Section 115H of Income Tax Act: Benefit under Chapter to be available in certain cases even after the assessee becomes resident.
Extract From Act: Section 115H of the Income Tax Act 1961:
Where a person, who is a non-resident Indian in any previous year, becomes assessable as resident in India in respect of the total income of any subsequent year, he may furnish to the Assessing Officer a declaration in writing along with his return of income under section 139 for the assessment year for which he is so assessable, to the effect that the provisions of this Chapter shall continue to apply to him in relation to the investment income derived from any foreign exchange asset being an asset of the nature referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) of clause (f) of section 115C: and if he does so, the provisions of this Chapter shall continue to apply to him in relation to such income for that assessment year and for every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money of such assets.
This section applies to the assessee who was NRI in the previous year and becomes an Indian resident in the current Financial Year. An assessee has to file a declaration to the Assessing Officer along with his Income Tax Return for the current financial year so that provisions of this chapter apply to him till his investments are transferred into money value.
- Assessee needs to file a declaration and his income tax return for the financial year in which he becomes assessable as a resident of India.
- Benefits under this section will apply only to the income from foreign exchange assets.
- NRIs get a concession on their tax at the rate of 20% on Investment Income and a 10% concession on tax for long term capital gains from specified assets
- Benefits of concessional levy under this section can be availed all assessment year until and unless the asset is converted into money and it retains its foreign exchange nature.
- The benefits under this section are also applicable to dividend income w.e.f. 01-04-2021.
Definitions:
- “Non-resident Indian” means an individual, being a citizen of India or a person of Indian origin who is not a “resident”. Explanation.—A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India;
- “Investment income” means any income derived from a foreign exchange assets. (As per Finance Act 2020: In section 115C of the Income-tax Act, in clause (c), the words, figures and letter “other than dividends referred to in section 115-O” shall be omitted with effect from the 1st day of April, 2021).
- “Foreign exchange asset” means any specified asset which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange;
- “Specified asset” means any of the following assets, namely:—
(i) shares in an Indian company; (This sub clause is not covered under section 115H)
(ii) debentures issued by an Indian company which is not a private company as defined in the Companies Act, 1956 (1 of 1956) (Now section 2(68) of the Companies Act, 2013);
(iii) deposits with an Indian company which is not a private company as defined in the Companies Act, 1956 (1 of 1956) (Now section 2(68) of the Companies Act, 2013);
(iv) any security of the Central Government as defined in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944);
(v) such other assets as the Central Government may specify in this behalf by notification in the Official Gazette.