NRI Tax on Foreign Asset Transfers: What Changes in 2025?
The Income Tax Bill, 2025 introduces Clause 215, which impacts how Non-Resident Indians (NRIs) can claim exemptions on capital gains from foreign exchange assets. This significantly updates the older Section 115F of the Income-tax Act, 1961.
Here’s a simplified guide to what’s changing — and how it affects your investment strategy as an NRI.
What Is Section 115F (Existing Law)?
Under Section 115F, NRIs can claim exemption from long-term capital gains tax when:
- They transfer a foreign exchange asset (like shares or bonds), and
- Reinvest the net consideration within 6 months into specified assets (e.g., new shares, bonds, NHAI/REC capital gain bonds).
Key Conditions:
- Holding must be long-term
- Reinvestment within 6 months
- Exemption allowed only in proportion to reinvestment
What Does Clause 215 of Income Tax Bill, 2025 Propose?
Clause 215 introduces a modernised framework for NRI capital gains exemption with these notable changes:
| Aspect | Section 115F (Old) | Clause 215 (2025 Bill) |
|---|---|---|
| Eligibility | NRIs only | Non-Residents (broader scope) |
| Asset Type | Only foreign exchange assets | Retains focus on foreign assets |
| Reinvestment Time | Within 6 months | May allow extended timelines (CBDT to notify) |
| Investment Options | Only notified bonds, shares | Broader list incl. govt securities, units, etc. |
| Partial Reinvestment | Proportional exemption | Similar proportionality retained |
| Withdrawal Before 3 Years | Entire exemption reversed | Same condition remains |
Focus Keyphrase Subheading:
NRI tax on foreign asset transfers – key updates in 2025
Let’s simplify what NRIs need to track:
- Clause 215 widens the scope to all non-residents, not just Indian passport holders.
- More flexible investment routes may be introduced by CBDT notifications.
- Exemption reversal clause remains: If new asset sold within 3 years, tax benefit is revoked.
Expert View:
“NRIs with global portfolios must align reinvestment timelines to new Clause 215 terms. Delayed CBDT notifications may delay planning.
Legal Insight:
- Clause 215 reflects recommendations of the Taxation of Non-Resident Investments Committee
- Still pending CBDT rule notifications to finalise investment options
- Ensures parity with newer tax regimes for global Indians
What Should NRIs Do Now?
✅ Re-evaluate foreign investment timelines
✅ Stay updated with CBDT notifications under Clause 215
✅ Use professional tax services to avoid exemption reversals
NRI investors can now defer or avoid capital gains tax on foreign asset transfers under Clause 215 of the Income Tax Bill, 2025. The updated law replaces Section 115F of the 1961 Act with a broader scope and flexible reinvestment norms. Key for NRIs planning global exits.
Optional FAQ Section:
Q1: Who qualifies under Clause 215?
All non-residents, including NRIs and foreign investors.
Q2: Is reinvestment mandatory to claim exemption?
Yes, within a CBDT-notified timeline, similar to the 6-month rule under Section 115F.
Q3: What if I sell the reinvested asset before 3 years?
Exemption will be revoked, and tax will become payable in the year of such sale.