CBDT's new 'NUDGE' on foreign assets: Why taxpayers should pay attention

International agreement on data sharing allows government to flag overseas assets missing from tax returns filed

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The Income Tax Department is sending text messages and emails to individuals flagged for possible non-disclosure of foreign assets in their returns for the current assessment year. It’s the second phase of NUDGE, an initiative of the Central Board of Direct Taxes (CBDT) to encourage voluntary compliance by using data rather than enforcement.

 

The department said on X its communication to taxpayers is based on information received under global data-sharing arrangements. Sources told news agency PTI that about 25,000 individuals were identified in the first phase of NUDGE.

 

Why these alerts are being issued

India receives financial information of residents from partner countries under the Automatic Exchange of Information framework, including the Common Reporting Standard and the US FATCA regime. After analysing data for FY25 (calendar year 2024), the tax department found high-risk cases where foreign assets “appear to exist” but were not reflected in Income Tax returns filed for assessment year (AY) 2025-26.

 

NUDGE is a non-intrusive, data-driven mechanism designed to help taxpayers correct omissions early by offering timely alerts instead of resorting to immediate enforcement, said CBDT in a press release.

 

What taxpayers should do

Taxpayers who receive its communication will be advised to review their filings and, if required, file a revised return by December 31, 2025. Not responding could attract penalties under both the Income-tax Act and the Black Money Act.

 

Penalties for non-disclosure of foreign assets include:

A flat penalty of Rs 10 lakh under the Black Money Act

 

Tax at 30 per cent on undisclosed foreign income

 

A penalty of up to 300 per cent on the tax payable

 

The campaign specifically targets correct reporting in Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income) of the ITR.

 

Last year’s NUDGE exercise prompted 24,678 taxpayers to revisit their returns for AY 2024-25. According to PTI, this resulted in disclosures of foreign assets worth Rs 29,208 crore and foreign-source income of Rs 1,089.88 crore. CBDT said this demonstrated the effectiveness of gentle, data-backed prompts in improving compliance.

 

The department has also been carrying out follow-up assessments. PTI reported that till June 2025, about 1,080 cases were assessed, resulting in tax demands of around Rs 40,000 crore.

 

Wider compliance push underway

To broaden awareness, the department is working with large corporates whose employees may own overseas assets, as well as with industry bodies and ICAI. A second phase of the campaign will roll out from mid-December to widen coverage beyond the initial 25,000 high-risk cases, PTI reported.

 

CBDT said the initiative is part of a “PRUDENT” approach to tax administration, one that reduces information asymmetry, promotes transparency, and strengthens a culture of voluntary tax compliance.