India has become a globalized economy where there is huge amount of employment, investment and trade going on across the globe. Therefore, taxation of cross border income has become a feature of Indian Income-tax Act. The Act provides for taxation of income earned by residents outside India as well as income received by non-residents from India. Relief from double taxation is provided under Double Taxation Avoidance Agreement (DTAA) or Foreign Tax Credit (FTC).
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Understanding Double Taxation Relief
Double taxation relief is given to an Assessee whose income has been charged to tax in a Foreign Country and also in India under the tax treaty. The provisions of Double taxation relief have been incorporated in the Income-tax Act, 2025. The said Act has also provided relief of Double taxation in an organized manner. Additionally, the legislative have also renumbered the provisions and forms to make it easily administrable to deal with the income which is subject to tax in cross border situations. The Assessee dealing with cross border income has to file certain forms and it is necessary to file the same in time and correctly to avoid denial of treaty, foreign tax credit etc. and also to avoid any legal consequences.
Key Compliance Forms for Non-Residents
The Income Tax Form 10F for Non-Residents has been renumbered as Form 41 and the corresponding rule i.e. Rule 75 for Form 10F has also been renumbered as Rule 75 for Form 41 under the Income Taxation Laws (Amendment) 2026 and 2026 Rules for Income-tax respectively. These amendments have come into force from 01/06/2026. This article shall, therefore, henceforth refer to the same as Form 41 and Rule 75 for Form 41 while dealing with the International Taxation for Non-Residents in India and would accordingly refer to the corresponding section under the Income Tax Act, 2025 which has been renumbered as section 159 of the Act, previously referred to as section 90A of the Income Tax Act, 1961.
The said form, Form 41 helps in providing required information in respect of Form 10F, for relief of Double Taxation Avoidance Agreement. This form can be downloaded from e-filing portal and needs to be filled online. All the required information and supporting document in respect of Form 10F are to be provided in Form 10F as required under Rule 75 of the Income Tax Rules of 2026. Important to note is that Form 41 needs to be filed before amount is remitted abroad and TDS on such amount should also be computed and paid before amount is remitted abroad. The amount cannot be remitted once Form 41 has been filed.
The Role of Chartered Accountants
A Chartered Accountant requires an e-verified copy of Form 41 in order to fill up Form No. 146 (CA certificate or the older Form 15CB). If Form 41 is not filed in advance, the Indian bank will not allow remittance at the concessional treaty rate. It must be noted that Form 41 is required to be filed only once a year and is valid for entire Indian Financial Year (1st April to 31st March). Thus, Form 41 must be filed as soon as foreign payee receives his updated TRC from his home country for the current year and TRC validity period should exactly match with the date of Form 41.
Consequences of Non-Compliance
The failure to file the Form 41 could result in the treaty relief not being granted. Royalty subject to tax at a lower rate of 10% under the Tax Treaty between India and another country may attract a TDS of 20% under the domestic law of India. Dividends on which a lower rate of TDS is admissible under the Tax Treaty (say 5%) may attract a TDS of 20% under the domestic law of India, if the relief under the Tax Treaty is not granted. All types of income of a Non Resident (including income of a Foreign Company) which is subject to tax in India would require the filing of Form 41 by the Non Resident (including Foreign Company) to claim relief under the tax treaty. NRI shareholders would require the filing of Form 41 to claim lower rate of TDS on dividends. Foreign consultants would require the filing of Form 41 and claim reduction in TDS on professional fees earned in India. NRI could claim tax treaty relief on interest income (eg interest on NRI fixed deposit accounts) if Form 41 is filed. Form 41 needs to be filed by Foreign Entities to claim tax treaty relief on all types of income that is taxable in India.
Now all the international taxation of non-residents relating to India would have to follow this procedure of filing of Form 10F (now Form 41) online through e-filing portal, of necessity, as all international transactions are under a scanner today and are automatically processed through the Centralized Processing Center (CPC) of the Income-tax Department. Thus strict compliance to the said procedure and the said forms is a must to avoid paying taxes in India at much higher rate than what is admissible under the DTAA when a reduced rate of taxation is applicable.
In summary, Non-Resident Indians can claim the relief from double taxation provided under DTAA and it is in their interest to comply with the procedures of claiming such relief.
Reforms to Expand Foreign Participation in G-Secs
What Changes in Taxation
Prior to the latest reform, Foreign Institutional Investors (FIIs), including SEBI-registered Foreign Portfolio Investors (FPIs), were taxed under Section 210 of the Income-tax Act, 2025. Any income earned from investments in Government Securities (G-Secs) was subject to tax.
Specifically:
- Interest income earned on G-Secs was taxed at 20% for FIIs/FPIs.
- Short-term capital gains arising from the sale of G-Secs were taxed at 30%, depending on the nature of the transaction.
- Long-term capital gains were taxed at 12.5%.
- As a result, a portion of the returns earned by foreign investors from holding or trading G-Secs was payable as tax in India.
New Tax Regime
Recognising the importance of a competitive tax framework in attracting global capital, the Government has introduced a tax exemption for FPIs/FIIs investing in G-Secs.
Under the new regime, FPIs/FIIs will be exempt from:
- Interest income earned from G-Secs; and
- Capital gains arising from the sale, transfer, exchange or redemption of G-Secs.
The exemption will apply to income arising on or after 1 April 2026. The Income-tax (Amendment) Ordinance, 2026 inserted specific provisions granting this exemption to FIIs investing in G-Secs.
| Classification of Capital GainsLong-Term Capital Gains (LTCG) arise when a Government Security is held beyond the prescribed holding period.Listed G-Secs: More than 12 months.Unlisted G-Secs: More than 24 months.Short-Term Capital Gains (STCG) arise when a Government Security is held for less than the prescribed holding period.Listed G-Secs: Up to 12 months.Unlisted G-Secs: Up to 24 months. |
G-Sec Market Reforms
Foreign investors can invest in Indian G-Secs through routes such as the General Route and the Fully Accessible Route (FAR). General Route is the standard channel for foreign investors. It allows them to buy and sell permitted Indian G-secs, but comes with certain restrictions, such as caps on how much can be invested in a particular security, how long it must be held, and an overall investment limit. FAR is an open-access channel where foreign investors can invest in select G-Secs without restrictions that apply under the General Route.
As on 12 May 2026, FPIs held G-Secs worth ₹3,75,171 crore, accounting for 3.34% of the total outstanding G-Secs stock of ₹112.42 lakh crore. Notably, FAR accounted for the majority of these investments, with FPI holdings of ₹3.21 lakh crore, representing 6.74% of the ₹47.63 lakh crore outstanding stock eligible under FAR.
FPI Investments in Government Securities (as on 12 May 2026)
| Route | FPI Holdings | Outstanding Stock | Share |
| General Route | ₹54,091 crore | ₹64.78 lakh crore | 0.83% |
| FAR | ₹3,21,080 crore | ₹47.63 lakh crore | 6.74% |
| Total | ₹3,75,171 crore | ₹112.42 lakh crore | 3.34% |
Recognising its strong investor interest, the Government has introduced further reforms to expand the scope of FAR and encourage greater foreign participation in the G-Sec market.
Expansion of the Fully Accessible Route (FAR)
The Government has now expanded the list of securities eligible under the FAR, broadening investment opportunities for foreign investors across a wider range of G-Secs.
The FAR framework will now include:
- New issuances of 15-year Government Securities;
- New issuances of 30-year Government Securities;
- New issuances of 40-year Government Securities; and
- Sovereign Green Bonds (SGrBs) issued in FAR-eligible tenors.
The expansion is expected to broaden investment opportunities across the maturity spectrum and encourage greater participation in long-duration sovereign debt instruments.
Relaxation of Investment Restrictions under the General Route
To facilitate greater FPI participation in G-Secs, the Government has removed:
- Short-term investment limit;
- Concentration limit; and
- Security-wise investment limit.
However, the overall investment limits remain unchanged at:
- 6% of the outstanding stock of Central Government Securities; and
- 2% of the outstanding stock of State Government Securities (SGSs).
Further, the existing ‘General’ and ‘Long-Term’ categories for FPI investments will be merged into a single investment limit for Government Securities and State Government Securities respectively.
Towards Deeper, More Globally Integrated Capital Markets
By simplifying market access and reducing operational complexities, these measures will provide a more seamless investment experience aligned with leading global markets. Over time, they are expected to support greater inclusion of Indian bonds in global indices, attract long-term foreign capital, expand participation in both debt and equity markets, and further integrate India’s financial system with the global economy. These reforms will encourage wider participation from global investors seeking opportunities in one of the world’s fastest-growing major economies.
References
Ministry of Finance
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2269169®=48&lang=2
Ministry of Law and Justice
Reserve Bank of India
https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=711#1