Income Tax
Section 210 of the Income-tax Act, 2025 (“Act”) deals with tax on income of Foreign Institutional Investors from securities (other than units referred to in section 208 of the Act), or capital gains arising from transfer of such securities. The section provides that the word "securities" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contract (Regulation) Act, 1956.
Section 210 of the Act further defines the expression "Foreign Institutional Investor" to mean such investor as the Central Government may, by notification in the Official Gazette, specified in this behalf.
The following notifications issued by the Central Government under the Income-tax Act, 1961 continue to operate, unless superseded or withdrawn, by virtue of section 536 of the Act:
- Notification No.SO 199(E), dated 22 January 2014;
- Notification No.SO 1057(E), dated 13 March 2020;
In view of the above, the Foreign Portfolio Investor (“FPI”) registered under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014 (“2014 FPI Regulations”) and under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 superseding the 2014 FPI Regulations are specified as Foreign Institutional Investors for the purpose of provisions of section 210 of the Act
Tax rates* applicable to FPIs in India, as per section 210 of the Act (effective from 1 April 2026), are depicted in the table below:
|
Nature of income |
Assessee being a company defined under section 2(28) of the Act |
Assessee being a partnership firm |
Assessee being other than a company and partnership firm |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
Where aggregate of income does not exceed INR 1 crore (no surcharge applicable) |
Where aggregate of income exceeds INR 1 crore but not exceeding INR 10 crores (surcharge @ 2% applicable) |
Where aggregate of income exceeds INR 10 crore rupees (surcharge @ 5% applicable) |
Where aggregate of income does not exceed INR 1 crore (no surcharge applicable) |
Where aggregate of income exceeds INR 1 crore (surcharge @ 12% applicable |
Where aggregate of income is below INR. 50 Lakh (no surcharge applicable) |
Where aggregate of income exceeds INR 50 lakhs but note exceeding INR 1 crore (surcharge @ 10% applicable) |
Where aggregate of income exceeds INR 1 crore but not exceeding INR 2 crores (surcharge @ 15% applicable) |
Where aggregate of income exceeds INR 2 crores but not exceeding 5 crores (surcharge @ 25% applicable) |
Where aggregate of income exceeds INR 5 crores (surcharge @ 37% applicable) |
|
|
Dividends |
20.800% |
21.216% |
21.840% |
20.800% |
23.296% |
20.800% |
22.880% |
23.920% |
23.920% (Higher surcharge of 25% not applicable) |
23.920% (Higher surcharge of 37% not applicable) |
|
Income in respect of securities (other than units referred to in section 208 of the Act) |
20.800% |
21.216% |
21.840% |
20.800% |
23.296% |
20.800% |
22.800% |
23.920% |
26.000% |
28.496% |
|
Capital Gains - where Securities Transaction Tax (“STT”) is chargeable |
||||||||||
|
Short-term capital gains1 governed by section 196 of the Act [including buy-back of shares] |
20.800% |
21.216% |
21.840% |
20.800% |
23.296% |
20.800% |
22.880% |
23.920% |
23.920% (Higher surcharge of 25% not applicable) |
23.920% Higher surcharge of 37% not applicable) |
|
Long-term capital gains1 (exceeding INR 1,25,000) governed by section 198 of the Act [including buy-back of shares] |
13.000% |
13.260% |
13.650% |
13.000% |
14.560% |
13.000% |
14.300% |
14.950% |
14.950% (Higher surcharge of 25% not applicable) |
14.950% Higher surcharge of 37% not applicable) |
|
Capital Gains – where STT is not chargeable |
||||||||||
|
Short-term capital gains1 not governed by section 196 of the Act |
31.200% |
31.824% |
32.760% |
31.200% |
34.944% |
31.200% |
34.320% |
35.880% |
35.880% (higher surcharge of 25% not applicable) |
35.880% (higher surcharge of 37% not applicable) |
|
Long-term capital gains1 not governed by section 198 of the Act |
13.000% |
13.260% |
13.650% |
13.000% |
14.560% |
13.000% |
14.300% |
14.950% |
14.950% (Higher surcharge of 25% not applicable) |
14.950% (Higher surcharge of 37% not applicable) |
*Taxes are inclusive of surcharge at applicable rates and health and education cess @ 4% on the tax and surcharge amount.
Income of FPIs other than the income mentioned in the aforesaid table would be chargeable to tax at the applicable rate depending on whether the FPI is constituted as corporate, firm or non-corporate and the nature of income. Further, the said rate would be increased by surcharge and health and education cess as applicable.
Notes:
- Classification of capital gains:
a) Gains arising from transfer of capital asset being any security listed in a recognised stock exchange in India or unit of the Unit Trust of India or unit of an equity-oriented fund or zero-coupon bond held for not more than 12 months shall be classified as short-term capital gains.
b) Gains arising from transfer of any capital asset other than those covered in a) above held for not more than 24 months shall be classified as short-term capital gains.
c) Gains arising from transfer of capital asset being any security listed in a recognised stock exchange in India or unit of the Unit Trust of India or unit of an equity-oriented fund or zero-coupon bond held for more than 12 months shall be classified as long-term capital gains.
d) Gains arising from transfer any capital asset other than those covered in c) above held for more than 24 months shall be classified as long-term capital gains.
2. Provisions of Double Taxation Avoidance Agreement (“DTAA”) signed by the Government of India
Section 159(4) of the Act prescribes that “where the Central Government has entered into an agreement with the Government of any country or specified territory, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee.” Accordingly, the aforesaid rates as per the Act or the rates prescribed under the relevant DTAA, whichever is more beneficial can be applied. To claim the benefit of DTAA, certificate of residency from the Government of other contracting state is mandatory.
- Further section 393 of the Act prescribes tax deduction at source (TDS) at the rate of 20% for income referred to in section 210(1)(Table: Sl. No. 1) i.e. on income in respect of securities. It further states that there should be no TDS on capital gains arising under section 210 of the Act. TDS may also apply for income other that the income mentioned in the table above at applicable rates. It may be noted that the TDS rates should be increased by applicable surcharge and health and education cess. Further, FPI's may be eligible to claim credit of taxes paid in India (including TDS) in the respective countries as per the provisions of DTAA or respective tax laws prevailing in that country.
4. If there are any specific provisions appliable to any income of the FPIs which are more beneficial than the rates mentioned above under the Act, then the applicability of the same to FPIs and TDS considerations thereto may need to be examined.
- Any 'non-resident' taxpayer can approach "Board for Advance Rulings" under Chapter XVIII of the Act to determine the tax implications in India for the transaction proposed to be entered.
The above information provided is for general guidance only. However, in view of the specific nature of the transactions and its tax implications, FPIs are advised to consult their own tax advisors with respect to the specific tax implications arising out of India.
Updated on: 17/04/2026
GIGW Compliant