NRI Taxation | Updated 27 October 2026

Section 115H: Tax Benefits for NRIs After Becoming Resident in India

Section 115H of the Income-tax Act, 1961 permitted certain non-resident Indians (NRIs) who later became residents in India to continue the special tax treatment of investment income from qualifying foreign exchange assets. From 1 April 2026, the corresponding rule appears in Section 217 of the Income-tax Act, 2025. The benefit is conditional: it is not an automatic exemption for every investment held by a returning NRI.

Current-law position: The 2025 Act applies to tax years beginning on or after 1 April 2026. The 1961 Act remains relevant to earlier years and saved rights or proceedings. The Income Tax Department confirms that a valid declaration previously made under Section 115H continues to be recognised under Section 536(2)(f) of the 2025 Act.

What does Section 115H provide?

Under the earlier law, a person who was an NRI in a previous year and subsequently became assessable as a resident could furnish a written declaration to the Assessing Officer with the return of income under Section 139. By doing so, the special provisions of Chapter XII-A continued to apply to investment income from certain foreign exchange assets for that assessment year and subsequent assessment years, until the assets were transferred or converted into money.

The relevant assets were those covered by Section 115C(f)(ii) to (v). Shares in an Indian company, falling under Section 115C(f)(i), were not included in this continuation facility.

Section 217 under the Income-tax Act, 2025

Section 217(1) carries forward the continuation mechanism for eligible investment income from foreign exchange assets described in Section 212(e), other than shares in an Indian company. The person must have been an NRI and subsequently become resident, and must furnish a written declaration to the Assessing Officer along with the return under Section 263 for the relevant tax year. The treatment continues until the specified assets are transferred or converted into money.

Section 217(2) also provides a choice to opt out of the special regime under Sections 212 to 216 for a tax year by declaring that choice in the return. Where that option is exercised, the ordinary tax provisions apply for that year.

Eligibility and conditions

The individual was an NRI in an earlier relevant year and subsequently became resident in India.
The income arises from a qualifying foreign exchange asset originally acquired or subscribed to in convertible foreign exchange, subject to the statutory definition.
The asset is of an eligible category, excluding shares in an Indian company for this continuation benefit.
The required declaration is submitted with the relevant income-tax return.
The asset has not been transferred or converted into money in a manner ending the continuation benefit.

Which assets may qualify?

The asset definitions should be read with Section 115C of the 1961 Act or Section 212 of the 2025 Act. Subject to the exact statutory definitions and any notifications, relevant categories include:

Eligible debentures issued by an Indian company other than a private company.
Eligible deposits with an Indian company other than a private company.
Qualifying Central Government securities.
Other assets specifically notified by the Central Government, where applicable.

Important: The continuation facility does not extend merely because an investment is foreign-funded, and it does not cover Indian-company shares under this particular provision. Verify the classification of each investment before claiming the benefit.

How to claim the continuation benefit

Identify eligible assets and their investment income, retain proof of the original investment in convertible foreign exchange, and prepare the statutory written declaration. File the declaration with the income-tax return for the year in which resident status first attracts the continuation provision. Maintain records of subsequent asset transfers, redemptions and conversions.

For tax years governed by the 1961 Act, refer to Section 115H read with Section 139. For tax years governed by the 2025 Act, refer to Section 217 read with Section 263. A declaration validly furnished under the former Act is preserved for purposes of the new Act as explained by the Income Tax Department.

Practical example

Suppose an individual acquired qualifying debentures of an eligible Indian company using convertible foreign exchange while an NRI, and later returned to India and became resident. If the individual files the required declaration with the applicable return and continues holding the qualifying debentures, the special regime may continue for the investment income. It ceases for those assets when the statutory transfer or conversion condition is triggered. The precise tax computation depends on the applicable year and other provisions.

Section 115D deals with computation of certain NRI income; Section 115E with tax on investment income and long-term capital gains; Section 115F with reinvestment relief; and Section 115G with certain return-filing exemptions. These provisions have distinct conditions and should not be conflated.

Frequently asked questions

Does becoming resident automatically cancel the special NRI tax benefit?

No. Eligible investment income may continue to receive the special treatment if the conditions and declaration requirements are met.

Can shares in an Indian company qualify for continuation under Section 115H?

No. The continuation provision expressly excludes that asset category, although other tax provisions may apply to the shares.

Must a returning NRI file a declaration?

Yes. The continuation provision requires a written declaration with the applicable return, subject to transitional recognition of earlier valid declarations.

What happens to a declaration filed before April 2026?

The Income Tax Department states that a valid declaration under Section 115H is recognised under Section 536(2)(f) of the Income-tax Act, 2025.

Official legal sources

This article provides general legal information. Residential status, eligibility, income classification and applicable tax year should be checked against the enacted law and the taxpayer's circumstances.