Many non-resident Indians (NRIs) those who claimed benefit of lower or nil rate of taxation under the Double Taxation Avoidance Agreement (DTAA) are receiving income tax notice(s) for failing to file Form 10F.

The Income Tax Act, 1961, allows NRI taxpayers to declare their income and file ITR by applying for lower or nil rate of income tax (in some cases) under DTAA.

For availing the benefit of lower or nil taxes under DTAA, NRIs must submit a Tax Residency Certificate (TRC) and Form 10F. This form could be filled any time before filing Income Tax Return (ITR). As per the existing Indian tax law, there is no deadline to file Form 10F and it can be filed electronically by all NRIs who may or may not have a PAN card.

 
 

The mentioned income tax notice given to NRIs read as follows: “Incorrect claim u/s 143(1)(a)(ii): Adjustment to total income has been done as per Schedule Capital gains & Special Income, and for this DTAA benefit is to be claimed then relevant statutory form shall be filed. This required adjustment to the income within the meaning of Section 143(1)(a) and accordingly this is an opportunity provided to respond within the time allowed.”

Read below to know the reason why this is happening, how to solve it and what should NRIs do now to save themselves from this problem.

Why are NRIs getting income tax notice under Section 143(1)(a)?

The tax notice under Section 143(1)(a) is being sent because the said NRI has not filed Form 10F, which as per the Income Tax Department should have been filed to claim DTAA benefits. Without claiming the DTAA benefits the NRI’s income would be taxed at the standard rates prescribed in the Income-tax Act, 1961 applicable to all taxpayers.

Three chartered accountants and one lawyer, whom ET Wealth spoke, have confirmed to us that their clients have received an intimation notice under Section 143 (1) (a) for claiming beneficial tax rate under DTAA without filing “a statutory form”. Experts have suggested that this ‘statutory form’ is Form 10F.

How can NRIs save themselves from this income tax notice under Section 143(1)(a)?

We have asked various experts about how NRIs can protect their interests if they got such a tax notice for FY 2023-24 (AY 2024-25) preventing them from availing the benefits of DTAA. Here’s what they said:

 

File Form 10F if there is still time to respond to the notice

Usually there is a 30-day time limit to respond to a Section 143 (1) (a) notice. Hence experts suggest to use this time to File 10F, then the notice will be closed.

In a scenario wherein an intimation is being served upon the taxpayer, the following actions can be undertaken:

  • An option to file Form 10F is available, even when an intimation issued by the Authorities proposing an adjustment
  • Accordingly, if the said Form was not filed previously, the taxpayer can proceed to e-file the Form 10F for the concerned year and correspondingly, disagree with the proposed adjustment by filing an online response on the income tax portal.
  • While filing Form 10F, a copy of the TRC should be uploaded, if available 

NRIs should not forget to attach the freshly filed Form 10F in response to the Section 143(1)(a) intimation notice. “Respond to the notice via the e-proceedings portal, attaching the TRC and the freshly filed Form 10F as supporting documents