India’s government has underlined a significant shift in tax administration strategy in the Economic Survey 2025–26, tabled in Parliament on Thursday, as officials highlight the growing role of behavioural interventions in strengthening compliance. Rather than relying primarily on audits and litigation, government stated that the Income Tax Department is increasingly deploying a data-driven, gentle-prompting model known as NUDGE (Non-intrusive Usage of Data to Guide and Enable) to encourage voluntary tax corrections and improve revenue mobilisation.
From enforcement to engagement: What NUDGE means
The NUDGE framework represents a behavioural economics-based compliance strategy, one that seeks to influence taxpayer behaviour through information and tailored prompts rather than traditional coercive enforcement. Under this model, taxpayers are alerted about discrepancies or omissions via SMS, email or portal notifications, encouraging them to review and update their returns voluntarily before formal action is taken.
Rather than defaulting to audits or penalties, the system leverages large-scale analytics to detect potential non-compliance and guide taxpayers toward correct reporting. This, in turn, reduces friction in the tax system and can help foster trust between citizens and the state.
Early results: foreign assets and deduction claims corrected
The Economic Survey 2026 highlighted tangible results from targeted NUDGE campaigns. In the Foreign Asset Campaign, nearly 25,000 taxpayers revised their returns after being nudged, with over 61 per cent responding positively. This led to the declaration of foreign assets worth more than ₹29,000 crore and foreign income exceeding ₹1,000 crore, much of it through belated filings.
Similarly, nudges aimed at correcting excessive claims under Section 80GGC saw more than 91,000 taxpayers updating their returns, reducing inflated deductions by nearly ₹2,050 crore and generating additional tax payments of over ₹680 crore. Targeted interventions also resulted in over ₹119 crore in additional collections by addressing incorrect House Rent Allowance (HRA) claims.
Beyond taxpayer filings: widening the tax net
The NUDGE framework’s influence extends to third-party reporting as well. Updates to Tax Deducted at Source (TDS) data triggered revisions from over 8,500 deductors, adding more than 1.08 crore deductees to the system and bringing nearly ₹4,825 crore in additional TDS revenue. Advanced analytics also flagged ₹2,038 crore in suspected non-genuine agricultural income and ₹33,057 crore in capital gains from promoter Offer for Sale transactions.
A citizen-centric approach to compliance
According to the Survey, the NUDGE initiative has “improved tax collection efficiency by shifting the focus from post-facto enforcement to preventive, technology-enabled compliance”, reducing litigation and compliance costs for both taxpayers and administrators.
By combining data insights, behavioural science and transparent communication, India’s tax authority hopes to build a more efficient and citizen-centred tax administration. The approach aligns with global practices in advanced economies, where behavioural tools are increasingly used to complement traditional enforcement.
Policy backdrop: resilient growth despite external challenges
The emphasis on tax compliance comes amid an optimistic macroeconomic outlook detailed in the Economic Survey. India’s economy is projected to grow between 6.8 per cent and 7.2 per cent in the fiscal year beginning April, surpassing market expectations and highlighting structural resilience.
This optimism persists despite ongoing challenges, including high tariffs imposed by the United States on Indian exports and uncertainty in trade negotiations. Officials have stated that ongoing talks with the US are expected to conclude during the year, potentially easing external pressures.
What NUDGE means for taxpayers
The shift toward behavioural compliance does not eliminate enforcement mechanisms; rather, it provides an early-warning and self-correction system that can reduce unnecessary disputes and streamline the tax ecosystem.
Experts note that, with tools such as NUDGE and associated data systems, taxpayers are encouraged to proactively review and rectify discrepancies, narrowing the compliance gap and reinforcing the voluntary nature of the tax system.