Kuwait Salary Remittances Trigger Rs 3.63 Crore Tax Addition; NRI Gets Partial Relief From ITAT

An Indian employed in Kuwait found himself facing a substantial income-tax addition after financial information reported to the department showed more than Rs 3.63 crore across bank accounts and an insurance policy in India.

The taxpayer, Rahulkumar Narshibhai Patel, said the money had come from salary earned overseas and transferred through banking channels. The Income Tax Appellate Tribunal (ITAT), Ahmedabad, has now deleted one disputed addition and returned another, involving nearly Rs 2.50 crore, to the assessing officer for a fresh examination.

The appeal concerned assessment year 2019-20. The tribunal passed its order on April 24, 2026.

How The Dispute Began

Information received through the department’s reporting system showed a value of Rs 2,49,75,347 with HDFC Bank, Rs 1,09,63,510 with ICICI Bank, and Rs 3,77,711 in an ICICI Prudential life insurance policy as of December 31, 2018, according to a recent report by Mint.

Since Patel had not filed his original income tax return, the department reopened the case. He later filed a return declaring nil income. During reassessment, he was asked to submit details of his non-resident external (NRE) and non-resident ordinary (NRO) accounts, fixed deposits, and a reconciliation of the reported figures.

The assessing officer found the explanation and supporting records inadequate. The entire Rs 3,63,16,568 was consequently treated as unexplained money under Section 69A of the Income Tax Act, 1961, and brought to tax under Section 115BBE.

During the appellate proceedings, Patel produced statements from his account with the National Bank of Kuwait, salary details, Indian bank statements, and other records. These showed that his salary earned in Kuwait had been sent to his Indian NRE accounts through regular banking channels.

What The Earlier Appeal Found

The Commissioner of Income Tax (Appeals) accepted that Rs 1,04,11,345 in the ICICI Bank account was explained through foreign remittances and fixed-deposit transactions. It also deleted the Rs 3,77,711 addition after finding that the sum merely represented the value of an insurance policy rather than income received during the year.

However, an unreconciled balance of Rs 5,52,165 in the ICICI Bank account was retained as unexplained. The addition of Rs 2,49,75,347 relating to HDFC Bank was also upheld because neither the taxpayer nor the bank had provided a clear breakup matching the reported figure.

Why The ITAT Granted Partial Relief

The ITAT observed that the taxpayer’s status as an NRI working in Kuwait was not disputed. Records examined during the proceedings had also established that a major part of the ICICI funds came from his foreign salary.

It therefore deleted the residual addition of Rs 5,52,165, noting that the difference arose from the inability to reconcile a cumulative reported figure with the bank records. The department had not produced independent material showing that this amount represented undisclosed income.

For the HDFC Bank figure, however, the tribunal found that a complete transaction-wise reconciliation was still unavailable. It sent the matter back to the assessing officer, directing the officer to obtain details from the bank and examine the taxpayer’s evidence afresh. No addition should be made if the money is shown to be overseas income remitted to India or a redeployment of those funds, it said.

The ruling underlines a practical lesson for NRIs: the overseas origin of money must be supported by a clear paper trail. Salary slips, foreign and Indian bank statements, remittance records, fixed-deposit documents and a transaction-wise reconciliation can become crucial when reported figures trigger scrutiny.

FAQs

1. Can foreign salary remitted to an NRE account be taxed in India?

It should not be treated as unexplained income if the taxpayer can establish that it was earned abroad and transferred through legitimate banking channels.

2. Why did the ITAT send the Rs 2.50 crore addition back for verification?

A transaction-wise reconciliation of the HDFC Bank figure was unavailable. The assessing officer must obtain the bank records and examine the source afresh.

3. What records should NRIs retain for overseas remittances?

NRIs should preserve salary slips, foreign and Indian bank statements, remittance records, fixed-deposit details, and a clear reconciliation of transactions.