The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (“FAST-DS 2026”) has opened an important compliance window for eligible taxpayers with undisclosed foreign income or assets and for certain taxpayers who failed to report foreign assets in their income tax returns.But for anyone considering a declaration, there is an important question that comes even before calculating the tax or fee:What is the value of the foreign asset for the purposes of the Scheme?At first glance, the answer may appear straightforward. A taxpayer with a foreign bank account may look at its closing balance. Someone owning an overseas property may consider its purchase price or cost of acquisition, while an investor holding foreign shares may look at their purchase price or prevailing market value.The valuation rules under the Scheme show why such an approach can be misleading.The FAST-DS 2026 Rules prescribe different valuation mechanisms for different categories of foreign assets. The value determined under these Rules can be crucial in deciding whether the taxpayer falls within the applicable monetary thresholds under the Scheme.Also read: Foreign Asset Disclosure Scheme 2026: From budget proposal to rollout - what residents and NRIs need to knowWhy valuation can determine eligibilityFAST-DS broadly covers two distinct categories.The first relates to undisclosed foreign income and undisclosed foreign assets (chargeable to tax under section 4 of the Black Money Act) where the aggregate value of such income and assets does not exceed ₹1 crore.The second deals with specified cases of non-reporting of foreign assets in the return of income under the mandatory requirements of section 139(1) of the Income-tax Act, 1961 (attracting sections 42 or 43 of the Black Money Act), where the aggregate value of such assets does not exceed ₹5 crore.These limits make valuation a critical factor in determining eligibility under the Scheme. A taxpayer may believe that the value of his foreign assets falls within the applicable threshold based on the amount originally invested, the current market value or the closing balance of a foreign bank account. That assumption may not necessarily be correct. Once the prescribed valuation and currency-conversion rules are applied, the value for the purposes of the Scheme may be different and could even cross the applicable monetary threshold.The first question, therefore, is not merely, “How much have I invested in foreign assets, or what is the balance in my foreign bank account?” The important question is, “How will these assets or bank accounts be valued under FAST-DS 2026?”The critical valuation date: 31 March 2026For FAST-DS 2026, the relevant valuation date for an undisclosed foreign asset is 31st March 2026.Rule 3 prescribes asset-specific methods for determining the fair market value (FMV) of a foreign asset. Since such assets are located outside India, their cost or FMV would ordinarily be expressed in a foreign currency. The value so determined is thereafter converted into Indian rupees in the manner prescribed under Rule 4 or Rule 5 of FAST-DS Rules, as applicable, for determining its value for the purposes of the Scheme.This creates a two-stage exercise:First, determine the FMV of the foreign asset under Rule 3; then convert that value into Indian rupees under the applicable currency-conversion rule.This distinction is important. The value of the asset may first be determined in the currency in which it is denominated—such as USD, GBP, EUR or AED—and thereafter converted into Indian rupees using the prescribed conversion mechanism.Also read: Foreign income disclosed in ITR-U: Why it could still trigger Black Money Act - FAST-DS 2026 ParadoxThe foreign bank account rule may surprise many taxpayersSubject to the exceptions discussed in subsequent paragraphs, the value of a foreign bank account is the sum of all deposits made into the account from the date of opening up to the valuation date.Suppose the total deposits made into a US bank account from the date it was opened until 31 March 2026 amount to USD 50,000. During this period, USD 40,000 was withdrawn, leaving only USD 10,000 in the account.The closing balance is therefore USD 10,000.But the value of the account under Rule 3(e) will be USD 50,000, not USD 10,000Redeposits from the same bank account are not counted againThe bank-account rule also contains important adjustments.Where money is withdrawn from the account and the proceeds of that withdrawal are subsequently redeposited into the same account, the redeposit is not taken into consideration again while computing the value of the account.Therefore, taxpayers should not simply download a foreign bank statement and add up every credit entry.They may need to trace the source and movement of funds to distinguish fresh deposits from redeposits of amounts previously withdrawn from the same account.The Rules also separately address a foreign bank account that had earlier been declared under Chapter VI of the Black Money Act and whose value had been subjected to tax and penalty. In such a case, the sum of deposits made into the account since the date of the earlier declaration is taken into consideration, subject to the prescribed adjustment for redeposits.For some taxpayers, reconstructing the transaction history of an old overseas account may therefore be one of the most important parts of the FAST-DS valuation exercise.For many assets: Why market value alone may not be enoughFor foreign assets such as bullion, jewellery, precious stones, archaeological collections, drawings, paintings, sculptures, other works of art and immovable property, the broad valuation principle is particularly noteworthy.The FMV is generally the higher of the cost of acquisition and the value determined in the prescribed manner as on the valuation date.For these categories, the taxpayer may obtain a valuation report from a valuer recognised by the Government of the relevant foreign country or specified territory, or by its recognised agency, for valuation of that particular category of asset under the applicable law.Where valuation in the prescribed manner is not carried out, the Scheme Rules provide for the indexed cost of acquisition as on the valuation date to be deemed as the FMV.For determining the indexed cost of acquisition, the Cost Inflation Index notified for the purposes of computing capital gains under section 48 is used.Foreign shares require a different approachThere is no single valuation method for all foreign shares and securities. Rule 3 prescribes different valuation methods depending on whether the investment consists of quoted shares or securities, unquoted equity shares, or other unquoted shares and securities.(1) Quoted Foreign Shares and SecuritiesWhere such shares and securities were traded on an established securities market, the prescribed market value on 31 March 2026 is based on the average of the lowest and highest quoted prices on that date.For this purpose, an established securities market broadly means an exchange that is officially recognised and supervised by a Government entity in the country in which the market is located and where the annual value of shares traded on the exchange (or a predecessor exchange) exceeded USD 1 billion during each of the three calendar years immediately preceding the valuation date.If there was no trading in such shares or securities on 31 March 2026, the Rules look to the immediately preceding date on which the shares or securities were traded in such market.The FMV is then the higher of the cost of acquisition and the market value so determined.(2) Unquoted Equity SharesThe FMV is the higher of the cost of acquisition and the value determined under the formula prescribed in Rule 3(c)(ii) of the Scheme.(3) Other Unquoted Shares and Securities:The FMV is determined based on higher of the cost of acquisition and the price that the share or security would ordinarily fetch if sold in the open market on the valuation date, for which the taxpayer may obtain a report from a valuer recognised by the Government of the relevant foreign country or specified territory, or any of its agencies, for the prescribed purpose.Where such valuation is not carried out, the indexed cost of acquisition is deemed to be the FMV.The practical takeaway is simple: foreign shares and securities do not constitute a single valuation category under FAST-DS 2026. The valuation method depends on the nature of the security held.What if the foreign asset was sold years ago?Another misconception may be that an asset sold before 31 March 2026 automatically becomes irrelevant.Rule 3(2) specifically addresses assets transferred before the valuation date.Where an asset was transferred for consideration, its FMV is the higher of its cost of acquisition and the sale price.Where it was transferred without consideration or for inadequate consideration, the comparison is instead between the cost of acquisition and the FMV on the date of transfer.Thus, the fact that a taxpayer no longer holds a particular foreign asset on 31 March 2026 does not, by itself, mean that the asset can be ignored for the valuation exercise.Moving money from one foreign asset to another requires an adjustmentOver time, taxpayers may have sold one foreign investment and used the proceeds to acquire another.For example, foreign shares may have been sold and the proceeds used to purchase an overseas property. Alternatively, money may have been withdrawn from a foreign bank account and invested in shares.If both values were counted without adjustment, the same underlying funds could effectively enter the valuation exercise twice.Rule 3(3) addresses this situation.Where a new asset is acquired or made out of the consideration received on transfer of an old asset, the FMV of the old asset determined under the Rules is reduced by the amount of consideration invested in the new asset.A similar adjustment applies where a new asset is acquired or made out of an amount withdrawn from a foreign bank account.FAST-DS 2026: Foreign asset valuation at a glanceForeign assetBroad valuation approachProperty, jewellery, art and similar assetsGenerally, higher of cost of acquisition and value determined in the prescribed mannerQuoted shares/securitiesHigher of cost of acquisition and prescribed market priceUnquoted equity sharesHigher of cost of acquisition and value determined under the prescribed formulaOther unquoted shares/securitiesHigher of cost of acquisition and value determined in the prescribed mannerForeign bank accountGenerally, aggregate deposits from the date of opening of the account up to the valuation date, subject to prescribed adjustmentsAsset transferred before 31 March 2026Special valuation rules apply depending on the manner of transfer. Considering FAST-DS 2026? Start with the valuationFor taxpayers considering FAST-DS 2026, the starting point should not be the closing balance of a foreign bank account, the original investment in an overseas asset or its apparent current market value.The better approach is to follow these steps:Step 1: Determine the value under Rule 3Step 2: Convert the value into INR under Rule 4 or Rule 5, as applicableStep 3: Check the applicable monetary thresholdStep 4: Determine whether the taxpayer qualifies under the applicable ₹1 crore or ₹5 crore category of the Scheme.A foreign bank account with a relatively small closing balance may have a much higher value under the prescribed rules, while other foreign assets may also be valued differently from what the taxpayer might ordinarily assume.The central message is therefore simple: when considering FAST-DS 2026, do not rely merely on the closing bank balance, purchase price or an informal estimate of market value. First determine the value of the foreign asset in accordance with the Scheme’s prescribed valuation rules.The author, O.P. Yadav, is a former IRS officer with over 36 years of experience in tax administration, education, and training. He is presently associated with Prosperr.io as Tax Evangelist. The views expressed are personal.(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)