Section 115E of ITA, 1961 : Section 115E: Tax On Investment Income And Long-Term Capital Gains

Explanation using Example

Imagine Priya, who is a non-resident Indian, has investments in Indian stocks. During the financial year, she decides to sell some of her stocks which she has held for more than 12 months, realizing long-term capital gains of INR 500,000. Additionally, she receives INR 200,000 as dividend income from other Indian company investments.

Under Section 115E of the Income-tax Act, 1961, when she files her tax return, her tax liability will be calculated as follows:

1. Tax on the dividend income (investment income) at 20%: 0.20 * INR 200,000 = INR 40,000.
2. Tax on the long-term capital gains at 10%: 0.10 * INR 500,000 = INR 50,000.
3. Finally, she would calculate the tax on her remaining income (if any) after reducing these two amounts from her total income.

Therefore, Priya's total tax liability under Section 115E would be the sum of INR 40,000 and INR 50,000, plus any tax on her reduced income.