The Income Tax Department has started sending mass communications under the “NUDGE” initiative. According to reports, these messages are being sent mainly to those taxpayers whose annual income is more than ₹50 lakh or who hold key managerial positions in companies. According to sources, the department is identifying cases where the information given in the income tax returns (ITR) is not matching with other financial data available with the department.
What is the “NUDGE” Initiative?
“NUDGE” stands for Non-intrusive Use of Data to Guide & Enable. This is part of the government’s data-driven compliance strategy, which aims to give taxpayers an opportunity to correct their mistakes before a direct notice or investigation is initiated. This can be considered a kind of “soft alert”. That is, if a taxpayer has made a mistake in income reporting, deduction or exemption claim, he can correct it by reviewing his return in time.
Who are the people focused on?
The following categories are being specifically addressed under this initiative:
- Key Management Personnel (KMP) of companies
- Individuals declaring annual income more than ₹50 lakh
- Taxpayers whose ITR information does not match the data received from banks, financial institutions or other third-party sources
- Cases where there is a possibility of under-reporting of income, concealment of assets or taking of wrong exemptions.
Now advice, no action
According to the news of financialexpress, officials say that this is currently an advisory operation and not a punitive action. The department is first giving taxpayers an opportunity to re-check their returns and file amended returns, if needed. However, if the error is not rectified at this stage and serious irregularities are found later, the case may reach scrutiny or penalty proceedings. Therefore, ignoring this message could be risky.
How is this system working?
The Income Tax Department is using advanced data analytics and risk analysis tools. The income, deductions and exemptions shown in the ITR are compared with third-party data. Wherever an inconsistency is found, a “NUDGE” communication is issued. Its objective is to promote voluntary compliance and make tax reporting more transparent.
Move towards trust based model
According to tax officials, this initiative is an important step towards a trust-based compliance model. Where earlier notices were issued directly, now the department is giving the opportunity for correction first. CBDT has been strengthening the data analysis and information-sharing framework for some time now. “NUDGE” is considered to be part of the same strategy.
What should taxpayers do?
If you get such a message, review your ITR carefully.
Match the data from Form 26AS, AIS and TIS.
Check eligibility of deductions and exemptions claimed.
File amended returns if required.
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