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The CBDT has notified a new set of rules to amend the existing Income-tax Rules, 1962 which shall come into force as on the date of its publication in the Official Gazette. The aim of this amendment is to insert two new rules after rule 21AH and two new forms after Form No.10IF, namely:

- 21AI. Computation of exempt income of specified fund for the purposes of clause (4D) of section 10

Form No. 10IG. Statement of Exempt income under clause (4D) of section 10 of the Income-tax Act, 1961

- 21AJ. Determination of income of a specified fund attributable to units held by non-residents under sub-section (1A) of section 115AD

Form No. 10IH. Statement of income of a Specified fund eligible for concessional taxation under section 115AD of the Income-tax Act, 1961

CBDT inserts two new rules after Rule 21AH and two new forms after Form No.10IF

Reproduction of newly inserted rules 

21AI. Computation of exempt income of specified fund for the purposes of clause (4D) of section 10 

(1) For the purpose of clause (4D) of section 10, income attributable to units held by non-resident (not being the permanent establishment of a non-resident in India) in a specified fund shall be computed in accordance with the following formula, namely:

Income exempt under clause (4D) of section 10= A*C1 + B*C2 +D*FI+E*F2, where

A = any income accrued or arisen to, or received by a specified fund as a result of transfer of capital asset referred to in clause (viiab) of section 47, on a recognized stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in convertible foreign exchange;

 

B = any income accrued or arisen to, or received by a specified fund as a result of transfer of securities (other than shares in a company resident in India);

C1 = ratio of the aggregate of daily 'assets under management' of the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the aggregate of daily total 'assets under management' of the specified fund, from the date of acquisition of the capital asset referred to in clause (viiab) of section 47 to the date of transfer of such capital asset.

C2 = ratio of the aggregate of daily 'assets under management' of the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the aggregate of daily total 'assets under management' of the specified fund, from the date of acquisition of the security (other than shares in a company resident in India) to the date of transfer of such security.

D = any income accrued or arisen to, or received by a specified fund from securities issued by a non-resident (not being a permanent establishment of a non-resident in India) and where such income otherwise does not accrue or arise in India;

E = any income accrued or arisen to, or received by a specified fund from a securitization trust which is chargeable under the head 'profits and gains of business or profession'; and

F1 = ratio of the 'assets under management' in the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the total 'asset under management' of the specified fund, as on the date of receipt of such income from securities issued by a non-resident (not being a permanent establishment of a non-resident in India) and where such income otherwise does not accrue or arise in India.

F2 = ratio of the 'assets under management' in the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the total 'asset under management' of the specified fund, as on the date of receipt of such income from a securitization trust which is chargeable under the head 'profits and gains of business or profession'.

 

(2) The specified fund shall furnish an annual statement of exempt income in Form No. 10IG electronically under digital signature on or before the due date, which is duly verified in the manner indicated therein.

(3) The Principal Director General of Income-tax (Systems) or the Director General of Income tax (Systems), as the case may be, shall specify the procedure for filing of the Form No. 10IG and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the statements so furnished under this rule.

Explanation. - For the purpose of this rule, the expressions, -

(a) 'assets under management' means the closing balance of the value of assets or investments of the specified fund as on a particular date;

(b) 'International Financial Services Centre' shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);

(c) 'permanent establishment' shall have the same meaning as assigned to it in clause (iiia) of section 92F;

(d) "securities" shall have the meaning as assigned to it in clause (bb) of the Explanation to clause (4D) of section 10;

(e) 'due date' shall have the same meaning as assigned to it in the Explanation 2 to sub-section (1) of section 139;

(f) 'specified fund' shall have the same meaning as assigned to it in sub-clause (i) of clause (c) of the Explanation to clause (4D) of section 10; and

(g) 'unit' shall have the same meaning assigned to it in clause (f) of Explanation to clause (4D) of section 10.

21AJ. Determination of income of a specified fund attributable to units held by non-residents under sub-section (1A) of section 115AD

(1) For the purposes of sub-section (1A) of section 115AD, the income of a specified fund by way of short-term or long-term capital gains, referred to in clause (b) of sub-section (1) of section 115AD, attributable to the units held by non-resident (not being the permanent establishment of a non-resident in India) shall be calculated in accordance with the following formula, namely:

A = B * C

Where,

  • A = income attributable to the units held by non-resident (not being the permanent establishment of a non-resident in India)
  • B = income arising from transfer of the security
  • C = ratio of the aggregate of daily 'assets under management' of the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the aggregate of daily total 'assets under management' of the specified fund, from the date of acquisition of the security to the date of transfer of such security.

(2) For the purposes of sub-section (1A) of section 115AD, the income of a specified fund by way of income received in respect of securities, referred to in clause (a) of sub-section (1) of section 115AD, attributable to the units held by non-resident (not being the permanent establishment of a non-resident in India) shall be calculated in accordance with the following formula, namely:

X = Y * Z

Where,

  • X = income attributable to the units held by non-resident (not being the permanent establishment of a non-resident in India)
  • Y = income received in respect of securities
  • Z = ratio of the 'assets under management' in the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the total 'asset under management' of the specified fund, as on the date of receipt of such income.

(3) The specified fund shall furnish an annual statement of income eligible for concessional taxation in Form No 10IH electronically under digital signature on or before the due date, which is duly verified in the manner indicated therein.

(4) The Principal Director General of Income-tax (Systems) or the Director General of Income tax (Systems), as the case may be, shall specify the procedure for filing of the Form No. 10IH and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the statements so furnished under this rule.

Explanation.- For the purpose of this rule, the expressions,-

(a) 'assets under management' means the closing balance of the value of assets or investments of the specified fund as on a particular date;

(b) 'permanent establishment' shall have the same meaning as assigned to it in clause (iiia) of section 92F;

(c) 'securities' shall have the same meaning as assigned to it in clause (bb) of the Explanation to clause (4D) of section 10;

(d) 'due date' shall have the same meaning as assigned to it in the Explanation 2 to sub-section (1) of section 139;

(e) "specified fund" shall have the same meaning as assigned to it in sub-clause (i) of clause (c) of the Explanation to clause (4D) of section 10; and

(f) 'unit' shall have the same meaning as assigned to it in clause (f) of Explanation to clause (4D) of section 10.'.

Disclaimer: The author is based in Jabalpur and is a Practicing Company Secretary dealing in Corporate, Legal & Taxation services. The information contained in this write up, as provided by the author, is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Author recommends that professional advice is sought before taking any action on specific issues.

The author can also be reached at cstanveersaluja@gmail.com.

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Category Income Tax, Other Articles by - CS Tanveer Singh Saluja 



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