Income Tax Department Launches 'NUDGE' Initiative for Timely Corrections

The Income Tax Department has reportedly begun issuing bulk notices under “NUDGE” initiative. Under the campaign, the department is sending notices to many individuals with annual incomes exceeding Rs 50 lakh and those working as key management personnel in companies, according to a report by CNBC-TV18. The department is scrutinising cases where the details reported in ITRs appear inconsistent with data available in its records, the report said citing sources. “NUDGE” stands for Non-intrusive Use of Data to Guide & Enable. This initiative is part of the government’s data-driven compliance strategy, which aims to give taxpayers the opportunity to correct their mistakes without direct notice or investigation. Simply put, this is a kind of soft alert—enabling taxpayers to re-examine their ITRs and, if any income has been missed, or incorrect deductions or exemptions claimed, correct them promptly. According to sources, this outreach is primarily aimed at: -Key Management Personnel (KMPs) in companies -Individuals reporting annual incomes exceeding Rs 50 lakh -Taxpayers whose ITR information is mismatched with third-party data available with the department (such as banks, financial institutions, company filings, etc.) -The department is identifying cases where there is suspicion of underreporting, undisclosed assets, or incorrect exemptions. -Advisory, not direct action According to officials, this campaign is currently advisory outreach, not direct enforcement action. This means the department is first giving taxpayers an opportunity to review their returns and, if necessary, file revised returns. If the error is not corrected at this stage and the mismatch is later found to be serious, the matter could escalate to scrutiny or penalty proceedings. Therefore, taking it lightly can be risky, according to the report. The department is using advanced risk analytics and data matching tools. Income, deductions, and exemptions shown in the ITR are being compared with third-party data. Where a mismatch is found, a NUDGE communication is being sent. The aim is to increase voluntary compliance and make tax reporting more accurate. Tax officials say this move is part of a trust-based compliance model. Where previously, action was taken directly through a notice or investigation, the department is now first providing an opportunity for correction by providing a nudge. The Central Board of Direct Taxes (CBDT) has been strengthening its analytics and information-sharing frameworks for some time. The NUDGE initiative is considered a major step in that direction. If you receive such a communication, you should re-examine your ITR carefully and reconcile data from Form 26AS, AIS, and TIS. You should also ensure eligibility for claimed deductions and exemptions and file a revised return if necessary. For those with incomes above Rs 50 lakh, this is a clear signal that the department’s monitoring has become more data-enabled and technological. Even a small mistake can lead to significant problems later. Income Tax Notice Alerts are no longer limited to just notices—through “NUDGE,” the department is already providing early warnings to make timely corrections, or the matter could escalate.