The Central Board of Direct Taxes (CBDT) is stepping up its efforts to ensure that taxpayers comply with disclosing foreign income and assets by sending out SMS and email alerts. This action is part of the second phase of the NUDGE campaign, which commenced on November 28, 2025.
Taxpayers who have not reported income or assets from overseas for the financial year are being encouraged to review and amend their Income Tax Returns (ITRs) by December 31, 2025, to avoid penalties. Following the initial NUDGE campaign, which resulted in a substantial number of disclosures, the CBDT has launched this initiative.
The first phase of the NUDGE campaign, initiated on November 17, 2024, led to 24,678 taxpayers revising their returns for Assessment Year (AY) 2024-25. This resulted in the disclosure of foreign assets valued at Rs 29,208 crore and foreign-source income totaling Rs 1,089.88 crore. For the current assessment year, the board has identified numerous high-risk cases where undisclosed foreign assets may exist. However, the exact number of such cases has not been made public yet.
Indian taxpayers are obligated by law to declare all foreign assets and income from foreign sources in their ITR forms. This reporting should be in line with the calendar year, covering January 1 to December 31 of the relevant period. For the current cycle, taxpayers must ensure they have reported all foreign income and assets for the calendar year 2024, as mandated by the Income-tax Act, 1961, and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Taxpayers holding foreign assets or overseas income are advised to use the appropriate ITR form, complete Schedule Foreign Assets (FA) and Foreign Source Income (FSI), and submit Form 67 if seeking relief for taxes paid abroad. For instance, investors who have acquired US stocks should use Form ITR-2 or ITR-3, as Forms ITR-1 and ITR-4 are not suitable. Accurate reporting is crucial, as Schedule FA encompasses all foreign assets, while Schedule FSI is dedicated to income sourced internationally.
The Indian government has robust mechanisms for monitoring foreign investments, utilizing data from the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA). These frameworks enable authorities to access detailed information on financial accounts held by Indian residents in foreign countries. Failure to disclose foreign assets can result in significant penalties, potentially amounting to several lakhs. Taxpayers have until December 31, 2025, to modify their returns for foreign income received in the 2024 calendar year as part of the ongoing compliance push.