Amendment of section 115R.
37. In section 115R of the Income-tax Act, in sub-section (2), with effect from the 1st day of September, 2019,-
(A) after the second proviso, before the Explanation, the following proviso shall be inserted, namely:-
“Provided also that no additional income-tax shall be chargeable in respect of any amount of income distributed on or after the 1st day of September, 2019 by a specified Mutual Fund, out of its income derived from transactions made on a recognised stock exchange located in any International Financial Services Centre:”;
(B) in the Explanation,-
(a) after clause (i), the following clause shall be inserted, namely:––
‘(ia) “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) after clause (ii), the following clauses shall be inserted, namely:––
‘(iii) “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.)
(iv) “recognised stock exchange” shall have the meaning assigned to it in clause (ii) of Explanation 1 to clause (5) of section 43;
(v) “specified Mutual Fund” means a Mutual Fund specified under clause (23D) of section 10-
(a) located in any International Financial Services Centre;
(b) deriving income solely in convertible foreign exchange;
(c) of which all the units are held by non-residents;
(vi) “unit” means beneficial interest of an investor in the fund;’.
Note:
While Passing the bill in the Loksabha as on 18-7-2019, the following amendments were made:
Clause 37
Amendments made:
Page 15, for line 36, substitute ‘International Financial Services Centre and where the consideration for such transaction is paid or payable in convertible foreign exchange:”,’. (14)
Page 15, omit line 50. (15)
Page 16, line 1, for “(c)”, substitute “(b)”. (16)
Thus, the amended provision will be:
37. In section 115R of the Income-tax Act, in sub-section (2), with effect from the 1st day of September, 2019,-
(A) after the second proviso, before the Explanation, the following proviso shall be inserted, namely:-
“Provided also that no additional income-tax shall be chargeable in respect of any amount of income distributed on or after the 1st day of September, 2019 by a specified Mutual Fund, out of its income derived from transactions made 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:”;
(B) in the Explanation,-
(a) after clause (i), the following clause shall be inserted, namely:––
‘(ia) “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) after clause (ii), the following clauses shall be inserted, namely:––
‘(iii) “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.)
(iv) “recognised stock exchange” shall have the meaning assigned to it in clause (ii) of Explanation 1 to clause (5) of section 43;
(v) “specified Mutual Fund” means a Mutual Fund specified under clause (23D) of section 10-
(a) located in any International Financial Services Centre;
(b) x x x x x x x x x
(c) (b) of which all the units are held by non-residents;
(vi) “unit” means beneficial interest of an investor in the fund;’.
Notes on Clauses:
Clause 37 of the Bill seeks to amend section 115R of the Income tax Act relating to tax on distributed income to unit holders.
Sub-section (2) of the said section, inter alia, provides that any amount of income distributed by the specified company or a Mutual Fund to its unit holders shall be chargeable to tax and such specified company or Mutual Fund shall be liable to pay additional incometax on such distributed income.
It is proposed to amend the said sub-section by inserting a proviso so as to provide that no additional income-tax shall be chargeable in respect of any amount of income distributed, on or after the 1st day of September, 2019, by a specified Mutual Fund out of its income derived from transactions made on a recognised stock exchange located in any International Financial Services Centre.
It is further proposed to insert the definition of the expressions “specified Mutual Fund”, “unit”, “convertible foreign exchange” and “International Financial Services Centre” in the Explanation to the said sub-section.
These amendments will take effect from 1st September, 2019.
