How To Respond To An Indian Income Tax Department Notice If you Are An NRI? 

Some Indian expatriates in the UAE have received letters from India’s income tax department about prior investments and residential statuses. These have raised concerns among non-resident Indians (NRIs) about what they should do if they receive such notices.  

Here’s what you should know if you’re a non-resident Indian (NRI) and have gotten such a letter from the Indian income tax department, as it’s critical to understand how to reply to them, especially since there was some uncertainty last year.  

What type of notices are these non-resident foreigners receiving? 

The income tax agency scrutinises NRI’s “residential’ status in their emailed notifications. It is sending them reminders to evaluate or reassess any taxable income or investments in India that were previously neglected or omitted from being stated.  

The email also asks NRIs to re-evaluate the previous five to six years of yearly disclosures or income tax returns (ITRs) submitted on their interests in the country. The income tax agency had previously announced that it has begun revisiting past tax assessments using a new algorithm called ‘INSIGHT,’ a platform that filters through massive volumes of data.  

This is consistent with the conclusion of the India Budget 2021, which shortened the time limit for inspecting NRI income tax to three years from six years. When the revenue involved is greater than Rs5 million, NRI taxes might be reassessed even after ten years.  

Why are certain NRIs receiving such notices?  

With the new algorithm, the tax department would be able to send up to 50,000 letters under Section 148A of the Income Tax Act of 1961, allowing the government to review NRI tax declarations with investments in their home country.  

Some NRIs have also received compliance emails in the past for high-value transactions they made in India. They’ve been requested to give photocopies of their passports, as well. This NRIs were also sent an e-compliance email with “e-Campaign – non-filing of Income Tax Return (ITR).”  

These emails are sent to the NRI’s or, in this case, the assessee’s registered email address. They send you an email that looks like the one below, in which they provide you with a list of transactions or investments you’ve made in India.  

Is it possible for me to disregard the notification and do nothing?  

If you receive such a message, you should not disregard it since it may result in a slew of unintended repercussions. If you are compelled to reply to such letters, you should do so after checking with your tax advisor. 

However, the vast majority of such warnings are sent to NRIs who do not file their income tax returns in India, despite having several investments or sources of income in the country. With all of the recent changes in the legislation, it is now suggested that returns be filed on a regular basis in India to prevent receiving similar letters in the future.  

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