Section 209
Section 209: tax on non-resident income from bonds or GDRs purchased in foreign currency
Section 209 sets special flat rates for a non-resident's interest income on certain notified bonds, dividend income on certain Global Depository Receipts (GDRs), and long-term capital gains from transferring either, all where purchased in foreign currency.
The rates
Where a non-resident'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 |
|---|---|
| Interest on bonds of an Indian company issued under a Central Government-notified scheme, or bonds of a public sector company sold by the Government, purchased in foreign currency | 10% |
| Dividends on Global Depository Receipts issued under a Central Government-notified scheme (against the initial issue of an Indian company's shares, against shares of a public sector company sold by the Government, or issued/re-issued against existing shares of an Indian company), purchased in foreign currency through an approved intermediary | 10% |
| Long-term capital gains from transfer of the bonds or GDRs described above | 12.5% |
| Total income as reduced by the above categories | Rates in force |
Deduction restrictions
If the non-resident's gross total income consists only of interest and/or dividend income described above, 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 any of the interest, dividend or long-term capital gains described above, the gross total income is first reduced by that income, and Chapter VIII deductions are then allowed as if the reduced amount were the gross total income.
No indexation, and other rules
The indexation provision (section 72(6)) does not apply when computing long-term capital gains on these bonds or GDRs.
A non-resident need not furnish a return of income under section 263(1) if the total income for the year consisted only of the interest and dividend income described above, and tax was deducted at source from that income.
Where the assessee acquired GDRs or bonds in an amalgamated or resulting company because of holding GDRs or bonds in the amalgamating or demerged company, the same tax treatment continues to apply to the new GDRs or bonds.
Key definitions
| Term | Meaning |
|---|---|
| "Approved intermediary" | An intermediary approved under a Central Government-notified scheme |
| "Global Depository Receipts" | As defined in section 193(4)(a) |
Frequently asked questions
Does a non-resident need to file a return for this income?
Not necessarily - if total income for the year consisted only of the interest and dividend income described in Section 209, and tax was deducted at source, no return under section 263(1) is required.
Does indexation apply to long-term capital gains on these bonds/GDRs?
No - Section 209(3) disapplies the indexation benefit under section 72(6) for these gains.
Related sections
Want this applied to your actual filing, not just explained?
Get help with your non-resident bond/GDR tax positionLast updated 9 September 2026