NRI Gets Relief After Rs 1.09 Crore Kuwait Remittance Triggers Tax Scrutiny

An Indian working in Kuwait came under the income tax department’s scrutiny after substantial sums appeared in his Indian bank accounts, even though he maintained that the money represented salary earned abroad.

The taxpayer, Narshibhai, worked in the oilfields of Mina Al-Ahmadi in Kuwait. His salary was deposited in an account with the National Bank of Kuwait, from where funds were remitted to his non-resident external (NRE) accounts in India.

Information available with the tax department showed Rs 2.49 crore with HDFC Bank, Rs 1.09 crore with ICICI Bank, and an insurance policy valued at Rs 3.77 lakh as of December 31, 2018. Since the taxpayer had not filed an original income tax return (ITR), the figures attracted the department’s attention.

The matter eventually reached the Income Tax Appellate Tribunal (ITAT), Ahmedabad, which deleted one addition and sent another back to the assessing officer for fresh verification.

How The Addition Reached Rs 3.63 Crore

After receiving a notice, the taxpayer filed an ITR declaring nil income. The assessing officer asked him to furnish statements of his NRE and non-resident ordinary (NRO) accounts, details of fixed deposits, and a reconciliation of the figures reported through the department’s financial-information system, according to a recent report by The Economic Times.

The taxpayer initially submitted limited information and did not provide a complete explanation of the reported amounts. The assessing officer consequently treated approximately Rs 3.63 crore as unexplained money under Section 69A of the Income-tax Act.

During the appellate proceedings, the taxpayer submitted additional evidence, including his Kuwait bank statements, salary details, Indian bank statements and documents tracing the transfer of money from Kuwait to India.

The Commissioner of Income Tax (Appeals) sought a remand report from the assessing officer. Notices were also issued to ICICI Bank, HDFC Bank and ICICI Prudential Life Insurance Company to verify the figures.

The inquiry established that the taxpayer’s salary had been credited in Kuwait and subsequently transferred to India through banking channels. Of the amount reported by ICICI Bank, around Rs 1.04 crore was explained through foreign remittances and the rollover of fixed deposits.

The insurance amount of Rs 3.77 lakh was also found to be the value of the policy on a particular date rather than a separate receipt of income. However, a difference of Rs 5.52 lakh remained, while the HDFC Bank figure of Rs 2.49 crore could not be reconciled.

Why The Tribunal Granted Partial Relief

The ITAT noted that the taxpayer’s non-resident status, employment in Kuwait and operation of NRE accounts were not disputed. The records also established a trail between his foreign salary and the remittances made to India.

It held that the Rs 5.52 lakh difference could not be treated as unexplained money merely because the cumulative figure reported by the bank did not match the available records. The department had not brought any independent evidence to show that it represented undisclosed income. The addition was therefore deleted.

The Rs 2.49 crore reported by HDFC Bank presented a different problem. The bank did not provide the necessary details despite being issued a notice, while the taxpayer also failed to produce a transaction-by-transaction reconciliation.

Instead of deleting this addition, the tribunal restored the matter to the assessing officer for another examination. It directed that no addition should be made if the money was found to represent foreign earnings remitted to India or the subsequent redeployment of those funds.

The April 24, 2026 order underlines that a large bank balance or remittance cannot, by itself, be taxed as unexplained money. However, NRIs should retain overseas salary records, foreign and Indian bank statements, remittance advice and fixed-deposit documents to establish a clear trail whenever the tax department seeks an explanation.

FAQs

1. Is salary earned abroad and remitted to India taxable?
Not merely because it is transferred to India. Its taxability depends on the person’s residential status and where the income was earned and first received.

2. Can a large NRE account deposit trigger an income tax notice?
Yes. Large transactions may attract scrutiny, particularly when the department cannot match them with an ITR or supporting financial records.

3. What documents should NRIs retain for overseas remittances?
They should keep salary records, foreign and Indian bank statements, remittance advice, fixed-deposit documents, and proof of their residential status.