The Income Tax Department has launched a significant data-matching initiative, sending out bulk alerts to thousands of taxpayers across India, including Ahmedabad. These communications demand the disclosure of foreign assets and income for the calendar year 2024 in their Income Tax Returns (ITR) for the Assessment Year 2025-26. The deadline for filing revised returns is December 31.
Why Are Taxpayers Receiving These Alerts?
The alerts are a direct result of a centralized data-matching exercise. The Indian government has received detailed information from foreign jurisdictions about assets held or income earned abroad by Indian residents. This data is then cross-referenced with filed ITRs. The system, known as NUDGE 2.0, has identified discrepancies where such foreign holdings were not reported.
Tax practitioners reveal a common error triggering these alerts: many Non-Resident Indians (NRIs) filed their tax returns without updating their residential status from 'Resident' to 'Non-Resident'. Consequently, the system expects them to declare worldwide income, leading to the alert if foreign assets are reported by other countries but not in the ITR.
Who is Affected and What Should They Do?
The scope of the alerts is broad. International tax expert Mukesh Patel clarified that while the government acts on received information, not all alerts indicate wrongdoing. "A number of NRIs have also received such alerts but they do not need to panic," he stated. Their primary action should be to revise their returns by correctly updating their status to NRI.
Interestingly, the net has also caught individuals who have travelled abroad for work or leisure but do not actually own any offshore assets. CA Karim Lakhani noted that assets in the USA and UAE are most frequently flagged. He advises that such recipients should not panic if they receive no further communication, but emphasizes the importance of timely correction to prevent the alert from escalating into a formal notice.
Understanding the Alert Message and Deadline
The alerts, dispatched via email and SMS, carry a specific message: "Data has been shared by foreign jurisdiction(s) showing that you held or earned foreign assets or income... However, schedule foreign assets was not included in your ITR... Please revise your ITR by 31st Dec."
Experts unanimously stress the critical nature of the December 31 deadline. Failure to respond or correct genuine errors can lead to the matter being converted into a formal notice, potentially inviting scrutiny, penalties, and legal complications. Even taxpayers with legitimate foreign bank accounts are reminded to ensure these are accurately reported in their ITR filings.
