Schedule VI explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Schedule VI lists incomes that are not included in the total income of certain eligible persons who operate in, or earn from, an International Financial Services Centre (IFSC). Section 11 of the Income-tax Act, 2025 brings it in (""). This article explains the Schedule as per the Income-tax Act, 2025 as amended by the Finance Act, 2026, with its 12 Table rows, seven Notes and the two changes made by the Finance Act.
The Table has 12 serial numbers. Rows 1 to 4, 9 and 10 mostly concern a specified fund; rows 5 to 8, 11 and 12 concern non-residents and IFSC units, including aircraft and ship leasing. Under the Finance Act, 2026 the unit-holding test inside the definition of "specified fund" was substituted and the cut-off year for investment divisions of offshore banking units became 2030, both w.e.f. 1-4-2026.
Later amendments, the Income-tax Rules, 2026 and notifications should be checked. Several rows leave the method of computing the income, or further conditions, to the rules.
How to read the Table
As in Schedule III, the Table has four columns: serial number (A), the income not to be included in total income (B), the eligible person (C) and the conditions (D). The opening paragraph also mentions "the income as mentioned in savings clause". Terms used in columns B to D take their meaning from the Notes below the Table. The sister Schedule for general eligible persons is covered in our note on Schedule III. The IFSC deduction for units appears in section 147, which the Schedule refers to. Our guides on section 11 and on what is not regarded as a transfer under section 70 give the surrounding rules.
If you are a non-resident investor or an IFSC unit and want to test your income against a row, our NRI tax filing service can map the facts to the Table.
The twelve rows
| Serial number | Income left out | Eligible person | Conditions (summary) |
|---|---|---|---|
| 1 | Income from transfer of the capital asset in section 70(1)(r), when the transfer takes place on a recognised stock exchange in an IFSC | Any specified fund | Consideration paid or payable in convertible foreign exchange; income excluded only to the extent attributable to units held by non-residents (not a permanent establishment in India) or to the investment division of an offshore banking unit; computed as may be prescribed |
| 2 | Income from transfer of securities (other than shares in a company resident in India) | Any specified fund | As specified in clauses (b) and (c) of column D at serial number 1 |
| 3 | Income from securities issued by a non-resident, where not issued by a permanent establishment of a non-resident in India | Any specified fund | Income otherwise does not accrue or arise in India, plus the same clauses (b) and (c) |
| 4 | Income from a securitisation trust chargeable under "Profits and gains of business or profession" | Any specified fund | Same clauses (b) and (c) |
| 5 | Income from transfer of non-deliverable forward contracts, offshore derivative instruments or over-the-counter derivatives, or distribution of income on them | Non-resident | Contract entered into with an offshore banking unit of an IFSC referred to in section 147, or a Foreign Portfolio Investor that is a unit of an IFSC; prescribed conditions |
| 6 | Royalty or interest on lease of an aircraft or a ship | Non-resident | Paid by a unit of an IFSC referred to in section 147; the unit has commenced operations on or before the 31st March, 2030 |
| 7 | Income from a portfolio of securities, financial products or funds managed by a portfolio manager, or an activity notified by the Central Government | Non-resident | Received in an account with an Offshore Banking Unit in an IFSC; excluded to the extent the income accrues or arises outside India and is not deemed to accrue or arise in India |
| 8 | Capital gains on transfer of equity shares of a domestic company that is a Unit of an IFSC | A non-resident, or an IFSC Unit engaged primarily in leasing of an aircraft or a ship | Company is primarily in aircraft or ship leasing and began operations on or before the 31st March, 2030; exclusion for transfers within ten tax years from commencement, or ten tax years from the tax year starting 1st April, 2023 if the first period ends before the 1st April, 2033 |
| 9 | Income accruing to, or received from, a specified fund, or on transfer of units in it | A unit holder of a specified fund | Nil |
| 10 | Capital gains on transfer of shares of a company resident in India | A non-resident or a specified fund | Transfer by the resultant fund or a specified fund; shares moved from the original fund (or its wholly owned special purpose vehicle) on relocation; excluded to the extent attributable to non-resident units, in the prescribed manner |
| 11 | Dividends from a company that is an IFSC Unit primarily engaged in leasing of an aircraft or a ship | A Unit of an IFSC | Unit primarily engaged in that leasing business |
| 12 | Interest payable | Non-resident | Payable by an IFSC Unit on moneys borrowed on or after the 1st September, 2019 |
The Notes that give the rows their meaning
Note 1 covers rows 1 to 4. It defines "convertible foreign exchange" (as treated by the Reserve Bank of India for the Foreign Exchange Management Act, 1999), the "investment division of offshore banking unit" (must have commenced operations on or before the 31st March, 2030), "manager", "permanent establishment" (by reference to section 173(c)), "securities", "securitisation trust" (section 221(6)(d); see sections 221 and 222), "sponsor", "trust" and "units". Notes 2 to 7 cover the Foreign Portfolio Investor, aircraft and ship, portfolio manager, specified fund, the relocation terms taken from section 70(2) and "Unit". References to other laws are quoted as printed; check those laws separately.
What "specified fund" means, and what changed in 2026
Note 1(g) defines "specified fund" in two limbs.
- Limb (i): a fund established or incorporated in India as a trust, company, limited liability partnership or body corporate and located in an IFSC, which either (A) holds a Category III Alternative Investment Fund registration and is regulated under the SEBI AIF Regulations, 2012 or the IFSCA Fund Management Regulations, 2022, or (B) holds a certificate as a retail scheme or an Exchange Traded Fund and meets the conditions in the IFSCA regulations; and (C) the unit-holding test below.
- Limb (ii): an investment division of an offshore banking unit that has a Category-I foreign portfolio investor registration and has commenced operations on or before the 31st March, 2030, and fulfils prescribed conditions, including separate accounts for the investment division.
Change 1 (clause (C)). A footnote prints that clause (C) of Note 1(g)(i) was substituted by the Finance Act, 2026, w.e.f. 1-4-2026. As it now stands, all the units other than the unit held by a sponsor or manager must be held by non-residents, except where a non-resident becomes resident under section 6(2), (3), (4), (5), (6) or (7) in a later tax year and the number of units held by the resident holder or holders does not exceed 5% of the total units issued, with such other conditions as may be prescribed. In the earlier wording the 5% test also referred to the aggregate value of the units.
Change 2 (the year 2030). In limb (ii)(A) the year "2030" was substituted for "2025" by the Finance Act, 2026, w.e.f. 1-4-2026.
Worked example
All details are assumed. Orchid Lease IFSC Ltd., a non-resident lessor, leases an aircraft to a unit of an International Financial Services Centre referred to in section 147. The unit began operations on 15 October 2028. The unit pays Orchid Lease Rs. 4,00,000 of interest and royalty for the tax year on account of the lease.
Serial number 6 asks two questions. Is the royalty or interest paid by a unit of an IFSC referred to in section 147? Yes. Did the unit commence operations on or before the 31st March, 2030? Yes, October 2028 is earlier. On those facts the Rs. 4,00,000 is not included in the total income of Orchid Lease. Had the unit started on 1 June 2031 the condition in clause (b) would fail and the row would not help.
For a specified fund with 200 units, where one non-resident holder becomes resident under section 6 and holds 8 units, 8 divided by 200 is 4%, below the 5% ceiling printed in Note 1(g)(i)(C), subject to the sponsor-or-manager exception and the prescribed conditions.
Need help?
Fund managers, offshore banking units and cross-border lessors should confirm the registration, the unit-holding pattern and the dates before treating any income as left out. Our tax planning advisory service can help you test a structure against Schedule VI.
Key takeaways
- The Table has 12 serial numbers; the Notes define the fund and the dates.
- "Specified fund" has two limbs, and clause (C) of the first limb was substituted w.e.f. 1-4-2026.
- The year 2030 replaced 2025 in the offshore banking unit limb, w.e.f. 1-4-2026.
- Income is excluded only to the extent of the conditions, often limited to non-resident units.
Read next
- Schedule III: income not included for eligible persons
- Section 147: offshore banking units and IFSC units
- Sections 221 and 222: securitisation trusts and venture capital undertakings
- Section 70: transactions not regarded as transfer
- Exempt incomes in Schedules II to VII
- Chapter III: incomes which do not form part of total income
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.