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?
He can, but only on part of it, and only if he files the declaration on time. Section 115H lets a person who was a non-resident Indian in a previous year and becomes assessable as resident in a subsequent year furnish a declaration in writing ALONG WITH his return under section 139 for that assessment year, and the chapter then continues to apply to him until the asset is transferred or converted into money — but the continuation extends only to INVESTMENT INCOME, and only from assets of the nature in sub-clauses (ii), (iii), (iv) and (v) of section 115C(f). Shares in an Indian company, which are sub-clause (i), are not in the list.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 1988-04-01, reported as Income-tax Act, 1961, s.115H, as it stands after the substitution made by the Direct Tax Laws (Amendment) Act 1987 with effect from 1 April 1988. It bears on section 115H, section 115C, section 115C(f), section 115D, section 115E, section 115F, section 115-I, section 139 of the Income Tax Act 1961, in Residence & Treaty Benefit, Capital Gains Exemptions, Deductions & Disallowances and How Tax Law Is Read matters.
The section is drafted to exclude two things and practitioners are caught by both. First, sub-clause (i) of section 115C(f) — shares in an Indian company — is deliberately omitted from the list in section 115H, so dividend or other investment income from shares does not continue at the concessional rate once the assessee becomes resident, however the shares were funded. What continues is income from debentures of, and deposits with, an Indian company which is not a private company, from Central Government securities within the Public Debt Act 1944, and from assets notified under sub-clause (v). Second, the section speaks only of 'the investment income derived from any foreign exchange asset'. It says nothing about long-term capital gains, so a returning resident who sells a foreign exchange asset does not get the section 115E capital-gains rate through section 115H, and neither the section 115F rollover nor the capital-gains limb travels with him. The machinery is equally unforgiving: the declaration must be in writing, addressed to the Assessing Officer, and furnished ALONG WITH the return under section 139 for the assessment year for which he is first so assessable — in CIT v. N. Sundarraman the Madras High Court records at its paragraph 7 that the ASSESSING OFFICER had found the declaration to have been made much later and not along with the returns, but the Court itself decided the case on a different footing — that the assessee was not a 'resident' at all and so needed no section 115H declaration — and did not decide whether a late declaration can be accepted; and the Madras High Court in Dr. M. Manohar refused to extend the benefit to interest earned on interest that had been re-deposited, because the section requires the income to be derived from the foreign exchange asset itself. The upside is that once the declaration is made the benefit runs on 'for that assessment year and for every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money of such assets' — it is not an annual election, and it ends only with the asset. On the other side of that question, the ITAT Kolkata in ACIT v. Prithvish Nag, I.T.A. No. 1067/Kol/2013, assessment year 2004-05, order dated 6 November 2015, said in terms that 'once declaration has been filed by assessee u/s 115H of the Act then he does not require to file the same in the subsequent year and assessee will continue to enjoy the benefit given under the provisions of the said section'. The Bench then restored the matter to the Assessing Officer because the declaration had not been produced for verification, so that sentence is the Tribunal's stated construction of the section and not a holding on proved facts — plead it as such.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
Read aloud by your device. Press again to stop.
As printed on the Year 2026 departmental page under the heading 'Benefit under Chapter to be available in certain cases even after the assessee becomes resident', section 115H reads: '115H. 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.' The archived Year 2000 page prints the identical words, with footnote 29 attached to 'Assessing'.
A person who was a non-resident Indian in any previous year and becomes assessable as resident in India in respect of the total income of a subsequent year may furnish to the Assessing Officer a written declaration along with his return of income under section 139 for the assessment year for which he is so assessable, to the effect that Chapter XII-A shall continue to apply to him in relation to the investment income derived from a foreign exchange asset of the nature referred to in sub-clause (ii), (iii), (iv) or (v) of section 115C(f); if he does so, the chapter continues to apply to that income for that assessment year and every subsequent assessment year until the transfer or conversion otherwise than by transfer into money of such assets. The continuation reaches investment income only, and only assets within sub-clauses (ii) to (v) — shares in an Indian company, being sub-clause (i), are not within it.
Not applicable — this is a statement of statutory text and of the amendment footnote printed on the archived departmental page. The judicial gloss referred to elsewhere in this entry is carried in the separate entries on CIT v. Mathew, CIT v. N. Sundarraman and Dr. M. Manohar v. ACIT.
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
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppHe can, but only on part of it, and only if he files the declaration on time. Section 115H lets a person who was a non-resident Indian in a previous year and becomes assessable as resident in a subsequent year furnish a declaration in writing ALONG WITH his return under section 139 for that assessment year, and the chapter then continues to apply to him until the asset is transferred or converted into money — but the continuation extends only to INVESTMENT INCOME, and only from assets of the nature in sub-clauses (ii), (iii), (iv) and (v) of section 115C(f). Shares in an Indian company, which are sub-clause (i), are not in the list. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 115H, section 115C, section 115C(f), section 115D, section 115E, section 115F, section 115-I, section 139 of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, s.115H, as it stands after the substitution made by the Direct Tax Laws (Amendment) Act 1987 with effect from 1 April 1988. The section is drafted to exclude two things and practitioners are caught by both. First, sub-clause (i) of section 115C(f) — shares in an Indian company — is deliberately omitted from the list in section 115H, so dividend or other investment income from shares does not continue at the concessional rate once the assessee becomes resident, however the shares were funded. What continues is income from debentures of, and deposits with, an Indian company which is not a private company, from Central Government securities within the Public Debt Act 1944, and from assets notified under sub-clause (v). Second, the section speaks only of 'the investment income derived from any foreign exchange asset'. It says nothing about long-term capital gains, so a returning resident who sells a foreign exchange asset does not get the section 115E capital-gains rate through section 115H, and neither the section 115F rollover nor the capital-gains limb travels with him. The machinery is equally unforgiving: the declaration must be in writing, addressed to the Assessing Officer, and furnished ALONG WITH the return under section 139 for the assessment year for which he is first so assessable — in CIT v. N. Sundarraman the Madras High Court records at its paragraph 7 that the ASSESSING OFFICER had found the declaration to have been made much later and not along with the returns, but the Court itself decided the case on a different footing — that the assessee was not a 'resident' at all and so needed no section 115H declaration — and did not decide whether a late declaration can be accepted; and the Madras High Court in Dr. M. Manohar refused to extend the benefit to interest earned on interest that had been re-deposited, because the section requires the income to be derived from the foreign exchange asset itself. The upside is that once the declaration is made the benefit runs on 'for that assessment year and for every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money of such assets' — it is not an annual election, and it ends only with the asset. On the other side of that question, the ITAT Kolkata in ACIT v. Prithvish Nag, I.T.A. No. 1067/Kol/2013, assessment year 2004-05, order dated 6 November 2015, said in terms that 'once declaration has been filed by assessee u/s 115H of the Act then he does not require to file the same in the subsequent year and assessee will continue to enjoy the benefit given under the provisions of the said section'. The Bench then restored the matter to the Assessing Officer because the declaration had not been produced for verification, so that sentence is the Tribunal's stated construction of the section and not a holding on proved facts — plead it as such. If it applies to you, the first step is this: Identify the FIRST assessment year for which the client is assessable as resident and file the written declaration with that year's return under section 139. Do not file it separately or later.
As printed on the Year 2026 departmental page under the heading 'Benefit under Chapter to be available in certain cases even after the assessee becomes resident', section 115H reads: '115H. 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.' The archived Year 2000 page prints the identical words, with footnote 29 attached to 'Assessing'. The matter was decided on 1988-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. A person who was a non-resident Indian in any previous year and becomes assessable as resident in India in respect of the total income of a subsequent year may furnish to the Assessing Officer a written declaration along with his return of income under section 139 for the assessment year for which he is so assessable, to the effect that Chapter XII-A shall continue to apply to him in relation to the investment income derived from a foreign exchange asset of the nature referred to in sub-clause (ii), (iii), (iv) or (v) of section 115C(f); if he does so, the chapter continues to apply to that income for that assessment year and every subsequent assessment year until the transfer or conversion otherwise than by transfer into money of such assets. The continuation reaches investment income only, and only assets within sub-clauses (ii) to (v) — shares in an Indian company, being sub-clause (i), are not within it.
Not applicable — this is a statement of statutory text and of the amendment footnote printed on the archived departmental page. The judicial gloss referred to elsewhere in this entry is carried in the separate entries on CIT v. Mathew, CIT v. N. Sundarraman and Dr. M. Manohar v. ACIT. In the words reproduced by the source cited on this page: "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"
It was decided by the CBDT Circulars & Instructions on 1988-04-01 and is reported as Income-tax Act, 1961, s.115H, as it stands after the substitution made by the Direct Tax Laws (Amendment) Act 1987 with effect from 1 April 1988. 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 115H, section 115C, section 115C(f), section 115D, section 115E, section 115F, section 115-I, section 139, 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 person who was a non-resident Indian in any previous year and becomes assessable as resident in India in respect of the total income of a subsequent year may furnish to the Assessing Officer a written declaration along with his return of income under section 139 for the assessment year for which he is so assessable, to the effect that Chapter XII-A shall continue to apply to him in relation to the investment income derived from a foreign exchange asset of the nature referred to in sub-clause (ii), (iii), (iv) or (v) of section 115C(f); if he does so, the chapter continues to apply to that income for that assessment year and every subsequent assessment year until the transfer or conversion otherwise than by transfer into money of such assets. The continuation reaches investment income only, and only assets within sub-clauses (ii) to (v) — shares in an Indian company, being sub-clause (i), are not within it. It arises in Residence & Treaty Benefit, Capital Gains Exemptions, Deductions & Disallowances and How Tax Law Is Read matters, on section 115H, section 115C, section 115C(f), section 115D, section 115E, section 115F, section 115-I, section 139 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. Schedule the assets asset by asset against section 115C(f) sub-clauses (ii) to (v). Anything that is a share in an Indian company is outside section 115H and should be taken out of the claim at the outset rather than defended. Do not claim capital gains relief under section 115H. The section covers investment income only; a capital-gains claim on the strength of it will be disallowed and will weaken the rest of the return. Keep the identity of each asset intact. The benefit runs 'until the transfer or conversion (otherwise than by transfer) into money of such assets', so a redemption, a maturity, or a switch out of the asset ends it — and reinvesting the proceeds does not restart it. Do not roll up interest into the principal and claim the concessional rate on the resulting income: Dr. M. Manohar v. ACIT (Madras High Court, 11 July 2011) holds that interest on re-deposited interest lacks the direct nexus with the foreign exchange asset that the section requires. Check the residential status question separately. Where the client is 'not ordinarily resident' rather than resident, consider whether he is still a non-resident Indian within section 115C(e) and entitled to section 115E in its own right, in which case no section 115H declaration is needed at all — that is what the Madras High Court accepted in CIT v. N. Sundarraman.
Still good law. The Year 2000 and Year 2026 departmental pages print identical operative words, and the same words are reproduced inside High Court judgments of 2005, 2011 and 2012 read in full this pass, so on the material available the section has stood unchanged since 1 April 1988. No Finance Act text was retrieved this pass. The section has been construed by the Kerala High Court in CIT v. Mathew (19 May 2005) — the assessee need not have been assessed as a non-resident in an earlier year — and by the Madras High Court in Dr. M. Manohar v. ACIT (11 July 2011) — the benefit does not extend to income lacking a direct nexus with the foreign exchange asset. Both are carried as separate entries. No decision doubting or overruling either was located this pass, but no systematic later-treatment search was run beyond the indiankanoon queries recorded in NOTES-B84.md. Also located: ACIT v. Prithvish Nag (ITAT Kolkata 'A' Bench, Mahavir Singh, Judicial Member and Waseem Ahmed, Accountant Member, I.T.A. No. 1067/Kol/2013, 6 November 2015, indiankanoon.org/doc/196545914/), which states that a declaration once filed under section 115H need not be repeated in a subsequent year, and then remands for the declaration to be produced; the disposal is 'In the result, Revenue's appeal is allowed for statistical purpose.' 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 current text was transcribed this pass from https://incometaxindia.gov.in/w/section-115h-45, which prints the heading 'Benefit under Chapter to be available in certain cases even after the assessee becomes resident', the Act name 'Income-tax Act, 1961' and the stamp 'Year: 2026', and independently from the archived /w/section-115h (Year: 2000), which prints the same words with footnote 29, 'Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988' — the substitution of 'Assessing' for 'Income-tax' in 'Assessing Officer'. The section is also reproduced verbatim inside two Madras High Court judgments and one Kerala High Court judgment read in full this pass — Dr. M. Manohar v. ACIT (11 July 2011), CIT v. N. Sundarraman (7 February 2012) and CIT v. Mathew (19 May 2005) — each in the same words including the sub-clause list '(ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v)', which is an independent confirmation that sub-clause (i) is absent from the section and not a transcription loss. Neither current departmental page carries any footnote entries. The Year 2026 page and the Year 2000 page are word for word the same apart from that 1988 substitution, so on the material read this pass the section has stood unchanged since 1 April 1988. The characterisation of what section 115H does NOT cover — long-term capital gains, and shares within section 115C(f)(i) — is a reading of the section's own words as transcribed, not a proposition taken from any decision. 'decided_on' is the COMMENCEMENT DATE recorded in footnote 29 (1 April 1988), not a decision date; 'bench' is 'Not applicable — statutory text' and 'favours' is null for the same reason. A verification pass corrected one attribution in this entry. The statement that the Madras High Court in CIT v. N. Sundarraman 'treated a declaration filed later as not answering that requirement' attributed to the Court what its paragraph 7 records as the Assessing Officer's finding; the Court did not decide the point. 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 person who was a non-resident Indian in any previous year and becomes assessable as resident in India in respect of the total income of a subsequent year may furnish to the Assessing Officer a written declaration along with his return of income under section 139 for the assessment year for which he is so assessable, to the effect that Chapter XII-A shall continue to apply to him in relation to the investment income derived from a foreign exchange asset of the nature referred to in sub-clause (ii), (iii), (iv) or (v) of section 115C(f); if he does so, the chapter continues to apply to that income for that assessment year and every subsequent assessment year until the transfer or conversion otherwise than by transfer into money of such assets. The continuation reaches investment income only, and only assets within sub-clauses (ii) to (v) — shares in an Indian company, being sub-clause (i), are not within it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
The CBDT rejected my condonation application without dealing with my reasons. Can I challenge that?
You want to make a claim you missed, but the time to revise the return has gone. Can you just write to the officer?
A declaration was required by the due date and you filed it late. Is that fatal?
I never deposited the unspent sale proceeds in a capital gains account. Can I still claim 54F?