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Notices & Litigation

You never filed, you have Indian income, and a notice has arrived

The department says a return was due for a year you did not file, pointing at TDS and income already showing against your PAN.

You have some Indian income, rent, interest, a capital gain, and TDS has been deducted on it, so it all shows against your PAN. You assumed that because tax was already deducted, there was nothing more to do, and you never filed a return. Now a notice, often through a non-filer e-campaign, says a return was required. The position for an NRI is specific: sometimes you genuinely did not have to file, but often you did, and if you were over-deducted, filing is the only way to get your money back.
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Last reviewed: 26 July 20268 min readReviewed by Preetesh Maloo, CA

The short answer

The department can require you to file under Section 142(1) where a return was due and not furnished, and it runs non-filer e-campaigns off the TDS and income showing against your PAN. Whether an NRI had to file turns on a narrow rule: under Section 115A(5), you need not file if your income was only dividend or interest (and certain royalty or fees) with tax deducted at the prescribed rate or higher. If you had rent, capital gains, or any other income, or if the TDS over-deducted and you want a refund, filing is required. Continued non-filing can lead to a best-judgment assessment under Section 144, interest and penalties, so the fix is to respond and file the pending returns.

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Related situations

Why TDS being deducted did not settle it

The common assumption is that once tax is deducted at source, the obligation is over. For an NRI that is only true in a narrow case. Under Section 115A(5), you are excused from filing a return only if your total income consisted solely of dividend or interest (and certain royalty or technical-fee income) on which tax was deducted at the rate the section prescribes or higher. That box is small.

The moment you also had rent, a capital gain from a property or mutual-fund sale, or any other head of income, you fall outside the carve-out and a return was due. And even within the carve-out, if the tax was over-deducted, the only way to recover the excess is to file. So TDS does not close the matter for most NRIs; it is the starting point, and the notice is the department pointing out the gap.

What the notice is, and why you answer it

The notice usually comes as a Section 142(1) requirement to furnish the return, backed by the non-filer e-campaign that the department runs off the income and TDS visible against your PAN (Section 142(1)). It is not yet an assessment; it is a direction to file, and responding is straightforward: file the pending return, report the income correctly, claim the TDS, and where it was over-deducted, claim the refund.

For many NRIs in this position, filing is actually to their advantage, because the TDS deducted on rent or a property sale is usually far more than the real tax, so the return produces a refund rather than a demand. The notice, in other words, is often the prompt that gets you money back, not a bill.

What happens if you keep not filing

Ignoring the notice is where it turns costly. If you continue not to file, the officer can make a best-judgment assessment under Section 144, estimating your income from the material available, which will not credit the deductions and exemptions you never claimed, so the figure is usually worse than your real position. On top of that come interest under Sections 234A, 234B and 234C, and a penalty for under-reporting under Section 270A, with prosecution possible in serious cases.

So the choice is between filing correctly, which for most NRIs in this spot yields a refund, and leaving it to a best-judgment assessment that assumes the worst. A practising CA works out whether a return was actually due, files the pending years, claims the TDS and any refund, and responds to the notice, all remotely under your authorisation.

What's involved

What the CA actually does

  1. 1

    We check whether you had to file

    We test your income against the Section 115A(5) carve-out to see whether a return was genuinely due, or whether the notice can be answered with an explanation.

  2. 2

    We file the pending returns

    Where filing is due, we prepare and file the returns for the relevant years, report the income correctly and claim the TDS shown against your PAN.

  3. 3

    We claim your refund

    Where the TDS on rent or a sale was over-deducted, we compute the real tax and claim the excess back with interest, which for many NRIs turns the notice into a refund.

  4. 4

    We respond to the notice and close it

    We file the response to the Section 142(1) notice so the matter does not proceed to a best-judgment assessment.

What to have ready

Documents you'll typically need

  • The notice and the year or years it covers
  • Your Form 26AS and AIS showing the income and TDS
  • Records of the income (rent, sale, interest) for those years
  • Your PAN and residency details

Your destination country can change the details

Requirements differ from one consulate, university and visa route to the next, how recent the figures must be, how long funds must have been held, and which certificates are mandatory. We assemble the documents around the exact checklist you're applying under. To see how India's tax treaty with your country of residence affects related filings, set your country below or compare all 46 countries.

References on this page

  • Section 142(1), Income-tax Act: notice requiring a return to be filed
  • Section 115A(5): the narrow no-filing carve-out for certain NRI income with adequate TDS
  • Section 144: best-judgment assessment where you continue not to file
  • Section 270A: penalty for under-reporting; interest under Sections 234A / 234B / 234C

Frequently asked questions

Common questions

Often yes. Under Section 115A(5) an NRI is excused from filing only where the income was solely dividend or interest (and certain royalty or fees) with tax deducted at the prescribed rate or higher. Rent, capital gains or any other income takes you outside that, and a return was due.

Not usually. It is a requirement to file the return that was due. For many NRIs the TDS on rent or a property sale was over-deducted, so filing actually produces a refund. The notice is often the prompt that gets your money back rather than a bill.

The officer can make a best-judgment assessment under Section 144, estimating your income without the deductions and exemptions you never claimed, plus interest and a penalty under Section 270A. That is almost always worse than filing correctly, which for most NRIs yields a refund.

It depends on the year and the route. Some years can be filed as updated returns; where the window to claim a refund has passed, a condonation application may reopen it. A practising CA works out the right mechanism for each year.

The exceptions that change the answer

Where the general rule stops applying to you

Every rule below has a carve-out, a cut-off date or a condition that flips the answer. These are the ones that decide real cases.

Advance tax threshold and instalments

Right now: Rs 10,000 of net tax liability triggers advance tax; 15% by 15 Jun, 45% by 15 Sep, 75% by 15 Dec, 100% by 15 Mar

Where it works differently

The liability arises from a capital gain late in the year
The s.234C proviso computes the instalment from the quarter the gain arose, so a March property sale does not attract interest for the earlier quarters.
Proviso to s.234C. Frequently missed, and it can save real money on an NRI property sale.
The taxpayer is a resident senior citizen with no business income
Advance tax does not apply at all.
s.207(2) is resident-only relief, so a non-resident retiree gets no such exemption.
TDS already covers the liability
No advance tax is due. For most NRIs, s.195 withholding on the gross amount over-covers it.
Advance tax is on the net liability after TDS credit.

Commonly got wrong

  • An NRI selling property must pay advance tax across all four quarters. The s.234C proviso starts the clock at the quarter the gain arose, and s.195 TDS usually already exceeds the liability.Advance tax on a capital gain is computed from the quarter the gain arose, and the section 195 TDS already deducted counts against it.
  • Retired NRIs are exempt from advance tax. The senior-citizen exemption in s.207(2) is resident-only.The senior-citizen advance-tax exemption applies to residents only.

Penalty for under-reporting vs misreporting

Right now: 50% of tax on under-reported income; 200% where it is misreporting

Where it works differently

The omission was inadvertent
50% under-reporting. Misreporting needs one of six specified limbs, such as false entries or suppression of receipts.
s.270A(9) lists them exhaustively.
Tax and interest are paid and no appeal filed
Immunity from penalty and prosecution can be sought under s.270AA, applied for within one month of the demand.
The one-month window is easy to miss from abroad.

Commonly got wrong

  • Leaving out income means a 200% penalty. 200% is for misreporting, which needs a specified limb. Ordinary under-reporting is 50%.50% of the tax on under-reported income. 200% only where the department establishes misreporting.

Tax on royalty and fees for technical services paid to non-residents

Right now: 20% plus surcharge and cess

Where it works differently

A treaty applies and is more beneficial
The treaty rate governs, commonly 10-15%. The doubling of the domestic rate made treaty claims worth far more.
s.90(2). Requires TRC and Form 10F (Form 41 from 1 Apr 2026).
The India-US or India-UK treaty applies to FTS
The make-available test can remove the income from Indian tax entirely, not merely reduce the rate.
Article 12 of both treaties.
Claiming the treaty rate
A foreign company must file an Indian return to take the DTAA rate over s.115A.
Condition attached to the FA 2023 amendment.

Commonly got wrong

  • Royalty and FTS to non-residents are taxed at 10%. Doubled to 20% from 1 April 2023.20% plus surcharge and cess under domestic law from 1 April 2023, or the treaty rate (often 10-15%) if you hold a TRC and file the return.

When the rule was applied against someone else

A taxpayer in this position won

The rule reads as settled. These are decisions where it was applied to someone in your situation and did not hold, with the exception that carried them and a link to the source.

Related

If this matched your situation, these go further

Your AIS shows a high-value transaction and the portal wants an answerYour refund window has closed, but the money may still be recoverable (Section 119(2)(b))Reopening an old year: responding to a Section 148 reassessment noticeNRI ITR filing (we file for you)Past-year DTAA refund recoveryDTAA TDS recoveryCompliance Radar

A notice says you should have filed?

Send us the notice and the years. A practising CA will check if it was even due and file for the refund on a free call, no obligation.

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