CBDT launches NUDGE Phase 2: Taxpayers urged to review foreign assets and update ITRs by Dec 31

The Central Board of Direct Taxes (CBDT) announced the launch of the second phase of the NUDGE initiative on Thursday, designed to promote voluntary compliance in the reporting of foreign assets and income.

According to the official release, the initiative will include a series of SMS and email alerts that the CBDT will initiate on November 28, 2025, to the taxpayers who are identified through the Automatic Exchange of Information (AEOI) analysis for the financial year 2024-25 in compliance with a government release.

The alerts will notify the taxpayers to check and correct their Income Tax Returns (ITRs) for the assessment year (AY) 2025-26 before December 31, 2025, in order to be free of any penal consequences.

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The Finance Ministry states that the sophisticated data analysis of AEOI data has revealed several high-risk cases where foreign assets seem to exist but have not been disclosed in the tax returns.

One of the main features of the campaign will be the push for precise reporting in the Schedule for Foreign Assets (FA) and the Schedule for Foreign Source Income (FSI), which are both obligatory under the Income-tax Act, 1961, and the Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015.

The CBDT said that the project is based on its PRUDENT method, which puts an emphasis on professionalism, taking responsibility, understanding of the respective laws and transactions, due diligence, effective but understanding enforcement, non-intrusive administration and the use of technology for processes.

The Board said that the strategy is in line with the government's Viksit Bharat vision that emphasises the three areas of transparency, accountability, and voluntary compliance.

The Central Board of Direct Taxes (CBDT) further claims that the NUDGE framework is a representation of its intention of a tax administration that is technology-enabled, data-driven and, most importantly, taxpayer-centric.

What is the NUDGE campaign?

The NUDGE campaign, which was the first of its kind, took place on November 17, 2024 and caused a total of 24,678 taxpayers to revisit their returns. These taxpayers, after having been prompted based on the Automatic Exchange of Information (AEOI) inputs, revealed foreign assets amounting to Rs 29,208 crore and foreign-source income of Rs 1,089.88 crore.

Information regarding the foreign financial assets of its residents, under the Common Reporting Standard (CRS), flows to India from partner jurisdictions and under FATCA from the US. The data gathered is used by the tax department to spot mismatches and steer the taxpayers through timely compliance.

The CBDT has advised all the eligible taxpayers to take this opportunity to get into full compliance with the statutory reporting requirements. More information on CRS, FATCA and the disclosure requirements under Schedules FA and FSI can be found on the official website of the Income Tax Department.

What will the second phase of the NUDGE campaign have?

According to the sources in CBDT, the second phase of the NUDGE initiative will focus on the following:

1) Initially, select high-risk cases of 25,000 (approximately) will be targeted.

2) In the second phase, starting from mid-December, the NUDGE campaign would be expanded to cover other cases as well to improve the compliance ecosystem.

3) Big corporates whose employees have foreign assets and have not disclosed are also being onboarded to sensitise taxpayers.

4) Industry bodies, ICAI and associations have also been requested to create awareness.

5) ⁠Black Money Act prescribed a penalty of 10 lakh for non-disclosure of foreign assets apart from a tax of 30 per cent and a penalty of 300 per cent on the tax payable.

6) Income Tax Department assessed approximately 1,080 cases, raising demand of Rs. 40,000 crore (approx.) till June 2025.

7) ⁠Searches were also conducted by the Department in Delhi, Mumbai and Pune, based on data received under CRS and spontaneous exchange of information on investments in Dubai, unearthing undisclosed foreign assets and income worth several hundreds of crores.

8) The department is taking information received from the CRS /FATCA framework very seriously.

9) After NUDGE, non-compliant cases may be taken up for further scrutiny and verification.