Many Non-Resident Indians (NRIs) are now receiving income tax notices in India related to cryptocurrency transactions and mismatched financial data. These notices often come under specific sections of the Income Tax Act, and they can create confusion and stress, especially when the information held by the tax department is incomplete or inaccurate.
For NRIs, dealing with such notices becomes even harder since they are not physically present in India to manage these issues. Missing or incorrect crypto records, TDS mismatches, or undisclosed assets are some of the common triggers. To respond properly, NRIs must understand the reason for the notice, gather the right documents, and follow digital compliance rules carefully.
Why Do NRIs Receive Income Tax Notices?
Here are the common triggers that can help NRIs prepare better responses and avoid unnecessary disputes with the department.
Mismatch in Reported Income
One of the most common reasons for notices is when the income reported in the ITR does not match the figures submitted by banks, employers, or mutual funds. These discrepancies often alert the tax department, and an NRI may receive a notice demanding clarification.
Unreported Crypto Transactions
Many NRIs once traded cryptocurrencies while they were residents in India, but did not declare this income later. Even in cases where no profits were made, missing records or incomplete reporting can lead to suspicion of unreported gains, resulting in notices.
Incomplete Exchange Data
When some Indian crypto exchanges shut down, their servers and trading data were deleted. The tax department collected only partial buy or sell information from those exchanges. This incomplete data is now being used to issue notices, even if the actual transactions do not reflect taxable income.
Non-Disclosure of Foreign Assets
Indian tax law requires NRIs to disclose their foreign bank accounts, investments, and properties. Failure to do so often results in scrutiny notices, as the department treats non-disclosure as a serious compliance gap.
TDS and Other Compliance Gaps
Mismatches between the TDS details reflected in Form 26AS and those entered in the ITR are another red flag. Even small differences may trigger notices, asking the NRI to explain or correct the error.
Sections of the Income Tax Act Involved
Several provisions of the Income Tax Act are applied when issuing notices to NRIs, especially those connected with cryptocurrency transactions and mismatched financial data. Each section has a different purpose, and understanding them helps in preparing an accurate response.
Section 148: Notice for Income Escaping Assessment
This section allows the tax department to reopen an assessment if it believes some income was not reported earlier. For NRIs, this often relates to undisclosed crypto trades or financial mismatches. A notice under Section 148 means the department suspects unreported income and requires the NRI to explain the transactions in detail.
Section 147: Reassessment Proceedings
Section 147 empowers assessing officers to reassess the income of taxpayers if they feel income has escaped assessment. NRIs are facing this provision frequently in crypto-related matters. The process is conducted with close scrutiny, and in many cases, authorities reject the explanations provided. This can lead to significant tax demands and penalties.
Section 144C: Draft Assessment Orders
This section is applied when the assessing officer issues a draft order to the taxpayer. For NRIs, it means they get an opportunity to file objections before the Dispute Resolution Panel. However, the process is manual and requires careful preparation of documents within the given time, making it difficult for NRIs living abroad.
Section 156: Demand Notices
Under Section 156, the tax authorities raise official tax demands based on their assessment. These notices can involve amounts running into lakhs or crores, creating major financial stress for NRIs. Once such a notice is issued, a timely response is essential, as non-compliance may result in additional penalties and interest charges.
Common Challenges Faced by NRIs
Dealing with income tax notices is already stressful, but for NRIs, it can be even more complex due to distance and technical issues. There are several practical challenges that make it difficult for them to respond effectively.
Ignored or Rejected Submissions
In many cases, NRIs have submitted responses to the assessing officer, but these have either been overlooked or outright rejected. Sometimes the details provided are considered incomplete or irrelevant, leading to further complications. This makes it frustrating for NRIs, as even genuine explanations are not always taken into account.
Difficulty in Submitting Relevant Evidence
Explaining cryptocurrency transactions can be complicated because of missing exchange data or technical details. If the submissions are not simplified and backed with proper evidence, they are often disregarded. NRIs may struggle to translate complex digital asset transactions into clear terms that the assessing officer can easily understand.
Physical Limitations
Being outside India creates additional hurdles for NRIs in responding to notices. They cannot easily appear before tax authorities or deliver documents in person. While faceless assessment has helped, some processes, such as appeals before certain panel,s still require manual submission, which is inconvenient for individuals living abroad.
How NRIs Can Respond to Notices?
Responding correctly to a tax notice is crucial for NRIs to avoid penalties and further disputes. A step-by-step approach ensures that all requirements are met within the deadlines specified by the tax authorities.
Step 1: Review the Notice Carefully
The first step is to read the notice thoroughly and understand why it has been issued. Each notice clearly mentions the section of the Income Tax Act under which it is sent. Identifying the reason helps NRIs decide the type of information and documents they need to prepare before submitting a response.
Step 2: Gather Supporting Documentation
It is important to collect all records that can validate your case. These include bank statements, proof of cryptocurrency trades, foreign income records, and TDS certificates. Having a complete set of supporting documents ensures that the response is credible and reduces the chances of rejection by the assessing officer.
Step 3: Verify Errors and File a Revised Return if Needed
Sometimes a notice is triggered due to an error in the return itself. If you discover any mistakes, it is better to file a revised ITR promptly. Correcting errors and providing updated information shows compliance and can help settle the matter without leading to penalties or additional assessments.
Step 4: Submit Response on the E-Filing Portal
The Income Tax Department has enabled NRIs to respond online under the faceless assessment scheme. All submissions can be made through the e-filing portal, where you can upload documents, explanations, and clarifications. This digital process reduces the need for physical presence, making it easier for NRIs to respond from abroad.
Step 5: Pay Additional Dues if Applicable
If the notice indicates a shortfall in tax payment, it is important to clear the dues quickly. Any delay may result in penalties or interest being added to the amount owed. Making the payment within the timeline also demonstrates good faith and compliance with the tax authorities.
Step 6: Seek Professional Guidance
For complex matters such as crypto-related notices, professional advice is highly recommended. Tax experts can interpret the notice, prepare accurate submissions, and guide NRIs through appeals if required. Since NRIs cannot manage everything in person, relying on professionals ensures that responses are correct and well-documented.
Appeal Options for NRIs
When an assessing officer passes an order that NRIs disagree with, they have the right to appeal. The law provides different routes for appeals, and choosing the correct option within the deadline is essential for a fair outcome.
Commissioner of Income Tax Appeals
NRIs can approach the Commissioner of Income Tax Appeals if they wish to challenge an order. The process is relatively convenient because appeals can be filed online within 30 days of receiving the order. This option allows NRIs or their representatives to present their case digitally, which is helpful when they cannot be present in India.
Dispute Resolution Panel (DRP)
The DRP is another option available to NRIs, especially in cases involving draft assessment orders under Section 144C. Unlike Commissioner Appeals, this process does not have an online submission facility. NRIs or their authorised representatives must manually file objections before the DRP and also send copies to the assessing officer, all within 30 days.
Digital Processes for NRIs in 2025
The Income Tax Department has modernised its systems to make compliance easier for NRIs. Most processes are now digital, allowing NRIs to handle notices and assessments without travelling to India.
Faceless Assessment and Scrutiny
Under the faceless scheme, all communication between taxpayers and the department is carried out online. NRIs can submit responses, upload documents, and track progress digitally. This reduces the need for physical meetings and ensures greater transparency in the process.
Virtual Hearings and Document Uploads
The e-filing portal allows NRIs to attend hearings virtually and submit required records directly online. This system saves time and makes it convenient for those living abroad, as they no longer need to rely on in-person interactions with tax officials.
Automated Notifications and PAN-Aadhaar Linking
The department now sends automated alerts about deadlines and pending actions through the portal. Additionally, linking PAN with Aadhaar is mandatory for NRIs, which ensures smoother communication and accurate record-keeping. These updates make it easier for NRIs to stay informed and compliant.
How KoinX Helps NRIs Handle Crypto Tax Notices?
For many NRIs, receiving a crypto tax notice can be stressful. The records are often incomplete, the rules feel complicated, and responding on time becomes a real challenge when you are living abroad. That is where KoinX steps in, helping you cut through the confusion with clear, reliable, and easy-to-use tools.
Accurate Crypto Transaction Records
KoinX automatically syncs with 800+ exchanges and wallets, ensuring that every crypto trade is tracked. This allows NRIs to present complete transaction records when replying to notices, reducing the risk of mismatches with tax department data.
Simplified Reporting for NRIs
With KoinX, NRIs can easily generate tax-ready reports that match Indian tax rules. This saves time and avoids confusion when preparing documents for the assessing officer or appeal authorities.
Evidence-Ready Tax Reports
KoinX prepares reports that can be used directly as supporting documents in response to scrutiny notices. These reports provide clarity on gains, losses, and holdings, making it easier for NRIs to defend their case.
Expert Support for Notice Responses
Beyond reports, KoinX also offers expert assistance to guide NRIs in preparing correct submissions. This helps ensure that responses are strong, relevant, and backed by proper evidence.
If you are an NRI dealing with tax notices related to crypto, KoinX can save you time and stress. Sign-up on KoinX today and simplify your compliance with accurate reports and expert support.
Conclusion
Income tax notices to NRIs for cryptocurrency and data mismatches have become increasingly common. These notices are strict and often based on incomplete records, leaving NRIs with the burden of proving their compliance. Handling them requires careful preparation, timely responses, and supporting documents that can be easily understood by the assessing officer.
By using digital processes and seeking professional guidance, NRIs can reduce the risks of penalties and disputes. Tools like KoinX further simplify the process by providing complete crypto transaction records and tax-ready reports. If you are an NRI, join KoinX today and ensure smoother resolution and protect yourself from unnecessary financial stress.
Frequently Asked Questions
What Should NRIs Do If They Receive Multiple Tax Notices At Once?
If an NRI receives several notices, each one must be reviewed and addressed individually. Ignoring any notice can create legal issues. It is best to prioritise them based on deadlines and seek professional guidance to ensure every response is timely and accurate.
Can NRIs Authorise Someone In India To Handle Notices?
Yes, NRIs can appoint an authorised representative, such as a chartered accountant or tax consultant, to manage notices on their behalf. This representative can file responses, attend hearings if required, and ensure submissions are properly documented within the given time frame.
Are Penalties Higher For NRIs Compared To Residents?
Penalties are not specifically higher for NRIs, but the consequences of non-compliance can be more severe due to distance and communication delays. If deadlines are missed or notices are ignored, the tax department may impose interest, fines, or issue orders without considering submissions.
How Can NRIs Keep Track Of Their Tax Notice Deadlines?
The Income Tax Department’s e-filing portal displays all active notices and deadlines. NRIs can log in regularly to track pending actions. Additionally, automated email and SMS alerts are sent by the department. Professional tax services also provide reminders and help manage compliance dates effectively.
