India Foreign Asset Compliance 2026: Schedule FA, FADS 2026 and Hong Kong Trust Governance for HNW Families

For India-linked high-net-worth families, 2026 has brought a more visible compliance reset around overseas wealth. The key news is not a new blanket tax aimed solely at HNW individuals. On 1 April 2026, India’s Income-tax Act, 2025 replaced the Income-tax Act, 1961 for new tax years, while the Income-tax Rules, 2026 also came into force. The Government describes the new Act as a more streamlined and modern code, and says it does not itself impose a new tax or increase the tax burden. [1]

The practical effect for families with overseas companies, accounts, investments or trusts is nonetheless significant: they need a clear, current and defensible record of residence, ownership, beneficial interests, signing authority, income and supporting documents. The law has changed format; transparency and documentary discipline have become even more important.

How Indian tax residence affects foreign income and overseas assets

India’s Income-tax Act, 2025 makes the scope of total income depend on residential status. For a resident, the statute includes income received in India, income accruing or arising in India, and income accruing or arising outside India. It expressly limits the treatment of foreign income for a person who is “not ordinarily resident”: that foreign income is included only when it is derived from a business controlled in, or a profession set up in, India. [2]

This is why an overseas bank account, foreign company, offshore trustee or overseas property is not a self-contained answer. It does not by itself determine Indian tax residence, taxability, reporting or treaty treatment. Those questions depend on the relevant tax year, the facts of the individual or family, the source and character of income, and applicable law.

For HNW families, the operational lesson is straightforward. Before considering any cross-border trust or holding arrangement, reconcile the facts that advisers will need: who holds the legal title, who is the beneficial owner or beneficiary, who has signing authority, who makes decisions, where income arises, and what documents support those positions.

Does Schedule FA apply to foreign trusts, overseas accounts and signing authority?

India’s official guidance states that Schedule FA applies to resident assessees who hold, own or have a beneficial interest in foreign assets, or have income from a source outside India. The schedule covers foreign bank and custodial accounts, equity or debt interests, insurance and annuity contracts, overseas immovable property, other capital assets, financial interests, account-signing authority, foreign trusts and other foreign-source income. [3]

For a foreign trust, the schedule specifically refers to interests held as a trustee, settlor or beneficiary. For foreign accounts, it separately covers signing authority that has not already been captured elsewhere in the schedule. [3]

The presence of a disclosure field does not itself decide whether an item is taxable. It does mean that a family should not allow its legal, beneficial and operational records to drift apart. A trust deed, trustee records, corporate registers, bank mandates, investment statements, source-of-funds records and annual tax information should be capable of being reconciled by appropriately qualified advisers.

Is FADS 2026 a foreign-asset planning scheme for India-linked HNW families?

India has also activated the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (FADS 2026). It is a one-time voluntary disclosure scheme under the Finance Act, 2026. It commenced on 16 August 2026, and the final date for filing a declaration is 31 December 2026. [4]

The scheme is relevant because it underlines the policy focus on overseas assets and income. It is not, however, a general HNW planning route. The official FAQ states that, for one category, the aggregate value of the undisclosed overseas asset and undisclosed foreign income must not exceed INR 1 crore; for another category concerning certain undeclared overseas assets, the aggregate value cannot exceed INR 5 crore. Assets above those thresholds are not eligible under the relevant category. [4]

For an India-linked HNW family, the message is not to presume eligibility or to treat the scheme as a substitute for a complete review. Instead, it is a reminder that historical ownership records, foreign trust roles, valuation evidence and prior reporting should be reviewed early, confidentially and with independent India-qualified advice.

Why assess Hong Kong trust governance for India-linked HNW families?

When India-linked families compare regional locations for a trust or family-governance arrangement, the most credible Hong Kong proposition is not anonymity. It is a combination of established trust law, professional administration, territorial source-based taxation, cross-border connectivity and a treaty framework with India—each subject to the family’s facts and applicable law.

Hong Kong’s Trustee Ordinance provides the statutory framework for trusteeship, while a Hong Kong trust can document how legal title, fiduciary responsibilities, powers, beneficiaries, protectors or enforcers where relevant, and family decision-making are organised. [5] For a family with operating businesses and family members across India, Hong Kong and the wider Asia-Pacific region, that discipline can be valuable in separating ownership records from day-to-day management and in preserving the evidence required for a future succession, incapacity, sale or banking review.

Hong Kong’s tax system is also source-based. The Inland Revenue Department states that persons carrying on a trade, profession or business in Hong Kong may be chargeable on profits arising in or derived from Hong Kong, while the question of source is largely one of fact. For this charge, Hong Kong does not distinguish residents from non-residents. The current corporate profits-tax rate is 8.25% on the first HKD 2 million of assessable profits and 16.5% above that threshold. The IRD also lists a 0% concession for qualifying profits of eligible family-owned investment holding vehicles managed by eligible single family offices in Hong Kong, subject to the statutory conditions. [6]

Those features may make Hong Kong a relevant jurisdiction to assess. They do not mean that a Hong Kong company or trust automatically secures a low-tax outcome, an offshore claim, a Family Office concession or an Indian tax result. Source analysis, eligibility, actual activities, trust terms, residence, disclosure and relevant tax-law provisions must all be examined independently.

Hong Kong and India also have a comprehensive agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, in force since 30 November 2018. This is a useful cross-border framework, but treaty availability and any relief depend on the applicable provisions, tax residence and the facts of the case; it is not automatic. [7]

Does a Hong Kong trust provide confidentiality or anonymity?

For many families, confidentiality is an important reason to consider a professional trust arrangement. The responsible way to describe Hong Kong’s advantage is controlled confidential administration, not secrecy. A licensed Hong Kong Trust or Company Service Provider must apply risk-based anti-money-laundering and counter-terrorist-financing controls, including customer due diligence, beneficial-owner identification and reasonable verification, understanding of ownership and control, ongoing monitoring and record retention. [8]

For a trust, the relevant beneficial-owner identification can include the settlor, trustee, protector or enforcer where applicable, beneficiaries or classes of beneficiaries with vested interests, and a person who ultimately controls the trust. Hong Kong’s TCSP guidance expressly prohibits anonymous accounts and requires required records to be available to the Registrar, competent authorities and auditors upon appropriate authority. [8]

This is not a weakness in a Hong Kong trust arrangement. It is the basis for a credible, professionally administered structure. The privacy benefit lies in disciplined handling of family records and decisions through documented controls—not in hiding identity, assets or income from lawful reporting or supervision.

What should India-linked HNW families review next?

For India-linked HNW families, the 2026 developments point to a practical sequence. First, establish the relevant residence, foreign-asset and reporting facts. Second, reconcile the family’s legal ownership, beneficial interests, trustee roles, account authorities and income records. Third, assess whether a Hong Kong trust or governance arrangement can support the family’s succession, administration and cross-border record-keeping objectives within the applicable legal and tax framework.

FGA Trust (TCSP Licence No. TC008341) works with high-net-worth families, entrepreneurs and their independent advisers on governance documentation and long-term trust administration across Hong Kong and Asia-Pacific. To discuss the governance questions that should be addressed alongside India-Hong Kong cross-border planning, Contact us today: https://fgatrust.com/en/proposal-request.

Regulatory position reviewed as at 6 October 2026. This article is for general educational purposes only. It is not Indian, Hong Kong or other legal, tax, investment, securities, foreign-exchange, succession or regulatory advice. A trust arrangement must never be used to conceal assets, evade taxes or avoid lawful reporting obligations.

References

[1]: https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/objective-and-scope-new-act "Income Tax Department, Government of India — Objective and scope of the Income-tax Act, 2025"

[2]: https://www.incometaxindia.gov.in/w/section-5-1 "Income Tax Department, Government of India — Section 5: Scope of total income, Income-tax Act, 2025"

[3]: https://www.incometaxindia.gov.in/w/schedule_fa "Income Tax Department, Government of India — Schedule FA: Details of Foreign Assets and Income from Any Source outside India"

[4]: https://www.incometaxindia.gov.in/documents/81799/15520974/FAST-DS-FAQs.pdf "Income Tax Department, Government of India — Foreign Assets of Small Taxpayers Disclosure Scheme, 2026: Frequently Asked Questions"

[5]: https://www.elegislation.gov.hk/hk/cap29 "Hong Kong e-Legislation — Trustee Ordinance (Cap. 29)"

[6]: https://www.ird.gov.hk/eng/tax/bus_pft.htm "Hong Kong Inland Revenue Department — Profits Tax"

[7]: https://www.ird.gov.hk/eng/tax/dta5.htm "Hong Kong Inland Revenue Department — Hong Kong–India tax treaty in force"

[8]: https://www.tcsp.cr.gov.hk/tcspls/portal/notice/931/eng/(E)_Guideline_on_Compliance_of_AML-CTF_Requirements_for_TCSPs_(March_2025).pdf "Hong Kong TCSP Registry — Guideline on Anti-Money Laundering and Counter-Financing of Terrorism for TCSP Licensees"