Section 210 — Tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer. Successor to s.115AD of the 1961 Act.
Section 210 is in Chapter XIII — Determination of Tax in Special Cases, which runs from section 190 to section 235.
Sub-section (1) fixes the tax payable on the total income of a specified fund or a Foreign Institutional Investor where that income includes any of the income in column B of the Table, as the aggregate of income-tax computed at the column C rate on the corresponding column B income. Table Sl. No. 1 covers income in respect of securities other than units referred to in section 208, taxed at 20% for a Foreign Institutional Investor and 10% for a specified fund. Sl. No. 2 covers short-term capital gains on transfer of such securities that are not short-term capital gains referred to in section 196, at 30%. Sl. No. 3 covers short-term capital gains referred to in section 196 on transfer of such securities, at 20%. Sl. No. 4 covers long-term capital gains on transfer of such securities that are not long-term capital gains referred to in section 198, at 12.5%. Sl. No. 5 covers long-term capital gains referred to in section 198 on transfer of such securities which exceeds Rs. 125000, at 12.5%. Sl. No. 6 covers the total income as reduced by the income in Sl. Nos. 1 to 5, at the rates in force.
Sub-section (2) confines the section, in the case of a specified fund, to the income attributable to units held by a non-resident that is not a permanent establishment of that non-resident in India, calculated in the prescribed manner, and does so irrespective of sub-section (1). Sub-section (3) provides that where the specified fund is an investment division of an offshore banking unit, the section applies to the extent of income attributable to that investment division as referred to in clause (g)(ii) of Note 1 of the Table in Schedule VI, as a Category-I portfolio investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019, calculated in the prescribed manner.
Sub-section (4) deals with deductions. Where the gross total income consists only of the Sl. No. 1 income, no deduction is allowed under sections 28 to 58, 60 and 61, or section 93(1)(a) or (e), or under Chapter VIII. Where it includes any income in Sl. Nos. 1 to 5, the gross total income is first reduced by that income and Chapter VIII deductions are then allowed as if the reduced figure were the gross total income.
Sub-section (5) disapplies section 72(6) in computing capital gains on transfer of the securities in Sl. Nos. 2 to 5. Sub-section (6) defines "Foreign Institutional Investor" as an investor specified in a notification by the Central Government, takes "permanent establishment" from section 173(c) and "securities" from section 2(h) of the Securities Contracts (Regulation) Act, 1956, and takes "specified fund" from Schedule VI [Note 1].
Portfolio investment by foreign institutions is priced separately from ordinary business income, and the Table gives each stream a fixed rate so the return does not depend on a net computation the investor could shape. The deduction bar in sub-section (4) is the counterpart of those concessional rates — income taxed at a special rate is taken out of the base before Chapter VIII operates — and sub-sections (2) and (3) stop a specified fund's concession being enjoyed by resident or permanent-establishment money routed through it.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Rate on income in respect of securities | 20% | Income in respect of securities other than units referred to in section 208, in the case of a Foreign Institutional Investor | Sub-section (1), Table Sl. No. 1(a) |
| Rate on income in respect of securities | 10% | The same income, in the case of a specified fund | Sub-section (1), Table Sl. No. 1(b) |
| Rate on short-term capital gains outside section 196 | 30% | Short-term capital gains, not being those referred to in section 196, arising from the transfer of such securities | Sub-section (1), Table Sl. No. 2 |
| Rate on short-term capital gains referred to in section 196 | 20% | Short-term capital gains referred to in section 196 arising from the transfer of such securities | Sub-section (1), Table Sl. No. 3 |
| Rate on long-term capital gains outside section 198 | 12.5% | Long-term capital gains, not being those referred to in section 198, arising from the transfer of such securities | Sub-section (1), Table Sl. No. 4 |
| Rate on long-term capital gains referred to in section 198 | 12.5% | Long-term capital gains referred to in section 198 arising from the transfer of such securities which exceeds Rs. 125000 | Sub-section (1), Table Sl. No. 5 |
| Rate on the balance of total income | Rates in force | Total income as reduced by the income against Table Sl. Nos. 1 to 5 | Sub-section (1), Table Sl. No. 6 |
The section is an aggregation, not a single rate: each Table row is applied to its own slice of income and whatever is left over is taxed at the rates in force under Sl. No. 6, so misclassifying a gain between Sl. Nos. 2 and 3, or between 4 and 5, changes the tax even though the last two carry the same 12.5%. Sl. No. 5 carries a threshold of Rs. 125000 written into the row itself rather than into the sub-section's words. The deduction consequences are severe and differ by case: if the gross total income is only Sl. No. 1 income, sections 28 to 58, 60 and 61, section 93(1)(a) or (e) and Chapter VIII are all shut; if it merely includes Sl. No. 1 to 5 income, Chapter VIII operates only on the gross total income after that income is stripped out. For a specified fund, sub-sections (2) and (3) override sub-section (1): the section reaches only income attributable to units held by non-residents other than through an Indian permanent establishment, or, for an investment division of an offshore banking unit, only income attributable to that division — the rest of the fund's income falls outside the Table altogether.
A Foreign Institutional Investor has, for a tax year, Rs. 10 crore of income in respect of securities other than units referred to in section 208, Rs. 4 crore of short-term capital gains outside section 196, and Rs. 6 crore of long-term capital gains outside section 198. Tax is Rs. 2 crore at 20% on the first, Rs. 1.2 crore at 30% on the second and Rs. 75 lakh at 12.5% on the third. A specified fund with the same first item would pay 10% on it, and only on the part attributable to units held by non-residents who are not operating through a permanent establishment in India.
This is the rate schedule applied in a foreign portfolio investor's or specified fund's return, and behind the withholding on its Indian securities income. It surfaces in dispute as an assessment order moving income from one Table row to another, or denying Chapter VIII deductions under sub-section (4).
Long-term capital gains referred to in section 198 arising from the transfer of such securities which exceeds ₹ 125000.
consists only of income in respect of securities referred in sub-section (1) (Table: Sl. No. 1), no deduction shall be allowed to it under sections 28 to 58, 60 and 61 or section 93(1)(a) or (e) or under Chapter VIII
In case of specified fund, provisions of this section shall apply only to the extent of income that is attributable to units held by non-resident (not being a permanent establishment of such non-resident in India) calculated in the manner as may be prescribed
The provisions of section 72(6) shall not apply for the computation of capital gains arising out of the transfer of securities referred to in sub-section (1) (Table: Sl. No. 2) to (Table: Sl. No. 5).
See the full 1961 to 2025 concordance.
All of them are in the Rules 2026 index.
See the notifications index.