Section 115H Explained: Tax on Investment Income After Returning to India

Last updated: Oct 2026

Section 115H is a choice for a returning Indian, not an automatic benefit. If you were a Non-Resident Indian (NRI) in an earlier year and become resident, you can keep the 20% rate on interest from certain foreign exchange assets.

• Rate: 20% on investment income under Section 115E
• Assets covered: debentures and deposits of Indian public companies, Central Government securities and notified assets
• Not covered: shares of Indian companies, and capital gains
• Action: a written declaration with your return for the first year you are resident
• Duration: until you transfer the assets or convert them into money

Check the asset type before you file the declaration. Compare 20% with your slab rate, because the choice helps only when your slab rate is higher.

Section 115H lets a returning Indian keep the special tax treatment of Chapter XII-A after becoming resident. Chapter XII-A holds the special provisions for non-residents, and it taxes investment income from foreign exchange assets at a flat 20%.

Without a declaration, the chapter stops applying once you are assessable as a resident, and your income follows normal slab rates. With the declaration, the chapter continues for that income. The Income Tax Department publishes the statute text on its website.

It covers investment income from 4 asset types, and nothing else. The assets are those in Section 115C(f), sub-clauses (ii) to (v).

The section refers only to investment income, which means income such as interest from the asset. Capital gains fall outside it, so a sale of any asset follows the capital gains rules for residents.

The rate is 20% on investment income, plus cess, and you cannot deduct Chapter VI-A items against that income. Section 115E sets the rate.

The Finance (No. 2) Act, 2024 raised the Chapter XII-A rate on long-term gains from 10% to 12.5% for transfers on or after 23 July 2024. That rate applies to non-residents. It does not extend to a returning resident through the section, because the section covers investment income only.

If you read a figure of 10% on long-term gains next to this section, check the date of the page.

It is better only when your slab rate on that income is above 20%. At a lower slab rate, the flat rate costs more.

Formula used: Tax = interest × rate × 1.04 for cess. The table uses Rs. 1,60,000 of interest and the new-regime slab rates.

Trade-off: if the flat rate costs more in a year, Section 115I lets you opt out of Chapter XII-A for that year by saying so in your return. Check the conditions with a tax professional.

Five steps preserve the benefit.

1. Confirm that you were a Non-Resident Indian in an earlier year and are assessable as resident now.
2. List each asset and match it to the 4 covered types.
3. Write the declaration that Chapter XII-A continues to apply to your investment income.
4. Furnish it with your return under Section 139 for the first year you are resident.

5. Keep the asset records, because the benefit continues until you transfer the asset or convert it into money.

   
   

The Classic Partners states that declarations made under the 1961 Act stay valid under the Income Tax Act, 2025 (Section 536(2)(f)). Confirm this with a tax professional.

Consider Priya, a 41-year-old finance manager who returned from Singapore to Pune with a household income of Rs. 2.5 lakh a month and a CIBIL Score of 774. She holds Rs. 20 lakh of deposits with an Indian public company, made in convertible foreign exchange while she was an NRI, and earns Rs. 1.6 lakh of interest a year. Her slab rate is 30%.

Priya files the declaration with her first resident-year return. She sells nothing, so no capital gains arise. For the filing steps, see the guide to which return form a salaried person files.

Bajaj Finance does not offer home loans to Non-Resident Indians. Applicants must be Indian citizens residing in India. A returning Indian who resides in India applies as a resident, subject to credit assessment.

Approval timelines can extend where residence status and income documents need clarification, and minimum income thresholds can differ by city. Check your home loan eligibility once you are resident and your returns are filed.