My NRI client's only Indian income for the year was interest on debentures of an Indian public company subscribed to in foreign exchange, and the company deducted tax at source. He did not file a return and has now had a notice. Was he obliged to file?
If both conditions in section 115G are satisfied, no. It is not necessary for a non-resident Indian to furnish a return under section 139(1) if his total income assessable under the Act during the previous year consisted ONLY of investment income or long-term capital gains or both, AND the tax deductible at source under Chapter XVII-B has been deducted from that income.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 1983-06-01, reported as Income-tax Act, 1961, s.115G, as inserted with Chapter XII-A by the Finance Act 1983 with effect from 1 June 1983. It bears on section 115G, section 115C, section 115D, section 115E, section 115H, section 139, section 139(1), section 271(1)(c) of the Income Tax Act 1961, in Residence & Treaty Benefit, TDS Defaults, Assessment & Scrutiny and Refunds, Interest & Condonation matters.
This is relief people do not know they have, and it is also relief that is easy to lose. The two conditions are cumulative and both are strict. 'Consisted only of' means exactly that: a single item of other Indian income — rent from a flat, a savings bank interest credit, a small dividend from an asset not acquired in convertible foreign exchange — takes the year outside the section and revives the ordinary section 139(1) obligation for the whole year. And it is the tax DEDUCTIBLE under Chapter XVII-B that must have been deducted, so a short deduction, or a deduction the payer never made, defeats the section however innocent the assessee. Two limits deserve to be stated plainly. First, s.115G excuses the FURNISHING of a return under s.139(1); it does not extinguish the charge, and it does not by itself answer a notice under s.142(1) or s.148 calling for a return. Second, the relief is worth nothing where the client wants a refund of excess deduction or wants to claim a treaty rate — a return is the only route to either, and filing voluntarily is usually the better course. Where the client also wants the benefit of the chapter to continue after he becomes resident, note that s.115H requires a declaration to be furnished ALONG WITH the return under s.139, so an assessee who relies on s.115G and files nothing has no return to attach the declaration to. One decision shows the section doing real work. In Rita Hemchand Gandhi v. ITO (International Taxation), Mumbai (ITAT Mumbai, order pronounced 21 June 2024), a non-resident whose only income was interest, on which the payer had deducted at ten per cent instead of the twelve and one-half per cent treaty rate, filed no return in reliance on section 115G; when the shortfall was detected on reopening she paid the balance immediately and the assessment was made at the returned figure. The Tribunal deleted the section 271(1)(c) penalty, holding that the error was the deductor's and not the assessee's. The case is an answer to a penalty rather than to the charge, and that is how it should be pleaded.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Under the heading 'Return of income not to be filed in certain cases', section 115G reads: '115G. It shall not be necessary for a non-resident Indian to furnish under sub-section (1) of section 139 a return of his income if— (a) his total income in respect of which he is assessable under this Act during the previous year consisted only of investment income or income by way of long-term capital gains or both; and (b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income.' Every consolidation of the section consulted prints the identical words under the identical heading.
A non-resident Indian need not furnish a return of income under section 139(1) where two conditions are both satisfied: his total income assessable under the Act during the previous year consisted only of investment income or income by way of long-term capital gains or both, and the tax deductible at source under Chapter XVII-B has been deducted from that income. The conditions are cumulative and the section addresses only the obligation to furnish a return under section 139(1).
Not applicable — this is a statement of statutory text. No judicial reasoning is involved, and no decision construing the section against a competing construction is recorded, though section 115G was applied by the ITAT Mumbai in Rita Hemchand Gandhi v. ITO (International Taxation) (order pronounced 21 June 2024).
It shall not be necessary for a non-resident Indian to furnish under sub-section (1) of section 139 a return of his income if— (a) his total income in respect of which he is assessable under this Act during the previous year consisted only of investment income or income by way of long-term capital gains or both; and (b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income.
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Handle my notice → Ask a CA on WhatsAppIf both conditions in section 115G are satisfied, no. It is not necessary for a non-resident Indian to furnish a return under section 139(1) if his total income assessable under the Act during the previous year consisted ONLY of investment income or long-term capital gains or both, AND the tax deductible at source under Chapter XVII-B has been deducted from that income. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 115G, section 115C, section 115D, section 115E, section 115H, section 139, section 139(1), section 271(1)(c) of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, s.115G, as inserted with Chapter XII-A by the Finance Act 1983 with effect from 1 June 1983. This is relief people do not know they have, and it is also relief that is easy to lose. The two conditions are cumulative and both are strict. 'Consisted only of' means exactly that: a single item of other Indian income — rent from a flat, a savings bank interest credit, a small dividend from an asset not acquired in convertible foreign exchange — takes the year outside the section and revives the ordinary section 139(1) obligation for the whole year. And it is the tax DEDUCTIBLE under Chapter XVII-B that must have been deducted, so a short deduction, or a deduction the payer never made, defeats the section however innocent the assessee. Two limits deserve to be stated plainly. First, s.115G excuses the FURNISHING of a return under s.139(1); it does not extinguish the charge, and it does not by itself answer a notice under s.142(1) or s.148 calling for a return. Second, the relief is worth nothing where the client wants a refund of excess deduction or wants to claim a treaty rate — a return is the only route to either, and filing voluntarily is usually the better course. Where the client also wants the benefit of the chapter to continue after he becomes resident, note that s.115H requires a declaration to be furnished ALONG WITH the return under s.139, so an assessee who relies on s.115G and files nothing has no return to attach the declaration to. One decision shows the section doing real work. In Rita Hemchand Gandhi v. ITO (International Taxation), Mumbai (ITAT Mumbai, order pronounced 21 June 2024), a non-resident whose only income was interest, on which the payer had deducted at ten per cent instead of the twelve and one-half per cent treaty rate, filed no return in reliance on section 115G; when the shortfall was detected on reopening she paid the balance immediately and the assessment was made at the returned figure. The Tribunal deleted the section 271(1)(c) penalty, holding that the error was the deductor's and not the assessee's. The case is an answer to a penalty rather than to the charge, and that is how it should be pleaded. If it applies to you, the first step is this: List every item of Indian income for the year before advising that no return is due. One item outside investment income and long-term capital gains destroys the exemption for the whole year.
Under the heading 'Return of income not to be filed in certain cases', section 115G reads: '115G. It shall not be necessary for a non-resident Indian to furnish under sub-section (1) of section 139 a return of his income if— (a) his total income in respect of which he is assessable under this Act during the previous year consisted only of investment income or income by way of long-term capital gains or both; and (b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income.' Every consolidation of the section consulted prints the identical words under the identical heading. The matter was decided on 1983-06-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. A non-resident Indian need not furnish a return of income under section 139(1) where two conditions are both satisfied: his total income assessable under the Act during the previous year consisted only of investment income or income by way of long-term capital gains or both, and the tax deductible at source under Chapter XVII-B has been deducted from that income. The conditions are cumulative and the section addresses only the obligation to furnish a return under section 139(1).
Not applicable — this is a statement of statutory text. No judicial reasoning is involved, and no decision construing the section against a competing construction is recorded, though section 115G was applied by the ITAT Mumbai in Rita Hemchand Gandhi v. ITO (International Taxation) (order pronounced 21 June 2024). In the words reproduced by the source cited on this page: "It shall not be necessary for a non-resident Indian to furnish under sub-section (1) of section 139 a return of his income if— (a) his total income in respect of which he is assessable under this Act during the previous year consisted only of investment income or income by way of long-term capital gains or both; and (b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income."
It was decided by the CBDT Circulars & Instructions on 1983-06-01 and is reported as Income-tax Act, 1961, s.115G, as inserted with Chapter XII-A by the Finance Act 1983 with effect from 1 June 1983. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 115G, section 115C, section 115D, section 115E, section 115H, section 139, section 139(1), section 271(1)(c), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. A non-resident Indian need not furnish a return of income under section 139(1) where two conditions are both satisfied: his total income assessable under the Act during the previous year consisted only of investment income or income by way of long-term capital gains or both, and the tax deductible at source under Chapter XVII-B has been deducted from that income. The conditions are cumulative and the section addresses only the obligation to furnish a return under section 139(1). It arises in Residence & Treaty Benefit, TDS Defaults, Assessment & Scrutiny and Refunds, Interest & Condonation matters, on section 115G, section 115C, section 115D, section 115E, section 115H, section 139, section 139(1), section 271(1)(c) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Obtain Form 16A or the Form 26AS / annual information statement entries and confirm that tax was actually deducted at the rate deductible under Chapter XVII-B, not merely that something was deducted. File anyway wherever a refund, a treaty rate, a carry-forward of loss or a section 115H declaration is in play — section 115G removes an obligation, it does not create an advantage. If a notice under section 142(1) or section 148 has been issued, do not answer it by citing section 115G alone: the section addresses the section 139(1) obligation, and a return called for by notice must be dealt with on its own terms. Where the client intends to become resident and to keep the chapter's benefit, remember that section 115H needs a declaration furnished with the return under section 139 — plan the first resident year's filing accordingly.
Still good law. Every consolidation of the section consulted prints identical text under an identical heading and none carries an amendment footnote, which is the best evidence available here that the section has not been amended since it was inserted with effect from 1 June 1983. No Finance Act text is set out in support of that. Section 115G was applied by the ITAT Mumbai in Rita Hemchand Gandhi v. ITO (International Taxation) Ward 2(3)(1), I.T.A. No. 50/Mum/2024, order pronounced 21 June 2024, to delete a penalty under section 271(1)(c) on a non-resident who had not filed a return. That order does not construe the section against a competing construction, and no decision doing so is recorded. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The section carries the heading 'Return of income not to be filed in certain cases', and every consolidation of it consulted prints identical words. None of them carries a footnote entry against the section, so on the material available the section has stood unchanged since it was inserted with the rest of Chapter XII-A by the Finance Act 1983 with effect from 1 June 1983 — that insertion date is printed in the footnote to section 115C, which names sections 115C to 115-I together. Section 115G has been applied by a Tribunal speaking in its own voice. In Rita Hemchand Gandhi v. ITO (International Taxation) Ward 2(3)(1), Mumbai, I.T.A. No. 50/Mum/2024, assessment year 2013-14, the ITAT Mumbai 'D' Bench (Prashant Maharishi, Accountant Member and Sunil Kumar Singh, Judicial Member) held at its paragraph 010 that 'According to provisions of section 115G non-resident assessee is not required to file her return of income under section 139 (1) if total income in respect of which she is assessable under this act during the previous year consisted only of investment income or income by way of a long-term capital gain or both and tax deductible at source under the provisions of chapter XVII B has been deducted from such income', and on that footing deleted a penalty under section 271(1)(c) levied on a non-resident who had filed no return because tax had been deducted at source on her only income, the shortfall having arisen from the deductor deducting at ten per cent instead of the treaty rate of twelve and one-half per cent; the appeal was allowed. The order is pronounced 21 June 2024 on its own face, though it is sometimes dated 24 June 2024. No decision construing the words of section 115G against a competing construction is recorded. The consequences of section 115G for sections 142(1) and 148, and the Form 26AS reference, are practitioner context and are not statements taken from any provision set out here. And this is a statutory entry, not a decision: it asserts no bench and no holding, and the date given against it is the commencement date of Chapter XII-A, 1 June 1983, not a date of decision. Two things have to be shown on the facts before the section helps, and they are cumulative. The total income assessable during the previous year must have consisted only of investment income or long-term capital gains or both; and the tax deductible at source under Chapter XVII-B must in fact have been deducted from that income. A shortfall in the rate deducted is not the same thing as no deduction, which is the distinction Rita Hemchand Gandhi turns on. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
A non-resident Indian need not furnish a return of income under section 139(1) where two conditions are both satisfied: his total income assessable under the Act during the previous year consisted only of investment income or income by way of long-term capital gains or both, and the tax deductible at source under Chapter XVII-B has been deducted from that income. The conditions are cumulative and the section addresses only the obligation to furnish a return under section 139(1).
TaxSphere, “Statutory position — s.115G: no return need be furnished where the only income is investment income or long-term capital gains and tax has been deducted at source”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-115g-no-return-where-the-only-income-is-investment-income-or-ltcg-and-tds-is-done/ (validity last checked 2026-09-08)
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Chapter XII-A gives my NRI client a flat twenty per cent with no deductions, but on his numbers the ordinary slab rates with Chapter VI-A relief come out cheaper. Can he simply not use the chapter, and does he have to commit for good?
My client is a person of Indian origin living in Dubai. He bought shares in an Indian listed company out of rupees lying in his NRO account. The assessing officer says Chapter XII-A does not apply to him at all and has taxed the gain at the ordinary rate. Is he right?
My client has returned to India for good and is now assessable as a resident. He holds shares and public-company debentures bought in foreign exchange while he was abroad. Can he keep the twenty per cent rate, and on what?
My client was a non-resident who kept money in non-resident bank accounts, has now returned to India, and has filed the section 115H declaration. The assessing officer says section 115H is available only to someone who was actually assessed as a non-resident in an earlier year, and my client never filed returns while abroad. Is that a good objection?
