Section 212 Income Tax Act 2025: What Are the NRI Tax Definitions?
Section 212 provides the meanings of five statutory expressions used in the special income-tax rules concerning non-resident Indians and investments made in convertible foreign exchange.
What does Section 212 of the Income-tax Act, 2025 cover?
Section 212 is titled Interpretation. Its opening words provide that the definitions in clauses (a) to (e) apply in Sections 213 to 218. These terms identify the persons, income and investments to which the connected special provisions may apply. Eligibility, computation, rates and exemptions must be determined from the operative provisions, not from the definitions alone.
Statutory definitions under Section 212
Section 212(a): Foreign exchange asset
A foreign exchange asset is a specified asset that the assessee acquired or purchased with, or subscribed to in, convertible foreign exchange. Thus, both the nature of the asset and the foreign-exchange funding requirement matter.
Section 212(b): Investment income
Investment income means any income derived from a foreign exchange asset. Whether a receipt qualifies depends on the asset and the applicable charging and computation provisions.
Section 212(c): Long-term capital gains
Long-term capital gains means income chargeable under the head "Capital gains" in relation to a capital asset that is a foreign exchange asset and is not a short-term capital asset. The definition does not convert a short-term gain into a long-term gain.
Section 212(d): Non-resident Indian
A non-resident Indian means an individual who is not a resident and who is either (i) a citizen of India or (ii) a person of Indian origin. The provision requires non-resident status; Indian citizenship or Indian origin alone is insufficient. Residential status and any applicable meaning of person of Indian origin must be checked under the relevant law.
Section 212(e): Specified asset
A specified asset is one of the assets expressly listed in clauses (i) to (v), explained below. An investment is not automatically a foreign exchange asset merely because its owner is a non-resident Indian.
Which investments are specified assets under Section 212(e)?
- Section 212(e)(i): Shares in an Indian company.
- Section 212(e)(ii): Debentures issued by an Indian company that is not a private company as defined in the Companies Act, 2013.
- Section 212(e)(iii): Deposits with an Indian company that is not a private company as defined in the Companies Act, 2013.
- Section 212(e)(iv): Any security of the Central Government as defined in Section 2(f) of the Government Securities Act, 2006.
- Section 212(e)(v): Other assets specified by the Central Government through notification.
How do Sections 213 to 218 use these definitions?
Section 213 addresses computation of certain non-resident Indian investment income and deductions. Section 214 provides special tax rates for qualifying investment income and long-term capital gains. Section 215 addresses relief in specified cases involving reinvestment of proceeds from foreign exchange assets. Section 216 deals with return-filing relief in qualifying cases. Section 217, as substituted by the Finance Act, 2026, addresses continuation of specified benefits on becoming resident and the option not to apply the special regime. Section 218, as substituted in 2026, concerns certain offshore banking or IFSC business income; the scope of Section 212's opening reference should therefore be read with the amended provisions.
Section 212 broadly corresponds to Section 115C of the Income-tax Act, 1961. The wording and cross-references of the applicable enactment should be used for the relevant tax year.
Practical illustrations
Example 1: Shares acquired using convertible foreign exchange
An eligible non-resident Indian subscribes to shares of an Indian company using convertible foreign exchange. Those shares may satisfy both Section 212(e)(i) and Section 212(a). The tax treatment of dividends or capital gains is then determined under the applicable substantive provisions.
Example 2: Deposit with a private company
A non-resident Indian makes a deposit with an Indian private company. Such a deposit is not included in the specified-asset category in Section 212(e)(iii), even if funded in foreign currency, unless it independently qualifies under another applicable specified category or notification.
Example 3: Non-resident Indian holding an ordinary overseas asset
A non-resident Indian owns shares in a foreign company. Those shares are not shares in an Indian company under Section 212(e)(i). Their taxation, if any, must be assessed under other applicable provisions.
Frequently asked questions
Does Section 212 prescribe an NRI income-tax rate?
No. It defines expressions used in connected sections. Section 214 contains special rates for qualifying income; the applicable rate depends on the relevant facts and provisions.
Is every foreign-currency investment a foreign exchange asset?
No. The investment must first be a specified asset under Section 212(e) and must satisfy the foreign-exchange acquisition or subscription requirement in Section 212(a).
Can a person of Indian origin qualify without Indian citizenship?
Yes. Section 212(d) expressly includes a non-resident individual who is a person of Indian origin, even where that individual is not an Indian citizen, subject to the applicable legal meaning and facts.
Are shares in a private Indian company excluded?
No. Clause (e)(i) refers to shares in an Indian company without excluding private companies. The restriction relating to a company that is not private appears separately in clauses (e)(ii) and (iii) for debentures and deposits.
What is the corresponding section in the 1961 Act?
Section 115C of the Income-tax Act, 1961 provided related definitions. Section 212 of the 2025 Act should be applied for the relevant period under the new law.
Official statutory sources
Last reviewed: 11 November 2026. This article provides general legal information and should be read with the full statutory provisions, relevant notifications and applicable treaty rules.