CBDT Launches 2nd NUDGE Initiative to Improve Voluntary Compliance of Foreign Assets: A Step Toward Transparency and Responsible Tax Reporting
The Central Board of Direct Taxes (CBDT) has announced its second phase of the NUDGE initiative, aiming to strengthen voluntary tax compliance specifically in relation to undisclosed foreign assets. This campaign, launched on 27th November 2025, is part of the government’s larger strategy to promote transparency, improve tax compliance, and curb tax evasion, particularly involving foreign income and overseas-held assets.
The initiative leverages advanced data analytics and information received from global reporting frameworks like the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA). The approach remains non-intrusive and taxpayer-centric, encouraging self-correction rather than immediate penal action.
This article explains the purpose, background, working mechanism, and impacts of the second NUDGE campaign in simple terms, making it easier for taxpayers to understand their responsibilities regarding foreign asset reporting.
Understanding the Concept of NUDGE Initiative
The NUDGE initiative stands for Non-intrusive Usage of Data to Guide and Enable taxpayers. The core idea is to gently prompt individuals to correct their filings if any foreign income or asset details are missed or inaccurately reported. Rather than sudden scrutiny or penalties, CBDT focuses on giving taxpayers a chance to review, declare, and comply voluntarily.
The government’s goal is to create an ecosystem of trust-based tax administration. Instead of perceived enforcement, taxpayers are guided using pre-verified information obtained from international tax-exchange systems.
Background of the First NUDGE Campaign
The first NUDGE campaign was launched on 17th November 2024. It was targeted at taxpayers whose foreign financial information was reported by other countries under the Automatic Exchange of Information (AEOI) framework. Many cases showed that such foreign assets were not disclosed in Income Tax Returns (ITRs) for Assessment Year 2024–25.
The outcome of the first phase was significant, as over 24,678 taxpayers revisited and corrected their tax returns. Disclosure of previously unreported foreign assets amounted to ₹29,208 crore, generating a foreign-source income declaration of ₹1,089.88 crore. The initiative demonstrated that when guided, taxpayers are willing to correct their tax compliances voluntarily.
Why the Second NUDGE Campaign Was Launched ?
Based on analysis of financial data received from global reporting agencies for FY 2024–25 (Calendar Year 2024), CBDT identified several high-risk cases where foreign assets or income likely exist but were not reported in the Income Tax Returns filed for AY 2025–26.
To address these discrepancies proactively, CBDT has launched the second phase of the NUDGE initiative. Messages via SMS and email will be sent beginning 28th November 2025, urging select taxpayers to verify and revise their returns before 31st December 2025. Timely compliance can help taxpayers avoid penalties, prosecution, or reopening of assessments.
What CBDT Wants Taxpayers to Do ?
The main objective of this initiative is to ensure accurate reporting of:
- Schedule FA (Foreign Assets)
- Schedule FSI (Foreign Source Income)
This is mandatory under the Income-tax Act, 1961, and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Taxpayers are encouraged to:
- Review financial statements or documentation relating to overseas assets.
- Verify whether the foreign income and asset details have been reported correctly.
- Revise or update their Income Tax Return if omitted or inaccurately reported.
Legal and Compliance Implications
Failing to correctly disclose foreign assets can lead to:
- Severe penalties under the Black Money Act
- Prosecution with imprisonment extending up to 7 years
- Reopening of assessments
- Interest and late fees
However, through this initiative, CBDT provides a risk-free window for taxpayers to correct their filings without immediate enforcement.
Role of Information Exchange Agreements
India actively participates in international financial transparency networks, including:
- Common Reporting Standards (CRS)
- Foreign Account Tax Compliance Act (FATCA)
- Automatic Exchange of Information (AEOI) agreements with multiple countries
These frameworks ensure that financial institutions across the globe share details of Indian residents holding foreign bank accounts, investments, immovable property, trusts, or other financial interests.
This shared data enables CBDT to match taxpayer filings with reported information—helping identify mismatches, tax evasion, or non-reporting.
Alignment with Vision of Viksit Bharat
The NUDGE initiative reflects India’s commitment to a transparent, modern, and citizen-friendly tax administration model. By building a compliance culture instead of an enforcement-first approach, the government aims to:
- Increase tax revenue without increasing tax rates
- Reduce information gaps
- Strengthen fairness in the tax system
- Promote responsible citizenship
CBDT’s adoption of technology and analytics supports the larger vision of Viksit Bharat—a self-reliant and digitally empowered nation.
The second round of the CBDT NUDGE initiative is a strategic step toward strengthening voluntary tax compliance, especially for foreign assets and overseas income reporting. With increasing global transparency and automated information sharing, undisclosed assets are more difficult to hide. Instead of penalizing taxpayers immediately, the government is offering an opportunity to correct filings voluntarily.
Taxpayers who receive communication under this initiative should take it seriously and ensure compliance before the deadline of 31st December 2025. Timely action will not only avoid penalties and legal consequences but also contribute to a fair, transparent, and efficient tax system.
