Section 193 — Tax on income from Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer. Successor to s.115ACA of the 1961 Act.
Section 193 is in Chapter XIII — Determination of Tax in Special Cases, which runs from section 190 to section 235.
Sub-section (1) applies to a resident individual who is an employee of an Indian company engaged in a specified knowledge based industry or service, or of such a company's subsidiary, and taxes his income through a three-row Table: dividends on Global Depository Receipts of such a company issued under a Central Government notified Employees' Stock Option Scheme and bought by him in foreign currency at 10%, long-term capital gains on transfer of those GDRs at 12.5%, and the balance of total income at the rates in force. Sub-section (2) governs deductions — where gross total income consists only of such dividend income, no deduction is allowed under any other provision, and where it merely includes gdr dividend or long-term gains, the gross total income is reduced by that income and deductions are computed on the reduced figure. Sub-section (3) disapplies section 72(6) in computing long-term capital gains on those GDRs. Sub-section (4) defines Global Depository Receipts, information technology service and software, Overseas Depository Bank, specified knowledge based industry or service (IT software, IT service, entertainment, pharmaceutical, bio-technology and anything else notified), and subsidiary, including one incorporated outside India.
It gives concessional flat rates to employees who took GDRs in their employer under a notified stock option scheme and paid for them in foreign currency, so the reward for holding employer stock through a depository receipt is taxed at a fixed rate rather than at slab rates. The deduction restrictions in sub-section (2) keep the concessional income out of the base for other reliefs.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Rate on dividend from qualifying Global Depository Receipts | 10% | GDRs of an Indian company engaged in specified knowledge based industry or service, issued under a Central Government notified Employees' Stock Option Scheme and purchased by the employee in foreign currency | Sub-section (1), Table Sl. No. 1 |
| Rate on long-term capital gains on transfer of those GDRs | 12.5% | Only on GDRs referred to in Table Sl. No. 1; section 72(6) does not apply to the computation | Sub-section (1), Table Sl. No. 2, with sub-section (3) |
| Rate on the rest of the total income | Rates in force | Total income as reduced by the income at Sl. Nos. 1 and 2 | Sub-section (1), Table Sl. No. 3 |
| Threshold for a company to be a subsidiary | As defined in section 2(87) of the Companies Act, 2013 | And includes a subsidiary incorporated outside India | Sub-section (4)(f) |
Three conditions must all hold before the concessional rates are available: the holder is a resident individual employee of a qualifying company or its subsidiary, the GDRs were issued under an Employees' Stock Option Scheme specified by Central Government notification, and he purchased them in foreign currency. If they do, dividend is taxed at 10% and long-term gains at 12.5% while the remaining income is taxed normally. Do not also claim Chapter VIII style deductions against that income — sub-section (2) either denies deductions altogether, where the gross total income is only such dividend, or strips the concessional income out of gross total income before deductions are computed.
A resident individual employed by an Indian information technology software company holds Global Depository Receipts of that company, issued under an Employees' Stock Option Scheme specified by Central Government notification and purchased by him in foreign currency. Dividend of Rs. 5,00,000 on them is taxed at 10% under Table Sl. No. 1 and a long-term gain of Rs. 40,00,000 on their transfer at 12.5% under Sl. No. 2, while his salary is taxed at the rates in force under Sl. No. 3. The bite is sub-section (2): that Rs. 45,00,000 is taken out of gross total income before any deduction is computed, so deductions cannot be set against it — and had he transferred the receipts while they were still a short-term capital asset, Sl. No. 2 would not apply at all and the 12.5% rate would be unavailable.
In the return, where tax on those two streams is computed at the special rates instead of the rates in force, and in an assessment that questions them. What has to be produced is the Central Government notification specifying the Employees' Stock Option Scheme, and evidence that the receipts were purchased in foreign currency.
the income-tax payable 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
See the full 1961 to 2025 concordance.
See the notifications index.
