What the courts have decided on section 115G, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Statutory position — s.115C: the Chapter XII-A definitions, and the convertible-foreign-exchange condition that the whole chapter turns on
CBDT Circulars & InstructionsCuts both ways
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?
On these facts, yes — and the reason is the funding, not the status. Section 115C(b) defines a "foreign exchange asset" as any specified asset "which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange", so an asset bought out of rupee funds is not a foreign exchange asset, and nothing in Chapter XII-A — not s.115E, not s.115F, not s.115H — can reach it. Being a non-resident Indian within s.115C(e) is a necessary condition but never a sufficient one.
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Statutory position — s.115-I: the non-resident Indian's annual election OUT of Chapter XII-A, made in the return itself
CBDT Circulars & InstructionsCuts both ways
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?
He can, and the election is for one assessment year at a time. Section 115-I lets a non-resident Indian elect not to be governed by Chapter XII-A for any assessment year by furnishing his return for that year under section 139 and DECLARING THEREIN that the chapter shall not apply to him for that year; if he does so, his total income for that year is computed and taxed in accordance with the other provisions of the Act.
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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
CBDT Circulars & InstructionsCuts both ways
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.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.