Section 209 — NR Specified Income Rates | ITA 2025

Section 209 — - TAX ON NON-RESIDENT INCOME (SPECIFIED CATEGORIES)

Section 209 is the substantive equivalent of 1961 s. 115A -- the SPECIAL-RATE provision for NON-RESIDENTS earning specified categories of Indian-source income. The provision contains a TABLE of specified incomes and corresponding concessional rates: (a) DIVIDENDS from Indian co. -- 20% (post FA 2020 abolition of DDT, NR-shareholder dividend taxable); (b) INTEREST on Indian Govt / Indian-co debt -- 20% (subject to DTAA more-beneficial test); (c) ROYALTY / FTS -- 20% (FA 2023 enhanced from 10%); (d) Long-term capital gains on specified securities -- 10% (without indexation); (e) Various others. NR's worldwide income excluded; only Indian-source covered. PRACTITIONER ESSENTIAL: the rates in s. 209 are DOMESTIC LAW maximum rates; DTAA may provide LOWER rates which prevail under s. 159 most-beneficial.

Statutory text — Income-tax Act, 2025

Marginal note -- Tax on income of non-residents

(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 income-tax computed at the rate specified in the column C applied on the corresponding income specified in column B.

TABLE Sl. Income Rate of income-tax No. payable

A B C

1. From interest on— 10%

(a) bonds of an Indian company issued as per such scheme as may be notified by the Central Government; or

(b) bonds of a public sector company sold by the Government, and purchased in foreign currency.

2. From dividends on Global Depository Receipts— 10%

(a) issued as per such scheme as may be notified by the Central Government against the initial issue of shares of an Indian company and purchased in foreign currency through an approved intermediary; or Sl. Income Rate of income-tax No. payable

A B C

(b) issued against the shares of a public sector company sold by the Government and pur- chased by him in foreign currency through an approved intermediary; or

(c) issued or re-issued as per a scheme as may be notified by the Central Government, against the existing shares of an Indian company purchased in foreign currency through an approved intermediary.

3. Long-term capital gains arising from the transfer 12.5% of bonds referred to against serial number 1 or Global Depository Receipts referred to against serial number 2.

4. Total income as reduced by income referred to Rates in force. against serial numbers 1 to 3.

(2) Where the gross total income of the non-resident—

(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

(ii) Global Depository Receipts referred to in sub-section (1) (Table:

Sl. No. 2), no deduction shall be allowed under sections 28 to 58, 60 and 61 or section 93(1)(a) or (e) or under Chapter VIII;

(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.

(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).

(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-section (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.

(5) Where the assessee acquired Global Depository Receipts or bonds in an amal- gamated 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.

(6) For the purposes of this section,—

(a) “approved intermediary” means an intermediary which is approved as per a scheme as may be notified by the Central Government; and

(b) “Global Depository Receipts” shall have the meaning assigned to it in section 193(4)(a). Tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 209	INCOME-TAX ACT, 1961 -- s. 115A
NR dividend 20% (post-FA 2020)	1961 s. 115A(1)(a)
NR interest 20%	1961 s. 115A(1)(a)(ii)
NR royalty / FTS 20% (FA 2023 enhanced)	1961 s. 115A(1)(b) [FA 2023]
Specified securities LTCG 10% no indexation	1961 s. 115A(1)(b) Proviso
No deductions; DTAA most-beneficial via s. 159	1961 s. 115A(2)

STATUTORY ARCHITECTURE: NR earning Indian-source specified income taxed at concessional rates per Table; tax computed as: (a) special rate on Column-B income; + (b) regular rate on balance income (if any). Practitioner key categories: (i) DIVIDEND from Indian companies (post-FA 2020 dividend income in shareholder's hands): 20% domestic max; DTAA typically 5-15% (e.g., India-Mauritius 5%; India-Singapore 10%; India-Netherlands 10%); under-DTAA-rate prevails. (ii) INTEREST: 20% domestic max; DTAA typically 7.5-15%; specified bonds 5% under FA 2017 framework. (iii) ROYALTY / FTS: 20% domestic max (FA 2023 enhanced from 10%); DTAA typically 10-15% with 'make available' qualifier in newer treaties (UK / Singapore / France). Engineering Analysis (SC 2021) defeats blanket royalty TDS where DTAA more beneficial. (iv) LTCG ON SPECIFIED SECURITIES (NR debentures of Indian co. / FCCBs / etc.): 10% without indexation. PRACTITIONER PROCESS: (a) determine NR's income classification; (b) apply Table rate; (c) test against DTAA / s. 159 for lower-rate availability; (d) ensure TRC + Form 10F before remittance; (e) PAN requirement under s. 393 / 1961 s. 206AA (else 20% / higher rate).

CROSS-REFERENCES

Section 9 -- Source-rule deeming.
Section 159 -- DTAA most-beneficial.
Section 160 -- Unilateral foreign tax relief.
Section 393 / Chapter XIX-B -- TDS on payments to NR.
Section 197 -- LTCG general.
Section 198 -- STT-paid LTCG.
Form 10F + TRC -- pre-condition for treaty rate.

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