Income Tax Act

Official PDF pages 291–295

SOURCE PDF PAGE 291
( i )   shares in an Indian company; or
( ii )   debentures issued by an Indian company which is not a private
company as defined in the Companies Act, 2013 (18 of 2013); or
( iii )   deposits with an Indian company which is not a private company
as defined in the Companies Act, 2013 (18 of 2013); or
( iv )   any security of the Central Government as defined in section 2( f )
of the Government Securities Act, 2006 (38 of 2006); or
( v )   such other assets as the Central Government may specify in this
behalf by notification.
Special provision for computation of total income of non-residents.
213.   (1) No deduction in respect of any expenditure or allowance shall be allowed
under any provision of this Act in computing the investment income of a
non-resident Indian.
(2) In the case of an assessee, being a non-resident Indian, where—
( a )   the gross total income consists only of investment income or income
by way of long-term capital gains or both, then no deduction shall be
allowed under Chapter VIII;
( b )   the gross total income includes any income referred to in clause ( a ),—
( i )   the gross total income shall be reduced by such income; and
( ii )   the deductions under Chapter VIII shall be allowed as if the gross
total income as so reduced was the gross total income of the asses -
see.
Tax on investment income and long-term capital gains.
214.   The income-tax payable on the total income of an assessee, being a non-
resident Indian, which includes income specified in column B of the Table
below, shall be the aggregate of income-tax computed at the rate specified in the
column C applied on the corresponding income specified in column B.
TABLE
Sl.
No.
Income   Rate of Income-
tax payable
A   B   C
1.   Income from investment.   20%
2.   Income from long-term capital gains on specified asset.   12.5%
3.   Total income as reduced by income referred to against
serial numbers 1 and 2.
Rates in force.
Capital gains on transfer of foreign exchange assets not to be charged in
certain cases.
215.   (1) Where, in case of an assessee, being a non-resident Indian,—
( a )   any long-term capital gains arises from the transfer of a foreign exchange
asset (herein referred to as original asset); and

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( b )   within six months after the date of such transfer, he has invested the
whole or any part of the net consideration in any specified asset (herein
referred to as new asset),
then the capital gains shall be dealt with in the following manner:—
( i )   if the cost of the new asset is not less than the net consideration in respect
of the original asset, the whole of such capital gain shall not be charged
under section 67;
( ii )   if the cost of the new asset is less than the net consideration in respect
of the original asset, then the capital gain computed by the following
formula shall not be charged under section 67:—
A = B ×  
C
D
Where,
A =   the capital gains not to be charged under section 67;
B =   whole of the capital gain;
C =   cost of acquisition of the new asset;
D =   net consideration in respect of the original asset.
(2) For the purposes of sub-section (1),—
( a )   “cost”, in relation to any new asset, being a deposit referred to in section
212( e )( iii ) or ( v ), means the amount of such deposit;
( b )   “net consideration” in relation to the transfer of the original asset, means
the full value of the consideration received or accruing as a result of the
transfer of such asset as reduced by any expenditure incurred wholly
and exclusively in connection with such transfer.
(3) Where the new asset is transferred or converted (otherwise than by transfer)
into money, within three years from date of its acquisition, the capital gain arising
from transfer of original asset not so charged under section 67 on the basis of the
cost of such new asset as provided in sub-section (1)( i ) or ( ii ), shall be deemed to
be income by way of capital gains relating to capital assets other than short-term
capital assets of the tax year in which the new asset is transferred or converted
(otherwise than by transfer) into money.
Return of income not to be furnished in certain cases.
216.   It shall not be necessary for a non-resident Indian to furnish a return of
his income under section 263(1), if—
( a )   his total income during the tax year consisted only of investment income
or income by way of long-term capital gains or both; and
( b )   the tax deductible at source under the provisions of Chapter XIX-B has
been deducted from such income.

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[Application of benefits under sections 212 to 216.
217.   (1) Where a non-resident Indian in any tax year,—
( a )   becomes assessable as a resident in India in respect of total income in a
subsequent year; and
( b )   furnishes a declaration in writing to the Assessing Officer along with his
return of income under section 263 for the tax year for which he is so as -
sessable, to the effect that provisions of sections 212 to 216 shall continue to
apply to him in relation to the investment income derived from any foreign
exchange asset referred to in section 212( e )   other than shares in an Indian
company, then the provisions of sections 212 to 216 shall continue to apply
in relation to such income for that tax year and every subsequent tax year
until the transfer or conversion (otherwise than by transfer) of such assets
into money.
(2) A non-resident Indian may choose not to be governed by the provisions of sections
212 to 216 for any tax year by declaring it in his return of income under section 263
for such tax year, and if he does so,—
( a )   the provisions of sections 212 to 216 shall not apply to him for that tax
year; and
( b )   his total income for that tax year shall be computed and charged to tax
according to the other provisions of this Act.
Tax on business income of Offshore Banking Units or International Financial
Services Centre unit.
218.   Where the total income of an assessee includes income of the nature referred
to in section 147(3), the aggregate of income-tax payable by the assessee shall
be the aggregate of income-tax computed on the income specified in column B of the
36.   Sections 217 and 218 substituted by the Finance Act, 2026, w.e.f.   1-4-2026 . Prior to their
substitution, sections 217 and 218 read as under :
“217.   Benefit under Chapter to be available in certain cases even after assessee becomes resi -
dent.— Where a non-resident Indian in any tax year,—
( a )   becomes assessable as a resident in India in respect of total income in a subsequent
year; and
( b )   furnishes a declaration in writing to the Assessing Officer along with his return of
income under section 263 for the tax year for which he is so assessable, to the effect
that provisions of sections 212 to 218 shall continue to apply to him in relation to
the investment income derived from any foreign exchange asset referred to in section
212( e )   other than shares in an Indian company,
then the provisions of sections 212 to 218 shall continue to apply in relation to such income
for that tax year and every subsequent tax year until the transfer or conversion (otherwise
than by transfer) of such assets into money.
218.   Chapter not to apply if the assessee so chooses.— A non-resident Indian may choose not
to be governed by the provisions of sections 212 to 217 for any tax year by declaring it in his
return of income under section 263 for such tax year, and if he does so,—
( a )   the provisions of sections 212 to 217 shall not apply to him for that tax year, and
( b )   his total income for that tax year shall be computed and charged to tax according
to the other provisions of this Act.”

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Table below at the rate specified in the corresponding entry in column C of the said
Table:
TABLE
Sl. No.   Income   Rate of income-tax payable
A   B   C
1.   Income referred to in section 147(3)   15%
2.   Total income as reduced by income referred
to in Sl. No. (1)
Rates in force. ]
Conversion of an Indian branch of foreign company into subsidiary Indian
company.
219.   (1) Where a foreign company is engaged in the business of banking in India
through its branch situated in India and such branch is converted into a sub -
sidiary Indian company as per the scheme framed by the Reserve Bank of India,
then, irrespective of anything contained in this Act and subject to the conditions as
may be notified by the Central Government,—
( a )   the capital gains arising from such conversion shall not be chargeable
to tax in the tax year in which such conversion takes place; and
( b )   the provisions of this Act relating to—
( i )   treatment of unabsorbed depreciation, set off or carry forward and
set off of losses;
( ii )   tax credit in respect of tax paid on deemed income relating to certain
companies; and
( iii )   computation of income of the foreign company and subsidiary
Indian company,
shall apply with such exceptions, modifications and adaptations as specified in
that notification.
(2) In case of failure to comply with any of the conditions specified in the scheme
or in the notification issued under sub-section (1), all the provisions of this Act shall
apply to the foreign company and the said subsidiary Indian company without any
benefit, exemption or relief under the said sub-section.
(3) Where, in a tax year, any benefit, exemption or relief has been claimed and
granted as per the provisions of sub-section (1) and, subsequently, there is failure
to comply with any of the conditions specified in the scheme or in the notification
issued under the said sub-section then,—
( a )   such benefit, exemption or relief shall be deemed to have been wrongly
allowed;
( b )   the Assessing Officer may, irrespective of anything in this Act, re-com -
pute the total income of the assessee for the said tax year and make the
necessary amendment; and

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( c )   the provisions of section 287 shall, so far as may be, apply thereto and
the period of four years specified in sub-section (8) of that section being
reckoned from the end of the tax year in which the failure to comply with
the condition referred to in sub-section (1) takes place.
(4) Every notification issued under this section shall be laid before each House of
Parliament.
Foreign company said to be resident in India.
220.   (1) Where a foreign company is said to be a resident in India in any tax year
and such company has not been a resident in India in earlier tax years,
then, irrespective of anything in this Act and subject to the conditions as may be
notified by the Central Government in this behalf, the provisions of this Act relating
to—
( a )   the computation of total income;
( b )   treatment of unabsorbed depreciation;
( c )   set off or carry forward and set off of losses;
( d )   collection and recovery; and
( e )   special provisions relating to avoidance of tax,
shall apply with such exceptions, modifications and adaptations as specified in that
notification for such tax year.
(2) Where the determination regarding foreign company to be resident in India has
been made in the assessment proceedings for any tax year, then, the provisions of
sub-section (1) shall also apply to any other tax year succeeding such tax year, which
ends on or before the date of completion of such assessment proceeding.
(3) Where, in a tax year, any benefit, exemption or relief has been claimed and granted
to the foreign company as per the provisions of sub-section (1), and, subsequently,
there is failure to comply with any of the conditions specified in the notification
issued under the said sub-section, then,—
( a )   such benefit, exemption or relief shall be deemed to have been wrongly
allowed;
( b )   the Assessing Officer may, irrespective of anything in this Act, re-com -
pute the total income of the assessee for the said tax year and make the
necessary amendment as if the exceptions, modifications and adaptation
referred to in sub-section (1) did not apply; and
( c )   the provisions of section 287
63  
shall, so far as may be, apply thereto and
the period of four years specified in sub-section (8) of that section being
reckoned from the end of the tax year in which the failure to comply with
the condition referred to in sub-section (1) takes place.
(4) Every notification issued under this section shall be laid before each House of
Parliament.