Tax on income from bonds or Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 209(1) of Income Tax Act 2025
209(1) The income -tax payable, on the total income of an assessee, being a non- resident, which includes income specified in column B of the Table below, shall be the aggregate of the amounts mentioned in column C thereof.
Table
| Income | Income-tax payable |
|---|---|
| From interest on–– (a) bonds of an Indian company issued in accordance with such scheme as notified by the Central Government; or (b) bonds of a public sector company sold by the Government, and purchased in foreign currency. | 10 % |
| From dividends on Global Depository Receipts— (a) issued as per such scheme as the Central Government may, notified, against the initial issue of shares of an Indian company and purchased in foreign currency through an approved intermediary; or (b) issued against the shares of a public sector company sold by the Government and purchased by him in foreign currency through an approved intermediary; or (c) issued or re-issued in accordance with a scheme notified by the Central Government, against the existing shares of an Indian company purchased in foreign currency through an approved intermediary. | 10 % |
| Long-term capital gains arising from the transfer of bonds referred to against serial number 1 or Global Depository Receipts referred to against serial number 2. | 12.5% |
| Total income as reduced by income referred to against serial numbers 1 to 3. | Income-tax chargeable on such income. |
Section 209(2) of Income Tax Act 2025
209(2) Where the gross total income of the non-resident—
- 209(2)(a) consists only of income by way of interest or dividends in respect of––
- (i) bonds referred to in sub-section (1) (Table: Sl. No. 1); or sub-section (1); or
- (ii) Global Depository Receipts referred to in sub-section (1) (Table: Sl. No. 2), no deduction shall be allowed under sections 26 to 61 or section 93(1)(a) or 93(1)(e) or under Chapter VIII;
- 209(2)(b) includes any income referred to in sub-section (1) (Table: Sl. No. 1) to (Table: Sl. No. 3),––
- (i) the gross total income shall be reduced by the such income; and
- (ii) the deduction under Chapter VIII shall be allowed as if the gross total income so reduced, were the gross total income of the assessee.
Section 209(3) of Income Tax Act 2025
209(3) The provisions of section 72(6) shall not apply for computation of long-term capital gains arising out of the transfer of long-term capital asset being bonds or Global Depository Receipts referred to in sub-section (1) (Table: Sl. No. 3).
Section 209(4) of Income Tax Act 2025
209(4) It shall not be necessary for a non-resident to furnish a return of his income under section 263(1), if—
- (a) his total income during the tax year consisted only of income referred to in sub-sections (1) (Table: Sl. No. 1) and (Table: Sl. No. 2); and
- (b) the tax deductible at source under the provisions of Chapter XIX-B has been deducted from such income.
Section 209(5) of Income Tax Act 2025
209(5) Where the assessee acquired Global Depository Receipts or bonds in an amalgamated or resulting company by virtue of his holding Global Depository Receipts or bonds in the amalgamating or demerged company, as the case may be, as per the provisions of sub-section (1), the provisions of that sub-section shall apply to such Global Depository Receipts or bonds.
Section 209(6) of Income Tax Act 2025
209(6) In this section,––
- (a) “approved intermediary” means an intermediary which is approved as per a scheme notified by the Central Government; and
- (b) “Global Depository Receipts” shall have the meaning assigned to it in section 190(4)(a).
FAQs on Section 209 of Income Tax Act 2025
Who is covered under Section 209 of the Income Tax Act, 2025?
Section 209 applies to non-residents who earn specified income from bonds or Global Depository Receipts (GDRs) purchased in foreign currency or earn long-term capital gains from their transfer.
What is the tax rate on interest from bonds purchased in foreign currency?
The tax rate is 10% on interest earned from bonds of Indian companies (issued under a notified scheme) or public sector companies sold by the Government and purchased in foreign currency.
What is the tax rate on dividends from Global Depository Receipts (GDRs)?
The tax rate is 10% on dividends from GDRs issued against shares of Indian companies or public sector companies, provided the GDRs are purchased in foreign currency through an approved intermediary.
What is the tax rate on long-term capital gains from the transfer of such bonds or GDRs?
The tax rate is 12.5% on long-term capital gains arising from the transfer of these bonds or GDRs.
Can a non-resident claim deductions under sections 26 to 61 or Chapter VIII if their only income is interest or dividends from such bonds or GDRs?
No, such deductions are not allowed if the gross total income consists only of interest or dividends from these specified instruments.
Can a non-resident claim deductions under Chapter VIII if their total income includes other income along with the specified income?
Yes, if the gross total income includes such specified income, then it shall be reduced by that income, and deductions under Chapter VIII are allowed on the balance.
Are long-term capital losses from these instruments eligible for carry forward and set-off?
No, Section 72(6) shall not apply for computation of long-term capital gains from the transfer of these bonds or GDRs, implying no carry forward or set-off of long-term capital losses.
Is a non-resident required to file a return if they only earn interest or dividends from these instruments and tax has been deducted at source?
No, return filing is not required under Section 263(1) if the total income consists only of such interest or dividend income and tax has been duly deducted at source.
What happens in case of amalgamation or demerger involving such bonds or GDRs?
If a non-resident acquires bonds or GDRs in an amalgamated or resulting company due to holding them in the amalgamating or demerged company, the same tax provisions continue to apply.
What is an ‘approved intermediary’ under this section?
An approved intermediary is one that is approved under a scheme notified by the Central Government.
What is the meaning of ‘Global Depository Receipts’ in this section?
The term “Global Depository Receipts” shall have the meaning assigned to it in Section 190(4)(a) of the Income Tax Act, 2025.
