The most often reason for a Non Resident Indian (NRI / PIO / OCI) based in UK, US, UAE/Middle East and Singapore, to get an Income Tax Notice from India is:
Income Tax Notice due to Non-Filing of Income Tax Returns.
In such a case, the Income Tax Department in India can send a NMS Income Tax Notice to the Non Resident Indian (NRI), which may or may not, specify few transactions and ask the NRI to file the Income Tax Returns and give a response for that particular Assessment Year. It is advisable to respond to the Income Tax Notice received by the NRI, within the given time or an extension can be taken with a proper reason, otherwise, there may be chances of you being penalised with a financial penalty as well as persecution.
Such an Income Tax Notice can be sent for any of the previous six assessment years to the (Non Resident Indian) Assessee and there are provisions being envisaged where the Income Tax Department will be able to open your tax file of the previous 15 years.
Hence it is important that as a NRI you File your Income Tax Returns in India and that too on time.
In case of late Income Tax Return filing, the ITD can levy a penalty of Rs 5,000 a year on you. However, the penalty is generally not being implemented and is not mandatory and depends upon the discretion of the Assessing Officer.
However, if there is no default in paying tax, the taxpayer is usually not penalised for late filing however the probability of the penalty is still present.
If any tax is due to the ITD, the department charges 1% interest per month from the due date which can go as high as 3% interest per month.
As a Non Resident Indian please File your Income Tax Returns in India on time and correctly and stay compliant. We have seen that 80% of NRI’s who file their Income Tax Returns in India get a Income Tax Refund rather than having to pay any Taxes in India.