NRI Income Tax Notice Response Guide — Types, Timelines & How to Handle (2026)
By MKW Advisors — NRI Tax Desk Last updated: March 2026 | Applicable for FY 2025-26 (AY 2026-27)
Why NRIs Are Increasingly Receiving Tax Notices
The Indian income tax department has dramatically improved its data collection and matching capabilities. Between the Annual Information Statement (AIS), Tax Information Sharing (TIS), automatic exchange of financial information under CRS/FATCA, and real-time property registration data, the department knows far more about NRI financial activity than most NRIs realize.
Common triggers for NRI notices include: high TDS refund claims on property sales, property registration without corresponding capital gains in the ITR, NRO interest income without an ITR filing, AIS/26AS mismatches, and failure to report mutual fund redemptions. When a notice arrives — often while you are thousands of miles away — the anxiety is real.
This guide explains every type of notice you might receive, the legally required response timelines, how to handle proceedings from abroad, and when you absolutely must engage a Chartered Accountant.
Types of Income Tax Notices: A Complete Reference
1. Section 143(1) — Intimation (Not Technically a "Notice")
What it is: An automated processing result generated by the Central Processing Centre (CPC) in Bengaluru after your ITR is processed. It compares the tax computed by you in your ITR with the tax computed by the CPC based on the data available.
Why you receive it: Every ITR generates a 143(1) intimation. It is not an adverse action — it is simply the CPC telling you whether they agree with your self-assessment or have made adjustments.
Possible outcomes:
- No demand, no refund: CPC agrees with your computation — you owe nothing, they owe nothing
- Refund: CPC agrees you overpaid (e.g., excess TDS) — refund is initiated
- Demand: CPC has made adjustments — e.g., disallowed a deduction, added income from AIS that you did not report, or corrected an arithmetical error — and the revised computation shows additional tax payable
Timeline: Issued within 9 months of the end of the financial year in which the ITR was filed
How to respond:
- If the intimation matches your computation: No action needed
- If there is a demand and you agree: Pay the demand online through the income tax portal
- If there is a demand and you disagree: File a rectification request under Section 154 (online, through the portal) explaining the error. Common CPC errors include: not recognizing advance tax payments, not matching TDS from 26AS, or incorrectly disallowing deductions
Severity level: Low. This is the most routine communication from the tax department.
2. Section 142(1) — Inquiry Before Assessment
What it is: A formal notice requiring you to furnish your return of income (if not already filed) or to produce specified books of accounts, documents, or information.
Why NRIs receive it:
- You did not file an ITR despite having taxable Indian income
- The department wants specific documents or explanations before commencing assessment
- It is a precursor to scrutiny — the department is gathering information
Timeline for response: As specified in the notice — typically 15-30 days
How to respond:
- If you have not filed an ITR: File it immediately and submit the acknowledgment
- If the notice requests specific documents: Upload them through the e-Proceedings portal
- If the notice asks for books of accounts: Compile and submit the requested records
Severity level: Moderate. Ignoring a 142(1) notice can lead to a best judgment assessment under Section 144 (where the AO estimates your income based on available information — usually unfavorably) and penalties under Section 271(1)(b) of Rs 10,000 per default.
3. Section 143(2) — Scrutiny Assessment Notice
What it is: A formal notice selecting your case for detailed scrutiny. The Assessing Officer (AO) will examine your ITR, supporting documents, and financial transactions in detail.
Why NRIs receive it:
- High TDS refund claims (especially property sale with large TDS refund)
- Significant capital gains reported without corresponding tax payment
- Large income variances between years
- AIS/26AS mismatch (income shown in government records not declared in ITR)
- Random selection by CASS (Computer Aided Scrutiny Selection)
- Transfer pricing issues (for NRIs with business income)
Timeline: Must be issued within 6 months from the end of the financial year in which the ITR was filed. For ITR filed for FY 2024-25 (AY 2025-26) on July 31, 2025: the notice must be issued by September 30, 2026.
How to respond:
- Take this seriously — scrutiny is a formal proceeding
- Engage a Chartered Accountant immediately if you do not already have one
- Respond through the e-Proceedings tab on the income tax portal
- Submit all requested documents within the deadline
- Attend virtual hearings (video conferencing through the portal is now standard)
Severity level: High. Scrutiny can result in addition of income, demands with interest, and penalties up to 50-200% of tax on the additions.
4. Section 148 / 148A — Reassessment Notice
What it is: A notice to reopen a previously completed assessment because the AO has reason to believe that income has escaped assessment (i.e., income that should have been taxed was not taxed).
Why NRIs receive it:
- Property sale registered but no ITR filed reporting the capital gain
- Information received through CRS/FATCA about foreign assets not disclosed
- AIS showing mutual fund redemptions or share transactions not reported
- Bank depositing information about large NRO credits not matching any ITR
- Information from other taxpayers (e.g., the buyer of your property claiming TDS credit but you not filing a return)
New Procedure (Section 148A): Since FY 2021-22, before issuing a Section 148 notice, the AO must first:
- Issue a Section 148A(b) notice — a show cause notice informing you of the information that suggests income has escaped assessment
- Give you an opportunity to respond (typically 7-30 days)
- Consider your response
- Only then, if satisfied that reassessment is warranted, issue the Section 148 order with the Section 148 notice
Timeline for reassessment:
- Within 3 years from the end of the relevant AY: Can be reopened if the AO has information suggesting income has escaped assessment
- Between 3-10 years: Can be reopened only if the escaped income is Rs 50 lakh or more, and the AO has evidence from a search, survey, or international information exchange
How to respond:
- To 148A(b): Respond within the given timeline with full details. This is your chance to explain the transaction and potentially prevent the reassessment from proceeding
- To 148 notice: File a return for the relevant AY as required. This return reopens the assessment, and the AO will proceed with a reassessment
Severity level: Very high. Reassessment can go back years, and the stakes are often large (unreported property sales, foreign assets, etc.).
5. Section 245 — Adjustment of Refund Against Outstanding Demand
What it is: An intimation that the department intends to adjust your refund (from one AY) against a demand outstanding for another AY.
Why NRIs receive it: You have a refund due for one year (e.g., excess TDS on property sale) and an unpaid demand for another year. The department proposes to set off the refund against the demand.
How to respond: If you agree with both the refund and the demand, no action needed. If you dispute the demand, respond within 30 days with your objection. If you do not respond, the department will proceed with the adjustment.
How to Check for Notices on the Income Tax Portal
Step 1: Log In
Go to incometax.gov.in and log in with your PAN and password.
Step 2: Check "Pending Actions"
Navigate to Pending Actions > Worklist to see any outstanding notices requiring your response.
Step 3: Check E-Proceedings
Go to Pending Actions > e-Proceedings to see any assessment proceedings in progress. Notices, hearing schedules, and submission requirements appear here.
Step 4: Check "Notices / Orders" Under e-File
Go to e-File > Notices / Orders to see all notices and orders issued to your PAN, including historical notices.
Step 5: Check Email and Registered Mobile
Notices are also sent to your registered email address and mobile number. Ensure these are current and monitored regularly.
Responding from Abroad: E-Proceedings for NRIs
The income tax department's shift to faceless assessment (since 2020) has been a significant benefit for NRIs. Virtually all proceedings — from 143(2) scrutiny to 148 reassessment — can now be handled entirely online.
How E-Proceedings Work
- Notice is served electronically — it appears on the portal and is emailed to you
- You respond by uploading documents — PDFs of bank statements, sale deeds, TDS certificates, computations, and explanatory letters are uploaded through the e-Proceedings tab
- Virtual hearings are conducted via video conferencing through the portal
- Orders are communicated electronically — the final assessment order appears on the portal
What You Need
- Valid login credentials for the income tax portal
- Digital Signature Certificate (DSC) or Aadhaar OTP for verification
- All relevant documents in PDF format
- A Chartered Accountant who can attend virtual hearings on your behalf (with proper authorization)
Authorizing a CA to Represent You
File Form 26 (Power of Attorney / Authorization) on the income tax portal authorizing your CA to represent you. The CA can then attend hearings, submit documents, and respond to queries on your behalf — all without you needing to be in India.
Common NRI Notice Triggers
1. High TDS Refund on Property Sale
If you sold property and the buyer deducted TDS at 20% of the entire sale consideration (which is standard for NRIs), but your actual capital gain was much lower (e.g., because of Section 54 exemption or high cost of acquisition), your refund claim may be large. The department routinely selects large refund claims for scrutiny.
Prevention: Obtain a lower TDS certificate from the AO under Section 197 before the sale. This reduces TDS to the actual tax liability, minimizing the refund claim.
2. Property Registration Without ITR
When you sell property, the sale deed is registered with the Sub-Registrar, and this information is transmitted to the income tax department. If you do not file an ITR reporting the capital gain for that year, the mismatch triggers an automated notice.
3. AIS / Form 26AS Mismatch
The AIS captures financial transactions — mutual fund purchases/redemptions, share transactions, property transactions, bank interest, dividends, and more. If any income reflected in AIS is not reported in your ITR, the CPC flags it in the 143(1) intimation, and it may trigger 143(2) scrutiny.
4. NRO Interest Without ITR
NRO FD interest is subject to TDS at 30%, but if you do not file an ITR, the department cannot verify whether TDS was correctly deducted or whether you are entitled to a lower rate under DTAA. Absence of ITR filing is itself a trigger.
5. Foreign Remittances (15CA/15CB Data)
Every Form 15CA filed generates a record with the tax department. If the CA's 15CB certificate claims no tax is payable (e.g., for NRE account transfers or under DTAA), and the department believes tax should have been paid, an inquiry may follow.
6. CRS/FATCA Information
India receives financial account information from over 100 countries under CRS. If your foreign bank accounts, investment accounts, or pension accounts are reported to Indian tax authorities, and this information does not match your ITR disclosures (or you have not filed an ITR), expect a notice.
When to Escalate to a Chartered Accountant
Handle yourself (with basic tax knowledge):
- Section 143(1) intimation with minor demand (arithmetic error, TDS mismatch)
- Section 245 adjustment intimation (if you agree with both amounts)
Engage a CA immediately:
- Section 142(1) notice requesting specific documents
- Section 143(2) scrutiny notice — always
- Section 148/148A reassessment notice — always
- Any notice involving alleged non-disclosure of income
- Notices with demands exceeding Rs 50,000
- Notices referencing foreign assets or CRS information
- Any notice where you do not understand what is being asked
The cost of a CA (Rs 10,000-50,000 for handling an assessment proceeding) is a fraction of the potential demand, interest, and penalty that can result from an improperly handled response.
Timeline Summary for Common Notices
| Notice Type | Response Deadline | Consequence of Non-Response |
|---|---|---|
| 143(1) demand | 30 days | Interest at 1% per month; recovery proceedings |
| 142(1) inquiry | 15-30 days (as stated) | Best judgment assessment under 144; penalty Rs 10,000 |
| 143(2) scrutiny | As per hearing schedule | Ex-parte assessment (without your input); likely adverse |
| 148A(b) show cause | 7-30 days (as stated) | Reassessment proceeds without your input |
| 148 notice | 30 days to file return | Assessment proceeds on available information |
| 245 adjustment | 30 days | Adjustment proceeds automatically |
Frequently Asked Questions
I received a 143(1) intimation showing "No demand No refund." Do I need to do anything?
No. This means the CPC has processed your return and agrees with your computation. No action is required. Keep the intimation for your records.
Can I attend a scrutiny hearing from abroad via video call?
Yes. Under the faceless assessment scheme, hearings are conducted via video conferencing through the income tax portal. You can attend from anywhere in the world. Alternatively, authorize a CA through Form 26 to attend on your behalf.
I did not file an ITR for a year I should have. Will I definitely get a notice?
Not necessarily. The department may not catch every non-filing. But with AIS, CRS, and property registration data, the probability of being caught has increased dramatically. If you have unreported income, it is better to file proactively (using ITR-U if the deadline has passed) than to wait for a notice. The penalties for voluntary filing are much lower than for notice-triggered compliance.
What if I receive a notice for a year I have already filed an ITR for?
The notice may be for a specific discrepancy (e.g., income shown in AIS but not in your ITR). Read the notice carefully to understand what the department is asking. Respond with documentation that either explains the discrepancy or acknowledges the omission and pays the additional tax.
Can the department freeze my Indian bank account based on a notice?
Yes. Under Section 226(3), the AO can issue a garnishee order attaching your bank account to recover outstanding tax demands. This is typically done only for large, unpaid demands after the taxpayer has not responded to notices. Responding promptly and engaging in the process prevents this escalation.
I got a notice about a property I sold 5 years ago. Is this legal?
Yes, if the escaped income is Rs 50 lakh or more, reassessment can go back up to 10 years. For amounts below Rs 50 lakh, the limit is 3 years from the end of the relevant AY. Check whether the notice falls within the legally permissible time limit — if it does not, you can challenge it.
What is the penalty for not responding to a notice?
Under Section 271(1)(b), penalty for each failure to comply with a notice under Sections 142(1) or 143(2) is Rs 10,000. For non-filing of ITR after a 142(1)/148 notice, prosecution under Section 276CC is possible (imprisonment of 6 months to 7 years). These are maximum penalties — actual penalties depend on the facts.
MKW Advisors Recommendation
The most important thing when you receive an income tax notice is: do not ignore it. Ignoring a notice is the single worst action (or inaction) an NRI can take. The department will proceed without your input, make adverse assessments based on available data, raise demands with penalties and interest, and potentially attach your bank accounts.
Three rules for NRI notice management:
- Monitor the portal quarterly — log into the income tax portal at least once every 3 months and check Pending Actions and e-Proceedings. Notices are sometimes served only electronically.
- Respond within the deadline, always — even if your response is preliminary (e.g., "I have received the notice and am compiling the requested documents; I request 15 days' extension"). Showing engagement prevents adverse ex-parte orders.
- Engage a CA for anything beyond 143(1) — scrutiny, reassessment, and inquiry proceedings require professional handling. The cost of a CA is always less than the cost of getting the response wrong.
Received an income tax notice and not sure how to respond? MKW Advisors — NRI Tax Desk provides end-to-end notice response services, from 143(1) rectifications to full scrutiny and reassessment representation. Contact us for a consultation.
Disclaimer: This guide is for informational purposes only and does not constitute legal or tax advice. Consult a qualified Chartered Accountant for advice specific to your situation.