CBDT Launches Second Phase of NUDGE Initiative to Boost Foreign Asset Compliance
CBDT launches Phase 2 of its NUDGE initiative, alerting taxpayers on unreported foreign assets and income to strengthen voluntary compliance and data-driven tax governance.
Introduction: A New Push for Transparent Tax Reporting
In a significant move aimed at tightening disclosure norms around offshore wealth, the Central Board of Direct Taxes (CBDT) has rolled out the second phase of its NUDGE initiative—a data-driven campaign designed to encourage taxpayers to voluntarily correct discrepancies in their income returns. With a December 31 deadline looming, thousands of individuals who may have under-reported or failed to disclose foreign assets are expected to receive alerts urging them to revisit their filings.
Context & Background: Building on Global Information Networks
India’s tax authorities now operate within an increasingly interconnected global financial ecosystem—one in which undisclosed foreign wealth is becoming far harder to hide. Through the Automatic Exchange of Information (AEOI) framework, partner jurisdictions around the world routinely share details of foreign financial assets held by Indian residents. Similar information flows from the United States under FATCA (Foreign Account Tax Compliance Act).
These global reporting systems provide Indian authorities with deep visibility into offshore accounts, investments, and income streams. Leveraging this information, the CBDT launched the first NUDGE campaign in November 2024, directing targeted SMS and email alerts to taxpayers whose returns did not match data received through AEOI.
The outcome was significant: 24,678 taxpayers revised their filings, collectively disclosing foreign assets worth ₹29,208 crore and foreign-source income exceeding ₹1,089 crore.
That success appears to have set the stage for an even more ambitious second phase.
Main Developments: CBDT Flags High-Risk Cases for FY 2024–25
The CBDT’s latest analysis of AEOI data for FY 2024–25 has uncovered a new set of high-risk discrepancies. These cases involve individuals who appear to hold foreign assets but failed to report them in their Income Tax Returns (ITRs) for Assessment Year 2025–26.
To bridge this gap, the CBDT has launched NUDGE Phase 2, under which:
- SMS and emails will be issued to potentially non-compliant taxpayers.
- Individuals will be advised to review and correct their filings, especially Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income).
- The last date for revising returns is December 31, beyond which taxpayers may face penalties under the Income-Tax Act, 1961 or the stricter Black Money Act, 2015.
This proactive campaign reflects the government’s shift toward non-intrusive compliance nudging, rather than conventional enforcement-first approaches.
Expert Insight: “This Is Data-Driven Tax Administration in Action”
Tax policy analysts note that the NUDGE initiative represents a new era of trust-based and technology-enabled tax governance.
“India’s tax administration is consciously moving away from intrusive scrutiny and prolonged litigation,” said a senior tax consultant based in New Delhi. “With global financial data at its disposal, the CBDT can now identify discrepancies early and give taxpayers an opportunity to self-correct. This reduces friction and builds a more transparent system.”
Trainers working with Civil Services aspirants point out that the initiative also embodies the broader PRUDENT framework guiding India’s tax reforms—an approach rooted in professionalism, understanding of taxpayer realities, data-backed decision-making, and effective enforcement delivered with empathy.
Public Response: A Mix of Relief and Realignment
For many taxpayers, the NUDGE emails act as a wake-up call—one that offers a chance to correct mistakes before they escalate into legal challenges.
Tax practitioners say clients often fail to report foreign assets due to:
- Lack of clarity on reporting requirements
- Misinterpretation of what qualifies as “foreign assets”
- Negligence in tracking small or dormant overseas holdings
- Assumption that foreign income below a threshold is exempt from reporting
The CBDT’s alerts, they say, are prompting individuals to reassess their international portfolios, recheck old accounts, and consult advisors on compliance norms.
Impact & Implications: A Growing Push for Voluntary Compliance
The launch of NUDGE Phase 2 carries several implications for the broader tax ecosystem:
1. Strengthening Voluntary Compliance
By alerting taxpayers before initiating punitive proceedings, the CBDT is encouraging self-correction instead of adversarial enforcement.
2. Deepening Trust in a Non-Intrusive System
The initiative reinforces the idea of a taxpayer-centered administration—one that is firm on compliance but empathetic in process.
3. Better Revenue Mobilization
Accurate reporting of foreign assets expands the tax base and enhances revenue without resorting to aggressive audits.
4. Reducing Information Asymmetry
With CRS, FATCA, and advanced analytics, authorities now possess granular insights into offshore wealth, reducing the chances of underreporting.
5. Setting the Stage for Future Campaigns
Given the impressive results from the first NUDGE campaign, similar targeted nudges may become a recurring feature of India’s compliance strategy.
Conclusion: NUDGE Phase 2 Marks a New Chapter in Tax Transparency
With the second phase of the NUDGE initiative, India’s tax administration continues its shift toward a tech-powered, trust-based, and data-smart governance model. As global information-sharing makes financial secrecy nearly impossible, the CBDT is positioning itself not just as an enforcer, but as an enabler—guiding taxpayers toward accuracy and compliance.
For individuals holding foreign assets or earning income abroad, this campaign serves as a timely reminder: transparency is no longer optional, and the window for voluntary correction is open only until December 31.
Disclaimer :This article is intended for informational and educational purposes only. It should not be considered financial or legal advice. Taxpayers are advised to consult qualified professionals for guidance related to compliance, foreign asset reporting, and tax regulations.