This is an India-specific guide. A communication about foreign income, an overseas account or currency movements is not automatically a reassessment notice, and foreign-government information is not by itself proof that tax was evaded. First authenticate the communication, identify its statutory section, tax year, service date, requested evidence and response deadline. Then determine whether the Income-tax Act, 1961 or the Income Tax Act, 2025 governs the matter before deciding how to respond.
The tax year is decisive: reassessment provisions in the 2025 Act apply to tax years 2026–27 onward, while earlier years generally remain under the 1961 Act, including transition cases. Foreign-exchange gains and losses can affect income computation under section 43AA of the 1961 Act, but their treatment depends on the transaction and other applicable provisions. A separate, time-limited Foreign Assets of Small Taxpayers Disclosure Scheme (FADS) 2026 has its own eligibility rules, valuation date, payment formulas and filing deadline.
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What a foreign-information communication does—and does not—mean
The Income Tax Department can receive information through agreements with foreign governments and use it as one possible indication that income may have escaped assessment. Other possible sources listed by the Department include information identified under a Board risk-management strategy, audit objections, notified collection schemes, Tribunal or Court orders, specified survey information, Approving Panel directions, and findings or directions in certain orders.
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Recognising a formal notice
Read the document itself rather than relying on an email subject line, telephone call or generic portal alert. A formal notice identifies a statutory section, the action required, the assessment or tax year concerned and a deadline or method for replying. A general information or compliance communication may ask for clarification without commencing the statutory reassessment sequence. The distinction matters because the response rights, evidence and time limits differ.
How reassessment proceeds under the Income Tax Act, 2025
For tax years governed by the 2025 Act, the Department describes an ordinary sequence before a notice under section 280 is issued:
- Information is identified. The AO must have information suggesting that income has escaped assessment, within the categories recognised by the Act and related rules.
- Show-cause notice under section 281(1). The taxpayer is given the information relied on and an opportunity to respond.
- Response is considered. The AO examines the explanation and supporting material.
- Reasoned order under section 281(3). The order requires prior approval and records why the case should or should not proceed.
- Notice under section 280. If the statutory conditions are met and approval has been obtained, the reopening notice is issued before reassessment, assessment or recomputation under section 279.
The Department’s FAQ identifies exceptions to the ordinary section 281 procedure. Those exceptions do not remove the requirement for approval before a section 280 notice is issued. Do not assume that receiving a section 281 communication means tax has already been assessed, or that absence of a section 281 notice alone proves a later notice is invalid; the specific exception and procedural history must be checked.
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Completion period described for a new-Act reassessment
The Department says an order under section 279 is generally due within one year from the end of the financial year in which the section 280 notice was served. Extensions and exclusions apply in specified situations, so this is not a guaranteed end date for every case. Preserve the exact service date and check the provisions applicable to the proceeding.
Which Act governs your tax year?
Do not map a section number from one Act to the other without first fixing the tax year and procedural history.
| Situation | Governing framework described by the Income Tax Department | Practical implication |
|---|---|---|
| Tax year 2026–27 or later | Sections 279–286 of the Income Tax Act, 2025 | Use the new Act’s notice sequence, approvals and limitation rules. |
| Tax year beginning before 1 April 2026 | Income-tax Act, 1961 provisions | Apply the 1961 Act’s reassessment rules and limitation periods. |
| Proceeding initiated under the 1961 Act and pending after 1 April 2026 | Continues under the 1961 Act, subject to its applicable rules | Do not switch sections merely because the calendar date has changed. |
| Certain fresh or continuing proceedings for earlier assessment years | Older framework, subject to the 1961 Act’s limitation periods | Review the commencement date, assessment year and procedural step before replying. |
The Department specifically addresses questions about a section 148A(1) notice issued before 1 April 2026 when a section 148 notice has not yet been issued. The answer depends on the transition provisions and the relevant year; it is not safe to assume that a new-Act section automatically replaces the old proceeding.
What to do when a communication arrives
- Authenticate it on the official e-filing portal. Use the Department’s notice-authentication facility and retrieve the communication from the account linked to the taxpayer’s Permanent Account Number. Do not rely on an attachment or a link supplied in an unsolicited message.
- Record the controlling details. Note the section, document identification number, assessment year or tax year, date of issue, date and mode of service, response channel and stated deadline.
- Classify the communication. Decide whether it is a general compliance request, a section 281 show-cause notice, a section 280 reopening notice, an assessment order or another statutory document.
- Reconcile the foreign item. Assemble bank statements, broker or custodian records, remittance advice, invoices, loan or gift documents, ownership records, exchange-rate calculations and earlier returns. Separate income, an asset or account, and a currency gain or loss; they are not interchangeable categories.
- Check the relevant return schedules and disclosures. Compare the records with the foreign-income, foreign-asset and other schedules filed for that year. Explain genuine omissions, ownership differences, timing differences and items that are not taxable rather than making an unsupported admission.
- Reply through the specified channel before the stated deadline. Follow the notice’s format and evidence requirements. There is no universal number of days that applies to every communication, and the correct response is not automatically a revised or updated return.
- Keep proof of filing. Save the submitted response, attachments, acknowledgement, portal transaction number and a copy of the notice. Preserve the original records in case the AO asks for clarification.
A taxpayer with multiple jurisdictions, inherited assets, controlled foreign companies, complex derivatives or a prior Black Money Act proceeding should obtain advice from an Indian tax professional or chartered accountant familiar with reassessment and foreign-asset reporting. The professional should work from the authenticated notice and the complete tax history, not from a summary message.
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Section 43AA of the Income-tax Act, 1961 addresses specified foreign-currency gains and losses. Subject to section 43A, the section covers computation under notified income computation and disclosure standards for items including monetary and non-monetary items, translation of financial statements of foreign operations, forward exchange contracts and foreign-currency translation reserves.
“Subject to the provisions of section 43A, any gain or loss arising on account of any change in foreign exchange rates shall be treated as income or loss, as the case may be, and such gain or loss shall be computed in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145.”
This statutory wording does not mean every movement in an exchange rate is immediately taxable in the same way. Timing, classification, whether an item is monetary or non-monetary, the accounting treatment, the applicable notified standard and section 43A can change the computation. A company translating a foreign operation, an individual holding foreign currency, an exporter with a forward contract and a borrower with a foreign-currency liability may have materially different results.
Keep three foreign issues separate
- Foreign-source income: salary, interest, dividends, business receipts, rent or gains may need to be included under the provisions applicable to the taxpayer and year.
- Foreign assets or accounts: ownership and disclosure schedules can matter even when an asset was acquired from explained funds and produced no income.
- Exchange-rate gain or loss: a computation issue governed by the relevant provisions and standards; it is not the same as receiving a foreign remittance.
Receiving money from abroad does not automatically establish taxable income. Conversely, an amount that is not taxable may still need to be disclosed in a schedule, and an exchange difference may require computation even when no new cash was received. Trace the source, ownership, purpose, date and currency conversion for each item.
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FADS 2026: a narrow disclosure window for specified foreign assets and income
The Finance Act, 2026 includes the Foreign Assets of Small Taxpayers Disclosure Scheme (FADS 2026), described by the Income Tax Department as a one-time voluntary disclosure scheme. Form 1 opened on 16 August 2026. The Department’s FAQ states 31 December 2026 as the last date to file and 31 March 2026 as the valuation date.
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| FADS category | Who or what it covers | Ceiling described in the FAQ | Amount payable described in the FAQ |
|---|---|---|---|
| Category 1 | Undisclosed foreign asset or foreign income chargeable to tax in India that was not offered to tax | Aggregate value not exceeding ₹1 crore | 30% tax plus an amount equal to that tax |
| Category 2 | Certain foreign assets acquired from explained sources but omitted from the relevant return schedule | Aggregate asset value not exceeding ₹5 crore | Flat ₹1 lakh fee |
These figures are scheme-specific and are not general tax rates, disclosure thresholds or penalties. The FAQ lists exclusions, including specified proceeds-of-crime cases and assessment years for which proceedings under the Black Money Act have already been completed. Eligibility also depends on the asset, source, valuation and return history. A taxpayer should verify the detailed rules, the valuation method and the portal’s current status before filing; a foreign asset below a stated ceiling does not by itself prove that FADS applies.
How to assess a possible FADS filing
- Inventory each foreign asset and item of foreign income, including jointly held or inherited property where relevant.
- Determine whether the item was taxable and omitted, or acquired from explained sources but omitted only from a return schedule.
- Apply the 31 March 2026 valuation date and aggregate the values within the relevant category.
- Check the exclusions and whether any Black Money Act proceeding has already been completed for the assessment year.
- Reconcile the proposed declaration with returns, assessments, foreign-tax records and source-of-funds evidence.
- File Form 1 by 31 December 2026 only after confirming that the category, valuation and payment calculation are correct.
Common mistakes and how to correct them
- Treating every email as a statutory notice: authenticate the communication and read the document’s section before responding.
- Assuming foreign data proves evasion: request or identify the specific issue and answer it with ownership, source and tax records.
- Using the wrong Act: start with the tax year, then check whether a proceeding was already pending under the 1961 Act.
- Calling every currency movement income: classify the underlying item and apply section 43AA, section 43A and the notified standards where relevant.
- Filing a blanket revised return: the proper action depends on the communication, year, filing status and facts.
- Missing the stated deadline while gathering documents: submit through the prescribed channel, explain any genuine difficulty where permitted and obtain professional advice immediately; do not wait for an informal extension.
- Assuming FADS is a general amnesty: test category, ceiling, valuation date and exclusions against the scheme’s current rules.
A practical decision framework
Use this order of questions:
- Is the communication authentic and visible in the official portal?
- Which section is cited, and is it information-gathering, show-cause, reopening, assessment or order stage?
- Which tax year is involved, and was a proceeding already pending before 1 April 2026?
- Does the foreign item represent income, an asset or account, an exchange-rate gain or loss, or more than one of these?
- What records prove source, ownership, valuation, conversion rate and prior disclosure?
- Is a time-limited scheme such as FADS potentially relevant, and do its exclusions and ceilings fit the facts?
- What exact response and evidence does the authenticated notice require, and by what date?
Following that sequence prevents the most damaging errors: replying to a spoofed message, applying a new section to an old assessment year, treating a data match as a tax finding, or making a disclosure without checking the underlying records.
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