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

Section 209 — TAX ON INCOME FROM BONDS OR GLOBAL DEPOSITORY RECEIPTS PURCHASED IN FOREIGN CURRENCY OR CAPITAL GAINS ARISING FROM THEIR TRANSFER

Section 209 of the Income-tax Act, 2025 corresponds to s. 115AC of the Income-tax Act, 1961.

STATUTORY ARCHITECTURE

Section 209 taxes a non-resident whose total income includes interest on specified bonds, dividends on specified Global Depository Receipts, or long-term capital gains from transferring them. Tax is the aggregate of tax at the column C rate on each class of income in column B of the Table.

KEY ELEMENTS

• Sl. No. 1 — interest on bonds of an Indian company issued under a notified scheme, or on bonds of a public sector company sold by the Government, purchased in foreign currency: 10%.
• Sl. No. 2 — dividends on Global Depository Receipts issued against initial or existing shares of an Indian company under a notified scheme, or against shares of a public sector company sold by the Government, purchased in foreign currency through an approved intermediary: 10%.
• Sl. No. 3 — long-term capital gains from transfer of those bonds or receipts: 12.5%.
• Sl. No. 4 — the remaining total income: rates in force.
• Sub-section (2)(a) — where gross total income consists only of the interest or dividends, no deduction under sections 28 to 58, 60 and 61, s. 93(1)(a) or (e), or Chapter VIII.
• Sub-section (2)(b) — where gross total income includes income at Sl. Nos. 1 to 3, that income is excluded and Chapter VIII deductions are allowed on the reduced figure.
• Sub-section (3) — s. 72(6) does not apply in computing the capital gains at Sl. No. 3.
• Sub-section (4) — no return under s. 263(1) if total income for the tax year consisted only of income at Sl. Nos. 1 and 2 and tax deductible under Chapter XIX-B has been deducted.
• Sub-section (5) — receipts or bonds acquired in an amalgamated or resulting company through holdings in the amalgamating or demerged company remain covered.
• Sub-section (6) — defines "approved intermediary"; "Global Depository Receipts" takes its meaning from s. 193(4)(a).

CHANGES FROM THE 1961 ACT

The section corresponds to s. 115AC of the 1961 Act. The 1961 Act taxed long-term capital gains at ten per cent for transfers before 23 July 2024 and twelve and one-half per cent thereafter; the 2025 text states a single 12.5%. Cross-references are renumbered: sections 28 to 44C and clauses (i) and (iii) of s. 57 of the 1961 Act become sections 28 to 58, 60, 61 and s. 93(1)(a) or (e); Chapter VI-A becomes Chapter VIII; Chapter XVII-B becomes Chapter XIX-B; and s. 209(3) excludes s. 72(6), the foreign-currency computation rule that corresponds to the first proviso to s. 48 of the 1961 Act. The 1961 reference to the second proviso (indexation) has no counterpart, because the 2025 Act allows indexation only for s. 197(3) (s. 72(2)).

PRACTITIONER NOTES

• The rates require purchase in foreign currency and, for receipts, an approved intermediary.
• The return exemption does not extend to a non-resident with capital gains at Sl. No. 3, since clause (a) of sub-section (4) is limited to income at Sl. Nos. 1 and 2.

CROSS-REFERENCES

• ss. 28 to 58, 60, 61, s. 93(1)(a), (e), Chapter VIII — deductions restricted by sub-section (2).
• s. 72(6) — excluded by sub-section (3).
• s. 263(1) — the return dispensed with by sub-section (4).
• Chapter XIX-B — sub-section (4)(b) condition.
• s. 193(4)(a) — meaning of "Global Depository Receipts".
• s. 115AC of the 1961 Act — corresponding provision.