Background – Non-Residents (NRIs, OCIs, etc) receiving notice from Indian Income Tax Department
In recent 1-2 years, it has been observed that Non-Residents (NRIs, OCIs) settled outside India are receiving notices (i.e. e-campaign notices, Sec 148A/148 Notices etc) from the Indian Income Tax department in relation to financial transactions undertaken by these Non-residents in India. This has raised a common concern amongst Non-Resident community regarding the steps to be taken by them on receiving such notices viz significance/gravity of notice, what needs to be done, how to appropriately respond to such notices, understanding if they need the help of a professional for responding to such notices, need and importance of filing tax returns in India, etc.
Notice Under Section 148A, 148, E-campaign to the NRIs and Basis of These Notices
In recent years, Income Tax Department has upgraded their database system. Hence, now income tax department is capturing various types of financial transactions of taxpayers. Non-residents (NRIs, OCIs) do various financial transactions in India. However, non-residents usually do not file ITR in India on following assumptions:
- That they have incurred financial transactions out of their foreign source funds which is not taxable in India
- That their Indian income is below the taxable limit
- That on Indian Income tax is duly paid through TDS
However, in the absence of an ITR, Income tax department wants to verify the evasion of any tax liability as well source of these financial transactions undertaken by the Non-residents. For the same, generally, Income Tax Department issues following types of notice under Income Tax Act, 1961
- e-campaign notices
- Notice under Section 148A
- Notice under section 148 to file an ITR
- Opening a Scrutiny Proceeding and detailed Questionnaire Notice under section 142(1)
E-Campaign Notice
This notice is issued generally in all cases where a significant financial transaction (SFT) i.e. high value transaction is entered by NRI, and there is no ITR filed by that NRI. In this cases, Income Tax Department issues emails with subject matter as ‘e-Campaign – Non-filing of Income Tax Return (ITR)’. These notices can also be checked online on income tax portal under e-compliance cell. Responding of these notices can be done online on the Income Tax Portal. By responding these notices, NRIs can plug further level of notices.
Show Cause Notice under section 148A of Income Tax Act, 1961
This notice is a show cause notice enquiring significant financial transactions captured by the Income Tax Department information system. This notice means that Income Tax Department has initiated a first level scrutiny enquiry. Non-compliance or unsatisfactory response to this notice leads to Assessment Proceedings (Scrutiny Proceedings).
Notice under section 148 of Income Tax Act, 1961
This notice means that Income Tax Department has initiated an Assessment Proceeding (Scrutiny Proceeding). Under this notice, Income Tax Department requires for filing of an ITR for respective year in which Significant Financial Transaction is entered by NRI and ITR was not filed. There is a time limit given in the notice to file the ITR. Non-compliance of this notice can lead to penalty as well tax liability on the financial transaction.
Scrutiny Proceedings Under Section 147/143(2) and Notices under section 142(1) of Income Tax Act, 1961
This notice means that Income Tax Department has initiated an Assessment Proceeding (Scrutiny Proceeding) under section 147/143(2). To process the assessment proceedings, Income Tax Authorities issues detailed and lengthy Questionnaires under section 142(1). These notices need to be responded within a limited time frame. Non-compliance of these questionnaire means that Assessing Officer can pass an order to levy tax on the financial transactions entered by NRIs.
Types of Financial Transactions Generally Getting Captured by the Income Tax Department
- Purchase or sale of immovable property in India
- Purchase or sale of mutual funds in India
- Purchase or sale of shares in India
- NRE/NRO Fixed Deposits in India
- NRE/NRO Deposits Interest income in India
- Dividend income from shares/mutual funds
- Foreign Remittances/Repatriation of money
Importance of Registered Email Address
It is very important to maintain a valid email account and same being registered with the income tax department. E-campaign Notices, Notices under section 148A or 148 or Scrutiny Proceeding notices, etc are received via email. If the email address is not valid or not registered with the income tax department, one may tend to miss receiving the notice in time and accordingly, submitting a timely response. Consequently, the income tax department passes an order according to their best judgement as per the information available with them, which leads to a high tax demand as well as penalty.
FAQs – NRI Income Tax Notices 148, 148A, Other Notices
Q1 – Should NRIs ignore Income Tax Department Notices under section 148, 148A, E-campaign Notices?
Ignoring the notices received from the Indian income tax department or not taking any action on them may trigger a lot of unnecessary consequences. It is advisable to seek advice of a Tax Consultant immediately on receipt of such type of notices. In such notices, correct response within the given timeline go a long way in saving from uncomfortable situations.
Q2 – Generally, to whom Notice under section 148A is being issued?
It has been observed that such notices are mostly issued to those NRIs, who enter into financial transactions in India (Investment in Properties/Bank Deposits/ Securities etc) or incomes in India, however, these NRIs do not file their income tax returns in India. In today’s scenario of new laws coming into existence, it is strongly recommended to file the returns (Benefits of for NRIs for filing income tax returns in India) regularly in India to avoid such notices in future.
Q3 – How to check if notice has been received or not
- In case of PAN already registered with the Indian income tax department, simply login into the account and check the ‘Compliance’ or ‘Pending Action’ tab & check if any notices are outstanding, where the response was not recorded
- In case of PAN not registered with the Indian income tax department, first register the same on the https://www.incometaxindiaefiling.gov.in/home website and then check the status of PAN to see if any notices have been issued.
- Usually, such communication is received over email. However, if the email-ID is not updated, then one needs to update the same on the Indian Income Tax website.
S Lohia & Associates, Chartered Accountants – Tax Litigation Services – Non Residents Tax Litigation Matters – NRI Notices U/Sec 148, U/Sec 148A, NRIs Scrutiny Proceedings U/Sec 147/143(3)/144, Summons U/Sec 131, Appeals with CIT (Appeal) or ITAT, E-campaign Notices, Rectification Applictions, Grievances etc
We, S Lohia & Associates, are a firm of Chartered Accountants, Lawyers and Other Expert. We have a good & experienced litigation team to serve Non-residents in relation to their various tax litigation matters. In this regard, Some of our service ingredients are:
- Handling Non-residents Notices under various sections of Income Tax Act i.e. 148, 148A, 147, 142(1), 143(2), 144, 131 etc.
- Preparation of comprehensive submissions to resolve the litigation at initial level.
- Finding alternative approaches to get relief from tax demand.
- Providing best expert for best resolution of the tax issues.
- Liaison with Tax Officials where ever required to resolve the tax matters.
- Discussions with Non-residents clients to explain about notices significance and action strategy
- Advising Non-resident clients to adopt better strategies to plug the notices.
- Assisting and handling tax litigation matters for PAN India through our offices in all major cities i.e. Delhi, Mumbai, Chennai, Kolkata, Hyderabad, Bangalore, Chandigarh, Himachal, Kochi, Gujarat, Gurgaon, Noida etc.
- We at S Lohia & Associates, have experience of provide Tax Litigation Services to Non-resident clients (NRIs, OCIs) on regular basis.