Wednesday, January 3, 2024

Indian Income Tax for NRIs: A Comprehensive Guide to Filing Updated Income Tax Return and Responding to Notices

As the deadline for filing belated returns for the Assessment Year 2023-24 has recently passed on December 31, 2023, it's imperative for Non-Residents (NRIs) to navigate the intricate landscape of Indian Income Tax. This comprehensive guide not only covers the steps for preparing and filing an Income Tax Return (ITR) but also delves into strategies for responding to notices and leveraging the Updated ITR provision.

1. Basics of ITR Filing:

An ITR is typically filed on or before the due date. However, if missed, NRIs can file a Belated or Revised ITR until December 31 of the relevant Assessment Year. For FY 2022-23 (AY 2023-24), this was the deadline (unless extended by the Government).

2. Introduction of Updated ITR:

In Budget 2022, the Indian Government introduced the Updated ITR, allowing taxpayers, including NRIs, to file returns up to 2 years from the end of the relevant assessment year. This provision, applicable from April 1, 2022, serves as a lifeline for those who missed the original deadlines.

3. E-Campaign Notices:

Since July 20, 2020, the Income Tax Department has been notifying taxpayers, including NRIs, about their financial transactions through e-campaigns. These notifications cover specified financial transactions like Mutual Funds, Deposits, Shares, Property, and more.

4. Steps for Preparing and Filing ITR:

Follow these steps for a seamless ITR filing experience:

1.Visit Income Tax Portal
2.Select the Appropriate ITR Form
3.Gather Necessary Documents
4.Fill in the Details
5.Review and Validate
6.Calculate Tax Liability
7.Pay Tax (if applicable)
8.Generate and Submit ITR

5. Responding to Notices:

Understanding the notices issued by the Income Tax Department and how to respond:

E-Campaign Notice:

This notice serves as an alert regarding financial transactions. Responding is crucial, and the process can be completed online on the Income Tax Portal. By responding promptly, NRIs can prevent further escalations.

Notice under Section 148A:

This is a show cause notice inquiring about significant financial transactions. A timely and satisfactory response is essential to avoid Assessment Proceedings (Scrutiny Proceedings). Engaging with a tax consultant can be beneficial for a comprehensive and accurate reply.

Notice under Section 148:

This notice signifies the initiation of Assessment Proceedings. NRIs receiving this notice are required to file an ITR for the respective year in which significant financial transactions occurred. Non-compliance can lead to penalties and tax liabilities. Responding within the stipulated time is critical.

Scrutiny Proceedings (Section 147/143(2)):

These proceedings involve detailed questionnaires under section 142(1). NRIs must respond within the given timeframe. Failure to comply can result in the Assessing Officer passing an order to levy taxes on financial transactions. Seeking professional advice is advisable for intricate responses.

6. Benefits of Filing Updated ITR for NRIs:

In addition to statutory compliance, NRIs can enjoy several advantages:

  1. Refund of TDS: Claim a refund of TDS deducted in India.

  2. Reporting Residential Status: Legal document for reporting residential status and financial transactions.

  3. Legal/Government Document: ITR copy serves as a legal/government document.

  4. Track Record with Income Tax Department: Maintain a track record.

  5. Carry Forward Losses: Carry forward losses, like losses on property sales.

  6. Avoiding Penalties and Enquiries: Minimize penalties and inquiries by proactively filing ITR.

7. Financial Planning and Updated ITR:

For NRIs planning significant transactions or those who missed declaring income, Updated ITR is a strategic tool. It aligns with financial planning, ensuring compliance and transparency.


Demystifying Indian Income Tax for NRIs is not just about filing returns; it's about understanding the nuances, responding to notices diligently, and leveraging provisions like Updated ITR for financial planning. This guide empowers NRIs to navigate the complexities and deadlines with confidence and compliance