Category: Personal Finance

What Is The Grandfathering Rule In Income Tax?

Tax rules keep changing, and these changes can sometimes impact your tax liabilities. But what will happen if you have made any investment before the change in rules? Then how will you manage your tax liabilities? To manage such tax liabilities, the government has introduced the Grandfathering Rule.

In today’s blog post, we will give you an overview of the grandfathering rule, why it is applied and how it works through an example.

Grandfathering Meaning

Grandfathering in Income Tax is a provision specified by income tax authorities to protect certain gains made before a change in tax law from being taxed unfavourably under the new laws. Simply put, it allows taxpayers to retain a tax benefit on investments made before a specified date.

In India, it is particularly related to long-term capital gains on the purchase of equity and equity-related mutual funds. This was introduced when the government brought in LTCG on such investments in the Union Budget 2018.

Why is the grandfathering rule applied?

This rule is applied to protect against the adverse impact of changes in tax laws. The key reasons why it was introduced are as follows:

Protecting Existing Investors: Investors who have accumulated significant gains on the purchases of equity and equity-related mutual funds before 1st Feb 2018; such gains were exempted till 31st Jan 2018.
Fairness: Tax rules are changed over time. And the provision of grandfathering helps in ensuring that only eligible investments are considered for tax purposes.
Smooth Transition: Once the new tax rules are implemented, the government tries to introduce such changes while reducing the impact on investors who already held such investments.

Rule Under Section 112A

Section 112A of the Income Tax Act 1961 defines the taxation of long-term capital gains arising from the sale of equity shares and equity-related mutual funds.

Investments Covered Under Section 112A: The key investments covered under Section 112A are equity shares of a company that is listed on a stock exchange, units of an equity-oriented mutual fund, and units of a business trust.
Tax Rules: The tax rate is 12.5% on eligible long-term capital gains exceeding 1.25 Lakh INR in a financial year.
The Rule of Grandfathering: It is important for eligible investments acquired before 1st February 2018. Under Section 55(2)(ac).

How Grandfathering Works

The steps for how grandfathering works are as follows:

Identification of Purchase Cost: The first step is to identify the original cost of acquisition of the investment. This is usually the amount an investor actually paid to purchase the shares or mutual fund units.
Calculating the Fair Value: The next step is to identify the market value of the investment as on 31st January 2018. This date was introduced by the government to provide for the LTCG changes.
Comparing the Fair Market Value: Once you identify the fair market value as of 31st Jan 2018, then you need to compare it with the actual sale price of the investment.
Cost of Acquisition: Once the lower amount is identified, compare it with the initial cost. Then the cost of the acquisition formula needs to be implemented.
Calculating Gain: The last step will be calculating the capital gain by deducting the cost of acquisition from the sale proceeds.

Formula of the Grandfathering Rule

The formula to calculate Capital Gain using the grandfathering rule is as follows:

Capital Gain = Sale Value – Indexed Cost of Acquisition

And the formula to calculate the cost of acquisition is as follows:

Indexed Cost of Acquisition = Cost of Acquisition * (CII of Year of Sale/CII of Year of Purchase)

Example of the Grandfathering Rule

Let’s understand the grandfathering rule through an example.

Mr A purchased shares of ABC Limited in 2016 for INR 1,00,000. By 31st January 2018, the value of such investment had increased to INR 3,00,000. The investor sold the shares in January 2026 for INR 5,00,000.

Read Also: Silver Taxation in India

Difference Between Grandfathering and Regular Capital Gain Calculation

The key differences between grandfathering and regular capital gain are as follows:

Particulars	Grandfathering	Regular Capital Gain
Use	It is used only when the eligible investments were acquired before 1st February 2018.	Investments are calculated according to the applicable capital gains provisions.
Cost of Acquisition	The cost of acquisition is determined using the grandfathering formula.	It is generally based on the actual cost of acquisition.
Market Value	The fair market value is considered based on 31st January 2018.	Fair market value is not generally used to determine cost under regular capital gains.
Objective	The grandfathering clause is defined to protect eligible gains accumulated before the tax changes.	Calculates taxable capital gains according to applicable tax rules.

Benefits of the Grandfathering Rule

The key benefit of the grandfathering rule is as follows:

Protect Gains: The key benefit of the grandfathering rule is that it protects eligible gains accumulated up to 31st January 2018. As the government reintroduced LTCG tax on eligible equity investments in 2018, it helped prevent investors from being taxed on entire gains.
Reduce Tax: The grandfathering rule can help investors reduce capital gains tax by lowering the cost of acquisition based on the prescribed formula.
Fairness During Tax Changes: The laws related to tax over time can affect investments made under earlier rules. Grandfathering ensures that only eligible capital gains are considered for taxation.

Conclusion

On a concluding note, grandfathering is a key provision implemented by Income Tax authorities to protect the interests of investors from the impact of changes in capital gains provisions. The long-term capital gains tax was reintroduced by the government in 2018, and after that it became difficult for the investors who purchased equity shares and equity-oriented mutual funds before 1st February 2018 to calculate their cost of acquisition. This can reduce the tax liability of the investor arising because of changes in regulations. However, to understand its formula and the provisions defined under section 112A is important when making any calculation of capital gain; therefore, it is advisable to consult your investment and tax advisor.

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Frequently Asked Questions (FAQs)

What is grandfathering?
The grandfathering rule in mutual funds is a provision introduced by income tax authorities to protect the interests of investors after long-term capital gains tax was reintroduced by the Government of India. It protects eligible capital gains accumulated before a specific date when tax law changes.
What is the cutoff date for the grandfathering rule in mutual funds?
The cutoff date for the mutual fund grandfathering rule is 31st January 2018. The rule is applicable to the eligible investments made on or before this specific date.
Name the investments that are eligible for the grandfathering rule?
The eligible investments that are eligible for the grandfathering rules include listed equity shares, units of equity-oriented mutual funds, units of trusts, etc.
Can we still use the grandfathering rule in mutual funds?
Yes, one can use the grandfathering rule in equity-oriented mutual funds, as it remains relevant when calculating capital gains on eligible investments acquired before 1st Feb 2018 and sold later.
How will the value be calculated if the sale price is lower than the fair market value on 31st January 2018?
According to the formula, it uses the lower of the sale consideration and the fair market value, and compares the amount with the original acquisition cost. This means the deemed cost can never exceed the sale price under the formula, and the calculation results in no capital gain.

November 3, 2026

Tax on Shares Received as Gifts: Rules for Investors

A gift of shares may cost the recipient nothing, but that doesn’t necessarily mean the tax question ends there. Imagine a father transferring shares worth ₹2 lakh to his daughter as a birthday gift. She hasn’t paid a single rupee for them, so does she owe any tax simply for receiving them? And what happens if she decides to sell those shares a few years later at a profit? The answers aren’t quite as straightforward as they might seem.

Under gift tax in India, shares received from a parent are generally exempt from tax at the time of receipt. However, selling those same shares later can bring capital gains tax into the picture. The original purchase price, the period for which the shares were held, and the circumstances of the gift can all affect the tax calculation. This blog explains the rules governing shares received as gifts, gift tax in India, when tax becomes payable, how gains are calculated, and what investors should know before transferring or selling gifted shares.

Are Gifted Shares Taxable? The Basic Principle

Receiving shares as a gift and selling them later are two different situations under tax law. For someone receiving gifted shares, the first question is whether tax becomes payable when the shares enter their demat account. The second is whether they will owe tax when those same shares are eventually sold for a profit. For example, suppose your father gifts you 100 shares that he bought for ₹200 each. You receive the shares without paying him anything. Since the gift comes from your father, it is generally exempt from tax at the time of receipt. Now, imagine you sell those shares later for ₹350 each.

You have made a profit, and that is where capital gains tax may come into the picture. The tax treatment of the gift and the tax on the eventual sale are two separate matters, each with its own rules. These are separate events, and understanding the difference can save investors from confusion when dealing with shares passed down by parents or other family members.

Here is how the distinction works:

When you receive the shares: The tax treatment depends on who gifted them, the value of the shares, and whether an exemption applies. Shares received from qualifying relatives are generally exempt from tax at the time of receipt.
When you sell the shares: Any profit from the sale may attract capital gains tax. The calculation generally considers the previous owner’s purchase cost rather than the market value on the date you received the shares.
Why both stages matter: An exemption when receiving a gift does not automatically make future profits tax-free. The original transfer and the eventual sale must be assessed separately.

Tax When You Receive Shares As A Gift?

A lot depends on who is sending the shares your way. In case your father has transferred equity shares worth ₹5 lakh in your demat account, then you are not taxed for simply having received them. Similarly, any kind of gifts from relatives as specified by the Income Tax Act, such as your spouse, parents, brothers, sisters, and others, are not subject to taxation.

However, in the case of gifts that have been received from a friend or someone else who is not related to you, then it becomes an entirely different scenario altogether. As per the provisions of section 56(2)(x) of the Income Tax Act, if the total fair market value of the gifts in a financial year is more than ₹50,000, the whole aggregate value is taxable as ‘income from other sources’.

There are exceptions, too. Shares received through a will or inheritance are generally exempt, as are qualifying gifts received on the occasion of your own marriage. Certain gifts from eligible institutions and other specified entities may also be exempt, depending on the conditions they meet.

Read Also: What is Angel Tax?

Tax When You Sell Gifted Shares

Selling gifted shares comes with its own tax rules. The original owner’s purchase cost generally carries over to the recipient, rather than resetting it to the market value on the date of the gift. The donor’s holding period also counts here, which can affect whether the profit is treated as a short-term or long-term capital gain.

For qualified listed equity shares, the holding period is generally 12 months for the gains to be classified as long-term. For transfers made on or after 23 July 2024, qualifying short-term gains are generally taxed at 20%, while qualifying long-term gains are generally taxed at 12.5% on gains exceeding the applicable annual threshold of ₹1.25 lakh. The actual rate and calculation depend on the security, transaction date and relevant tax provisions. Certain eligible shares acquired before 31 January 2018 may also qualify for the grandfathering provisions.

Tax for the Donor

Giving shares as a gift generally doesn’t mean the donor has to pay tax on shares at the time of transfer. There is one thing to watch out for, though. If you gift shares to your spouse or child, any income earned from them, including dividends and certain gains, can be clubbed with your own income under the applicable tax rules. So, even when the gift itself is exempt, the income it generates may still affect your tax liability.

Gifts to Different Recipients: A Quick Reference Table

Who receives the shares can make a difference to the tax treatment. This table gives a quick overview of what generally applies when you gift shares to family members or someone outside your family.

Recipient	Tax when receiving the gift	Clubbing risk
Spouse	Exempt	Yes
Minor child	Exempt	Yes
Adult child	Exempt	Generally no
Parents or siblings	Exempt	Generally no
Friend or non-relative	Taxable if the applicable gift threshold is exceeded	No, generally

How to Gift Shares: Step by Step

Transferring shares as a gift involves a few simple steps. Unlike inheritance tax, which concerns assets received through inheritance, gifting shares involves a direct transfer during the owner’s lifetime. Understanding the process can help you complete the transfer without unnecessary delays.

Check the recipient’s details: Get their demat account number and the relevant depository participant details.
Initiate the transfer: Use a Delivery Instruction Slip (DIS) or your depository’s online transfer facility, where available.
Check applicable charges: Confirm whether stamp duty and any depository or broker charges apply before completing the transfer, as these differ from the tax considerations associated with inheritance tax.

Reporting In Your ITR

When filing your Income Tax Return (ITR), report taxable gifts under the applicable income category and schedule, where required. If you sell gifted shares, calculate and report the resulting gains under the relevant Capital Gains schedule. Keep the donor’s original purchase records, transfer documents and other supporting details to establish the cost of acquisition and holding period. The types of taxes and reporting requirements depend on the nature of the transaction and the applicable ITR form.

Common Mistakes

A few minor errors while giving away shares might cause future tax-related problems. Here are a few tips that should be kept in mind before giving away or receiving shares.

Forgetting to maintain purchase details: Maintain purchase details of the donor for proper calculation of capital gains upon sale of the shares.
Forgetting clubbing provisions: Ensure that dividends or gains from shares given to a spouse or minor children may be clubbed with your income.
Not taking care of gift tax while receiving shares from friends: Don’t forget the ₹50,000 limit while receiving shares as gifts from friends.

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Frequently Asked Questions (FAQs)

I received shares from my father. Do I have to pay tax on shares?
Generally, no. Under gift tax in India, shares received from your father are exempt from tax at the time of receipt, regardless of their value.
A friend gifted me shares worth ₹1 lakh. Is that taxable?
Yes, generally, based on the type of tax, if the aggregate value of relevant gifts from non-relatives exceeds ₹50,000 in a financial year, the entire taxable value is subject to gift tax under Income from Other Sources.
How is the gain calculated when I sell gifted shares?
The gain is generally calculated using the original owner’s purchase cost, not the market value when you received the gifted shares. The applicable capital gains tax depends on the holding period and other relevant rules.
Does the person gifting the shares have to pay any tax?
Generally, no tax is payable on the gift transfer itself because the shares are gifted rather than sold. However, clubbing provisions may apply when gifting shares to a spouse or minor child, affecting the tax on share income.
How do I transfer shares to someone as a gift?
You can usually transfer shares through a Delivery Instruction Slip (DIS) or your depository’s online facility, subject to its requirements. Keep the gift deed, transfer records and purchase details and remember that types of taxes and applicable charges may differ depending on the transaction.

October 30, 2026

Impact of Repo Rate Hike in India: Loans, Inflation, Investments & Economy

The Reserve Bank of India (RBI) uses the repo rate as an important tool to manage inflation and economic activity. On October 7, 2026, the RBI increased the repo rate by 25 basis points, from 5.25% to 5.50%, marking its first rate hike since February 2023.

The decision can affect borrowers, savers, businesses and investors across India.

Impact of Increasing the Repo Rate in India

The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends funds to commercial banks. A rise in the repo rate will imply that banks will have to bear a higher cost of borrowing which they may pass on to customers through increased lending rates.

The recent 25-bps hike may not have much immediate impact but the effects could be greater if the RBI continues increasing rates. The RBI has changed its stance from neutral to calibrated tightening, implying that it is now more worried about inflation and keeping the interest rates at a higher level.

Effect on Home Loans

Floating rate home loan borrowers will immediately feel the impact of the repo rate rise. Most of the new floating rate loans are pegged to various external benchmark rates, including the repo rate.

In the event of an increase in rates, borrowers will have to pay a higher EMI or longer repayment. For example, a ₹50 lakh loan for 25 years at around 7.5% interest could have its monthly EMI increased by around ₹800 with a 25-bps hike, provided that the loan tenure remains the same.

The impact can become much larger if multiple rate hikes take place. Higher borrowing costs can also reduce housing affordability and cause some buyers to postpone property purchases.

Comparison Table

Particular	Before Hike	After Hike	Change
Repo Rate	5.25%	5.50%	+25 bps
Rate Direction	Neutral	Calibrated tightening	Changed
Immediate Effect	Lower borrowing cost	Higher borrowing cost	Costlier credit
Potential Inflation Impact	Higher demand pressure	Lower demand pressure	Inflation control
Potential Savings Impact	Lower deposit yields	Potentially higher yields	Positive for savers

Impact on Personal, Auto and Business Loans

A hike in repo rate can also impact personal and vehicle loans. Higher funding costs may eventually lead to lenders raising interest rates, but not all loans reprice immediately or by exactly the same amount.

Businesses could also have to deal with higher costs of financing. Companies that have been dependent on loans to fund expansion, working capital or purchases of capital goods may re-evaluate their expansion plans when borrowing becomes expensive.

This could be particularly important for NBFCs, many of which rely on bank loans, bonds and other wholesale funding. Longer term rises in funding costs could eat into their margins unless they were able to pass the burden on to borrowers.

Effect on Inflation, Savings and Investments

Controlling inflation is one of the key reasons for increasing the repo rate. Higher interest rates can discourage excessive borrowing and spending, which can reduce demand and ease inflationary pressure over time .

The RBI’s October 2026 decision was taken against the backdrop of rising inflation risks, including concerns related to crude oil and food prices. Simultaneously, the RBI upgraded its FY27 GDP growth forecast to 7.1% from 6.7%, suggesting that it sees India’s economic growth holding strong despite tighter financial conditions.

Impact on Fixed Deposits

At some point, higher repo rates can be good for savers, as banks may hike rates on deposits and fixed deposits. But in the normal course of business, existing Fixed Deposits continue at the booked rate.

New fixed deposits or those that are renewed after the rate hike may fetch better returns. The size of the benefit will depend on how individual banks react to changes in funding costs and competition for deposits.

Impact of Repo Rate Hike on Banks in India

The RBI has hiked the repo rate by 25 basis points (0.25%), to 5.50% from 5.25%. This can affect both the lending and deposit sides of a bank’s business.

Impact on bank loans: Suppose a company has a floating rate loan of Rs 1 crore at 8.50% interest. If the bank passes on the 25-bps increase in full, the rate could climb to as high as 8.75%. If the entire ₹1 crore remains outstanding, the annual interest cost will go up from about ₹8.50 lakh to ₹8.75 lakh, an increase of about ₹25,000 a year.

Impact on fixed deposits: If banks increase FD rates, the effect can also be a positive one for depositors. For example, if the bank hikes its 1-year FD rate from 6.50% to 6.75%, then a customer investing ₹5 lakh could get an earning of around ₹33,750 in interest at 6.75%, compared with ₹32,500 at 6.50%. This represents an additional ₹1,250 in interest over one year, before applicable taxes.

Thus, a repo rate hike can increase borrowing costs while potentially improving returns on new deposits.

Impact on Stock Market and Debt Investments

Impact on Stock Market: A repo rate hike can put pressure on the stock market as higher borrowing costs may reduce corporate profits and consumer spending. Rate-sensitive sectors such as real estate, automobiles and NBFCs may be affected more. Investors may also become cautious about high-growth stocks when interest rates remain elevated.

Impact on Debt Investments: A repo rate hike can push bond yields higher and affect the prices of existing bonds. For example, if a ₹10 lakh bond has a 7% coupon and market yields rise from 7% to 7.25% after a rate hike, the bond’s market price may decline because newer bonds offer higher yields. Long-duration bonds and debt funds are generally more sensitive to such interest-rate movements. However, new investors may benefit from higher yields on newly issued debt securities.

Repo Rate Increase: Key Impacts

Area	Impact of Repo Rate Increase	Who Is Affected?
Home Loans	Floating loan rates may increase, leading to higher EMIs or a longer repayment tenure.	Home loan borrowers
Personal Loans	Borrowing costs may rise, making personal loans more expensive.	Individual borrowers
Auto Loans	Higher interest rates can increase the cost of vehicle financing.	Car and two-wheeler buyers
Business Loans	Higher borrowing costs can increase business expenses and delay expansion plans.	Businesses and MSMEs
Fixed Deposits	Banks may offer higher interest rates on new or renewed deposits.	Savers and FD investors
Inflation	Higher borrowing costs can reduce spending and demand, helping control inflation.	Consumers and the economy
Stock Market	Higher interest rates can put pressure on valuations and rate-sensitive sectors.	Equity investors
Debt Investments	Rising yields can affect existing bond prices but may create opportunities in new debt investments.	Debt investors
Economic Growth	Higher borrowing costs can moderate consumption and investment, potentially slowing growth.	Businesses and consumers

What Should Borrowers and Investors Do?

Borrowers should know the interest rates on their loans and how the lender passes on any change in the repo rate to customers. For those having floating rate loans, one can check whether to go for higher EMI, longer tenure or partial prepayment, depending on one’s financial situation.

Depositors can check the latest FD rates before renewing deposits and should not take it for granted that all banks will immediately pass on the entire repo rate hike.

Investors should also not take a decision on one RBI rate announcement. Important factors to watch would be inflation, crude oil prices, future RBI policy decisions, credit growth, corporate earnings and overall economic condition.

The key question is whether the October 2026 hike will be a one-off tweak or the start of a longer tightening cycle.

Conclusion

India’s repo rate hike from 5.25% to 5.50% is significant in that it marks a change in the direction of monetary policy after a long period without a hike. In the near term, lenders could pay more for their financing, while savers could enjoy the possibility of higher rates on deposits.

Impacts will vary for individuals, companies and investment types. Home loans, personal loans, auto finance, NBFC funding and rate sensitive sectors could face more pressure while fixed income investors could see better opportunities with rising yields.

The ultimate economic impact will depend on the size and duration of the rate cycle. Thus, borrowers, savers and investors should keep an eye on the latest repo rate as well as the future course of RBI, inflation and economic growth.

Frequently Asked Questions (FAQs)

What is the repo rate?
The repo rate is the rate at which the Reserve Bank of India provides short-term funds to the commercial banks. Repo rate is one of the monetary tools used by RBI for Monetary policy implementation .
What is the current repo rate in India?
Following the RBI’s October 7, 2026 policy decision, the repo rate stands at 5.50%, after a 25-basis-point increase from 5.25%.
How does an increase in repo rate affect home loans?
An increase can raise interest rates on eligible floating-rate home loans. This may result in higher EMIs, a longer repayment tenure or both, depending on the lender and loan terms.
Why does RBI increase the repo rate?
The RBI can hike the repo rate to curb inflation and to avoid runaway demand adding to price pressures. The latest hike comes amid rising inflation worries while the RBI retained an upbeat outlook on economic growth.
Does a higher repo rate affect the stock market?
Yes, it can move the stock market, especially rate sensitive sectors. Higher borrowing costs could impact corporate profits, consumer demand and company valuations. But market reaction will also depend on growth, inflation and expectations on RBI policy in the future.

October 7, 2026

Apple Pay Launched in India: How It Works, Who Can Use It & How to Set Up

Apple Pay is a contactless digital payment service that allows users to add an eligible credit or debit card to Apple Wallet and use their Apple device to make payments.

At the time of launch, eligible Axis Bank Visa and Mastercard credit cardholders can use Apple Pay in India. RuPay cards are not supported at launch, while Apple has indicated that support will expand over time.

Apple Pay Launched in India: How It Works & Who Can Use It

Finally, Apple Pay has arrived in India, bringing digital payment services from Apple to another major market for digital payments around the world. The new service became available starting from September 30, 2026, through a collaboration with Axis Bank, providing support to eligible Visa and Mastercard credit cards.

With Apple Pay, it becomes possible to make contactless payments via an iPhone, iPad, or Apple Watch without entering card details, PINs or OTPs again and again. Initially, the launch will include Apple Pay support at shops, inside mobile applications and on websites accepting the service.

The important thing about this launch is that India already has an advanced digital payments infrastructure headed by UPI. Different from UPI, Apple Pay makes transactions through adding an eligible bank card into Apple Wallet.

How does Apple Pay work?

Apple Pay uses NFC (Near Field Communication) technology for contactless payments. When a user brings an enabled Apple device close to a compatible payment terminal, the device communicates with the terminal and securely processes the card transaction.

Instead of sharing the actual card number with the merchant, Apple Pay uses a device-specific account number and tokenisation to protect payment information. Authentication can be completed through Face ID, Touch ID or the device passcode.

This means users can make a payment without physically handing over their card.

Who can use Apple Pay in India?

At launch, Apple Pay is available to:

Eligible Axis Bank Visa credit cardholders
Eligible Axis Bank Mastercard credit cardholders
Users with compatible iPhone, iPad or Apple Watch devices
Customers shopping at merchants, apps and websites that support Apple Pay

RuPay cards and cards from most other Indian banks are not supported at launch. Apple is expected to expand bank and card support over time.

Apple says Apple Pay is available on iPhone, iPad and Apple Watch, while Mac support is coming soon.

Apple Pay vs UPI

Apple Pay and UPI are different payment systems.

Feature	Apple Pay	UPI
Payment method	Linked bank card	Bank account
Main technology	NFC/contactless	UPI infrastructure
Authentication	Face ID, Touch ID or passcode	UPI PIN/biometric, depending on method
QR payments	Not the core launch feature	Widely used
Card required	Yes, supported card	No card required
Device ecosystem	Apple devices	Android and iOS

Therefore, Apple Pay should not be viewed as a replacement for UPI. Instead, it provides another way for eligible Apple users to make card-based digital payments.

How to Set Up & Use Apple Pay

Setting up Apple Pay involves adding an eligible card to Apple Wallet and completing the required verification.

Step 1: Open Apple Wallet

Open the Wallet app on your compatible iPhone or iPad and select the option to add a card.

Depending on the supported card and bank, users may also be able to initiate the setup through their banking app. Axis Bank customers can add eligible cards through the supported setup process.

Step 2: Add your card

Follow the instructions to add your eligible Axis Bank Visa or Mastercard credit card.

You may be asked to verify your card details and complete an authentication process with the bank.

Step 3: Complete verification

The bank may require additional verification before the card is activated for Apple Pay.

Once verification is completed, the card becomes available in Apple Wallet for eligible transactions.

Step 4: Make a payment

At a contactless payment terminal:

Open Apple Pay or activate your default card.
Authenticate using Face ID, Touch ID or your device passcode.
Hold your iPhone or Apple Watch near the contactless payment terminal.
Wait for the payment confirmation.

Apple says the service is designed to allow payments without manually entering card details, PINs or OTPs at checkout.

Is Apple Pay secure?

Security is one of the major features of Apple Pay.

Apple Pay does not simply share your physical card number with every merchant. Instead, it uses tokenisation and a device-specific account number to help protect card information. Transactions are also authenticated through the user’s device security, such as Face ID, Touch ID or a passcode.

If an iPhone is lost, Apple provides mechanisms that allow users to manage or disable Apple Pay remotely.

Where You Can Use Apple Pay

Apple Pay can be used across physical stores, apps and websites that support Apple Pay. Apple says the service is available at retailers of different sizes across India.

1. Physical stores

Apple Pay can be used at stores equipped with compatible contactless/NFC payment terminals.

Instead of inserting or swiping a card, users can hold their iPhone or Apple Watch near the terminal after authenticating the transaction.

2. Online shopping

Apple Pay can also be used at participating online retailers where the Apple Pay option is available during checkout.

This can reduce the need to repeatedly enter card information when making a purchase.

3. Apps

Participating apps can integrate Apple Pay as a payment option.

At launch, reports have identified services and retailers including Zomato, Blinkit, Tata 1mg, Croma and Reliance brands among merchants supporting Apple Pay. Availability can vary by merchant and transaction.

4. Apple Stores

Apple Pay is available at select Apple retail business locations in India, provided that the terminal and card are compatible.

For in-store transactions, customers need to watch for the contactless payment icon or the sign that says ‘Apple Pay accepted’ at the point of sale. For online transactions and purchases made via apps, Apple Pay will be shown as one of the payment options on the checkout page, if available.

Apple Pay Launch in India: What It Means for Users

The launch gives Apple users another way to make digital payments using their existing eligible credit cards.

For consumers, the biggest difference is the convenience of using an iPhone or Apple Watch instead of carrying the physical card. The service also adds Apple’s device-level authentication and tokenisation to card payments.

However, the initial rollout is limited. Only eligible Axis Bank Visa and Mastercard credit cards are supported at launch, and India’s RuPay network is not currently supported. Apple has indicated that the service will expand to additional banks and cards over time.

For now, Apple Pay and UPI serve different purposes: UPI remains a bank-account-based payment system, while Apple Pay’s Indian launch is focused on card-based payments.

Conclusion

Apple Pay today officially launches in India for those using an eligible Axis Bank Visa and Mastercard credit card. Now customers will be able to securely add their supported credit cards in Apple Wallet to make contactless payments via their iPhone, iPad, and Apple Watch on both in-store and online transactions at participating stores and websites with the addition of Mac also likely to come soon.

With further partnerships with other Indian banks and card networks under way, the reach and presence of Apple Pay within India may only continue to grow. For now though, its arrival offers yet another opportunity for Indian Apple users to expand their options when paying digitally especially as this comes as the rest of the country continues to adopt the UPI payments platform.

Frequently Asked Questions (FAQs)

Is Apple Pay launched in India?
Yes, Apple Pay officially launched in India on September 30, 2026.
Which bank cards work with Apple Pay in India?
At launch, eligible Axis Bank Visa and Mastercard credit cards are supported.
Can I use RuPay cards with Apple Pay?
No. RuPay cards are not supported at the initial launch.
Can Apple Pay be used without an iPhone?
Apple Pay is currently available on compatible iPhone, iPad and Apple Watch devices. Mac support is coming soon.
Is Apple Pay the same as UPI?
No. Apple Pay uses eligible payment cards, while UPI enables bank-account-based payments through India’s UPI infrastructure.

September 30, 2026

UPI MDR 2026: Charges & Rules Explained

There is considerable discussion regarding UPI MDR charges. However, this does not mean that a charge will now apply to every UPI payment. The new rules will apply to certain merchant payments, while a different MDR rate has been set for stock market and capital-market payments. In this context, it is important for investors and traders to understand what the UPI MDR 2026 entails and how it might impact their transactions.

What Is UPI MDR?

UPI MDR stands for Merchant Discount Rate. Simply put, it is a charge applicable to certain UPI merchant payments within the payment ecosystem. It is incorrect to view this as a UPI transaction fee, as there is no provision to charge the MDR separately to the customer. Under the new framework, it will apply only to specific merchant transactions, while Person-to-Person UPI payments will remain free. The revenue generated from MDR will be utilized within the UPI ecosystem for needs such as payment infrastructure, cybersecurity, innovation, and customer service.

What Are the New UPI MDR Rules From October 15, 2026?

Under the new UPI MDR framework, not every transaction will incur a charge. Starting October 15, 2026, an MDR of 0.4% will apply to eligible Person-to-Merchant (P2M) transactions exceeding ₹2,000, subject to a maximum cap of ₹300 per transaction. Meanwhile, P2M payments up to ₹2,000 and Person-to-Person (P2P) transfers will remain free. A zero-MDR regime will also continue for certain small merchants.

UPI Transaction	MDR Treatment
Person to Person	No MDR
P2M up to ₹2,000	No MDR
Eligible P2M above ₹2,000	0.4%
Eligible P2M ₹75,000 or above	Maximum ₹300
Capital-market payments	0.02%, maximum ₹300

An important point to note here is that an MDR of 0.4% does not mean charging the customer 0.4% directly. This is a charge applicable within the merchant-side payment ecosystem, and banks/payment providers have been instructed not to pass it on to the customer separately.

For example, if an eligible merchant receives a UPI payment of ₹10,000, the MDR at a rate of 0.4% would be ₹40. However, sending ₹10,000 to a friend would not incur any MDR. This is the key difference between P2M and P2P transactions.

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Will Customers Have to Pay UPI MDR?

Under the new framework, the direct burden of the UPI MDR cannot be passed on to the customer. This means you will not have to pay any separate amount as MDR when making a payment; instead, the MDR will be treated as a merchant-side cost within the payment ecosystem. Therefore, it is important to distinguish between the payment amount displayed and the MDR. This also dispels the misconception that customers will be charged extra for every large UPI payment.

UPI MDR for Stock Market Transactions: What Investors Need to Know

In the stock market, UPI is used for various types of financial payments. Therefore, it would not be correct to view the new MDR framework solely from the perspective of standard merchant payments.

1. UPI Payments via Stock Brokers

When an investor uses UPI with their broker, it is important to understand the nature of the payment. Eligible capital-market payments involving brokers do not attract the standard 0.4% MDR (Merchant Discount Rate) applicable to merchant payments exceeding ₹2,000; instead, they fall under the 0.02% rate designated for the capital-market category.

2. Adding Funds to a Trading Account

A common use of UPI is transferring funds into a trading account. Here, it is incorrect to equate the MDR with brokerage charges; payment processing and the actual share trade are distinct activities. Brokers have raised concerns that if a client frequently transfers funds without executing trades, the payment-processing costs for the broker could rise.

3. Impact on Stock Investments

A rate of 0.02% has been set for eligible UPI payments related to stocks and securities. This indicates that capital-market payments are treated differently to ensure that investing via digital payments remains convenient.

4. Mutual Fund Investments and SIPs

Mutual fund payments also fall under the capital-market category. However, SIPs and standard one-time payments should not be viewed in the same light. SIP payments processed via UPI AutoPay or recurring mandates receive different treatment; according to reports, the prescribed transaction MDR will not apply to them.

5. UPI AutoPay and Mandates

With UPI AutoPay, the investor authorizes a mandate upfront, and the payment is subsequently processed automatically on the scheduled date. Consequently, it is not treated the same as a manually initiated UPI payment. This distinction is particularly significant for recurring investments like SIPs.

Understand the different investment payments this way.

Payment Type	Reported Treatment
Stock broker-related eligible payment	0.02% MDR, max ₹300
Securities-related payment	0.02% MDR, max ₹300
Mutual fund one-time payment	0.02% MDR, max ₹300
UPI AutoPay SIP	Excluded from Prescribed MDR transaction charges
P2P fund transfer	No MDR

Understanding the 0.02% MDR through calculation

If an MDR of 0.02% applies to an eligible capital-market payment, the calculation would be as follows

Payment Amount	0.02% MDR
₹5,000	₹1
₹10,000	₹2
₹50,000	₹10
₹1,00,000	₹20
₹10,00,000	₹200
₹15,00,000	₹300*

0.02% on ₹15 lakh = ₹300, and the applicable MDR on amounts above this will also remain capped at ₹300.

UPI MDR vs Brokerage Charges What’s the Difference?

UPI MDR and brokerage are two different types of charges. One is related to payment processing, while the other can be the cost of trading through a broker.

Base	UPI MDR	Brokerage
What is?	A merchant discount rate applied within the payment ecosystem	A charge levied by a broker for applicable trading services
What is it related to?	Eligible UPI payments	Trades in stocks, F&O, and other applicable segments
Capital-market rate	0.02%, capped at ₹300 per transaction	Varies by broker and trading segment
When can it apply?	On applicable UPI payments	On applicable buy/sell transactions
Are they the same charge?	No	No
What does it mean for investors?	A payment-processing cost	A cost associated with trading services

What Does UPI MDR Mean for Traders and Investors?

For those making payments to investment and trading accounts via UPI, the impact will depend on the type of transaction.

1. For Stock Investors

If you add funds to your broker account using UPI, the payment may fall under the ‘capital market’ category; consequently, it will be treated differently than a standard merchant payment.

2. For Active Traders

For traders who frequently add funds to their trading accounts, payment processing costs at the broker level could be a relevant factor. However, it would be incorrect to classify this directly as a trading or brokerage charge.

3. For Mutual Fund Investors

It is important to distinguish between one-time UPI payments and SIP payments made via UPI AutoPay for mutual funds, as they are treated differently under the prescribed MDR framework.

Why Is UPI MDR Being Introduced?

The purpose of UPI MDR is not merely to levy a charge; its framework was introduced to support the costs and future investments of the payment ecosystem.

UPI Infrastructure: The payment infrastructure requires continuous maintenance and upgrades to keep pace with the growing volume of UPI transactions.
Technology Investment: Constant investment is required for new payment technologies and enhanced transaction processing capabilities.
Cybersecurity: Ongoing expenditure is necessary to maintain robust fraud prevention and cybersecurity systems.
Payment Ecosystem Sustainability: MDR creates a source of transaction-linked revenue for banks, payment apps, and other ecosystem participants.
Better Customer Support: Maintaining the reliability of the large-scale UPI network entails expenses related to customer service and operational support.

Read Also: Best UPI Apps in India

Conclusion

Understanding UPI MDR 2026 is essential for investors and traders. Not every UPI payment will incur a charge, and a separate MDR rate has been set for capital-market payments. Therefore, it is important to understand the transaction type and applicable charges when making payments via UPI for investment or trading accounts.

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Frequently Asked Questions (FAQs)

What is UPI MDR 2026?
UPI MDR 2026 is a payment processing charge applicable to specific merchant and capital-market UPI transactions.
Will UPI MDR be charged on every UPI payment?
No. MDR will not be charged on every UPI payment; its applicability depends on the type of transaction.
What is the UPI MDR for capital-market payments?
The MDR for capital-market UPI payments is set at 0.02%, with a maximum limit of ₹300 per transaction.
Will investors pay UPI MDR separately?
No. There is no provision to charge MDR separately to the customer.
Is UPI MDR the same as brokerage?
No. UPI MDR is related to payment processing, whereas brokerage is a charge applicable to trading services.
Does UPI MDR apply to SIP payments?
The treatment of SIP and UPI AutoPay transactions may differ from standard merchant UPI payments. Applicable rules depend on the transaction type.
Does UPI MDR apply to stock brokers?
The prescribed MDR framework may apply to eligible UPI payments falling under the capital-market category.

September 21, 2026

What Is a Black Swan Event?

The global economy can be completely changed in just a single day by a sudden news update being announced. The stock market turns red, stock prices tumble, and panic spreads rapidly across trading floors. Standard financial models fail to predict this sudden crash, leaving even the most experienced investors caught off guard. Surviving these extreme market shocks requires preparation, a calm mindset, and robust risk management strategies. Careful planning protects capital during unexpected chaos and helps maintain financial stability.

What Is a Black Swan Event in the Financial Market

A black swan event is a highly rare and unpredictable occurrence that has a massive impact on the economy. These shocks fall far outside the normal expectations of historical data. Standard financial forecasting models usually fail to predict them because they rely entirely on past trends.

When exploring financial markets, beginners often ask what a black swan event is and how it affects their capital. In simple terms, it is an extreme market shock. To fully grasp what a black swan event is, one must look at its main features.

It is extremely rare.
Causes severe economic damage or creates massive price swings.

These occurrences bring sudden spikes in market volatility.

Historical Examples of Black Swan Events

History shows that markets are vulnerable to sudden global shocks. Looking at past crashes helps traders prepare for future uncertainty. A true black swan event in stock market history always leaves a lasting mark on the economy.

Some major examples are given here:

The 2008 Global Financial Crisis: A worldwide banking crisis was caused by the collapse of the housing market. Massive wealth was seen to be wiped out across the world’s stock markets. This happened as liquidity dried up completely.
The 2020 COVID-19 Pandemic: Strict lockdowns were forced by the sudden spread of the coronavirus. A massive global sell-off was triggered by the uncertainty. In March 2020, a violent crash in indices was seen. The Indian markets were gripped by extreme panic.
The 1998 LTCM Collapse: A highly successful hedge fund was what Long-Term Capital Management was. However, their risk models had failed. This was caused by the unexpected Russian debt default.
The 2004 Indian Tsunami: Markets can also be shocked unexpectedly by natural disasters. Supply chains were disrupted by the devastating tsunami. It is showed by this how trading floors are rippled by non-financial events. The severity of a black swan in stock market history can be illustrated. The major index drops during the 2020 crash should be observed here:

Event Date	Index	Daily Drop	Market Reaction
March 9, 2020	Dow Jones	-7.79%	Worst single-day crash in history at that time
March 12, 2020	BSE Sensex	-8.18%	Lower circuit triggered
March 16, 2020	Dow Jones	-12.93%	Extreme global sell-off

Common Option Strategies for Black Swan Events

During market crashes, normal trading strategies often fail. However, options trading provides specific ways to hedge against extreme drops. Traders often use these methods to protect their portfolios.

Put Ratio Backspreads: This strategy involves selling options at a higher strike price and buying more lots at a lower strike price. It offers limited risk if the market stays calm but provides massive profit potential if the market crashes violently.
Buying Deep Out-of-the-Money Puts: Purchasing deep out-of-the-money put options is a classic defense method. These options are cheap during calm markets but gain massive value when a sudden crash happens.
Long Straddles: A trader buys both a call and a put option at the exact same strike price. This strategy profits from massive price swings in either direction.
Volatility Index Strategies: The India VIX measures market fear and usually spikes during a market crash. Strategies built around volatility indices can yield high returns when panic sets in.

Certain strategies must be completely avoided during extreme market stress. Naked option selling can lead to unlimited losses. Using a fast platform like Pocketful helps traders execute protective strategies swiftly using advanced option chain tools.

Market Psychology of a Trader During Black Swan Events

A black swan event quickly becomes a psychological test for investors. The sudden loss of wealth triggers intense emotional reactions that ruin logic.

Panic Selling: Fear takes over, causing investors to sell holdings at any price to avoid further losses. This herd mentality pushes market prices even lower.
Paralysis and Inaction: Some traders freeze when their screens turn completely red. They fail to cut their losses in time because the market moves too fast.
Loss of Confidence: Extreme shocks destroy trust in standard financial models. Traders may completely abandon their long-term strategies and shift to safe assets.
Margin Call Anxiety: Retail traders with highly leveraged positions face margin calls. The stress of arranging extra funds causes severe mental strain.

To survive these shocks, maintaining emotional discipline is vital. Panic leads to poor decisions. Relying on pre-set stop losses helps traders stay rational when the broader market gives in to fear.

What is Tail Risk and How Option Trading is Highly Exposed to Tail Risk

Tail risk refers to the probability of extreme financial events happening that fall far outside normal expectations. In a standard bell curve of market returns, the ends of the curve are called tails. Tail risk is the danger of rare but devastating losses occurring in those extreme ends.

Option trading is highly exposed to this specific risk. Many option sellers rely on strategies that generate small, consistent profits during calm markets. They base their trades on the assumption that huge market crashes are impossible.

However, when a massive shock hits, the options premium explodes. Variables known as option Greeks behave very differently during a crash. Vega risk becomes dominant as implied volatility spikes. Gamma risk also increases drastically, causing the option delta to change faster than a trader can manage.

For option sellers, an unhedged position during a tail event can wipe out years of accumulated profits in a matter of minutes. Therefore, understanding and pricing this hidden risk is absolutely crucial for anyone trading in the derivatives segment.

How to Manage Tail Risk in Option Trading

Managing tail risk is about survival rather than maximizing returns. Traders must protect their capital from complete destruction. Here are four effective ways to manage this risk:

Avoid Naked Option Selling: Selling options without a hedge exposes the trader to unlimited risk. Always use risk-defined strategies to put a hard cap on potential losses.
Strict Position Sizing: Leverage magnifies losses during extreme market falls. Keeping trade sizes small ensures that a single bad trade does not wipe out the entire account.
Maintain Adequate Liquidity: Having spare cash in a portfolio is essential. It prevents the forced liquidation of positions during margin calls.
Use Advanced Trading Tools: Fast execution is critical during market panic. The Pocketful trading platform offers a Scalper Mode and real-time tools. These help traders manage risk effectively during high volatility.

Conclusion

Periods of extreme uncertainty will always be faced by financial markets. Rare shocks being predicted is impossible. But a natural part of the economic cycle is formed by them. A disciplined approach must be maintained. Proper hedges should be used. Excessive leverage needs to be avoided. Wealth can be protected by investors through this. Pocketful can be used by investors. Your risk of a black swan event is mitigated by it. Ultimately, these rare market events should be viewed as lessons in risk management. A stronger and more resilient investing journey for the future by it.

Frequently Asked Questions (FAQs)

What is the main meaning of a black swan event?
It is an extremely rare, unpredictable market shock that causes severe financial impact.
Can traders find benefits in black swan events?
Yes. While they cause panic, prepared traders using strategies like long puts can generate massive profits during the crash.
How to use options during these market shocks?
Traders use risk-defined option strategies, like put ratio backspreads, to hedge their portfolios and limit potential downside.
Do standard models predict these events?
No. Standard financial models rely on historical data and fail to predict rare and extreme outliers.
How does implied volatility react during a crash?
Implied volatility spikes massively, causing the prices of option premiums to explode rapidly.

September 19, 2026

PIS vs Non-PIS Account: Key Differences for NRIs

Are you an NRI looking to invest in the Indian stock market? You will need an NRI investment account to get started. But before you do, you must understand the difference between a PIS vs Non-PIS account. PIS (Portfolio Investment Scheme) accounts let you buy and sell Indian stocks on a repatriable basis. On the other hand, a Non-PIS account allows investments using local non-repatriable funds. Both NRI trading account options work differently when it comes to money transfers and rules. A key difference lies in the NRE/NRO account repatriation of your funds. Let us dive into the details!

What is a PIS Account?

Under the Reserve Bank of India (RBI) and FEMA rules, PIS stands for Portfolio Investment Scheme. It is a special route created for NRIs to buy and sell shares of Indian companies in the secondary market. If you want to trade in Indian equities and send the money back to your home country, you must have this account.

There are two main types of PIS accounts. An NRE-PIS account uses funds from your NRE bank account, meaning the money and profits are fully repatriable. An NRO-PIS account uses local Indian income, making the funds non-repatriable beyond a certain limit.

To protect Indian companies, the RBI has set strict limits. A single NRI cannot hold more than 5% of a company’s paid-up capital. Also, the total holdings of all NRIs in a single company are capped at 10%, though this can be increased to 24% in special cases.

What is a Non-PIS Account?

A Non-PIS account is a simpler way for NRIs to invest in India without the strict RBI reporting of the PIS route. This account is directly linked to your regular NRO savings account. It is mainly used for non-repatriable investments.

You fund this account using income earned locally in India. This includes money like dividends, rental income, or pensions. You can also transfer money from abroad into your NRO account to use for Non-PIS investments.

Recently, many top brokerages are shifting towards the Non-PIS route. The reason is simple. It offers lower costs, zero banking PIS charges, and an easier setup process. You also get wider investment choices, making it a great NRI trading account option. Plus, modern platforms like Pocketful can help you set up an account easily to begin your investment journey.

PIS vs Non-PIS Account: Key Differences

Let us look at a simple comparison of a PIS vs Non-PIS account.

RBI Reporting Requirements: A PIS account requires daily reporting to the RBI by your bank. A Non-PIS account does not need this strict daily reporting.
Linked Bank Account: PIS accounts are usually linked to an NRE bank account for full NRE/NRO account repatriation of funds. Non-PIS accounts are linked to an NRO account, where repatriation is restricted to $1 million per financial year.
Costs and Charges: PIS accounts have higher fees due to bank charges for RBI reporting. Non-PIS accounts are much cheaper as they do not involve these extra banking fees.
Allowed Categories of Investment: Through PIS, you can mainly trade delivery equity shares. Through a Non-PIS account, you can invest in delivery equity, IPOs, Futures and Options (F&O), and mutual funds easily.

Investment Options in PIS vs Non-PIS Accounts

It is important to know what you can buy with each account. Here are the investment options for both routes:

Listed Equity Shares: Allowed in both. You can buy and sell stocks for delivery in both PIS and Non-PIS accounts.
IPOs: Allowed in Non-PIS accounts. You do not need a PIS account to apply for IPOs.
Mutual Funds: Allowed under the Non-PIS route. You can freely invest in Indian mutual funds using your regular NRO or NRE account without the PIS tag.
ETFs, Corporate Bonds, and Government Securities: Allowed under Non-PIS. You can easily diversify your portfolio with these safer assets without PIS permissions.
F&O and Intraday Trading: Allowed only in Non-PIS accounts. If you want to trade in Futures and Options or do intraday trading, you must use a Non-PIS NRO account. PIS accounts strictly do not allow intraday or F&O trading.

Investment Avenue	Through PIS	Through Non-PIS
Listed Indian Shares	Secondary-market transactions, where permitted	Available under applicable rules
IPOs	Based on applicable requirements	Available through the permitted route
Mutual Funds	Generally not covered under PIS	Available
ETFs	Based on the applicable framework	Available
Corporate Debt	Generally outside PIS	Available
Government Securities	Subject to applicable requirements	Available
REITs	Subject to applicable requirements	Available
InvITs	Subject to applicable requirements	Available
F&O / Intraday Trading	Route-specific eligibility applies	Available subject to applicable rules and broker facilities

How Do PIS and Non-PIS Accounts Work?

Understanding the money flow is important. Here is how both of these NRI investment account types work.

Step-by-step flow for the PIS route:

You start by adding money to your NRE or NRO bank account.
The bank allocates this money to your special PIS bank account.
The bank reports your PIS balance to the RBI and your broker.
You place an order in your NRI trading account.
When you buy or sell, money flows between the PIS account and your linked demat account seamlessly.

Step-by-step flow for the non-PIS route:

You deposit funds into your regular NRO savings account.
You transfer these funds directly to your linked NRI trading account.
You place your trade on your broker’s platform.
The shares are instantly credited to or debited from your demat account without any extra bank reporting steps.

Benefits of a PIS Account and a Non-PIS Account

Both accounts have unique perks for the Indian audience. Let us check them out.

Benefits of a PIS Account

Regulatory Compliance: It perfectly follows all RBI and FEMA guidelines for foreign money.
Automated RBI Reporting: Your bank handles all the complex reporting for you.
Full Repatriation: An NRE-PIS account allows you to take your invested money and profits back to your home country freely.
Easier Tax Tracking: The bank automatically calculates and deducts the required TDS on your equity trades.

Benefits of a Non-PIS Account

Lower Cost: You avoid the hefty annual maintenance and reporting fees charged by PIS banks.
Easier Setup: The paperwork is much simpler, and account opening is faster.
Fewer Restrictions: You do not have to worry about the 5% individual or 10-24% aggregate RBI limits.
Wider Investment Access: You can trade in F&O, mutual funds, and IPOs effortlessly.

Is a PIS Account Mandatory for NRIs?

Many NRIs wonder if a PIS account is compulsory. The simple answer is no, it is not always mandatory.

You only need a PIS account if you want to buy and sell secondary market equity shares on a repatriable basis. If you are using your NRE funds for buying stocks and want to send the profits abroad, PIS is compulsory.

However, PIS is not needed for many other investments. You do not need it if you only want to invest in IPOs, mutual funds, or bonds. You also do not need it if you wish to trade in F&O or do non-repatriable NRO trading.

Remember, RBI rules state that one NRI can hold only one designated PIS account at a time. You cannot have multiple PIS accounts across different banks.

Which Account Should an NRI Choose?

Choosing the right account depends completely on your investment goals. Here is a quick guide to help you decide.

For full repatriation: If you want full repatriation of your equity gains, choose the NRE-PIS account.
For mutual funds and bonds: If you mainly want to invest in mutual funds or government bonds, a simple Non-PIS NRO account is all you need.
For active trading: If you want to trade in F&O or do intraday trading, you must select the Non-PIS account. PIS does not allow this.
For diversified investors: If you want the best of both worlds, you can open both. Use PIS for long-term repatriable stock investments and a Non-PIS account for trading and mutual funds.

If you are looking for an effortless experience, Pocketful can help you set up an NRI trading account suited exactly to your investor profile.

Common Mistakes NRIs Should Avoid

Starting your investment journey in India can be tricky. Avoid these common mistakes:

Assuming every investment needs a PIS account: Many NRIs think they need PIS for mutual funds and IPOs, which is false.
Linking PIS mandate to the wrong or multiple banks: You are legally allowed only one PIS account. Opening multiple can lead to severe regulatory issues.
Ignoring FEMA repatriation limits: Remember that NRO funds have a strict $1 million annual limit for sending money abroad.
Confusing the PIS account with the demat account: A PIS account is just a banking permission, whereas a demat account actually holds your shares.
Choosing an account type without checking eligibility rules: Always check what instruments are allowed. For instance, do not open a PIS account if your main goal is F&O trading.

Conclusion

Both PIS and Non-PIS accounts serve different purposes for NRIs. Neither is strictly better than the other. A PIS account is wonderful if sending money abroad is your top priority. On the flip side, a Non-PIS account shines when it comes to lower costs and wider investment options. Keep your goals in mind, keep a balanced approach, and always remind yourself to check the current RBI/FEMA rules. It is also a good idea to consult your bank or broker before making your final choice.

To open your NRI trading and demat account and get started with your investments in India, download Pocketful – offering users zero brokerage on delivery trades and an easy-to-use platform designed for both beginners and experienced investors.

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Frequently Asked Questions (FAQs)

What is the main difference between PIS vs Non-PIS account?
The main difference is repatriation and reporting. PIS accounts require RBI reporting and allow easy repatriation of stock market gains. Non-PIS accounts use local funds, have less reporting, and have restricted repatriation.
Can I open both PIS and Non-PIS accounts?
Yes, you can open both. You can use your PIS account for long-term repatriable equity investments and your Non-PIS account for mutual funds and F&O trading.
Is a PIS account needed for mutual funds?
No, a PIS account is not needed to invest in Indian mutual funds. You can invest directly using your normal NRE or NRO bank accounts.
Can I trade intraday using a PIS account?
No, intraday trading is strictly prohibited under the PIS route. If you wish to trade intraday or in F&O, you must use a Non-PIS NRO account.
How many PIS accounts can an NRI have?
According to RBI guidelines, an NRI can have only one designated PIS account with a single authorised bank branch in India.

September 16, 2026

Money Market Instruments: Types, Features & Benefits

Managing surplus cash can often feel challenging for individuals looking to balance safety with growth. Keeping funds idle in a regular savings account rarely provides optimal returns against inflation over time. At the same time, locking funds into long term assets restricts immediate access to cash during unexpected emergencies. Finding the right middle ground requires exploring short term financial avenues that offer stability and decent yields. This guide explores a practical solution designed for short duration investments, helping readers make informed financial decisions.

What is a Money Market Instrument?

New investors frequently ask what are the money market instruments when they begin exploring the financial world. To put it simply, these are short term borrowing tools utilized by governments, banks, and large corporations. They use these tools to meet their immediate cash requirements for daily operations. Understanding what are the money market instruments helps individuals discover secure places to park their temporary idle funds.

The instruments of money market are basically debt assets that mature in a very short time. This maturity period is always less than one year, which keeps the investment highly liquid. The Reserve Bank of India regulates the instruments to maintain stability in the economy. This strict regulation ensures that these assets remain a safe avenue for conservative investors.

Money market instruments are generally traded directly between large institutions. This direct trading method is known as the over the counter market, rather than a traditional stock exchange. Because the trading volumes are massive, retail investors rarely buy them directly. Instead, everyday investors participate by investing in specialized mutual funds. These mutual funds pool small amounts of money to buy these high value assets.

Features of Money Market Instruments

These unique traits make them highly suitable for specific financial goals. The primary features of money market instruments include the following points:

High Liquidity and Quick Access These assets are designed to be converted into cash very quickly without significant price drops. Since the maturity period is under one year, the invested capital does not stay locked away. This makes them an excellent choice for building an emergency fund.
Low Risk Profile These tools focus on capital safety rather than aggressive growth. They are issued by highly rated entities like the government and top tier corporations. As a result, the chances of the borrower failing to repay the money are extremely low.
Discounted Issue Price Many of these tools do not pay regular interest like a standard bank fixed deposit. Instead, they are sold at a price lower than their actual face value. When the instrument matures, the investor receives the full face value, and the difference is their profit.
Large Transaction Sizes These assets are traded in huge quantities by banks and mutual funds. A standalone individual investor usually cannot afford the minimum required amount to buy them directly. Retail participation is mainly facilitated through mutual fund schemes.
Regulated Environment The central bank closely monitors these short term markets to manage the country’s cash supply. This regulatory oversight prevents extreme volatility and ensures smooth trading. Such a controlled environment provides peace of mind to the end investors.

Types of Money Market Instruments

There are several instruments of money market and different types of tools available within this financial segment. Each type serves a distinct purpose for the borrower needing the funds.

Treasury Bills (T-Bills) Think of T-Bills as the central government’s way of raising quick cash for short term needs. Since they are backed by the govt itself, its easily the safest option out there. The way they work is you buy them at a discount, and they mature at their full face value within a year (364 days to be exact).
Commercial Paper (CP) Big, highly reputed companies issue Commercial Papers when they need to fund day-to-day working capital. These are completely unsecured notes, meaning no physical assets are pledged as guarantee. Because there is no backup collateral, only companies with really excellent credit ratings can get away with issuing them.
Certificates of Deposit (CD) Banks and financial institutions issue these to raise short term deposits. Honestly, they are a lot like your normal bank fixed deposits, but there’s one major difference. Certificates of Deposit are negotiable money-market instruments that can be transferred or traded subject to applicable regulations and market conditions.
Repurchase Agreements (Repos) Mostly used by banks, Repos are basically short term borrowing deals. How it works is a borrower sells some government securities to a lender, and promises to buy them back at slightly higher price later on. It gives the borrowing institution instant cash for their overnight or short term needs.
Banker’s Acceptance This is a unique financial tool widely used in international trade to secure payments. It is essentially a future payment guarantee signed and backed by a commercial bank. It assures the seller that the payment will be made on the promised date.

Instrument Name	Primary Issuer	Risk Level	General Maturity Period
Treasury Bills	Central Government	Very Low	Up to 364 Days
Commercial Paper	Large Corporations	Moderate	Up to 1 Year
Certificates of Deposit	Commercial Banks	Low	Up to 1 Year
Repurchase Agreements	Banks and Institutions	Low	Overnight to Short Term

How to Invest in Money Market Instruments

Directly buying these assets is difficult for everyday people because of the high costs. However, investing through mutual funds makes the process completely accessible. Here is a simple four step guide to start investing.

Step 1: Choose a Reliable Digital Platform The first step involves selecting a trusted online investment platform. Investors can use platforms like Pocketful to begin their financial journey easily. Pocketful provides a seamless and user friendly space to explore various mutual funds.
Step 2: Complete the KYC Registration Before any money can be invested, individuals must complete their Know Your Customer verification. This is a mandatory safety step that requires basic identity and address proof. Modern digital platforms allow this process to be completed entirely online in a few minutes.
Step 3: Select a Suitable Mutual Fund Once the account is ready, investors should look for liquid funds or short duration debt funds. These specific mutual funds collect money from many people to buy large short term assets. A professional fund manager handles all the complex research and trading.
Step 4: Execute the Investment Investors can choose how they want to put their money into the selected fund. They can invest a single lump sum amount if they have idle cash available. Alternatively, they can start a Systematic Investment Plan to invest small amounts every month.

Advantages of Money Market Instruments

Choosing these short term tools provides several major benefits for conservative individuals. They offer a highly practical way to manage temporary cash balances.

High Capital Safety These instruments generally carry lower risk than many long-term investments, but returns and principal are not guaranteed. Because the maturity timeline is very short, the assets are less affected by long term market crashes. This stability helps individuals protect their hard earned savings.
Excellent Liquidity These investments allow people to access their cash almost immediately. Most mutual funds in this category process withdrawal requests within one or two working days. There are typically no strict lock in periods to worry about.
Better Yields Than Savings Accounts Regular bank savings accounts offer very low interest rates that barely fight inflation. Short term mutual funds generally provide slightly higher and more competitive returns. This ensures that idle cash works a bit harder to generate profit.
Portfolio Diversification Putting all funds into the stock market can be highly stressful during bad economic times. Adding these stable tools helps reduce the overall risk of an investment portfolio. It creates a reliable financial cushion that absorbs sudden market shocks.

Limitations of Money Market Instruments

Despite their strong safety features, these financial tools have some clear drawbacks. Individuals must recognize these limitations to avoid unrealistic expectations.

Lower Growth Potential These tools are strictly designed for safety and capital preservation, not aggressive wealth creation. They naturally provide lower returns when compared to long term equity shares. Investors looking to double their money will not find these suitable.
Vulnerability to Inflation Inflation silently reduces the purchasing power of money over the years. Because the returns from these tools are moderate, they sometimes fail to beat rising inflation rates. This means the actual real world value of the profit might be minimal.
Interest Rate Fluctuations The profits generated by these tools depend heavily on the current economy. If the central bank lowers the national interest rates, the returns on these assets will also decrease. This makes the future income slightly unpredictable.
Standard Tax Implications The profits earned from these short term funds do not receive any special tax benefits. The gains are simply added to the individual’s regular income and taxed according to their standard tax slab. This can reduce the final take home profit for people in higher tax brackets.

Points to Consider Before Investing in Money Market Instruments

Making a hasty financial decision can lead to poor results. Individuals should carefully evaluate a few critical points before committing their funds.

Match the Investment Horizon These funds are perfectly suited for financial goals that are less than one year away. If the goal requires holding the money for five or ten years, equity funds are usually a better choice. Aligning the timeline is crucial for success.
Check the Expense Ratio Mutual funds charge a small yearly fee called the expense ratio for managing the money. Individuals should compare different funds and select one with a lower expense ratio. Lower management fees directly translate into higher final returns for the investor.
Verify the Credit Quality It is important to check the safety ratings of the actual papers the mutual fund holds. A fund holding mostly AAA rated or sovereign papers has a much lower chance of default. Chasing higher returns by choosing low rated funds increases the risk of losing money.
Assess Emergency Access Since these tools are often used as an emergency backup fund, quick access is vital. Investors should ensure their chosen platform and fund allow for fast, penalty free withdrawals. This guarantees that the money is available precisely when an urgent need arises.

Conclusion

Securing financial health requires a balanced approach that uses different types of assets. Short term investment options play an essential role in providing both stability and quick cash access. While they may not generate massive wealth like the stock market, they reliably protect the value of temporary cash. Understanding these simple financial concepts empowers individuals to take better control of their savings. By carefully using trusted digital platforms and making informed choices, the entire investing process becomes smooth, safe, and highly rewarding.

Frequently Asked Questions (FAQs)

What is the basic meaning of these instruments?
They are short term debt assets used by large institutions to raise cash quickly. They provide investors with a stable place to park temporary funds for less than a year.
What are their main benefit of money market instruments?
They offer a high level of capital safety and excellent liquidity. They generally provide slightly better returns than keeping money idle in a standard bank savings account.
How can an individual money market instrument?
Direct purchasing requires massive capital. Retail individuals can easily use them by investing in specific liquid or debt mutual funds through online digital platforms.
How long should one hold instruments of money market?
They are ideal for short term financial goals. Most individuals hold them for a few days up to one year to safely manage their emergency funds.
Are the profits completely tax free?
No, the profits earned are not tax free. The gains are added to regular income and taxed according to the individual’s applicable income tax slab

September 12, 2026

Liberalised Remittance Scheme (LRS): Meaning, Rules, Limits and How It Works

The LRS full form is the Liberalised Remittance Scheme. It is an RBI framework that allows resident Indians to send money abroad for permitted purposes. These include education, travel, medical treatment, investments, and gifts.

Every LRS remittance is subject to RBI rules and the applicable LRS scheme limit. There is a code defined for each reason that helps the banks and financial institutions to track the reason for remittance. Also, there is a limit set for different purposes. The scheme provides a regulated framework for permitted foreign-exchange transactions while ensuring FEMA and RBI compliance.

To understand what is LRS, read this guide here and explore everything you need. Understand its needs, importance, and also the working here in this guide.

What Is LRS?

LRS is an RBI framework introduced in 2004 that allows resident Indians to remit money abroad for a wide range of permitted purposes without needing case-by-case RBI approval for each transaction.

It’s governed under FEMA, 1999, and operates through authorised dealer banks using Form A2 for every remittance. In short, it’s the legal channel through which an Indian resident can send foreign currency abroad, up to a set annual limit.

Some of the common reasons to remit money are as follows:

For education, you need to pay fees to universities.
To meet travel needs, such as booking a hotel.
For medical treatment like fees to a hospital.
As the investment in stocks or other assets is permitted.
For the family maintenance of the relatives.
As a gift upto the permitted amount.

What Documents are Required for an LRS Remittance?

PAN card is mandatory for every LRS transaction.
Form A2 is the FEMA declaration submitted to your bank.
Purpose-specific proof such as a university admission letter for education or a hospital estimate for medical treatment.
KYC documents are already on file with your bank if you’re an existing account holder.
Source of funds proof is occasionally requested for larger remittances.

Who Can Use the LRS Scheme?

The LRS scheme is available only to resident individuals in India. Eligibility is based on residential status under FEMA rather than citizenship alone.

Resident individuals: Indian residents can make LRS remittances for permitted purposes.
Minors: A minor can use the scheme through their natural or legal guardian.
NRIs: Non-Resident Indians cannot use LRS for overseas remittances.
HUFs: Hindu Undivided Families are not eligible under the scheme.
Companies: Corporate entities cannot make remittances under LRS.
Partnerships and trusts: These entities are also outside the scope of LRS.

A Quick Note: LRS Full Form in MedicalIf you searched for LRS full form in medical contexts, it stands for Lactated Ringer’s Solution. It is an intravenous fluid used for hydration and electrolyte replacement in hospitals, commonly seen in nursing and pharmacy settings. That’s unrelated to the remittance scheme covered here.

LRS Scheme Limit for 2026

The LRS scheme limit stands at USD 250,000 per resident individual per financial year. The amount was finalised back in 2015. Since then, the government and the authorities have kept it fixed at this limit. Some of the details that you should know for the LRS 2026 are as follows:

Cumulative limit: The USD 250,000 limit covers all permitted LRS remittances combined, including education, travel, medical expenses, and investments.
Annual reset: The limit applies from April to March and resets at the beginning of each financial year.
Individual limit: The limit applies to each resident individual, not the entire family. Minors can also use LRS through a guardian.
PAN-based tracking: Since January 2026, banks report LRS transactions to track cumulative remittances against the annual limit.

What LRS Remittances Can Be Used For

An LRS remittance can be used for several permitted purposes, including education, travel, medical treatment, and overseas investments. The permitted uses include:

Permitted Purpose	What It Covers
Overseas education	Tuition fees, living expenses, and related study costs
Medical treatment	Treatment abroad and eligible companion expenses
Overseas travel	Tour packages, travel expenses, and related bookings
Foreign investments	Shares, ETFs, and mutual funds listed overseas
Maintenance of relatives	Financial support for close relatives living abroad
Gifts and donations	Permitted transfers to individuals or organisations abroad
Foreign bank accounts	Opening and maintaining eligible overseas bank accounts

What Is Not Permitted Under LRS

LRS cannot be used for transactions prohibited under FEMA or other applicable RBI restrictions. Some key exclusions include:

Not Permitted	What It Includes
Prohibited FEMA transactions	Margin trading and foreign exchange trading abroad
Restricted jurisdictions	Transfers to specified non-cooperative countries
Prohibited payments	Remittances related to lottery winnings and banned magazines
Restricted investments	Direct investments subject to specific RBI restrictions

How LRS Actually Works

The LRS remittance process is completed through an authorised dealer bank. You must meet the eligibility requirements and submit the necessary documents. You would also need to specify the purpose of your remittance. Here is how the process works:

Check Your Eligibility: Only resident individuals can use the LRS. Minors can also make remittances through a guardian. NRIs, companies, HUFs, partnerships, and trusts are not eligible.
Submit Form A2 and Required Documents: Submit Form A2 along with your PAN and other required documents. The form declares the purpose of the remittance and confirms compliance with FEMA rules.
Complete the Remittance Through Your Bank: The authorised dealer bank processes the transfer and collects any applicable TCS. It also reports the transaction against your PAN through the RBI’s centralised tracking system.

TCS on LRS Remittances in 2026

Tax Collected at Source rates on LRS remittances changed meaningfully after Budget 2026, and getting this wrong is one of the most common costly mistakes people make.

Purpose	TCS Rate (FY 2026-27)
Education funded through a qualifying financial institution loan	Nil.
Education or medical treatment, self-funded	Nil up to ₹10 lakh, 2% on the amount exceeding the applicable threshold.
Overseas tour packages	Flat 2%, no threshold.
Any other purpose, including investment, gifts, or family maintenance	Nil up to ₹10 lakh, then 20% above that.

The ₹10 lakh threshold is cumulative across all LRS purposes combined during the financial year, not a separate allowance for each category. Any TCS collected isn’t a final cost either, it can be claimed as a credit against your total tax liability or refunded when you file your income tax return.

LRS for Investing in US Stocks

Buying US stocks directly from India routes through LRS, since you’re remitting rupees abroad to fund a foreign brokerage account. This falls under the “other purposes” category, meaning TCS applies at 20% on remittances beyond the ₹10 lakh cumulative threshold for the year.

If you’d rather not eat into your LRS limit or deal with TCS on this category, listed international ETFs on NSE, tracking indices like the NASDAQ 100 or S&P 500, offer indirect exposure to the same US companies without an outward remittance at all, since you’re simply buying a rupee-denominated fund through your regular demat account.

Example of LRS Remittance and TCS

Suppose you remit ₹6 lakh in June for your child’s education abroad. Later, you remit ₹8 lakh to invest in a US-listed ETF. Your total LRS remittance for the financial year is ₹14 lakh.

Particulars	Amount
Education remittance	₹6 lakh
Investment remittance	₹8 lakh
Total remittance	₹14 lakh
TCS threshold	₹10 lakh
Amount exceeding threshold	₹4 lakh
Applicable TCS on investment portion above threshold	20%

Since the investment remittance takes the cumulative amount above ₹10 lakh, the portion exceeding the threshold attracts the applicable TCS rate for that purpose.

Common Mistakes to Avoid Under LRS

Understanding the LRS scheme limit is only one part of making an overseas remittance. You should also avoid these common mistakes:

Treating each purpose separately: The USD 250,000 limit is cumulative across all permitted purposes.
Ignoring TCS on investments: Eligible overseas investment remittances above the applicable threshold can attract TCS.
Not tracking remittances across banks: Your total LRS usage is tracked cumulatively, even when you use different banks.
Forgetting to claim TCS credit: TCS can be adjusted against your tax liability or claimed as a refund, subject to applicable tax rules.
Submitting incomplete documents: Missing Form A2 or other required documents can delay your remittance.

Conclusion

The Liberalised Remittance Scheme makes it possible for resident Indians to send money abroad for permitted purposes within the annual limit. Before making an LRS remittance, check the applicable limit, TCS rules, and documentation requirements.

Also, if you are looking to invest better with proper planning and support, connect with Pocketful. Open a demat account, check all the investment choices for you, map them to your goals, and invest. Ensure that you track and make changes over time, and if needed, get expert guidance.

Frequently Asked Questions (FAQs)

What Is the LRS Limit for 2026?
The LRS scheme limit is USD 250,000 per resident individual per financial year. It applies cumulatively across permitted purposes.
Does LRS Apply to Buying US Stocks?
Yes. Sending money abroad to fund a foreign brokerage account for investing in US stocks falls under LRS.
Can NRIs Use the Liberalised Remittance Scheme?
No. LRS is available to resident individuals, including minors through a guardian. NRIs, companies, HUFs, and partnerships are not eligible.
Is TCS on LRS Remittance a Final Cost?
No. Eligible TCS can be claimed as credit against your income tax liability. It may also be claimed as a refund while filing your income tax return.
What Is the TCS Rate for Education Remittances Under LRS?
According to the supplied draft, education remittances funded through a qualifying financial institution loan attract no TCS. Self-funded education remittances have nil TCS up to ₹10 lakh and 2% above the threshold.

September 11, 2026

What is Double Taxation Avoidance Agreement (DTAA)?

Earning money across borders sounds exciting for any professional or investor. However, managing the legal deductions on that hard earned money can quickly become stressful. When individuals work or invest in multiple places, different governments often want a share of the same earnings. This creates an unfair burden on the hard working individual. Fortunately, financial systems have established official treaties to fix this exact problem. These treaties ensure that global investors keep more of their profits without facing unjust repetitive tax deductions.

What Is DTAA?

The term stands for Double Tax Avoidance Agreement. It is a formal tax treaty signed between two sovereign countries. The primary goal of this treaty is to prevent individuals from paying taxes twice on the exact same income.

Often, a person might earn money in a foreign nation while holding citizenship in their home country. Without this treaty, both nations could legally demand a portion of those earnings. By signing this document, the Indian government ensures fair play for its residents and non residents.

This arrangement encourages individuals to explore global business opportunities and foreign investments without financial fear. It actively protects the financial interests of professionals, business owners, and Non Resident Indians. The framework provides absolute clarity on which country has the right to collect the tax. This makes global finance much easier to navigate for everyday taxpayers.

How Double Tax Avoidance Agreement Works?

The system operates using two primary methods to stop the repetitive collection of taxes. These are the Exemption Method and the Tax Credit Method. Both methods provide relief but function in completely different ways for the taxpayer.

Under the Exemption Method: The income is taxed in only one of the two nations. For instance, the country where the money is earned might collect the tax. Then, the home country will simply ignore that specific income during the tax filing process. This completely removes the double burden.
The Tax Credit Method: It works differently and is very common. The individual might have to pay taxes in both places initially. However, the home country allows the taxpayer to subtract the amount already paid abroad from their local tax bill. This ensures the total outgoing amount does not exceed the higher of the two tax rates.

To make this work, taxpayers generally need a document called a Tax Residency Certificate. This official paper proves where the person officially lives. It ensures the correct international rules are applied to their specific financial case.

Furthermore, governments now use a Multilateral Instrument to keep these rules updated. The Multilateral Instrument is a global agreement that modifies existing treaties instantly. It prevents multinational companies from finding loopholes and evading taxes. This ensures the system remains fair for regular taxpayers while stopping corporate tax evasion.

Benefits of DTAA

There are many advantages to having these international treaties in place. Here are the main benefits for taxpayers:

Prevents dual taxation: The most obvious advantage is that it stops two governments from taking a cut from the same income.
Lowers withholding tax: The agreement often reduces the Tax Deducted at Source on earnings like bank interest, dividends, and royalties.
Promotes international investment: By removing heavy financial penalties, it encourages individuals to invest in global markets.
Offers tax sparing: Sometimes, a foreign country gives a special tax break to help a new business grow. This framework ensures the home country recognizes that break as tax paid, protecting the investor’s incentive.
Prevents tax evasion: The bilateral nature of the treaty helps governments track money legally. This ensures transparency and reduces illegal money hiding.
Provides a dispute resolution path: It offers a clear legal channel for taxpayers. If a disagreement arises between the two nations regarding tax collection, this treaty helps settle the argument efficiently.

Read Also: What is Hedging?

Detailed Example of DTAA

Consider a Non Resident Indian who lives in New York but holds a fixed deposit account in an Indian bank. When the fixed deposit generates interest, the Indian bank will naturally want to deduct tax at the source.

Under normal domestic rules, the bank might deduct a flat 30 percent tax on that interest income. However, the treaty between India and the United States changes this scenario completely. Because of the signed agreement, the tax rate on this specific interest is capped at a much lower 15 percent.

To get this benefit, the individual simply shows their United States residency documents to the Indian bank. The bank then deducts only 15 percent instead of 30 percent.

Later, when the person files their annual returns in the United States, they can show this 15 percent deduction as a tax credit. This means they will not pay that 15 percent again to the United States government. The entire process becomes smooth and financially efficient for the individual.

List of Countries With Which India Does Not Have DTAA Agreement

India has signed these treaties with more than 80 nations globally. However, there are still places where no such formal document exists. When an individual earns money in a non treaty nation, they can still seek relief under Section 91 of the Income Tax Act.

This domestic law provides unilateral relief. This means India voluntarily offers a tax credit even without a mutual agreement with the other nation. This ensures that Indian residents are not unfairly penalized just because a formal treaty is missing.

The relief calculation under Section 91 is straightforward. The amount of unilateral relief is the lesser of the Indian tax rate or the foreign tax rate applied to the foreign income. This calculated amount is then deducted directly from the taxpayer’s overall Indian tax liability. The individual must provide documentary evidence of the foreign tax paid to claim this benefit successfully.

Below is a look at the status of a few specific nations regarding these treaties.

Country Name	Treaty Status with India	Relief Mechanism for Double Taxation
Seychelles	No Agreement exists	Unilateral relief under Section 91
Nigeria	No Agreement exists	Unilateral relief under Section 91
Bahamas	No Agreement exists	Unilateral relief under Section 91

DTAA Rates In India

The specific rates for Tax Deducted at Source change depending on the partner nation. Every single country negotiates its own mathematical terms with the Indian government. Generally, the rates for earnings like dividends or bank interest sit somewhere between 10 percent and 15 percent under these deals.

Taxpayers should always check the exact percentage for the specific country where they earn income. By knowing the correct rate, investors can accurately plan their financial year. Here are some common rates applied to specific partner nations.

Partner Country	General TDS Rate Under Treaty
United States of America	15%
Singapore	15%
United Kingdom	15%
Germany	10%
Russia	10%

DTAA and Income Tax Filing

Claiming these benefits during the annual electronic filing season requires a little bit of extra paperwork. It is never an automatic process. The taxpayer must accurately report their foreign earnings to the tax department to get the benefits.

When filling out the Income Tax Return, the individual must complete special sections. These are known as Schedule FSI and Schedule TR. Schedule FSI asks for details on the foreign source income. Schedule TR requires the exact tax amount already paid to the foreign government.

To successfully claim the relief, specific documents are mandatory. The most important one is the Tax Residency Certificate. Additionally, the taxpayer must submit Form 10F. This specific form can be downloaded from the official government portal. It captures vital details like the applicant’s nationality, address, and tax identification number.

If the relief falls under Section 91 for a non treaty nation, the taxpayer must also file Form 67. This form is absolutely necessary to claim the foreign tax credit properly. Keeping these papers safe prevents any unwanted notices from the tax office.

Read Also: Best Banks for Savings Accounts

Conclusion

Managing global finances certainly requires attention to detail. However, the legal frameworks in place are designed to help rather than hinder progress. These treaties ensure that money earned through hard work or smart investments is not unfairly diminished by overlapping regulations. By understanding the correct forms and maintaining clear records, individuals can comfortably participate in the global economy.

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Frequently Asked Questions (FAQs)

What is the full form of DTAA?
The full form is Double Tax Avoidance Agreement. It is a tax treaty between two countries preventing the same income from being taxed twice.
Who is eligible to claim this benefit?
Any individual resident in one country but earning income in another can claim this benefit. This applies as long as both nations have signed the treaty.
Which form is necessary to claim the relief?
Taxpayers generally need to submit Form 10F along with a valid Tax Residency Certificate. This paperwork helps them claim the lower tax rates.
What happens if a country does not have this treaty with India?
If no treaty exists, Indian residents can still avoid paying twice. They can claim unilateral relief under Section 91 of the Income Tax Act.
Are the deduction rates the same for all countries?
No, the deduction rates vary heavily. Each partner country negotiates its own specific rate with India, usually ranging from 10 percent to 15 percent.

September 10, 2026

Category: Personal Finance

Grandfathering Meaning

Why is the grandfathering rule applied?

Rule Under Section 112A

How Grandfathering Works

Formula of the Grandfathering Rule

Difference Between Grandfathering and Regular Capital Gain Calculation

Benefits of the Grandfathering Rule

Conclusion

Frequently Asked Questions (FAQs)

What is grandfathering?

What is the cutoff date for the grandfathering rule in mutual funds?

Name the investments that are eligible for the grandfathering rule?

Can we still use the grandfathering rule in mutual funds?

How will the value be calculated if the sale price is lower than the fair market value on 31st January 2018?

Are Gifted Shares Taxable? The Basic Principle

Tax When You Receive Shares As A Gift?

Tax When You Sell Gifted Shares

Tax for the Donor

​Gifts to Different Recipients: A Quick Reference Table

How to Gift Shares: Step by Step

Reporting In Your ITR

Common Mistakes

Frequently Asked Questions (FAQs)

I received shares from my father. Do I have to pay tax on shares?

A friend gifted me shares worth ₹1 lakh. Is that taxable?

How is the gain calculated when I sell gifted shares?

Does the person gifting the shares have to pay any tax?

How do I transfer shares to someone as a gift?

Impact of Increasing the Repo Rate in India

Effect on Home Loans

Comparison Table

Impact on Personal, Auto and Business Loans

Effect on Inflation, Savings and Investments

Impact of Repo Rate Hike on Banks in India

Impact on Stock Market and Debt Investments

Repo Rate Increase: Key Impacts

What Should Borrowers and Investors Do?

Conclusion

Frequently Asked Questions (FAQs)

What is the repo rate?

What is the current repo rate in India?

How does an increase in repo rate affect home loans?

Why does RBI increase the repo rate?

Does a higher repo rate affect the stock market?

Apple Pay Launched in India: How It Works & Who Can Use It

How does Apple Pay work?

Who can use Apple Pay in India?

Apple Pay vs UPI

How to Set Up & Use Apple Pay

Step 1: Open Apple Wallet

Step 2: Add your card

Step 3: Complete verification

Step 4: Make a payment

Is Apple Pay secure?

Where You Can Use Apple Pay

1. Physical stores

2. Online shopping

3. Apps

4. Apple Stores

Apple Pay Launch in India: What It Means for Users

Conclusion

Frequently Asked Questions (FAQs)

Is Apple Pay launched in India?

Which bank cards work with Apple Pay in India?

Can I use RuPay cards with Apple Pay?

Can Apple Pay be used without an iPhone?

Is Apple Pay the same as UPI?

What Is UPI MDR?

What Are the New UPI MDR Rules From October 15, 2026?

Will Customers Have to Pay UPI MDR?

UPI MDR for Stock Market Transactions: What Investors Need to Know

1. UPI Payments via Stock Brokers

2. Adding Funds to a Trading Account

3. Impact on Stock Investments

4. Mutual Fund Investments and SIPs

5. UPI AutoPay and Mandates

Understand the different investment payments this way.

Understanding the 0.02% MDR through calculation

UPI MDR vs Brokerage Charges What’s the Difference?

Gifts to Different Recipients: A Quick Reference Table