Income of Non Resident

(Sec. 115D) Computation of Investment income of Non-Resident :

Non deductionof any expenditure or allowance is allowed in computing the Investment Income of a Non

Resident Indian. Further no deduction under chapter VIA allowed from Investment Income or from Long

Term Capital Gains. While computing Long Term Capital Gain indexed cost shall not be allowed.

Note : (Sec. 115C) Definitions :

(a)     Non-resident Indian mean an individual, being a citizen of India or a person of Indian origin who is not a ‘resident’.

(b)     Investment Income means any income derived from a foreign exchange asset.

(c)     Foreign Exchange Asset means any specified asset which the assessee has acquired, purchased with or subscribed to, in convertible foreign exchange.

(d)     Specified asset means nay of the following assets :

i)        shares in an Indian company;

ii)       debentures issued by an Indian public company which is not a private company as defined in the

Companies Act, 1956;

iii)      deposits with an Indian company which is not a private company; defined in the Companies Act,     

          1956.

iv)      any security of the Central Government; as per Sec. 2(2) of Public Dept. Act., 1994.

v)        such other assets as the C.G. may specify in this behalf by notification in the official Gazette.

(e)     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, and any rules made there under.

2.      (Sec. 115E) Tax on Investment Income and Long Term Capital Gain :

         Both the income is to be taxed @20% but capital gain on transfer of specified assets is to be taxed @ 10% provided.

Note :    Sec. 115G. It shall not be necessary for a non-resident Indian to furnish return u/s 139(i) of his income if—

(a)   his total income in respect of which he is assessable under this Act during the previous year consisted only Investment Income or Long Term capital Gain or Both and

(b)   the TDS has been deducted from such income.

3.      (Sec. 115F) Long Term Capital Gain (LTCG) on transfer of foreign exchange assets not to be charged in certain cases :

         LTCG on transfer of foreign exchange assets will not be charged to tax, if whole net consideration is invested within 6 months of transfer in any specified assets. If only part of net consideration is invested, proportionate exemption will be granted as under :

Note :    If the specified assets is transferred within 3 years of its acquisition date the exempt capital gain will be chargeable in such year as LTCG.

4.      (Sec. 115H) Benefit under this chapter can be availed even after the assessee becomes resident :

         Where a Non-resident-Indian becomes resident in subsequent year, the provision of this chapter will continue to apply on Investment Income derived from specified assets, provided he furnished to the A.O. a declaration in writing alongwith return u/s 139(1) to the effect that this chapter shall continue to apply.

5.      (Sec. 115I) Chapter not to apply if assessee so choose :

Note :    It is important to note that this option is given for Chapter XXA (Sec. 115C to 115H) and this option is not applicable for provision of Chapter XX regarding determination of tax in certain special cases.

6.      Sec. 115 AB Tax on income or capital Gain from units purchased in foreign currency by overseas financial organisation. Where total income of an Overseas Financial Organisation (Fund, Institution, Association or Body approved by SEBI) includes :

         Income in respect of units of Long Term Capital Gain (LTCG) in respect of such units purchased in foreign currency. The Income tax payable shall be 10% of such income on gross basis. No deduction u/s 28 to 44C or 57 and chapter VI A shall be allowed.

Note :    Unit means unit of mutual fund specified. u/s 10(223D) or of the Unit Trust of India.

7.      Sec. 115AB Tax on non-resident sportsman or sports associations :

         Where a non-resident and a non citizen sportsman has any income by way of participation in —

(1)    any game or sport in India, or

(2)    advertisement, or

(3)    contribution of articles relating to any game or sport in India in any newspaper, magazines or journals or where a non-resident association has any Income by way of guarantor in relation to any game or sport played in India.

         Such income will be taxed @10% and no deduction for any expenditure or allowance shall be allowed from these incomes under any provision of this Act. However the assessee will not be required to furnish any return u/s 139(1) for the above income if T.D.S. is already made.

8.      (Sec. 115 AC) Tax on income from Bonds of shares purchased in foreign currency :

         Income tax @10% shall be payable in case of following incomes.

(a)    Income by way of interest on notified bonds of an Indian Company issued in accordance with such scheme as notified by C.G. or on bonds of a public sector company sold by the government and purchased in foreign currency.

(b)    Income by way of dividends on GDRs—

        Issued against the initial issue of shares of an Indian Company issued in accordance with such scheme as notified by C.G. and purchased in foreign currency; or Issued against the share of a public sector Company sold by Govt. and purchased in foreign currency through an approved intermediary; or  Issued or Reissed against the exiting share of an Indian Company issued in accordances with such schemes as notified by C.G. and purchased in foreign currency.

9.      (Sec. 115 AD) Tax on Income of Foreign Institutional Investors from securities or capital gains arising from their transfer :

Where a notified Foreign Institutional Investor receives income or LTCG or STCG in respect of securities, other than on units referred in Sec. 115AB no deduction u/s 28 to 44C, 57 (i) & 57 (iii) or 80D to 80U shall be allowed. The assessee shall not been entitled to index cost nor conversion into Foreign Currency shall be allowed while computing LTC Gains.

10.     (Sec. 115A) Tax on dividends, interest, royalty and technical service fees in case of foreign companies.

         Tax @20% is charged on following income

(a)    Dividend

(b)    Interest from Govt. or on Indian Concern on monies borrowed by Govt. or the Indian Concern in foreign currency.

(c)    Income from units of U.T.I. or M.F. purchased in foreign currency

Note :    Income by way of Royalty & fees for technical services received from Govt. or an Indian concerned in pursuance of an agreement after 31.3.76 but before 1.6.97 and agreement approved by C. Govt. Tax @30% is charged.

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