Section 208
Section 208: tax on Offshore Fund income from units purchased in foreign currency
Section 208 sets special flat rates for an "Offshore Fund" - an overseas financial organisation with a SEBI-approved investment arrangement - on income and long-term capital gains from units of specified mutual funds or the Unit Trust of India purchased in foreign currency.
The rates
Where an Offshore Fund's total income includes the income below, tax is computed at these flat rates on that income, with the rest of the total income taxed at the rates otherwise in force:
| Income | Rate of income-tax payable |
|---|---|
| Income received in respect of units purchased in foreign currency | 10% |
| Long-term capital gains from transfer of units purchased in foreign currency | 12.5% |
| Total income as reduced by the above two categories | Rates in force |
Deduction restrictions
If the Offshore Fund's gross total income consists only of income from units and/or long-term capital gains from transfer of units, no deduction is allowed under sections 28 to 58, 60 and 61, section 93(1)(a) or (e), or Chapter VIII.
If the gross total income includes such income among other income, the gross total income is first reduced by that unit-related income, and Chapter VIII deductions are then allowed as if the reduced amount were the gross total income.
Key definitions
| Term | Meaning |
|---|---|
| "Overseas financial organisation" (Offshore Fund) | A fund, institution, association or body established under the laws of a country outside India, which has entered into a SEBI-approved arrangement for investment in India with a public sector bank, public financial institution, or a mutual fund specified in Schedule VII (Sl. No. 20 or 21) |
| "Public financial institution" | As defined in section 2(72) of the Companies Act, 2013 |
| "Unit" | A unit of a mutual fund specified in Schedule VII (Sl. No. 20 or 21), or of the Unit Trust of India |
Frequently asked questions
Who counts as an "Offshore Fund" for Section 208?
An overseas financial organisation established under a foreign country's laws that has a SEBI-approved investment arrangement with a public sector bank, public financial institution, or a specified mutual fund.
What rate applies to income from these units?
10% on income received in respect of the units, and 12.5% on long-term capital gains from transferring the units.
Related sections
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