Section 115D of the Income-tax Act: Computation of NRI Income and Deduction Restrictions
Section 115D lays down special rules for calculating the taxable income of qualifying non-resident Indians (NRIs) from foreign exchange assets. It restricts expenses and certain deductions where the special NRI taxation regime applies.
Who is covered by Section 115D?
The provision forms part of Chapter XII-A, which governs certain income of NRIs. For this purpose, the meaning of an NRI and terms such as foreign exchange asset, investment income and long-term capital gains are set out in Section 115C. Not every person described as an NRI in everyday usage necessarily qualifies for every benefit under this Chapter.
Section 115D(1): No deduction for investment expenses
In computing investment income covered by the special regime, an NRI cannot deduct expenditure or allowances under the Act. This means that investment-related expenses cannot simply be subtracted from that income to reduce the taxable amount.
Section 115D(2): Deductions from gross total income
Clause (a): Only investment income or long-term capital gains
If gross total income consists exclusively of qualifying investment income, qualifying long-term capital gains, or both, deductions under Chapter VI-A are not available against that income. The historical text of Section 115D also referred to the second proviso to Section 48; that reference should be read with the law applicable to the relevant assessment year.
Clause (b): Income from other sources is also included
Where gross total income includes other income in addition to the special-category investment income or long-term capital gains, the special-category income is first excluded for the purpose of calculating Chapter VI-A deductions. Eligible deductions are then considered against the remaining gross total income, subject to the other conditions and limits of the Act.
Illustration of the deduction rule
| Income category | Illustrative amount | Treatment |
|---|---|---|
| Qualifying investment income | Rs. 4,00,000 | Excluded from the base for Chapter VI-A deductions |
| Other eligible income | Rs. 3,00,000 | Potential deduction base, subject to applicable rules |
| Gross total income | Rs. 7,00,000 | Deduction eligibility is assessed on Rs. 3,00,000, not Rs. 7,00,000 |
This is an illustration of the computation principle, not a determination that any particular deduction is available. Eligibility can also depend on the applicable tax regime and other statutory conditions.
Section 213 of the Income-tax Act, 2025
Section 213 preserves the same essential framework: no expenditure or allowance deduction against qualifying NRI investment income, and restrictions on deductions when special-category income is included in gross total income. Under the 2025 Act, the corresponding deductions chapter is Chapter VIII rather than Chapter VI-A. The Income Tax Department identifies Sections 213, 214 and 215 as the successors to Sections 115D, 115E and 115F respectively.
Related provisions and practical considerations
Section 115E addresses tax rates on qualifying investment income and long-term capital gains; Section 115F addresses relief where specified reinvestment conditions are satisfied; Section 115G concerns return-filing relief in specified circumstances; and Section 115H concerns continuation of certain benefits after becoming resident. The option to opt out of the Chapter XII-A regime under Section 115-I may also require consideration for earlier years.
Official statutory references
Read the Income Tax Department's Section 115D page, the Income-tax Act, 2025 as amended, and the official NRI FAQs and transition guidance. Consult the legislation for the particular tax year when applying these rules.
Historical note: The original page recorded the Finance Act, 1992 amendment to Section 115D(2), effective 1 April 1993. The applicable consolidated law and subsequent amendments should be checked for the year concerned.