Do You Know? Income Tax Department Indulges in NUDGE Awareness Campaigns

In common usage, a nudge means the act of pushing your friend/neighbor with the elbow. It is a way of drawing his attention to something that you want to. This act of pushing is adopted by our (Indian) Income Tax Department to alert taxpayers to rectify their mistakes before issuing any notices.

The NUDGE in Indian Income Tax stands for "Non-Intrusive Usage of Data to Guide and Enable". It is a campaign by the Central Board of Direct Taxes (CBDT) that uses advanced data analytics to identify potential discrepancies in a taxpayer's filed return and encourages them to voluntarily correct the errors.

According to TOI's article (linked at the bottom) dated December 25, some taxpayers received these SMS's/emails. 

Key Aspects of the NUDGE Campaign:

Advisory Nature: 

The communication (via SMS and email) is advisory and not a formal legal notice or the start of an intrusive investigation. It reflects a "trust-first" approach by the tax department to promote voluntary compliance.

Data-Driven: 

The campaign utilises data analytics and information received from various sources, including international information exchange agreements (such as AEOI, CRS, and FATCA), to identify high-risk cases.

Specific Issues: 

The campaign targets particular issues, such as:

• Ineligible deductions or exemptions claimed (e.g., bogus donations to unrecognised political parties).
• Incorrect or invalid Permanent Account Numbers (PANs) of donees or other entities.
• Non-disclosure or underreporting of foreign assets and foreign source income in the ITR's Schedule FA and Schedule FSI.
• Other issues of importance.

What to Do When You Receive a Nudge Message 

Taxpayers who receive a NUDGE message are advised to review their Income Tax Returns (ITRs) for discrepancies and, if necessary, file a revised return within the specified deadline (e.g., by December 31 for the relevant assessment year) to avoid potential penalties or a detailed investigation later.

Taxpayers are advised to carefully verify all deductions and exemptions claimed on their returns against supporting documents to ensure accuracy and compliance.

If discrepancies are identified, taxpayers should correct the figures and file a revised return on or before December 31 to avoid penalties, additional tax liabilities, or further scrutiny by the department.

Individuals whose claims are genuine and in accordance with the law do not need to take any further action. 

However, they may retain documentation in case verification is requested by the department.

Key deductions under scrutiny include House Rent Allowance, donations to political parties, foreign source receipts/payments, and exemptions under the Double Taxation Avoidance Agreement.

We should note that the NUDGE initiative is part of the department’s trust-first approach, which aims to provide taxpayers with an opportunity to voluntarily correct errors in their returns without facing immediate enforcement action. So, we should be thankful and appreciate their cooperation.

For some more news, please read this article from The Times of India dated December 25, 2025.

What is AIS in Income Tax Returns and How it Differs from Form 26AS

A sample of the front page

 An AIS, or Annual Information Statement, is a detailed report introduced by India's Income Tax Department. 

It enables a consolidated view of a taxpayer's financial transactions executed during a year, aiming to encourage voluntary compliance and assist in the pre-filling and submission of Income Tax Returns (ITR). 

This auto-generated statement is available on the Income Tax Portal. This information is compiled automatically by the Tax Department from data collected from various third-party entities that are legally mandated to report financial transactions associated with a taxpayer's Permanent Account Number. 

The AIS contains two Parts- A (providing general information of the taxpayer) and B (financial transactions done by or related to him).

The length of the statement depends on the volume of transactions mentioned under 57 categories of income and expenses in Part B.

Key Details and Features

1. Comprehensive Data Compilation

The AIS includes a broad range of information reported by various entities (like banks, employers, mutual funds, stock exchanges, etc.) using your Permanent Account Number (PAN).

Even the LIC and PF organisations provide their statements regarding your premiums, contributions, etc., to the Tax Department.

 The data thus provided includes:

Salary, interest (from savings accounts, FDs, etc.), and dividend income, if any.

LIC premiums paid in a year and maturity/claims paid.

PF contributions and funds drawn during the said year.

Details of Securities and Mutual Fund transactions.

High-value transactions involving property purchases/sales and large cash deposits/withdrawals.

Foreign Remittances and purchases of foreign currency.

Details of tax payments like TDS, TCS, advance tax, and self-assessment tax.

Any other financial transactions executed during that year with other entities.

2. Taxpayer Information Summary (TIS): 

The AIS is accompanied by a simplified summary called the TIS, which provides an aggregated, category-wise view of your financial data. This summary enables the calculation of Income Tax dues and the balance amount of tax payable. 

The derived value from TIS is used for pre-filling your ITR.

3. Feedback Mechanism for Rectification and Claims

Taxpayers can submit online feedback if they find any incorrect, duplicated, or unfamiliar information in the AIS. 

This feature helps in reconciling data and ensures accuracy before filing the ITR.

4. Accessibility and Available Formats for Download

The AIS can be accessed via the official Income Tax e-filing portal (navigating to the Annual Information Statement under the "Services" tab).

It can be downloaded in various formats, including PDF, JSON, and CSV. 

A mobile app, "AIS for Taxpayer," is also available and can be downloaded from the Google Play Store or the Apple App Store.

AIS vs. Form 26AS

AIS is an extension and a more detailed version of the traditional Form 26AS. While Form 26AS primarily focuses on TDS/TCS details, AIS captures a much wider array of financial information, often including transactions where no tax was deducted. 

Form 26AS is the old format, which has been revamped and enhanced into a comprehensive format type now designated as the Annual Information Statement.

Form 26AS may become obsolete in due course.

Importance of AIS for Taxpayers

Reviewing your AIS is crucial before filing your ITR to ensure all income sources are accurately reported, which helps in:

• Avoiding omissions or under-reporting of income
• Minimizing the risk of receiving tax notices from the Income Tax Department
• Ensuring that the tax credits claimed match the data available to the tax authorities. 

You can access your AIS from the IncomeTax Portal or through the mobile app.