CBDT | Exemptions for Non-Resident Financial Instruments and Specified Funds in IFSC

Central Board of Direct Taxes (CBDT) issued the Income-tax (Twelfth Amendment) Rules, 2023 on July 17, 2023. The amendment aims to provide exemptions and regulations regarding certain income and financial instruments for non-residents.

The key changes introduced by the amendment are as follows

• Exemption for non-residents from tax on income from non-deliverable forward contracts, offshore derivative instruments, and over-the-counter derivatives. The exemption is subject to the condition that the contract, instrument, or derivative is entered into by the non-resident with an offshore banking unit of an International Financial Services Centre (IFSC) that holds a valid certificate of registration granted by the International Financial Services Centres Authority (IFSCA).
• Regulation of specified funds in IFSC. The amendment defines the term "specified fund" and lays down the conditions that a fund must meet in order to be considered a specified fund. Specified funds are exempt from tax on income derived from investments made in them.
• Substitution of Form No. 10CCF. The amendment substitutes Form No. 10CCF in Appendix II of the IT Rules with a new form. The new form has been simplified and includes additional information that is required for the purposes of taxation of non-residents.

The amendments are effective from the date of their publication in the Official Gazette.

Here are some of the key benefits of the amendment for non-residents

• They will be exempt from tax on income from non-deliverable forward contracts, offshore derivative instruments, and over-the-counter derivatives.
• They will be able to invest in specified funds in IFSC without having to pay tax on the income derived from their investments.
• The new form for Form No. 10CCF has been simplified and includes additional information that is required for the purposes of taxation of non-residents.

Overall, the amendment is a positive step for non-residents who are looking to invest in India. It provides them with a number of tax benefits and makes it easier for them to comply with the tax laws.

Official copy of the notification has been enclosed below