Section 215 · Special cases
Section 215 of the Income-tax Act, 2025 — Capital Gains Exemption for NRIs on Reinvestment of Foreign Exchange Assets
By CA Rajat Agrawal
Updated 04 Jul 2026
Chapter XIII
📜 What the law says — Section 215, Income-tax Act 2025
215. (1) Where, in case of an assessee, being a non-resident Indian,—
(a) any long-term capital gains arises from the transfer of a foreign exchange
asset (herein referred to as original asset); and
(b) within six months after the date of such transfer, he has invested the
whole or any part of the net consideration in any specified asset (herein
referred to as new asset),
then the capital gains shall be dealt with in the following manner:—
(i) if the cost of the new asset is not less than the net consideration in respect
of the original asset, the whole of such capital gain shall not be charged
under section 67;
(ii) if the cost of the new asset is less than the net consideration in respect
of the original asset, then the capital gain computed by the following
formula shall not be charged under section 67:—
C
A=B×
D
Where,
A = the capital gains not to be charged under section 67;
B = whole of the capital gain;
C = cost of acquisition of the new asset;
D = net consideration in respect of the original asset.
(2) For the purposes of sub-section (1),—
(a) “cost”, in relation to any new asset, being a deposit referred to in section
212(e)(iii) or (v), means the amount of such deposit;
(b) “net consideration” in relation to the transfer of the original asset, means
the full value of the consideration received or accruing as a result of the
transfer of such asset as reduced by any expenditure incurred wholly
and exclusively in connection with such transfer.
(3) Where the new asset is transferred or converted (otherwise than by transfer)
into money, within three years from date of its acquisition, the capital gain arising
from transfer of original asset not so charged under section 67 on the basis of the
cost of such new asset as provided in sub-section (1)(i) or (ii), shall be deemed to
be income by way of capital gains relating to capital assets other than short-term
capital assets of the tax year in which the new asset is transferred or converted
(otherwise than by transfer) into money.
Return of income not to be furnished in certain cases.
In plain language
Section 215 of the Income-tax Act, 2025 gives Non-Resident Indians (NRIs) a powerful exemption: if you earn long-term capital gains from selling a foreign exchange asset (an Indian investment bought with money brought in from abroad) and you reinvest the sale proceeds in another specified asset within 6 months, the capital gain is not taxed — fully or partly, depending on how much you reinvest. It carries forward, almost word for word, the well-known Section 115F of the Income-tax Act, 1961, and applies from tax year 2026-27 (i.e., from 1 April 2026) under the new Act.
What Section 215 actually says
- Who: only a non-resident Indian as defined in Section 212 — an individual who is a non-resident and is either a citizen of India or a person of Indian origin.
- What income: only long-term capital gains arising from the transfer of a foreign exchange asset — a specified asset that was acquired, purchased or subscribed to in convertible foreign exchange (for example, shares of an Indian company or debentures/deposits of an Indian public company bought by remitting dollars, dirhams or pounds through banking channels, or from an NRE/FCNR account).
- The condition: within 6 months from the date of transfer, the NRI must invest the whole or part of the net consideration (sale price minus expenses of transfer) in another specified asset or notified savings certificates.
How much gain is exempt
- Full exemption: if the cost of the new asset is equal to or more than the net consideration, the entire long-term capital gain escapes tax.
- Proportionate exemption: if you reinvest only part, the exempt gain is computed by the formula Exempt gain = Total capital gain × Cost of new asset ÷ Net consideration. The balance is taxed at the concessional rate under Section 214 (12.5% for long-term capital gains, plus surcharge and cess, in line with the rate that applied under the 1961 Act for transfers on or after 23 July 2024 — verify the current Finance Act rate for your year).
The 3-year lock-in and clawback
Do not sell the new asset early. Section 215(3) contains a clawback: if the new specified asset is transferred or converted into money within 3 years of its acquisition, the capital gain that was earlier exempted is deemed to be long-term capital gain of the year in which you sell or convert it — and becomes taxable then. So the exemption is really a reward for keeping money invested in India for at least three years.
Who this matters for, in practice
- NRIs holding Indian shares, debentures or company deposits bought with foreign currency who want to churn their portfolio without a tax hit each time.
- Returning NRIs planning their exit — the exemption works alongside Section 217, which lets certain benefits continue even after you become a resident (on filing a declaration with your return).
- NRIs who want a simple compliance life — if your Indian income is only investment income and/or such long-term gains and proper TDS has been deducted, Section 216 may even spare you from filing an Indian return.
Interaction with related sections
- Section 212 defines "non-resident Indian", "foreign exchange asset", "specified asset", "convertible foreign exchange" and "investment income" — your eligibility starts here.
- Section 213 bars normal deductions and indexation-style computation for this special regime.
- Section 214 is the charging provision — 20% on investment income and the concessional rate on long-term capital gains — which Section 215 lets you avoid by reinvesting.
- Section 218 makes the whole regime optional: you may elect for normal taxation in any year if that works out cheaper.
Practical tips
- Keep proof of foreign-currency acquisition (FIRC, NRE account statements) — the asset must have been bought in convertible foreign exchange to qualify.
- Track the 6-month deadline from the date of transfer strictly; there is no deposit-scheme extension like Section 54's capital gains account for this provision.
- Diary the 3-year lock-in date of every new asset to avoid an accidental clawback.
💡 Example
Example 1 — Full exemption: Rohan, an NRI in Singapore, sells shares of an Indian company that he had bought by remitting US dollars. Sale price ₹52,00,000, brokerage ₹2,00,000, so net consideration is ₹50,00,000. His cost was ₹30,00,000, giving a long-term capital gain of ₹20,00,000. Within 6 months he reinvests the full ₹50,00,000 in debentures of an Indian public company (a specified asset). Result: the entire ₹20,00,000 gain is exempt under Section 215. Without the reinvestment, tax under Section 214 at 12.5% plus 4% cess would have been about ₹2,60,000.
Example 2 — Proportionate exemption: Same facts, but Rohan reinvests only ₹30,00,000 of the ₹50,00,000 net consideration. Exempt gain = ₹20,00,000 × ₹30,00,000 ÷ ₹50,00,000 = ₹12,00,000. The remaining ₹8,00,000 is taxable; at 12.5% plus cess that is roughly ₹1,04,000.
A short story: Meera, a nurse in Dubai for 12 years, had invested her savings in deposits of an Indian public company through her NRE account. In 2027 she redeemed them at a handsome long-term gain and, on her CA's advice, moved the entire proceeds into shares of an Indian company within four months — paying zero tax under Section 215. Two years later she was tempted to sell those shares for a house deposit, but her CA reminded her of the 3-year clawback: selling early would have made the old exempted gain taxable that year. She waited the extra fourteen months, sold after the lock-in, and kept her exemption intact.
| Aspect | Rule under Section 215 (Income-tax Act, 2025) |
|---|
| Eligible taxpayer | Non-Resident Indian only (non-resident who is an Indian citizen or person of Indian origin — Section 212) |
| Eligible income | Long-term capital gains on transfer of a foreign exchange asset (specified asset bought in convertible foreign exchange) |
| Reinvestment deadline | Within 6 months from the date of transfer |
| Reinvest in | Any specified asset — e.g., shares of an Indian company, debentures/deposits of an Indian public company, Central Government securities or notified savings certificates |
| Full exemption | Cost of new asset ≥ net consideration → entire gain exempt |
| Partial exemption | Exempt gain = Capital gain × Cost of new asset ÷ Net consideration |
| Lock-in / clawback | New asset sold or converted into money within 3 years → exempted gain taxed as LTCG of that year |
| Old-law equivalent | Section 115F of the Income-tax Act, 1961 |
Related sections
Frequently asked questions
Who can claim the exemption under Section 215 of the Income-tax Act, 2025?
Only a Non-Resident Indian — an individual who is non-resident under the Act and is either an Indian citizen or a person of Indian origin (Section 212). Resident taxpayers and non-resident foreigners without Indian origin cannot use it.
What is a foreign exchange asset for Section 215?
It is a specified asset — such as shares of an Indian company, debentures or deposits of an Indian public company, or Central Government securities — that the NRI acquired, purchased or subscribed to using convertible foreign exchange (for example, funds remitted from abroad or from an NRE/FCNR account).
How long do I have to reinvest, and is there a deposit scheme like Section 54?
You must reinvest within 6 months from the date of transfer. There is no capital gains account scheme for this section, so the actual investment in the new specified asset must happen within the 6-month window.
Does Section 215 exempt short-term capital gains too?
No. Only long-term capital gains from the transfer of a foreign exchange asset qualify. Short-term gains are taxed under the normal provisions applicable to non-residents.
What happens if I sell the new asset within 3 years?
The clawback in Section 215(3) applies: the capital gain that was earlier exempted is treated as long-term capital gain of the year in which you transfer or convert the new asset into money, and it becomes taxable in that year.
What tax rate applies if I do not reinvest?
The gain is taxed under Section 214 of the 2025 Act at the concessional rate for NRI long-term capital gains — 12.5% (plus surcharge and cess) in line with the rate applicable under the corresponding old-law provision for transfers on or after 23 July 2024. Confirm the rate for your tax year under the applicable Finance Act.
Is Section 215 the same as Section 115F of the old Income-tax Act, 1961?
Yes, substantially. Section 215 reproduces Section 115F — the 6-month reinvestment rule, proportionate exemption formula and 3-year clawback are all retained without material change in the 2025 Act.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 04 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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