Central Board of Direct Taxes (CBDT) Launches Second 'NUDGE' Drive to Boost Foreign Asset Disclosure Compliance
SDG 16: Peace, Justice and Strong Institutions | SDG 17: Partnerships for the Goals
Institutions: Ministry of Finance | Central Board of Direct Taxes (CBDT)
The Central Board of Direct Taxes (CBDT) has announced the launch of the second phase of its NUDGE (Non-intrusive Usage of Data to Guide and Enable) initiative, aimed at significantly strengthening voluntary compliance in the reporting of foreign assets and income. This technology-enabled, data-driven approach is guided by the CBDT’s PRUDENT tax administration philosophy, which prioritizes non-intrusive engagement and trust.
The initiative is built on actionable intelligence derived from the Automatic Exchange of Information (AEOI) framework, specifically data received under the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA). Advanced data analytics for FY 2024–25 identified thousands of high-risk cases where taxpayers appear to hold foreign assets but did not report them in their Income Tax Returns (ITRs) for AY 2025–26.
Action & Deadline: Starting November 28, 2025, the CBDT will issue SMS and email alerts to identified taxpayers. Taxpayers are advised to review and revise their ITRs by December 31, 2025, to ensure correct reporting in Schedule Foreign Assets (FA) and Schedule Foreign Source Income (FSI).
Consequence of Non-Compliance: Failure to comply will lead to the escalation of cases for scrutiny and verification, risking penal consequences under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Non-disclosure of foreign assets attracts a penalty of ₹10 lakh, in addition to a 30% tax and 300% penalty on the tax payable.
Positive Outcome of Phase 1: The inaugural NUDGE campaign (November 2024) yielded positive outcomes, leading 24,678 taxpayers to revisit their returns and disclose foreign assets worth ₹29,208 crore, along with foreign-source income of ₹1,089.88 crore.
Policy Relevance
The continuation of the NUDGE initiative reinforces the government’s commitment to building a transparent and accountable tax ecosystem aligned with the Viksit Bharat vision. By leveraging global transparency frameworks (AEOI/CRS/FATCA) and advanced analytics, the policy reduces information asymmetry between the taxpayer and the tax authority. The large disclosure resulting from the first NUDGE campaign (₹29,208 crore in foreign assets) demonstrates the effectiveness of non-intrusive compliance nudging as a primary tool for revenue mobilization before escalating to costly and time-consuming enforcement actions.
What is the Automatic Exchange of Information (AEOI)?→ The Automatic Exchange of Information (AEOI) refers to the systematic and periodic transmission of taxpayer information between partner jurisdictions without request. India participates in AEOI through the Common Reporting Standard (CRS) (OECD framework) and FATCA (with the US). This framework is critical for international tax transparency, enabling the CBDT to obtain data on the overseas financial holdings of Indian residents to prevent tax evasion and identify compliance discrepancies.
Relevant Question for Policy Stakeholders: How will the CBDT leverage the positive compliance response of the NUDGE initiative to design future incentives that encourage the consistent disclosure of foreign income without needing annual, targeted intervention?
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