Chapter XIII - Determination of Tax in Special Cases
Section 210
Section 210: tax on Foreign Institutional Investor and specified fund income from securities
Section 210 provides special rates for taxable securities income and gains of a Foreign Institutional Investor or specified fund. Test current scheduled exemptions first, including the conditional Government-security exemption introduced with effect from 1 April 2026.
On this page
Need advice on Section 210?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) The income-tax payable on the total income of an assessee, being a specified fund or Foreign Institutional Investor, which includes income referred to in column B of the Table below, 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.
| Sl. No. | Income | Rate of income-tax payable |
|---|---|---|
| 1 | Income in respect of securities other than units referred to in section 208. | (a) 20% in case of Foreign Institutional Investor; (b) 10% in case of specified fund. |
| 2 | Short-term capital gains (not being short-term capital gains referred to in section 196) arising from the transfer of such securities. | 30% |
| 3 | Short-term capital gains referred to in section 196 arising from the transfer of such securities. | 20% |
| 4 | Long-term capital gains (not being long-term capital gains referred to in section 198 arising from the transfer of such securities). | 12.5% |
| 5 | Long-term capital gains referred to in section 198 arising from the transfer of such securities which exceeds ₹ 125000. | 12.5% |
| 6 | Total income as reduced by income referred to against serial numbers 1 to 5. | Rates in force. |
(2) 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, irrespective of the provisions of sub-section (1).
(3) Irrespective of anything contained in sub-section (1), where the specified fund is an investment division of an offshore banking unit, the provisions of this section shall apply to the extent of income that is attributable to such investment division 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 made under the Securities and Exchange Board of India Act, 1992, calculated in such manner as may be prescribed.
(4) Where the gross total income of the specified fund or Foreign Institutional Investor— (a) 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; (b) includes any income referred to in sub-section (1) (Table: Sl. No. 1) to (Table: Sl. No. 5),–– (i) the gross total income shall be reduced by the amount of such income; and (ii) the deduction under Chapter VIII shall be allowed as if the gross total income as so reduced, were the gross total income of the specified fund or Foreign Institutional Investor.
(5) 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).
(6) For the purposes of this section,–– (a) “Foreign Institutional Investor” means such investor as specified in a notification by the Central Government; (b) “permanent establishment” shall have the meaning assigned to it in section 173(c); (c) “securities” shall have the same meaning as assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (d) “specified fund” shall have the meaning assigned to it in Schedule VI [Note 1].
Introduction
The specified-fund and Foreign Institutional Investor routes share a table but can have different rates or attribution conditions. First identify which taxpayer class and type of securities income is involved.
For a specified fund, the section limits the covered amount by qualifying non-resident unit holdings or the described offshore banking investment division.
Key takeaways
FII and specified-fund income
The section provides separate rates for listed securities income and capital gains of qualifying foreign institutional investors or specified funds.
Fund attribution matters
For a specified fund, the rule applies only to the income attributable to qualifying non-resident-held units or the described offshore banking investment division.
Deduction and indexation limits
Covered securities income is subject to the stated deduction restrictions, and covered capital gains do not receive indexation.
Check the current Government-security exemption before applying rates
The Taxation and Other Laws (Amendment) Act, 2026 inserted Schedule IV entry 13D for a Foreign Institutional Investor’s interest on Government securities and capital gains from their sale, exchange or transfer, with deemed effect from 1 April 2026. The exemption is subject to furnishing information in the prescribed form and manner.
A separate entry 13E covers the Bank for International Settlements. The defined Government-security and eligible-person conditions matter; do not extend these entries to every security, every specified fund or every non-resident.
Section 210’s quoted rate table was not replaced by this amendment. First test Section 11 and the current Schedule IV exemption, then apply the rate table to income that remains included in total income. Keep the security classification, investor status and prescribed-information evidence with the computation.
The rates
Where the total income of a specified fund or FII 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 from securities (other than units covered by Section 208) | 20% for a Foreign Institutional Investor; 10% for a specified fund |
| Short-term capital gains (not of the kind covered by Section 196) from transfer of such securities | 30% |
| Short-term capital gains of the kind covered by Section 196 from transfer of such securities | 20% |
| Long-term capital gains (not of the kind covered by Section 198) from transfer of such securities | 12.5% |
| Long-term capital gains of the kind covered by Section 198 exceeding ₹1,25,000 from transfer of such securities | 12.5% |
| Total income as reduced by the above categories | Rates in force |
Special rules for a "specified fund"
For a specified fund, this section applies only to the extent of income attributable to units held by non-residents (excluding a non-resident's permanent establishment in India), calculated in the prescribed manner.
Where the specified fund is an investment division of an offshore banking unit, this section applies to the extent of income attributable to that investment division (as a Category-I portfolio investor under SEBI's Foreign Portfolio Investors Regulations, 2019), calculated in the prescribed manner.
Deduction restrictions and no indexation
If the specified fund's or FII's gross total income consists only of income from securities 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 income described above among other income, 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.
The indexation provision (section 72(6)) does not apply when computing these capital gains.
Key definitions
| Term | Meaning |
|---|---|
| "Foreign Institutional Investor" | An investor specified in a Central Government notification |
| "Permanent establishment" | As defined in section 173(c) |
| "Securities" | As defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956 |
| "Specified fund" | As defined in Schedule VI (Note 1) |
Official August 2026 amendment
Step-by-step flow for applying Section 210
- 1
Is the assessee a Foreign Institutional Investor (as notified) or a specified fund (Schedule VI, Note 1)?
- No: Section 210 does not apply.
- Yes: Go to the next step.
- 2
Specified fund: how much income is attributable to non-resident unitholders?
For a specified fund, Section 210 applies only to income attributable to units held by non-residents (not their Indian permanent establishments), computed in the prescribed manner. For an offshore banking unit's investment division, only the income attributable to that division (Section 210(3)).
- 3
Classify the income from securities (other than Section 208 units)
Securities income: 20% for an FII, 10% for a specified fund. Short-term gains under Section 196: 20%. Other short-term gains: 30%. Long-term gains not under Section 198: 12.5%. Long-term gains under Section 198: 12.5% on the amount exceeding ₹1,25,000. Rest of total income: rates in force.
- 4
Compute gains without Section 72(6)
Section 72(6) does not apply to the capital gains in Table Sl. No. 2 to 5 (Section 210(5)).
- 5
Restrict deductions
If gross total income is only securities income (Sl. No. 1), no deduction under Sections 28 to 58, 60, 61, 93(1)(a) or (e) or Chapter VIII. Otherwise Chapter VIII deductions come only from the balance (Section 210(4)).
Practical checklist
Do
- Check current scheduled exemptions, investor status and prescribed information before applying the securities rate table.
- Confirm Foreign Institutional Investor or specified-fund status and classify each securities gain.
- Apply the row matching ordinary securities income, short-term gain or long-term gain, including section 196 or 198 references.
Avoid
- Apply one rate to all securities receipts.
Illustrative example
Worked example: an FII with dividend and capital gains
Hypothetical facts (illustration only, not a real taxpayer): K Investors, a notified Foreign Institutional Investor, has in the tax year: dividend and interest from securities of ₹1,00,00,000; short-term capital gains covered by Section 196 of ₹40,00,000; other short-term capital gains of ₹10,00,000; and long-term capital gains covered by Section 198 of ₹5,25,000.
Securities income at 20%
₹1,00,00,000 x 20% = ₹20,00,000.
Section 196 short-term gains at 20%
₹40,00,000 x 20% = ₹8,00,000.
Other short-term gains at 30%
₹10,00,000 x 30% = ₹3,00,000.
Section 198 long-term gains
Excess over ₹1,25,000: ₹5,25,000 - ₹1,25,000 = ₹4,00,000; ₹4,00,000 x 12.5% = ₹50,000.
Total
₹20,00,000 + ₹8,00,000 + ₹3,00,000 + ₹50,000 = ₹31,50,000.
Outcome
- Tax under Section 210 is ₹31,50,000.
- A specified fund with the same income would pay 10% on securities income, and only on income attributable to non-resident unitholders.
- Surcharge and cess, if applicable, are outside this illustration.
Glossary
- Foreign Institutional Investor
- An investor specified by Central Government notification (Section 210(6)(a)).
- Specified fund
- As defined in Schedule VI, Note 1 (Section 210(6)(d)).
- Permanent establishment
- As defined in Section 173(c); income attributable to units held through a non-resident's Indian PE is outside the specified-fund rule.
- Securities
- As defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956.
Frequently asked questions
What is the rate difference between an FII and a specified fund on securities income?
20% for a Foreign Institutional Investor versus 10% for a specified fund, on income from securities other than the units covered by Section 208.
Does a specified fund get taxed under Section 210 on all its income?
No - it applies only to the extent the income is attributable to units held by non-residents (excluding any Indian permanent establishment of such non-residents), calculated in the prescribed manner.
Need help applying this provision to your situation?
Get help with your FII/specified fund Indian tax positionLast updated 10 October 2026