The Classic Partners LLP
Special Provisions for NRIs (Chapter XII-A)
Sections 115C to 115I of the Income Tax Act give NRIs a concessional flat-rate tax regime on investment income and long-term capital gains from specified foreign-exchange assets. We evaluate it against normal provisions every year.
Optimise with Chapter XII-AWhat the Special Regime Covers
Chapter XII-A applies to an NRI's specified foreign exchange assets — shares of Indian companies, debentures and deposits of public limited companies, and notified government securities — that were purchased with convertible foreign exchange.
- Flat 20% tax on investment income from such assets, without deductions under Chapter VI-A.
- Concessional 12.5% tax on long-term capital gains from specified assets.
- No return filing needed (Section 115G) where income consists only of such investment income/LTCG and full TDS has been deducted.
- Section 115F exemption on LTCG when net proceeds are reinvested in specified assets.
Continuing Benefits After Returning to India
Under Section 115H, an NRI who becomes a resident can file a declaration with the return to continue concessional treatment on eligible assets until their transfer. Declarations filed under the 1961 Act remain valid under the Income Tax Act, 2025 (Section 536(2)(f)), so existing elections carry forward seamlessly from 1 April 2026. This pairs powerfully with RNOR planning for returning Indians.
Opting In or Out
The regime is optional. Under Section 115-I, an NRI can elect normal provisions for any year by declaring so in the return of income — useful when slab rates, indexation, or treaty relief produce a lower tax. We run both computations every year and choose whichever is lawfully cheaper, factoring in your residential status and exempt income position.
Our Chapter XII-A Services
Eligibility Review
Confirming which assets qualify as foreign exchange assets.
Regime Comparison
Side-by-side tax under Chapter XII-A vs normal provisions vs DTAA.
Section 115F Reinvestment
Structuring reinvestment to exempt long-term capital gains.
Section 115H Election
Declarations to retain benefits after you become resident.
TDS Coordination
Correct withholding so Section 115G no-filing relief actually applies.
Return Filing
Complete NRI return filing with the chosen regime.
Frequently Asked Questions
What are the special provisions for NRIs under the Income Tax Act?
Chapter XII-A (Sections 115C to 115I) offers NRIs a concessional flat tax of 20% on investment income and 12.5% on long-term capital gains from specified foreign exchange assets purchased with convertible foreign exchange.
Which assets qualify as foreign exchange assets?
Shares of Indian companies, debentures and deposits of Indian public limited companies, and central government notified securities, in each case acquired or purchased with convertible foreign exchange.
Can an NRI skip filing a return under the special provisions?
Yes. Under Section 115G, an NRI need not file a return if total income consists only of such investment income or long-term capital gains and the full tax has been deducted at source.
Do the benefits continue after the NRI returns to India?
Yes. By filing a declaration under Section 115H with the return, the concessional treatment continues on eligible assets until they are transferred, and declarations made under the 1961 Act remain valid under the Income Tax Act, 2025.
Is the special regime always beneficial?
Not always. Because Chapter VI-A deductions are denied and rates are flat, normal provisions or DTAA relief sometimes produce lower tax, which is why Section 115-I allows opting out year by year.
Holding Indian investments as an NRI?
We'll compare the special regime against normal provisions and file whichever saves you more.
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