Global Data Sharing Puts Foreign Assets Under Scanner

The Income Tax Department is tracking foreign assets of Indian residents through global information-exchange agreements, receiving detailed account-level data from over a hundred jurisdictions, including ownership, balances, income, and underlying structures.

On Global Data Visibility

The ITD today possesses an unprecedented degree of visibility into offshore financial holdings of Indian residents, primarily on account of India’s participation in the Organisation for Economic Co-operation and Development (OECD) Common Reporting Standard (CRS) and the FATCA framework with the United States.

Through these automatic-exchange mechanisms, the department receives annual, account-level information from over a hundred jurisdictions, including details of beneficial ownership, balances, investment income and, in several cases, the corporate or trust structures through which such assets are held.

This dataset is further supplemented by intelligence from authorized dealer banks under the Foreign Exchange Management Act (FEMA), cross-border remittance trails, information shared by foreign regulators, and inputs from enforcement agencies. “Consequently, foreign assets that may have once escaped detection are now subject to a sophisticated, multi-layered surveillance ecosystem, enabling the Department to issue targeted nudges where discrepancies between declared income and offshore holdings are evident,” says Tushar Kumar, advocate, Supreme Court of India.

Global Reporting Drives The Nudge

The "NUDGE" initiative for tax compliance by Central Board of Direct Taxes (CBDT) is specifically focused on direct tax matters and the reporting of foreign assets and income. “Every nation usually enters into data exchange agreements with other countries to combat tax evasion. India also has agreements with various countries for the exchange of financial accounts with many countries,” says Ritika Nayyar, partner, Singhania & Co.

The CBDT has activated relationships for receiving data from over 100 jurisdictions. This network includes jurisdictions spread across the continents of Europe, Asia & the Middle East, the Americas, and even other offshore centers such as the Cayman Islands, the British Virgin Islands, Bermuda, etc, as part of the exchange network.

The list of jurisdictions is regularly updated by the CBDT. “It ensures that there is full transparency in the exchange of financial information and data among these committed jurisdictions, which enables India to receive detailed reports on its residents' financial accounts from all major banking institutions across the globe,” says Nayyar.

On Limits Of The Nudge

Even if a taxpayer fixes mistakes under the Income-tax Act or the Black Money Act, any breach of FEMA—like buying property abroad without permission, exceeding LRS limits, or using non-compliant investment structures—remains a violation and is not automatically forgiven.

Such infractions may still invite compounding proceedings or regulatory scrutiny from the Reserve Bank of India or ED, depending on the nature of the contravention. “The nudge thus affords a window to regularize tax filings, but it does not operate as a shield against collateral regulatory liabilities unless a specific statutory amnesty is separately notified by the union government,” says Kumar.