‘CBDT’s ‘Trust First’ drive spurs Rs 29,000 cr foreign asset disclosure by over 30K taxpayers’

New Delhi: Fostering tax compliance, the Central Board of Direct Taxes (CBDT) has successfully encouraged 30,161 taxpayers to declare foreign assets worth over Rs 29,000 crore under its Compliance-Cum-Awareness Campaign, government sources claimed on Thursday. The initiative, which emphasised a ‘Trust First’ approach, sought to promote voluntary disclosure rather than enforcement-driven compliance.

Sources also confirmed that in September last year, India received financial information from over 108 countries regarding foreign accounts and income in the form of interest and dividends earned outside India. Leveraging this data, obtained through the automatic exchange of information framework under the Common Reporting Standard (CRS) and the Foreign Accounts Tax Compliance Act (FATCA), the CBDT launched the campaign on November 17, 2024, urging taxpayers to revise their Income Tax Returns (ITRs) for the Assessment Year (AY) 2024-25 and declare their foreign assets and income.

The initiative followed a system-driven and taxpayer-friendly approach, providing individuals with detailed guidance on filling out Schedule Foreign Assets and Schedule Foreign Source Income. To ensure transparency and ease of compliance, the Income Tax Department (ITD) provided taxpayers with explanatory materials that helped them understand the financial information received under CRS and FATCA.

As part of its outreach efforts, the ITD sent SMS and emails to 19,501 taxpayers identified as having significant foreign account balances or substantial foreign income. These communications encouraged them to revise their ITRs to reflect accurate foreign asset and income details. Additionally, 30 seminars, webinars, and outreach sessions were conducted across the country, engaging over 8,500 participants. Awareness was further amplified through informative pamphlets, brochures, and social media interactions under the ‘Samvaad’ initiative. 

The campaign yielded remarkable results, with 24,678 taxpayers reviewing their ITRs and 5,483 taxpayers filing belated returns for AY 2024-25. This led to declarations of foreign assets worth Rs 29,208 crore and additional foreign income amounting to Rs 1,089.88 crore. Furthermore, 6,734 taxpayers revised their residential status from Resident to Non-Resident, aligning their tax filings with their actual financial circumstances.

Overall, approximately 62 per cent of nudged taxpayers responded positively, voluntarily revising their ITRs to disclose foreign assets and income. The number of taxpayers making voluntary disclosures has been rising steadily, increasing from 60,000 in AY 2021-22 to 2,31,452 taxpayers in AY 2024-25. Due to extensive outreach and awareness efforts, voluntary disclosures saw a significant 45.17 per cent growth compared to AY 2023-24.

At the core of this initiative is the CBDT’s ‘Trust First’ approach, which prioritises voluntary compliance over enforcement measures.

Instead of resorting to immediate verification or intrusive actions, the Department placed its trust in taxpayers, allowing them ample opportunity to rectify their filings before any formal verification process was initiated. By fostering transparency, education, and cooperation, the initiative has reinforced a compliance-friendly tax environment, ensuring that taxpayers can correct their filings proactively before facing regulatory scrutiny.

India, an early adopter of CRS, has been receiving financial data since 2018 for calendar years starting from 2016. More than 125 countries participate in this automatic exchange of financial information, sharing details of accounts, balances, interest earned, and dividends received. Additionally, India has a similar exchange arrangement with the United States under FATCA.