Income tax law - NRI taxation

Section 115I of Income Tax Act 1961: NRI Option Not to Apply Chapter XII-A

Section 115-I allowed a non-resident Indian to opt out of the special tax provisions in Chapter XII-A for a particular assessment year and instead have total income computed and taxed under the other provisions of the Income-tax Act.

Updated for the law position as on 28 September 2026.

Current-law note: The Income-tax Act, 2025 came into force on 1 April 2026. The subject of old Section 115-I continues under Section 218 of the Income-tax Act, 2025. Section 115-I remains relevant when examining periods and matters governed by the Income-tax Act, 1961 and its repeal-and-savings framework.

In simple terms: the special NRI regime was optional for an eligible non-resident Indian. Under Section 115-I, the NRI could state in the return of income that Chapter XII-A should not apply for that assessment year. Once that election was made, income for that year was computed and taxed under the other applicable provisions of the 1961 Act.

What did Section 115-I provide?

Section 115-I formed part of Chapter XII-A of the Income-tax Act, 1961, titled "Special Provisions Relating to Certain Incomes of Non-Residents." The section dealt specifically with the choice available to a non-resident Indian not to be governed by that Chapter for an assessment year.

Text of Section 115-I of the Income-tax Act, 1961

Chapter not to apply if the assessee so chooses.

115-I. A non-resident Indian may elect not to be governed by the provisions of this Chapter for any assessment year by furnishing his return of income for that assessment year under section 139 declaring therein that the provisions of this Chapter shall not apply to him for that assessment year and if he does so, the provisions of this Chapter shall not apply to him for that assessment year and his total income for that assessment year shall be computed and tax on such total income shall be charged in accordance with the other provisions of this Act.

Conditions and effect of the Section 115-I option

Eligible person: the option was available to a "non-resident Indian" within the scheme of Chapter XII-A.
Year-specific choice: the election applied to the assessment year for which it was made.
Declaration in the return: the NRI had to furnish the return under Section 139 and declare that Chapter XII-A would not apply for that assessment year.
Result of opting out: total income was computed and tax was charged under the other applicable provisions of the Income-tax Act, 1961 instead of the special Chapter XII-A regime.

Meaning of important provisions

Non-resident Indian under Chapter XII-A

For this special regime, the expression "non-resident Indian" must be read with the definitions in Section 115C. Chapter XII-A dealt with specified investment income and long-term capital gains connected with foreign exchange assets held by eligible NRIs.

Section 139 - return of income

Section 115-I linked the election to the return of income furnished under Section 139. The declaration in that return was the statutory method by which the assessee chose not to apply Chapter XII-A for the relevant assessment year.

Chapter XII-A

Chapter XII-A contained the special provisions in Sections 115C to 115-I relating to certain incomes of non-residents. These provisions included definitions, special computation rules, tax on investment income and long-term capital gains, reinvestment relief, return-filing relief in specified cases, continuation of certain benefits after becoming resident, and the opt-out choice under Section 115-I.

Section 115-I and current Section 218 of the Income-tax Act, 2025

From 1 April 2026, the Income-tax Act, 2025 is the current income-tax statute. The elective mechanism formerly contained in Section 115-I is carried forward in Section 218 of the Income-tax Act, 2025. Under the new framework, a non-resident Indian may choose not to be governed by the relevant special provisions for a tax year by making the declaration in the return of income. The consequence remains that income is then computed and charged under the other applicable provisions of the new Act.

Point	Income-tax Act, 1961	Income-tax Act, 2025
Opt-out provision	Section 115-I	Section 218
Period terminology	Assessment year	Tax year
Return provision referred to	Section 139	Section 263
Core effect	Chapter XII-A does not apply for the elected year; other provisions govern computation and tax.	Specified NRI special provisions do not apply for the elected tax year; other provisions govern computation and tax.

Why this legacy page is still useful: tax returns, assessments, appeals, rectification proceedings, litigation and other matters relating to periods governed by the Income-tax Act, 1961 may still require reference to Section 115-I. For current tax years, readers should verify the corresponding provisions of the Income-tax Act, 2025 and the applicable Income-tax Rules, 2026.

Practical points for an NRI

The opt-out decision should not be treated as an automatic tax-saving choice. Its effect depends on the nature of income, the assets involved, the applicable tax rates, deductions or exemptions available under the general provisions, and the law governing the relevant year. The election is tied to the return for that year, so the applicable return form and instructions should also be checked before filing.

Official references

For current statutory material and filing information, see the Income Tax Department - Income-tax Act, 2025, the Department's Non-Resident guidance, and the Income Tax e-Filing portal.