NRI & OCI Tax Litigation in India: Income Tax Enquiries, E-Campaigns & Notices under Sections 131, 148 and 148A

Background: Rising Income Tax Scrutiny for NRIs, OCIs & Returning Non-Residents

In recent years, the Income Tax Department of India has significantly strengthened its technology-driven intelligence and data-tracking capabilities. Through advanced information systems, the department now captures and consolidates financial data from multiple reporting sources such as banks, mutual fund houses, property registrars, airport entry-exit records, TDS filings, foreign remittance data, and financial institutions.

This vast data is systematically reconciled with information already available in Income Tax Returns (ITRs), past assessments, and responses submitted on the compliance portal, resulting in the generation of automated enquiries and scrutiny notices.

As a result, Non-Residents (NRIs), Overseas Citizens of India (OCIs), returning NRIs, seafarers, and even foreign citizens who conduct financial transactions in India or hold assets in India—without filing ITRs—are increasingly receiving income tax enquiries, e-campaign communications, notices, and summons from the Indian tax authorities.

CA Mitesh and Associates is India's leading CA Firm Firm with special focus on accurate Income Tax Return filing and Handling Income Tax Notices in India.                                                                                                                                                  Contact us via WhatsApp: Click Here  or Email: info@mnpartners.in

Types of Income Tax Notices Issued to NRIs, OCIs & Returning NRIs

The Income Tax Department issues different categories of notices depending on the nature of enquiry, stage of proceedings, and legal provisions applicable. These notices are communicated through email, SMS, physical post, and uploads on the income tax portal.

Common Income Tax Notices for Non-Residents

E-Campaign Enquiry Notices

These notices are issued to verify high-value financial transactions reported to the tax department.

• Issued via: Income Tax Compliance Portal (www.incometax.gov.in)

• Action required: Timely online response on the compliance portal

Pre-Assessment Verification Notice – Section 133(6)

Issued to seek information and documentary evidence relating to specific transactions under investigation.

• Issued by: Jurisdictional Assessing Officer

• Mode: Email, physical post, and/or tax portal

• Action required: Submission as per instructions mentioned in the notice

Pre-Assessment Enquiry Notice – Section 148A

A crucial notice providing the taxpayer an opportunity of being heard before reassessment proceedings are initiated.

• Issued by: Jurisdictional Assessing Officer (ITO / DCIT / DDIT)

• Mode: Email and tax portal

• Action required: Detailed reply with documentary support on the portal

Assessment Proceedings – Section 147

Initiated where income is believed to have escaped assessment. This is the broader reassessment mechanism.

• Handled through: Sections 148, 142(1), 143(2)

• Action required: Strict compliance with each notice issued

Notice for Filing ITR – Section 148

An initial notice requiring the taxpayer to file an income tax return to commence reassessment proceedings.

• Issued by: Jurisdictional Assessing Officer

• Action required: Online filing of ITR after analysing transactions and income

Scrutiny Notice – Section 143(2)

Issued after ITR filing to seek further explanations and evidences.

• Action required: Preliminary submissions or await detailed questionnaire

Assessment Questionnaire – Section 142(1)

A detailed questionnaire covering entire reassessment proceedings.

• Action required: Comprehensive response with supporting documents; personal hearing may be required

Summons – Section 131(1A)

Investigation-level summons, often related to foreign assets, overseas income, or complex structures.

• Issued by: Investigation Wing (DDIT – FAIU)

• Action required: Detailed reply and personal appearance if required

CA Mitesh and Associates is India's leading CA Firm Firm with special focus on accurate Income Tax Return filing and Handling Income Tax Notices in India.                                                                                                                                                  Contact us via WhatsApp: Click Here  or Email: info@mnpartners.in

Why NRIs & OCIs Are More Prone to Income Tax Notices

NRIs and OCIs often maintain emotional, family, or financial ties with India, leading to property ownership, investments, or bank transactions. In many cases:

• Income earned in India is subject to TDS, leading to the belief that tax obligations are fully discharged

• No significant taxable income arises in India

• Income is earned outside India and assumed to be non-taxable

However, all financial transactions, TDS credits, remittances, and investments are captured by the Income Tax Department’s information systems. When no ITR is filed, the system cannot determine residential status or confirm tax neutrality—triggering automated enquiries and litigation.

Regular filing of ITR remains the most effective preventive measure against such tax litigation.

Financial Transactions Commonly Captured by the Income Tax Department

The following transactions are routinely reported and tracked:

• Sale or purchase of immovable property in India

• Opening NRE / NRO / FCNR fixed deposits

• Interest income from NRE or NRO accounts

• Mutual fund investments and redemptions

• Purchase and sale of shares

• High-value cash deposits in Indian bank accounts

• Dividend income

• Repatriation of funds from NRO accounts

• Large credit card payments

• Forex card transactions

Any mismatch or absence of ITR reporting can attract scrutiny.

Importance of Updated Address, Email & Mobile Number

Income tax communications are sent via:

• Income tax portal (primary mode)

• Email

• SMS (in select cases)

• Physical post

NRIs must ensure their email address, Indian address, and mobile number are updated on:

• Income tax portal

• PAN records

• Income tax returns

Failure to do so may result in missed communications, leading to ex-parte (one-sided) assessment orders, tax demands, and penalties.

How NRIs, OCIs & Seafarers Can Safeguard Against Tax Litigation

• Periodically monitor the income tax portal (“Pending Actions”)

• File ITRs regularly, even if income is not taxable

• Keep contact details updated

• Consult Chartered Accountants specializing in NRI taxation

• Seek immediate professional advice upon receipt of any notice

CA Mitesh and Associates is India's leading CA Firm Firm with special focus on accurate Income Tax Return filing and Handling Income Tax Notices in India.                                                                                                                                                  Contact us via WhatsApp: Click Here  or Email: info@mnpartners.in

What to Do If an Assessment Order or Tax Demand Is Passed Without Your Knowledge

In cases where an NRI becomes aware of tax demand belatedly:

• Immediately consult a tax litigation expert

• Update communication details on the portal

• File appeal along with condonation of delay

• Apply for stay of demand and penalty proceedings

• Resume regular tax filings

Professional NRI Tax Litigation & Advisory Support

NRI Tax Service operates PAN-India with offices in Delhi NCR, Mumbai, Kolkata, Chennai, Bengaluru, Chandigarh, Hyderabad, Ahmedabad, Kochi, Dehradun, and more.

The firm provides end-to-end support in:

• E-campaign responses

• Notices under Sections 133(6), 148A, 148

• Scrutiny proceedings (147, 143(2), 142(1), 144)

• Summons under Section 131

• Penalty proceedings

• Appeals before CIT(A), ITAT, DRP

• Rectifications, grievances, RTI applications

• Liaison and personal hearings

CA Mitesh and Associates is India's leading CA Firm Firm with special focus on accurate Income Tax Return filing and Handling Income Tax Notices in India.                                                                                                                                                  Contact us via WhatsApp: Click Here  or Email: info@mnpartners.in

Frequently Asked Questions (FAQs)

Why do NRIs receive notices even when no tax is payable?

Because without an ITR, the system cannot verify residential status or tax neutrality despite TDS. Further, though there is no tax payable in India or taxes have been paid in the form of TDS. However, in the absence of ITR, neither the Inc tax department system know that being NRI your source of funds are outside India which is not taxable in India nor their system know that your income tax liability in India is discharges by wah of TDS. Hence, filing ITR reports the income as well Non-resident status and almost completely plug the prima facie litigation possibility of Tax System.

Should seafarers file ITRs?

Yes. Filing ITR prevents unnecessary scrutiny and serves multiple financial purposes. Being Non-resident your ship income may not be taxable in India. However, you must be incurring many financial transactions in India (out of the Ship Salary Income). These financial transactions, on being captured in tax system, in the absence of an ITR, will attract notices from Tax Information System. To avoid it, ITR must be submitted regularly. An ITR is also a handy document for various other purposes such as loan, VISA, a govt document etc.

Why do notices appear even after filing recent ITRs?

If any ITR for latest/recent year(s) is filed by Non-residents, sometimes even then an e-campaign or other enquiry pops up in Compliance Portal. In this regard, it needs to be understood that though the ITR is filed for recent year, however, enquiry may be cropping up via e-campaign or other notices for earlier years for which ITR has not been submitted. Income tax system works on year to year basis. Hence, if for a specific year ITR is not filed but financial transaction has taken place for that year, then there are chances that enquiry will be initiated by the the Tax Information System for respective year. However, since you are now regular in your tax filing so you will be able to take immediate note of enquiries and respond them timely.

Can past non-compliance be corrected now?

Under the latest tax provisions (via recent amendments) and Updated ITR (ITR U) u/s 139(8A) of the Income Tax Act can be submitted. This updated ITR can now be filed (effective April 2025) for 4 years from the end of respective assessment year for which ITR is to be filed. Hence, all previous 4 years financial transactions can be plugged by filing an Updated ITR. Also, if there is any e-campaign enquiry is pending  for response, that should be promptly responded.

How to Respond to an Income Tax Notice

For Paid Subscribers Only

Sample Response Template for an Income Tax Notices

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CA Mitesh and Associates is India's leading CA Firm Firm with special focus on accurate Income Tax Return filing and Handling Income Tax Notices in India.                                                                                                                                                  Contact us via WhatsApp: Click Here  or Email: info@mnpartners.in

Conclusion

NRI OCI tax litigation in India has intensified due to data-driven enforcement. Enquiries, e-campaigns, and notices under Sections 131, 148, and 148A must be handled with precision, professional guidance, and timely compliance. Regular filing, transparency, and expert advisory are the strongest safeguards against prolonged tax disputes.

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