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Return of Income Not to be Filed in Certain Cases

Section 115G of the Income-tax Act, 1961 provides relief to certain non-resident Indians (NRIs) and foreign citizens from the requirement of filing an income tax return in India, under specific conditions.
It is a facilitative provision that ensures NRIs or foreign investors are not burdened with return filing compliance if their income consists only of specified investment incomes and the necessary tax has already been deducted at source (TDS).

This section is closely linked with the Chapter XII-A of the Income-tax Act (Special provisions relating to certain incomes of NRIs).

Who is Covered under Section 115G?

Section 115G applies to the following categories of taxpayers:

  • Non-Resident Indians (NRIs), as defined under Section 115C(e).
  • Foreign citizens who have invested in specified assets in India.

When Return of Income is Not Required?

An NRI or foreign citizen is not required to file an income tax return in India if all of the following conditions are satisfied:

  1. The taxpayer’s total income during the relevant previous year consists only of the following:
    • Investment Income (as defined under Section 115C(c)) from specified assets (shares, debentures, deposits, etc. purchased in foreign exchange), and/or
    • Long-term Capital Gains arising from transfer of such specified assets.
  2. Tax deductible at source (TDS) on such income has already been deducted under Chapter XVII-B (i.e., at the time of payment of income).

✅ If these two conditions are met, filing of return is not mandatory.

Relevant Definitions

To understand Section 115G better, some definitions under Section 115C are crucial:

  • Investment Income [Sec. 115C(c)] – Income derived (other than dividends on shares referred in Section 115-O) from a foreign exchange asset.
  • Foreign Exchange Asset [Sec. 115C(b)] – Any specified asset acquired in convertible foreign exchange. Specified assets include:
    • Shares in an Indian company
    • Debentures of an Indian company (not private companies)
    • Deposits with Indian companies (not private companies)
    • Securities of the Central Government
    • Other assets as notified by the Central Government

Practical Example

Suppose Mr. A, an NRI, has the following during FY 2024-25:

  • Investment income of ₹5,00,000 from debentures of an Indian listed company.
  • Long-term capital gain of ₹3,00,000 from sale of shares (purchased in foreign exchange).
  • No other income in India.
  • The company has already deducted TDS @20% (as per special provisions under Sec. 115E).

👉 In this case, since Mr. A’s income is only investment income + LTCG on foreign exchange assets and TDS has been deducted, he is not required to file ITR in India as per Section 115G.

Exceptions – When Return Filing is Still Required

Even NRIs/foreign citizens have to file a return of income if:

  • They have any other income in India (e.g., rent, business income, salary, etc.).
  • They want to claim a refund of excess TDS deducted.
  • They want to claim any deductions under Chapter VI-A or exemptions.
  • They want to carry forward capital losses to future years.
  • Their income includes assets not covered under “foreign exchange assets.”

Applicable ITR Forms (If Filing is Required)

  • ITR-2 → For NRIs with investment income, capital gains, and no business income.
  • ITR-3 → If NRI has business or professional income.

If Section 115G exemption applies → No ITR required.

Compliance Benefits of Section 115G

  • Reduces compliance burden on NRIs and foreign investors.
  • Ensures that tax collection at source (TDS) suffices, avoiding duplication of reporting.

Aligns with India’s intention to encourage foreign investment.

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