As the Income Tax Return (ITR) filing window for Assessment Year (AY) 2025–26 opens, Non-Resident Indians (NRIs) have a valuable opportunity to simplify their tax process and potentially avoid filing returns altogether—thanks to a lesser-known special tax regime under Chapter XII-A of the Income Tax Act, 1961.
Whether you’re earning investment income from India or just looking to reduce tax complexity, understanding this optional regime could make a big difference.
🌍 What Is Chapter XII-A and Why Should NRIs Care?
Chapter XII-A offers concessional tax treatment to NRIs on income earned from specific foreign exchange (FOREX) assets in India. These include:
- Shares of Indian companies
- Debentures and deposits with Indian public companies
- Central Government securities
If your Indian income is limited to these types and tax has already been deducted at source (TDS), you may not need to file an ITR at all.
✅ Conditions to Skip Filing Your ITR
Under this regime, NRIs are exempt from filing a tax return if:
- Your only income in India is:
- Investment income (e.g., interest, dividends), and/or
- Long-term capital gains (LTCG) from specified FOREX assets
- Investment income (e.g., interest, dividends), and/or
- The relevant TDS has been deducted on these earnings
If both conditions are met, you’re free to skip filing your return for the year.
📊 Tax Rates Under Chapter XII-A (Post-June 23, 2024)
Here’s what you’ll pay if you opt for this regime:
| Type of Income | Tax Rate |
| Long-Term Capital Gains (LTCG) | 12.5% (was 10%) |
| Investment income (interest/dividend) | 20% |
| Other types of income | Standard rates |
These rates are flat and final—no additional tax liability or rebates.
🚫 What You Can’t Do Under This Regime
While the rates are attractive, there are trade-offs. If you opt in, you:
- Cannot claim deductions under Chapter VI-A (such as Section 80C, 80D, etc.)
- Don’t get indexation benefits on LTCG
- Cannot deduct expenses or allowances
- Lose the forex fluctuation adjustment benefit under Section 48
This regime is designed to be simple and final—what you see is what you pay.
🔄 Opting In (Or Out)
The regime under Chapter XII-A is optional and year-specific. You can choose to opt out in a particular year if another method works better for you.
To do this:
- Declare your intent while filing your ITR
- Notify your Assessing Officer accordingly
🧳 Still Get Benefits After You Return to India
If you return to India and become a resident, your existing investments (made while you were an NRI) can still enjoy Chapter XII-A benefits—until you sell or liquidate those assets.
📄 Which ITR Form Should You Use?
Picking the right ITR form is crucial:
| ITR Form | When to Use |
| ITR-2 | If you have income from salary, capital gains, property, or other sources |
| ITR-3 | If you earn business or professional income in India |
| ITR-1 | ❌ Not available to NRIs—even if your income would normally qualify for it |
📅 Key Deadline
The last date to file your ITR for FY 2024–25 (AY 2025–26) is July 31, 2025, if you’re not subject to a tax audit.
📌 Important: Deadlines follow Indian Standard Time (IST), even if you’re residing abroad.
✍️ Final Thoughts
For NRIs, tax compliance in India can be tricky—but Chapter XII-A offers a way to reduce tax hassle and liability. If your Indian income is limited to certain investment types, and TDS is properly deducted, this regime may allow you to legally skip filing a return—saving time and paperwork.
Still unsure if this applies to you? Consult a tax expert, or feel free to ask here—I’m happy to help walk you through it.
