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Many Non-Resident Indians (NRIs) are receiving income tax notices under Section 143(1)(a) for claiming a lower or nil tax rate under the Double Taxation Avoidance Agreement (DTAA) without filing Form 10F. The Indian Income Tax Act of 1961 allows NRIs to apply for DTAA benefits, but failure to submit the form has led to tax adjustments and compliance issues.
Why Are NRIs Receiving These Notices?
The Income Tax Department is flagging cases where NRIs have claimed DTAA benefits but did not electronically file Form 10F. Even if an NRI provides a Tax Residency Certificate (TRC) from their home country, Indian tax authorities require Form 10F to validate the claim. The lack of this form is prompting automatic tax adjustments, leading to higher tax liabilities for many NRIs.
How to Resolve the Tax Notice Issue?
1. File Form 10F Immediately – If the response deadline (usually 30 days) is still open, NRIs should file Form 10F electronically and respond to the notice through the Income Tax e-proceedings portal, attaching the TRC as supporting documentation.
2. Request a Rectification if the Deadline Has Passed – If the notice period has expired and tax has been adjusted at a higher rate, NRIs should file Form 10F and submit a rectification request under Section 154 to get their tax return reprocessed.
3. Appeal Against the Notice – If tax authorities do not accept the rectification, NRIs can challenge the decision before the Commissioner of Income Tax (Appeals) (CIT-A) and, if necessary, escalate to the Income Tax Appellate Tribunal (ITAT) or higher courts. Past rulings suggest that DTAA benefits should not be denied solely due to missing Form 10F if tax residency can be proven otherwise.
How to Avoid This Issue in the Future?
Tax experts recommend that NRIs proactively file Form 10F and their TRC when claiming DTAA benefits. With increased compliance enforcement, NRIs should ensure all required documents are submitted to avoid unnecessary tax notices and adjustments.
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