High salary earners getting ‘nudge’ notices from Income Tax Dept? Here’s why you received it and what action to take now

Many salaried employees with hefty salaries are getting income tax Nudge intimations, prompting them to correct errors like undisclosed property income, crypto gains, ESOP, and more. The Income Tax Department is giving a last chance to these employees to fix their mistakes voluntarily before they take strict action against those with undisclosed incomes.

Also the Income Tax Department has identified a pattern where the same chartered accountant is being used by several taxpayers to make donations to a single political party, and various charitable institutions. As a result, the tax department has said they will initiate separate actions against those CAs as well.

As reported by ET (Anuradha Shukla), tax authorities have issued notices to these individuals, including CEOs and managing directors of multinational companies, urging them to rectify the anomalies before penalties are imposed, according to officials.


Also read: Income Tax Department sends notices to many senior executives earning over Rs 50 lakh for alleged misuse of exemptions

The Income Tax Department has sent notices to these executives for not declaring foreign assets and overseas income, underreporting stock-linked incentives and inflating perks like housing and travel allowances to lower their taxable income.

“We have over two dozen cases where executives invested in expensive properties, more than 50 who received hefty secondary salary payments from foreign clients in cryptocurrencies and cases involving huge donations to political parties that are neither recognised nor contesting elections,” said a senior official, who did not wish to be identified.

Also read: Rs 119 crore recovered from wrong HRA tax deduction claims, 25000 filed revised ITRs to declare Rs 1000 crore foreign income; Here’s how Nudge campaign works

The discrepancies were unearthed during intensified reviews of income tax returns (ITRs) of high-income individuals in the current assessment cycle. As part of its ‘Non-intrusive Usage of Data to Guide and Enable (Nudge) campaign, the department has asked many executives to file revised ITRs.

“Many taxpayers felt they could get away with foreign purchases and assets. However, with the large volume of financial data received by the government through automated exchange programmes and PAN (Permanent Account Number)-linked tracking, it is increasingly difficult to underreport foreign transactions,” the official said.

Undisclosed foreign assets included properties bought in the names of minor children and spouses, foreign stocks, income received in cryptocurrencies and deposits in overseas accounts.

Just a heads up, this is a Nudge notice, not an income tax notice with a DIN number. This means this is an intimation to you to correct any errors, and it doesn’t mean that you have done anything wrong in your ITR. If you are confident that the income and assets declared in the ITR are accurate and you have no undisclosed assets or income, then you don’t need to do anything until you receive an actual income tax notice with a DIN number.

Here’s what to do

Chartered Accountant Suresh Surana says: “By leveraging data analytics, the department has identified discrepancies between the income reported in ITRs and the transaction data or TDS details.”

If it is possible then file a revised ITR, else file ITR-U to fix the mistakes. According to Surana, taxpayers who have received such notices should review their filed returns for the relevant years, gather complete transaction details, and, if necessary, file an updated return (ITR-U) under Section 139(8A) to correct any omissions.

Surana says that it is essential to pay the appropriate additional tax along with interest to avoid further scrutiny, penalties, or prosecution.

Surana says: “Maintaining proper records such as TDS certificates, exchange statements, and transaction logs is also crucial for substantiating claims in case of any potential litigation.”