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TMI BlogExemption from Income Tax Return Filing for Non-Resident Indians : Clause 216 of Income Tax Bill, 2025 Vs. Section 115G of Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... n passive categories and has already been subjected to tax deduction at source (TDS). The legislative intent behind such provisions is to reduce the procedural burden on NRIs, facilitate ease of doing business, and ensure that the tax administration focuses on cases where further scrutiny is warranted. This commentary offers a detailed examination of Clause 216, systematically analyzes its contents, and juxtaposes it with the existing Section 115G, highlighting similarities, differences, and the implications for stakeholders. Objective and Purpose The primary objective of both Clause 216 and Section 115G is to provide a conditional exemption from the mandatory filing of income tax returns for NRIs whose Indian income profile is simple and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 139(1) if: * The total income in respect of which the person is assessable under the Act during the previous year consisted only of investment income or income by way of long-term capital gains or both; and * The tax deductible at source under Chapter XVII-B has been deducted from such income. Comparison: Both provisions are nearly identical in their applicability, focusing on NRIs with income limited to investment income and/or long-term capital gains. The key differences are in the references to the relevant sections for return filing (section 263(1) in the Bill and section 139(1) in the 1961 Act) and the chapters governing TDS (XIX-B vs. XVII-B). 2. Definitions and Terminology Non-resident Indian: Both provisions employ the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply, and the NRI is required to file a return. 4. Chapter Reference and Legislative Framework 1961 Act: Chapter XVII-B deals with TDS provisions. Section 139(1) is the principal provision mandating the filing of income tax returns. 2025 Bill: The references are to Chapter XIX-B for TDS and section 263(1) for return filing. These changes are likely a result of the re-codification and restructuring of the statute in the new Bill. The substance, however, remains consistent. 5. Ambiguities and Issues in Interpretation * Definition Consistency: The precise definitions of "investment income" and "non-resident Indian" must be consistently maintained to avoid interpretational disputes. * Scope of Income: The phrase "consisted only of inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors * Accurate TDS Deduction: Banks and other intermediaries must ensure correct TDS rates are applied to NRI investment incomes and capital gains. * Reporting Obligations: Deductors should provide TDS certificates and report such deductions to the tax authorities to facilitate cross-verification. For Policymakers * Policy Continuity: The near-identical framing of Clause 216 and Section 115G reflects a policy continuity and a recognition of the efficacy of the existing exemption. * Modernization and Clarity: The restructuring of chapter and section references should be accompanied by clear transitional provisions and public awareness initiatives. Comparative Table: Clause 216 of the Income Tax Bill, 2025 vs. Section 115G of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions and procedural frameworks, which could affect the practical application of the provision. 4. International Comparison Globally, many jurisdictions offer similar compliance relief to non-residents with limited and fully-taxed income sources. For instance, the United States exempts certain non-residents from filing returns if their only U.S. income is subject to withholding at source at the correct rate. The Indian approach aligns with these international best practices, promoting ease of compliance for inbound investments and remittances. 5. Potential Issues and Recommendations * Clarity in Definitions: The definitions of "investment income," "long-term capital gains," and "non-resident Indian" must be harmonized and clearly cros ..... X X X X Extracts X X X X X X X X Extracts X X X X
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