Returning NRIs? Know the New Concessional Tax Regime
Concessional tax regime for NRIs has always been a niche yet crucial part of Indian tax law. With the introduction of Clause 217 of the Income Tax Bill, 2025, the landscape has shifted. This clause redefines the tax treatment available to non-resident Indians (NRIs) becoming residents — replacing the earlier Section 115H under the Income-tax Act, 1961.
What Was Section 115H?
Under the 1961 Act, Section 115H provided NRIs with:
- The option to continue availing concessional tax rates on foreign income
- Only if such income was from investments made during their non-resident period
- The benefit was available for the year they became residents and continued till the investments existed
But this required a formal declaration with the ITR in the first year of return.
What’s New in Clause 217 of the 2025 Income Tax Bill?
The draft Clause 217 proposes a reimagined approach:
| Criteria | Section 115H (1961) | Clause 217 (2025 Bill) |
|---|---|---|
| Eligibility | NRIs becoming residents | Same, but with streamlined procedures |
| Benefit | Continue concessional rate | Introduces optional regime |
| Conditions | Declaration in ITR + proof of investment | Simplified opt-in mechanism |
| Income Covered | Investment income only | May extend to other foreign-sourced income (TBD in rules) |
| Tenure | Till the investment remains | Likely to be time-bound (exact years pending notification) |
✅ Expert View: The new clause intends to make compliance smoother and remove ambiguity. However, final rules (if notified) will be key.
Key Legal References
- Clause 217 – Income Tax Bill, 2025 (read with explanatory memorandum)
- Section 115H – Income-tax Act, 1961
- CBDT FAQs and clarifications (to be updated once notified)
Why This Matters for Returning NRIs
This shift is part of India’s broader aim to modernise its tax structure under the new Income Tax Code. For NRIs planning to return:
- You now have a cleaner, possibly more inclusive path
- Potential for fewer paperwork hassles
- But may lose certain legacy benefits if not carefully timed
How to Opt In (Once Law is Passed)
While rules are awaited, here’s what returning NRIs should prepare:
- Track your residency status under Section 6
- Maintain documentation of all foreign income/investments
- File return in the first year of becoming resident
- Tick the correct regime option (as per new utility format, expected by AY 2026–27)
Summary Snippet (for Google):
NRIs returning to India? Clause 217 of Income Tax Bill 2025 simplifies concessional tax benefits, replacing Section 115H of the old Act. Learn what changes and how to opt in.
FAQ Section
Q1. Who can claim concessional rates under Clause 217?
Any NRI becoming a resident in India, subject to conditions under the new tax code.
Q2. Will investments made before becoming resident still qualify?
Yes, provided the investments are eligible and declared in your return.
Q3. Can I choose between new and old regime?
Yes, Clause 217 is optional — you can decide annually during ITR filing.
Q4. Will the new regime cover all foreign income?
Depends on final CBDT notifications — keep an eye on official clarifications.