Errors in returns leads to Income tax notices to several FPIs , AIFs
Several foreign portfolio investors (FPIs) and alternative investment funds (AIFs) have received notifications from the Income Tax Department pointing out errors in their tax forms.
These tax red flags include incorrect exemption claims, false statements, incorrect income suppression, and incorrect capital gains tax computation problems, as per the source and reports in various news papers. The notices, which were sent out between October 15 and November 15, mostly concern FY22 tax returns and previous years returns FY21
According to a source and a senior official with the Income Tax (IT) Department, the total amount of tax discrepancies is believed to be around 15,000 crore, and digital data integration is assisting in the detection of fraud and errors. The person stated, “We are in the midst of issuing more notices,” adding that some notices have questioned capital gains tax computations and others relate to lapses in filing.
These notices have been sent to FPIs and AIFs who submitted capital gains tax at the lower 15% surcharge, according to people with knowledge of the matter. According to tax experts, some of the notices may contain inaccuracies because computerised processing may have applied the incorrect surcharge or failed to take into account the treaty benefits that the assessees claimed.
Gains from the selling of listed shares are exempt from the 37% surcharge. In reality, the surcharge on long-term gains from the sale of unlisted shares has been restricted at 15% in Budget 2022. This may be an error, but hopefully it will be fixed quickly so that any unreasonable demands made on taxpayers are rescinded. FPIs are currently submitting requests for rectification or reprocessing to have this fixed.
There could be some inaccuracies, according to sources at the tax department. There may have been confusion as a result of the surcharge’s several changes throughout the previous year.
A standard 15% surcharge was levied on long-term capital gains on the transfer of any kind of assets in the 2022 budget. Previously, it varied from 15% on listed equity shares and units to 37% for other assets.