High net-worth individuals (HNIs) are receiving summons from the investigation wing of the Income Tax Department, which is probing their non resident status, reported Hindu Business Line.
Largely based on information obtained from jurisdictions such as Singapore, Switzerland, Cayman Islands and British Virgin Islands, the summons are being sent to Indians who are said to control certain structures or are in the role of decision makers in certain entities.
The questionnaire sent with the summons requires the recipients to prove their non resident status, if applicable, he added.
The Department is asking for tax filings as well as passport and immigration details dating from the time of acquiring the asset, which, in some cases, could go as far back as 40 years.
Individuals have to determine their residential status for each financial year. If they become a non-resident during any financial year, they must provide evidence of their stay outside India beyond the threshold, and give a slew of details including addresses.
“Many high networth individuals who migrate abroad for work or permanently, start filing their returns as nonresidents but miss updating their records. This is pertinent compliance to ensure that tax authorities have the requisite details for determining their status,” said Raashi Shah, Partner, Illume Advisory.
The summons is the preliminary stage of the investigation, wherein individuals are given an opportunity to explain their case and furnish facts to allay the tax authorities’ concerns.
The documents to be furnished to prove residential status include passport, lease agreement, employment contract, bank statements, and utility bills, Shah said. Queries would also cover travel history, employment, and residency status in India and abroad, she added.
Based on the submissions, the IT Department can accept the non resident status of the individual and close the file or probe further for nonreporting or tax evasion. Post this, the Department can invoke the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, for offshore income or initiate income tax proceedings if the evasion pertains to Indian income.
The Department could take a year or more to verify the submissions.