CBDT’s Nudging Campaign: Over 30,000 Taxpayers Declare Foreign Assets Worth Rs 29,000 Crore

Introduction

The Central Board of Direct Taxes (CBDT) has achieved a significant milestone through its innovative ‘Nudging Campaign’, leading to 30,161 taxpayers declaring foreign assets worth over Rs 29,000 crore. The campaign, aimed at encouraging voluntary compliance, has seen a remarkable response, reinforcing India’s evolving tax transparency framework.

Key Outcomes of the Campaign

According to government sources, the campaign yielded the following results:

• 24,678 taxpayers reviewed and revised their Income Tax Returns (ITRs).
• 5,483 taxpayers filed belated returns for Assessment Year (AY) 2024-25, declaring foreign assets worth Rs 29,208 crore and additional foreign income of Rs 1,089.88 crore.
• 6,734 taxpayers revised their residential status from Resident to Non-Resident.
• Overall, 62% of the targeted taxpayers voluntarily responded by declaring foreign assets and income.

Growth in Voluntary Disclosures

The number of taxpayers voluntarily disclosing foreign assets has seen substantial growth:

• 60,000 taxpayers in AY 2021-22
• 2,31,452 taxpayers in AY 2024-25
• A 45.17% increase in voluntary disclosures compared to AY 2023-24

Data Sharing and Compliance Initiatives

India is one of the early adopters of the Common Reporting Standards (CRS) and has been receiving financial data since 2018 for the calendar year 2016 onwards. In September 2024, India received financial information from 108 countries, detailing foreign accounts, interest, and dividend income. This data-sharing was done under:

• Common Reporting Standards (CRS) - Global framework
• Foreign Accounts Tax Compliance Act (FATCA) - Agreement with the US

Using this data, the Income Tax Department (ITD) launched the Compliance-Cum-Awareness Campaign on November 17, 2024, urging taxpayers to declare their foreign income and assets in revised ITRs for AY 2024-25.

Awareness and Outreach Measures

To ensure widespread awareness and compliance, the CBDT adopted a system-driven and taxpayer-friendly approach, incorporating:

• 19,501 taxpayers received direct SMS and emails, urging them to revise ITRs.
• 30 outreach sessions, seminars, and webinars across India, engaging over 8,500 participants.
• Distribution of pamphlets, brochures, and social media awareness campaigns (Samvaad sessions).
• Step-by-step guidance for taxpayers on filling Schedule Foreign Assets and Schedule Foreign Source Income.

Trust First Approach: Voluntary Compliance Over Enforcement

The CBDT campaign is built on the Trust First approach, prioritizing voluntary compliance rather than immediate enforcement. Key aspects of this initiative include:

• Encouraging proactive disclosures before formal verification processes.
• Fostering transparency, education, and cooperation between tax authorities and taxpayers.
• Ensuring a compliance-friendly environment, reducing intrusive tax enforcement actions.

The Road Ahead: Strengthening India’s Tax Compliance Framework

The success of this campaign marks a transformative shift in India’s tax compliance framework, ensuring fairness and responsible financial disclosures. As India strengthens its financial monitoring mechanisms, initiatives like these will continue to play a crucial role in maintaining fiscal integrity and international compliance.

Conclusion

The CBDT’s Nudging Campaign has set a precedent for proactive compliance, showcasing the power of trust-based tax administration. With continued awareness and evolving regulatory frameworks, India is positioning itself as a leader in global tax transparency and financial accountability.