Is there a special low-tax regime for NRI investments in India?

Yes. Chapter XII-A taxes a non-resident's income and long-term gains on Indian assets bought in convertible foreign currency, foreign-exchange assets, at concessional flat rates: 20% on investment income and a reported 10% on long-term gains, computed without indexation.

No, it is elective. You can opt out for any year and be taxed under the ordinary rules if they are better, which can happen since the flat 20% on investment income may exceed the slab for someone with modest other income. So it is a choice to weigh.

Is this the same as the Section 115AC bonds regime?

No. Section 115AC is specific to foreign-currency bonds and GDRs, while Chapter XII-A is the broader foreign-exchange-asset regime covering Indian company shares, public-company deposits and debentures, and government securities. A CA checks which fits your holdings.

Investments

The NRI special regime for investments bought in foreign currency

Q: Can I keep the lower rate after I move back to India?

Yes, under Section 115H. By filing a declaration with your return, you can keep the concessional treatment on your existing foreign-exchange assets even after becoming resident, until those assets are sold or converted.

You invested foreign currency in Indian shares, deposits or securities, and want to know whether a lower special rate applies.

You put foreign money into Indian investments, shares of an Indian company, deposits or debentures of Indian public companies, central government securities, and now you are earning income or selling. The ordinary rates are one option, but there is a long-standing special regime for exactly this, non-residents investing in Indian assets with convertible foreign currency, that can tax the income and gains lower, and can even be carried on after you move back to India. It is under-used because few know it is still there, so it is worth checking whether it beats the normal route for you.

Request a free CA call

Last reviewed: 26 July 20267 min readReviewed by Preetesh Maloo, CA

The short answer

There is a special regime, Chapter XII-A of the Income-tax Act, for a non-resident who buys certain Indian assets, shares of an Indian company, deposits or debentures of Indian public companies, or central government securities, in convertible foreign currency. These are foreign-exchange assets, and the regime taxes investment income like interest and dividends at a flat 20%, and long-term gains on them at a reported 10%, computed without indexation. It is elective, you can opt out and use the ordinary rates if they are better, and it has two useful features: a rollover exemption if you reinvest the sale proceeds, and the option to keep the concessional rate on those assets even after you return to India and become resident.

References on this page

Chapter XII-A (Sections 115C to 115I): a non-resident's Indian assets bought in convertible forex are 'foreign-exchange assets'
Investment income taxed at a flat 20%; long-term gains at a reported 10%, computed without indexation
The regime is elective: a non-resident can opt out and use the ordinary rates where better
Section 115F rollover on reinvestment; Section 115H lets the concessional rate continue after you become resident

What the regime covers, and the rates

Chapter XII-A, Sections 115C to 115I, is a regime built for non-residents who invest in India with foreign money. It applies to foreign-exchange assets, meaning specified Indian assets, shares of an Indian company, deposits or debentures of Indian public companies, and central government securities, that a non-resident acquired in convertible foreign currency.

For these, investment income, the interest and dividends they throw off, is taxed at a flat 20%, and long-term capital gains on selling them are taxed at a reported 10%, computed without the benefit of indexation or the forex proviso. Because Indian capital-gains rates changed in 2024, the exact long-term figure is worth confirming for the year of sale, but the regime has historically taxed these gains at 10%, which can now be lower than the 12.5% that applies to many assets under the ordinary rules. That is the point of checking it: for some NRI holdings it genuinely undercuts the default.

Elective, with rollover and a continuation option

Two features make the regime more than just a rate. First, under Section 115F, if you reinvest the net proceeds of a long-term foreign-exchange asset into another specified asset or savings within six months, the gain is exempt proportionately, a rollover relief specific to this regime. Second, and unusually, under Section 115H you can choose to keep the concessional treatment on your existing foreign-exchange assets even after you return to India and become resident, by filing a declaration with your return, until those assets are sold or converted. So the lower rate does not automatically vanish the moment you move back.

The regime is elective. It is not forced on you, you can opt out for any assessment year and be taxed under the ordinary provisions if they work out better, which matters because the flat 20% on investment income can be worse than the slab for someone with little other income. So it is a genuine choice to weigh, not a default. A practising CA compares the special regime against the ordinary rates for your specific holdings and income, and files the declaration where continuing it after a return is worthwhile.

Want a senior CA to handle this for you — start to finish?

We act for you before the tax office (Section 288) — you stay abroad, no India trip needed.

Senior CA who specialises in NRI tax · we deal with the tax officer, you don't

Chat with a CA on WhatsApp

What's involved

What the CA actually does

1
We test it against the normal rates
We compute your tax both under the Chapter XII-A special regime and the ordinary rules, and use whichever is lower for your holdings.
2
We apply the rollover relief
Where you reinvest the proceeds of a foreign-exchange asset, we claim the Section 115F rollover so the gain is exempt to that extent.
3
We continue it after you return
If you are moving back to India, we file the Section 115H declaration so the concessional rate carries on for your existing assets.
4
We confirm the current rate
We verify the long-term rate for your year of sale, since capital-gains rates changed in 2024, before you rely on the figure.

What to have ready

Documents you'll typically need

The Indian investments and their purchase-in-forex evidence
Interest, dividend and sale statements
Any reinvestment details, for the rollover
Your PAN and residency details, including any return-to-India date

Your destination country can change the details

Requirements differ from one consulate, university and visa route to the next — how recent the figures must be, how long funds must have been held, and which certificates are mandatory. We assemble the documents around the exact checklist you're applying under. To see how India's tax treaty with your country of residence affects related filings, set your country below or compare all 31 countries.

Frequently asked questions

Common questions

If this matched your situation, these go further

Bonds and GDRs of an Indian company bought in foreign currency The forex rule on Indian shares: computing your gain in your own currency PMS, AIFs and GIFT City — how each investing route is taxed for an NRI NRI ITR filing (we file for you)DTAA TDS recovery Stocks / equity redemption coordination Capital gains calculator

Investing in India with foreign currency?

Tell us what you hold. A practising CA will check if the special regime beats the normal rate on a free call, no obligation.