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Section 213 Income Tax Act 2025: Can NRIs Claim Deductions?

Section 213 prescribes how investment income and long-term capital gains of a non-resident Indian are treated when computing total income. It restricts expenses against investment income and limits Chapter VIII deductions where special-category income is included.

Current law: Income-tax Act, 2025 (Act 30 of 2025), as amended by the Finance Act, 2026; effective from 1 April 2026, subject to statutory provisions. Section 213 corresponds broadly to section 115D of the Income-tax Act, 1961.

Section 213: Special provision for computation of total income of non-residents

Section 213(1). No deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the investment income of a non-resident Indian.

Section 213(2). In the case of an assessee, being a non-resident Indian, where:

  1. Clause (a): The gross total income consists only of investment income or income by way of long-term capital gains or both; no deduction shall be allowed under Chapter VIII.
  2. Clause (b): The gross total income includes any income referred to in clause (a):
    1. The gross total income shall be reduced by such income; and
    2. Deductions under Chapter VIII shall be allowed as if the reduced gross total income were the assessee's gross total income.

How does Section 213 affect NRI deductions?

1. Expenses cannot be deducted from investment income

An eligible NRI cannot subtract expenditure or allowances from investment income governed by this special regime. For example, an expense incurred to earn qualifying investment income cannot be used to reduce that income under Section 213(1).

2. Only investment income or long-term capital gains

Where gross total income consists exclusively of the qualifying investment income or long-term capital gains described in the provision, Chapter VIII deductions are unavailable under Section 213(2)(a).

3. Mixed income

Where gross total income also includes other income, the special-category investment income and long-term capital gains must first be excluded for computing the amount against which Chapter VIII deductions may be considered. Any deduction remains subject to its own eligibility conditions and limits.

Important distinction: Section 213 governs computation and deductions. The special tax rates for qualifying investment income and long-term capital gains are set out separately in Section 214.

Relevant statutory definitions under Section 212

Non-resident Indian: An individual who is not resident in India and is either an Indian citizen or a person of Indian origin, as described in Section 212(d).
Foreign exchange asset: A specified asset acquired, purchased or subscribed to by the assessee in convertible foreign exchange, under Section 212(a).
Investment income: Income derived from a foreign exchange asset, under Section 212(b).
Long-term capital gains: Income chargeable under the head Capital gains from a foreign exchange asset that is not a short-term capital asset, under Section 212(c).
Specified asset: Includes shares in an Indian company, qualifying debentures or deposits of an Indian company other than a private company, Central Government securities, and notified assets, as detailed in Section 212(e).

Illustrative computation

Example A: Investment income only

An NRI has Rs. 4,00,000 of qualifying investment income and no other gross total income. Expenses incurred to earn this income cannot be deducted under Section 213(1), and Chapter VIII deductions are not available under Section 213(2)(a).

Example B: Investment income plus other income

An NRI has Rs. 3,00,000 of qualifying investment income and Rs. 5,00,000 of other income, giving gross total income of Rs. 8,00,000. For Chapter VIII deduction purposes under Section 213(2)(b), the relevant reduced gross total income is Rs. 5,00,000. The actual permissible deduction depends on the applicable Chapter VIII provisions and other conditions.

These illustrations simplify the statutory computation and do not determine the final tax liability.

Frequently asked questions

Can an NRI claim expenses against qualifying investment income?

No. Section 213(1) expressly disallows expenditure or allowances in computing the investment income covered by the special regime.

Are Chapter VIII deductions available when an NRI has only qualifying investment income?

No. Section 213(2)(a) disallows Chapter VIII deductions where gross total income consists only of qualifying investment income, long-term capital gains, or both.

Can an NRI claim Chapter VIII deductions against salary or other income?

Potentially. Under Section 213(2)(b), the special-category income is excluded when determining the gross total income relevant to those deductions. The deduction must independently be permitted under applicable law.

Does Section 213 itself specify the tax rate?

No. Section 214 specifies the relevant rates for investment income and long-term capital gains under this special regime.

Official law and related provisions

Official consolidated Act (PDF)Income Tax Department: 2025 ActIncome-tax e-Filing Portal

Reviewed: 11 November 2026. This article provides general statutory information; specific tax treatment depends on the facts and applicable law.