Special Provisions Relating to Taxation of Income of Non-Resident Indians (NRIs)
Table of Contents
Special Provisions Relating to Taxation of Income of NRIs – N.D. Savla & Associates
The Income-tax Act, 1961 contains specific provisions for Non-Resident Indians (NRIs) to simplify their taxation and encourage investments in India. These special provisions apply to certain incomes such as foreign exchange assets, specified deposits, shares, and property investments. At N.D. Savla & Associates, we guide NRIs in utilizing these provisions effectively, ensuring reduced tax liability and full compliance.
Overview
Under Chapter XIIA of the Income-tax Act, NRIs have the option to be taxed at special concessional rates on income earned from investments in India. These provisions are particularly useful for NRIs holding foreign exchange assets like shares, debentures, deposits, and government securities. Once chosen, this scheme applies to all eligible incomes unless the NRI opts out.
Features
Concessional tax rate of 20% on investment income from foreign exchange assets
10% tax rate on long-term capital gains from certain assets (shares, debentures, deposits, government securities)
No requirement to file ITR in India if tax is already deducted at source (TDS fully covers liability)
Option for NRIs to opt out and be taxed under normal provisions if more beneficial
Exemptions available under Sections 54, 54EC, and 54F for reinvested capital gains
Applicability of DTAA benefits to avoid double taxation
Documents Required
Passport & PAN card
Investment proofs (shares, debentures, deposits, government securities)
Bank account details (NRE/NRO/FCNR)
Property purchase/sale documents
TDS certificates (Form 16A / Form 26AS)
Proof of reinvestment (if claiming exemptions)
Tax Residency Certificate (TRC) and Form 10F (for DTAA claims)
Procedure
Eligibility Check – Identify whether NRI holds qualifying foreign exchange assets.
Tax Computation – Apply concessional tax rates on investment income and capital gains.
TDS Review – Ensure correct TDS deduction by banks, companies, or buyers.
Exemption Planning – Suggest reinvestments to claim capital gains exemptions.
ITR Filing – File return if additional income exists or refunds are due (though exempt if TDS fully covers tax).
DTAA Application – Claim treaty benefits for income taxable in both India and country of residence.
Why This Matters
Special provisions offer lower tax rates and simplified compliance for NRIs. However, improper application can lead to excessive TDS, missed exemptions, or disputes with tax authorities. With N.D. Savla & Associates, your NRI taxation under special provisions is managed correctly, ensuring you maximize benefits while staying fully compliant.
