Two conditions must be satisfied together
Section 216 of the Income-tax Act, 2025 says a non-resident Indian need not furnish the return under section 263(1) where total income consists only of qualifying investment income, qualifying long-term capital gains or both, and the tax deductible under Chapter XIX-B has been deducted from that income. It is not a general rule that every NRI with some TDS can avoid filing. This guide concerns tax year 2026–27 under the Act effective from 1 April 2026, as amended by Finance Act, 2026. Income Tax Department: amended Income-tax Act, 2025, sections 212, 216 and 217.
Apply the defined terms before the filing test
Section 212 defines the relevant NRI, foreign-exchange asset, investment income and long-term capital gains for this framework. The claimant is a non-resident individual who is an Indian citizen or person of Indian origin. The asset must satisfy the specified-asset and convertible-foreign-exchange acquisition conditions. Long-term gains in this framework relate to the defined foreign-exchange asset, not every long-term asset an NRI sells. Preserve residence, ownership, acquisition funding and income classification evidence.
Reconcile the whole taxable-income population
Build a complete list of income relevant to the Indian computation and classify it before testing the word only. Other taxable income outside the two qualifying categories defeats this composition condition even where small; section 216 supplies no separate de minimis allowance for such other income. Do not confuse genuinely exempt or out-of-scope receipts with taxable other income. Their treatment requires independent support rather than omission from a bank-to-income reconciliation.
Match required withholding to actual deduction
Reconcile each payer, income stream, relevant withholding rule and actual deduction evidence. A certificate showing some TDS does not establish that all tax deductible from the relevant income has been deducted. A shortfall at one payer should not be hidden by a grand total from unrelated transactions. Resolve missing or inconsistent withholding records before relying on the exception. This article does not prescribe a universal TDS rate or substitute TDS for a complete tax computation.
Distinguish this exception from other return requirements and choices
The wording specifically addresses a return under section 263(1). It does not authorise ignoring a separate statutory notice or another independently applicable requirement. If either condition fails, examine ordinary filing obligations rather than assuming section 216 itself supplies a new universal threshold. A refund claim, a declaration under section 217 or another return-dependent position may also require a filing decision. Document the actual reason for filing or not relying on this exception.
Use the illustrations as eligibility checks
The amounts below are fictional income-population and withholding reconciliations. Where required withholding is stated, it is an assumed independently established amount for those facts, not a statutory percentage inferred from the example. The cases do not calculate final income tax, surcharge, cess or refund. A positive section 216 result assumes the special framework applies and no separate obligation or return-dependent choice changes the conclusion.
Applicable primary references
Income Tax Department: amended Income-tax Act, 2025, sections 212, 216 and 217 Income Tax Department: section 216, 2026 text
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Only the two qualifying categories
Assume qualifying investment income ₹5,00,000 and qualifying long-term capital gains ₹2,00,000, with all required tax deducted. Total income in this model is ₹7,00,000 and other taxable income is ₹0. Both stated section 216 conditions are satisfied, subject to the article’s scope assumptions.
Illustrative example 2: A small other-income amount matters
Keep the same ₹7,00,000 qualifying income but add ₹10 of independently determined taxable house-property income outside the defined categories. Total income becomes ₹7,00,010. The composition condition fails; there is no ₹10 exemption from the word only in section 216.
Illustrative example 3: Some withholding is insufficient
Assume only qualifying income and independently established required withholding of ₹40,000. Actual deduction is ₹35,000, leaving a ₹5,000 shortfall. Do not rely on section 216 merely because a TDS certificate exists.
Illustrative example 4: Test more than one payer
For two qualifying income streams, assume required deductions of ₹12,000 and ₹18,000. Actual deductions are ₹12,000 and ₹15,000. Required total is ₹30,000 against ₹27,000 deducted, with the ₹3,000 shortfall traceable to the second payer. The withholding condition is not established.
Illustrative example 5: Investment income alone can satisfy composition
Assume qualifying investment income ₹4,50,000, qualifying long-term capital gains ₹0 and other taxable income ₹0. With the required withholding fully deducted, the ₹4,50,000 population passes the composition test: both categories need not be present.
Illustrative example 6: A reconciliation can change the filing conclusion
An initial review identifies ₹6,00,000 qualifying income with complete withholding. A later complete income review identifies ₹25,000 taxable income outside the defined categories. Total becomes ₹6,25,000 and section 216’s composition condition fails. Preserve the additional source and revisit ordinary filing obligations.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Fix the applicable tax year | Use the Act and amendment version governing the period. |
| 2 | Establish NRI status | Residence and citizenship or origin evidence. |
| 3 | Ground the asset definitions | Specified asset and convertible-foreign-exchange acquisition trail. |
| 4 | List all relevant income | Bank, broker, property and other source reconciliation. |
| 5 | Classify qualifying streams | Investment income and long-term gains under section 212. |
| 6 | Identify other taxable income | Separate supported exempt/out-of-scope receipts from taxable amounts. |
| 7 | Determine required withholding | Applicable rule and payer-wise calculation evidence. |
| 8 | Verify actual deductions | Certificates and reconciled tax records, with shortfalls explained. |
| 9 | Check separate filing grounds | Notices, declarations, refund or other return-dependent positions. |
| 10 | Document the filing decision | Both section 216 tests and the final supported conclusion. |
Sixteen practitioner FAQs
1. Is section 216 a blanket exemption for NRIs?
No. Its person, income and withholding conditions must be met.
2. Does any investment income qualify?
Use the defined section 212 framework, including the relevant asset conditions.
3. Does every long-term gain qualify?
No. The special definition is tied to the qualifying foreign-exchange asset.
4. Must both investment income and long-term gains exist?
No. The provision covers either category or both.
5. Does a small amount of other taxable income matter?
Yes. The composition test uses only the specified categories.
6. Are exempt receipts automatically other taxable income?
No. Establish their separate lawful treatment before classifying them.
7. Is one TDS certificate sufficient evidence for all income?
No. Reconcile the full income and withholding population.
8. Can partial required deduction be ignored?
Do not rely on the exception where the required-deduction condition is not satisfied.
9. Are the example withholding amounts universal rates?
No. They are explicitly assumed independently established amounts.
10. Does section 216 calculate final tax?
No. It addresses the stated return-filing exception.
11. Does failure of the exception always mean tax is payable?
No. Filing and final tax payable are separate determinations.
12. What if the exception fails?
Examine the ordinary filing provisions and other applicable requirements.
13. Can a statutory notice be ignored because of section 216?
No. The exception is expressly framed around section 263(1).
14. Could a refund or declaration affect the practical decision?
Yes. Review the relevant filing-dependent position independently.
15. Is resident status irrelevant because the asset was bought abroad?
No. Establish the applicable person and framework for the actual tax year.
16. What should the evidence note conclude?
Whether each condition is satisfied and whether another requirement or choice calls for filing.
Conclusion
Section 216 provides a narrow NRI return exception based on qualifying income composition and deduction of the required tax at source. Test both conditions.