The Income Tax Department is increasing scrutiny of tax returns as the deadline for filing income tax returns for the financial year 2024-25 approaches. Numerous taxpayers are receiving alerts to review their claims for deductions and exemptions. The deadline for submitting these returns has been extended to September 15, 2025, while the last date for updated or belated returns remains December 31, 2025. This effort forms part of the department’s NUDGE campaign, aimed at prompting taxpayers to correct any discrepancies in their filings.
Understanding the NUDGE Campaign
The NUDGE campaign, which stands for Non-intrusive Usage of Data to Guide and Enable, is intended to help taxpayers identify and rectify potential errors in their income tax returns. The Income Tax Department has indicated that over 21 lakh taxpayers have updated their income tax returns for assessment years 2021-22 to 2024-25, contributing more than ₹2,500 crore in taxes. The campaign employs advanced data analytics to spot instances where taxpayers might have claimed ineligible deductions or exemptions, resulting in underreported income.
Taxpayers receiving notifications via SMS and email are encouraged to review their returns and make necessary corrections before the December 31 deadline. The department adopts a trust-first approach, allowing taxpayers the opportunity to voluntarily rectify inaccuracies in their claims. This initiative seeks to foster a transparent and compliant tax atmosphere, focusing on guidance over enforcement.
Reasons Behind Taxpayer Alerts
The alerts sent to taxpayers are part of proactive measures to ensure compliance. According to tax experts, the NUDGE campaign prompts individuals to voluntarily reassess claims for deductions and exemptions that may have been identified as potentially ineligible. The department also employs global information-exchange frameworks to detect discrepancies in foreign asset reporting.
Taxpayers may receive communications that explain the reasons for the alerts, advising them to verify the accuracy of their claims. If discrepancies arise, they are urged to file revised returns by the December 31, 2025 deadline. This strategy aims to reduce the need for further inquiries from the tax authorities.
Exemptions and Deductions Under Scrutiny
Tax experts indicate that exemptions and deductions lacking genuine support are likely to face increased scrutiny. Common areas of concern include claims related to donations to political parties and house rent allowances. Deductions claimed with incorrect or invalid PAN details are also at risk of being questioned by the Income Tax Department.
The department has noted that discrepancies may occur from claims exceeding what is stated in Form 16 or other official documents. Taxpayers should exercise caution regarding deductions associated with the Double Taxation Avoidance Agreement (DTAA) and gratuity exemptions, as these areas are also under close observation.
Steps for Taxpayers Receiving Nudges
Taxpayers who receive nudges from the Income Tax Department should take specific steps to ensure compliance. Experts recommend maintaining thorough documentation for all claims, including receipts and bank statements that substantiate deductions and exemptions. This practice not only facilitates the verification of claims but also prepares taxpayers for any inquiries from tax authorities.
Taxpayers are advised to review their claims diligently and file revised returns if necessary. However, if they believe their claims are accurate, they can wait for further communication from the department. The Income Tax Department has clarified that genuine claims do not require any additional action. Those who miss the opportunity to revise their returns by the deadline can still file updated returns starting January 1, 2026, though this could lead to potential additional tax liabilities.
Disclaimer: Digihunt is not a financial advisor and this is not investment advice.