Transactions of a section of non-resident Indians (NRIs) have come under the scanner of the income tax department, which suspects due taxes may not have been paid by them. According to sources, an unprecedentedly high number of NRIs have received notices from the tax authorities in recent weeks, asking them to correlate the funds in their bank accounts or investments made by them, with the incomes reported in their tax filings. In many cases, the notices are being sent under Section 148 (A), which means the authorities possess information to the effect that certain income has escaped assessment and believe more tax may be payable.
Though no explicit tax demands have been raised in the current set of notices, tax experts say these could be precursor to assessment orders seeking higher taxes.
Also, the taxman has asked some foreign investors to share information on the capital infusion they have made in Indian firms and the price at which the shares have been bought. The move, according to sources, is because the department feels that transaction value in these cases may be higher than the respective fair market values, and resulted in higher capital gains for the Indian entities. It is rare that taxman asks for information from foreign buyers of Indian equities, for assessment of the income of domestic companies.
The details being sought are elaborate and comprehensive, ranging from explanations regarding the source of funds, valuation of investments made, regulatory compliances observed to tax residency certificates, the sources said.
NRIs have to pay tax and file returns in India on any income arising in the country through house property, salary income in India, investments or interest income in savings bank accounts. Only NRIs’ income arising in the country is taxable in India while an Indian resident is required to pay tax on her global income.