Income Tax Department’s NUDGE Initiative for Voluntary Correction of Ineligible Deductions and Exemptions
The Central Board of Direct Taxes (CBDT) has intensified its data-driven compliance efforts by encouraging taxpayers to voluntarily review Income-tax Returns (ITRs) where refund claims appear to carry potential discrepancies. This initiative reflects the Government’s continued emphasis on a non-intrusive, transparent, and taxpayer-friendly compliance framework.
Under the risk management framework, supported by advanced data analytics, cases pertaining to Assessment Year (AY) 2025–26 have been identified where certain deductions or exemptions claimed in Income-tax Returns (ITRs) appear to be potentially ineligible. These include instances of suspected bogus donations to Registered Unrecognised Political Parties (RUPPs), as well as other inadmissible claims. It has also been observed that, in some cases, incorrect or invalid Permanent Account Numbers (PANs) of donees have been quoted. Additionally, certain returns reflect discrepancies in the quantum of deductions or exemptions claimed.
Identified taxpayers are being informed through SMS and email under the “Non-intrusive Usage of Data to Guide and Enable (NUDGE)” campaign to review and rectify discrepancies in their Income-tax Returns. This initiative, keeping in view the due date for filing revised returns by 31 December 2025, follows a trust-first approach to tax administration. It enables taxpayers to voluntarily review their ITRs and correct ineligible claims, if any. The campaign leverages data analytics and technology to promote a transparent, non-intrusive, and taxpayer-centric compliance environment.
Illustrative Example
To help taxpayers understand the nature of such communications, a generic illustration of the message being issued is reproduced below.
Illustrative Communication
It was noticed that a claim of refund has been made in the Income-tax Return for the relevant PAN for AY 2025-26.
Processing of the return has been kept on hold as it was identified under the risk management process on account of certain discrepancies in the refund claim. Detailed information has been sent to the registered email address.
In the email following discrepancy has been stated:
“A significant proportion of TDS deducted on Gross Total Income has been claimed as refund.”
As the time-limit for filing a revised return for AY 2025-26 expires on 31st December 2025, the taxpayer is advised to avail this opportunity to file a revised return, if required.
Alternatively, an updated return may be filed from 1 January 2026, subject to payment of additional tax.
If a revised return has already been filed on the relevant issue, the message may be ignored.
— Income-tax Department
In Response to above illustration what action a tax payer can do?
1. Verify and Reconcile AIS, TIS and Form 26AS with the Filed Return
- The first and most important step is to carefully verify and reconcile the following documents with the Income-tax Return already filed:
(i). Annual Information Statement (AIS)
(ii). Taxpayer Information Summary (TIS)
(iii). Form 26AS
This reconciliation should include:
(i). Income reported and offered to tax
(ii). TDS/TCS credits claimed
(iii). Deductions and exemptions claimed
(iv). Donation details, if any, claimed under Chapter VI-A
2. No Action Required Where the Return Is Correct and Claims Are Genuine
- If, after verification, the taxpayer is satisfied that:
- All deductions claimed in the return are genuine, eligible and supported by valid evidence,
- No bogus or inadmissible donation has been claimed, and
- The data reflected in AIS, TIS and Form 26AS fully matches with the return of income filed,
- Then no further action is required. In such cases, the taxpayer may ignore the communication, as it is only advisory in nature. However, it is advisable to retain supporting documents for future reference.
3. Action Required Where AIS / TIS / Form 26AS Has Changed After Filing of Return
In certain cases, it may be observed that changes or updates have occurred in AIS, TIS or Form 26AS after the filing of the Income-tax Return. Such changes may arise due to:
(i). Late TDS corrections by deductors
(ii). Updated information reporting
(iii). Correction of PAN or transaction details
In such situations, the taxpayer must:
Consider the revised information now appearing in AIS/TIS/26AS, and
Re-evaluate the correctness of the return already filed
- If the impact of such changes is material or significant, the taxpayer should revise the return of income within the prescribed time limit, i.e., on or before 31st December 2025, as applicable to the relevant Assessment Year.
This initiative is part of the CBDT’s broader “Non-intrusive Usage of Data to Guide and Enable (NUDGE)” campaign, which leverages technology and analytics to guide taxpayers while preserving ease of compliance. Taxpayers are encouraged to treat such communications as an opportunity to proactively regularise their tax affairs and ensure accurate reporting.
You can see the official press release from below mentioned link
Disclaimer: This material and the information contained herein is intended for clients and other Chartered Accountants to provide updates and is not an exhaustive treatment of such subject. We are not, by means of this material, rendering any professional advice or services. It should not be relied upon as the sole basis for any decision which may affect you or your business.
