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I have seen many NRIs are getting notice under section 148A by Indian Income Tax authorities. In case they don’t reply to this notice within a specified time, they end up getting a notice under section 148 in which the assessing officer has reasons to believe that such an individual’s income chargeable to tax might have escaped assessment. Let me try to explain what is happening and what should be done to avoid unnecessary demands and penalties from Indian Income Tax Authorities.

Please note, I am writing this article for NRIs only. There are hundred other reasons where these notices can be issued but as I closely work with NRIs, my main aim is to get resolution of taxation issues they are facing in India. Let’s get started:

1. Section 148A- It is a newly introduced section effective from 1st Apr, 2021. According to this section, when assessing officer has some information which suggest that income chargeable to tax has escaped assessment, in simple words that some income is not disclosed by assessee then he conducts an enquiry (Show cause) and provide him an opportunity of being heard. Time period within which response shall be submitted will be provided in the notice which can be from 7 days to 30 days. If assessee doesn’t respond to this notice or Assessing officer is not satisfied with the response submitted by assessee then officer will issue a notice under section 148.
2. Section 148 – Under this section a notice is issued to assessee requiring him to file a return of income with explanation in respect of that income which he thinks escaped assessment.
3. Section 147 – Under this section Assessing officer after getting a reply from assessee, compute/recompute/assess/reassess assessee income and pass an order accordingly.

Question is Why NRIs are getting these notices in spite of the fact that for that particular financial year they were neither in India nor earned any income in India or if income was earned it was below exemption limit or was exempt as per rule?

This is happening because usually NRIs do inward remittance in India and then invest this sum in NRE/NRO term deposits or purchase an immovable property or purchase mutual funds or do any other investments. As they do not have any income in India in that particular financial year, they skip filing annual income tax return in India. Income tax authorities has a mechanism (risk management system) through which they get details of these high value transactions but they don’t have the information of the source of funds behind these transactions as tax return was not filed by assessee in this regard. Hence, they issue a notice under section 148A to assessee telling them they have details of particular transactions with them and they do not know source of these funds as return is not filed. They give an opportunity to assessee to provide explanation and submit relevant documents to make them understand how these transactions are done without earning income in India.

Actions what NRIs should take to deal these kinds of matters:

1. Update your contact details in your online income tax account to get notices or intimations directly on emails.
2. Respond within time limit mentioned in the notice. Now, all responses can be filed online by login to the income tax account.
3. Prepare detailed response explaining your case and submit all necessary documents as a proof.
4. If you need more time to respond, submit partial response and request for few more days to submit full response.
5. Better to take a professional help to deal with these kinds of matters as they know the proper way of submitting the response.
6. Better to File income tax return on regular basis even if you don’t have any income in India. It will let income tax department know about your residential status. Also, transactions like gift, inheritance money etc shall also be reported in ITRs as exempt income. It becomes more important when you are doing high value transactions or investments in India.
7. Do transactions in a rightful way, don’t indulge in cash transactions, Disclose each and every reportable transaction in ITRs. This is necessary as now department automatically gets all your transactions details directly through different financial parties.

I personally feel, India is changing and change is always difficult. Our government is trying to make processes faceless (transparent) and fast. I grew up criticizing corruption prevailing in our system. Now, things are changing for better and I feel proud of being part this change. But implementing this kind of system takes time as people are not used of it. I think we can give our contribution in this change by staying honest, cooperative and patient.

Disclaimer: This article is solely based on my views, experience and interaction I had with Indian Income Tax Department. People may have different views on above.

Please do let me know if you still have any questions related to above. You can write to me at ushma@nricaservices.com or call/Whatsapp me at +91 9910075924.