According to news reports, the Income-tax Department is investigating the transactions of a group of non-resident Indians (NRIs) and suspects that due taxes may not have been paid by them. According to reports, an unprecedentedly large number of NRIs have received notices from tax authorities requesting that they reconcile the funds in their bank accounts or investments with the income reported in their tax filings. In many cases, the notices are sent under Section 148(A), which means that the authorities have information that certain income has escaped assessment and believe that more tax may be due.
While there are no explicit tax demands in the current set of notices, tax experts believe they could be precursors to assessment orders seeking higher taxes. The increased scrutiny by the taxman is significant, and NRIs must exercise greater caution when filing their tax returns.
Foreign Investors Asked to Share Information
In addition to the notices issued to NRIs, the taxman has asked some foreign investors to share information on capital infusions made in Indian firms and the price at which the shares were purchased. The department is taking this action because it believes that the transaction value in these cases may be higher than the respective fair market values, resulting in higher capital gains for Indian entities. It is unusual for the taxman to request information from foreign buyers of Indian equities in order to assess the income of domestic companies.
Elaborate and Comprehensive Details Being Sought
The information sought by the tax authorities is detailed and comprehensive. These include explanations of the source of funds, valuation of investments made, regulatory compliances observed, and tax residency certificates. As a result, it is critical for NRIs and foreign investors to be prepared with all necessary documents and information in order to avoid delays in the assessment process.
Tax Liability of NRIs
NRIs are required to pay taxes and file returns in India on any income earned in the country through house property, salary earned in India, investments, or interest earned in savings bank accounts. It is important to note that only NRI income earned in India is taxable, whereas an Indian residents must pay tax on their global income.
NRIs and foreign investors must exercise greater caution when filing their tax returns in India. The increased scrutiny by the taxman has resulted in an increase in the number of notices issued, and it is critical to provide all required documents and information to avoid any delays in the assessment process. NRIs must ensure that any income earned in the country is taxed, and foreign investors must be aware of fair market values when investing in Indian firms. NRIs and foreign investors can avoid future legal complications by adhering to tax regulations.