Is any Relief available to Non-Resident Indians when they become Resident?
Section 115H of the Income Tax Act,1961 provide benefits in case an assessee was assessed as a Non-Resident Indian in preceding years and is assessed as Resident in the relevant previous year, he is eligible to pay the tax on specified investment income at the rate at which he use to pay tax in preceding years. He just needs to furnish a declaration in writing along with his return of income under section 139 of the Income Tax Act,1961 for the assessment year for which he is so assessable. The declaration shall contain a request made to Assessing officer to allow continuity of applicability of the provisions as were applicable to him when he was Non-Resident.
One may think why NRI will opt for this provision. The reason is that interest income not earned in India is Not Taxable in hands of NRI, while the same is Taxable to Residents. Due to this if NRI earns above mentioned income it is taxable in his hands. By opting for this provision he will still continue to get the benefit as was available to NRI.
Now, the question comes why is Government giving this benefit? To understand this, once carefully see the list of specified assets given in this section. The list shows that in all the cases the asset brings foreign currency in our country. The flow of Foreign Exchange in the country is a good sign of development. So for development of the country Government gives this benefit.
Section 115H reads as under:-
“Where a person, who is a non-resident Indian in any previous year, becomes assessable as resident in India in respect of the total income of any subsequent year, he may furnish to the Assessing Officer a declaration in writing along with his return of income under section 139 for the assessment year for which he is so assessable, to the effect that the provisions of this Chapter shall continue to apply to him in relation to the investment income derived from any foreign exchange asset being an asset of the nature referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) of clause (f) of section 115C; and if he does so, the provisions of this Chapter shall continue to apply to him in relation to such income for that assessment year and for every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money of such assets.”
The relevant clauses of Section 115C reads as under:-
In this Chapter, unless the context otherwise requires,—
(f) “specified asset” means any of the following assets, namely :—
(ii) debentures issued by an Indian company which is not a private company68 as defined in the Companies Act, 1956 (1 of 1956);
(iii) deposits with an Indian company which is not a private company68 as defined in the Companies Act, 1956 (1 of 1956);
(iv) any security of the Central Government as defined in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944);
(v) such other assets as the Central Government may specify in this behalf by notification in the Official Gazette.