Chapter XIII - Determination of Tax in Special Cases
Section 215
Section 215: rollover relief on reinvestment in a new specified asset
Section 215 gives a non-resident Indian rollover relief similar to other capital-gains reinvestment exemptions in the Act: if the proceeds from selling a foreign exchange asset are reinvested in a new specified asset within six months, the long-term capital gain is not taxed - subject to a three-year clawback if the new asset is disposed of too soon.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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 to 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 to 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 charged under section 67; B = whole of the capital gain; C = cost of acquisition of the new asset; D = net consideration in respect of the original asset.
(2) For the purposes of sub-section (1),–– (a) “cost”, in relation to any new asset, being a deposit referred to in section 212(e)(iii) or (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.
(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 on the basis of the cost of such new asset as provided in sub-section (1)(i) or (ii), shall be deemed to be income by way of capital gains 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.
Introduction
Section 215 is a reinvestment relief for a qualifying non-resident Indian transferring a foreign exchange asset. The net consideration must be invested in the specified new asset within the statutory period.
The proportion of gain relieved depends on how much is reinvested; a transfer or conversion of the new asset within three years can bring the earlier relieved gain into charge.
Key takeaways
Reinvestment relief for NRI
A qualifying non-resident Indian can avoid immediate capital-gains charge by investing the net consideration from a foreign exchange asset in the specified new asset.
Full or proportionate relief
Relief is full when the new asset costs at least the net consideration; lower reinvestment gives only proportionate relief.
Three-year clawback
Transfer or conversion of the new asset into money within three years brings the previously relieved gain into charge.
When the exemption applies
The exemption applies where a non-resident Indian:
- Has long-term capital gains from transfer of a foreign exchange asset (the "original asset"); and
- Within six months after that transfer, invests the whole or part of the net consideration in a specified asset (the "new asset").
How much of the gain is exempt
If the cost of the new asset is not less than the net consideration of the original asset, the whole capital gain is not charged to tax under section 67.
If the cost of the new asset is less than the net consideration, only a proportionate part of the gain is exempt, computed by the formula:
- A = B x C / D
- A = the capital gain not charged to tax
- B = the whole capital gain
- C = cost of acquisition of the new asset
- D = net consideration in respect of the original asset
Key terms for the computation
| Term | Meaning |
|---|---|
| "Cost" of a new asset that is a deposit under section 212(e)(iii) or (v) | The amount of that deposit |
| "Net consideration" | The full value of the consideration received or accruing on transfer of the original asset, reduced by any expenditure incurred wholly and exclusively in connection with that transfer |
Clawback if the new asset is disposed of within three years
If the new asset is transferred, or converted (other than by transfer) into money, within three years of its acquisition, the capital gain that was not charged to tax (based on the cost of the new asset) becomes taxable - as long-term capital gains relating to a capital asset other than a short-term capital asset - in the tax year in which the new asset is transferred or so converted.
Step-by-step flow for applying Section 215
- 1
Is the assessee a non-resident Indian with a long-term capital gain on transfer of a foreign exchange asset?
- No: Section 215 does not apply.
- Yes: Go to the next step.
- 2
Work out the net consideration
Full value of consideration received or accruing, less expenditure incurred wholly and exclusively in connection with the transfer (Section 215(2)(b)).
- 3
Was the whole or part of the net consideration invested in a specified asset within six months of the transfer?
- No: No relief; the gain is charged under Section 67.
- Yes: Go to the next step.
- 4
Is the cost of the new asset at least equal to the net consideration?
- Yes: The whole capital gain is not charged under Section 67.
- No: Exempt gain A = B x C / D (B = whole gain, C = cost of new asset, D = net consideration).
- 5
Is the new asset transferred or converted into money within three years of acquisition?
- Yes: The gain earlier not charged is deemed long-term capital gain of the year of transfer or conversion (Section 215(3)).
- No: The relief stands.
Practical checklist
Do
- Identify the original foreign exchange asset and calculate its net consideration.
- Keep acquisition and transfer dates, investment proof and cost of the new asset for the three-year clawback test.
Avoid
- Assume the entire gain is relieved when the new asset costs less than the net consideration.
Illustrative example
Worked example: partial reinvestment by an NRI
Hypothetical facts (illustration only, not a real taxpayer): Ms. Kapoor, a non-resident Indian, sells a foreign exchange asset for ₹50,00,000, incurring ₹1,00,000 of transfer expenses. Her long-term capital gain is ₹10,00,000. Within six months she invests ₹24,50,000 in a specified asset.
Net consideration (D)
₹50,00,000 - ₹1,00,000 = ₹49,00,000.
Partial reinvestment
Cost of new asset (C) ₹24,50,000 is less than D, so the formula in Section 215(1)(b)(ii) applies.
Exempt gain (A)
₹10,00,000 x ₹24,50,000 / ₹49,00,000 = ₹5,00,000 is not charged under Section 67.
Taxable gain
₹10,00,000 - ₹5,00,000 = ₹5,00,000 remains chargeable.
Outcome
- ₹5,00,000 of the gain is relieved and ₹5,00,000 is taxed in the year of transfer.
- If she transfers or converts the new asset into money within three years of acquiring it, the relieved ₹5,00,000 becomes long-term capital gain of that later year.
Glossary
- Original asset
- The foreign exchange asset whose transfer gives rise to the long-term capital gain.
- New asset
- The specified asset in which the net consideration is invested within six months.
- Net consideration
- Full value of consideration less expenditure incurred wholly and exclusively in connection with the transfer (Section 215(2)(b)).
- Cost (of a deposit)
- For a new asset that is a deposit referred to in Section 212(e)(iii) or (v), the amount of the deposit (Section 215(2)(a)).
Frequently asked questions
How much time does an NRI have to reinvest to claim this exemption?
Six months from the date of transfer of the original foreign exchange asset.
What happens if the NRI sells the new asset soon after buying it?
If the new asset is transferred or converted into money within three years of acquisition, the previously exempted capital gain becomes taxable in the year of that later transfer or conversion.
Is the exemption reduced if only part of the sale proceeds is reinvested?
Yes - if the cost of the new asset is less than the net consideration from the original asset, only a proportionate part of the gain (computed by the formula in Section 215(1)) is exempt.
Need help applying this provision to your situation?
Plan your NRI capital gains reinvestment with our tax teamLast updated 10 October 2026