The summons typically demand information about the year of opening foreign accounts, residency status during that period, and passport copies dating back to the inception of these accounts

The Income Tax Department of India has recently escalated its scrutiny of Non-Resident Indians (NRIs) by issuing summons requiring them to disclose details of their foreign assets and prove their non-resident status. This development emerged as part of an investigation into NRIs’ financial connections with foreign entities. The summons typically demand information about the year of opening foreign accounts, residency status during that period, and passport copies dating back to the inception of these accounts. Parallel regimes for exemption of Charitable and Religious Trust i.e. Section 10(23C) and Section 11 to 13 of the Income Tax Act,1961 | Know More, Click here The nature of these summons indicates a rigorous approach by the Income Tax authorities, as individuals are being asked to substantiate their non-resident status, sometimes over a period spanning several decades. This demand for historical data has raised concerns among NRIs, particularly because the documentation required is extensive and, in many cases, difficult to compile due to the time elapsed. The crux of the department’s inquiry often revolves around the individual’s residence status. Under Indian tax laws, an individual is considered a resident if they spend 182 days or more in India during the previous year or 60 days in the previous year and 365 days in the preceding four years. NRIs must now demonstrate that they do not meet these criteria for the period in question to avoid being taxed as residents. Parallel regimes for exemption of Charitable and Religious Trust i.e. Section 10(23C) and Section 11 to 13 of the Income Tax Act,1961 | Know More, Click here Tax experts emphasise that the onus lies on the individual to provide detailed calculations and supporting documents showing their time spent in and out of India. This includes presenting old passports and other relevant travel documents, which could be challenging, particularly if these records were not meticulously kept over the years. NRIs are not legally required to disclose their foreign assets under normal circumstances. However, the issuance of summonses often stems from information shared under international agreements. Unfortunately, the data received from foreign jurisdictions may lack specificity, causing confusion and additional compliance burdens on the assessee. For instance, there have been cases where the IT department provided only a reference number without sufficient details, leaving NRIs uncertain about the exact nature or origin of the assets in question. Parallel regimes for exemption of Charitable and Religious Trust i.e. Section 10(23C) and Section 11 to 13 of the Income Tax Act,1961 | Know More, Click here With the Finance Act of 2024 reducing the time limit for issuing summons under Section 149 of the Income Tax Act from ten years to five years, NRIs might feel some relief. However, prior to April 1, 2021, this limit was as long as 16 years if the income was derived from foreign assets, adding to the complexity. The failure to provide satisfactory documentation could lead to severe consequences. Penalties may be imposed, or the IT department could add the amount to the assessee’s income, leading to a higher tax liability. If the situation escalates, NRIs might also face proceedings under the Black Money Act (BMA), although its provisions do not apply to NRIs under normal circumstances. However, poor or inadequate responses could result in ex-parte assessments and unfavourable rulings under sections like 69 of the Income Tax Ac, which deals with unexplained investments. Parallel regimes for exemption of Charitable and Religious Trust i.e. Section 10(23C) and Section 11 to 13 of the Income Tax Act,1961 | Know More, Click here Properly preserved old passports and documented proof of overseas investments can serve as crucial evidence in such inquiries. Should an NRI receive a summons, prompt and accurate responses are essential to avoid further complications. The ongoing investigations by the Income Tax department into NRIs’ foreign financial connections underscore the importance of maintaining precise records and understanding the implications of one’s residency status.