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Special Provisions

Special provision in case of Non-resident Indian [Sec.115C to 115-I]




Applicable on

Non-resident Indians deriving -

a) Income from investment in foreign exchange asset; or

b) Long-term capital gain on foreign exchange asset.

Notes
Foreign exchange asset means any specified asset, which the assessee has acquired or purchased with, or subscribed to, in convertible foreign exchange.
Specified asset means any of the following: 
  • Shares in Indian company;
  • Debenture issued by an Indian company which is not a private company;
  • Deposit with an Indian company, which is not a private company;
  • Any security of the Central Government; or
  • Any notified asset.

Investment income means any income (other than dividend referred in sec. 115-O) derived from a foreign exchange asset.

Long-term capital gain 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.

Non-resident Indian means an individual, being a citizen of India or a person of Indian origin who is not a resident.

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Special provision [Sec. 115D]

  • No deduction in respect of any expenditure or allowance is allowed under any provision of this Act in computing the investment income

  • No deduction shall be allowed to the assessee u/s 80C to 80U


Tax on investment income and long term capital gain [Sec. 115E]

Nature of income
Rate of tax
Income from investment
20%
Long term capital gain
10%



Exempted capital gain [Sec. 115F]

Applicable to

Non-resident Indian (i.e. an individual being a citizen of India or a person of Indian origin who is a non-resident)

Conditions

  • Assessee has transferred any of the following long term capital asset, acquired in convertible foreign exchange:
    1. Shares in an Indian company; or
    2. Debentures of an Indian public limited company; or
    3. Deposits with an Indian public limited company; or
    4. Central Government securities.

    (hereinafter referred to as original asset )

  • Within 6 months of transfer of original asset, the taxpayer has invested the whole or any part of net consideration in any of the following assets (hereinafter referred to as new asset)
    1. Shares in an Indian company; or
    2. Debentures of an Indian public limited company; or
    3. Deposit with an Indian public limited company; or
    4. Central Government securities; or
    5. National Savings Certificate VI and VII issues.


Amount of exemption

Exemption is available to the minimum of the following:

a)  Long term capital gain; or

b)  Long term capital gain * Amount invested in the new asset

Net sale consideration on transfer of original asset


Withdrawal of exemption

When the new asset acquired by the assessee is transferred or converted into money within 3 years from the date of its acquisition, the capital gains exempted earlier shall be revoked.

On revocation of exemption, benefit availed earlier under this section shall be taxed as long-term capital gain in the previous year in which such new asset is transferred or converted into money.

Note : Sec. 115F is optional in nature and not mandatory, i.e. an assessee may or may not opt for sec. 115F by giving a declaration in return of income to this effect. [Sec. 115-I]

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Return of income not to be filed in certain cases [Sec. 115G]

It is not necessary to file return if during the previous year there is no other income and tax has been deducted at source.

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Applicability of provisions after becoming resident [Sec. 115H]

Where a person become assessable as resident in India in any subsequent previous year, he may assessed as above provisions for that income provided he file a declaration in writing along with his return of income of subsequent year in this regard.

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Non-applicability of provisions [Sec. 115I]
An assessee may elect not to be governed by this provision for any assessment year by furnishing return of income for that assessment year u/s 139 declaring therein that the provision of this chapter shall not apply on him for that assessment year and if he does so, the provisions of this chapter shall not apply on him.