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CS Executive · Tax Laws and Practice · Computation of Total Income and Tax Liability of various Entities

Mr. Kabir Joshi is a non-resident Indian whose gross total income for the tax year consists only of interest on foreign-currency bonds that is investment income, and long-term capital gains. Under section 213 of the Income-tax Act, 2025, which statement is correct?

No Chapter VIII deduction is allowed, and no expenditure or allowance can be deducted from the investment income. Section 213 denies both when a non-resident Indian's gross total income consists only of investment income, long-term capital gains, or both.

  1. ANo deduction under Chapter VIII is allowed, and no expenditure is deductible in computing the investment incomeCorrect
  2. BChapter VIII deductions are allowed in full against the long-term capital gains alone
  3. CChapter VIII deductions are allowed in full, but expenses against investment income are barred
  4. DExpenses are allowed against investment income, but Chapter VIII deductions are barred

Explanation

Section 213(1) bars any deduction of expenditure or allowance in computing investment income of an NRI. Section 213(2)(a) bars Chapter VIII deductions where gross total income consists only of investment income or long-term capital gains or both. Hence both restrictions apply.

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