Why in the news?

  • Central Board of Direct Taxes (CBDT) launched the second NUDGE initiative to strengthen the voluntary compliance of foreign assets.

NUDGE Campaign of CBDT

  • What is it?:
    • It uses behavioural insights (“nudge theory”) to encourage voluntary tax compliance rather than coercive enforcement.
    • Part of India’s broader push toward non-intrusive, technology-driven, trust-based tax administration.
  • Objectives:
    • Increase voluntary tax compliance.
    • Expand the tax base, especially among high-value transaction individuals.
    • Reduce tax gap (difference between potential & actual collections).
    • Promote trust-based governance through non-coercive methods.
    • Encourage timely filing, accurate reporting, and responsible financial behaviour.
  • Key Features:
    • Data-driven Compliance: Uses AI/analytics, SFT (Statement of Financial Transactions) data, GST data, TDS/TCS, and financial footprints to identify Non-filers, Under-reporting cases, Mismatch between income & expenditure etc.
    • Soft Communication: Sends polite, informative messages to taxpayers and no notices or penalties initially.
    • Non-intrusive Compliance Management: Prioritises self-correction by taxpayers and allows them to respond online, explain, or file return.
    • Integration with e-Campaign / Compliance Portal: Taxpayers can view mismatches & respond digitally and thereby reduce physical interface.
  • Benefits:
    • For Taxpayers:
      • Avoids penalties through early voluntary compliance.
      • Easy online verification of mismatches.
      • Enhances ease of compliance.
    • For Government:
      • Boosts revenue without aggressive enforcement.
      • Reduces litigation & administrative burden.
      • Builds a culture of compliance.
      • Supports transparent, digital governance.

Source: Press Information Bureau