Income Tax 2025

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Tax on investment income and long-term capital gains. ​

214 ​

The Income-tax payable, on the total income of an assessee, being a non-resident Indian, which includes income specified in column B of the Table below, shall be the aggregate of the amounts mentioned in column C thereof. --Table--

Explanation

Section Summary: ​

Section 214 of the new income tax law specifies how income tax is calculated for non-resident Indians (NRIs) when their total income includes certain types of investment income and long-term capital gains. The tax payable is determined by aggregating specific amounts as outlined in a table provided in the section.

Key Changes: ​

  1. Focus on NRIs: This section specifically addresses the tax treatment of NRIs, which was not as explicitly detailed in prior versions of the income tax law.
  2. Aggregation of Tax Amounts: The tax payable is calculated by aggregating amounts specified in a table, which may include different rates or methods for various types of income.

Practical Implications: ​

  • For NRIs: NRIs will need to ensure that their investment income and long-term capital gains are correctly categorized and taxed according to the rates specified in the table.
  • Compliance Burden: NRIs may face additional compliance requirements to accurately report and pay taxes on these types of income.

Critical Concepts: ​

  • Non-Resident Indian (NRI): An individual who is not a resident of India for tax purposes. The residency status is determined based on the number of days spent in India during a financial year.
  • Investment Income: Income derived from investments, such as dividends, interest, or rental income.
  • Long-Term Capital Gains (LTCG): Profits from the sale of assets held for more than a specified period (usually 36 months for most assets, but 12 months for listed securities).

Compliance Steps: ​

  1. Identify Income Types: NRIs must identify and categorize their income into the types specified in the table.
  2. Calculate Tax: Use the rates and methods provided in the table to calculate the tax payable for each type of income.
  3. Aggregate Tax Amounts: Sum the tax amounts calculated for each income type to determine the total tax payable.
  4. File Returns: Ensure that the income and calculated tax are accurately reported in the annual income tax return.

Examples: ​

  • Scenario 1: An NRI earns ₹10 lakh from long-term capital gains on the sale of property and ₹2 lakh from dividends. According to the table, the tax rate for LTCG is 20% and for dividends is 10%. The tax payable would be ₹2 lakh (20% of ₹10 lakh) plus ₹20,000 (10% of ₹2 lakh), totaling ₹2.2 lakh.
  • Scenario 2: Another NRI earns ₹5 lakh from interest on fixed deposits and ₹3 lakh from rental income. If the table specifies a 30% tax rate for interest and 20% for rental income, the tax payable would be ₹1.5 lakh (30% of ₹5 lakh) plus ₹60,000 (20% of ₹3 lakh), totaling ₹2.1 lakh.

This section ensures that NRIs are taxed appropriately on their investment income and long-term capital gains, aligning with the broader tax framework in India.