India is witnessing a significant increase in voluntary tax compliance, with millions of taxpayers proactively correcting errors in their filings. The Central Board of Direct Taxes (CBDT) announced on Tuesday that a staggering 3.6 million individuals have already updated or revised their income tax returns in the current fiscal year, FY26.
NUDGE Campaign Prompts Taxpayer Action
This surge is largely driven by the tax department's 'Non-intrusive Usage of Data to Guide and Enable (NUDGE)' initiative. Under this campaign, the CBDT is sending text messages and emails to identified taxpayers, requesting them to review and correct discrepancies in their returns. The authority is using its extensive data and risk management framework to spot errors, such as claims for ineligible deductions or exemptions that lead to an understatement of income.
The board has set a clear deadline for this voluntary correction process. Taxpayers have been given an opportunity to revise their returns on or before 31 December 2025. This proactive approach is designed to foster a "trust-first" environment in tax administration.
Breaking Down the Numbers: Revised vs. Updated Returns
Of the total 3.6 million assessees, the CBDT provided a detailed breakdown. More than 2.1 million taxpayers have filed updated returns for four assessment years up to FY25. Separately, another 1.5 million individuals have revised their returns for the current assessment year, 2025-26.
It is crucial to understand the difference between the two actions. A revised return can be filed for the current assessment year until December's end to fix mistakes like unreported income or incorrect deductions. An updated return, however, can be filed for previous assessment years, offering a longer window for correction but often with additional tax liabilities.
Common Errors and the Importance of the Deadline
The tax authority highlighted specific irregularities detected through its analytics. These include instances of taxpayers claiming bogus donations to unrecognized political parties. In some cases, returns featured incorrect or invalid Permanent Account Numbers (PAN) for the donation recipients.
Tax experts are urging citizens to take the December 31 deadline seriously. Amit Maheshwari, Tax Partner at AKM Global, explained that timely revision can help avoid further enquiries from the department. "Where claims are genuine and correctly made, no further action is required. However, if discrepancies are identified, timely revision can help avoid further enquiries," he stated.
Maheshwari further noted that while taxpayers can file an updated return after the revision window closes from January 1, 2026, it would involve paying additional tax. Proactive correction helps mitigate risks of penalties, interest, and prolonged litigation.
The CBDT's final advice is clear: concerned taxpayers should immediately review their Income Tax Returns (ITRs), verify all claims for deductions and exemptions, and file a revised return if needed before the year-end deadline. This step is essential to align with the department's goal of encouraging transparent and voluntary compliance.
