Receiving an income tax notice can be a real nightmare, especially for Non-Resident Indians (NRIs). The possibility of NRI Receives Notices up to 16 years after a transaction can cause anxiety, especially when one doesn’t remember the details or have the necessary documentation. In this article, we will discuss the top reasons why an NRI may receive an income tax notice and how they can avoid it.
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Top Reasons NRI Receives Notices
The first reason why NRIs receive income tax notices is rental income. Many NRIs have landed property on rent and receive some kind of rent, either in their account or their spouse’s account, but fail to declare it in their income tax return. If your income is more than INR 2.5 lakh, you must declare it in your income tax return and pay any necessary taxes. It’s always safer to file your income tax return every year, even if there are no taxable transactions. If you forget to file regularly, some transactions may mandate filing, and you may forget them in between.
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The second reason is interest income. Many NRIs forget to declare interest income earned from fixed deposits (FDs) that they have booked in their non-resident ordinary (NRO) account. Don’t forget to declare this income, even if you have an NRI FD account.
Income from the Sale of Property
In most cases, NRIs forget to file their income tax return after selling a property because they assume that TDS (Tax Deducted at Source) is already deducted, and they don’t have to file a return. That is not the case. If you have sold a property, you have to file an income tax return and declare the sale value. If you have already paid excess tax, you have to claim a refund.
Sale of Shares and Stocks
Another reason why NRIs receive income tax notices is the sale of shares and stocks. Many NRIs invest a significant amount in stocks as long-term investments and forget to sell them for years. Suddenly, when they sell the shares, they receive a good income, which may be more than INR 2.5 lakh. Even if there is no income, you still have to file an income tax return and show whether you made any profits or losses.
It’s crucial to file your income tax return every year, even if you don’t have any taxable transactions. Filing your return is your part of compliance. It doesn’t cost much, but it gives you a lot of peace of mind. By following these simple tips, NRIs can avoid income tax notices and ensure that their financial records are up-to-date.
NRIs must ensure that they file their income tax returns regularly, especially if they have rental or interest income, engage in financial transactions, or sell property or shares, to avoid income tax notices. Failure to do so can lead to a nightmare of receiving notices related to income tax, which can be a hassle to deal with even after several years. By being informed about the top reasons why NRIs Receives Notices and taking preventive measures such as regularly filing income tax returns, NRIs can sidestep unwarranted complications and enjoy peace of mind.