The Central Board of Direct Taxes’ latest press note on its “2nd NUDGE” initiative reads like a polite reminder, but the sub-text is chillingly clear. The CBDT has announced that, from 28 November 2025, SMS and email alerts will go out to a fresh batch of “high-risk” taxpayers where foreign assets appear in global data but not in their Indian income-tax returns for AY 2025-26. These taxpayers are being “nudged” to review and, if necessary, revise their returns by 31 December 2025, with a pointed reminder that disclosures in Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income) are mandatory under both the Income-tax Act and the draconian Black Money Act.
Behind the soft vocabulary of “Non-intrusive Usage of Data to Guide and Enable (NUDGE)” lies a very hard proposition: the Income Tax Department now has both the international feeds and the domestic technology to see through most offshore games that resident Indians and some NRIs have relied on for years. This is not a new law, but a new way of using data, in an efficient but non-discriminatory manner. The first NUDGE campaign, launched in November 2024, led tens of thousands of taxpayers to revisit their filings; foreign assets worth tens of thousands of crores and substantial additional foreign income were voluntarily disclosed, and many quietly corrected their residential status from “resident” to “non-resident”. That success has encouraged the CBDT to press ahead with NUDGE2, this time focusing on roughly 25,000 high-risk cases where foreign accounts or investments show up abroad but nowhere in Schedule FA.
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What the press note really means
Read carefully, the press note does three things at once. First, it formally informs taxpayers that automatic exchange of information (AEOI) data for FY 2024-25 have been mined to identify cases where foreign assets “appear to exist” but are missing in ITRs for AY 2025-26. Second, it converts what used to be a quiet data-matching exercise into a structured, time-bound compliance window: those who respond and correct their returns by 31 December 2025 are effectively being offered a chance to limit the fallout to back taxes, interest and civil penalties.
Third, by explicitly tying the campaign to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, it reminds taxpayers that wilful non-disclosure can trigger a flat 30% tax on the value of the asset, a penalty of up to three times that tax (taking the effective hit to 120%), and separate penalties of ₹10 lakh per year per undisclosed asset, plus prosecution in serious cases.
For anyone who still believes that an old foreign bank account, a Dubai company or a Swiss portfolio can be kept permanently outside Indian taxman’s line of sight, this is the moment of reckoning.
“Do not treat these notices as routine”: Avinash Gupta’s warning
Speaking exclusively to The KBS Chroncile, Avinash Gupta, a Delhi-cum-Dubai-based chartered accountant who regularly advises NRIs on Indian tax and foreign asset issues, calls NUDGE2 “a very welcome but very serious initiative.” In his words, these messages must not be treated as routine system-generated emails to be ignored or casually replied to. The department is not sending them at random – they are based on concrete information received from abroad and processed through analytics.
Mr Gupta points out that some recipients of such notices are not hardened tax evaders at all, but people who sit in complicated fact situations that the raw data do not fully capture. One recurring category, he says, is Indian nationals who are merely authorised signatories to legitimate overseas accounts – for example, a director, manager or family member signing on behalf of a foreign company, trust or fund that is fully compliant in its home jurisdiction.
“In these cases,” he stresses, “the correct response is to state clearly that you are only an authorised signatory, attach supporting documents, and identify the real account-holding entity. You are not required to disclose that foreign entity as your own asset in Schedule FA, but you must not ignore the communication.”
A second group comprises individuals who have genuinely left India and acquired non-resident status – permanent residents in Canada, US green-card holders and the like – but never informed the Indian tax authorities or continued filing as residents out of habit or poor advice. “They too may surface in AEOI data,” Mr Gupta notes, “and the system will flag the mismatch between their reported residential status and foreign holdings. Here the right course is to correct your status to NRI, regularise past filings where needed, and explain the transition.”
Third, there are cases where the foreign assets or income are entirely legitimate and have actually been disclosed overseas, and even in India in some form, but the reporting in Schedule FA/FSI is incomplete or technically defective. These, he says, can often be resolved through a careful, well-documented reply setting out the facts, pointing to earlier Indian disclosures and, where necessary, filing a revised return.
And finally, there are the cases the campaign truly targets: resident Indians and erstwhile residents who have parked undeclared wealth abroad on the assumption that “nobody will ever know”. For them, Mr Gupta’s advice is blunt: if information exchange has already exposed an undisclosed asset, it is far wiser to pay up and settle than to gamble with being treated as an economic offender or fugitive under the Black Money Act.
A surveillance web around offshore money
What has changed in the last few years is visibility. India now receives systematic information on overseas bank accounts, custodial holdings, insurance products and investment entities linked to Indian residents from a large number of partner jurisdictions under the OECD’s Common Reporting Standard, and from the United States under FATCA. That data set includes names, addresses, account numbers, balances and income flows.
CBDT is feeding this information into analytics engines that also mine domestic data: ITRs, TDS/TCS trails, PAN-linked bank accounts, property registrations, capital-market records and even corporate payrolls. Discrepancies between the global and domestic pictures – a high-balance foreign account against a modest Indian salary, for instance, or foreign dividends with no matching declaration in Schedule FSI – are flagged for further scrutiny and, increasingly, for NUDGE communications.
Parallel efforts on the enforcement side have created specialised units focused exclusively on undisclosed foreign income and assets. In other words, when an email refers to “possible foreign assets not disclosed in your return”, the safest working assumption today is that the department already has your data from at least one international or domestic source. Ignoring the message or tossing off a defensive one-line reply is no longer bravado; it is reckless.
Classical evasion tricks – and why they may now fail
The classic pattern, familiar to every practitioner, is the returning professional who keeps an old foreign bank or brokerage account alive after resuming residence in India and then quietly uses it as a parking lot. Fees for consulting work, “gifts” from relatives and unreported business receipts go straight into that account, while Indian returns pretend the account does not exist. For years this depended on the comfort that no one outside the foreign bank and the taxpayer knew of the account. Under CRS and FATCA, that comfort is gone: if you are a tax resident of India today, your foreign financial institution is expected to report your account details to its home tax authority, which in turn shares the information automatically with India.
A second long-favoured strategy has been to route funds through an offshore company or trust in Dubai, Singapore, Mauritius or the Caribbean, with the Indian individual as beneficial owner. Money remitted under the Liberalised Remittance Scheme – or, worse, sent through informal hawala channels – is layered through this structure and invested abroad, while nothing appears in Schedule FA. Beneficial-ownership rules, tighter anti-money-laundering standards and international pressure on tax havens mean that many of these structures now generate reportable data. Where the Indian individual was resident when the foreign asset was acquired, amendments to the Black Money Act allow the tax department to reach back and tax that asset even if the person has since become an NRI.
On the trade side, exporters have long used trade-based money-laundering techniques to convert legitimate export proceeds into offshore wealth. Under-invoicing is one crude method: goods are shipped at full price, but the invoice presented to Indian authorities is for a lower amount, with the balance diverted to an overseas account controlled by the exporter or a related party.
More sophisticated schemes use intermediary “brokerage” companies controlled by the Indian promoter in low-tax jurisdictions. The Indian entity sells at artificially low prices to this intermediary, which then bills the real buyer at market rates; the extra margin accumulates abroad. Studies on illicit financial flows suggest that such trade mis-invoicing has been one of the largest channels for moving unaccounted money out of developing countries, including India.
Today, however, customs data, banking records and mirror statistics from trading partners are routinely cross-checked. India’s own financial intelligence and enforcement agencies have begun to crack major trade-based laundering rackets, including export houses using third-country routes to move funds disguised as legitimate trade. Structures built on shell companies, fake invoices and fictitious addresses now leave a digital footprint that is increasingly hard to erase.
Why NRIs are nervous too
The headline fear is, of course, for resident Indians who have used these techniques to stash black money abroad. But NUDGE2 also unsettles segments of the NRI community for more nuanced reasons. First, the Black Money Act is not confined to those who are residents today. If you were a resident in India when you earned the foreign income or created the asset, you can be brought within the Act’s ambit even if you are non-resident now. Many professionally successful NRIs built their overseas savings while living and working abroad, but some assets – especially legacy accounts or investments made during transitions in and out of India – may straddle residential status periods and therefore raise difficult questions.
Second, AEOI and CRS reporting is residence-based, not citizenship-based. It is entirely possible for someone who believes they are a clean, long-term NRI to be reported as an Indian tax resident by a foreign institution that still has an old Indian address on file or has not properly captured their new tax identification number. That mismatch can lead to a NUDGE notice despite the absence of any intent to conceal. Here again, the remedy is not panic but precision: such taxpayers should work with their advisers to reconcile residence definitions, file status-correction requests with the Indian department where needed, and provide documentary proof of non-residence.
Third, even wholly legitimate NRI accounts can create headaches for resident relatives who are joint holders or mandate-holders. A son or daughter in India who operates a parent’s foreign account under a power of attorney may find their PAN popping up in information feeds. If their Indian return shows no corresponding foreign interest, the system will inevitably become curious. Mr Gupta’s advice is that such resident signatories must be prepared to demonstrate that the beneficial ownership lies with the NRI, not with them.
What should you do if you are nudged?
For anyone with foreign accounts, investments or export proceeds parked abroad, the safest approach now is straightforward. Treat every SMS or email from the tax department referring to foreign assets or income as serious business. Do not delete it, do not delegate it to a casual reply, and do not assume it is a scam simply because it landed in your inbox.
Instead, assemble all relevant documents – bank statements, portfolio reports, contracts, remittance records – and sit down with a chartered accountant or experienced tax counsel who understands both Indian and international reporting rules. If you have genuinely omitted a foreign asset or income stream that ought to have been disclosed as a resident, use the NUDGE window to correct your return fully and honestly and to pay whatever tax, interest and statutory penalties are due. Given the Black Money Act’s combination of 30% tax, a 90% penalty, hefty fixed penalties and the prospect of prosecution in egregious cases, the arithmetic is brutal but simple: regularising now is almost always cheaper than fighting later.
If, on the other hand, you are merely an authorised signatory, a joint holder with no beneficial interest, or someone whose true status is NRI and whose overseas assets are legitimate and properly disclosed elsewhere, you still cannot ignore the notice. You must reply within time, explain the facts calmly, and back them up with documents – corporate share registers, board resolutions, foreign tax returns, residence permits and so on. An aggressive, argumentative tone helps no one; a clear factual narrative does. And, do not hesisitate to consult a competent tax professional specialising in overseas and international taxation.
The end of “nobody will ever know”
CBDT’s NUDGE2 campaign is being sold as a trust-based, technology-driven effort to “guide and enable” taxpayers. That is partly true. But it is also a quiet announcement that the old world of casual offshore evasion is ending. With automatic information exchange, sophisticated analytics and a stringent Black Money Act in the background, resident Indians – and many NRIs with historic Indian links – can no longer rely on distance, complexity or secrecy to protect undeclared foreign wealth.
Those who take the hint now and clean up their offshore balance-sheets will pay a painful but finite price. Those who treat NUDGE2 as just another government email may find that the next communication is not a nudge but a knock.