The Income Tax Department has launched a significant compliance drive, giving individuals involved in property deals and cooperative bank transactions a final deadline of December 31 to file corrected income tax returns. This action follows a series of inspections that uncovered major under-reporting of high-value transactions in mandatory statements.
The NUDGE Campaign: A Proactive Tax Compliance Drive
This initiative is part of the Non-intrusive Usage Of Data To Guide And Enable (NUDGE) campaign launched by the Central Board of Direct Taxes (CBDT). Under this program, the department is proactively sending intimations to taxpayers whose financial transactions, as per official records, do not match the declarations in their tax returns. The goal is to encourage voluntary compliance before stricter enforcement actions are taken.
The department has started dispatching these intimations in batches. The first notice was sent on December 10, and a second round is scheduled for December 20. Recipients are required to take corrective action by the year-end deadline of December 31.
Widespread Under-Reporting Uncovered in Inspections
The campaign was triggered by extensive checks conducted by the Income Tax Department's Intelligence and Criminal (I&C) wing on sub-registrar offices (SROs) handling property registrations and various cooperative banks. These inspections, covering records from the last five years, revealed a troubling pattern of non-compliance with the Statement of Financial Transaction (SFT) norms.
Officials discovered that property transactions and cooperative bank deposits with a total value exceeding Rs 20,000 crore were not reported under the SFT framework as required by law. The SFT is a critical reporting mechanism where:
- Sub-registrar offices must report all real estate deals valued at Rs 30 lakh or more.
- Banks must report deposits ranging from Rs 10 lakh to Rs 50 lakh, depending on the type of account.
This data is cross-referenced by tax authorities to verify if individuals have accurately included these transactions in their annual income tax returns (ITR). The recent search found large-scale discrepancies.
Who is Receiving Notices and What Must They Do?
The department is targeting two primary groups of individuals for this corrective action:
- Those who completely omitted reporting eligible transactions: Individuals whose property deals or bank deposits qualified for SFT reporting but were neither reported in the SFT nor declared in their income tax returns. They are being asked to submit updated returns.
- Those who under-reported the transaction value: Taxpayers who declared a lower value for their transactions than what is reflected in the official SFT data. They must correct their returns and pay the differential tax amount along with any applicable interest.
The first wave of intimations focuses on transactions from the Assessment Year 2020-21. A source indicated that this year is being prioritized to ensure corrective measures are taken before the case becomes time-barred. Notices for subsequent assessment years will follow shortly.
The Bigger Picture: Enhanced Data Analytics in Tax Administration
The NUDGE campaign represents a shift towards a more data-driven and transparent tax administration system. By leveraging vast amounts of financial data already reported by third parties like banks and registrars, the department can efficiently identify mismatches and non-compliance without initiating immediate intrusive searches or surveys.
This approach offers taxpayers an opportunity to voluntarily rectify errors, promoting a culture of compliance. For the government, it is a powerful tool to plug revenue leakage from unreported or under-reported high-value transactions, especially in sectors like real estate and cooperative banking which have traditionally seen lower transparency.
Taxpayers who have received an intimation or believe their past returns may have omissions are strongly advised to consult with tax professionals and file corrected or updated returns before the December 31, 2023 deadline to avoid potential penalties and further scrutiny.
