Law Legends


Section 115H - Tax Benefits for NRI

Topic Covers:

1. Introduction

2. Eligibility Conditions for NRI

3. Benefits of section 115H

a. Exemption for specified Income

b. Lower tax rates for certain investment

c. Facilitation of fund repatriation

d. Avoidance of double taxation

4. Conclusion

1. Introduction

Every person earning income in India is required to pay tax if he fulfills the conditions. To calculate the correct income tax liability is required to determine the residential status of the person every year. The tax liability will differ and depends upon the residential status of the person. This section gives benefits to the NRI who became residents in the subsequent year. In this article, we understand the eligibility conditions and benefits of section 115H.

2. Eligibility Conditions for NRI

NRI must fulfill the specified condition to take the benefit of the section 115H. He must have been a resident of India for the previous year. Factors to determine the residential status of the individual are provided in the income tax act. The residential status of an individual is based on the number of days stayed in India during the financial year.

3. Benefits under section 115H

a. Exemption for specified Income:

Certain types of income are exempted for the NRI. Like interest earned on NRE accounts and dividend from specified investments.

b. Facilitation of fund repatriation:

This section simplified the manner to repatriate the income earned in India and investment proceeds subject to fulfilling specified regulations.

c. Avoidance of double taxation:

India has signed a double taxation avoidance agreement with various countries. DTAA is a bilateral agreement between two countries that helps to avoid taxing the income twice. Once, in the country in which the income is earned and second in the country of resident. DTAA specified rules for taxing various income earned by the NRI.
According to the provisions of DTAA, NRIs are allowed to claim tax credits or exemptions in the resident country.

d. Compliance requirement:

NRI must comply with the obligations. Like other person, NRI is also required to file the Income tax return within the prescribed due date.
According to foreign assets and liabilities disclosure NRI are also required to disclose the foreign assets and income.

e. Exemption of specified Income:

Certain types of income are exempted under this section115H.
• Interest earned on the NRE account is exempted from tax.
• Subject to specified conditions NRI can also avail the tax exemption on capital gain arising from the sale of specified assets.

4. Conclusion:

This section offers benefits to NRI by optimizing tax liabilities. To avail the benefit of this section NRI must comply with the specified conditions. To maximize the advantage NRI can take professional advice.

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