Capital gains on transfer of foreign exchange assets not to be charged in certain cases
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 215(1) of Income Tax Act 2025
215(1) Where, in case of an assessee, being a non-resident Indian,––
- (a) any long-term capital gains arises from the transfer of a foreign exchange asset (herein referred as original asset); and
- (b) within six months after the date of such transfer, he has invested the whole or any part of the net consideration in any specified asset (herein referred as new asset),
then the capital gains shall be dealt with in the following manner:—
- (i) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 67;
- (ii) if the cost of the new asset is less than the net consideration in respect of the original asset, then the capital gain computed by the following formula shall not be charged under section 67:––
A=B×C/D
Where,
- A = the capital gains not to be charges being computed;
- B = whole of the capital gain;
- C = cost of acquisition of the new asset;
- D = net consideration in respect of the original asset.
Section 215(2) of Income Tax Act 2025
215(2)For the In sub-section (1),––
- (a)“cost”, in relation to any new asset, being a deposit referred to in section 212(e)(iii)(v), means the amount of such deposit;
- (b)“net consideration” in relation to the transfer of the original asset, means the full value of the consideration received or accruing as a result of the transfer of such asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.
Section 215(3) of Income Tax Act 2025
215(3)Where the new asset is transferred or converted (otherwise than by transfer) into money, within three years from date of its acquisition, the capital gain arising from transfer of original asset not so charged under section 67 shall be deemed to be income by way of capital gains of the tax year in which such transfer or conversion takes place relating to capital assets other than short-term capital assets of the tax year in which the new asset is transferred or converted (otherwise than by transfer) into money.
FAQs on Section 215 of Income Tax Act 2025
Who is eligible for exemption under Section 215?
Only a non-resident Indian (NRI) is eligible for exemption under Section 215.
What type of capital gain is considered for exemption under this section?
Only long-term capital gains arising from the transfer of a foreign exchange asset are considered.
What is meant by a ‘foreign exchange asset’?
The term is defined elsewhere in the Act, but generally refers to certain specified assets acquired in foreign exchange by NRIs.
What condition must be met for the exemption to apply?
The NRI must invest the whole or part of the net consideration in a specified asset within six months from the date of transfer.
What is a ‘specified asset’?
The term refers to investments such as those covered under section 212(e)(iii)(v), including deposits and certain bonds as notified.
How is the exemption amount calculated if full net consideration is reinvested?
If the cost of the new asset is equal to or more than the net consideration, the entire capital gain is exempt.
How is the exemption amount calculated if only part of the net consideration is reinvested?
If the cost of the new asset is less than the net consideration, the exempt capital gain is calculated as:
A = B × C / D
Where:
A = capital gain not to be charged
B = total capital gain
C = cost of new asset
D = net consideration from the original asset
What is meant by ‘net consideration’?
It is the full value of consideration from the transfer of the original asset minus any expenditure incurred wholly and exclusively in connection with the transfer.
What happens if the new asset is converted into money within three years?
The capital gain previously exempt under Section 215 becomes chargeable as capital gains in the year of such conversion or transfer.
Does the three-year condition apply to both transfer and conversion?
Yes, if the new asset is transferred or converted (otherwise than by transfer) into money within three years, the benefit is withdrawn.
What type of income is it treated as upon violation of the three-year condition?
It is deemed to be capital gains income in the year of such violation.
Is the re-computed capital gain treated as long-term or short-term?
It is treated as capital gains from assets other than short-term capital assets, subject to the year of inclusion.
Can the exemption be claimed if the new asset is acquired after six months?
No, the investment must be made within six months from the date of transfer of the original asset.
