Sponsored
    Follow Us:
Sponsored

The Income Tax Act,1961 encompasses various special taxation regimes for Non-Resident Indians (NRIs), among which lies a significant provision detailed in Sections 115C to 115I within Chapter XII-A of the Income Tax Act, 1961. Despite its significance, many NRI individuals still lack clarity regarding this provision and the benefits it offers.

It’s imperative to note that only individuals who are citizens of India or persons of Indian origin, but not residents, can avail themselves of this special tax regime. Specifically, the benefit is extended to assets acquired or purchased in convertible foreign currency, which include:

  • Shares of Indian Companies
  • Debentures of Indian Public Companies
  • Deposits of Indian Public Companies
  • Central Government Securities
  • Any other assets as notified by the Central Government in the Official Gazette

Under this special tax regime, the following tax rates apply:

  • Income from investment in specified assets: 20%
  • Long-term capital gains from specified assets: 10%
  • Any other income of the NRI: Normal tax provisions

Special Tax Regime for Certain Incomes of Non-Resident Indians (NRI)

Calculation of long-term capital gains on the sale or transfer of specified assets involves the following considerations:

  • Indexation benefit under the second proviso to Section 48 is unavailable.
  • Chapter VI-A deductions can’t be availed.

NRIs can claim exemption under Section 115F of the Income Tax Act, 1961, by reinvesting the sale consideration in another specified asset within six months from the date of transfer. The maximum exemption that we can get under this section is as below:

Exemption:  Long-Term Capital Gain * Investment in any newly specified asset/ Net Sale Consideration

However, if the newly specified asset is transferred within three years of acquisition, the earlier exemption granted becomes taxable as long-term capital gain.

In cases where NRI income solely comprises investment income from specified assets or long-term capital gains from the transfer of foreign exchange assets, or both, and TDS has been deducted on such income, then he/she is not required to file the return of income under section 139(1).

Hence, it can be affirmed that investment income from the above-mentioned foreign exchange assets and long-term capital gains arising from the transfer of specified assets are treated separately and fall under the purview of the special tax regime. Any other income earned by an NRI in India is taxed according to the remaining provisions outlined in the Income Tax Act, 1961.

Conclusion: The special tax regime delineated in the Income Tax Act, 1961, for NRIs is a testament to the Indian government’s efforts to incentivize and encourage investment from the Indian diaspora. By offering reduced tax rates on investment income and long-term capital gains from specified assets, this regime not only fosters a welcoming investment environment but also aligns with the broader objective of enhancing economic ties with Non-Resident Indians. As we unravel the complexities of this provision, it becomes evident that with informed decision-making and strategic planning, NRIs can significantly benefit from this regime, optimizing their tax liabilities and maximizing returns on their investments in India. However, it is crucial to approach these opportunities with a comprehensive understanding of the legal framework and, if necessary, seek professional advice to navigate the intricacies effectively.

*****

Disclaimer: All views expressed in this article are personal and belong solely to the authors and do not represent those of people, institutions, or organizations that the authors may or may not be associated with within a personal or professional capacity unless explicitly stated. The content of this article is for informational purposes only and should not be construed as professional advice or judgment whatsoever. The readers should not construe the material contained herein as business, financial, legal, regulatory, or professional advice.

Sponsored

Author Bio

Dainik is a chartered accountant who cleared all levels of the CA Examinations on their first attempt. His professional journey has vast exposure in various domains including GST Litigation & Advisory, SEZ Units Establishment in GIFT City, Gandhinagar including consultation for day-to-day com View Full Profile

My Published Posts

An Ultimate Guide: How Non-Resident Indians (NRI’s) can effortlessly transfer Indian Assets to their Children Living Abroad Essential Financial Steps and Tax Tips that every NRI’s must not miss ICEGATE Implementation at non IT/ITES SEZs from 01.07.2024 – Clarification Taxation of Physical Gold, Paper Gold & Gold Derivatives in India Taxability of Offshore Indirect Transfer of Capital Assets situated in India by Non-Resident Corporations/Entities View More Published Posts

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

2 Comments

Leave a Comment

Your email address will not be published. Required fields are marked *

Sponsored
Sponsored
Ads Free tax News and Updates
Sponsored
Search Post by Date
December 2024
M T W T F S S
 1
2345678
9101112131415
16171819202122
23242526272829
3031