what is FPI in ITR Filing in India
what is FPI in ITR Filing in India
In the context of Income Tax Return (ITR) filing in India, FPI stands for Foreign Portfolio Investor. FPI refers to a foreign entity or non-resident individual that passively invests in Indian financial assets—such as stocks, bonds, or mutual funds—without seeking direct management control of the companies. [1, 2, 3, 4, 5]
ITR Filing Requirements for FPIs
- Mandatory Filing: FPIs are legally required to file an annual ITR with Indian revenue authorities to report all India-sourced income.
- Registration and PAN: Before filing, an FPI must register with the Securities and Exchange Board of India (SEBI) and obtain a Permanent Account Number (PAN).
- Advance Tax: FPIs must pay income tax (via advance tax) on their India-sourced earnings before repatriating proceeds out of the country.
- Applicable ITR Forms: While specific forms vary by entity type, non-resident investors often use forms like ITR-2 for reporting Indian assets and income.
Key Taxation Rules
Under Section 115AD of the Income Tax Act, FPI income is generally categorized and taxed as follows:
| Nature of Income | Tax Rate (Plus Surcharge & Cess) |
|---|---|
| Dividend & Interest Income | Generally 20% (unless a lower rate applies via DTAA). |
| Short-Term Capital Gains (STCG) | 20% for listed equity shares (effective July 2024); 30% for others. |
| Long-Term Capital Gains (LTCG) | 12.5% for gains over ₹1.25 lakh (effective July 2024); previously 10%. |
Compliance Steps for Filing
- DTAA Benefits: To claim lower tax rates under a Double Taxation Avoidance Agreement, FPIs must file Form 10F and provide a Tax Residency Certificate (TRC).
- Characterization: All income from security transfers is treated strictly as Capital Gains, not business income.
- No Indexation: FPIs are not eligible for indexation benefits or foreign exchange fluctuation benefits when calculating capital gains.
Related Post
ITR filing start Date AY 2026-27
Income tax return form 2026-27 ! Download Notified Forms
ITR Forms for AY 2026-27: Major changes you need to know
for more refer income tax website click here