In a fresh compliance push, the Income Tax Department has intensified its crackdown on undisclosed foreign assets by roping in multinational companies (MNCs) operating in India. As part of its data-driven “nudge” strategy, the department has asked MNCs to alert their Indian employees about possible gaps in reporting foreign income and assets in their income-tax returns. Employees who have failed to make the required disclosures have been advised to voluntarily correct their filings by 31 December, failing which they may face scrutiny and penal consequences under Indian tax and black money laws.
What the Update Is About
- The Income Tax Department has asked multinational companies (MNCs) with operations in India to inform their Indian employees about the need to disclose any undisclosed foreign assets and foreign income in their tax returns.
- This is part of a broader compliance effort by the Central Board of Direct Taxes (CBDT) using the second phase of the NUDGE Campaign — a data-driven voluntary compliance initiative.
Deadline: December 31, 2025
- Employees who have not reported foreign assets or earnings must revise their Income Tax Returns (ITRs) on or before 31 December 2025.
What Must Be Reported
Employees should disclose in their returns:
- Foreign financial assets (e.g., overseas bank accounts, brokerage/custodial accounts, ESOP/RSU holdings, foreign mutual funds, etc.)
- Foreign-sourced income, including:
- Dividends
- Interest
- Capital gains
- Other earnings from overseas assets or investments
Reason for the Drive
- The tax department is using data from international information-sharing frameworks such as FATCA (with the US) and Common Reporting Standards (CRS) to identify discrepancies where foreign income or assets may have gone unreported.
- These automated alerts are intended to prompt voluntary corrections before more formal enforcement.
Consequences of Non-Compliance
While the current communications are technically advisory nudges rather than formal notices, ignoring them may lead to:
- Assessment proceedings by the tax department
- Penalties under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015 — potentially up to ₹10 lakh or more, depending on the specifics
- Possible prosecution in serious cases if intentional evasion is suspected
Key Points for Taxpayers
- These warnings are not penalty notices but nudges to encourage voluntary compliance with disclosure requirements.
- If foreign income or assets were omitted in the originally filed return, taxpayers should file either a revised return or, where applicable, an ITR-U (updated return) before the year-end deadline.
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Accurate reporting helps avoid scrutiny and adverse consequences later.