The I-T Department's exemption wing, which deals with tax related issues pertaining to charitable institutions and those bodies which have been granted I-T waivers, has begun a "discreet probe into the financial aspects" and alleged violation of Indian tax laws, sources said.

"Once the preliminary information is gathered, the Tax Department would be taking a view on issuing notices to the authorities concerned. Also, the CBDT would be informed as this is not a regular case and involves relations between two countries," the sources added.

As per the information available with the government, several teachers at the American Embassy school were working "illegally", in violation of both tax laws and their visa status.

The government has earlier indicated that these violations were serious and it was likely to initiate action in this regard.

However, the MEA is still awaiting a response on the information sought in December last year on visa and other details of all the teachers at these schools and their salaries along with the bank account details of their Indian staff members.

India, in 1973, had granted "tax exempted status" to 16 teachers of the school. However, as per information available with the government, there were many more teachers who were working but not shown as such.

However, in Washington last month, US State Department Spokesperson Jen Psaki responded to reports of an Indian government inquiry into allegations of tax evasion with the statement that the school "is not run by the Embassy (and) only about a third of the students there are American".

India initiated a slew of initiatives in retaliation against the arrest and strip-search of its senior diplomat Devyani Khobragade, a 39-year-old 1999-batch IFS officer, on December 12 in New York on charges of visa fraud.

Extra privileges given to US diplomats were withdrawn and activities of various American institutions were put under scrutiny as part of Indian government's stern reaction to the issue.

The sprawling school, located next to US Embassy on American government-owned land, has about 1,500 students on its rolls, nearly 500 of whom are from US.

The remaining students hail from several different countries and also include some locals.

"I-T exemptions are made for an agreed number of entities after proper circulars are drawn up officially. Tax authorities have to be informed about any scaling up or down in these numbers. The information that has come is that some violations are being done in these numbers and the department will verify that," the sources said.

Media reports have suggested that US authorities have advised female spouses to fill up their visa details as that of a "housewife", which is an apparent effort to evade the tax net.

Apart from withdrawing extra privileges of US diplomats, India also asked US Embassy to "discontinue" commercial activities undertaken by the American Community Support Association (ACSA) from its premises.


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