Tax — the part nobody warns you about.

PAN and TRC — the two documents that gate everything

Permanent Account Number (PAN)

A PAN is India's primary tax identifier. As a foreign national, you can apply for a non-resident PAN from outside India through the NSDL or UTIITSL portals — no India trip required. The application asks for your passport, address proof, and category (foreign citizen). Turnaround is typically 7-15 business days.

You'll need a PAN for almost every meaningful financial action in India: opening a brokerage account, subscribing to a mutual fund, receiving Indian-sourced dividends, claiming treaty rates on withholding tax. Get it early.

Tax Residency Certificate (TRC)

A TRC is issued by your home country's tax authority (IRS Form 6166 in the US; HMRC equivalent in the UK; ATO equivalent in Australia, etc.) confirming that you're a tax resident there. India requires a current TRC to apply Double Taxation Avoidance Agreement (DTAA) rates — which are usually meaningfully lower than India's domestic withholding and tax rates.

TRCs are typically valid for one financial year and need annual renewal. Plan ahead — the IRS Form 6166 process in particular can take 4-6 weeks.

Why the right treaty paperwork can save you 5-15%

India has Double Taxation Avoidance Agreements with most major countries — US, UK, Singapore, UAE, Canada, Australia, Germany, Netherlands, France, Japan, and many more. The treaty rate is often materially better than India's domestic rate.

Examples of the differential:

• Dividends from Indian companies: Indian domestic withholding is 20% plus surcharge on dividends paid to non-residents. US treaty rate is typically 15% (sometimes 25% on portfolio dividends; treaty has nuanced sub-rates). UK treaty: 10-15%. Singapore treaty: 10-15%.
• Interest on Indian bonds: Domestic 20% withholding. US treaty 15%. UK treaty 15%. UAE treaty 12.5%. Singapore treaty 15%.
• Royalties / fees for technical services: Domestic 10-25% depending on type. Treaty rates often 10-15% across major DTAAs.

To apply the treaty rate, you submit your TRC plus a Form 10F declaration to the Indian payer (the company, mutual fund, or custodian). Without these, India applies the higher domestic rate and you have to claim the difference back via a refund — which is operationally painful and slow.

How India taxes investment gains

Listed Indian equity (stocks, equity mutual funds, ETFs)

• Short-term capital gains (held under 12 months): 20% plus surcharge.
• Long-term capital gains (held over 12 months): 12.5% on gains above ₹1.25 lakh per financial year; 0% on gains within the ₹1.25 lakh exemption.
• Securities Transaction Tax (STT) applies on the trade itself — typically 0.1% on equity sales — and is absorbed by the broker.

Debt mutual funds, gold ETFs, other non-equity products

• Most debt and non-equity gains are now taxed at marginal rates (income-tax slab rate) rather than the older indexed long-term framework. Treaty rates may apply where applicable.

Indian real estate (if you somehow have it)

• Short-term (held under 24 months): marginal slab rate.
• Long-term (held over 24 months): 12.5% with no indexation. Note: the Finance Act 2024 taxpayer-favourable election between 12.5% no-indexation and 20% with indexation was given specifically to resident individuals and HUFs; non-residents (including foreign nationals) do not get this choice and pay the 12.5% non-indexed rate plus surcharge and cess.
• Withholding by the buyer at source. For all non-resident sellers (NRIs, OCIs and foreign nationals alike), TDS is governed by Section 195: 20% on long-term gains plus surcharge and cess, 30% on short-term gains. The 1% rate under Section 194-IA applies only to resident Indian sellers — it is not available to non-residents of any category. A lower-deduction certificate (Form 13) under Section 197 can reduce the effective rate based on actual computed gain rather than gross consideration.

Indian AIF / startup gains

• Tax pass-through at the AIF level for Cat I and Cat II — gains pass through to the LP as if direct. LP taxes them based on character (capital gain / business income / dividend) and treaty rate.
• Cat III AIFs may have fund-level taxation rather than pass-through — depends on the specific fund structure.

Don't accidentally become an Indian tax resident

If you spend more than 182 days in a financial year (April 1 to March 31) physically in India, you may become an Indian tax resident. There's also a 60-day-plus-365-day-over-4-years secondary test for some residency edge cases.

The implications of becoming a resident are substantial:

• RNOR transition window. Most foreigners who newly qualify as Indian tax residents will fall into Resident-but-Not-Ordinarily-Resident (RNOR) status for the first 2-3 years (specifically, RNOR applies if you've been a non-resident for at least 9 of the prior 10 years OR present in India for 729 days or fewer in the prior 7 years). During RNOR, India taxes only your Indian-sourced income, not your global income — the foreign salary / investment income stays out of the Indian tax net for that window.
• Once RNOR ends and you become Resident and Ordinarily Resident (ROR), India taxes your global income — not just Indian-sourced.
• From RNOR onward, you may need to file an Indian tax return (ITR) annually; once ROR, full foreign-asset disclosure on Schedule FA applies.
• Your home-country tax position becomes more complex via DTAA tie-breaker rules — typically resolvable, but plan in advance.

If you're spending meaningful time in India, use our 182-day calculator to track days actively. The threshold can sneak up on you across multiple short trips.

The GIFT City IFSC tax regime

GIFT City has its own friendlier tax rules layered on top of the standard India tax framework, designed specifically for foreign-investor friendliness:

• STT and CTT exempt on IFSC trades.
• No GST on financial services from IFSC intermediaries.
• Reduced withholding on certain bond interest — typically 4-9% depending on bond type and IFSC listing date.
• Several capital gains streams exempt for non-residents on IFSC-listed instruments — particularly on certain IFSC-listed corporate bond, derivative and global-equity transactions.
• No PAN requirement for many IFSC transactions if the IFSC intermediary deducts withholding tax at source on your behalf.
• From April 1, 2026: mutual funds and ETFs that relocate from Mauritius / Singapore / Luxembourg to GIFT City do so as a tax-neutral transaction.

For most individual foreign investors, the IFSC tax regime is meaningfully cleaner than the standard India tax framework, both in absolute rates and in operational simplicity.

Frequently asked