Taxation on Non-Residents


  • 1. Non-Resident Indian means an individual being a citizen of India or a person of Indian origin who is not a resident.
  • 2. Foreign Exchange Asset means any specified asset which the assesse has acquired or purchased with or subscribed to in convertible foreign exchange.
  • 3. Specified Asset means any of the following assets:
    • a. Shares in an Indian company. (Public/Private)
    • b. Debentures issued by a Public Limited Indian Company.
    • c. Deposits in a Public Limited Indian Company.
    • d. Any security of the Central Government.
    • e. Any other asset

 4. Section 115E: Computation of Income-Tax

  • Income tax on the total income of the Non-Resident shall be calculated as follows:
    • a. On Investment Income tax will be calculated @ 20%.
    • b. On Long Term Capital Gain tax will be calculated @ 10%.
    • c. On any other income as reduced by the amount of income referred to in clauses (a) and (b), tax will be calculated @ Normal Rates.

 5. Section 115D: Special provision for computation of total income of NRIs.

  • Income tax on the total income of the Non-Resident shall be calculated as follows:
    • a. Investment Income: No deduction in respect of any expenditure or allowance shall be allowed under any provision of the Income Tax Act in computing the investment income.
    • b. Long Term Capital Gain: No deduction shall be allowed under chapter VI-A. Second proviso to section 48 shall not apply for computation of LTCG. First Proviso to section 48 shall be applicable.

 6. Section 115F: Capital Gain on transfer of foreign exchange assets not to be charged in certain cases

  • Where a NRI has transferred a Long Term Foreign Exchange Asset and has within a period of six months after the date of such transfer invested the net consideration in specified assets,
  • a. if the cost of the new asset is not less than the net consideration in respect of the original asset, whole of the capital gain shall not be charged to tax under section 45.
  • b. if the cost of new asset is less than the net consideration in respect of the original asset, the following shall not be charged to tax under section 45,
    Capital Gain X(Cost of acquisition of new asset /Net Consideration )

 7. Section 115G: Return of Income not to be filed in certain cases

  • NRI is not required to furnish the return of income if
    • a. Total income consists of only Investment Income and/or LTCG and
    • b. Tax at source has been deducted from such income.