign assets and foreign source income in Schedule FA and Schedule FSI of their Income-tax Return, irrespective of whether such assets or income are reflected in AIS" [CBDT note on CRS/FATCA in AIS, 17 July 2026].

The duty to file at all is also wider for a holder of a foreign asset. A resident and ordinarily resident individual who at any time in the year holds, "as a beneficial owner or otherwise", any asset located outside India, or has signing authority in an account outside India, or is a beneficiary of such an asset, must furnish a return even if income is below the level at which a return is otherwise required [Fourth proviso to section 139(1) of ITA 1961]. "Beneficial owner" means the individual who provided the consideration for the asset, directly or indirectly, for the benefit of himself or another; "beneficiary" means one who derives benefit from an asset paid for by someone else [Explanations 4 and 5 to section 139(1) of ITA 1961]. Shares received from the overseas parent and held in a foreign brokerage account fall within the first limb. The return form asks for these assets under the statute [Section 139(6) of ITA 1961]. ITA 2025 states the same duty in section 263(1)(a)(ix) (fourth proviso to section 139(1) of ITA 1961). The carve-out for a beneficiary whose income is taxed in the owner's hands is repeated.

Two features of Schedule FA are commonly misunderstood. Since the form for assessment year (AY) 2022-23 the schedule runs on the calendar year ending 31 December that precedes the assessment year, not the Indian financial year [Notification 21/2022, Form ITR-2, Schedule FA; Notification G.S.R. 227(E) of 2026, Form ITR-2, Schedule FA] (ITR-2 is the income-tax return form for an individual with capital gains or foreign assets and no business income). And the equity and custodial-account tables ask for the peak value during the year as well as the closing value, converted at the telegraphic transfer buying rate [Notification 21/2022, Form ITR-2, Schedule FA, Tables A2, A3; ITR-2 Instructions AY 2019-20, p.32; Step-by-Step Guide, p.4]. The brokerage account through which the shares are held is reported separately from the shares themselves.

4. The dividend, before and after it is received

Where the parent is a United States company, the India-United States tax treaty limits the tax the United States may withhold on a dividend. It sets two ceilings: 15% of the gross dividend where the recipient is a company that owns at least 10% of the paying company's voting shares, and 25% in every other case [Article 10(2) of the India-United States tax treaty]. An individual employee-shareholder is in the second group, so up to 25% may be withheld before the dividend is received.

India then taxes the gross dividend at the individual's applicable rate and gives credit for the United States tax under the foreign tax credit rule, Rule 76 of IT Rules 2026 (Rule 128 of IT Rules 1962). The credit is worked out separately for each source and each country, and is the lower of the Indian tax on that income and the foreign tax paid; IT Rules 2026 add that foreign tax above what the treaty allows is ignored [Rule 76(7) of IT Rules 2026; Rule 128(5) of IT Rules 1962]. The Indian tax actually payable on the dividend is therefore the difference between the tax at the individual's rate and the United States tax credited. The rule applies to any income taxed in India on which foreign tax has been paid - a capital gain on the shares included - and contains no exclusion by type of income [Rule 76(1) of IT Rules 2026; Rule 128(1) of IT Rules 1962]. Foreign tax in excess of the credit allowed is neither refunded nor carried forward to a later year; the rules contain no provision for either [Rule 76 of IT Rules 2026; Rule 128 of IT Rules 1962]. The treaty's capital-gains article gives no separate relief; it leaves each country to tax under its own law [Article 13 of the India-United States tax treaty]. The credit is set against tax, surcharge and cess, not against interest, fee or penalty [Rule 76(4) of IT Rules 2026].

The credit is claimed on a statement, Form 44 under IT Rules 2026 (Form 67 under IT Rules 1962), filed within twelve months of the end of the tax year, provided the return itself was filed in time; with an updated return, by the date that return is filed [Rule 76(10), (12) and (13) of IT Rules 2026; Rule 128(9) of IT Rules 1962]. Where the foreign tax paid in a year is Rs 1,00,000 or more, the form must be verified by an accountant [Rule 76(16) of IT Rules 2026]. On advance tax: if dividend income makes the advance tax paid fall short, no shortfall interest is charged provided the tax on that dividend is paid in a later instalment or by 31 March [Section 425(4)(a)(iv) of ITA 2025; Clause (d) of the proviso to section 234C(1) of ITA 1961]. Under ITA 1961 the same protection is in the proviso to section 234C(1), which lists "the amount of dividend income" as clause (d); "dividend" there means a dividend as defined in section 2(22) of ITA 1961, other than a deemed dividend under sub-clause (e) of that definition [Clause (d) of the proviso to section 234C(1) of ITA 1961, and Explanation 2 to that section]. Clause (d) and Explanation 2 were inserted by section 59 of the Finance Act 2020 [Section 59 of the Finance Act 2020].

5. What goes wrong, and under which Act

Three statutes are relevant, and each addresses a different failing. The years in question here are years already past, so ITA 1961's numbers are given first.

Under the Income-tax Act. An assessment that finds income not reported attracts a penalty of 50% of the tax on the under-reported income, rising to 200% where the under-reporting amounts to "misreporting", which includes misrepresentation or suppression of facts and failure to record investments in the books [Section 270A(7)-(9) of ITA 1961; Section 439(9)-(11) of ITA 2025]. Interest runs at 1% a month on tax not paid with a timely return [Section 234A of ITA 1961; Section 423 of ITA 2025]. A late return carries a fee: for years under ITA 1961, Rs 5,000 if filed by 31 December of the assessment year and Rs 10,000 after that, limited to Rs 1,000 where total income is up to Rs 5,00,000 [Section 234F of ITA 1961]; under ITA 2025, Rs 1,000 or Rs 5,000 by the same income test [Section 428(a) of ITA 2025; Section 234F of ITA 1961]. Wilful evasion is separately prosecutable [Section 478 of ITA 2025; Section 276C of ITA 1961, as substituted by the Finance Act 2026]. A further provision of ITA 1961, section 271AAB, imposed a separate penalty on undisclosed income found in a search. Each of its two operative sub-sections names the period of search dates it covers, and the later period ends before 1 September 2024; a search begun on or after that date is outside both. The Department's own concordance to ITA 2025 marks the section "Redundant", with no successor [Section 271AAB(1) and (1A) of ITA 1961; Income Tax Department, Act Navigator]. A search begun on or after 1 September 2024 is instead dealt with by the block assessment provisions of Chapter XIV-B of ITA 1961, under which neither interest under sections 234A to 234C nor the penalty under section 270A is levied on the undisclosed income assessed for the block period; that Chapter carries its own penalty, which is outside this article [Section 297 of ITA 2025; Section 158BF of ITA 1961].

Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the Black Money Act), two distinct things are penalised. Undisclosed foreign income or an undisclosed foreign asset is taxed at 30%, with a penalty of three times that tax [Sections 3 and 41 of the Black Money Act]. Separately, a failure to furnish the return, or to disclose a foreign asset in it, carries a fixed penalty of Rs 10,00,000 even where the asset was bought from income that was fully taxed, unless the aggregate value of the assets other than immovable property is Rs 20,00,000 or less, a threshold in force from 1 October 2024 [Sections 42 and 43 of the Black Money Act, and the proviso as substituted by section 164 of the Finance (No. 2) Act 2024; CBDT Instruction of 18 August 2025, para 2].

The penalty provisions are worded as a power ("may direct"), not an obligation, and the Income Tax Appellate Tribunal (ITAT) has read that discretion both ways. In one line of decisions the penalty was deleted where the taxpayer's conduct was found to be bona fide. In Addl. CIT, Central Range 5, Mumbai v. Leena Gandhi Tewari, ITAT Mumbai, Black Money Act (BMA) Bench, assessment year 2017-18, order dated 29 March 2022, reported at [2022] 136 taxmann.com 409 (Mumbai-Trib.), the Tribunal, applying the Supreme Court's guidance in Hindustan Steel Ltd v. State of Orissa, (1972) 83 ITR 26 (SC), held that the word "may" means "the penalty is not to be imposed in all cases of lapses", that the discretion "has to meet the well-settled tests of judicious conduct", and that "unless there are sufficient prima facie reasons to at least doubt bonafides well demonstrated by the assessee, an assessee cannot be visited with penal consequences" - the account there having been held for an ailing parent and never used by the taxpayer [ITAT Mumbai, Tewari, 29 March 2022, paras 7-9]. In Addl. CIT, Central Range-8 v. Manoj Mahendrakumar Pandya, ITAT Mumbai, BMA Appeal No. 6/Mum/2024, assessment year 2016-17, order dated 26 June 2024, the same approach was taken where the asset had been shown in the returns of earlier and later years [ITAT Mumbai, Pandya, 26 June 2024]. In Shobha Harish Thawani v. JCIT, ITAT Mumbai, BMA Appeal Nos. 01 to 03/Mum/2023, assessment years 2016-17 to 2018-19, order dated 9 August 2023, reported at [2023] 154 taxmann.com 564 (Mumbai-Trib.) and TS-554-ITAT-2023(Mum), by contrast, the penalty was upheld for three years: the Tribunal held that the penalty attaches to the omission from Schedule FA and is not confined to assets whose source is unexplained, that the Act contains no condition relieving a taxpayer who has explained the source or offered the income to tax, that the claim of a bona fide mistake was unsupported by evidence, and that the officer's discretion had been exercised judiciously [ITAT Mumbai, Thawani, 9 August 2023, paras 10-12]. The two lines have not been reconciled - the later decision did not discuss the earlier one, although it was cited to the bench - and this article does not predict which a future bench would follow. The Tewari bench also observed that the consequences of the omission under the Income-tax Act are separate from the Black Money Act outcome and unaffected by it [ITAT Mumbai, Tewari, 29 March 2022, paras 8-9].

The Board has addressed prosecution, not penalty. By an instruction of 18 August 2025 it directed that where the penalty under sections 42 or 43 is not imposed or imposable because the assets (other than immovable property) do not exceed Rs 20,00,000 in aggregate, prosecution under sections 49 or 50 of the Black Money Act is not to be initiated [CBDT Instruction of 18 August 2025, F.No. 285/46/2021-IT(Inv.V)/88, para 5]. The instruction is confined to that threshold case; it says nothing about how an officer should decide whether to levy the penalty where the assets exceed the threshold, which remains a matter for the Tribunal decisions above.

6. The relief on offer: the disclosure scheme of 2026

The Foreign Assets of Small Taxpayers Disclosure Scheme (FAST-DS) is Chapter IV of the Finance Act 2026, sections 130 to 144. It is a self-contained code, part of neither Act above, though it operates by reference to both [Sections 130 to 144 of the Finance Act 2026]. It covers the previous year ending 31 March 2026 and earlier years [Section 139 of the Finance Act 2026] - all years governed by ITA 1961, whose section numbers are therefore used in this Part and those that follow. "Small" is not a separate test of the taxpayer; it describes the value ceilings in the scheme's own table. Declarations may be made from 16 August to 31 December 2026 [Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026 (the "FAST-DS Rules"), Notification 114/2026].

A declaration is made for a specific asset or income, on one of three grounds: no return was filed; a return was filed but left the asset or income out; or it escaped assessment [Section 132 of the Finance Act 2026]. The scheme's table (section 133) has two rows, and the difference between them is the situation, not the size:

• Row 1 - income that was never taxed. This covers an undisclosed asset located outside India, or undisclosed foreign income - that is, income that never bore Indian tax. The amount payable is tax at 30% of the asset's value as on 31 March 2026, plus tax at 30% of the undisclosed income, plus a further amount equal to 100% of that tax. Eligibility: the aggregate value of the undisclosed asset and the undisclosed income does not exceed Rs 1 crore [Sl. No. 1 of the Table in section 133 of the Finance Act 2026].
• Row 2 - taxed income, missed reporting. This covers an asset acquired from income that was already taxed (or from foreign income earned while non-resident) and simply not declared in the relevant Schedule. The amount payable is a fee of Rs 1,00,000, with no tax. Eligibility: "the value of the asset located outside India does not exceed five crore rupees" [Sl. No. 2 of the Table in section 133 of the Finance Act 2026].

For an employee who paid tax on the perquisite, the dividends and any gains but did not complete Schedule FA, Row 2 is the relevant one. The position changes if any of the income from the shares was not taxed: a dividend left out of the return, for instance, or the differential Indian tax on a dividend, after credit for the foreign tax, left unpaid. In our understanding that income is then "undisclosed foreign income" within Row 1, priced under Row 1, while the shares themselves, bought from taxed salary, remain within Row 2 [Section 132, and the Table in section 133, of the Finance Act 2026].

The valuation date. The scheme's rules fix a single valuation date, 31 March 2026, for every asset, and value each asset at the higher of its cost of acquisition and its market value on that date [Rules 2(1)(e) and 3(1) of the FAST-DS Rules]. So both the 30% tax in Row 1 and the Rs 1 crore and Rs 5 crore ceilings are measured at what the asset was worth on 31 March 2026, whatever it cost and whatever it is worth on the day of declaration.

What a valid declaration does, and does not do. Once the amount is paid, the declared income or asset is not included in total income under either ITA 1961 or the Black Money Act; no rectification, revision, set-off or relief may be separately claimed in respect of it; and no amount paid is refundable [Sections 136 to 138 of the Finance Act 2026]. The immunity provision, section 139 of the Finance Act 2026, opens with the words "Notwithstanding anything contained in the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015" and then provides that the declarant "shall be granted immunity from the levy of any further tax or penalty and also from prosecution under the said Act in respect of income or asset so declared, for the previous year ending on the 31st March, 2026 or any earlier previous year"; "the said Act" is the Black Money Act named in the opening words [Section 139 of the Finance Act 2026]. In our understanding these are two different protections, and they do not contradict each other. The first, in sections 136 to 138 of the Finance Act 2026, is about tax: the declared income or asset cannot be brought to tax again, under ITA 1961 or under the Black Money Act. The second, in section 139 of the Finance Act 2026, is immunity from further tax, from penalty and from prosecution, and it is expressed for the Black Money Act alone. The Income-tax Act's own penalty for under-reporting and its prosecution provision (Part 5) are not mentioned anywhere in the scheme, its rules or its forms. In our understanding, therefore, the scheme neither grants protection from them nor takes it away; it is silent. The certificate issued on payment, Form 4, is in the same terms: it grants immunity "from levy of any further tax or penalty and prosecution for any offence under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015", and the rules do not describe the payment as tax under any named Act [Rule 7 of the FAST-DS Rules and Part B of Form 4].

Who is excluded. Section 140 of the Finance Act 2026 excludes two cases: income or assets that represent proceeds of crime where proceedings under the Prevention of Money-laundering Act, 2002 have been initiated or are pending; and income or assets of an assessment year "for which assessment proceedings have been completed" under the Black Money Act [Section 140 of the Finance Act 2026]. Where an assessment under either Act is still pending when the declaration is made, section 141 of the Finance Act 2026 requires the Assessing Officer to take the declaration into account when completing that assessment [Section 141 of the Finance Act 2026]. A search, a survey or a prosecution is not, on the text, a bar.

7. The clocks

Declarations under the scheme are open from 16 August to 31 December 2026 [FAST-DS Rules, Notification 114/2026]. After a declaration, an order stating the amount is due within a month; payment within two months of that; up to two months more at 1% a month; then a certifying order [Section 135 of the Finance Act 2026].

As per section 139(8A) of ITA 1961 (section 263(6) of ITA 2025), an updated return may be furnished within forty-eight months from the end of the relevant assessment year [Section 139(8A) of ITA 1961, as amended by the Finance Act 2025; Section 263(6) of ITA 2025]. As per section 140B of ITA 1961 (section 267 of ITA 2025), additional income-tax is payable with an updated return, at 25% of the aggregate tax and interest where the return is furnished within twelve months from the end of the relevant assessment year, 50% where furnished within twenty-four months, 60% within thirty-six months and 70% within forty-eight months [Section 140B of ITA 1961, as amended by the Finance Act 2025]. In our understanding, an updated return revises the income and tax reported under the Income-tax Act. Whether it also answers the separate penalty under section 43 of the Black Money Act for the omission of the asset from Schedule FA is not clear, for a reason on the face of the statute: section 43 of the Black Money Act penalises a failure to disclose a foreign asset in a return furnished "under sub-section (1) or sub-section (4) or sub-section (5) of section 139" of ITA 1961, and does not mention an updated return under section 139(8A) [Section 43 of the Black Money Act, current text; as quoted in ITAT Mumbai, Tewari, para 5].

A revised return under section 139(5) (section 263(5) of ITA 2025) may now be furnished, "subject to the provisions of section 234-I" of ITA 1961, at any time "before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier" [Section 139(5) of ITA 1961]. The earlier limit, "before three months prior to the end of the relevant assessment year", was substituted by section 5 of the Finance Act 2026, and section 16 of that Act inserted section 234-I; both came into force on 1 April 2026 [Sections 1(2), 5 and 16 of the Finance Act 2026]. The new limit therefore governs the return for the year ended 31 March 2026 (assessment year 2026-27), which may be revised until 31 March 2027, unless the assessment is completed earlier; for assessment year 2025-26 and earlier years the revision window had already closed before the amendment took effect. A revised return furnished beyond nine months but before twelve months from the end of the assessment year - for that year, between 1 January and 31 March 2027 - carries a fee of Rs 1,000 where total income does not exceed Rs 5 lakh and Rs 5,000 in any other case [Section 234-I of ITA 1961, inserted by the Finance Act 2026]. ITA 2025 was amended in step by section 66 of the Finance Act 2026: section 263(5) now allows a revised return, "subject to the provisions of section 428(b)", at any time "within twelve months from the end of the relevant tax year, or before the completion of the assessment, whichever is earlier", in place of the nine months in the Act as enacted [Section 263(5) of ITA 2025, as substituted by section 66(b) of the Finance Act 2026; Section 139(5) of ITA 1961]. Section 428(b) of ITA 2025 charges the same Rs 1,000 or Rs 5,000 where a revised return is furnished "beyond nine months from the end of relevant tax year"; it states no upper bound of its own, the twelve months in section 263(5) being the outer limit [Section 428(b) of ITA 2025; Section 234-I of ITA 1961]. Section 428 in this form was substituted by section 96 of the Finance Act 2026; both amendments came into force on 1 April 2026 [Sections 1(2), 66 and 96 of the Finance Act 2026]. The belated-return limit in section 139(4) of ITA 1961 remains "before three months prior to the end of the relevant assessment year" [Section 139(4) of ITA 1961].

8. If the scheme does not fit

If the ceilings are exceeded, or a declaration is otherwise unavailable, the provisions that remain are these. First, a revised return under section 139(5) of ITA 1961 (section 263(5) of ITA 2025), within the time stated in Part 7. Second, an updated return under section 139(8A) of ITA 1961 (section 263(6) of ITA 2025), within the forty-eight-month window and provided none of the bars in Part 10 applies. An updated return corrects the Income-tax Act position; as Part 7 explains, whether it also answers the section 43 penalty under the Black Money Act for the Schedule FA omission is not clear. On pending proceedings, the scheme's own text is the guide: the exclusion in section 140(b) of the Finance Act 2026 is for an assessment that "has been completed", and section 141 of that Act requires a declaration made while an assessment is pending to be taken into account in that assessment [Sections 140(b) and 141 of the Finance Act 2026].

9. If a notice arrives

Under ITA 1961 as it applied to past years, reassessment begins with a show-cause notice under section 148A of that Act before any notice under section 148. A notice under section 148 requires "information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment", and the section defines that information as a list which expressly includes "any information received under an agreement referred to in section 90 or section 90A" - that is, information exchanged under a tax treaty, which is how a foreign account or shareholding ordinarily reaches the department [First proviso and Explanation 1(iii) to section 148 of ITA 1961]. ITA 2025 carries the same structure in sections 280 and 281, with "information" defined as a list in section 280(6) [Sections 280(6) and 281(1)-(2) of ITA 2025; Explanation 1 to section 148, and section 148A, of ITA 1961]. A return filed within the time the section 148 notice allows is treated, so far as may be, as if it were a return under section 139 of ITA 1961; a return filed after that time is not [Section 148 of ITA 1961, main clause and third proviso]. That matters here because section 43 of the Black Money Act, discussed in Part 7, is written by reference to returns under section 139. Since the Finance Act 2026, the return in response to a section 148 notice may itself be an updated return, furnished within the period the notice specifies, and a person who takes that course "shall be precluded from filing return in pursuance of the said notice in any other manner" [Eighth proviso to section 139(8A) of ITA 1961, inserted by the Finance Act 2026; Section 263(6)(b)(ii) of ITA 2025]. The additional income-tax on an updated return filed in response to such a notice is ten percentage points higher than the ordinary rate for the same time band - 35%, 60%, 70% or 80% instead of 25%, 50%, 60% or 70% [Section 140B(3A) of ITA 1961, inserted by the Finance Act 2026; Section 267(5)(ii) of ITA 2025; Form ITR-U (2026), Part B-ATI, Sl. No. 10]. A summons is a different thing from a notice of reassessment. Section 131(1A) of ITA 1961 (section 246(2)(b) of ITA 2025) lets an investigation officer who "has reason to suspect that any income has been concealed" call for documents and examine a person on oath, "notwithstanding that no proceedings with respect to such person ... are pending" [Section 131(1) and (1A) of ITA 1961; Section 246(1) and (2)(b) of ITA 2025]. It is an enquiry power, usable before any proceeding exists, and the bars to an updated return in Part 10 do not mention a summons as such [Provisos to section 139(8A) of ITA 1961]. What the summons says may matter more than the summons itself. The bar described in Part 10 applies once information received under a tax treaty, or held under the Black Money Act, "has been communicated" to the person [Clauses (c) and (d) of the third proviso to section 139(8A) of ITA 1961]. A summons is therefore to be read for what it says about the information behind it. In practice a summons is seldom explicit on the point: the usual form says only that the department has information that the person holds a foreign bank account or asset, without naming where the information came from. Whether a statement of that kind amounts to a communication of treaty or Black Money Act information is not clear; it is the same question that arises with an entry in the Annual Information Statement, discussed in Part 10, and the statute does not answer it. A summons that gives no indication at all leaves the route open on the text, though the enquiry behind it may lead to a notice that closes it. The Black Money Act runs its own assessment under its section 10 [Section 10 of the Black Money Act]. The questions to settle on receiving any notice are the same: which year, which asset, which statute, and whether the updated-return route remains open.

10. When an updated return is not available

Section 139(8A) of ITA 1961 (section 263(6) of ITA 2025) sets out, in provisos, the cases in which an updated return cannot be furnished. They fall into three groups.

The first group turns on the return's own effect. The provision does not apply if the updated return "is a return of a loss" (with an exception for a loss return filed in time), "has the effect of decreasing the total tax liability determined on the basis of return furnished under sub-section (1) or sub-section (4) or sub-section (5)", or "results in refund or increases the refund due" on the basis of that return [First proviso to section 139(8A) of ITA 1961; Section 263(6)(c)(i)-(iii) of ITA 2025]. An updated return that adds only the Schedule FA disclosure, with no change to income or tax, does not on those words fall within any of the three. Nothing in the statute, the rule or the form's text bars such a return; however, we understand that in practice the Department's return-preparation utility will not compute tax, and so will not generate the return file, unless there is a net amount payable. The additional income-tax that accompanies an updated return is fixed by section 140B of ITA 1961 (section 267 of ITA 2025) as 25%, 50%, 60% or 70% "of aggregate of tax and interest payable", by the time band in which the return is furnished, and nothing in the section requires that amount to be more than nil [Section 140B(1)-(3A) of ITA 1961, current text]. ITA 2025's section 267 is built the same way: its operative sub-sections apply "where ... tax is payable" on the basis of the updated return and impose the payment, and neither says that a return on which nothing is payable cannot be furnished [Section 267(1), (3) and (5) of ITA 2025; Section 140B(1)-(3) of ITA 1961]. The prescribed form is Form ITR-U, with the full return form for the year - and so its Schedule FA - selected and filed with it [Rule 12AC(1) of IT Rules 1962; Form ITR-U (2026), Part A, item A9]. The form asks for the reason for updating from a list that includes "Others", and computes the additional tax on the "additional income" returned [Form ITR-U (2026), Part A, item A10; Part B-ATI, Sl. Nos. 1, 9, 10].

The second group turns on what has already happened in the person's case. No updated return may be furnished where one has already been furnished for that year; where "any proceeding for assessment or reassessment or recomputation or revision of income under this Act is pending or has been completed" for that year, save for the case in Part 9 of an updated return furnished in response to a notice under section 148 of ITA 1961; where the Assessing Officer has information about the person for that year "in his possession under" the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976, the Prohibition of Benami Property Transactions Act 1988, the Prevention of Money-laundering Act 2002 or the Black Money Act, "and the same has been communicated to him" before the updated return is furnished; where information for that year "has been received under an agreement referred to in section 90 or section 90A" of ITA 1961 - a tax treaty - "in respect of such person and the same has been communicated to him" before the updated return is furnished; where prosecution under Chapter XXII has been initiated for that year; or where the person belongs to a class the Board notifies [Clauses (a) to (f) of the third proviso to section 139(8A) of ITA 1961; Section 263(6)(c)(iv)-(viii) and (x) of ITA 2025, with "specified laws" defined in section 263(9)(d) to include the Black Money Act]. Two of these bear directly on the present subject: a communication of information held under the Black Money Act, and a communication of treaty-exchanged information such as Common Reporting Standard data.

The third group is the reassessment notice. No updated return may be furnished "where any notice to show-cause under section 148A" of ITA 1961 "has been issued in his case after thirty-six months from the end of the relevant assessment year", unless an order under section 148A(3) has found that it is not a fit case to issue a notice under section 148 [Fourth and fifth provisos to section 139(8A) of ITA 1961, inserted by the Finance Act 2025; Section 263(6)(c)(ix) of ITA 2025]. A search, requisition or survey is a further bar for the year in question and earlier years [Second proviso to section 139(8A) of ITA 1961; Section 263(6)(d) of ITA 2025]. ITA 2025, as amended by the Finance Act 2026, carries every one of these bars and exceptions [Section 263(6)(b)-(e) of ITA 2025, current text; Provisos to section 139(8A) of ITA 1961].

Reading the three groups together. Within thirty-six months of the end of the assessment year, a show-cause notice under section 148A of ITA 1961 does not by itself bar an updated return. What may bar it is the second-group condition that no "proceeding for assessment or reassessment" is "pending or has been completed" for the year. A reassessment proceeding begins with the notice under section 148; the show-cause notice under section 148A comes before that notice. Whether the show-cause stage alone means a reassessment proceeding is already "pending" is not answered by the statute. Section 148A describes its own job as deciding "whether or not it is a fit case to issue notice under section 148"; it does not call itself a reassessment proceeding [Section 148A(1)-(3) of ITA 1961]. In our view three things point the same way. First, the Act lists the show-cause notice as a bar of its own, the third group above, and attaches to it its own condition: the notice must have been issued after thirty-six months from the end of the assessment year. If a show-cause notice already counted as a pending proceeding under the second group, that separate bar and its time condition would serve no purpose [Section 139(8A) of ITA 1961]. Second, the Department's published validation rule for the return forms names a proceeding "initiated u/s 148, 153A or 153C" as the bar, and does not mention section 148A [Income Tax Department, e-filing Validation Rules for ITR-3, AY 2026-27, Rule 19]. Third, once a notice under section 148 issues, the eighth proviso noted in Part 9 allows an updated return in response to it. On that reading, within thirty-six months a show-cause notice alone does not close the route; after thirty-six months it does. One departmental statement reads the other way at first sight. The Department's help page on reassessment cases that were under way when ITA 2025 came into force on 1 April 2026 says that such proceedings were "initiated" by the section 148A notice. That page answers a different question, which Act applies to a case that straddles the changeover, and does not deal with updated returns [Income Tax Department, e-filing FAQ "Reassessment Proceedings", on section 536(2)(c) of ITA 2025].

The second group works independently of all this. Whatever the stage of any reassessment, the route closes once information held under the Black Money Act, or received under a tax treaty, has been communicated to the person [Clauses (c) and (d) of the third proviso to section 139(8A) of ITA 1961]. The word "communicated" is defined nowhere in the primary text found. Section 148 of ITA 1961 speaks of information "with the Assessing Officer", which is a different event from information "communicated" to the taxpayer [First proviso to section 148 of ITA 1961]. In our view the practical question is this. A taxpayer often sees only an entry in the Annual Information Statement, an e-campaign message or a call for information, none of which says under which agreement or statute the information was received, and none of which is addressed by any provision located. Whether such a communication counts as information "communicated" to the taxpayer decides whether the updated-return route is still open. The statute does not answer it. Separately, whether an updated return, once furnished, answers the section 43 penalty under the Black Money Act is the point stated in Part 7, and it is not clear [Section 43 of the Black Money Act].

11. What there is to evaluate

In our view, depending on the position, the matters to evaluate are these. Whether the return can still be revised under section 139(5) of ITA 1961 within the time stated in Part 7. If not, whether an updated return is available: within the forty-eight-month window, with none of the bars in Part 10 applying, and bearing in mind the point in Part 7 that it is not clear whether an updated return answers the section 43 penalty under the Black Money Act. Any foreign tax credit would then be claimed on Form 44 (Form 67 under IT Rules 1962) filed alongside it. Whether the scheme's values fit and the year is one ending on or before 31 March 2026, so that a declaration by 31 December 2026 is open, with the limits on its immunity described in Part 6. And in every case, reporting the asset in Schedule FA going forward, since the reporting duty stands independently of the tax position.

What to do next

The documents to gather are three: the plan statement showing vesting dates and quantities, the broker's annual statement (peak and closing balances, in the foreign currency), and the foreign tax certificate for any withholding. The next check is whether Schedule FA was filed for each calendar year the shares were held. If a year is missing, the questions are, in order: can the return still be revised; is the updated-return route available; do the scheme's values and dates fit. This article is educational and is not advice on any particular position.

Sources

Every reference used in the text, the document it comes from and where the document was obtained.