Section 115C: Provisions relating to certain income of Non-Residents

By | July 8, 2015

The term ‘non-resident Indian’ has been defined in section 115C (e) to mean:

  1. an individual, being a citizen of India; or
  2. a person of Indian origin, who is not a resident .

As Per Income Tax Act, 1961-

“Person of Indian origin” includes:

A person shall be deemed to be of Indian origin, if he or either of his parents or any of his grandparents, was born in undivided India.

Mostly in case of Non-resident there are two incomes which we regularly come across, they are:

  • Investment income and
  • Long-term Capital gain
  1. Investment income is the income which is derived from the investment on foreign exchange assets other than dividend income. Foreign exchange assets are those assets which are acquired /purchase in Convertible foreign exchange. This Investment income will be tax at the rate 20% as per section 115E of Income taxAct, 1961.
  2. Long-term capital gains are the gains arising out of Capital assets being a foreign exchange asset which is not a short-term capital asset. No deductions shall be allowed on this income. Long-term capital gains will be taxed at 10% as per Income tax Act, 1961.

Related Case:

S. 115C 115D, 115E & 115H of the IT Act, 1961—Non resident—The income of the applicant arising from existing NRO deposits with SBI shall be taxed @ 20 per cent plus applicable surcharge and cess and after his return to India, the applicant can invoke the provisions of S. 115H untill conversion of his NRO account into rupee account as per the extant RBI regulation/instruction and untill conversion, income from NRO account shall be segregated from the income of the applicant and subjected to tax @ 20 per cent plus applicable surcharge and cess. Dr. Virindra Kumar Raina.

Reference:

As Per Section 115C, of the Income Tax Act, 1961-

  1.  In this Chapter, unless the context otherwise requires,—

(a) “convertible foreign exchange” 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, 1999 (42 of 1999)], and any rules made there under;

(b) “foreign exchange asset” means any specified asset which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange;

(c) “investment income” means any income derived [other than dividends referred to in section 115-O] from a foreign exchange asset;

(d) “long-term capital gains” means income chargeable under the head “Capital gains” relating to a capital asset, being a foreign exchange asset which is not a short-term capital asset;

(e) “non-resident Indian” means an individual, being a citizen of India or a person of Indian origin who is not a “resident”.

  1. 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;

(f) “specified asset” means any of the following assets, namely :—

(i)  shares in an Indian company;

(ii)   debentures issued by an Indian company which is not a private company as defined in the Companies Act, 1956 (1 of 1956);

(iii) deposits with an Indian company which is not a private company as defined in the Companies Act, 1956 (1 of 1956);

(iv) any security of the Central Government as defined in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944);

(v) such other assets as the Central Government may specify in this behalf by notification in the Official Gazette.

Leave a Reply