NRI Taxation Rules Simplified: Clause 213 vs Section 115D
India’s tax laws for NRIs have always had a separate treatment for specific types of income. With the Income Tax Bill, 2025 proposing Clause 213, many are wondering how it differs from Section 115D of the Income Tax Act, 1961.
In this blog, we break it down—simply, clearly, and legally.
What is Clause 213 of the Income Tax Bill, 2025?
Clause 213 retains the core idea of Section 115D but updates the framework for easier computation of income for Non-Resident Indians (NRIs). It applies only to eligible NRIs investing in specified assets.
Key Highlights of Clause 213
- Applies to investment income and long-term capital gains from foreign exchange assets.
- No deductions under Chapter VI-A allowed for such income.
- Gross basis taxation: Taxed without allowing for expenses or standard deductions.
- Similar in structure to Section 115D but aligned with the new tax code format.
Section 115D vs Clause 213 – Comparison Table
| Feature | Section 115D (1961 Act) | Clause 213 (2025 Bill) |
|---|---|---|
| Applicable To | NRIs investing in foreign exchange assets | NRIs under proposed 2025 regime |
| Income Covered | Investment income, LTCG | Investment income, LTCG |
| Deductions under Chapter VI-A | Not available | Not available |
| Tax Rate | Special rates under Chapter XII-A | To be notified (expected similar treatment) |
| Method of Computation | Gross basis, no expenses | Gross basis, no expenses |
| Legal Reference | Section 115D of Income Tax Act, 1961 | Clause 213 of Income Tax Bill, 2025 |
Legal Reference and Notification
- Section 115D is part of Chapter XII-A of the Income Tax Act, 1961.
- Clause 213 is proposed under the Draft Direct Tax Code, 2025, published by the Department of Revenue.
- Official Draft Bill
Who is an Eligible NRI?
As per the proposed Bill and existing rules:
- A citizen of India or person of Indian origin
- Not a resident in India during the relevant financial year
- Holding specified assets in convertible foreign exchange
Practical Tip for NRIs
Don’t mix account types. Keep investment income from foreign exchange assets in a separate account. It helps during ITR filing and ensures clean audit trails.
Expert View
Tax experts recommend continuing investments through NRE/NRO accounts and focusing on long-term capital assets. With gross taxation and no deductions, timing of investment matters more than ever.
Summary
Clause 213 of the Income Tax Bill, 2025 mirrors Section 115D, offering gross taxation on NRI investment income. It disallows deductions, targets foreign exchange asset income, and simplifies tax calculation for NRIs. Compare both provisions to ensure compliance and plan better.
FAQs on NRI Taxation Rules
Q1. Can NRIs claim Chapter VI-A deductions on investment income?
No, both Clause 213 and Section 115D prohibit such deductions.
Q2. Are capital losses allowed to be set off?
No, Clause 213 also adopts a gross taxation approach, disallowing set-offs.
Q3. Do I need to file ITR if only exempt NRI income is earned?
If your income is below the taxable limit, filing is optional. But disclosure may help in asset reporting and refunds.
Final Thoughts
Clause 213 is not a radical shift—it’s a continuation of the special treatment NRIs receive under Indian tax law. But as India moves towards a new direct tax code, NRIs must revisit their investment structure.