Income Tax Act 2025: Section 193 for Tax Year 2026-27

Tax on income from Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer

[Section-193 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

Section 193(1) of Income Tax Act 2025

193(1) Where the total income of an assessee, being an individual, who is a resident and an employee of an Indian company engaged in specified knowledge based industry or service, or an employee of its subsidiary engaged in specified knowledge based industry or service (hereafter in this section referred to as the resident employee), includes income specified in column B of the Table below, the income-tax payable shall be the aggregate of income-tax specified in the column C thereof.

Table

Section 193(2) of Income Tax Act 2025

193(2) Where the gross total income of the resident employee—

• 193(2)(a) consists only of income by way of dividends in respect of Global Depository Receipts referred to in sub-section (1)(Table: Sl. No. 1), no deduction shall be allowed to him under any other provision of this Act;
• 193(2)(b) includes any income referred to in sub-section (1)(Table: Sl. No. 1) and (Table: Sl. No. 2),––
  • (i) the gross total income shall be reduced by such income; and
  • (ii) the deduction under any provision of this Act shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.

Section 193(3) of Income Tax Act 2025

193(3) The section 72(6) shall not apply for computation of long-term capital gains arising out of the transfer of long-term capital asset, being Global Depository Receipts referred to in sub-section (1)(Table: Sl. No. 2).

Section 193(4) of Income Tax Act 2025

193(4) In this section,—

• 193(4)(a) “Global Depository Receipts” means any instrument in the form of a depository receipt or certificate (by whatever name called) created by the Overseas Depository Bank outside India or in an International Financial Services Centre and issued to investors against the issue of,—
  • (i) ordinary shares of issuing company, being a company listed on a recognised stock exchange in India; or
  • (ii) foreign currency convertible bonds of issuing company;
  • (iii) ordinary shares of issuing company, being a company incorporated outside India, if such depository receipt or certificate is listed and traded on any International Financial Services Centre;
• 193(4)(b) “information technology service” means any service which results from the use of any information technology software over a system of information technology products for realising value addition;
• 193(4)(c) “information technology software” means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form and capable of being manipulated or providing inter-activity to a user, by means of an automatic data processing machine falling under heading information technology products but does not include non-information technology products;
• 193(4)(d) “Overseas Depository Bank” means a bank authorised by the issuing company to issue Global Depository Receipts against issue of Foreign Currency Convertible Bonds or ordinary shares of the issuing company;
• 193(4)(e) “specified knowledge based industry or service” means—
  • (i) information technology software;
  • (ii) information technology service;
  • (iii) entertainment service;
  • (iv) pharmaceutical industry;
  • (v) bio-technology industry; and
  • (vi) any other industry or service, as specified by the Central Government, by notification; and
• 193(4)(f) “subsidiary” shall have the same meaning as assigned to it in section 2(87) of the Companies Act, 2013 and includes subsidiary incorporated outside India.

FAQs on Section 193 of Income Tax Act 2025

Who is eligible for the concessional tax rates under Section 193 of the Income Tax Act, 2025?
Only resident individual employees of Indian companies (or their subsidiaries) engaged in specified knowledge-based industries or services are eligible. These are referred to as “resident employees” under this section.

What are the tax rates applicable under Section 193(1)?

Dividend income from GDRs purchased in foreign currency under a notified ESOP scheme: Taxed at 10%.

• Long-term capital gains from transfer of such GDRs: Taxed at 12.5%.
• Remaining income (i.e., total income minus the above): Taxed at applicable rates.

Are deductions available against dividend income from GDRs?
No. If the gross total income of the resident employee consists only of such dividend income (as per Table Sl. No. 1), no deductions under any other provision of the Act are allowed [Section 193(2)(a)].

Can deductions be claimed if income includes both dividend and capital gains from GDRs?
Yes. In such cases:

• The gross total income is first reduced by dividend and long-term capital gain components from GDRs.
• Deductions are allowed on the balance as if that were the gross total income [Section 193(2)(b)].

Can losses be set off against capital gains from transfer of GDRs?
No. As per Section 193(3), the provisions of section 72(6) do not apply. This means carried forward losses cannot be set off against such capital gains.

What qualifies as “Global Depository Receipts” under this section?
GDRs include instruments issued by an Overseas Depository Bank against:

• Ordinary shares or foreign currency convertible bonds of Indian listed companies;
• Shares of foreign companies (if such GDRs are listed and traded in an International Financial Services Centre) [Section 193(4)(a)].

What industries qualify as “specified knowledge-based industry or service”?
These include:

• Information technology software and services
• Entertainment services
• Pharmaceutical industry
• Biotechnology industry
• Any other industry notified by the Central Government [Section 193(4)(e)].

What is the role of the Central Government under Section 193?
The Central Government must notify the ESOP schemes eligible for these tax provisions and may also notify additional industries or services as “specified” under this section.

Does it apply to employees of foreign subsidiaries of Indian companies?
Yes. If the foreign subsidiary is engaged in a specified knowledge-based industry or service, and the employee is a resident in India, they qualify.

When does this provision come into effect?
Section 193 is applicable from April 1, 2026, i.e., from Assessment Year 2026–27 onward.