The Income-tax Act, 2025 applies to income from 1 April 2026, while income up to 31 March 2026 (FY 2025-26) stays under the 1961 Act.
For Indians investing abroad, it is mostly renumbering: residence, DTAA relief and capital gains on foreign shares work as before.
A handful of changes come from the Income-tax Rules, 2026 and the Finance Act 2026, including Form 44, TCS rates, the s93 interest deduction and relief for undisclosed foreign assets.
This page is for residents investing abroad under LRS, RSU and ESPP holders, and returning NRIs who now hold foreign assets as residents. Jump to what to do in your situation, or look up any old or new number in the old to new mapping of sections, rules and forms.
Table of contents
- When the Income-tax Act 2025 applies: FY 2025-26 vs Tax Year 2026-27
- What the Income-tax Act 2025 did not change for Indians investing abroad
- What changed under the Income-tax Act 2025, and from when
- What to do under the Income-tax Act 2025, by situation
- Deadlines under the Income-tax Act 2025: 31 December 2026 and 31 March 2027
When the Income-tax Act 2025 applies: FY 2025-26 vs Tax Year 2026-27
Income up to 31 March 2026 stays under the Income-tax Act, 1961, and income from 1 April 2026 falls under the Income-tax Act, 2025, according to CBDT's transition FAQs.
| When | Which law applies |
|---|---|
| Return for FY 2025-26 (AY 2026-27), filed in 2026 | Income-tax Act, 1961 and Income-tax Rules, 1962 |
| 1 April 2026 | Income-tax Act, 2025 and Income-tax Rules, 2026 come into force |
| 15 June 2026 | First advance tax instalment for Tax Year 2026-27, under the 2025 Act |
| From July 2027 | Returns for Tax Year 2026-27 fall due under the 2025 Act (31 July for salaried and investment-only filers) |
Three transition rules sit behind these dates:
- TDS and TCS: the 2025 Act applies where the earlier of credit or payment (for TCS, debit or receipt) is on or after 1 April 2026 (FAQ Q6.1, Q6.21).
- Foreign remittances: a remittance made on or after 1 April 2026 uses Forms 145 and 146, but whether the income is taxable follows the year it accrued (FAQ Q4.25, Q4.27).
- Earlier years: an assessment, reassessment or appeal for any year before 1 April 2026 stays under the 1961 Act, even if it starts later (s536(2)(c)).
The Income-tax Act 2025 also drops "previous year" and "assessment year". Income of FY 2026-27 is "Tax Year 2026-27", not "AY 2027-28" (s3).
What the Income-tax Act 2025 did not change for Indians investing abroad
The Income-tax Act 2025 renumbered the rules Indians investing abroad rely on without rewriting them, according to CBDT's section map:
- Residence and RNOR: the residence tests are unchanged in substance, and RNOR status moved from s6(6) to s6(13).
- DTAA relief: treaty relief moved from s90 to s159, and unilateral relief from s91 to s160.
- Capital gains on foreign shares and ETFs: moved from s112 to s197.
- Losses from earlier years: losses from years before 1 April 2026 carry forward under the Income-tax Act 2025 on the old Act's terms (FAQ Q8.2).
- Foreign dividends: still taxed as income from other sources, which moved from s56 to s92. The one change, on deducting interest, is in the next section.
- Exchange rate for converting foreign income: the TTBR rule moved from Rule 115 to Rule 206 of the Income-tax Rules, 2026.
- TCS on LRS investment: still 20% on remittances above Rs 10 lakh, now under s394 (s394 text).
- LRS itself: the USD 2,50,000 limit, Form A2 and PAN for LRS are RBI rules under FEMA, set out in the RBI Master Direction on LRS.
- Form 145 for LRS investing: still not needed for an individual's remittance that is not chargeable to tax and needs no RBI prior approval (Rule 220(3)(a), Form 145 FAQ).
- Black Money Act, 2015: a separate law, so the penalties behind Schedule FA were not renumbered.
Note: Schedule FA, where you report foreign shares, RSUs and accounts, is part of the ITR forms. CBDT notifies those forms under Rule 164 of the Income-tax Rules, 2026, so the Tax Year 2026-27 forms will set how foreign assets are reported in returns due from July 2027.
What changed under the Income-tax Act 2025, and from when
Eight changes matter to Indians investing abroad, and they start on different dates. Some come from the Income-tax Rules, 2026 and some from the Finance Act 2026, which amended both the old and new Acts. The table runs from the earliest start date to the latest.
| # | Change | Who it affects | Applies from |
|---|---|---|---|
| 1 | Prosecution under Black Money Act s49 and s50 no longer applies to foreign assets, other than immovable property, worth up to Rs 20 lakh in aggregate. | Anyone with foreign assets missing from past returns | Deemed from 1 October 2024 |
| 2 | Revised returns allowed for 12 months from the end of the year, in both Acts. A fee of Rs 1,000 or Rs 5,000 applies to a revision after 9 months (s234-I of the 1961 Act for FY 2025-26; s428(b) of the 2025 Act after that). | Anyone correcting a return, for example to add Schedule FA details | FY 2025-26 (until 31 March 2027) |
| 3 | TCS on LRS for education or medical treatment above Rs 10 lakh cut from 5% to 2%. Overseas tour packages now attract 2% on any amount (was 5% up to Rs 10 lakh and 20% above). TCS on investment stays at 20% above Rs 10 lakh. | Residents sending money abroad | 1 April 2026 |
| 4 | FAST-DS 2026 lets you declare undisclosed foreign assets or income up to Rs 1 crore at 30% tax plus an equal amount, or pay a flat Rs 1 lakh fee for already-taxed foreign assets up to Rs 5 crore left out of the return schedule (FAST-DS FAQs). | Anyone with foreign assets missing from past returns | Open 16 August to 31 December 2026 |
| 5 | Form 67 is now Form 44. New: Form 44 needs verification by a practising chartered accountant if the taxpayer is a company or foreign tax paid in the tax year is Rs 1 lakh or more; Form 67 needed none. It is due within 12 months from the end of the tax year if the return was filed by the original or belated deadline; with an updated return, by the date that return is filed, which matches Form 67's timing; in practice, file it before your ITR (Form 44 guidance note). | Anyone claiming credit for foreign tax, such as US tax withheld on dividends | Tax Year 2026-27 |
| 6 | New Form 45 claims credit within six months from the end of the month in which a foreign tax dispute is settled. Form 44 must already be filed (Form 44/45 FAQ). | Anyone with a foreign tax dispute | Tax Year 2026-27 |
| 7 | No deduction of any expenditure, including interest, against dividend or mutual fund income (s93). FY 2025-26 income keeps the 20% interest limit under s57. | Anyone who borrowed to invest | Tax Year 2026-27 |
| 8 | Form 168 replaces Form 26AS and the AIS, and shows TCS collected from 1 April 2026 (Form 168 guidance note). | Everyone, including anyone checking TCS on LRS | Tax Year 2026-27 |
Other changes, such as the new tax treatment of Indian share buybacks, the narrower Sovereign Gold Bond exemption and the 31 August due date for non-audit business filers, are in the old to new mapping of sections, rules and forms. The Budget memorandum explains the reasons behind changes 1 and 7.
What to do under the Income-tax Act 2025, by situation
Most Indians investing abroad need to change only a few habits from Tax Year 2026-27. Find your situation below.
Residents investing abroad under LRS
- Check the TCS collected on your remittances in Form 168, then claim it in your return.
- From Tax Year 2026-27, stop deducting interest against dividend or mutual fund income (s93).
- From Tax Year 2026-27, claim credit for foreign tax, such as US tax withheld on dividends, in Form 44 instead of Form 67. If that foreign tax is Rs 1 lakh or more, a practising chartered accountant must verify Form 44. File Form 44 before your ITR so the credit is on record.
- No Form 145 is needed for your LRS investment remittances (Rule 220(3)(a)).
Example. Suppose you are a resident who sends Rs 15 lakh abroad under LRS to invest in US stocks during Tax Year 2026-27, with no other LRS remittances that year. TCS applies at 20% only to the amount above Rs 10 lakh (s394(1) [Table: Sl. No. 7(b)]).
| Item | Amount |
|---|---|
| Total remitted in Tax Year 2026-27 | Rs 15 lakh |
| Less: threshold | Rs 10 lakh |
| Amount above the threshold | Rs 5 lakh |
| TCS at 20% | Rs 1 lakh |
| Total TCS collected | Rs 1 lakh |
#### The result: Rs 1 lakh of TCS, shown in Form 168 and claimed in your return
For how TCS works and how to claim it, read TCS on foreign investments.
RSU and ESPP holders
- Your RSU and ESPP shares are still taxed as a perquisite, now under s17(1)(d) (old s17(2)(vi)), valued under s17(4)(h): fair market value less anything you paid (s17 text).
- When you sell, your cost is the value already taxed at vesting, now under s73(1) [Table: Sl. No. 4] (old s49(2AA), s73 text).
- From Tax Year 2026-27, your Form 16 becomes Form 130 and Form 12BA becomes Form 123.
- If foreign tax paid in the year, such as US tax withheld on dividends, is Rs 1 lakh or more, Form 44 must be verified by a practising chartered accountant. File it before your ITR.
- Keep reporting your RSUs and the account holding them in Schedule FA. The Tax Year 2026-27 ITR forms will set its format; until then, the current rules are in Schedule FA for RSU holders.
For the full picture, read how RSUs are taxed in India from grant to sale.
Returning NRIs
- RNOR status moved from s6(6) to s6(13), with the residence tests unchanged in substance.
- If you bought foreign assets while you were a non-resident and left them out of your return's foreign asset schedule, FAST-DS 2026's Rs 1 lakh route covers them, if worth up to Rs 5 crore, until 31 December 2026 (FAST-DS FAQs).
For every number you need after moving back, read section numbers for returning NRIs under the new Act.
Deadlines under the Income-tax Act 2025: 31 December 2026 and 31 March 2027
Two dates matter for Indians investing abroad before Tax Year 2026-27 returns open.
- 31 December 2026: FAST-DS 2026 closes. After that date, the Rs 1 lakh fee route and the 30% tax route for undisclosed foreign assets are no longer available (FAST-DS FAQs).
- 31 March 2027: the last day to revise a return for FY 2025-26 (AY 2026-27), under the 12-month window the Finance Act 2026 added (FAQ Q3.7). A revision is how to add foreign assets left out of Schedule FA, or a foreign tax credit you missed.
Note: A revision filed more than 9 months after the end of the year attracts a fee of Rs 1,000 or Rs 5,000. Check the e-filing portal for the exact date the fee starts, as the wording in the 1961 Act is unclear.
