NRIs get I-T department’s queries on investments

MUMBAI: A significant number of non-resident Indians (NRIs), including those in the UAE, have received notices under sections 148/148A from the income tax (I-T) department for reassessment. Details are being sought of high-value transactions like purchase of immovable property, investment in securities or deposits or even for outward remittances from India.
To their surprise, details relating to their foreign currency non-resident (FCNR) accounts in India have also been sought. These are opened in permissible foreign currency —the interest income is taxexempt — and the funds deposited are fully repatriable.
“Naturally, when a person suddenly has a huge FCNR deposit, the I-T department is bound to inquire about the source — this is why so many notices seem to have been issued,” explains Ameet Patel, tax partner with Manohar Chowdhry &Associates.
Rutvik Sanghvi, partner at Rashmin Sanghvi & Associates, states, “Many NRIs earn largely exempt incomes from within India and prefer not to file tax returns unless mandated by law — but are then flagged as ‘non-filer’ under the Central Board of Direct Taxes’ Risk Management Strategy. The I-T department’s notices is backed by a system-driven suggestion that income has escaped assessment.”
Some non-residents view these notices as fishing inquiries without establishing how income has escaped tax. On the flip side, Patel points out, “A large number of NRIs automatically assume they are non-residents for tax purposes in India, whereas the residential status is dependent on the number of days’ stay in India during a given period. They must understand that treating FCNR interest as exempt in India without first correctly determining the residential status for each year is risky.”
Anil Harish, advocate and partner at DM Harish & Co, offers guidance, “Upon receiving a notice under section 148A for reopening of assessment, check whether the material relied upon by the I-T officer is attached. If not, ask for it. Then check if the notice is within the limitation period of 3years from the end of the assessment year. If the proposed addition is more than Rs 50 lakh, check if it falls within limitation period of 10 years from the end of the relevant assessment year. Also, check if sanction has been taken from higher authorities for such a notice. Then give a reply.”