AI vs. Tax Evasion: The Success of NUDGE:

 

Meaning of NUDGE:

1.  NUDGE stands for Non-Intrusive Usage of Data to Guide and Enable, and the CBDT has carried out two campaigns under this banner till now – first in November 2024 for taxpayers who had undisclosed foreign assets for the assessment year 2024-25, and the second such campaign was launched in November last year for AY 2025-26.

2.  NUDGE is a technology-enabled exercise, in turn, stands on the “seven limbs” of the SAKSHAM framework. SAKSHAM stands for Sankalan (Hindi for collection of information), Anusandhan (research), Kriyanvayan (execution), Sampark (contact), Hastak (hand-holding), Adhikar (right) and Mulyankan (analysis).

3.  This (SAKSHAM) encourages the I-T Department assessing officers to use data (sent by reporting entities like banks, etc.) for better communication to foster voluntary compliance by taxpayers.

4.  The Department uses AI and data analytics to send targeted SMS/emails regarding discrepancies (e.g., in foreign assets, HRA, and donations).

 

Key Outcomes and Impact (NUDGE 1.0 & 2.0):

1.  Revenue Generation: The campaign generated approximately ₹8,800 crore in additional tax over two years.

2.  Corrective Actions: Taxpayers filed over 1.1 crore updated/revised returns.

3.  Foreign Assets: Over 25,000 taxpayers reported foreign income in revised returns, adding over ₹1,000 crore in income and disclosing ~₹29,000 crore in foreign assets.

4.  Reversal of Refund: NUDGE helped in reversal of refund claims worth Rs 1,750 crore last year.

5.  TDS Revisions: More than 8,500 deductors revised TDS returns, adding nearly ₹4,825 crore.

Conclusion:

The success of NUDGE 1.0 and 2.0 demonstrates that India is building a modern tax state-one where data analytics and international information exchange (AEOI) make concealment increasingly difficult.