SPECIAL PROVISIONS RELATING TO CERTAIN
INCOMES OF NON-RESIDENTS
115C.
In this Chapter, unless the
context otherwise requires,—
(a) “convertible
foreign exchange” means foreign exchange which is for the time being treated by
the Reserve Bank of India as convertible foreign exchange for the purposes of
the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder;
(b) “Foreign
exchange asset” means any specified asset which the assessee
has acquired or purchased with, or subscribed to in, convertible foreign
exchange;
(c) “Investment
income” means any income derived 65[R2] [other than dividends referred to in section 115-O] from a
foreign exchange asset;
(d) “Long-term
capital gains” means income chargeable under the head “Capital gains” relating
to a capital asset, being a foreign exchange asset which is not a short-term
capital asset;
( e) “non-resident
Indian” means an individual, being a citizen of
Explanation.—A person
shall be deemed to be of Indian origin if he, or either of his parents or any
of his grand-parents, was born in undivided
(f) “specified asset” means any of the following assets, namely
:—
(i) shares in an Indian company;
(ii) debentures issued by an Indian company which is not a
private company66[R3] as defined in the Companies Act, 1956 (1 of 1956);
(iii) deposits with an Indian company which is not a private
company66[R4] as defined in the Companies Act, 1956 (1 of 1956);
(iv) any security of the Central Government as defined in clause
(2) of section 267[R5] of the Public Debt Act, 1944 (18 of 1944);
(v) such other assets as the Central Government may specify in
this behalf by notification in the Official Gazette.
Special
provision for computation of total income of non-residents.
115D.
(1) No deduction in respect of any
expenditure or allowance shall be allowed under any provision of this Act in
computing the investment income of a non-resident Indian.
(2) Where
in the case of an assessee, being a non-resident Indian,—
(a) the
gross total income consists only of investment income or income by way of long-term
capital gains or both, no deduction shall be allowed to the assessee
68[R6] [under Chapter VI-A and nothing contained in the
provisions of the second proviso to section 48 shall apply to income chargeable
under the head “Capital gains”];
(b) the
gross total income includes any income referred to in clause (a), the
gross total income shall be reduced by the amount of such income and the
deductions under Chapter VI-A shall be allowed as if the gross total income as
so reduced were the gross total income of the assessee.
69[R7] [Tax on investment income and long-term capital gains.
115E. Where the total income of an assessee,
being a non-resident Indian, includes—
(a) any income from investment or income from long-term capital
gains of an asset other than a specified asset;
(b) income by way of long-term capital gains, the tax payable by
him shall be the aggregate of—
(i) the amount of income-tax calculated on
the income in respect of investment income referred to in clause (a), if
any, included in the total income, at the rate of twenty per cent;
(ii) the
amount of income-tax calculated on the income by way of long-term capital gains
referred to in clause (b), if any, included in the total income, at the
rate of ten per cent; and
(iii) the amount of income-tax with which he would have been
chargeable had his total income been reduced by the amount of income referred
to in clauses (a) and (b).]
Capital gains on transfer
of foreign exchange assets not to be charged in certain cases.
115F. (1) Where,
in the case of an assessee being a non-resident
Indian, any long-term capital gains arise from the transfer of a foreign
exchange asset (the asset so transferred being hereafter in this section
referred to as the original asset), and the assessee
has, within a period of six months after the date of such transfer, invested 70[R8] [***] the whole or any part of the net consideration in
any specified asset 71[R9] [***], or in any savings certificates referred to in
clause (4B), of section 10 (such specified asset 72 [R10] [***], or such
savings certificates being hereafter in this section referred to as the new
asset), the capital gain shall be dealt with in accordance with the following
provisions of this section, that is to say,—
(a) if the cost of the new asset is not less than the net
consideration in respect of the original asset, the whole of such capital gain
shall not be charged under section 45;
(b) if the cost of the new asset is less than the net
consideration in respect of the original asset, so much of the capital gain as
bears to the whole of the capital gain the same proportion as the cost of
acquisition of the new asset bears to the net consideration shall not be
charged under section 45.
Explanation.—For the purposes of this sub-section,—
(i) “cost”, in
relation to any new asset, being a deposit 73[R11] [***] referred
to in sub-clause (iii), or specified under sub-clause (v), of clause (f) of
section 115C, means the amount of such deposit;
(ii) “net
consideration”, in relation to the transfer of the original asset, means the
full value of the consideration received or accruing as a result of the
transfer of such asset as reduced by any expenditure incurred wholly and
exclusively in connection with such transfer.
(2) Where
the new asset is transferred or converted (otherwise than by transfer) into
money, within a period of three years from the date of its acquisition, the
amount of capital gain arising from the transfer of the original asset not
charged under section 45 on the basis of the cost of such new asset as provided
in clause (a) or, as the case may be, clause (b), of sub-section
(1) shall be deemed to be income chargeable under the head “Capital gains”
relating to capital assets other than short-term capital assets of the previous
year in which the new asset is transferred or converted (otherwise than by
transfer) into money.
Return of income not to
be filed in certain cases.
115G. It shall not be necessary for a
non-resident Indian to furnish under sub-section (1) of section 139a return of
his income if—
(a) his
total income in respect of which he is assessable under this Act during the
previous year consisted only of investment income or income by way of
long-term capital gains or both; and
(b) the tax deductible at source under the provisions of Chapter
XVII-B has been deducted from such income.
Benefit under Chapter to
be available in certain cases even after the assessee
becomes resident.
115H.
Where a person, who is a
non-resident Indian in any previous year, becomes assessable as resident in
India in respect of the total income of any subsequent year, he may furnish to
the 74[R12] [Assessing]
Officer a declaration in writing along with his return of income under section
139 for the assessment year for which he is so assessable, to the effect that
the provisions of this Chapter shall continue to apply to him in relation to
the investment income derived from any foreign exchange asset being an asset of
the nature referred to in sub-clause (ii) or sub-clause (iii) or sub-clause
(iv) or sub-clause (v) of clause (f) of section 115C; and if he does so, the
provisions of this Chapter shall continue to apply to him in relation to such
income for that assessment year and for every subsequent assessment year until
the transfer or conversion (otherwise than by transfer) into money of such
assets.
Chapter not to apply if
the assessee so chooses.
115-I. A
non-resident Indian may elect not to be governed by the provisions of this
Chapter for any assessment year by furnishing 75[R13] [his return of
income for that assessment year under section 139 declaring therein] that the
provisions of this Chapter shall not apply to him for that assessment year and
if he does so, the provisions of this Chapter shall not apply to him for that
assessment year and his total income for that assessment year shall be
computed and tax on such total income shall be charged in accordance with the
other provisions of this Act.]
[R1]Chapter XII-A, consisting of sections 115C, 115D, 115E, 115F, 115G, 115H and 115-I, inserted by the Finance Act, 1983, w.e.f. 1-6-1983
[R2]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998
[R3]Clause (iii) of section 3(1) of the Companies Act, 1956, defines “private company”.
[R4]Clause (iii) of section 3(1) of the Companies Act, 1956, defines “private company”
[R5]For definition of “Government security”
[R6]Substituted for “under sub-section (2) of section 48 or under Chapter VI-A” by the Finance Act, 1992, w.e.f. 1-4-1993. Earlier these words were substituted for “under Chapter VI-A” by the Direct Tax Laws (Second Amendment) Act, 1989, w.r.e.f. 1-4-1988.
[R7]Substituted by the Finance Act, 1997, w.e.f. 1-4-1998. Prior to its substitution, section 115E, as amended by the Finance Act, 1985, w.e.f. 1-4-1986, read as under :
“115E. Tax on investment income and long-term capital gains.—(1) Where the total income of an assessee, being a non-resident Indian, consists only of investment income or income by way of long-term capital gains or both, the tax payable by him on his total income shall be the amount of income-tax calculated on such total income at the rate of twenty per cent of such income.
(2) Where the total income of an assessee, being a non-resident Indian includes any income of the nature referred to in sub-section (1), the tax payable by him on his total income shall be—
(i) the income-tax payable by him in accordance with the provisions of sub-section (1) on income of the nature referred to in that sub-section included in the total income; plus
(ii) the amount of income-tax chargeable on the total income as reduced by the amount of income of the nature referred to in sub-section (1), had the total income so reduced been his total income.”
[R8]“or deposited” omitted by the Finance Act, 1988, w.e.f. 1-4-1989
[R9]“or in an account referred to in clause (4A)” omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R10]“or such deposit in the account aforesaid” omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R11]“referred to in clause (4A) of section 10 or” omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R12]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R13]Substituted for “to the Assessing Officer his return
of income for that assessment year under section 139 together with a
declaration in writing to the effect” by the Finance Act, 1990, w.e.f. 1-4-1990.