Section 213 — Special provision for computation of total income of non-residents. Successor to s.115D of the 1961 Act.
Section 213 is in Chapter XIII — Determination of Tax in Special Cases, which runs from section 190 to section 235.
Sub-section (1) bars every deduction for expenditure or allowance, under any provision of the Act, in computing the investment income of a non-resident Indian. Sub-section (2) then deals with Chapter VIII deductions. Clause (a) denies them altogether where the gross total income of a non-resident Indian consists only of investment income, or of long-term capital gains, or of both. Clause (b) applies where the gross total income merely includes such income: the gross total income is first reduced by that income, and Chapter VIII deductions are allowed as if the reduced figure were the assessee's gross total income.
Investment income and long-term capital gains of a non-resident Indian are taxed on a gross basis at their own rates, so allowing costs against them, or allowing Chapter VIII deductions to be absorbed by them, would give relief twice over. The section keeps that income sealed off: no expenditure comes out of it, and no deduction goes into it.
The two sub-sections do different jobs and both bite. Sub-section (1) is absolute — no expenditure or allowance under any provision of the Act may be set against investment income, so costs of earning it are simply lost. Sub-section (2) does not disallow Chapter VIII deductions generally; it shrinks the base against which they are measured, so where other income exists the deductions are allowed but only up to gross total income minus the investment income and long-term capital gains. Where there is nothing but that income, clause (a) leaves no base at all and no deduction is available.
A non-resident Indian has investment income of Rs. 30 lakh and business income in India of Rs. 5 lakh, and claims Rs. 4 lakh of Chapter VIII deductions. Under sub-section (2)(b) the gross total income of Rs. 35 lakh is reduced by the Rs. 30 lakh, so the deductions are allowed only against Rs. 5 lakh — here the full Rs. 4 lakh fits, but a Rs. 6 lakh claim would be capped at Rs. 5 lakh. Any expenses he incurred in earning the Rs. 30 lakh are not deductible at all, because of sub-section (1).
A non-resident Indian meets this section in the computation of total income in his return and in a processing intimation that restricts Chapter VIII deductions or disallows expenditure claimed against investment income.
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.
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
See the full 1961 to 2025 concordance.
