Special provisions relating to certain
incomes of non-residents
Definitions.
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 29[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 India or a person of Indian
origin who is not a “resident”.
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 India;
(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 company30[R3] as
defined in the Companies Act, 1956 (1 of 1956);
(iii) deposits with an
Indian company which is not a private com-pany30 [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 231[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 32[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.
33[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 34[R8] [***] the whole or any part of the net
consideration in any specified asset 35[R9] [***], or in any savings certificates referred
to in clause (4B) of section 10 (such specified asset 36[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 37[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 139 a 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 38[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 39[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]The italicised words shall be inserted by the Finance Act, 2003, w.e.f. 1-4-2004. Words “other than dividends referred to in section 115-O” were omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Earlier the quoted words were 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”. For text of section 3, see Appendix One.
[R4]Clause (iii)
of section 3(1) of the Companies Act, 1956, defines “private company”. For text
of section 3, see
Appendix One.
[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.