The Income Tax department has advised taxpayers to revise their Income Tax Returns by December 31 if they have not disclosed foreign income and overseas assets for the previous financial year.
Central Board of Direct Taxes (CBDT) is urging taxpayers with undisclosed foreign income to come clean and reveal their overseas assets under the NUDGE campaign — Non-intrusive Usage of Data to Guide and Enable (NUDGE).
This is the second NUDGE campaign, under which the CBDT will issue SMSs and emails from November 28, 2025, to such taxpayers, urging them to review and revise their returns on or before December 31, 2025, to avoid penal consequences.
“CBDT’s move is likely to push many wealthier taxpayers to regularize their positions because they have realized that the tax department already had access to third-party data. The least risky course of action becomes proactively correcting past non-disclosures and tightening internal documentation around source of funds, residential status, and tax positions on foreign source income, rather than waiting for the department to initiate scrutiny or launch proceedings under the Black Money Act,” says Rahul Charkha, Partner, Economic Laws Practice.
The first NUDGE campaign that commenced on 17th November 2024, successfully prompted 24,678 taxpayers to revise their returns for AY 2024-25, resulting in the disclosure of foreign assets totaling Rs 29,208 crore and foreign-source income of Rs 1,089.88 crore.
For AY 2025-26, the Central Board of Direct Taxes (CBDT) has identified several high-risk cases where foreign assets appear to exist but have not been reported in the ITRs filed; however, the actual number is yet to be published by them.
Foreign Income Disclosures
Indian taxpayers are required to disclose overseas assets and all income received from foreign sources in their income tax return forms. The reporting of the overseas assets and foreign income is to be made on a calendar basis i.e. January 1 and December 31 of the relevant year. For example, for the FY 2024-25 or the Assessment year 2025-26, the reporting of assets and income will relate to the calendar year 2024.
ITR Filing with Foreign Income
Taxpayers with overseas assets and foreign income must exercise caution when filing their Income Tax Returns (ITRs). The campaign aims to facilitate correct reporting in Schedule Foreign Assets (FA) and Foreign Source Income (FSI) in ITRs.
They must select the appropriate ITR form, complete Schedule FA and Schedule CG, and file Form 67 to ensure that all disclosures related to foreign assets and income are accurately reported to tax authorities.
Indian investors purchasing US stocks are required to file their income tax returns using Form ITR-2 or ITR-3, and cannot use Form ITR-1 or ITR-4.
Schedule FA in the ITR form is for reporting foreign assets, regardless of income earned, while Schedule FSI is designated for reporting income from foreign sources. Taxpayers can claim tax relief for taxes paid abroad by submitting Schedule TR.
Accurate and complete disclosure of foreign assets and income is a statutory requirement under the Income-tax Act, 1961, and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Sandeep Bhalla, Partner, Dhruva Advisors, says, “Undisclosed foreign income or assets attract 30% tax plus a 90% penalty — an effective 120% levy applied on a gross basis, with no deductions, exemptions, set-offs or foreign tax credits. A separate penalty of Rs 10 lakh may apply for failure to disclose such assets in Schedule FA/FSI. In cases of deliberate concealment or misrepresentation, prosecution can also be initiated.”
Foreign Income Tracking System
Indian taxpayers need to be aware that India has a system in place to track all overseas investments made in foreign jurisdictions, including the US.
India, under the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA), obtains comprehensive information regarding financial accounts of its residents in foreign jurisdictions, which includes details like the account holder’s name, address, tax identification number (TIN), bank account number, balance, including income details such as interest and dividends. Severe penalties exist for the non-disclosure of foreign assets, potentially reaching several lakhs.
Taxpayers who need to revise their ITR will have to do so for foreign income received between January 1 and December 31, 2024, for filing a revised ITR for AY 2025-26. “With increased inter-agency data sharing, including via FIU-IND, banking systems, and global reporting protocols, disclosures may also trigger further regulatory review where the source or movement of funds appears irregular,” adds Bhalla.