Hi all,
I would like discuss some provisions relating to Non Residents.
Often we come across, the following incomes of Non Resident for filing return of Income under the Income Tax Act 1961:
a) Investment Income and,
b) Long Term Capital Gain
First, let us discuss about the Investment Income:
a. The Section 115C of the Act defines, the Investment Income as the income derived from the investment on Foreign Exchange Asset other than dividend income. (As known to us, Foreign Exchange asset means asset acquired or purchased by the assessee in Convertible foreign exchange.)
b. Very important is that No Deductions will be allowed under any of the provisions of the Act against this investment income. Suppose if the assessee is having some other income apart from the income mentioned above, den investment income will be deducted from such income, den deductions are allowed as such as per Sec 115D of the Income tax Act.
c. And the above investment income shall be liable to tax at the rate of 20 Percent as per Sec 115E of the Income tax Act.
d. If the assessee is assessable to income tax only for the above mentioned income and TDS is deducted at source against the income, den the assessee shall not require to file the return of income as per Sec 115G of the Act.
Secondly, Let us discuss about Long term Capital Gains:
a. The same as above, Sec 115C of the income tax act defines, Long term capital gains arising out of the foreign exchange asset (Capital asset) which is not the short term capital asset.
b. No deductions are allowed under any of the provisions of the act against this long term capital gains during the previous year and if the Non resident is having some other income apart from the above mentioned income, deductions will be allowed from such other income for the previous year as per the sec 115D of the act.
c. The assessee is liable to pay the income tax at the rate of 10 percent on the Long term capital gains arising out of Foreign exchange capital asset as per Sec 115 E of the Act.
d. More specifically, if the Non resident utilize the long term capital gain by investing in Specified assets or saving certificates as mentioned in Income Tax Act, 1961 within the period of 6 months and the new asset value is equal to the net consideration of Long term capital gain (i.e. LTCG-Investment value),den the whole of the capital gain shall not be charged to Income tax act as per Sec 115F.
e. If the Cost the new asset is less than net consideration as mentioned in the above point, den the difference will be the amount chargeable to income tax.
f. If the above mentioned income is only income of the Non resident and TDS deducted at source against the income, the assessee shall not require filing the return of income under the Income tax act as per Sec 115G.
Apart from the above, the non resident assessee becomes resident in India in respect of the total income of any subsequent year, if assessee wishes to continue to get the benefits under the provisions of the Income tax act for the investment income and Long term capital gain arising out of the foreign exchange asset ,den he/she required to make a application in writing to Assessing Officer and if he/she does so, the provisions of the act will continue to apply until the transfer or conversion into money of such assets.
And, it is the sole consent of Non resident assessee after becomes a resident in India to not to continue with the provisions of the income tax act for the above mentioned income. If assessee chooses to not to continue, den he/she shall require to make an application in writing to the Assessing officer and if he/she does so, the provisions of the act will not apply not only to that assessment year and also for the subsequent assessment years.
I hope it is clear with the concepts.
If any wrong, please give comments so I could correct myself.
Thanks and Regards
S Janani
CAclubindia
