A non-resident client sold derivatives on the exchange in GIFT City and was paid in dollars. Is there any capital gains charge in India?
No, if the transaction is within section 47(viiab). That clause provides that any transfer of a capital asset being a bond or Global Depository Receipt referred to in section 115AC(1), or a rupee denominated bond of an Indian company, or a derivative, or such other securities as may be notified by the Central Government, made by a NON-RESIDENT on a recognised stock exchange located in any International Financial Services Centre, and where the consideration for the transaction is paid or payable in foreign currency, is not regarded as a transfer for the purposes of section 45. Nothing being regarded as a transfer, no capital gain arises to be computed.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2025-04-01, reported as Income-tax Act 1961, s.47(viiab) and its Explanation, as printed on the Income-tax Department's section page carrying the year stamp 2025. It bears on section 47(viiab), section 45, section 115AC, section 43(5), section 10(4D) of the Income Tax Act 1961, in Capital Gains and Capital Gains Exemptions matters.
This is a clause of four cumulative conditions and the whole of it has to be satisfied. The transferor must be a non-resident — a resident trading on the same exchange in the same asset is outside it. The asset must be one of the four described kinds; the fourth is open only to the extent the Central Government has notified other securities, and this entry does not state that any notification exists. The venue must be a recognised stock exchange located in an International Financial Services Centre, 'recognised stock exchange' taking the meaning in clause (ii) of Explanation 1 to clause (5) of section 43. And the consideration must be paid or payable in FOREIGN CURRENCY — this is the condition that fails in practice, and it is worth noticing that the words here are 'foreign currency', where the parallel wording in section 10(4D) is 'convertible foreign exchange'. Note the definitional cross-references the clause carries in its own Explanation: 'International Financial Services Centre' from clause (q) of section 2 of the Special Economic Zones Act 2005; 'derivative' from clause (ac) of section 2 of the Securities Contracts (Regulation) Act 1956; and 'securities' from clause (h) of section 2 of that Act. The clause also feeds section 10(4D), which exempts a specified fund's income from the transfer of a capital asset referred to in this clause on such an exchange where the consideration is paid or payable in convertible foreign exchange.
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Not a case. Section 47 opens by providing that nothing contained in section 45 shall apply to the transfers it lists. Clause (viiab) lists the transfer of a capital asset being (a) a bond or Global Depository Receipt referred to in sub-section (1) of section 115AC; or (b) a rupee denominated bond of an Indian company; or (c) a derivative; or (d) such other securities as may be notified by the Central Government in this behalf — made by a non-resident on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency. Its Explanation provides that for the purposes of the clause 'International Financial Services Centre' has the meaning assigned to it in clause (q) of section 2 of the Special Economic Zones Act 2005; 'recognised stock exchange' has the meaning assigned to it in clause (ii) of Explanation 1 to clause (5) of section 43; 'derivative' has the meaning assigned to it in clause (ac) of section 2 of the Securities Contracts (Regulation) Act 1956; and 'securities' has the meaning assigned to it in clause (h) of section 2 of that Act.
A transfer answering the whole of the description in clause (viiab) is not regarded as a transfer for the purposes of section 45, with the result that the charge under that section does not arise. The four elements of the description are cumulative: the asset must be one of the four kinds listed; the transferor must be a non-resident; the transfer must be made on a recognised stock exchange located in an International Financial Services Centre; and the consideration for the transaction must be paid or payable in foreign currency.
Not a judicial route. An exchange located in an International Financial Services Centre is, for tax purposes, situated in India, so a trade executed on it would ordinarily give rise to a transfer of a capital asset situate in India and a charge under section 45 read with section 9(1)(i), regardless of where the parties are. That would have made the exchange unusable by non-residents, who face no such charge on the offshore exchanges with which it competes. Clause (viiab) removes the charge at its source by taking the transaction outside the definition of transfer rather than by exempting the income, which avoids the computational and set-off questions an exemption would raise. The conditions are the perimeter: the non-residence of the transferor, the venue, the settlement in foreign currency and the closed list of assets together confine the relief to genuinely offshore-facing trading, and the notification power in sub-clause (d) allows the list to be widened administratively as products are introduced in the Centre.
made by a non-resident on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency.
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Handle my notice → Ask a CA on WhatsAppNo, if the transaction is within section 47(viiab). That clause provides that any transfer of a capital asset being a bond or Global Depository Receipt referred to in section 115AC(1), or a rupee denominated bond of an Indian company, or a derivative, or such other securities as may be notified by the Central Government, made by a NON-RESIDENT on a recognised stock exchange located in any International Financial Services Centre, and where the consideration for the transaction is paid or payable in foreign currency, is not regarded as a transfer for the purposes of section 45. Nothing being regarded as a transfer, no capital gain arises to be computed. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 47(viiab), section 45, section 115AC, section 43(5), section 10(4D) of the Income Tax Act 1961. It is reported as Income-tax Act 1961, s.47(viiab) and its Explanation, as printed on the Income-tax Department's section page carrying the year stamp 2025. This is a clause of four cumulative conditions and the whole of it has to be satisfied. The transferor must be a non-resident — a resident trading on the same exchange in the same asset is outside it. The asset must be one of the four described kinds; the fourth is open only to the extent the Central Government has notified other securities, and this entry does not state that any notification exists. The venue must be a recognised stock exchange located in an International Financial Services Centre, 'recognised stock exchange' taking the meaning in clause (ii) of Explanation 1 to clause (5) of section 43. And the consideration must be paid or payable in FOREIGN CURRENCY — this is the condition that fails in practice, and it is worth noticing that the words here are 'foreign currency', where the parallel wording in section 10(4D) is 'convertible foreign exchange'. Note the definitional cross-references the clause carries in its own Explanation: 'International Financial Services Centre' from clause (q) of section 2 of the Special Economic Zones Act 2005; 'derivative' from clause (ac) of section 2 of the Securities Contracts (Regulation) Act 1956; and 'securities' from clause (h) of section 2 of that Act. The clause also feeds section 10(4D), which exempts a specified fund's income from the transfer of a capital asset referred to in this clause on such an exchange where the consideration is paid or payable in convertible foreign exchange. If it applies to you, the first step is this: Establish the transferor's residential status for the relevant previous year first; the clause is available only to a non-resident and there is no equivalent for a resident.
Not a case. Section 47 opens by providing that nothing contained in section 45 shall apply to the transfers it lists. Clause (viiab) lists the transfer of a capital asset being (a) a bond or Global Depository Receipt referred to in sub-section (1) of section 115AC; or (b) a rupee denominated bond of an Indian company; or (c) a derivative; or (d) such other securities as may be notified by the Central Government in this behalf — made by a non-resident on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency. Its Explanation provides that for the purposes of the clause 'International Financial Services Centre' has the meaning assigned to it in clause (q) of section 2 of the Special Economic Zones Act 2005; 'recognised stock exchange' has the meaning assigned to it in clause (ii) of Explanation 1 to clause (5) of section 43; 'derivative' has the meaning assigned to it in clause (ac) of section 2 of the Securities Contracts (Regulation) Act 1956; and 'securities' has the meaning assigned to it in clause (h) of section 2 of that Act. The matter was decided on 2025-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. A transfer answering the whole of the description in clause (viiab) is not regarded as a transfer for the purposes of section 45, with the result that the charge under that section does not arise. The four elements of the description are cumulative: the asset must be one of the four kinds listed; the transferor must be a non-resident; the transfer must be made on a recognised stock exchange located in an International Financial Services Centre; and the consideration for the transaction must be paid or payable in foreign currency.
Not a judicial route. An exchange located in an International Financial Services Centre is, for tax purposes, situated in India, so a trade executed on it would ordinarily give rise to a transfer of a capital asset situate in India and a charge under section 45 read with section 9(1)(i), regardless of where the parties are. That would have made the exchange unusable by non-residents, who face no such charge on the offshore exchanges with which it competes. Clause (viiab) removes the charge at its source by taking the transaction outside the definition of transfer rather than by exempting the income, which avoids the computational and set-off questions an exemption would raise. The conditions are the perimeter: the non-residence of the transferor, the venue, the settlement in foreign currency and the closed list of assets together confine the relief to genuinely offshore-facing trading, and the notification power in sub-clause (d) allows the list to be widened administratively as products are introduced in the Centre. In the words reproduced by the source cited on this page: "made by a non-resident on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency."
It was decided by the CBDT Circulars & Instructions on 2025-04-01 and is reported as Income-tax Act 1961, s.47(viiab) and its Explanation, as printed on the Income-tax Department's section page carrying the year stamp 2025. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 47(viiab), section 45, section 115AC, section 43(5), section 10(4D), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. A transfer answering the whole of the description in clause (viiab) is not regarded as a transfer for the purposes of section 45, with the result that the charge under that section does not arise. The four elements of the description are cumulative: the asset must be one of the four kinds listed; the transferor must be a non-resident; the transfer must be made on a recognised stock exchange located in an International Financial Services Centre; and the consideration for the transaction must be paid or payable in foreign currency. It arises in Capital Gains and Capital Gains Exemptions matters, on section 47(viiab), section 45, section 115AC, section 43(5), section 10(4D) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Match the asset precisely to one of the four descriptions — a bond or Global Depository Receipt referred to in section 115AC(1), a rupee denominated bond of an Indian company, a derivative within clause (ac) of section 2 of the Securities Contracts (Regulation) Act 1956, or a security notified by the Central Government under the clause. Do not rely on the fourth description unless you can produce the notification; the clause reaches other securities only 'as may be notified by the Central Government in this behalf'. Confirm the exchange is a recognised stock exchange within clause (ii) of Explanation 1 to clause (5) of section 43 and is located in an International Financial Services Centre. Check the settlement currency on the contract note and in the bank records: the clause requires the consideration to be paid or payable in foreign currency, and a rupee settlement takes the transaction outside it entirely. Where the seller is a pooled vehicle rather than the non-resident himself, look to section 10(4D) instead, which exempts a specified fund's income from a transfer of a capital asset referred to in this clause, but only proportionately to non-resident unit holding.
Still good law. Validity could not be fully checked. The clause was read once, on the Department's section page carrying the year stamp 2025, in a continuous transcription of clauses (vii) to (viii) of section 47, which is how I satisfied myself that no clause in that stretch was skipped or mislabelled. The independent corroboration relied on is section 10(4D), read this pass on the Department's section 10 page carrying the year stamp 2025, which describes the same transaction in the same terms — 'transfer of capital asset referred to in clause (viiab) of section 47, on a recognised stock exchange located in any International Financial Services Centre'. I was not able to read a second year-stamped page of section 47 for this clause, and the Department's footnote markers do not appear inline in the transcribed text, so the amendment history of this clause is not established. No judicial decision construing section 47(viiab) was located. Clause (viiab) and the whole of its Explanation were re-read on the indiankanoon bare-Act text of section 47 (doc 454297) and came back word-for-word identical — a route independent of the Department, and one that shows the clause is unchanged by the Finance Act 2025. An indiankanoon phrase search for "clause (viiab) of section 47" on 8 September 2026 returned eleven results, of which the only legislative ones are section 17 of the Finance Act 2018 and section 17 of the Finance Act 2021, and none is a decision construing the clause; that confirms the absence of authority and gives a lead on the clause's legislative history for a later pass. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This is a statutory entry, not a decision, and 'decided_on' is not a decision date. It is 1 April 2025, the effective date of the version of section 47 read this pass — the Department's section page carrying the year stamp 2025. The insertion date of clause (viiab) was NOT established: the Department's footnotes on that page were read, but the footnote markers do not appear inline in the transcribed clause text, so I cannot attribute any particular footnote to this clause and none is attributed here. I did NOT verify whether any securities have been notified under sub-clause (d) of the clause, and nothing in this entry should be read as saying that any have. The tier value 'cbdt' is used because the library's fixed tier vocabulary has no value for a statutory entry. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
A transfer answering the whole of the description in clause (viiab) is not regarded as a transfer for the purposes of section 45, with the result that the charge under that section does not arise. The four elements of the description are cumulative: the asset must be one of the four kinds listed; the transferor must be a non-resident; the transfer must be made on a recognised stock exchange located in an International Financial Services Centre; and the consideration for the transaction must be paid or payable in foreign currency.
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