Working abroad? You may pay zero tax on selling Indian shares if you meet this condition

Indians who have emigrated to foreign countries and have accumulated substantial wealth through work or business, can take advantage of Section 215 of the Income Tax Act, 2025, to invest in Indian securities without facing taxes on their sale. For instance, if you are working in Saudi Arabia and send some of your earnings back to India to invest in listed equity shares, you won't have to pay when you sell those shares, as long as you meet the conditions of Section 215 .

The government aims to promote investment from NRIs in specified Indian assets without imposing an immediate capital gains tax burden.

There are specific conditions to qualify, but the key eligibility requirement is that the money used by the NRI to invest in Indian shares must be from a foreign exchange asset. Simply being an NRI at the time of the sale is not enough.


Check out these two examples to get a better grasp of this foreign exchange concept:

Example 1: NRI status alone is not enough

Raju moved to the UAE in 2020 and became an NRI. In 2021, while visiting India, he invested Rs 20 lakh from his Indian savings account in shares of an Indian company. In 2026, as an NRI, he sold those shares and earned a long-term capital gain of Rs 10 lakh.

Although Raju was an NRI at the time of sale, the shares were not acquired using convertible foreign exchange. Therefore, the shares are not a foreign exchange asset, and he cannot claim the tax exemption under Section 215 merely because he is an NRI.

Example 2: Tax exemption available

Baburao remitted USD 25,000 from his UAE bank account to India through authorised banking channels and used those funds to purchase listed shares of an Indian company. The shares therefore qualify as a foreign exchange asset.

When Baburao sells the shares in 2026 and earns a long-term capital gain of Rs 10 lakh, he reinvests the entire sale consideration in specified assets within six months. In this case, the entire Rs 10 lakh capital gain is exempt under Section 215.

What is Section 215 and its conditions?

According to Chartered Accountant Suresh Surana, Section 215 of the ITA 2025 (corresponding to Section 115F of the Income Tax Act, 1961) provides tax exemption to those NRIs who reinvest the sale proceeds from certain foreign exchange assets.

Surana clarifies the requirements:

Foreign exchange asset for the purpose of Section 215

A foreign exchange asset is an asset that an NRI has acquired, purchased or subscribed to using convertible foreign exchange. Just being an NRI at the time of sale is not enough.

Surana further explains that the initial investment in the asset needs to have been made with convertible foreign exchange through authorized banking channels, following FEMA regulations.

The net consideration must be invested within 6 months

The tax exemption is available when an NRI earns long-term capital gains on the transfer of a foreign exchange asset and reinvests the entire amount in a specified asset within 6 months from the date of transfer.

If the entire net consideration is reinvested, the entire long-term capital gains get tax exempt. If only a part of the net consideration is reinvested, the exemption is proportionate to the amount reinvested.

Re-investment must be done in specified assets only

The expression "specified asset" is clearly defined under Section 212 of the Income Tax Act, 2025 (corresponding to Section 115C of the Income Tax Act, 1961).

The list of specified assets includes shares in an Indian company, debentures issued by an Indian public company, deposits with an Indian public company, central government securities and other assets as may be notified by the central government.

Accordingly, if an NRI sells shares that were originally bought with convertible foreign exchange, the exemption under Section 215 can be claimed by reinvesting the net sale consideration in any of the above specified assets within 6 months.

Three-year lock-in

The tax exemption is subject to a lock-in condition. If the newly acquired specified asset is transferred or converted into money within 3 years from its acquisition, the exemption claimed earlier is withdrawn and the exempted capital gain becomes taxable in the year of the transfer or conversion.

How to show this in ITR?

The Section 215 claim under Section 115F of Income Tax Act, 1961 is required to be reported in Schedule CG (Capital Gains) and Schedule D (Information about deduction claimed against Capital Gains) of the ITRs.

The long-term capital gain arising from the transfer of the foreign exchange asset should first be reported in Schedule CG - Part B - Item No. 7 from sale of foreign exchange asset by non-resident Indian (If opted under chapter XII-A), where the taxpayer reports the long-term capital gain on sale of the foreign exchange asset, the deduction claimed under Section 115F, and the resultant taxable long-term capital gain.

Source: CA Suresh Surana

After that, in Schedule CG, Part D - Information about deduction claimed against Capital Gains, Item No. 1e - Deduction claimed u/s 115F (for Non-Resident Indians), the taxpayer has to provide the necessary details supporting the exemption claim, including the date of transfer of the original foreign exchange asset, the amount invested in the new specified asset or savings certificate, the date of investment, and the amount of deduction claimed. This allows tax authorities to verify the exemption claimed under Section 115F.

Source: CA Suresh Surana

Does the NRI need to pay tax on this in their country of residence, or can they take benefit of DTAA or Section 90 of Income Tax Act, 1961?

Surana says the tax exemption under Section 215 of Income Tax Act, 2025, is available only under Indian tax law and does not determine the taxability of the gains in the individual's country of residence.

Whether the gains are taxable abroad depends on the domestic tax laws of that country. However, if the same capital gains are taxable in both India and the foreign country, the taxpayer may claim relief under the applicable Double Taxation Avoidance Agreement (DTAA) subject to availability of documents such as Tax Residency Certificate, Form 10F etc, says Surana.

In India, such treaty relief is available under Section 90 of the ITA 1961 (corresponding to Section 159 of the ITA 2025), subject to the provisions of the relevant DTAA and fulfilment of the prescribed conditions.

Accordingly, while the India tax laws may exempt the capital gains from tax in India, the taxability in the country of residence must be determined separately under its domestic tax laws and the applicable DTAA.