The Income Tax Department has exempted certain non-resident and foreign investors from filing Income Tax Return (ITR) after 2020-21. In a notification, the Central Board of Direct Taxes (CBDT) has said that non-residents (corporate or any other citizen) who do not earn through any means other than investment in ‘Specified Funds’ may apply to the International Financial Services Centers (IFSC). OR Alternative Investment Funds of GIFT City fall under Category III category, they need not file ITR.
In addition, foreign investors (non-residents acting under SEBI guidelines) who have transacted during the financial year in Global Depository Receipts, Rupee Dominated Bonds, Derivatives or other notified securities capital assets, recognized stocks of IFSC Listed on the exchange, they are exempted from filing ITR. There is a condition in this that the transfer of properties should be in foreign currency and people of this class should not have any other income in India. In both the cases mentioned above, non-resident citizens have to ensure that the PAN card is exempted.
what does the rule say
As per IT rules, if tax has been deducted on the income of non-resident people and remitted to the government by ‘Specified Fund’, then PAN is not required. In addition, necessary details and documents such as contact information, TIN and residential status declaration should be submitted by that non-resident citizen to the ‘Specified Fund’. Neha Malhotra, director of Nangia Andersen LLP, told PTI that since the government has all the tax related information in respect of taxpayers who are exempted from filing ITR and their earnings are also covered under TDS, hence the move will help the government. There is no impact on revenue.
why the discount
Malhotra said, exempting such non-residents from the conditions for filing income return, their compliance burden is eased. Reducing compliance burden on taxpayers reflects the successful tax management of the country, which will further improve investor confidence. Amit Maheshwari, tax partner, tax and consulting firm AKM Global, said the notification provides that foreign investors who make investments in funds operating in GIFT City and receive income from such funds, shall be required to return tax returns in India. will not be required to file provided they should not have any other income in India.
What do experts say
However, such investors are not required to hold PAN in India and the exemption makes it easy to invest without any hassle and will help make GIFT City a better investment destination, Maheshwari said. BDO India Associate Partner (Tax and Regulatory Services) Raghunathan Parthasarathy said that in both the cases where exemption has been given in filing of ITR, the tax authorities can peruse the records of the entities as the transactions are fully subject to Securities Transaction Tax and these Transactions are done in stock exchanges.
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