The CBDT NUDGE Drive has officially entered its second phase, targeting taxpayers who may have undisclosed foreign assets that were not properly reported in their Income Tax Returns (ITRs). Starting November 28, 2025, the Central Board of Direct Taxes (CBDT) began sending SMS and email alerts to Indian residents who hold foreign assets but might have missed reporting them correctly for Assessment Year 2025–26.
This initiative, known as CBDT NUDGE Drive NUDGE—Non-intrusive Usage of Data to Guide and Enable, aims to improve voluntary tax compliance without direct enforcement actions. The drive is based on data gathered from the Automatic Exchange of Information (AEOI) system for FY 2024–25 (CY 2024), which helps tax authorities identify high-risk cases.
What Triggered the CBDT NUDGE Drive?
In its official press release, the CBDT NUDGE Drive confirmed that discrepancies were found in several ITR filings where foreign assets appeared to exist but were not disclosed under Schedule FA or Schedule FSI. These cases are flagged as high-risk, and taxpayers are now encouraged to review and correct their ITRs before it is too late.
Taxpayers who do not correct these omissions by December 31, 2025 may face severe consequences under the Income-tax Act, 1961, and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
What Are Undisclosed Foreign Assets?
Any foreign asset held by an Indian resident must be reported, regardless of whether it generates income.
Foreign assets include:
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Foreign bank accounts (savings, current, NRE/foreign accounts)
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Shares in foreign companies
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ESOPs from overseas employers
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Mutual funds or ETFs abroad
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Real estate or property outside India
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Crypto assets or digital tokens held on foreign exchanges
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Foreign insurance policies
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Money held in depository or custodial accounts
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Any other financial interest in a foreign entity
Even jointly-held assets must be reported proportionately.
Which ITR Form Should You Use?
If you hold foreign assets, you cannot file ITR-1 or ITR-4.
You must file:
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ITR-2 (for individuals/HUFs without business income)
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ITR-3 (for individuals/HUFs with business income)
Where to Report Foreign Assets?
The CBDT NUDGE Drive emphasizes accurate reporting in two critical ITR schedules:
1. Schedule FA (Foreign Assets)
Schedule FA captures your foreign assets for the calendar year (Jan–Dec), not the financial year.
You must report:
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Type of foreign asset
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Country
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Name of institution
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Account number or unique ID
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Opening/Acquisition date
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Peak value during the year
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Closing value as on Dec 31
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Income generated from the asset
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Income offered to tax in India
2. Schedule FSI (Foreign Source Income)
This schedule reports foreign income such as:
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Foreign bank interest
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Dividends from foreign companies
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Capital gains from foreign securities
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Rent from property overseas
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ESOP-related income
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Overseas salary or remuneration
You must disclose:
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Nature of income
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Country
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Amount earned
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Tax paid abroad
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DTAA relief claimed (if any)
3. Schedule TR (Tax Relief)
If you have paid tax abroad, India allows:
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Section 90 – Tax relief under Double Taxation Avoidance Agreement (DTAA)
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Section 91 – Tax relief if no DTAA exists
Supporting documents required:
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Proof of tax paid abroad
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Foreign tax withholding statement
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Foreign tax authority certificate
Penalties for Not Reporting Foreign Assets
Non-reporting or misreporting of foreign assets triggers some of India’s harshest tax penalties under the Black Money Act:
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Penalty of ₹10 lakh per year for undisclosed foreign assets
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Tax @ 30% of the asset value
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Prosecution in severe cases, including imprisonment
Even genuine mistakes can have serious consequences if not corrected before the deadline.
What Should Taxpayers Do Now?
The CBDT NUDGE Drive is a reminder, not a punishment. Taxpayers should:
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Review SMS/email alerts received from the tax department
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Check all foreign assets held in 2024 globally
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Verify ITR filings, especially Schedule FA & FSI
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File a revised return before December 31, 2025 if any detail is missing
The CBDT NUDGE Drive is designed to help taxpayers comply with foreign asset reporting requirements in a transparent and non-intrusive manner. With growing global data-sharing systems like AEOI, under-reporting of foreign assets is easily detectable. The December 31, 2025 deadline should not be ignored—timely correction can help avoid steep penalties and legal action.
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