For Non-Resident Indians (NRIs), the Indian tax base operates on two distinct exemption layers — first, the structural limitation of Section 5(2) which keeps all foreign-source income outside the Indian tax net altogether, and second, specific carve-outs in Section 10 and Chapter XII-A which exempt or concessionally tax certain Indian-source income. Layer 1 — Foreign source income outside Section 5(2): An NRI is taxed in India only on income that (a) is received or deemed to be received in India, or (b) accrues / arises or is deemed to accrue / arise in India under Section 9. Consequently, foreign salary for services rendered abroad, foreign rental income, foreign capital gains on foreign assets, foreign dividends, foreign interest, foreign business income, and foreign pension are all wholly outside the Indian tax net regardless of whether the NRI repatriates these to India. This is not a Section 10 "exemption" but a definitional non-taxability — the income simply never enters the chargeable base. Layer 2 — Specific Section 10 exemptions on Indian-source income: (1) Section 10(4)(ii) — Interest on Non-Resident External (NRE) Account, including NRE savings, fixed deposit, and recurring deposit accounts — fully exempt for an individual who is a "person resident outside India" under FEMA. The NRE exemption is FEMA-based, not Income-tax-based — meaning even if the person becomes Income Tax Resident in a particular year (e.g., year of return), the NRE interest remains exempt as long as FEMA non-resident status persists; the moment FEMA status changes, the exemption ends and account must be redesignated. (2) Section 10(15)(iv)(fa) — Interest on Foreign Currency Non-Resident (FCNR-B) deposits in scheduled banks — fully exempt for non-residents; held in foreign currency (USD / GBP / EUR / JPY / CAD / AUD), eliminates rupee-fluctuation risk, repatriable. (3) Section 10(15)(iid) — Interest on notified savings certificates and bonds purchased in foreign currency by non-residents / RNOR — exempt as per CBDT notifications. (4) Section 10(1) — Agricultural income from land in India — fully exempt for NRIs, subject to FEMA restrictions on NRI ownership of agricultural land (NRIs generally cannot purchase agricultural land but can inherit it). (5) Section 56(2)(x) — Gifts from "relatives" (spouse, parents, siblings, lineal ascendants / descendants, in-laws) fully exempt regardless of value; gifts up to ₹50,000 in aggregate per year from non-relatives also exempt; gifts on the occasion of marriage of the recipient exempt; amounts received under will / inheritance / contemplation of death exempt. (6) Section 47 — Specific transfers not regarded as "transfer" for capital gains — gifts, will, HUF partition, holding-subsidiary transfers, amalgamation, demerger — NRIs can use these to restructure Indian assets without triggering tax. (7) Pre-2020 Section 10(34) — Dividend income up to ₹10 lakh was exempt; post-Finance Act 2020, dividends are fully taxable in recipient hands but TDS at concessional treaty rate (typically 5%–15%) is available with TRC + Form 10F. (8) Pre-2018 Section 10(38) — LTCG on listed equity / equity-oriented MF was fully exempt; replaced by Section 112A which exempts LTCG up to ₹1.25 lakh per FY (post-Budget 2024) and taxes excess at 12.5%. Layer 3 — Concessional rates under Chapter XII-A: Section 115E provides 20% flat tax on investment income from "foreign exchange asset" and 10% on long-term capital gains from such asset; Section 115F provides full / pro-rata exemption on LTCG reinvested in another specified asset within 6 months; Section 115G exempts NRIs from filing ITR if total income is only Chapter XII-A income with proper TDS; Section 115H allows continued benefit on becoming Resident; Section 115I permits election to be governed by normal provisions instead. Layer 4 — DTAA treaty override: Under Section 90(2), NRIs can elect the more beneficial of the Income-tax Act or the applicable DTAA — often resulting in lower withholding rates on dividend, interest, royalty, FTS, and capital gains; requires TRC + Form 10F + No-PE / beneficial ownership pack. All exempt income — though not chargeable to tax — must still be disclosed in Schedule EI of the ITR; non-disclosure can trigger inquiry / scrutiny. Our practice maps each NRI client's income across these four layers, ensures correct exemption invocation, and provides the documentation pack to defend exemptions during faceless assessment.

Yes — interest earned on Non-Resident External (NRE) accounts and Foreign Currency Non-Resident (FCNR-B) deposits is fully exempt from income tax in India for eligible non-residents — making these the two most tax-efficient banking instruments available to NRIs. However, the exemption is conditional on specific criteria, and a frequent cause of dispute is the interplay between FEMA residency (which governs the exemption) and Income-tax residency (which is irrelevant for these specific exemptions but determines other tax obligations). Section 10(4)(ii) — NRE Account Interest Exemption: The statutory provision exempts "any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Management Act, 1999 (FEMA), and the rules made thereunder" — provided the individual is a "person resident outside India" as defined under Section 2(w) of FEMA. Critical conditions: (a) The exemption applies only to individuals — not to companies, firms, HUFs, AOPs, BOIs holding NRE accounts (although typically NRE accounts are not opened by such entities); (b) The individual must be a "person resident outside India" under FEMA — note: this is FEMA residency, which is forward-looking / intent-based, NOT Income-tax residency under Section 6; (c) The account must be operated in accordance with FEMA / RBI regulations — proper KYC, source of funds (only foreign currency or transfer from another NRE / FCNR), and credit limitations (only foreign-source remittances or interest / sale of investments funded by foreign remittances); (d) Joint account with resident — NRE account can have a resident as "former or survivor" mode or as a power of attorney, but the resident cannot operate freely or credit local income; violation can disqualify the exemption. Practical implications: (i) An NRI living in the USA earning interest on NRE FD in HDFC Bank — fully exempt under Section 10(4)(ii); no TDS by bank; no tax in NRI's Indian ITR (must still disclose in Schedule EI); (ii) Year of permanent return — Income-tax residency may become Resident, but FEMA residency typically remains NR till intent to permanently reside changes; NRE interest remains exempt during this transition; once FEMA Resident, account must be redesignated to Resident account or RFC, and post-redesignation interest becomes taxable; (iii) Frequent travellers — if FEMA NR status is maintained based on intent to remain abroad, NRE interest exemption continues regardless of how many days are spent in India during visits. Section 10(15)(iv)(fa) — FCNR-B Deposit Interest Exemption: Foreign Currency Non-Resident (Bank) — FCNR-B — deposits in scheduled banks held in permitted foreign currencies (USD, GBP, EUR, JPY, CAD, AUD), with tenure of 1 to 5 years, are exempt under Section 10(15)(iv)(fa). Conditions similar to NRE — depositor must be FEMA non-resident, deposit funded by foreign exchange remittance or transfer from existing NRE / FCNR account. FCNR advantages over NRE: (a) Held in foreign currency — eliminates rupee depreciation risk; (b) Maturity-based fixed deposit — 1-5 years; (c) Can be re-credited on maturity to NRE or freshly remitted abroad without conversion loss. FCNR limitations: (i) No savings-account variant — only fixed deposit; (ii) Generally lower interest rates than rupee-denominated NRE FDs; (iii) RBI cap on interest rates for tenures. NRO Account — NOT Exempt (Important Contrast): Non-Resident Ordinary (NRO) account — used for managing Indian-source income (rent, dividend, pension, sale proceeds of inherited / acquired assets) — interest is FULLY TAXABLE at slab rates, with TDS at 30% (plus surcharge and cess) under Section 195. Many NRIs mistakenly believe all "NR" accounts are tax-free — this is incorrect; only NRE and FCNR are tax-exempt; NRO is taxable. Repatriation: NRE — fully repatriable (principal and interest); FCNR — fully repatriable; NRO — limited to USD 1 million per financial year subject to Form 15CA / 15CB CA certification. Common pitfalls and disputes: (1) FEMA status loss on permanent return — bank must redesignate NRE to Resident / RFC promptly; failure to redesignate while account holder has become FEMA Resident continues "exempt" credits but exposes to FEMA contravention and Income-tax dispute; (2) Resident family member operating NRE account excessively — RBI may flag operational misuse, leading to denial of exemption; (3) Source of funds — NRE credits must be from foreign exchange remittances or NRE-eligible transfers; local income credits to NRE (e.g., rent, dividend) violate FEMA and disqualify the exemption; (4) Joint NRE with resident as primary — operationally possible only with conditions; primary holder must always be NR; (5) Schedule EI non-disclosure in ITR — even though exempt, must be reported; non-disclosure triggers Section 143(2) / 142(1) notices; (6) Section 64 clubbing — NRE interest of minor / spouse in some structures may attract clubbing — fact-specific analysis. RFC Account for Returning NRIs: Resident Foreign Currency (RFC) account — for returning NRIs to retain foreign currency assets earned abroad — interest is exempt during RNOR period under specific provisions; becomes taxable once ROR. Useful bridge during the residency transition. Our practice handles end-to-end NRE / FCNR strategy — tax-free interest preservation, FEMA-IT residency reconciliation, account redesignation timing on return, Schedule EI disclosure, and defence in any AO inquiry on FEMA status.

Chapter XII-A of the Income-tax Act, 1961 — comprising Sections 115C to 115I — is a special concessional tax regime exclusively applicable to Non-Resident Indians and persons of Indian origin (PIOs) on income arising from specified "foreign exchange assets" acquired with convertible foreign exchange. The regime offers flat low rates on specified income, exemption on reinvestment, ITR-filing exemption in certain cases, and continued benefit even after the NRI returns to India — making it one of the most attractive tax incentives for NRI investment in India. Eligibility — Section 115C definitions: (a) "Non-Resident Indian" means an individual being a citizen of India or a person of Indian origin who is not a "Resident". Person of Indian origin = a person any of whose parents or grandparents was born in undivided India; (b) "Foreign Exchange Asset" means any "specified asset" which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange; (c) "Specified Asset" means — (i) shares in an Indian company, (ii) debentures issued by an Indian public company, (iii) deposits with an Indian public company, (iv) any security of the Central Government as defined in the Public Debt Act, 1944, (v) other notified assets; (d) "Investment Income" means income derived from foreign exchange asset (other than dividends from Indian companies referred to in Section 115-O — pre-2020 framework, now updated); (e) "Long-term capital gains" means LTCG on transfer of foreign exchange asset. Convertible foreign exchange = foreign exchange which is for the time being treated by RBI as convertible foreign exchange for the purposes of FEMA. Section 115E — Concessional Tax Rates: Tax on income of NRI from foreign exchange asset is computed at the following flat rates: (i) Investment income: 20% flat; (ii) Long-term capital gains from foreign exchange asset: 10% flat. Both are flat rates without indexation, without basic exemption limit, without deductions under Chapter VI-A — meaning gross income is taxed at the flat rate. Surcharge and cess apply on top. Comparison with normal regime: A Resident taxpayer with Indian listed share LTCG would pay 12.5% (post-Budget 2024) on gains above ₹1.25 lakh; a Resident with debenture / debt LTCG would pay 12.5% without indexation. NRI under Section 115E — listed share LTCG would also default to Section 112A 12.5%; but for unlisted shares, debentures, deposits, government securities, the 10% Chapter XII-A flat rate is significantly lower than the 12.5% normal LTCG or slab-rate STCG. Investment income — 20% flat under 115E vs 30% slab in normal regime — clearly more efficient at higher slabs but less efficient at lower slab levels (where slab is 5% / 20%). Section 115F — Reinvestment Exemption: LTCG on transfer of foreign exchange asset is exempt — wholly or pro-rata — if the net consideration is reinvested in another "specified asset" or in National Savings Certificates within 6 months from the date of transfer. Conditions: (a) Reinvestment must be in foreign exchange asset / NSC within 6 months; (b) New asset must be held for at least 3 years from acquisition; (c) Premature transfer triggers recapture — exemption granted earlier becomes taxable in the year of premature transfer. Pro-rata formula: Exempt amount = LTCG × (cost of new asset / net consideration). Section 115G — ITR Filing Exemption: NRI is not required to furnish an ITR under Section 139(1) if his total income consists only of investment income / LTCG covered under Chapter XII-A AND tax has been correctly deducted at source thereon. This is significant compliance simplification — many passive NRI investors with only Indian dividend / interest / debenture income subject to TDS need not file Indian ITR. Caveat: If TDS has been short-deducted, or if refund is claimed, ITR filing is necessary; also, claiming exempt income disclosure becomes voluntary in such cases. Section 115H — Continued Benefit on Becoming Resident: An NRI who holds foreign exchange asset and becomes Resident in India in a subsequent previous year can elect — by furnishing a declaration in writing along with the ITR — to continue being governed by Chapter XII-A in respect of investment income from such foreign exchange asset (other than shares in an Indian company) until the asset is converted into money. This is a powerful protection — an NRI returning to India after years abroad can preserve the 20% rate on debenture / deposit / government security income from his FE assets indefinitely until sale, despite becoming Resident. The benefit extends only to investment income, not to LTCG (LTCG follows normal rules from year of becoming Resident). Section 115I — Election out of Chapter XII-A: An NRI can elect — by furnishing declaration with ITR — that the provisions of Chapter XII-A shall NOT apply to him, and his income shall be computed under the regular provisions of the Act (slab rates, basic exemption, deductions, indexation). When normal regime is more beneficial: (i) NRI with low total income — basic exemption and lower slabs may yield lower tax than 20% flat under 115E; (ii) NRI claiming Section 80C / 80D / 80E deductions — Chapter XII-A blocks these; (iii) NRI with substantial business expenses against investment income — normal computation allows deductions. Election is on a year-by-year basis. Practical optimisation: (a) NRI with significant Indian portfolio — diversify across foreign-exchange assets to maximise Chapter XII-A applicability; (b) Pre-sale planning — invest in specified assets with convertible foreign exchange and document FIRC trail; (c) Post-sale within 6 months — reinvest LTCG into another specified asset for 115F exemption; (d) Returning home — file Section 115H declaration to preserve rates; (e) Annual review of 115E vs normal regime via 115I election. Common documentation: FIRC for forex source, broker statement evidencing FX-purchased shares, bank statement showing NRE / FCNR funding, holding-period record. Our practice provides end-to-end Chapter XII-A advisory — eligibility validation, foreign exchange asset documentation, 115E vs normal regime comparison, 115F reinvestment planning, 115G ITR-exemption assessment, 115H continued-benefit declaration, and 115I election where beneficial.

Gifts and inheritance received by NRIs in India are generally exempt from Indian income tax under Section 56(2)(x) of the Income-tax Act, 1961 — but the exemption depends on the relationship between donor and donee, the value of the gift, the occasion, and the source. India does NOT levy any inheritance tax (Estate Duty was abolished in 1985), so the act of receiving an inheritance is itself untaxed; subsequent income from the inherited assets is taxable based on the recipient's residential status. Section 56(2)(x) — Gift Taxation Framework: Section 56(2)(x) — applicable from 1 April 2017 — taxes the receipt of money or property by any person without consideration (gift) or for inadequate consideration, if the aggregate value exceeds ₹50,000 in a previous year, EXCEPT in specific exempted situations. The relevant exemptions are: (i) Receipt from a "relative"; (ii) Receipt on the occasion of marriage of the recipient; (iii) Receipt under a will or by way of inheritance; (iv) Receipt in contemplation of death of the payer; (v) Receipt from a local authority, fund, foundation, university, hospital, trust referred to in Sections 10(23C)(iv)/(v), 12AA / 12AB; (vi) Receipt by certain HUFs from members on partition; (vii) Receipt from individuals in certain demerger / amalgamation / business reorganisation situations. "Relative" — Definition under Section 56 Explanation: "Relative" in the case of an individual means: (a) Spouse; (b) Brother or sister of the individual; (c) Brother or sister of the spouse; (d) Brother or sister of either parent; (e) Any lineal ascendant or descendant of the individual; (f) Any lineal ascendant or descendant of the spouse; (g) Spouse of any of the above. For HUF — relative means any member. Practical examples for NRIs: (1) NRI receives ₹50 lakh gift from father (Indian resident) — Father is a "lineal ascendant" → Relative → Fully exempt under Section 56(2)(x); (2) NRI receives ₹10 lakh gift from a friend on his birthday — Friend is not a relative; not a marriage occasion → Taxable as income from other sources (above ₹50,000 threshold); (3) NRI receives ancestral property worth ₹2 crore through father's will → Inheritance under will → Fully exempt; (4) NRI receives ₹5 lakh on marriage from a non-relative friend — Marriage gift → Fully exempt; (5) NRI receives shares worth ₹15 lakh from sister (resident) — Sister is a relative → Fully exempt. Inheritance — Special Treatment: Receipt of property by way of will, intestate succession, or in contemplation of death of the payer is EXPRESSLY EXEMPT under Section 56(2)(x) — regardless of value, regardless of relationship. India had inheritance tax (Estate Duty) until 1985, but this was abolished — there is no separate inheritance tax in India today. Documentation for inheritance: (a) Death certificate of the deceased; (b) Will (probated where required) OR succession certificate / legal heir certificate (intestate succession); (c) Mutation of property records / share registrar updates / bank account transfer documents; (d) Gift deed or transfer deed where relevant. FEMA aspects: Under FEMA, NRI inheritance of Indian property is generally permitted — agricultural land, plantation, and farmhouse may have specific restrictions on subsequent sale by NRI. Proceeds of sale of inherited property can be repatriated up to USD 1 million per financial year through NRO route with Form 15CA / 15CB. Post-Receipt Income Taxability: While the inheritance itself is exempt, all subsequent income from the inherited assets becomes taxable in NRI hands based on residential status: (i) Rental income from inherited Indian property — taxable as Indian-source; TDS by tenant under Section 194-IB if monthly rent exceeds ₹50,000; (ii) Capital gains on subsequent sale — taxable; cost of acquisition is the cost to the previous owner (deceased) under Section 49(1) — i.e., step-up in basis is NOT available in India (unlike US); (iii) Interest on inherited bank deposits / FDs — taxable based on account type (NRO taxable, NRE may be redesignation issue); (iv) Dividend on inherited shares — taxable post-2020. Holding period rule under Section 49(1): When NRI sells inherited property, the period of holding includes the period for which the previous owner held it — making most inherited assets long-term immediately, and entitled to indexation and Section 54 / 54F / 54EC reinvestment exemptions. Marriage Gifts: Section 56(2)(x) Proviso — gifts received on the occasion of the marriage of the individual are exempt without limit, regardless of relationship of donor — applies to monetary gifts, jewellery, immovable property received at the time of marriage. Documentation — wedding invitation, photographs, gift deed dated within reasonable proximity to marriage. Foreign Donor / Foreign Gift: NRI receiving gift from a foreign donor — Section 56(2)(x) applies based on relationship and amount, regardless of donor's citizenship / residence. Foreign donors who are relatives can gift any amount tax-free; non-relative foreign donors above ₹50,000 trigger taxation. Note: FCRA (Foreign Contribution Regulation Act) does NOT apply to gifts between individuals from relatives; applies primarily to associations / NGOs / specified persons. Cross-border gifts between relatives are exempt under both income tax and FEMA. NRI Gift to Indian Resident: Reverse direction — NRI gifting to Indian resident — Section 56(2)(x) exemption applies similarly. Resident relative receives from NRI relative → exempt. NRI gifting to non-relative resident above ₹50,000 → taxable in resident's hands. Anti-avoidance considerations: (a) Section 64 clubbing — Spouse / minor children gift may be clubbed in donor's income for subsequent income; (b) GAAR — large gifts forming part of tax-avoidance arrangement may be disregarded under Section 95-102; (c) Source of donor's funds — large gifts may attract source-explanation inquiry under Section 68 / 69 if donor is unable to substantiate; (d) Gift deed — recommended for all gifts above ₹50,000 to document the relationship, occasion, and amount. Our practice handles end-to-end NRI gift / inheritance planning — gift deed drafting, will drafting, succession certificate / probate guidance, mutation and transfer of Indian assets, FEMA repatriation route, post-receipt tax compliance, and Section 56(2)(x) / 49(1) defence in case of inquiry.

Dividend income taxation for NRIs underwent a fundamental shift on 1 April 2020 — the Finance Act, 2020 abolished the Dividend Distribution Tax (DDT) regime under which dividends were taxed in the hands of the company and exempt for the recipient, and replaced it with the classical taxation system under which dividends are taxable in the hands of the recipient at applicable rates with TDS by the company. For NRIs, this changed dividend from "exempt income" (pre-2020) to "taxable income" — though significantly mitigated by DTAA treaty rates. Pre-2020 framework (for context): Until FY 2019-20, dividend income from Indian companies was exempt in the hands of recipients under Section 10(34) (up to ₹10 lakh; above which Section 115BBDA imposed 10% additional tax for specified resident shareholders) — companies paid DDT at ~20.5%. NRIs receiving Indian dividend pre-2020 — received post-DDT amount; exempt from further tax under Section 10(34); no Indian ITR required for dividend alone. Post-2020 framework — Classical Taxation: From 1 April 2020 — dividends declared / paid by Indian companies are FULLY TAXABLE in the hands of the recipient (resident or non-resident); TDS is applicable at source. For NRI recipients — Section 195 read with Section 115A: Domestic rate — 20% (plus surcharge and cess); applies on gross dividend without deductions. Treaty rate option — under most India DTAAs, dividend article (typically Article 10) prescribes lower withholding rates: India-USA DTAA — 25% (general) or 15% (qualifying corporate shareholders); India-UK — 15% (general) / 10% (corporate); India-Singapore — 10%–15% based on shareholding; India-Mauritius — 5% / 15%; India-Netherlands — 5% / 10%. Section 90(2) — More Beneficial Provision: An NRI can elect the more beneficial of the domestic Section 195 rate (20%) or the treaty rate — typically the treaty rate is lower. Documentation for treaty rate: (a) Tax Residency Certificate (TRC) from country of NRI's residence; (b) Form 10F filed online on Income Tax e-filing portal — mandatory; (c) PAN of the NRI (alternatively, Rule 37BC alternative documents if no PAN); (d) No-PE declaration (only relevant for business income, not dividend, but often included as standard practice); (e) Beneficial owner declaration where treaty has BO clause. Post-MLI (Multilateral Instrument) — Principal Purpose Test (PPT): Where the relevant treaty is MLI-covered (most major DTAAs are post-2019), the PPT denies treaty benefit if obtaining the lower rate was a principal purpose of any arrangement — requires substance documentation of the NRI / shareholding entity. Withholding by Indian Company: When Indian company pays dividend to NRI, the company applies TDS at the applicable rate (20% domestic OR treaty rate if proper documentation is on file before dividend declaration date). Increasingly, listed companies have streamlined processes for NRI shareholders to submit TRC + Form 10F + PAN proactively to avail treaty rate at the time of dividend payment. Refund through ITR: If TDS has been deducted at higher 20% rate due to inadequate documentation, NRI can claim refund of excess by filing Indian ITR-2 / ITR-3 — declaring dividend, claiming treaty benefit under Section 90, and computing refund. Schedule SI (Special Income) of ITR populates for special-rate dividend; refund is credited to NRI's Indian bank account (NRO / NRE). Compliance Forms: (i) Form 26AS / AIS — verify dividend and TDS; (ii) Form 16A from company — TDS certificate; (iii) Bank FIRC for inward remittance if dividend remitted abroad. Special Considerations: (1) Dividend on Foreign Exchange Asset under Chapter XII-A — Section 115E earlier covered dividends as "investment income" at 20% — but post-2020 dividend taxation, Section 115A treats dividend at 20% directly; Chapter XII-A overlay is largely subsumed for dividend; (2) Mutual Fund dividend — pre-2020 was exempt under Section 10(35); post-2020 fully taxable; equity MF dividend taxed at 20% (NRI), debt MF dividend taxed at slab rate; (3) Bonus shares and stock dividends — bonus shares are not "dividend" — the cost basis of original shares splits between original and bonus per Section 55; capital gains tax applies on subsequent sale; (4) Inter-corporate dividend — different regime under Section 80M for Resident corporate recipient (deduction); (5) Buyback of shares — pre-2024, buyback was taxed in the company's hands under Section 115QA; post-Budget 2024 changes shifted buyback proceeds taxation to recipient as "deemed dividend" — rate as applicable to dividend; (6) GAAR / PPT — large dividend through holding company structures may face PPT challenge — substance documentation is critical. Treaty Rate Comparison Table (Indicative): India-USA — 25% / 15% (corporate qualifying); India-UK — 15% / 10% (corporate); India-Singapore — 10% / 15% (based on shareholding %); India-UAE — 10%; India-Mauritius — 5% / 15% (shareholding-based); India-Canada — 15% / 25%; India-Australia — 15%; India-Germany — 10%. NRIs should always check the latest applicable treaty rate net of MLI overlay. DTAA Compliance Pack — Practical Checklist: Before dividend is declared, the NRI should provide to the Indian company: (a) Valid TRC for the relevant year; (b) Form 10F online filing acknowledgement (with prescribed annexure); (c) PAN of NRI; (d) Self-declaration regarding beneficial ownership and tax residency; (e) Certified copy of passport / visa / OCI proving non-resident status. The company verifies and applies treaty rate at TDS. Annual cycle: TRC must be obtained fresh each year; Form 10F refiled annually; provided to Indian companies before each dividend declaration cycle. Common pitfalls: (i) TRC obtained late — company defaults to 20% domestic rate; refund through ITR; (ii) Form 10F not filed on portal — company defaults to higher rate; (iii) PAN not linked to Aadhaar (for OCI returning to India and obtaining Aadhaar) — leads to inoperative PAN issues; (iv) MLI-covered treaty without substance — PPT challenge possible; (v) Multiple companies paying dividend — coordination overhead. Our practice manages end-to-end NRI dividend taxation — TRC procurement guidance, Form 10F online filing, treaty rate optimisation, NRI ITR with Schedule SI / refund computation, and AO defence on dividend / treaty disputes.

NRIs selling Indian property or shares are subject to capital gains tax in India — but a robust set of exemption provisions under Sections 54, 54F, 54EC, 47, 112A, and Chapter XII-A allow significant tax mitigation through reinvestment, treaty benefits, and procedural reliefs. Capital Gains Framework for NRIs: Sale of Indian Property — Long-term Capital Gains (LTCG) if held over 24 months — taxed at 12.5% (post-Budget 2024, without indexation as default; option for 12.5% with no indexation OR 20% with indexation under transitional provisions for property acquired before 23 July 2024) under Section 112; Short-term Capital Gains (STCG) if held under 24 months — taxed at NRI's slab rate. Sale of Listed Equity Shares / Equity-oriented Mutual Funds — LTCG (held over 12 months) taxed under Section 112A at 12.5% on gains exceeding ₹1.25 lakh per FY (post-Budget 2024); STCG (held under 12 months) taxed under Section 111A at 20% (post-Budget 2024 increase). Sale of Unlisted Shares / Debt MF / Bonds — LTCG taxed at 12.5% (without indexation); STCG at slab rate or 20% under Chapter XII-A 115E for foreign exchange asset. Section 195 TDS on Property Sale by NRI: Buyer of property from NRI must deduct TDS under Section 195 at: (a) LTCG sale — 12.5% on capital gains (or higher if long-term gain not computed and entire sale value used as base — 20%-22.88% depending on surcharge); (b) STCG sale — 30% on entire sale consideration generally, computed on gain at slab if computation possible. The NRI can apply for a Section 197 Lower / Nil Deduction Certificate from the AO before sale — to direct the buyer to deduct TDS only on actual capital gain (not entire sale value) at the correct rate. This avoids cash flow problem of high upfront TDS. Reinvestment Exemptions Available to NRIs: Section 54 — LTCG on Sale of Residential House Property: Exempt if reinvested in another residential house in India — purchase within 2 years before / after sale, or construction within 3 years after sale. Conditions: (i) Original property must be residential and held over 24 months; (ii) New property must be a residential house in India; (iii) Lock-in 3 years on new property — premature sale triggers recapture; (iv) Maximum exemption: actual LTCG or amount reinvested, whichever lower; (v) Capital Gains Account Scheme (CGAS) for amounts not yet utilised — must deposit before ITR due date. Section 54F — LTCG on Sale of Other Long-term Assets: Where LTCG arises on sale of asset OTHER than residential property (e.g., commercial property, plot of land, shares, gold), and net consideration is reinvested in residential house in India — pro-rata exemption based on (cost of new house / net consideration). Conditions: (i) Reinvest in one residential house in India; (ii) Same time-windows as Section 54; (iii) Should not own more than one other residential house at the time of new acquisition; (iv) 3-year lock-in on new property. Section 54EC — LTCG Reinvested in Specified Bonds: LTCG on sale of land or building reinvested in NHAI / REC / PFC / IRFC bonds within 6 months — fully exempt up to ₹50 lakh per FY. Conditions: (i) Bonds must be held for 5 years (lock-in); (ii) Premature redemption not permitted; (iii) ₹50 lakh cap per assessee per FY combined across financial years for the same transaction. Section 115F — LTCG on Foreign Exchange Asset (NRI-specific): Already discussed under Chapter XII-A — LTCG from FE asset reinvested in another specified asset / NSC within 6 months — full / pro-rata exemption; 3-year lock-in. Section 47 — Transfers Not Regarded as Transfer: Several transfers excluded from capital gains taxation altogether — gift, will, HUF partition, holding-subsidiary, amalgamation, demerger; cost and period of holding carry over to recipient under Section 49(1). Section 112A — Listed Equity LTCG Threshold: First ₹1.25 lakh per FY of LTCG on listed equity / equity MF subject to STT — fully exempt; balance taxed at 12.5%. Applies to NRIs equally. Section 49(1) — Cost Basis Carry-Over for Inherited / Gifted Assets: Cost of acquisition for the NRI = cost to the previous owner (donor / deceased); period of holding includes previous owner's period — making most inherited assets long-term and indexation-eligible. NRIs must obtain valuation reports / property tax records / share certificates from prior owner's records. DTAA Capital Gains Articles: Article 13 of DTAAs governs capital gains — typically: (a) Immovable property — taxable in source state (India); (b) Movable property forming part of PE — taxable where PE is; (c) Shares of Indian company — varies by treaty: India-Mauritius (post-2016 protocol, source-state taxes shares acquired after 1 April 2017), India-Singapore (post-2017 protocol, similar shift), India-Cyprus (post-2016), India-USA (residence state), India-UAE (residence state for shares of Indian company under specific conditions); (d) Other capital assets — typically residence state. Mauritius, Singapore, Cyprus grandfathering — NRIs holding Indian company shares acquired before the protocol cut-off date may enjoy treaty exemption on sale. Practical Optimisation Steps for NRI Property Sale: Step 1 — Obtain Section 197 lower deduction certificate well before sale; Step 2 — Compute exact capital gains with indexation / transitional regime; Step 3 — Plan reinvestment under Section 54 / 54F / 54EC depending on property type and proceeds; Step 4 — Use Capital Gains Account Scheme (CGAS) to park unused amount before ITR due date; Step 5 — File Form 15CA / 15CB for repatriation of sale proceeds (NRO route up to USD 1 million / FY); Step 6 — File NRI ITR-2 / ITR-3 claiming exemptions and computing final tax / refund. Step 7 — Maintain holding period and lock-in compliance. Common pitfalls and disputes: (i) Buyer fails to deduct TDS under Section 195 — assessee-in-default treatment; NRI must coordinate; (ii) High upfront TDS on entire sale value where Section 197 not obtained — cash-flow stress; (iii) Reinvestment timeline missed — Section 54 / 54F exemption denied; (iv) CGAS deposit missed before ITR due date — exemption denied for unutilised amount; (v) Cost basis records lost for inherited assets — valuation challenge during faceless assessment; (vi) Treaty grandfathering disputes for pre-protocol Mauritius / Singapore shares; (vii) Indexed cost computation errors under transitional regime post-Budget 2024. Our practice handles end-to-end NRI capital gains — pre-sale planning, Section 197 lower-deduction certificate, Section 54 / 54F / 54EC reinvestment structuring, Section 115F NRI-specific reinvestment, Form 15CA / 15CB repatriation, ITR filing with Schedule CG / SI, treaty rate application, refund pursuit, and faceless assessment defence on capital gains adjustments.

Whether an NRI must file an Indian ITR depends on the composition of their Indian-source income, the level of TDS deducted, the desire to claim refund, and specific exemptions like Section 115G — there is no blanket "all NRIs must file" rule, but in practice, most NRIs benefit from filing an ITR even when not strictly mandated. Section 139(1) — Mandatory ITR Filing Threshold: An NRI is required to file an Indian ITR if their total Indian-source income (before deductions) exceeds the basic exemption limit — ₹2.5 lakh under old regime, ₹3 lakh under new regime (default for AY 2024-25 onwards). For NRIs, basic exemption is the same as resident individuals (no special threshold for NRIs); senior citizen / super senior thresholds (₹3 lakh / ₹5 lakh) do NOT apply to NRIs even if aged 60+ or 80+. Mandatory filing trigger conditions under Seventh Proviso to Section 139(1): Even if income is below threshold, ITR is mandatory if: (a) Deposited aggregate ₹1 crore+ in current accounts in any bank; (b) Spent ₹2 lakh+ on foreign travel for self / others; (c) Paid electricity bill aggregating ₹1 lakh+ in a year; (d) Sales / turnover / gross receipts of business exceed ₹60 lakh; (e) Gross receipts of profession exceed ₹10 lakh; (f) TDS or TCS aggregate ₹25,000+ (₹50,000 for senior citizens); (g) Savings bank deposits aggregate ₹50 lakh+. Section 115G — ITR Exemption for Specific NRI Cases: NRI is NOT required to file ITR under Section 139(1) if total income consists ONLY of: (a) Investment income from foreign exchange asset (Section 115E); AND/OR (b) Long-term capital gains from foreign exchange asset (Section 115E); AND tax has been correctly deducted at source on such income at applicable rates. Limitations of 115G exemption: (i) Income must be only Chapter XII-A income — any other Indian-source income (rent, salary for services in India, NRO interest) disqualifies; (ii) TDS must be at correct rate — short deduction or no deduction triggers ITR requirement; (iii) Not applicable to capital gains other than from foreign exchange asset (e.g., Indian property sale not covered); (iv) Refund cannot be claimed — to claim refund, ITR is necessary even if 115G applies. When NRIs Should Voluntarily File ITR Even if Not Mandated: (1) Refund of Excess TDS: If the Indian payer (bank, broker, tenant, buyer) has deducted TDS at higher rate (e.g., 20% on dividend instead of 10% treaty rate; 20% on property sale on entire value instead of 12.5% on gain) — NRI can claim refund only by filing ITR. Many NRIs lose substantial refunds by not filing. (2) Carry Forward of Losses: Capital losses (LTCG / STCG losses), business losses can be carried forward for 8 years (LTCG only against LTCG, STCG against any capital gain) — ONLY if ITR is filed by due date. Useful for NRIs with portfolio losses or property sale losses. (3) Loan / Visa Applications: Indian banks for home loan, foreign embassies for visa renewal, immigration authorities often request prior years' Indian ITRs as proof of income — voluntary filing builds the record. (4) Property Transactions: Future sale of Indian property — buyer / authorities may request prior years' ITRs to establish source of funds, especially for high-value transactions. (5) Treaty Benefit Verification: Some foreign tax authorities (USA IRS, UK HMRC) request Indian ITR as evidence of Indian tax credit claimed in foreign return — for FTC / Section 90 reciprocal claim. (6) Schedule EI Disclosure: Even exempt income (NRE / FCNR / agricultural / Section 56(2)(x) gifts) — though not chargeable — should be disclosed in Schedule EI; non-disclosure can trigger inquiry. Voluntary filing creates clean record. (7) Compliance Continuity: For NRIs likely to return to India, continuous ITR record helps establish residency transition, RNOR computation, and Section 115H continued-benefit declaration. (8) Specific Form 15CA / 15CB: Repatriation of NRO funds requires CA certificate and clean tax record — historic ITRs simplify the process. ITR Forms Applicable to NRIs: ITR-1 (Sahaj) — NOT available to NRIs; expressly excluded since FY 2017-18. ITR-2 — for NRIs with income from salary, house property, capital gains, other sources, exempt income; most common form for NRIs. ITR-3 — for NRIs with business / profession income or as partner in firm. ITR-4 (Sugam) — presumptive taxation; NOT available to NRIs. Schedules to populate in NRI ITR-2 / ITR-3: (1) Personal Information — residential status as NR clearly indicated; (2) Schedule SAL — salary for services in India (if any); (3) Schedule HP — house property in India; (4) Schedule CG — capital gains on Indian assets; (5) Schedule OS — other sources (interest, dividend); (6) Schedule SI — special rate income (LTCG, STCG, dividend at treaty rate); (7) Schedule EI — exempt income (NRE interest, FCNR interest, agricultural, gifts, etc.); (8) Schedule TR — tax relief under Section 90 / 91 / DTAA; (9) Schedule FA — foreign assets — generally NOT applicable to NRI (only Resident & Ordinarily Resident must disclose); (10) Schedule FSI — foreign source income — generally NOT applicable to NRI; (11) Schedule 80 — deductions; (12) Schedule TDS — TDS reconciliation with Form 26AS / AIS. Filing Process: (a) Online through Income Tax e-filing portal (incometax.gov.in); (b) Login with PAN; (c) Select appropriate ITR form; (d) Pre-fill data from Form 26AS / AIS / TIS; (e) Populate schedules; (f) Compute tax / refund; (g) Verify via OTP (Aadhaar / Net banking) or DSC for high-value cases or signed ITR-V; (h) Acknowledgement number generated. Bank Account for Refund: Refund is credited to Indian bank account — for NRIs, NRO account is the typical refund destination; NRE refund credit is also allowed for specific income types. Foreign bank account credit is not standard. Common ITR Filing Issues for NRIs: (i) Wrong residential status — selecting "Resident" when actually NR triggers global income claim; (ii) Schedule EI ignored — exempt income missed; (iii) Treaty rate not claimed in Schedule SI — refund not computed; (iv) Form 26AS mismatch with Schedule TDS — refund delay; (v) PAN inoperative — ITR filing blocked; (vi) Late filing — Section 234A interest, Section 234F late fee (₹1,000–₹5,000), loss carry-forward denied. Our practice files end-to-end NRI ITRs — residential status verification, TDS reconciliation across all Indian payers, treaty benefit computation, refund pursuit, Schedule EI / SI / CG / TR population, e-filing through portal, and post-filing follow-up till refund credit. We also advise on whether ITR is mandatory and on the trade-offs of voluntary filing vs Section 115G exemption.