Section 216 Income Tax Act 2025: When Can NRIs Skip Filing an ITR?
Section 216 provides a limited exemption from furnishing an income-tax return for a non-resident Indian (NRI) whose total income consists only of qualifying investment income, long-term capital gains, or both, where the required tax has been deducted at source.
What does Section 216 say?
Heading: Return of income not to be furnished in certain cases.
(a) his total income during the tax year consisted only of investment income or income by way of long-term capital gains or both; and
(b) the tax deductible at source under the provisions of Chapter XIX-B has been deducted from such income.
The word and is important: both statutory conditions must be satisfied. This exemption does not apply merely because the individual is an NRI or because some tax was withheld.
What are the conditions for not filing an income-tax return?
Condition 1: Only eligible categories of income
The NRI's total income during the tax year must consist exclusively of investment income, long-term capital gains, or both, within the special NRI regime in Sections 212 to 216. Other taxable income, such as salary, rental income or business income, generally prevents reliance on this specific filing exception.
Condition 2: Required tax has been deducted at source
The tax deductible on the qualifying income under Chapter XIX-B must actually have been deducted. A mere expectation that the payer would deduct tax is insufficient. Verify the deduction using the relevant withholding certificates and tax-credit records.
Important distinction: Section 216 removes the need to furnish a return under Section 263(1) when its conditions are met; it does not eliminate the tax liability, create a new tax rate, or guarantee that tax deducted at source is correct in every case.
Relevant statutory definitions and cross-references
For this special regime, an individual who is not resident in India and is an Indian citizen or a person of Indian origin as described in Section 212. Residential status must be determined for the relevant tax year.
Income derived from a foreign exchange asset. It is not a blanket description of all interest, dividends or other receipts of an NRI.
A specified asset that the assessee acquired, purchased or subscribed to in convertible foreign exchange, subject to the statutory wording.
Income chargeable under the head Capital gains arising from the transfer of a foreign exchange asset that is not a short-term capital asset.
Specified categories of Indian-company shares and debentures, deposits, Central Government securities and notified assets, subject to the precise statutory conditions.
The general statutory obligation to furnish a return, from which Section 216 provides a narrowly framed exception for qualifying NRIs.
Read Section 212 for the full definitions and Section 214 for the applicable special tax rates. The filing exception is separate from the reinvestment relief under Section 215.
Practical examples of Section 216
Example 1: Only qualifying investment income, with TDS
An eligible NRI earns Rs. 3,00,000 solely as investment income from a qualifying foreign exchange asset. Assume the tax deductible under Chapter XIX-B has been deducted in full. If the NRI has no other taxable income for that tax year, Section 216 may dispense with the requirement to file a return under Section 263(1).
Example 2: Qualifying long-term capital gains, but no TDS
An eligible NRI earns only qualifying long-term capital gains, but the tax deductible at source has not been deducted. Section 216 cannot be relied upon because the second condition is not met. The individual must separately assess filing and tax-payment obligations.
Example 3: Investment income plus rent
An NRI receives qualifying investment income and taxable rent from Indian property. Even if TDS has been deducted on the investment income, Section 216 does not provide a filing exemption, because total income is not confined to the two specified income categories.
What should an NRI check before deciding not to file?
- Confirm non-resident status and eligibility under the definition in Section 212(d).
- Identify every item of taxable income for the tax year; check whether all of it falls within the qualifying investment-income or long-term-capital-gains categories.
- Verify that the underlying assets satisfy the foreign exchange asset and specified asset definitions.
- Check whether tax deductible under Chapter XIX-B was actually deducted on all qualifying income.
- Reconcile Form 16A, Form 26AS and the Annual Information Statement, where applicable.
- Consider whether filing is necessary or desirable to claim a refund, report another source of income, or satisfy a separate applicable requirement.
Section 216 is a statutory exception, not a prohibition on filing a return. An NRI who wants to claim a refund or needs to report other income should examine the applicable return-filing rules.
Frequently asked questions
Is every NRI exempt from filing an income-tax return?
No. The exemption applies only where both conditions in Section 216 are satisfied. NRI status alone is not enough.
Does Section 216 apply when an NRI has only salary or rental income?
No. The specified income categories are investment income and long-term capital gains under the special regime.
What if TDS was required but was not deducted?
The exemption is unavailable because Section 216(b) requires the tax deductible at source to have been deducted.
Can an NRI with both investment income and long-term capital gains qualify?
Yes, provided these are the only categories of total income and the applicable tax has been deducted at source.
Does Section 216 grant an income-tax exemption?
No. It concerns the obligation to furnish a return, not the chargeability of the income.
Which provision did Section 216 replace?
It corresponds broadly to Section 115G of the Income-tax Act, 1961. The Income Tax Department's transition FAQs confirm continuity of this filing relief.
Official statutory references
Last reviewed: 11 November 2026. This article provides general legal information and should be read with the latest applicable statutory text and facts of the tax year.