Have You Received an SMS or Email from the Income Tax Department Regarding Foreign Assets

The Income Tax Department has started issuing SMS and email communications to taxpayers about potential non-disclosure of foreign assets and foreign-source income in Income-tax Returns for AY 2025–26. This action is part of the second phase of the CBDT’s NUDGE initiative. Using information obtained through the Automatic Exchange of Information (AEOI) mechanism, including CRS and FATCA data, the Department has identified instances where foreign bank accounts, investments, or insurance policies are linked to PANs but have not been reported in Schedule FA or Schedule FSI.

This communication is not a scrutiny notice. It is a preventive step that allows taxpayers to voluntarily rectify omissions by filing a revised return on or before 31 December 2025. Reporting of foreign assets is compulsory for Resident and Ordinarily Resident taxpayers, regardless of the value of the account, transaction activity, or whether tax has been paid abroad. Previous NUDGE campaigns have led to substantial voluntary disclosures, highlighting the importance of this exercise. Ignoring such messages may result in penalties under the Income-tax Act and the Black Money Act.

A. Introduction

If you have received an SMS or email from the Income Tax Department asking you to verify the disclosure of foreign assets in your Income-tax Return for AY 2025–26, it should not be treated as a routine alert that can be overlooked.

The Central Board of Direct Taxes (CBDT) has rolled out the second phase of its NUDGE initiative, with a specific emphasis on foreign assets and foreign-source income that have not been disclosed in Schedule FA and Schedule FSI.

The Department already possesses information about foreign assets associated with your PAN. Instead of immediately initiating proceedings, it has adopted a transparent approach by informing taxpayers in advance and providing them with an opportunity to revise their returns by correctly reporting the required details.

B. Why This Message Is Being Sent Now

Based on the analysis of Automatic Exchange of Information (AEOI) data for FY 2024–25 (Calendar Year 2024), the CBDT has identified high-risk cases where foreign assets appear to exist but have not been disclosed in the Income-tax Returns filed for AY 2025–26.

Accordingly, SMS and email communications have been sent starting from 28 November 2025, requesting taxpayers to examine their returns and file revisions on or before 31 December 2025 to avoid penal action. This stage does not amount to scrutiny—it is the period before scrutiny begins.

C. How the Information Was Collected and Whether Any Exceptions Apply

Foreign tax authorities regularly share financial details of Indian residents under international information-sharing arrangements, including:

• the Common Reporting Standards (CRS), and
• the FATCA framework with the United States.

The shared information covers foreign bank accounts, custodial holdings, overseas investments, and specific insurance products. Despite this, many taxpayers continue to rely on risky assumptions such as the account being inactive, the balance being minimal, or taxes having already been paid outside India.

Disclosure in Schedule FA is compulsory irrespective of whether the income is taxable in India. Failure to report is treated as a reporting lapse.

There are no carve-outs to this requirement. If an individual qualifies as a Resident and Ordinarily Resident, even a “small” or “dormant” foreign account must be disclosed. Explanations like “small or dormant account,” “no income earned,” or “already taxed abroad” are not considered valid.

D. Outcome of the First NUDGE Campaign (And Why This Phase Is More Significant)

The CBDT’s confidence in this strategy is supported by concrete results. During the first NUDGE campaign initiated on 17 November 2024:

• 24,678 taxpayers reviewed and updated their returns,
• foreign assets amounting to ₹29,208 crore were declared, and
• foreign-source income of ₹1,089.88 crore was reported.

Notably, a substantial number of disclosures were made even by taxpayers who were not directly contacted. The underlying data itself prompted compliance.

The second phase builds on these outcomes and focuses on disclosures for AY 2025–26, where the Department already holds confirmed AEOI data.

E. What Is Being Checked

The present campaign is specifically examining:

• Schedule FA (Foreign Assets), and
• Schedule FSI (Foreign Source Income)

in the Income-tax Return. Full and accurate reporting is a legal obligation under the Income-tax Act, 1961. In serious instances, non-compliance may also invite action under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, which prescribes strict penalties and prosecution.

This is exactly why the CBDT is offering taxpayers an opportunity to voluntarily set the record straight.

F. What to Do If You Receive This Communication

If you have received an SMS or email as part of this campaign:

• Do not treat it as a routine or generic message.
• Re-examine your Income-tax Return for AY 2025–26.
• Thoroughly check Schedule FA and Schedule FSI against foreign bank statements and investment documents.
• If any missing or incorrect details are found, submit a revised return on or before 31 December 2025.

Waiting for a formal notice and later claiming that the lapse was “unintentional” is unlikely to be effective, especially when the Department already has third-party information from overseas authorities.

G. CBDT’s PRUDENT Approach – A Courteous Alert, Not a Threat

The CBDT has termed this initiative as PRUDENT, meaning Professional, Responsible, Effective with empathy, Non-intrusive, and focused on tax consultation.

Put simply, the Department is conveying:
“We are aware. We are informing you that we are aware. Please correct it on your own.”

While the tone of the communication is courteous, the consequences of ignoring it are serious.

H. Final Note

The second NUDGE campaign is currently not an enforcement drive. It is an opportunity for voluntary rectification before enforcement action becomes inevitable.

Taxpayers with foreign assets should consider this communication as a last chance to regularise disclosures for AY 2025–26 and avoid extended litigation, penalties, and avoidable anxiety.

 

 

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