FAST-DS 2026: what to declare if you hold a foreign life insurance policy

By Eldar Edmond Grady, CEO, PPLI.com. Research checked 20 October 2026.हिन्दी में पढ़ें

Indian law as at 20 October 2026, for an individual who owns the policy personally. Section numbers follow the Income-tax Act 1961 unless stated; the Income-tax Act 2025 applies from 1 April 2026 and renumbers them.

PPLI.com is a research publisher. It is not an insurer, an insurance intermediary or a tax adviser, it is not registered with IRDAI or SEBI, and it does not solicit or arrange insurance in India. Nothing on this page is an offer of insurance or advice on your own return. A declaration under FAST-DS is a tax filing; make it with a Chartered Accountant.

A one-time window, open until 31 December 2026

Suppose you worked in Dubai from 2012 to 2021, bought a unit-linked life policy from an insurer there in 2016, paid the premiums from your Dubai salary, and moved back to Pune in 2021. You became resident, then ordinarily resident, and your CA filed ITR-2 each year. The policy never went into surrender value.">Schedule FA, because nobody thought of an insurance policy as a foreign asset. Under Indian law it is one: a life policy with a cash or surrender value is a foreign financial asset, and the ITR has a line for it, “Foreign Cash Value Insurance Contract or Annuity Contract”.

The Finance Act 2026 created the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026, usually written FAST-DS, for cases like that one. The Government notified the Scheme Rules on 14 August 2026 (G.S.R. 732E) together with a set of FAQs, and declarations are accepted from 16 August to 31 December 2026. Every asset is valued as at 31 March 2026. A valid declaration and payment bring immunity from further tax, penalty and prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 for the asset or income declared.

The scheme is for individuals who were resident and ordinarily resident in India in the year the asset was acquired or the income arose. Your residential status today does not matter: the FAQs confirm that someone who is now a non-resident or RNOR can still declare, provided they were resident in the relevant year. It does not cover proceeds of crime where proceedings are pending under the Prevention of Money-laundering Act, 2002, and it cannot reopen an assessment already completed under the Black Money Act.

Which category a foreign policy falls into

The scheme has two categories, and for a life policy the difference is usually the source of the premiums. If the premiums came from income that India never taxed and should have, the policy is an undisclosed foreign asset in the first category. If the premiums came from income earned abroad while you were a non-resident, or from income India had already taxed, and the only failure was not listing the policy after you became resident, it falls in the second category, which is cheap.

A returning NRI who funded the policy entirely from foreign earnings is the second category. The Dubai example above, with a policy worth ₹2.4 crore at 31 March 2026 and nothing else undisclosed, costs ₹1 lakh to regularise. The same person who also kept ₹60 lakh in a Dubai savings account never reported is still within ₹5 crore, and the fee is still ₹1 lakh for the declaration. If premiums continued after the return from an Indian account, the source is still taxed Indian income, and the policy stays in the second category; the FEMA question that raises is a separate one, covered on FEMA, LRS and foreign life insurance.

Without the scheme, the exposure is the full Black Money Act: 30% tax on the undisclosed asset under section 3, a penalty of three times that tax under section 41, a penalty of ₹10 lakh for every year the asset was left out of the return under sections 42 and 43, and prosecution under sections 49 and 50. ClearTax puts the tax and penalty together at 120% of the asset’s value. The ₹20 lakh relief for small foreign assets, in place since October 2024, does not reach a policy of any size that matters here.

What a life policy is worth for the scheme

The Scheme Rules give detailed valuation methods for shares, property, bullion, bank accounts and partnership interests, and a general rule for every other foreign asset: the fair market value is the higher of the cost of acquisition and the price the asset would ordinarily fetch if sold in the open market on 31 March 2026, which can be supported by a report from a valuer recognised in the country where the asset sits. Where no market valuation is done, the indexed cost of acquisition is deemed to be the fair market value. There is no rule written for insurance policies specifically.

For a unit-linked or variable policy the practical approach is to obtain two figures from the insurer: the total premiums paid, and the surrender value as at 31 March 2026. The surrender value is the price the policy would fetch from the only buyer it has, the insurer, and it is the figure Schedule FA itself asks for each year. The higher of the two is the value to test against the ceiling. Convert at the RBI reference rate on 31 March 2026, because the rules require every value in rupees at that rate. The FAQs allow a variance of up to 20% on non-bank assets without the declaration failing, which gives some room if the insurer’s statement date does not match exactly.

One trap is double counting. If you funded the policy from a foreign bank account that you also failed to report, the FAQs let you reduce the account’s value by what you reinvested in the policy, so the same rupee is not declared twice. Keep the premium receipts and the bank statements that show the transfer.

Four forms, and a payment deadline that bites

A declaration cannot be used to revise or rectify an assessment already completed, and no set-off or relief can be claimed later in an appeal or other proceeding on the strength of it. If an assessment is pending, the Assessing Officer has to take the declaration into account.

What happens to the policy once it is on the record

The scheme settles the past. It does not change what the policy is for Indian law going forward, so three rules continue to apply.

You may keep it

Exchange control allows a resident to hold a life policy issued abroad while they were resident outside India (FEM (Insurance) Regulations, 2015, regulation 4(ii)). A policy bought as an NRI is lawful to keep after the return. Paying further premiums from Indian funds is a different question, and in our reading an unresolved one; see FEMA, LRS and foreign life insurance.

You report it every year

While you are resident and ordinarily resident, the policy goes into Schedule FA of ITR-2 or ITR-3 each year with its surrender value, in the cash value insurance contract table. An RNOR does not file Schedule FA. The insurer’s country also reports the policy to India under the Common Reporting Standard, which India has operated since 2017, so the two records should match. How CRS and Schedule FA work for a policy is set out under Schedule FA and CRS.

Tax arrives when money comes out

For a policy issued after 1 April 2023 with annual premium above ₹5 lakh (₹2.5 lakh for a ULIP-type policy issued after 1 February 2021), the exemption in section 10(10D) is not available on surrender or maturity, and the amount received, less premiums paid, is taxed at slab rate as income from other sources under section 56(2)(xiii). A death benefit stays exempt whatever the premium. An ITAT Delhi order of August 2026 (Sarvesh Naidu) is reported to have held, on its facts, that a foreign policy taken while non-resident was not an undisclosed foreign asset and that section 10(10D) applied; that is one tribunal decision on a small policy, not a general shield. The full treatment is on how India taxes a foreign life insurance policy, and the planning that should have come first is on returning to India: the RNOR window.

Sources and authorities

• Finance Act 2026, Chapter on the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (reported by ClearTax as clauses 114 to 128 of the Finance Bill, 2026).
• Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026, notification G.S.R. 732E of 14 August 2026, and the accompanying FAQs, as summarised in KPMG Flash News, 17 August 2026 (secondary).
• ClearTax: FAST-DS 2026 (secondary) for the two categories, the 120% computation and the Schedule FA table listing insurance.
• Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015: sections 3, 41, 42, 43, 49 and 50; Finance (No. 2) Act 2024 relief for foreign movable assets up to ₹20 lakh.
• Income Tax Department: Schedule FA, including the Foreign Cash Value Insurance Contract or Annuity Contract table.
• FEMA 12(R)/2015-RB, Foreign Exchange Management (Insurance) Regulations, 2015, regulation 4(ii).
• Income-tax Act 1961, section 10(10D), sixth to eighth provisos; section 56(2)(xiii); CBDT Circular 15/2023 and Rule 11UACA.
• ITAT Delhi, Sarvesh Naidu v DDIT (Inv.)-1, AY 2017-18, reported decision, order text not yet public; ITAT Mumbai, Taragauri T. Doshi v ITO, ITA 549/Mum/2010, 12 March 2012.
• CBDT Guidance Note on FATCA and CRS: cash value insurance contracts as reportable financial accounts.