NRI's CORNER
F.E.M.A.
Tax on investment income from specified assets.

NRIs CORNER - Investment income from specified assets

1.      NRIs are granted a special benefit by way of an option of being taxed at concessional tax rate of  20% as regards "investment income" and 10% as regards "long term capital gains" arising from "specified assets."
2.      These concessions are granted under the Income Tax Act, 1961.
3.      The concessions are available to a Non Resident Indian i.e. a non-resident as defined under the Income Tax Act, 1961 being distinct from an NRI (person resident outside India) as defined under FEMA, 1999.
4.      Further, an NRI is given a choice, and if he so decides, then only provisions of said Chapter are applicable to him. As for the provisions, concerned NRI has to file a declaration together with return of income and then only provisions are applicable. Otherwise, an NRI is to be taxed at par with Residents in said matters.
5.      .01 If the NRI so chooses and furthermore if he does not have any other income, then, for the income opted under these provisions, he is not required to furnish a return of income.
.02 However, it is necessary that tax is deducted at source as regards the specified income.
6.      Benefit of Concessional Tax to be available in certain cases even after the assessee becomes resident :
Where a non-resident Indian becomes assessable as resident in India in any previous year, he, may if he so opts, continued to be governed by the provisions of this chapter in respect of the investment income of all the foreign exchange assets except shares of an Indian company, until the transfer or conversion  into money of such assets.
.05
"Long Term Capital Gains" 
 
01.
 
means capital gain related to Foreign Exchange asset - In case of a share held in acompany or any other security listed in recognized stock exchange in India or a unit of Unit Trust of India or a unit of Mutual Fund or a zero coupon bond held for more than 12 months or more and other specified assets held for 36 months or more.
 
02.
 
Long Term Capital Gains of an equity share in a company or a unit of an equity oriented fund, where such transaction is chargeable to securities transaction tax, are exempt from tax.
9.       ''tax rate" as mentioned above income tax is levied @ of 20% incase of investment income  & @ of 10% incase of long-term capital gain.
 *2% Education Cess and 1% Secondary and Higher Education Cess  is payable on tax and surcharge.
10.      If the assessee elects to be governed by the provisions of this chapter the following shall be the consequences:
01.
No deduction from Investment income.       
No deduction in respect of any expenditure or allowance shall be allowed. 
02.
No deduction under Chapter VI-A and proviso 2 to section 48 not applicable:
If the Gross Total Income of the non-resident Indian consists only of investment income or income by way Long-term capital gains or both, no deduction shall be allowed to the assessee under Chapter VI-A (80C to 80U) and nothing contained in the provisions of the second proviso to section 48 regarding indexation of cost shall apply to income chargeable under the head "Capital gains".

 

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