In a decisive move ahead of a critical deadline, the Income Tax department has initiated direct communication with several multinational corporations operating in India. The authorities are pressing these companies to urgently notify their Indian employees about the mandatory requirement to declare any undisclosed foreign assets and income for the assessment year 2025-26.
Formal Communications Sent to Major Corporations
According to tax advisors and a recent report, the department has dispatched formal notices to a number of large multinationals. These include a prominent global consumer healthcare firm, a major wireless technology company, and a US-based semiconductor designer. The communications explicitly state that a specific number of their India-based employees are subject to mandatory foreign asset reporting.
In one such email reviewed by professionals, the tax office asserted that it already possesses relevant data and sought employer cooperation. The message indicated that 30 employees of one organization fall under the reporting mandate for AY 2025-26. To maintain confidentiality, the department refrained from naming individuals in the initial email but urged employers to ensure statutory compliance is met by their staff.
The High Stakes of Non-Disclosure
The companies have been advised to sensitize their workforce about the severe consequences of non-compliance. Failure to disclose overseas assets and income can trigger assessment proceedings, a steep penalty of Rs 10 lakh, and potential prosecution under the stringent Black Money (Undisclosed Foreign Income and Assets) Act, 2015.
Tax experts note that many lapses are not deliberate but stem from common misconceptions. Employees of multinational firms often neglect to report income from Employee Stock Option Plans (ESOPs), overseas dividends, or capital gains, wrongly assuming such foreign earnings escape the notice of Indian authorities. This assumption is now outdated due to robust global data-sharing pacts.
Information is now routinely exchanged with Indian authorities through international frameworks like the US Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS), making concealment increasingly difficult.
Speed of Data Exchange and Employer Onus Surprises Experts
Advisors have expressed surprise at the accelerated pace of information flow. "The exchange of information is moving at a speed that's unheard of. The government is getting data within six months of the year-end," remarked Rajesh Shah, partner at Jayantilal Thakkar & Co. He added that the department's reminders via SMS and email are aimed at helping genuine taxpayers correct their filings without entering litigation.
However, this proactive approach places a significant burden on employers. Ashish Karundia, founder of a CA firm, pointed out that employers are now expected to monitor and interpret employees' foreign assets—a complex area often beyond standard payroll visibility. He also highlighted the need for clarity from the Central Board of Direct Taxes (CBDT) on whether ESOP disclosure is required at the time of grant or vesting.
Part of the NUDGE Campaign: A Window with Caveats
This outreach is a key component of the second phase of the CBDT's 'NUDGE Campaign', launched in 2024. It offers taxpayers a final opportunity to file revised or updated returns by December 31, 2025. Individuals with unreported foreign income from interest, dividends, rent, or capital gains are being asked to correct their filings before this deadline.
Yet, experts caution against over-reliance on the updated return mechanism. Mohit Bang, partner at Trivedi & Bang, warns of a significant legal gap. "There is a misconception that disclosing foreign assets through an Updated Return (ITR-U) provides immunity from the stringent penalties of the Black Money Act," he said. Since Section 43 of the Black Money Act does not explicitly recognize an updated return for penalty waiver, taxpayers using ITR-U may still be liable for the ₹10 lakh penalty. He emphasizes that disclosure and correction before the December 31 deadline are crucial to avoid penalties for both non-reporting and potential tax evasion.
The overarching message from the tax department and advisors is clear: Indian residents with overseas financial interests have no option but to ensure full and accurate disclosure in their Income Tax Returns to avoid severe legal and financial repercussions.
