NRI Special Tax Provisions · Panaji, Goa
NRI with investment income from Indian assets? The Income Tax Act contains dedicated special provisions for NRIs under Chapter XII-A — offering flat tax rates on investment income and long-term capital gains that can be significantly lower than regular rates. Our Chartered Accountants in Goa advise on when to elect these provisions and when the regular rates or DTAA rates are more beneficial.
Overview
Chapter XII-A (Sections 115C to 115-I) of the Income Tax Act provides a special tax regime specifically for non-resident Indians. Under this chapter, investment income (interest on foreign currency deposits and specified assets) is taxed at a flat 20%, and long-term capital gains on specified assets acquired in foreign currency are taxed at a flat 10% — without the benefit of cost indexation. These rates apply without the basic exemption limit threshold, but NRIs can elect not to be governed by this chapter and instead be taxed under the regular provisions or DTAA rates. Choosing correctly — based on the type and quantum of income — is a meaningful tax planning decision.
This topic is part of our broader exempt income for NRIs and NRI tax filing overview guidance for non-residents and overseas Indians.
What's covered
End-to-end guidance and compliance for non-resident Indians.
Book a free consultation →Determining whether your investments and income qualify for the special NRI provisions under Sections 115C to 115-I.
Advising on the 20% flat tax rate on foreign-currency investment income under Section 115E and comparing with regular rates.
Computing long-term capital gains on specified assets under the 10% flat rate and comparing with indexation-based regular rates.
Advising whether to opt for Chapter XII-A or regular income tax provisions for your specific income composition.
Comparing Chapter XII-A rates with applicable DTAA treaty rates to identify the most beneficial tax position.
Explaining the interaction of Chapter XII-A rates with the basic exemption limit and deductions — and planning accordingly.
Our process
We identify all Indian investment and capital gains income subject to XII-A.
We compute tax under Chapter XII-A, regular provisions and DTAA rates.
We advise the most tax-efficient option for your income profile.
We prepare and file the return under the chosen regime with full documentation.
Frequently asked questions
Chapter XII-A (Sections 115C to 115-I) of the Income Tax Act provides a special tax regime for NRIs holding 'specified assets' acquired in foreign currency. Key benefits include: investment income taxed at a flat 20% under Section 115E; long-term capital gains on specified assets taxed at a flat 10% under Section 115E (without indexation); no deductions (Sections 28–44C and Chapter VI-A) against this income; and no requirement to file a return if only this type of income is earned and full TDS has been deducted.
Specified assets under Section 115C include: shares of Indian companies; debentures (other than bearer debentures) of an Indian company; deposits with an Indian company or public sector company; securities of the Central Government; and any other asset specified by the Central Government by notification. These must have been acquired, subscribed or purchased by the NRI in convertible foreign exchange to qualify.
Investment income — defined as income by way of interest or dividends from specified assets — earned by an NRI is taxable at a flat rate of 20% under Section 115E. This applies without deducting any expenses or allowances and without the benefit of the basic exemption threshold. TDS is deducted at this rate at source.
Yes. Under Section 115-I, an NRI can elect not to be governed by Chapter XII-A in any assessment year by declaring so in the income tax return for that year. In that case, regular income tax provisions apply — including regular slab rates, indexation for capital gains, and the full benefit of deductions under Chapter VI-A. This election is evaluated afresh each year based on which option results in a lower tax liability.
No. Under Chapter XII-A, the benefit of cost indexation is not available on long-term capital gains from specified assets. However, the flat rate of 10% may still result in a lower overall tax than the regular 20% long-term capital gains rate with indexation — depending on the holding period and the cost of acquisition. We compute both options to determine which is beneficial.
Regular rates may be more beneficial when: the asset was acquired in Indian rupees (not foreign exchange) and doesn't qualify as a specified asset; the cost after indexation significantly reduces the capital gains; the NRI has other losses to set off; or the DTAA rate for the specific income type is lower than both 20% and 10%. We assess this comparison individually for each NRI's income profile.
Under Section 115G, an NRI is not required to file a return if their total income consists only of investment income or long-term capital gains from specified assets, and TDS has been deducted from that income under Chapter XVII-B. However, filing is still advisable to carry forward losses, claim excess TDS refunds, and establish a clear tax compliance record.
Contact N D Savla & Associates in Panaji, Goa. We analyse your NRI investment income and capital gains, compute the tax under Chapter XII-A, regular provisions and applicable DTAA rates, advise on the optimal election, and prepare and file your return under the most beneficial regime.
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Book a free consultation with a qualified Chartered Accountant in Goa. We'll compare all regimes and file your return for maximum tax efficiency — no obligation.