 "Income Tax Department, CBDT")
The Income Tax department has announced a campaign called NUDGE that uses data to urge certain taxpayers to voluntarily review and correct claims that may be ineligible.
The campaign for assessment year 2025–26 (AY26) focuses on suspicious deductions and exemptions, including bogus donations to registered unrecognised political parties. NUDGE, short for “non-intrusive usage of data to guide and enable” is advisory and not punitive, said the department. It has identified taxpayers who have time until December 31, 2025, to file revised Income Tax returns (ITRs) without facing additional costs.
Why the tax department is nudging taxpayers
According to the Central Board of Direct Taxes (CBDT), data analysis has shown that some taxpayers have claimed deductions or exemptions that do not meet legal conditions. In several cases, such claims have resulted in inflated refunds or understatement of taxable income.
Using its risk management framework and advanced data analytics, the tax department has identified patterns that warrant correction, including:
- Donations claimed where the recipient political party is not eligible for tax benefits
- Incorrect or invalid permanent account numbers quoted in returns
- Errors in the quantum or eligibility of deductions and exemptions claimed
- Based on these red flags, NUDGE is contacting certain taxpayers through text messages and emails.
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What taxpayers are expected to do
Taxpayers who receive a NUDGE communication are advised to:
- Recheck their filed ITR carefully
- Verify whether all deductions and exemptions claimed comply with Income-Tax law
- File a revised return by December 31, 2025, if any claim is found to be incorrect
Those who miss the deadline can still file an updated return from January 1, 2026, but this will attract additional tax liability as prescribed under law.
The CBDT said that taxpayers whose claims are genuine and made in accordance with the law need not take any further action.
Refund scrutiny tightens
The campaign comes at a time when the tax department is closely scrutinising refund claims. Refund outflows have slowed in FY26, reflecting a more cautious approach to processing cases where deductions or exemptions appear inflated or unsupported.
Tax officials have previously indicated that delays in refunds are often linked to checks on wrongful or exaggerated claims, with assessments being examined more thoroughly before refunds are released.
Voluntary compliance showing results
The government says the trust-based approach is already yielding results. In FY26, more than 2.1 million taxpayers have updated returns for earlier assessment years, paying over Rs 2.5 billion in additional taxes. For the current assessment year, over 1.5 million ITRs have already been revised.
For taxpayers, the takeaway is clear: deduction claims, especially political donations, are increasingly visible to data analytics systems. Reviewing returns now may help avoid follow-up queries, additional tax costs, or prolonged scrutiny later.
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