Section 115H of Income Tax

Section 115H of the Income Tax Act deals with individuals who were NRIs in the previous year but are now residents in the current year under Chapter XII-A. The NRIs must file a declaration in writing along with their income tax return under Section 139 for the assessment year in which they become a resident.

Read more
Save Tax
Upto ₹46,800 Under Sec 80C
Best Tax Saving Plans
  • High Returns

    Get Returns as high as 17%*
  • Zero Capital Gains tax^

    unlike 10% in Mutual Funds
  • Save upto Rs 46,800

    in Tax under section 80 C
We are rated~
rating
58.9 Million
Registered Consumer
51
Insurance Partners
26.4 Million
Policies Sold
In-built life cover
Get Instant Tax Receipts
Save upto ₹46,800 in Taxes Under Section 80C
+91
Secure
We don’t spam
View Plans
Please wait. We Are Processing..
Your personal information is secure with us
Plans available only for people of Indian origin By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company
Get Updates on WhatsApp
We are rated~
rating
58.9 Million
Registered Consumer
51
Insurance Partners
26.4 Million
Policies Sold

What is Section 115H of the Income Tax Act?

Under the Income Tax Act, non-residents are eligible for certain tax privileges outlined in Chapter XII-A. This provision grants them a special tax concession on income generated from investments in foreign exchange assets. It's important to note that this special tax rate is not applicable to resident Indians.

In the event that a Non-Resident Indian (NRI) becomes a resident Indian in any given year, they have the option to avail themselves of the benefits offered by Chapter XII-A. To exercise this choice, the NRI must provide a written statement to the assessing officer explicitly stating their desire for the provisions of Chapter XII-A to continue applying to them.

What are the Benefits of Section 115H of the Income Tax Act?

If a non-resident provides a written statement to the assessing officer along with their Income Tax Return in the year they are assessed as a resident, they can enjoy the following advantages:

  • Non-residents can benefit from a tax concession of 20% on income generated from investments in foreign exchange assets. This special tax rate is applicable to the income from such investments.

  • NRIs can also avail of a 10% tax concession on long-term capital gains. This concession is specifically applicable to dividend income and specified assets.

  • Non-residents can continue to enjoy the concessional tax rate until they convert their foreign exchange assets into money. This provides them with a sustained tax advantage during the holding period of the foreign exchange asset.

  • If the assessee owns specified assets, they can benefit from discounted tax rates. These rates remain applicable even if they decide to transfer their convertible foreign exchange from one bank to another.

What are the Provisions Under Section 115H of the Income Tax Act?

Section 115H of the Income Tax Act includes many provisions that grant concessional tax rate benefits to individuals of Indian origin who are non-residents. Here are the key provisions under Section 115H:

  1. Residential Status Criteria:

    • A person is considered a resident if they stayed in India for 182 days or more in the relevant previous year.

    • Alternatively, if a person stays in India for 365 days or more in the four immediately preceding years and at least 60 days or more in the relevant previous year, they are also considered a resident.

  2. Resident but Not Ordinarily Resident (RNOR) Criteria:

    A person is considered an RNOR if they are a resident in India for 2 years out of the preceding ten years or if they have stayed in India for 730 days or more in the preceding seven years.

  3. Non-Resident Status for PIO:

    A Person of Indian Origin (PIO) is considered a non-resident if they do not fall under the resident or RNOR category.

  4. Eligibility for Concessional Tax Rate:

    • Any person of Indian origin can avail themselves of the concessional tax rate benefits under Section 115H.

    • If an individual of Indian origin is not a resident of India, they are considered a non-resident for the purposes of this section.

  5. Definition of Foreign Exchange Asset:

    A foreign exchange asset is defined as any asset acquired by the taxpayer in convertible foreign exchange.

  6. Specified Assets:

    • Specified assets include securities issued by the Central Government as defined by the Public Debt Act of 1944.

    • It also covers shares of an Indian company, debentures issued by an Indian public company, deposits with an Indian public company, and any other asset specified by the Central Government of a similar nature.

  7. Exclusion of Benefits Upon Becoming a Resident Indian:

    Once an NRI becomes a resident Indian, they are no longer eligible to avail benefits from income derived from shareholdings in an Indian company.

  8. Return Filing and Concessional Rates:

    Non-residents can benefit from concessional rates of tax on the specified assets if they furnish their return under Section 139 and express their willingness in writing to be covered under Section 115H.

  9. Inclusion of Dividend Income:

    Dividend income has been included in the specification of assets since April 1, 2021.

Invest & Save upto ₹46,800 per annum in taxInvest & Save upto ₹46,800 per annum in tax

What are the Conditions for Availing the Benefits Under Section 115H?

Section 115H of the Income Tax Act provides certain provisions for Non-Resident Indians (NRIs) to avail of specific benefits. To qualify for these benefits, NRIs must meet the following conditions:

    • Residency in a DTAA Signatory Nation: NRIs should be residents of a country with which India has entered into a Double Taxation Avoidance Agreement (DTAA).
    • Furnishing Tax Residency Certificate (TRC): NRIs are required to provide a Tax Residency Certificate (TRC) issued by the tax authority of the nation in which they are considered residents. This certificate serves as proof of their tax residency status.
    • Possession of Indian PAN Number: NRIs seeking benefits under Section 115H must possess an Indian Permanent Account Number (PAN).
    • Income from Specified Assets:

The benefits under this section are applicable to income earned by NRIs from specified assets, including:

    • Foreign currency deposits in Indian banks

    • Debt securities issued by Indian companies

    • Units of equity-oriented mutual funds

    • Shares of Indian companies listed on a stock exchange

Conclusion

Section 115H of the Income Tax Act serves as a significant provision benefiting Non-Resident Indians (NRIs) by offering specific advantages on income earned from specified assets. To avail of these benefits, NRIs must fulfill the above-mentioned conditions This section aims to facilitate a more favorable tax treatment for NRIs, promoting financial inclusivity and cross-border investments.

FAQ's

  • What is a Non-Resident Indian (NRI) as per the Income Tax Act?

    An NRI is an individual of Indian origin who does not reside in India. If an individual's grandparents or parents were born in India, they are regarded as a person of Indian origin.
  • What is the relevant section for the NRE exemption?

    Any interest earned on the NRE account is completely exempt from taxation under Section 10(4)(ii) of the Income Tax Act, and there is no specified limit.
  • What does Section 115H in the Income Tax Return (ITR) refer to?

    Section 115H enables non-resident taxpayers to retain the benefits of a reduced tax rate even if they transition into the status of a resident Indian in any subsequent year.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

Income Tax articles

Recent Articles
Popular Articles
Withholding Tax

02 Jul 2024

Withholding tax, also known as Tax Deducted at Source (TDS) in
Read more
Section 80EEA - Deduction for Interest on Home Loan

05 Jun 2024

Section 80EEA of the Income Tax Act provides a significant tax
Read more
Section 80CCE of the Income Tax Act

29 May 2024

Section 80CCE of the Income Tax Act provides taxpayers with
Read more
Section 80CCC of the Income Tax

06 May 2024

Section 80CCC, part of the broader 80C category in the Income
Read more
Income Tax Proof

28 Feb 2024

Income tax proofs play an important role during tax assessment
Read more
Deductions in New Tax Regime Under Union Budget 2023-24
  • 14 Feb 2020
  • 39723
There are no major changes made when it comes to deductions in the new tax regime under the recent Union Budget
Read more
What is Form 16 & How to Download It
  • 17 Jan 2017
  • 215396
Form 16 is a crucial document in India for salaried individuals. Issued by your employer, it acts as a bridge
Read more
Leave Encashment Tax Exemption - Section 10(10AA)
  • 04 Jan 2024
  • 3652
Leave Encashment Tax Exemption under Section 10(10AA) provides a significant financial benefit for employees
Read more

top
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL