Non-Resident Indians often struggle with one recurring question:
Do I need to file an income tax return in India every year?

In certain cases, the law itself offers relief.

Section 115G of the Income Tax Act, 1961 is one such provision that reduces the compliance burden for NRIs whose Indian income is limited and already taxed at source.

Let’s break it down clearly.

What Is Section 115G of the Income Tax Act?

Section 115G is a special provision applicable to Non-Resident Indians (NRIs). It provides exemption from filing an income tax return in India, provided specific conditions are met.

The intent is simple.
If your income is straightforward and tax has already been deducted, the law does not force you into unnecessary compliance.

Purpose of Section 115G

The primary objective of Section 115G is to:

• Reduce tax compliance for NRIs
  
• Avoid duplicate reporting where tax has already been deducted
  
• Simplify tax administration for investment-based income
  

This section mainly benefits NRIs earning passive income from India.

Who Can Claim Benefit Under Section 115G?

An NRI can avail the benefit of Section 115G only if all conditions are satisfied.

1. Status Must Be NRI

The individual must qualify as a Non-Resident Indian as per the Income Tax Act.

2. Nature of Income Must Be Restricted

The total income of the NRI in India should consist only of:

• Investment Income, or
  
• Long-Term Capital Gains, or
  
• A combination of both

No other income should be included.

What Is Investment Income?

Investment income generally includes:

• Interest from shares, debentures, or deposits
  
• Dividends from Indian companies
  
• Income from specified foreign exchange assets

What Is Long-Term Capital Gains?

Long-term capital gains arise from:

• Sale of equity shares
  
• Sale of mutual funds
  
• Sale of other capital assets held for the prescribed long-term period

3. TDS Must Be Properly Deducted

This is crucial.

• Tax must have been deducted at source (TDS)
  
• Deduction should be as per applicable provisions of the Income Tax Act
  
• No short deduction or non-deduction

If TDS is not deducted correctly, Section 115G relief will not apply.

Effect of Section 115G: ITR Filing Exemption

If all conditions are fulfilled, then:

• The NRI is not required to file an income tax return in India
  
• Compliance obligation ends with TDS deduction
  
• No further reporting is mandatory

This exemption is automatic. No separate application is required.

Crux of Section 115G Explained Simply

What this really means is:

If an NRI’s income in India comes only from investments or long-term capital gains, and
full tax has already been deducted at source, then filing an ITR in India is not compulsory.

That’s the core relief under Section 115G.

When Section 115G Will NOT Apply

NRIs must still file an income tax return if:

• There is any other income, such as:
  
  • Rental income
    
  • Business or professional income
    
  • Short-term capital gains not fully taxed
    
• TDS has not been deducted or deducted incorrectly
  
• The NRI wants to:
  
  • Claim a refund
    
  • Carry forward losses
    
  • Claim deductions or exemptions
    

Section 115G offers relief, not a blanket exemption.

Practical Example

An NRI earns:

• Dividend income from Indian shares
  
• Long-term capital gains from equity mutual funds
  
• TDS deducted as per law
  

No other income in India.

Result:
No income tax return filing required under Section 115G.

Why NRIs Should Still Review Their Tax Position

Even when Section 115G applies, it’s wise to:

• Verify correct TDS deduction
  
• Check tax rates applied
  
• Review DTAA benefits
  
• Ensure residential status is correctly determined
  

A small mismatch can trigger notices later.

Final Thoughts: Section 115G

Section 115G of the Income Tax Act, 1961 is a compliance-friendly provision designed specifically for NRIs with limited, investment-based income in India.

Used correctly, it saves time, effort, and unnecessary filings.

At Habinx Compliance, we advise NRIs to review their income structure annually to determine whether Section 115G applies or whether filing an income tax return is still beneficial.

Disclaimer: Every effort has been made to avoid errors or omissions in this material. Despite this, errors may occur. Any mistake, error, or discrepancy noted may be brought to our notice and will be addressed in subsequent updates. The author shall not be liable for any direct, indirect, special, or incidental damage arising from the use of this information.

FAQs About Section 115G

1. What is Section 115G of the Income Tax Act?

Section 115G provides relief to NRIs from filing an income tax return in India if their income is only from investments or long-term capital gains and TDS has been deducted.

2. Who is eligible for exemption under Section 115G?

Non-Resident Indians whose total income in India consists solely of investment income, long-term capital gains, or both, with proper TDS deduction.

3. Is filing an income tax return mandatory for NRIs under Section 115G?

No. If all conditions under Section 115G are satisfied, filing an income tax return in India is not mandatory.

4. What types of income are covered under Section 115G?

Investment income such as interest or dividends and income from long-term capital gains on specified assets.

5. Does Section 115G apply if there is rental or business income?

No. If an NRI earns any income other than investment income or long-term capital gains, Section 115G will not apply.

6. What if TDS is deducted incorrectly or not deducted?

In such cases, the exemption under Section 115G will not be available, and the NRI must file an income tax return.

7. Can an NRI still file an ITR even if Section 115G applies?

Yes. An NRI may choose to file an ITR to claim a refund, carry forward losses, or report income voluntarily.

8. Is Section 115G exemption automatic?

Yes. If all conditions are met, no separate application or declaration is required to claim the exemption.

9. Does Section 115G apply every year automatically?

Eligibility must be checked every financial year based on income type and TDS compliance.

10. Should NRIs consult a tax expert even if Section 115G applies?

Yes. Reviewing income structure, TDS accuracy, and DTAA benefits helps avoid future tax notices or disputes.