Income Tax Notices to Several FPIs, AIFs for Errors in Filing Returns

The Income Tax Department has sent notices to numerous foreign portfolio investors (FPIs) and alternative investment funds (AIFs) of anomalies in the filing of tax returns.

According to those with firsthand knowledge of the situation, these tax red flags include incorrect capital gains tax computations, false statements, income concealment, and incorrect exemption claims. The notices, which were received in October and up until November 15th, mostly concern FY22 tax returns.

The total amount of tax discrepancies, according to a senior tax official, is believed to be around 13,000 crore, and digital data integration is assisting in the detection of errors and evasion. The insider stated, “We are sending more notices,” and added that while some notices have questioned capital gains tax estimates, others pertain to filing errors.

These notices have been sent to FPIs and AIFs who have submitted capital gains tax at the lower 15% surcharge, according to people with knowledge of the situation.

As per tax experts, some of the notices may contain errors because computerised processing may have applied the incorrect surcharge or failed to take into account the treaty benefits that the assessees claimed.