What transactions as an NRI will land you in Tax Trouble?
Posted on October 01 2020
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Many Non Resident Indians have received and many more will be receiving (in due course), Income Tax Notices from the Income Tax Department in India. These Income Tax Notices have been sent to the NRI, largely for default in Filing of their Income Tax Returns in India. There is huge quantum of information with the ITD on the Non Resident Indian assessee and their transactions in India. There are many transactions which are of high value which get reported to the ITD for the NRI and if you have not reported these transactions in your Income Tax Returns then even if you are a NRI you can receive an Income Tax Notice.
Notices for high-value transactions: As a Non Resident Indian, invariably, you must be doing high value transactions in India like property purchase or sale, investments in Mutual Funds and Deposits, purchasing jewellery or designer clothes, or gifting monies to near and dear ones among other transactions. Any high-value transaction (with or without quoting PAN) for a Non Resident Indian (NRI / OCI / PIO) that you thought you can get away with can invite a Notice for the Non Resident Indian from the Income Tax Department.
The Income Tax Department in India gets loads of information and thats on all transactions by regular channels across India and these transaction details have all the details of the Non Resident Indians also. The Income Tax Department closely scrutinises this information in different levels and Non Resident Indians (NRI / PIO / OCI) with bank balances, deposits, credit and debit card purchases, mutual fund and share investments, or purchase of bonds and debentures are all under the flashlight of the ITD. Sale or purchase of property by a Non Resident Indian attracts attention of the Tax Department. Hence it is best to be compliant with Income Tax law for a Non Resident Indian and stay safe and sleep tight.
Under the Income Tax law in India, as applicable to Non Resident Indians (NRI / OCI /PIO) details of all such transactions are required to be furnished by the NRI in the NRI’s Income Tax Return and the organisation that you are transactiong with is also required to provide the details to the Income Tax Department. For example, if you have made a investments of Rs 10 lakh in a Mutual Fund, the respective Mutual Fund company has to file the details with the Income Tax Department for all Resident and Non Resident Indians and also Corporate Houses. All in all, each and every transaction is reported with the Income Tax Department. If as a Non Resident Indian, you are not filing correct Income Tax Returns in India, it is only non-effort that the Income Tax Department and the Officers of the Income Tax Department that can keep you safe.
Unlike the past 20 years, such is the tight monitoring system in place in the Income Tax Department now, that the Taxman may send you a Notice asking you to file a Income Tax Return based on this solid and often true information that they have against you. If there is a sharp discrepancy between your earnings and spending, the tax department may ask you to explain your sources of income and if you have not declared it correctly you will be liable to steep penalties and prosecution.
Most of the Income Tax Notices received by Non Resident Indians have lead to the Income Tax Department raising a tax demand, due to the non correct response and follow through of the Notice. If the Income Tax Notice received by the NRI is not dealt with expeditiously and in the correct manner, it could also lead to the NRI’s bank accounts and properties being attached.
The Government of India, has made it mandatory for buyer of a property worth Rs 50 lakh or more to deduct 1% tax (TDS or withholding Tax) from the payment to the seller and deposit it with the Income Tax Department. The buyer needs to issue a TDS (Tax Deducted at Source) certificate called the Form 16B, to the seller. Hence if a Non Resident Indian is buying or selling a property in India, the information on the property transaction is directly being provided to the Income Tax Department. Moreover there is a process underway in various parts of the country, where the Property Registration office information is getting imported by the Income Tax Department directly. So if as a Non Resident Indian if you have had a property transactions, purchase or sale, you are required to declare the transaction in your Income Tax Returns correctly and if you donot do it there will be a mismatch with the information already available with the ITD and there are reasonable changes of the NRI receiving the Income Tax Notice.
The Income Tax Department in India gets loads of information and thats on all transactions by regular channels across India and these transaction details have all the details of the Non Resident Indians also. The Income Tax Department closely scrutinises this information in different levels and Non Resident Indians (NRI / PIO / OCI) with bank balances, deposits, credit and debit card purchases, mutual fund and share investments, or purchase of bonds and debentures are all under the flashlight of the ITD. Sale or purchase of property by a Non Resident Indian attracts attention of the Tax Department. Hence it is best to be compliant with Income Tax law for a Non Resident Indian and stay safe and sleep tight.
Under the Income Tax law in India, as applicable to Non Resident Indians (NRI / OCI /PIO) details of all such transactions are required to be furnished by the NRI in the NRI’s Income Tax Return and the organisation that you are transactiong with is also required to provide the details to the Income Tax Department. For example, if you have made a investments of Rs 10 lakh in a Mutual Fund, the respective Mutual Fund company has to file the details with the Income Tax Department for all Resident and Non Resident Indians and also Corporate Houses. All in all, each and every transaction is reported with the Income Tax Department. If as a Non Resident Indian, you are not filing correct Income Tax Returns in India, it is only non-effort that the Income Tax Department and the Officers of the Income Tax Department that can keep you safe.
Unlike the past 20 years, such is the tight monitoring system in place in the Income Tax Department now, that the Taxman may send you a Notice asking you to file a Income Tax Return based on this solid and often true information that they have against you. If there is a sharp discrepancy between your earnings and spending, the tax department may ask you to explain your sources of income and if you have not declared it correctly you will be liable to steep penalties and prosecution.
Most of the Income Tax Notices received by Non Resident Indians have lead to the Income Tax Department raising a tax demand, due to the non correct response and follow through of the Notice. If the Income Tax Notice received by the NRI is not dealt with expeditiously and in the correct manner, it could also lead to the NRI’s bank accounts and properties being attached.
The Government of India, has made it mandatory for buyer of a property worth Rs 50 lakh or more to deduct 1% tax (TDS or withholding Tax) from the payment to the seller and deposit it with the Income Tax Department. The buyer needs to issue a TDS (Tax Deducted at Source) certificate called the Form 16B, to the seller. Hence if a Non Resident Indian is buying or selling a property in India, the information on the property transaction is directly being provided to the Income Tax Department. Moreover there is a process underway in various parts of the country, where the Property Registration office information is getting imported by the Income Tax Department directly. So if as a Non Resident Indian if you have had a property transactions, purchase or sale, you are required to declare the transaction in your Income Tax Returns correctly and if you donot do it there will be a mismatch with the information already available with the ITD and there are reasonable changes of the NRI receiving the Income Tax Notice.
Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.
With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.
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