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Chandigarh City - Special Provisions
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Special Provisions Relating To Certain Income Of Non-Resident Indian Citizen And Foreign Nationals Of Indian Origin The salient features of the special provisions are as under :
The income derived by non-resident Indian from any foreign exchange asset is called "Investment income". For this purpose, "foreign exchange assets" means any specified asset acquired or purchased with, or subscribed to in, convertible foreign exchange". The assets so specified under section 115-C (f) are:
1.shares in an Indian company;
2.debentures issued by an Indian company which is not a private company as defined in the Companies Act, 1956;
3.deposits with an Indian company which is not a private company as defined in the companies Act, 1956;
4.securities of the Central Government; and
5.such other assets as may be notified by the Central Government.
ii.In computing the " investment income" of a non-resident Indian, no deduction will be allowed:
a.in respect of any expenditure or allowance under any provision of the Income-tax Act, and
b.in respect of deductions permissible under Income Tax Act.
In computing income chargeable under the head "Capital gains" in respect of shares in, or debentures of, an Indian company, the provisions relating to "adjusted cost" will not apply. However, where the non-resident Indian elects to furnish return of income to the Assessing Officer for any assessment year, the deductions permissible under the provisions of Income-tax Act will be allowed for that year.
c.Where the total income of a non-resident Indian consists only of "investment income" such income shall be charged to tax at a flat rate of 20% by way of income-tax. The recent amendment provides that the long term capital gains arising from the transfer of foreign exchange assets shall be taxed at a concessional rate of 10%.
The Act provides a separate method of computation of capital gains (whether short-term or long-term) arising from transfer of shares or debentures of an Indian company held by a non-resident Indian. The cost of acquisition, expenditure incurred in connection with such transfer and the full value of consideration received or accruing as a result of such transfer should be converted into the same foreign currency as was initially utilised for purchase of the said shares or debentures.
The capital gains should be computed in that foreign currency and then such gains should be reconverted into Indian currency. This manner of computation of capital gains will be applicable in respect of capital gains accruing or arising from every reinvestment thereafter in, and sale of, shares or debentures of, an Indian company.
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