The Special provisions of the Income Tax which are applicable to Non-resident income with respect to certain income as prescribed in Chapter XII-A of the Income Tax Act. These provisions provide benefit to Non-Resident Indian to claim benefit of special rate of taxation on certain income generated from the “specified assets” even after becoming resident by intimating to assessing officer and availing an option at the time of filing ITR.
“Non-resident Indian” means an individual, being a citizen of India or a person of Indian origin who is not a “resident”.
A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India;
When a Non-resident Indian made an investment under “Foreign exchange asset” in convertible foreign exchange and deriving income in the form of “investment income” from such foreign exchange asset or any “ Long term Capital Gain” accruing to the Non-resident Indian which is chargeable under the head “Capital gain” from the transfer of capital asset, being a foreign exchange asset.
It’s a specified asset which means any of the following:
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 Management Act,
No deduction allowed-
This section states that while computing the Total Income of the Non-Resident in respect of the income generated from the “Foreign exchange asset” specified under Sec 115C, no deduction in respect of any expenditure or allowance shall be allowed.
Taxability
Sec 115E deals with the rate of taxation on the income generated from the Foreign exchange asset which are as follows:
Where the Non-resident Indian invests the proceeds of the “Net sale consideration” arising from the transfer of Foreign Exchange asset in the following manner:
Then the “Long term capital gain” accruing shall be exempt in the following manner:
Long term Capital Gain * Cost of New asset
Net Sale Consideration
This section provides the benefit to Non-resident Indian to continue to apply the provision of special rate of taxation in respect of Foreign exchange asset specified under Sec 115C i.e.
Even when a person, who is a non-resident Indian in any previous year, becomes assessable as resident in India in respect of the total income of any subsequent year furnish to the Assessing Officer a declaration in writing along with his return of income under section 139 for the assessment year for which he is so assessable.
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The provisions of this Chapter XII-A of the Income Tax Act shall continue to apply to such person in relation to such income for that assessment year and for every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money of such assets
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