Section 215 — Capital gains on transfer of foreign exchange assets not to be charged in certain cases. Successor to s.115F of the 1961 Act.
Section 215 is in Chapter XIII — Determination of Tax in Special Cases, which runs from section 190 to section 235.
Sub-section (1) relieves a non-resident Indian where long-term capital gains arise from the transfer of a foreign exchange asset (the original asset) and, within six months after the date of transfer, he invests the whole or any part of the net consideration in any specified asset (the new asset). If the cost of the new asset is not less than the net consideration, the whole gain is not charged under section 67; if it is less, the exempt part is A = B × C ÷ D, where B is the whole gain, C the cost of acquisition of the new asset and D the net consideration.
Sub-section (2) defines "cost", for a new asset being a deposit referred to in section 212(e)(iii) or (v), as the amount of the deposit, and "net consideration" as the full value of the consideration on the transfer of the original asset reduced by expenditure incurred wholly and exclusively in connection with it.
Sub-section (3) is the clawback: where the new asset is transferred, or converted otherwise than by transfer into money, within three years from the date of its acquisition, the gain not charged under section 67 is 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 so converted.
The relief is for a non-resident Indian who keeps the proceeds of a foreign exchange asset inside the specified assets rather than taking them away, so it is measured by the net consideration reinvested and not by the gain. The six-month window forces the reinvestment to follow the sale closely, and the three-year lock-in makes the relief conditional on the new asset being held.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Window for investing in the new asset | Six months after the date of transfer | Investment of the whole or any part of the net consideration in any specified asset | Sub-section (1)(b) |
| Full exemption | The whole of the capital gain is not charged under section 67 | Where the cost of the new asset is not less than the net consideration in respect of the original asset | Sub-section (1)(i) |
| Proportionate exemption | A = B × C ÷ D | Where the cost of the new asset is less than the net consideration; B is the whole capital gain, C the cost of acquisition of the new asset, D the net consideration of the original asset | Sub-section (1)(ii) |
| Lock-in on the new asset | Three years from the date of its acquisition | Transfer, or conversion otherwise than by transfer into money, within that period revives the charge in the year of transfer or conversion | Sub-section (3) |
The comparison is between the cost of the new asset and the net consideration, not the gain, so reinvesting only the gain leaves a proportionate part chargeable. The six-month period runs after the date of transfer only; there is no window before it. On a breach, sub-section (3) does not reopen the earlier year: the revived amount is capital gains of the year the new asset is transferred or converted into money, and a conversion into money without any transfer counts equally.
A non-resident Indian transfers a foreign exchange asset for a net consideration of Rs. 1 crore, realising a long-term gain of Rs. 40 lakh, and within six months invests Rs. 75 lakh in a specified asset. Under sub-section (1)(ii), Rs. 40 lakh × 75 ÷ 100, that is Rs. 30 lakh, is not charged under section 67, and Rs. 10 lakh remains chargeable. If he encashes the new asset two years later, sub-section (3) brings the Rs. 30 lakh back as capital gains of that year.
You claim it in the return for the tax year in which the foreign exchange asset was transferred, and meet it again in the year of any early encashment or transfer of the specified asset.
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
Where the new asset is transferred or converted (otherwise than by transfer) into money, within three years from date of its acquisition
See the full 1961 to 2025 concordance.
