New Delhi: The Income Tax Department has begun issuing “NUDGE” notices to crores of taxpayers across the country as part of a push to strengthen tax compliance. The communication is not a penal action but an advisory alert that allows individuals to voluntarily correct discrepancies between their Income Tax Return (ITR) and the financial data available with the department. Advanced risk analytics, AI-based profiling and third-party data integration are being used to identify cases where reported income, investments or expenditure do not match official records.
NUDGE stands for Non-intrusive Usage of Data to Guide & Enable. Officials describe it as part of a trust-based compliance model in which taxpayers are first given an opportunity to self-correct before any formal scrutiny proceedings are initiated.
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Who is being targeted
Sources indicate that the current campaign is largely focused on high-income individuals, particularly those with annual income above ₹50 lakh and those holding senior management positions in companies. Notices are also being sent in cases involving:
- Mismatch between AIS and ITR income figures
- Non-disclosure of high-value transactions
- Incorrect deduction or exemption claims
- Incomplete reporting of foreign assets or investments
- Discrepancies in shares, mutual funds, property or banking data
The system automatically flags such cases by reconciling data from the Annual Information Statement (AIS), bank accounts, TDS records, investment platforms, stock market transactions and other financial sources.
What to do if you receive a NUDGE notice
Tax experts say there is no need to panic, as this is not a final notice. The recommended course of action is:
- Reconcile your ITR with the AIS in detail
- File a revised or updated ITR if an error is found
- Pay any additional tax and interest promptly
- Retain all supporting documents
Timely correction can help avoid scrutiny, penalties and interest, and may prevent the case from moving into formal investigation.
What not to do
- Do not ignore the notice
- Do not submit a hurried response without verification
- Do not provide incorrect or incomplete information
Failure to respond properly can push the case into a higher-risk category, leading to regular scrutiny and possible penal action.
Shift toward a data-driven tax regime
The initiative marks a significant move toward a digital, data-integrated tax administration. An earlier campaign launched in November 2024 targeted non-disclosure of foreign assets and led to thousands of taxpayers updating their returns. The scope has now expanded to include deduction mismatches, high-value spending and investment data.
Officials believe that with PAN-linked data integration, digital financial trails and AI analytics, under-reporting of income has become far more difficult. Voluntary correction is therefore being positioned as the safest option for taxpayers.
Message for taxpayers
A NUDGE notice should be viewed as an opportunity rather than a warning. Correcting returns in time not only reduces the risk of future scrutiny but also limits exposure to additional interest and penalties.
Overall, the move highlights the growing use of AI and data analytics in tax administration, with a clear emphasis on voluntary compliance and early self-correction.
About the author — Suvedita Nath is a science student with a growing interest in cybercrime and digital safety. She writes on online activity, cyber threats, and technology-driven risks. Her work focuses on clarity, accuracy, and public awareness.
