Introduction
The landscape of NRI investment taxation 2025 is changing. Clause 214 of the draft Income Tax Bill, 2025 aims to modernise tax treatment for non-resident Indians (NRIs), replacing provisions under Section 115E of the Income-tax Act, 1961. This blog simplifies these updates for NRIs, consultants, and tax professionals.
What Did Section 115E Say? (Old Regime)
Under the 1961 Act, Section 115E offered a concessional tax regime for NRIs on:
- Investment income from foreign exchange assets – taxed at 20%
- Long-term capital gains (LTCG) on foreign exchange assets – taxed at 10%
- No deductions under Chapter VI-A allowed
- Assets had to be purchased in convertible foreign exchange
- Applicability limited to individuals qualifying under Section 115C
This regime was simple, low-tax, and incentivised NRI investments in India.
What Does Clause 214 of Income Tax Bill, 2025 Propose?
The draft Clause 214 introduces new rules for non-resident individuals:
- Defines eligible foreign exchange assets more broadly
- LTCG still taxed at 10%, but with clarified definitions
- Investment income taxable at 20%
- Reaffirms no deductions under Chapter VII
- Shifts scope from “non-resident Indians” to non-resident individuals
- Seeks alignment with OECD principles and anti-avoidance provisions
Key Comparison: Section 115E vs. Clause 214
| Feature | Section 115E (Old) | Clause 214 (New) |
|---|---|---|
| Applicability | Non-Resident Indian (NRI) | Any Non-Resident Individual |
| LTCG Tax Rate | 10% | 10% (Retained) |
| Investment Income Tax Rate | 20% | 20% (Retained) |
| Eligible Assets | Narrowly defined | Broader definition |
| Currency Requirement | Only foreign exchange | Foreign exchange + notified classes |
| Chapter VI-A deductions | Not allowed | Still not allowed |
Legal Reference & Notification Angle
- Clause 214: Income Tax Bill, 2025 (Draft circulated for public comments)
- Section 115E: Income-tax Act, 1961 (Repeal proposed)
- Draft Bill Source – Ministry of Finance
This shift reflects India’s move towards simplifying the tax code, with alignment to global tax practices.
Expert Insight: What NRIs Should Do
“NRIs with long-term investments in Indian equities or bonds should reassess portfolio structures before the final law kicks in,” says a senior CA from Efiletax. “Legacy tax planning under 115E may no longer apply—early restructuring can help avoid adverse consequences.”
Practical Tip for NRIs
- Recheck the holding structure of Indian assets
- Review if your income will still qualify under foreign exchange asset rules
- Be prepared to submit declarations and proofs of remittance
What Stays Unchanged?
- Concessional tax rates remain the same
- Still no Chapter VII deductions
- Still limited to investment income and capital gains, not regular income
What Changes?
- Widened applicability
- Asset class redefined
- Terminology moved from “NRI” to “non-resident individual”
Conclusion: Stay Ahead with Efiletax
Tax laws for NRIs are shifting from legacy terms to modern definitions. At Efiletax, our experts are decoding each clause to help you comply and save. Whether you’re investing in Indian equities or earning interest on NRE deposits, we’ve got you covered.
NRI investment taxation 2025 changes under Clause 214 of the new tax bill. This clause modernises Section 115E provisions with clearer rules on foreign exchange assets, tax rates, and eligibility. Learn how these changes affect your portfolio and what NRIs must do before they invest.
Optional FAQ for SEO
Q1. What is Clause 214 in the Income Tax Bill, 2025?
It replaces Section 115E to modernise NRI investment taxation rules and expand asset eligibility.
Q2. Are tax rates changing under Clause 214?
No, concessional rates of 10% (LTCG) and 20% (investment income) remain the same.
Q3. Does Clause 214 apply only to NRIs?
It applies to any non-resident individual, not just those qualifying as NRIs under older definitions.