Foreign portfolio investors slapped with notice from IT department

MUMBAI: The country's income tax department has issued notices to a large number of foreign portfolio investors (FPIs) in the last few days for filing defective returns. Hundreds of return notices have been issued under Section 12 (2) of the Income Tax Act for the previous assessment years.

Investors have been asked to rectify the deficiencies and submit a balance sheet including profit and loss account but this is not required under the existing rules.

This is because FPIs receive capital gains and dividend income in India and they do not run any business or engage in any commercial activity. He also has no permanent office in India.

Experts described the situation as "unprecedented" and said defects in the new income tax portal could be the cause of the notice. A person with knowledge of the matter said that the FPI did not consider it a technical defect but they felt that the income tax department was investigating them.

He added that he had faced difficulties in the past due to the country's precarious tax system and now the government's move could tarnish India's image.