As a practicing Chartered Accountant, I often deal with tax notices issued to resident and non-resident individuals alike. One such case from early 2024 stood out—not because of its complexity, but because of how proper documentation, timely response, and a solid understanding of NRI taxation helped close the case without reassessment.
Let me walk you through how I helped my NRI client successfully navigate a Section 148A(b) income tax notice.
📩 The Notice: Section 148A(b) for Escaped Income — A Real Case
In February 2024, one of my clients, an NRI working in Japan, received a show cause notice under Section 148A(b) from the Income Tax Department for A.Y. 2020–21.
The notice was based on data flagged under the Risk Management System (RMS) and alleged that income had escaped assessment.
⚠️ The triggers listed in the notice:
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Time deposits of ₹17 lakhs (HDFC Bank) and ₹47.33 lakhs (YES Bank)
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Salary of ₹4.13 lakhs from Cognizant Technology Solutions India
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No Income Tax Return (ITR) filed for A.Y. 2020–21
This information was classified under "High Risk Non-Filer" categories by the department.
🌍 The Client's Background: NRI with Clean, Tax-Free Income
My client had been residing and working in Japan for over a decade, including during FY 2019–20. He had repatriated his salary savings to India through normal banking channels and invested them into NRE fixed deposits.
Here’s what we established early:
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He was a Non-Resident (NRI) under Indian tax law for that year.
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His Indian income was below the basic exemption limit.
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All deposits were made in NRE accounts, and the interest was exempt under Section 10(4)(ii) of the Income Tax Act.
📂 Our Response Strategy: Facts, Clarity, and Full Disclosure
We filed a comprehensive response on the Income Tax e-filing portal, clearly explaining:
🔍 Key Points Included:
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Residential status with supporting passport details
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Origin of funds for FDs – foreign salary from Japan
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Exemption claims for NRE interest
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Computation of income confirming no tax liability
📎 Supporting Documents Submitted:
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Passport and stay details for FY 2015–16 to 2019–20
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Japan salary slips
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Form 16 from Cognizant India & Form 26AS
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NRO and NRE bank statements (with FD transactions highlighted)
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Computation of total income
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Home loan interest certificate
We also addressed a minor discrepancy in reported FD amounts, clarifying that some of the entries in the SFT report were either renewals or misreported figures.
✅ The Outcome: Case Dropped, No Section 148 Notice Issued
On March 25, 2024, we received an order under Section 148A(d) stating:
“The sources to the NRE FDs in INR are out of foreign fund transfers… I am satisfied that the assessee’s case is Not a FIT CASE for issuing notice under Section 148 of the Act.”
The case was closed without initiating reassessment proceedings.
💡 Key Learnings and Insights for Professionals & NRIs
✔️ 1. Residential Status is Critical
Whether a person is a resident or non-resident can entirely change their tax liability in India.
✔️ 2. NRE FD Interest is Exempt
Under Section 10(4)(ii), NRE interest income is exempt if the person qualifies as an NRI and the funds are from foreign earnings.
✔️ 3. RMS Flags Don’t Equal Tax Evasion
Many RMS notices are generated by algorithms. Manual verification and representation can resolve them effectively.
✔️ 4. Timely, Fact-Based Responses Work
We made our submission within the deadline and supported every claim with evidence. That made all the difference.
✔️ 5. Good Documentation is a Lifesaver
Having organized records — bank statements, salary slips, passport entries — helps resolve cases swiftly.
📢 Final Thoughts for Fellow CAs and NRIs
Notices under Section 148A can create panic, especially for NRIs unfamiliar with Indian tax laws. But this case shows that a calm, data-backed response can lead to a clean resolution — without litigation, reassessment, or penalties.
If you're a tax professional, ensure your NRI clients:
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Track and classify deposits correctly,
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Understand when filing is mandatory, and
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Keep remittance trails clear.
If you’re an NRI taxpayer, consult a CA who understands both international and Indian tax frameworks — it’s worth it.
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