NRI taxation | Updated 27 October 2026
Section 115G Income Tax Act: When NRIs Need Not File an Income Tax Return
Section 115G of the Income-tax Act, 1961 provided a limited return-filing exemption for non-resident Indians whose taxable Indian income consisted only of specified investment income or long-term capital gains, provided tax was deducted at source. Section 216 of the Income-tax Act, 2025 continues the exemption for tax years beginning on or after 1 April 2026.
What is Section 115G?
Section 115G was part of Chapter XII-A, which contained special provisions for certain incomes of non-residents. It dispensed with the obligation to furnish a return under Section 139(1) of the 1961 Act where both statutory conditions were fulfilled. The corresponding current rule is Section 216 of the 2025 Act, which refers to Section 263(1).
Conditions for the NRI return-filing exemption
- Eligible taxpayer: The individual must qualify as a non-resident Indian under the relevant special provisions. Merely holding an NRE or NRO account does not itself establish eligibility.
- Permitted income only: The taxpayer's total assessable income must consist exclusively of qualifying investment income, qualifying long-term capital gains, or both. The terms have special statutory meanings and do not cover every type of investment or capital gain.
- Tax deducted at source: The tax deductible at source under the applicable statutory chapter must actually have been deducted from that income.
For the statutory definitions of non-resident Indian, foreign exchange asset, investment income and long-term capital gains, see Section 115C (1961 Act) and the corresponding definitions in the 2025 Act.
Section 115G and Section 216: legal provisions compared
| Issue | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Exemption provision | Section 115G | Section 216 |
| General return provision | Section 139(1) | Section 263(1) |
| Tax deduction chapter | Chapter XVII-B | Chapter XIX-B |
| Qualifying income | Investment income or long-term capital gains or both, as defined for the special NRI regime | Corresponding qualifying income categories |
| Key requirement | Tax deductible at source has been deducted | Tax deductible at source has been deducted |
The Income-tax Act, 2025 applies from 1 April 2026. The earlier Act remains relevant to earlier tax periods and proceedings under the applicable transition provisions. The Income Tax Department's transition guidance confirms that the relief continues in substantially similar terms.
What is investment income?
For this special regime, investment income refers to income derived from a qualifying foreign exchange asset, subject to the statutory exclusions and definitions. A foreign exchange asset is a specified asset acquired, purchased or subscribed to using convertible foreign exchange. Not all bank interest, dividends, rental income or securities gains automatically qualify.
When should an NRI file a return?
An NRI should assess ordinary return-filing obligations where there is salary, rental income, business income, other non-qualifying taxable income, or gains outside the defined special regime. A return may also be useful to claim a refund or assert treaty relief, even where a limited statutory exemption might otherwise apply. Other independent filing requirements should be considered separately.
Practical examples
Example 1: Only qualifying investment income
An eligible NRI earns only qualifying investment income from a foreign exchange asset, and the tax deductible on that income is deducted. Subject to the statutory definitions and any other applicable filing requirements, the NRI may rely on the return-filing exemption.
Example 2: Qualifying gains and rental income
An NRI has qualifying long-term capital gains but also taxable rental income from an Indian property. Because the total income is not confined to the permitted categories, Section 115G or Section 216 does not provide the exemption.
Example 3: No tax deducted
An eligible NRI earns qualifying investment income but the tax required to be deducted at source is not deducted. The TDS condition is not met, so the special return-filing exemption cannot be relied upon.
Frequently asked questions
Does every NRI qualify for exemption from filing an ITR?
No. The exemption is limited to NRIs with the specified categories of income and the required tax deduction at source.
Is an NRI exempt merely because TDS was deducted?
No. The income must also be exclusively within the qualifying categories. TDS on other income does not by itself satisfy this provision.
What is the corresponding provision under the Income-tax Act, 2025?
Section 216, which continues the conditional return-filing exemption and refers to the general return requirement under Section 263(1).
Official legislation and guidance
- Income Tax Department: Section 115G of the 1961 Act
- Income Tax Department: Section 216 of the 2025 Act
- Income Tax Department: Non-resident FAQs and transition guidance
- Official transition FAQs (PDF)
Disclaimer: This article provides general legal information. Verify the tax year, residential status, source and character of income, TDS compliance and any independent filing obligation before deciding not to file a return.