The Central Board of Direct Taxes (CBDT) has notified conditions for exemption of income accrued or received by, non-resident as a result of transfer of non-deliverable forward contracts.
The Board has notified the Income-tax (33rd Amendment) Rules, 2021 which seeks to further amend the Income-tax Rules, 1962.
The Board has inserted Rule 21AK in respect of Conditions for the purpose of clause (4E) of section 10.
The income accrued or arisen to, or received by, a non-resident as a result of transfer of non-deliverable forward contracts under clause (4E) of section 10 of the Act, shall be exempted subject to fulfillment of the two conditions.
Firstly, the non-deliverable forward contract is entered into by the non-resident with an offshore banking unit of an International Financial Services Centre which holds a valid certificate of registration granted under International Financial Services Centres Authority (Banking) Regulations, 2020 by the International Financial Services Centres Authority; and
Secondly, such a contract is not entered into by the non-resident through or on behalf of its permanent establishment in India. The offshore banking unit shall ensure that the condition provided in clause (ii) of sub-rule (1) is complied with.
A non-deliverable forward contract shall mean a contract for the difference between an exchange rate agreed before and the actual spot rate at maturity, with the spot rate being taken as the domestic rate or a market determined rate and such contract being settled with a single payment in a foreign currency; and
Offshore banking unit” means a banking branch Unit located in an International Financial Services Centre, as referred to in sub-section (1A) of section 80LA of the Act.
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