Amendment of section 10.
6. In section 10 of the Income-tax Act,––
(I) after clause (4B), the following clause shall be inserted, namely:––
“(4C) any income by way of interest payable to a non-resident, not being a company, or to a foreign company, by any Indian company or business trust in respect of monies borrowed from a source outside India by way of issue of rupee denominated bond, as referred to in clause (ia) of sub-section (2) of section 194LC, during the period beginning from the 17th day of September, 2018 and ending on the 31st day of March, 2019;”;
(II) with effect from the 1st day of April, 2020,––
(a) in clause (12A), for the words “forty per cent.”, the words “sixty per cent.” shall be substituted;
(b) in clause (15), after sub-clause (viii), the following sub-clause shall be inserted, namely:-
‘(ix) any income by way of interest payable to a non-resident by a unit located in an International Financial Services Centre in respect of monies borrowed by it on or after the 1st day of September, 2019.
Explanation.-For the purposes of this sub-clause,-
(a) “International Financial Services Centre” shall have the meaning assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
(b) “unit” shall have the meaning assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005(28 of 2005);’;
(III) in clause (34A), the brackets and words “(not being listed on a recognised stock exchange)” shall be omitted with effect from the 5th day of July, 2019.
Note:
While Passing the bill in the Loksabha as on 18-7-2019, the following amendments were made:
Clause 6
Amendments made:
Page 7, after line 5, insert –
(IA) after clause (4C) as so inserted, the following shall be inserted with effect from 1st day of April, 2020, namely:--
“(4D) any income accrued or arisen to, or received by a specified fund as a result of transfer of capital asset referred to in clause (viiab) of section 47, on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in convertible foreign exchange, to the extent such income accrued or arisen to, or is received in respect of units held by a non-resident.
Explanation – For the purposes of this clause, the expression –
(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 the rules made thereunder;
(b) “manager” shall have the meaning assigned to it in clause (q) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(c) “Specified Fund” means a fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate, --
(i) which has been granted a certificate of registration as a Category III Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992.);
(ii) which is located in any International Financial Services Centre;
(iii) of which all the units are held by non-residents other than units held by a sponsor or manager;
(d) “sponsor” shall have the meaning assigned to it in clause (w) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992.);
(e) “trust” means a trust established under the Indian Trusts Act, 1882 (2 of 1882.) or under any other law for the time being in force;
(f) “unit” means beneficial interest of an investor in the fund and shall include shares or partnership interests;’. (8)
Page 7, after line 16, insert –
‘(IIA) in clause (23C), with effect from the 1st day of September, 2019,--
(a) In the second proviso, for the words “and the prescribed authority”, the words “and the compliance of such requirements under any other law for the time being in force by such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, as are material for the purpose of achieving its objects and the prescribed authority,” shall be substituted;
(b) In the fifteenth proviso, for the portion beginning with “(ii) the activities of such fund” and ending with “was notified or approved,”, the following shall be substituted, namely:--
“(ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution-
(A) are not genuine; or
(B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or
(iii) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not complied with the requirement of any other law for the time being in force, and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality,”. (9)
Thus, the amended provision will be:
Amendment of section 10.
6. In section 10 of the Income-tax Act,––
(I) after clause (4B), the following clause shall be inserted, namely:––
“(4C) any income by way of interest payable to a non-resident, not being a company, or to a foreign company, by any Indian company or business trust in respect of monies borrowed from a source outside India by way of issue of rupee denominated bond, as referred to in clause (ia) of sub-section (2) of section 194LC, during the period beginning from the 17th day of September, 2018 and ending on the 31st day of March, 2019;”;
(IA) after clause (4C) as so inserted, the following shall be inserted with effect from 1st day of April, 2020, namely:--
“(4D) any income accrued or arisen to, or received by a specified fund as a result of transfer of capital asset referred to in clause (viiab) of section 47, on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in convertible foreign exchange, to the extent such income accrued or arisen to, or is received in respect of units held by a non-resident.
Explanation – For the purposes of this clause, the expression –
(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 the rules made thereunder;
(b) “manager” shall have the meaning assigned to it in clause (q) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(c) “Specified Fund” means a fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate, --
(i) which has been granted a certificate of registration as a Category III Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992.);
(ii) which is located in any International Financial Services Centre;
(iii) of which all the units are held by non-residents other than units held by a sponsor or manager;
(d) “sponsor” shall have the meaning assigned to it in clause (w) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992.);
(e) “trust” means a trust established under the Indian Trusts Act, 1882 (2 of 1882.) or under any other law for the time being in force;
(f) “unit” means beneficial interest of an investor in the fund and shall include shares or partnership interests;
(II) with effect from the 1st day of April, 2020,––
(a) in clause (12A), for the words “forty per cent.”, the words “sixty per cent.” shall be substituted;
(b) in clause (15), after sub-clause (viii), the following sub-clause shall be inserted, namely:-
‘(ix) any income by way of interest payable to a non-resident by a unit located in an International Financial Services Centre in respect of monies borrowed by it on or after the 1st day of September, 2019.
Explanation.-For the purposes of this sub-clause,-
(a) “International Financial Services Centre” shall have the meaning assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
(b) “unit” shall have the meaning assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005(28 of 2005);’;
(IIA) in clause (23C), with effect from the 1st day of September, 2019,--
(a) In the second proviso, for the words “and the prescribed authority”, the words “and the compliance of such requirements under any other law for the time being in force by such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, as are material for the purpose of achieving its objects and the prescribed authority,” shall be substituted;
(b) In the fifteenth proviso, for the portion beginning with “(ii) the activities of such fund” and ending with “was notified or approved,”, the following shall be substituted, namely:--
“(ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution-
(A) are not genuine; or
(B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or
(iii) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not complied with the requirement of any other law for the time being in force, and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality,
(III) in clause (34A), the brackets and words “(not being listed on a recognised stock exchange)” shall be omitted with effect from the 5th day of July, 2019.
Notes on Clauses:
Clause 6 of the Bill seeks to amend section 10 of the Income tax Act relating to incomes not included in total income.
It is proposed to insert a new clause (4C) in the said section so as to provide for exemption in respect of any income by way of interest payable to a non-resident, not being a company, or to a foreign company, by any Indian company or business trust in respect of monies borrowed from a source outside India by way of issue of rupee denominated bond as referred to in clause (ia) of sub-section (2) of section 194LC issued during the period commencing from the 17th September, 2018 and ending on 31st March, 2019.
This amendment will take effect retrospectively from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-2020 and subsequent assessment years.
Further, clause (12A) of the said section provides that any payment from the National Pension System Trust to an employee on closure of his account or on his opting out of the pension scheme referred to in section 80CCD, to the extent it does not exceed forty per cent. of the total amount payable to him at the time of such closure or his opting out of the scheme, shall be exempt from tax.
It is proposed to amend the said section so as to increase the said tax exempt amount from forty per cent. to sixty per cent.
It is proposed to insert sub-clause (ix) in the clause (15) so as to provide that any income by way of interest payable to a nonresident by a unit located in an International Financial Services Centre in respect of monies borrowed by it on or after 1st September, 2019 shall be exempted from tax.
It is further proposed to insert an Explanation to define the expressions “International Financial Services Centre” and “unit”. These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020- 2021 and subsequent assessment years.
Clause (34A) of the said section provides for exemption to any income arising to a shareholder on account of buy-back of shares not being listed on a recognised stock exchange by the company as referred to in section 115QA.
It is proposed to amend the said clause so as to provide the said exemption also to the income arising to a shareholder on account of buy-back of shares listed on a recognised stock exchange by the company as referred to in section 115QA.
This amendment will take effect from 5th July, 2019.
