Why does NRI Misses Income Tax Notices?
In today’s interconnected world, it’s not uncommon for Non-Resident Indians (NRIs) to face challenges in staying updated with income tax notices. Many NRIs are surprised when they receive tax demands or adjustments without prior knowledge. This article aims to shed light on the reasons behind this issue and provide valuable insights into how NRIs can avoid missing out on crucial income tax notices.
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One of the primary reasons NRIs miss income tax notices is the lack of proper communication channels. To address this, NRIs should proactively update their income tax portal with their latest contact information, particularly their email address. Neglecting this crucial step often leads to miscommunication, as outdated email IDs, still linked to their previous tax consultants or chartered accountants, result in notices being sent to the wrong recipient. Consequently, NRIs may remain unaware of critical tax-related communications.
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To ensure effective communication, NRIs must update their income tax portal with their current email address. Even if they are not actively earning income in India or filing tax returns, maintaining an updated profile is crucial. While providing a foreign contact number may not be necessary, NRIs can consider providing a reliable Indian contact number, such as that of a trusted relative or their chartered accountant. This way, the income tax department can reach out when required, reducing the risk of missed notices.
In addition to updating contact details, NRIs should also prioritize updating their residential address. This step is essential, as the income tax department may resort to physical notices if email correspondence goes unanswered. Unfortunately, many NRIs neglect to update their addresses, resulting in sending notices to outdated locations. By ensuring their address is up to date, NRIs increase their chances of receiving crucial notices in a timely manner, mitigating potential complications.
To proactively monitor income tax notices, Encourage NRIs to regularly check their email inbox and income tax portal. Developing a habit of reviewing their communication channels on a quarterly basis is considered a best practice. However, considering busy schedules or the likelihood of forgetting, NRIs can delegate this task to a chartered accountant. By engaging the services of a competent professional, NRIs can ensure they promptly monitor their notices and take any necessary actions in a timely manner. Several chartered accountants utilize specialized applications to scan notices for multiple clients efficiently, making the process seamless.
Failing to respond to income tax notices can result in an unfortunate scenario known as “ex parte assessment.” This process grants the income tax office the authority to add any income it deems appropriate and make it taxable. For instance, if an NRI has purchased a property using legitimate funds worth one crore, not responding to notices can lead the assessing officer to assume the entire one crore as unaccounted income. Consequently, tax authorities may impose a tax liability of 30% (approximately 30 lakhs) and potential penalties of up to 300% of the tax amount (90 lakhs in this case). Resolving such assessments can be arduous, as even during the appeal process, the lack of response to prior notices diminishes the chances of a favorable outcome.
NRIs must take proactive steps to stay informed about income tax notices. Updating contact information, particularly email addresses and residential addresses, is of utmost importance. Regularly checking email inboxes and the income tax portal is strongly recommended to stay abreast of any communication from the income tax department. Alternatively, engaging a qualified chartered accountant to monitor notices on a quarterly basis can provide peace of mind.