Section 212 — Interpretation. Successor to s.115C of the 1961 Act.
Section 212 is in Chapter XIII — Determination of Tax in Special Cases, which runs from section 190 to section 235.
The section defines five expressions for use in sections 213 to 218 only. "Foreign exchange asset" is any specified asset acquired, purchased with, or subscribed to in convertible foreign exchange. "Investment income" is income derived from a foreign exchange asset, and "long-term capital gains" is capital gains on a foreign exchange asset that is not a short-term capital asset. "Non-resident Indian" is an individual who is not a resident and is either a citizen of India or a person of Indian origin. "Specified asset" is a closed list — shares in an Indian company; debentures of, or deposits with, an Indian company that is not a private company under the Companies Act, 2013; any Central Government security as defined in section 2(f) of the Government Securities Act, 2006; and such other assets as the Central Government may specify by notification.
The concessional regime in sections 213 to 218 turns entirely on assets bought with foreign exchange by non-resident Indians, and this section fixes which assets and which persons qualify so that the operative sections need not repeat the tests.
Two filters have to be passed before anything in sections 213 to 218 is available, and both are here rather than in those sections. The asset must be on the closed list in clause (e) and it must have been acquired, purchased with or subscribed to in convertible foreign exchange — an otherwise identical holding bought in rupees is not a foreign exchange asset. On the person side, the individual must be non-resident and either an Indian citizen or a person of Indian origin, that expression itself being defined in section 2(78) rather than here.
A non-resident individual who is a citizen of India subscribes in convertible foreign exchange to debentures of an Indian company that is not a private company: the debentures are a specified asset under clause (e)(ii) and, being subscribed to in convertible foreign exchange, a foreign exchange asset, so the interest is “investment income” for sections 213 to 218. Had he placed a deposit with an Indian private company instead, clause (e)(iii) would have kept it off the list however the money came in. And had he bought the same debentures out of a rupee account, clause (a) would fail — he would still be a non-resident Indian, but he would hold no foreign exchange asset and nothing in sections 213 to 218 would be open to him.
Never on its own: you meet it inside sections 213 to 218, when a return computes tax on investment income or long-term capital gains under those sections and an assessment tests whether the asset and the holder qualify. It names no form and no authority — it is the set of definitions the department applies, and its reach stops at those six sections.
"foreign exchange asset" means any specified asset which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange
See the full 1961 to 2025 concordance.
