SUBJECT: FOREIGN ASSETS DISCLOSURE AWARENESS UNDER THE INCOME TAX ACT
Strategic Analysis of Mandates and Global Compliance Obligations for AY 2025-26
IN THIS ISSUE:
- AEOI & CRS: The architecture of the global intelligence network.
- NUDGE 2.0: Why 25,000 taxpayers just received high-risk alerts.
- PRUDENT Enforcement: The CBDT’s new data-driven compliance model.
- The December 31 Deadline: Your final window for voluntary correction.
By Advocate Amresh Upadhyay Expert in Tax Litigation & Global Compliance www.taxlitigater.com
INDEX PAGE
- Editor’s Note: The Paradigm Shift to Transparency………………….. Page 3
- Feature: The Architecture of Global Information Exchange………… Page 4
- CRS & FATCA Frameworks
- Eliminating Information Asymmetry
- Special Report: Data-Driven Enforcement & NUDGE 2.0…………… Page 6
- The “PRUDENT” Approach
- Results of Phase 1: ₹29,208 Crore Disclosed
- Legal Watch: Penalties & Legislative Relief……………………………. Page 8
- The ₹20 Lakh Immunity Threshold
- Discretionary Penalties: The Vinil Venugopal Ruling
- Critical Action Plan: Final Deadlines for Dec 31, 2025…………….. Page 10
- Forms 67 & 10F Mandatory Requirements
- Contact & Reference Sources……………………………………………. Page 12
EDITOR’S NOTE (Page 3)
The Paradigm Shift to Data-Driven Transparency
The contemporary global tax landscape has transitioned from a paradigm of bilateral cooperation to a state of comprehensive, data-driven transparency. For Indian residents with global financial footprints, this shift is characterized by an intricate web of reporting obligations under the Income-tax Act, 1961, and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
The recent launch of the second phase of the NUDGE campaign by the Central Board of Direct Taxes (CBDT) underscores the government’s commitment to leveraging international data exchange frameworks to ensure every offshore interest is accounted for. This edition provides the legal and procedural precision required to navigate the high-stakes compliance environment of AY 2025-26.
— Advocate Amresh Upadhyay
FEATURE STORY (Page 4)
The Architecture of Global Information Exchange
The enforcement of Indian tax laws on foreign assets is now powered by a sophisticated global intelligence network based on the Automatic Exchange of Information (AEOI) framework, which has effectively eliminated the “information asymmetry” of the past.
CRS & FATCA Frameworks
The Common Reporting Standard (CRS) facilitates the annual exchange of financial account information between over 100 jurisdictions. Simultaneously, the Foreign Account Tax Compliance Act (FATCA) enables a similar exchange between India and the United States, targeting American brokerage accounts, ESOPs, and retirement funds.
The dataset received by the Indian Income Tax Department is remarkably granular, including details on beneficial ownership, dividend credits, and the specific trust or corporate structures used to hold assets. Data for the calendar year 2024 is now available to Indian authorities within six months, enabling real-time cross-verification.
SPECIAL REPORT (Page 6)
Data-Driven Enforcement: The NUDGE 2.0 Campaign
The NUDGE campaign represents a strategic shift to a guided, trust-based compliance model termed “PRUDENT”—signifying Professional, Responsible, Effective with empathy, and Non-intrusive.
Phase 2 Launch: November 28, 2025
In this phase, approximately 25,000 individuals have been identified for targeted outreach via SMS and email. These “nudges” provide a voluntary window to review the Annual Information Statement (AIS) and file revised returns by the statutory deadline of December 31, 2025.
The success of the first campaign, which led to the disclosure of ₹29,208 crore in previously unreported assets, suggests this approach is highly effective in prompting compliance before formal enforcement action.
LEGAL WATCH (Page 8)
Penalties & Legislative Relief
Under the Black Money Act (BMA), the penalty for inaccurate particulars in Schedule FA is a flat ₹10 Lakh per year of default. However, recent shifts offer significant relief:
- The ₹20 Lakh Immunity Threshold: Effective October 1, 2024, the ₹10 lakh penalty will not apply if the aggregate value of foreign assets (excluding immovable property) does not exceed ₹20 Lakh.
- Judicial Relief: The Special Bench of the ITAT Mumbai (Vinil Venugopal) ruled that the penalty is discretionary, not automatic. AO’s must distinguish between willful evasion and “technical or venial” breaches.
CRITICAL ACTION PLAN (Page 10)
If you hold global assets, ensure these steps are completed before December 31, 2025:
- Audit Schedule FA: Report details for Calendar Year 2024 (Jan-Dec), including any accounts closed during that period.
- Mandatory Form Selection: Foreign assets must be reported in ITR-2 or ITR-3. Disclosures in ITR-1 or ITR-4 are invalid for foreign asset holders.
- Foreign Tax Credit (Form 67): To claim FTC, you must file Form 67 online before submitting your ITR.
- Electronic Form 10F: Non-residents claiming DTAA benefits must now file Form 10F electronically on the portal; manual filing is no longer accepted.
CONTACT & REFERENCES (Page 12)
Tax Litigater Advocates & Solicitors Serving clients globally with precision and integrity. Web: www.taxlitigater.com
Referenced Sources:
- CBDT Press Release (Nov 27, 2025): Launch of 2nd NUDGE Campaign.
- ITD Brochure: Declaration of Foreign Assets and Income (July 2025).
- Finance (No. 2) Act, 2024: Threshold Amendments.
- ITAT Mumbai Special Bench: Vinil Venugopal & Ranjeeta Vinil (Oct 14, 2025).
Disclaimer: This newsletter is for informational purposes only and does not constitute legal advice.
इन स्रोतों से जानकारी ली गई
A. Official Government / Statutory Sources (Primary Authority)
- Press Release: CBDT launches 2nd NUDGE initiative to strengthen voluntary compliance in respect of Foreign Assets – Income Tax Department
https://incometaxindia.gov.in/Lists/Press%20Releases/Attachments/1234/PressRelease-CBDT-launches-2nd-NUDGE-initiative-to-strengthen-voluntary-compliance-in-respect-of-Foreign-Assets.pdf - Declaration of Foreign Assets and Income (Official Booklet) – Income Tax Department
https://incometaxindia.gov.in/booklets%20%20pamphlets/declaration-of-foreign-assets-and-income.pdf - Enhancing Tax Transparency on Foreign Assets & Income: Understanding CRS & FATCA – Income Tax Department
https://www.incometax.gov.in/iec/foportal/sites/default/files/2024-11/Enhancing%20Tax%20Transparency%20on%20Foreign%20Assets%20and%20Income.pdf - CBDT launches Compliance-Cum-Awareness Campaign for Schedule FA (AY 2024-25) – TaxTMI
https://www.taxtmi.com/news?id=28101 - Double Taxation Relief (Official Tutorial) – Income Tax Department
https://incometaxindia.gov.in/Tutorials/64.Double-Taxation-Relief.pdf - Form 67 – User Manual – Income Tax Department
https://www.incometax.gov.in/iec/foportal/help/statutory-forms/popular-form/form67-um
B. Big-4 / Institutional & Professional Analysis
- India – CBDT Launches Second NUDGE Initiative for Voluntary Compliance – KPMG
https://kpmg.com/xx/en/our-insights/gms-flash-alert/flash-alert-2025-274.html - CBDT Launches Second NUDGE Campaign for Foreign Asset Compliance – Taxmann
https://www.taxmann.com/post/blog/cbdt-launches-second-nudge-campaign-for-foreign-asset-compliance - [Opinion] Non-Disclosure of Foreign Assets – No Automatic Penalty – Taxmann
https://www.taxmann.com/post/blog/opinion-non-disclosure-of-foreign-assets-no-automatic-penalty - EY Tax Alert: Penalty under Black Money Act stayed for reporting default – EY
https://www.ey.com/content/dam/ey-unified-site/ey-com/en-in/alerts-hub/2025/10/sb-holds-levy-of-penalty-under-black-money-act-for-default-in-reporting-of-foreign-assets.pdf - Discretion, Not Default – Penalty under the Black Money Act – AZB & Partners
https://www.azbpartners.com/bank/discretion-not-default-penalty-under-the-black-money-act/
C. Major News & Media Coverage
- CBDT launches second NUDGE initiative to boost voluntary compliance – DD News
https://ddnews.gov.in/en/cbdt-launches-second-nudge-initiative-to-boost-voluntary-compliance-on-foreign-asset-disclosure/ - CBDT Launches Second NUDGE Initiative to Boost Offshore Asset Compliance – Angel One
https://www.angelone.in/news/taxation/cbdt-launches-second-nudge-initiative-to-boost-offshore-asset-compliance - ITR filing AY 2025-26: Received message from I-T department? – Times of India
https://timesofindia.indiatimes.com/business/financial-literacy/taxation/itr-filing-ay-2025-26-received-message-from-i-t-department-big-clarification-issued-what-taxpayers-need-to-know/articleshow/126059664.cms - Explained: Why MNC staff are getting tax notices for foreign assets – Financial Express
https://www.financialexpress.com/money/explainer-why-mnc-staff-are-getting-tax-notices-for-foreign-assetsnbsp-4086357/ - Have foreign income or equity income? How to report in ITR (AY 2025-26) – Economic Times
https://m.economictimes.com/wealth/tax/have-foreign-income-or-income-from-equity-know-how-to-report-this-in-itr-form-for-ay-2025-26/articleshow/123650627.cms - Tax nudge: IT Dept ropes in MNCs to flag undisclosed foreign assets – CAalley
https://www.caalley.com/news-updates/indian-news/tax-nudge-income-tax-dept-ropes-in-mncs-to-flag-undisclosed-foreign-assets-employees-face-dec-31-deadline
D. Black Money Act – Policy Review, Relief & Penalty Debate
- Black Money Act under Review: Government Panel to Revisit Penalties – Bhatt & Joshi Associates
https://bhattandjoshiassociates.com/black-money-act-under-review-government-panel-to-revisit-harsh-penalties-and-implementation-challenges/ - CBDT Raised Exemption Limit for Undisclosed Foreign Assets – Rajput Jain & Associates
https://carajput.com/blog/undisclosed-foreign-assets/ - Select black money holders to get relief from penalty & prosecution – CAalley
https://www.caalley.com/news-updates/indian-news/select-black-money-holders-to-get-relief-income-tax-dept-to-not-not-apply-penalty-and-prosecution-in-these-situations - ₹10 lakh penalty for inadvertent reporting errors – Why law needs reform – CAalley
https://www.caalley.com/news-updates/indian-news/why-black-money-act-needs-changes - Revised ITR won’t save you: Foreign asset errors can trigger probe – CAalley
https://www.caalley.com/news-updates/indian-news/revised-itr-wont-save-you-foreign-asset-errors-can-trigger-penalty-probe - Foreign Assets, Black Money Law & a Common NRI Compliance Trap – CA for NRI
https://cafornri.com/foreign-assets-black-money-law-and-a-common-nri-compliance-trap-what-every-taxpayer-must-understand/
E. NUDGE Notices, Emails & Response Guidance
- CBDT 2nd NUDGE Campaign – Critical Update for NRIs & Returning NRIs – Dinesh Aarjav & Associates
https://www.dineshaarjav.com/blog-detail/cbdt-2nd-nudge-campaign-for-foreign-asset-disclosure - Foreign Asset Disclosure Notice for NRIs – What it means & how to respond – Dinesh Aarjav & Associates
https://www.dineshaarjav.com/blog-detail/nri-foreign-asset-disclosure-notice - Have You Received an SMS or Email from IT Dept regarding Foreign Assets? – K M Gatecha & Co
https://kmgcollp.com/received-an-sms-or-email-from-the-income-tax-department-regarding-foreign-assets/ - Foreign Asset Email AY 2025-26: Schedule FA Compliance Guide – N C Agrawal & Co
https://ncagrawal.com/foreign-asset-email-ay-2025-26/
F. Schedule FA & ITR Disclosure – Practical Compliance
- Schedule FA – Disclosure of Foreign Assets in ITR – K M Gatecha & Co
https://kmgcollp.com/schedule-fa-disclosure-of-foreign-assets-in-itr/ - Schedule FA & the “Calendar Year Trap” – Dinesh Aarjav & Associates
https://www.dineshaarjav.com/blog-detail/schedule-fa-calendar-year-trap-foreign-asset-reporting - Schedule FA in ITR-2: Disclosure of Foreign Assets – IndiaFilings
https://www.indiafilings.com/learn/schedule-fa-in-itr-2/ - Report Foreign Income & Assets in ITR-2 (AY 2025-26) – TaxBuddy
https://www.taxbuddy.com/blog/foreign-income-reporting-itr-2 - Updated Foreign Asset Reporting Framework for Correct ITR Submission 2025 – RealtyNXT
https://realtynxt.com/blogs/2025-12-13/revised-itr-filing-simplified-with-essential-steps-for-reporting-foreign-assets-correctly
G. Foreign Tax Credit, DTAA & Mandatory Forms
- Form 67: Claim of Foreign Tax Credit – TaxBuddy
https://www.taxbuddy.com/blog/form-67-claim-foreign-tax-credit - Claiming DTAA Benefits in India – Form 10F Mandatory – Certicom
https://certicom.in/claiming-dtaa-benefits-in-india-why-form-10f-is-must/ - Form 10F – Purpose, Applicability & Filing – ClearTax
https://cleartax.in/s/form-10f-income-tax - Form 10F Guide for NRIs – iNRI
https://www.goinri.com/blog/form-10f-guide-what-every-nri-must-know-about-tax-filing - Form 10F – Applicability & Online Filing – TaxBuddy
https://www.taxbuddy.com/blog/form-10f-of-income-tax - What is Form 10F? Purpose & Tax Benefits – InvestMates
https://investmates.io/blog/form-10f - Indian Corporate Tax Compliance: DTAA, Form 10F & Deadlines – AKM Global
https://www.akmglobal.com/blog/corporate-tax-compliance-india-dtaa-form-10f/
