By CA Surekha S Ahuja
Complete Disclosure & Notice-Defence Guide -Indian Income-tax Law (AY 25-26)
Why Income-tax Notices Are Being Issued — and How to Respond Correctly Without Panic
Thousands of Indian residents — especially senior citizens and parents whose children are settled abroad — are receiving Income-tax notices for:
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Foreign old-age pensions and social security
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Welfare and senior-citizen allowances
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Carbon credits and green incentives
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Foreign bank accounts held jointly with children
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Foreign properties where names appear only “for convenience”
Most recipients genuinely believed:
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“There was no TDS”
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“The money was spent abroad”
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“It was a welfare benefit”
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“It was my child’s account”
However, under CRS (Common Reporting Standard) and FATCA, foreign banks, governments and platforms automatically report this information to India.
Notices are issued because disclosure is missing — not because tax evasion is proven.
This guide explains what must be disclosed, what is taxable, what is not, and how to fix past omissions, in the simplest possible language.
THE GOLDEN RULE
Residential Status Decides Everything
| Status | What India Can Tax | What Must Be Disclosed |
|---|---|---|
| Resident & Ordinarily Resident (ROR) | Global income | All foreign assets & accounts |
| Resident but Not Ordinarily Resident (RNOR) | Limited | Generally no Schedule FA |
| Non-Resident (NR) | Indian source only | No foreign asset disclosure |
🔴 CRS does not check residential status
🟢 Indian tax law applies it after data is received
COMPLETE LIST OF FOREIGN OLD-AGE & SOCIAL SECURITY RECEIPTS
Foreign Old-Age Pensions / State Pensions
Examples:
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Canada OAS
-
UK State Pension
-
EU government pensions
-
Australia Age Pension
✔ Usually paid without TDS
✔ Still taxable in India if ROR
✔ Must be reported in Schedule FSI
✔ Foreign account must be disclosed in Schedule FA
Social Security / Contributory Pensions
Examples:
-
Canada CPP
-
US Social Security
-
EU statutory schemes
✔ Covered under DTAA Article 18 (Pensions)
✔ India generally gets taxing right for residents
✔ FTC available only if tax actually paid abroad
Survivor, Spousal & Disability Benefits
Important clarification:
-
These are not inheritances
-
They are income replacements
✔ Periodic receipts taxable
✔ Lump-sum arrears taxable in year of receipt
✔ Disclosure mandatory as long as account exists
Guaranteed Income Supplements & Senior-Citizen Welfare Allowances
Often misunderstood as “non-income”.
✔ If cash is received, it is income
✔ No blanket exemption under Indian law
✔ Welfare label does not remove disclosure obligation
Medical, Care & Elder Support Payments
| Type | Indian Treatment |
|---|---|
| Expense reimbursement | Not income |
| Fixed monthly allowance | Taxable |
| Home-care stipend | Taxable |
| Cash-value health plans | FA disclosure |
⚠ Even if not taxable, account disclosure remains mandatory.
CARBON CREDITS, CARBON POINTS & GREEN INCENTIVES
(High-Notice-Risk Area)
Carbon Credits / Carbon Points
Examples:
-
Carbon credits sold
-
Carbon points converted to cash
-
Climate incentive payments
| Event | Tax Treatment |
|---|---|
| Credits generated | Asset |
| Credits sold / monetised | Capital gains |
| Incentive payments | Income |
| Wallet holding credits | FA disclosure |
✔ Tax arises when monetised, not when earned
✔ CRS visibility starts at conversion or credit
Green Energy & Sustainability Incentives
Examples:
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Solar feed-in tariffs
-
EV incentives
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Environmental bonuses
✔ Recurring cash → taxable income
✔ Capital subsidy → capital receipt (case-specific)
✔ Disclosure of receiving account mandatory
RECEIPTS LINKED TO CHILDREN SETTLED ABROAD
Gifts & Maintenance from Children
✔ Genuine gifts not taxable
❌ Still disclose foreign account if credited abroad
✔ Gift documentation strongly recommended
Joint Foreign Bank Accounts with Children
Most common reason for notices
✔ Income taxed only to real owner
✔ Schedule FA must be filed by every joint holder
✔ Full peak balance disclosed (not proportionate)
CRS tracks names, not family understanding.
Parents Named in Foreign Properties of Children
✔ Schedule FA (Table C) mandatory
✔ Ownership nature must be specified
✔ Rental income taxed only if legally belongs to parent
Foreign Credit Cards / Supplementary Cards
✔ Card itself is not income
✔ Linked bank / credit account may be reportable
✔ Spending is irrelevant — name linkage matters
WHAT IS NOT A VALID DEFENCE
The following do NOT remove disclosure or taxability:
❌ No TDS
❌ Below basic exemption limit
❌ Money spent abroad
❌ Not remitted to India
❌ Welfare / social security label
❌ Joint account
❌ Children sent the money
WHY NOTICES ARE BEING ISSUED NOW
Because:
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CRS reports balances, not explanations
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Matching is automated
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Schedule FA non-filing is a red flag
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Black Money Act focuses on non-disclosure
SIMPLE ACTION PLAN (NOTICE-READY)
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Prepare a Global Asset & Receipt List
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Check residential status every year
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Disclose every foreign account where name appears
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Tax income only in hands of real owner
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File revised return by 31 December 2025 if required
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Never ignore a notice — reconcile first
If your name appears anywhere abroad — bank, pension, property, credit or wallet — India already has the information.
Disclosure brings peace. Silence invites notices.
