NRI Wins Tax Relief in ₹66 Lakh Property Case: ITAT Rules TDS Payment Valid Despite No ITR Filing
Tribunal Restores Case After Ex-Parte Tax Orders
Lesson for NRIs on Property Deals and Tax Compliance
By Our Legal Reporter
New Delhi: January 15, 2026:
Buying property in India is often an emotional and financial milestone for Non-Resident Indians (NRIs). But it also comes with complex tax rules that many are unaware of. A recent case highlights this challenge: an NRI based in the United States bought property worth ₹66.95 lakh in India, paid Tax Deducted at Source (TDS), but failed to file his Income Tax Return (ITR). The tax department issued a notice, treating the purchase as unexplained income. The matter escalated to the Income Tax Appellate Tribunal (ITAT) Ahmedabad, which eventually granted relief, restoring the case for fresh adjudication.
The Case in Detail
- The Buyer: Mr. Patel, a US citizen of Indian origin, runs a convenience store at a gas station in America.
- The Property: He purchased real estate in India valued at ₹66.95 lakh during the disputed year.
- The Tax Notice: The Indian tax department flagged the purchase as unexplained, since no ITR was filed.
- The Challenge: Mr. Patel explained that all documents were in India and he could not travel immediately due to business commitments. Despite this, the tax authorities passed ex-parte orders (without his representation).
- The Relief: On November 7, 2025, ITAT Ahmedabad ruled in his favour, restoring the matter to the Assessing Officer (AO) for fresh consideration.
ED’s Findings and Tribunal’s Observations
- Natural Justice: ITAT emphasized that procedural rigidity should not override substantive justice. NRIs often face logistical challenges in accessing documents from abroad.
- TDS Payment Valid: The tribunal noted that since TDS was already deducted on the property purchase, the transaction was not hidden.
- Fresh Adjudication: ITAT directed the AO to re-examine the case, giving Mr. Patel a fair chance to present documents.
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Why NRIs Face Such Issues
- Misunderstanding of TDS: Many NRIs believe that if TDS is deducted, they need not file an ITR. TDS is only part of the tax mechanism and does not exempt one from filing returns.
- Documentation Challenges: NRIs often keep property papers in India, making compliance difficult when notices are issued.
- Complex Rules: Property transactions involve multiple tax provisions, including capital gains, source of funds, and reporting obligations.
Lessons for NRIs
This case offers important takeaways for NRIs investing in Indian real estate:
- Always File ITR: Even if TDS is deducted, filing an ITR is mandatory if income exceeds taxable limits.
- Maintain Records: Keep copies of sale deeds, bank statements, and TDS certificates accessible digitally.
- Seek Professional Help: Engage tax consultants familiar with NRI rules to avoid compliance lapses.
- Respond to Notices Promptly: Ignoring tax notices can lead to ex-parte orders and penalties.
- Use Technology: With e-filing and online portals, NRIs can comply without physical presence.
Also Read: Delhi High Court Upholds Bail in ₹831 Crore GST Evasion Case
Wider Impact on NRI Investments
- Trust in Indian Real Estate: Such cases can discourage NRIs from investing, unless tax clarity improves.
- Need for Awareness: Government and financial institutions must educate NRIs about compliance requirements.
- Judicial Relief: ITAT’s ruling shows that courts recognize practical difficulties faced by NRIs and aim to balance fairness with compliance.
Conclusion
The ₹66 lakh property case highlights the fine line between compliance and justice in India’s tax system. While the tax department acted strictly, the ITAT restored balance by ensuring Mr. Patel got a fair chance to explain his purchase. For NRIs, the message is clear: paying TDS is not enough—filing ITR is essential. At the same time, India’s judiciary continues to safeguard the principle of natural justice, ensuring that genuine investors are not unfairly penalized.
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