Section 115C of the Income-tax Act, 1961: Definitions for Non-Resident Indians
Section 115C defined important expressions used in Chapter XII-A, the special tax regime for certain income of non-resident Indians (NRIs). These definitions determine which taxpayers, investments and income could qualify for the Chapter's special treatment. For tax years beginning on or after 1 April 2026, the corresponding definitions are found in Section 212 of the Income-tax Act, 2025.
Definitions under Section 115C
Clause (a): Convertible foreign exchange
Foreign exchange treated by the Reserve Bank of India as convertible foreign exchange for purposes of the Foreign Exchange Management Act, 1999 (FEMA) and its rules. Whether a particular remittance qualifies must be checked against the applicable RBI and FEMA requirements.
Clause (b): Foreign exchange asset
A specified asset acquired, purchased or subscribed to by the taxpayer using convertible foreign exchange. Both the type of asset and the source of funds are material.
Clause (c): Investment income
Income derived from a foreign exchange asset. The older page referred to an exclusion for dividends under Section 115-O; that wording is outdated and is not part of the official Finance Act 2025 version of Section 115C.
Clause (d): Long-term capital gains
Income taxable under the head "Capital gains" from a foreign exchange asset that is not a short-term capital asset. The applicable holding-period and taxation rules must be checked for the relevant year and asset.
Clause (e): Non-resident Indian
An individual who is an Indian citizen or a person of Indian origin and who is not resident for income-tax purposes. Under the explanation to Section 115C, a person is deemed to be of Indian origin if that person, either parent or any grandparent was born in undivided India. Income-tax residence is determined under the relevant statutory residence rules; it is not determined solely by citizenship or visa status.
Clause (f): Specified asset
The provision enumerates the following categories:
| Sub-clause | Asset category |
|---|---|
| (i) | Shares in an Indian company. |
| (ii) | Debentures issued by an Indian company other than a private company, as described in the statutory provision. |
| (iii) | Deposits with an Indian company other than a private company, as described in the statutory provision. |
| (iv) | Central Government securities within the statutory definition cited in the provision. |
| (v) | Other assets notified by the Central Government in the Official Gazette. |
The statutory wording historically refers to the Companies Act, 1956 and the Public Debt Act, 1944. These references should not be silently replaced when explaining the text of Section 115C; applicability under the current law must be read with the corresponding enactments and savings provisions.
Section 212 of the Income-tax Act, 2025
Section 212 carries forward the corresponding NRI-related definitions for the new tax-year framework. The Income Tax Department confirms that qualifying foreign exchange assets under the earlier law retain their relevant characterization for earlier tax years, and that the new regime maintains the substance of the special NRI provisions.
Related NRI tax provisions
- Section 115D (1961) / Section 213 (2025): Special computation rules for investment income and deductions.
- Section 115E (1961) / Section 214 (2025): Tax on qualifying investment income and long-term capital gains.
- Section 115F (1961) / Section 215 (2025): Capital gains relief upon qualifying reinvestment, subject to conditions.
- Section 115G (1961) / Section 216 (2025): Return-filing relief in specified cases.
- Section 115H (1961) / Section 217 (2025): Continuation of certain benefits after becoming resident.
Practical example
Suppose a non-resident Indian subscribes to qualifying shares of an Indian company using convertible foreign exchange. Those shares may constitute a foreign exchange asset if all statutory conditions are met. Income from the shares and gains on their transfer must then be evaluated under the applicable special provisions, including the tax year, holding period, source of investment and any election to use the ordinary tax rules.
Official legal sources and further reading
- Income Tax Department: Section 115C (2025 version of the 1961 Act)
- Income-tax Act, 1961 as amended by Finance Act, 2025 (official PDF)
- Income-tax Act, 2025 (official PDF)
- Income Tax Department: Non-resident FAQs and transition guidance
Updated 27 October 2026. This article provides general statutory information. Tax treatment depends on the relevant tax year and individual circumstances.