For businesses, professionals, and individuals dealing with taxes in India, staying updated with regulatory changes is essential. Recently, the Central Board of Direct Taxes (CBDT) announced a significant update regarding undisclosed foreign assets, and it is worth understanding how it affects taxpayers.
What’s Changed
The CBDT has increased the prosecution threshold under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 from INR 5 lacs to INR 20 lacs. This update was communicated through Instruction F No 285/46/2021 IT (Inv.)/88 dated 18th August 2025.
Key points to note:
- Prosecution under Sections 49 and 50 will now be initiated only if undisclosed foreign movable assets exceed Rs 20 lakh in a given year.
- Assets below this threshold may still be subject to penalties under Sections 42 and 43, but formal prosecution is less likely.
- The change provides some relief to individuals and entities with smaller foreign holdings while allowing authorities to focus on larger, high-value cases.
Why It Matters
This adjustment represents a more focused approach by tax authorities. It allows them to direct resources to cases involving significant non-compliance while reducing the burden on smaller instances.
- Targeted enforcement: Larger cases receive priority attention.
- Reduced risk for smaller holdings: Individuals and businesses with assets below Rs 20 lakh face lower prosecution risk.
- Legislative alignment: The update reflects amendments introduced in the Finance (No. 2) Act, 2024, showing a deliberate and considered approach to enforcement.
What You Should Do
Even with the increased threshold, compliance and transparency remain crucial.
- Report all foreign assets: Movable or immovable, everything must be declared.
- Understand applicable penalties: Even assets under Rs 20 lakh may attract penalties under Sections 42 and 43.
- Seek professional guidance: Experienced chartered accountants can help navigate these updates and ensure full compliance. Firms like AVS & Associates can guide businesses and individuals in understanding and applying these changes effectively.
Key Insights for Taxpayers
Raising the prosecution threshold does not give license to overlook smaller undeclared foreign assets. The change is designed to help authorities focus on larger, high-value cases while providing some relief to individuals and businesses with modest holdings.
It’s important to remember that compliance and transparency remain critical. Even if your assets fall below the new threshold, reporting obligations and potential penalties still apply. Staying informed about such regulatory updates, being proactive in disclosure, and seeking professional advice when needed are the best ways to avoid complications and maintain financial peace of mind in India’s dynamic tax environment.