Section 209 Tax on income from bonds or Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer.

Income-tax Act, 2025

At a Glance

These documents reproduce Clause 209 of the Income Tax Bill, 2025 (Old Version) and Section 209 of the Income-tax Act, 2025 as enacted. Both provisions impose special tax treatment for non-residents on income from certain bonds and Global Depository Receipts (GDRs) purchased in foreign currency and on capital gains arising on their transfer. The changes between the Bill and the enacted Section are primarily textual, reference-based and procedural in nature; they affect computation wording, cross-references to other sections, and a minor definitional cross-reference. Affected parties: non-resident investors, financial intermediaries (approved intermediaries), Indian issuing companies and tax administration. Effective date or enactment date: Not stated in the document.

Background & Scope

Statutory hook: Clause/Section 209, appearing in the Income Tax Bill, 2025 (old version) and in the Income-tax Act, 2025 respectively. The provision is located within the special provisions relating to non-residents and foreign companies. The text covers income from (i) interest on specified bonds issued by Indian companies or public sector companies and purchased in foreign currency; (ii) dividends on Global Depository Receipts acquired in foreign currency through an approved intermediary; and (iii) long-term capital gains on transfer of those bonds or GDRs. The enacted section also contains procedural provisions governing deductions, returns, and certain transitional/amalgamation situations. Definitions provided in the enacted section include 'approved intermediary' (as per a Central Government-notified scheme) and a cross-reference defining 'Global Depository Receipts' (section 193(4)(a) in the Act). The Bill version contains similar material but uses a different cross-reference for GDRs (section 190(4)(a)).

Statutory Provision Mode

Text & Scope

The provision applies to an assessee who is a non-resident and whose total income includes any of the incomes specified in the statutory Table. The Table enumerates four entries:

• Interest on (a) bonds of an Indian company issued under a Central Government notified scheme, or (b) bonds of a public sector company sold by the Government, when purchased in foreign currency - taxed at 10%.
• Dividends on Global Depository Receipts - where the GDRs are issued/re-issued under notified schemes and purchased in foreign currency through an approved intermediary - taxed at 10%.
• Long-term capital gains on transfer of the bonds or GDRs referred to above - taxed at 12.5%.
• The remainder: total income as reduced by the incomes in items 1-3 - in the enacted section described as "Rates in force"; in the Bill as "Income-tax chargeable on such income."

Interpretation

The enacted text frames the tax liability of a non-resident as "the aggregate of income-tax computed at the rate specified in column C applied on the corresponding income specified in column B." This language emphasises a rate-applied computation for each head listed. The Bill phrasing (aggregate of the amounts mentioned in column C) is functionally similar but less explicit about the computation methodology. The enacted provision also expressly excludes application of section 72(6) for computation of long-term capital gains on these specified assets.

Exceptions/Provisos

Several limiting or procedural provisions are present:

• Where a non-resident's gross total income consists only of interest and/or dividends as specified (items 1 and 2), no deductions are allowed under enumerated provisions (enacted section cites sections 28 to 58, 60 and 61; Bill cited sections 26 to 61).
• Where the gross total income includes any of items 1-3, the gross total income is to be reduced by such income and deductions under Chapter VIII are to be allowed as if the reduced gross total income were the gross total income of the assessee.
• A non-resident need not furnish a return u/s 263(1) if total income in the year consisted only of the interest/dividend incomes in items 1-2 and tax was deducted at source under Chapter XIX-B.
• Transitional/amalgamation rule: where GDRs or bonds are acquired by an assessee in an amalgamated or resulting company by virtue of holding such instruments in the amalgamating or demerged company, the same provisions apply to such GDRs or bonds.

Illustrations

• Example 1: A non-resident holds interest-bearing bonds of an Indian company purchased in foreign currency and receives interest of X in the year. The interest is taxed at 10% under item 1. Not stated in the document whether grossing up, surcharges or cesses apply beyond the stated rate.
• Example 2: A non-resident sells long-term GDRs (acquired in foreign currency through an approved intermediary) and realises capital gain Y. The long-term capital gain is taxed at 12.5% as per item 3. Not stated in the document whether indexation or specific computation method for capital gain is modified beyond the exclusion of section 72(6).

Interplay

The enacted section cross-references other statutory provisions: Chapters and sections governing deductions (Sections 28-58, 60, 61), Chapter VIII deductions, section 72(6) (specifically excluded), the return filing provision referenced (section 263(1) in the texts), Chapter XIX-B (TDS provisions) and the definition of GDRs (section 193(4)(a) in the Act text; Bill referenced section 190(4)(a)). The documents do not reproduce the content of those cross-referenced provisions; therefore detailed interaction mechanics are Not stated in the document.

Differences between the Clause 209 of the Income Tax Bill, 2025 (Old Version) and Section 209 of the Income-tax Act, 2025

Topic	Bill (Clause 209 Old Version)	Enacted Section 209	Practical impact
Computation wording	"aggregate of the amounts mentioned in column C thereof."	"aggregate of income-tax computed at the rate specified in the column C applied on the corresponding income specified in column B."	clearer computational method in the enacted text ensuring rates are applied to corresponding income heads rather than potentially interpreted as flat sums.
Residual income wording (Table item 4)	"Income-tax chargeable on such income."	"Rates in force."	enacted text signals application of prevailing tax rates to the residual income; the Bill phrase might have invited alternative interpretations of chargeability. Exact fiscal consequences Not stated in the document.
Cross-references to deduction sections	Excludes deductions u/ss 26 to 61 (and certain sub-clauses) and under Chapter VIII.	Excludes deductions u/ss 28 to 58, 60 and 61 (and certain sub-clauses) and under Chapter VIII.	the enacted text alters the catalogue of excluded deduction sections; which specific deductions are affected is Not stated in the document.
Definition cross-reference for "Global Depository Receipts"	Cross-refers to section 190(4)(a).	Cross-refers to section 193(4)(a).	depends on the substantive definitions in those sections-Not stated in the document.
Minor drafting/typo corrections	Contains editorial notes/corrections in the Bill (e.g., "as per with" corrected to "as per").	Polished enacted language ("as may be notified by the Central Government").	reduces ambiguity; no substantive policy change apparent from document.

Practical Implications

• Compliance and risk areas: Non-resident taxpayers receiving the enumerated incomes must ensure correct application of the specified rates (10% for interest/dividend; 12.5% for long-term capital gains) and must verify whether their gross total income consists solely of those heads to determine deductibility limits and return filing obligations. The enacted text's explicit computation language reduces ambiguity when computing aggregate tax on the heads in the Table.
• Record-keeping/evidence points: The provision emphasises acquisition "in foreign currency" and purchase "through an approved intermediary" for GDRs; therefore investors and intermediaries should retain evidence of currency of purchase and intermediary approval status under a Central Government-notified scheme. Not stated in the document are the particulars of the scheme or the certification/documentation required by the approved intermediary; those details are Not stated in the document.

Key Takeaways

• Both texts impose special fixed rates for non-residents on interest (10%), dividends on GDRs (10%) and long-term capital gains on transfer of such assets (12.5%).
• The enacted section clarifies computation language - "income-tax computed at the rate specified" - whereas the Bill used a less explicit phrase "aggregate of the amounts mentioned". Practical effect: clearer computational instruction in the enacted text.
• Cross-reference differences: enacted section cites deduction sections as 28-58, 60 and 61; the Bill cited 26-61. This narrows the list of excluded deductions in the enacted text relative to the Bill; practical impact depends on which specific provisions were moved/excluded (details Not stated in the document).
• The enacted section uses a different cross-reference for the statutory definition of "Global Depository Receipts" (section 193(4)(a)) versus the Bill's section 190(4)(a). The practical significance depends on the definitions in those sections (Not stated in the document).
• The enacted provision replaces the Bill's phrase "Income-tax chargeable on such income" for the residual income with "Rates in force", which suggests that the balance of income will be taxed under prevailing rates rather than by reference to a specific computation language in the Table. The exact fiscal effect is Not stated in the document.
• Procedural provisions on returns and applicability on amalgamation are retained in substance; they require documentary corroboration for threshold compliance (Not stated in the document as to the precise documentary standards).

---

Full Text:

Section 209 Tax on income from bonds or Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer.

Tax on foreign currency bonds and GDRs: clarified computation and fixed-source tax treatment for non resident incomes. Non residents are subject to special tax treatment on interest from specified bonds and dividends on GDRs acquired in foreign currency through an approved intermediary, and on long term capital gains from transfer of those assets; the enacted section prescribes separate tax treatment for each income head, clarifies computation by requiring income tax be computed at the specified rate applied to the corresponding income, and conditions applicability on foreign currency acquisition, intermediary approval, specified deduction exclusions, return filing exceptions and transitional/amalgamation treatment.