×

New to site? Create an Account


Login

Lost password? (close)

Already have an account? Login


Signup

(close)

Section 115AC of Income tax act

|

June 5, 2021

|

7 mins read

Section 115AC of Income tax act – Special Provisions for Computing Tax on Income from Bonds or Global Depository Receipts

Under the provisions of the Income Tax Act, the following income would have concessional rate of tax mentioned against them : –

Particulars Rate of Tax
Interest income of non-resident from following bonds purchased in foreign currency –

  • Bonds of an Indian company, issued in accordance with such scheme as Central Government may notify;
  • Bonds of a public sector company sold by Government
10%
Dividend income (other than dividend referred to in Section 115-O) of non-resident from Global depository receipt which are : –
a)     Issued in accordance with scheme specified by the Central Government against the initial issue of shares of an Indian company; or
b)     Issued against the shares of a public sector company sold by the Government ; or
c)     Issued or re-issued in accordance with scheme specified by the Central Government against the existing shares of an Indian company.Note: Global Depository receipts are purchased by non-resident in foreign currency through an approved intermediary
10%
Long-term capital gains income of non-resident arising from the transfer of above Bonds or GDRs 10%

Certain other provisions, relating to a non-resident who derived income by way of dividend and interest preferred above relating to the tax rates, obligation to file return of income and others are discussed as under : –

a) If the gross total income of the non-resident consists only of dividend and interest referred above

Where the gross total income of the non-resident consists only of the aforesaid dividend or interest income, no deduction shall be allowed to him under section 28 to 44C (relating to computation of taxable income under the head ” profits and gains of Business and profession”) or section 57(i) or 57(iii) (relating to computation of taxable income under the head ”  income from other sources”) or under Chapter VIA.

b) If the gross total income of the non-resident consists income other than dividend and interest referred above

Where the gross total income of the non-resident consists of other incomes, then, the deduction under Chapter VI-A will be available in respect of other incomes [Section 115AC(2)]

c) Benefit of first and second proviso to Section 48 of Income Tax Act

The benefit of : –

  • indexation ; and
  • computation of capital gains in foreign currency,

shall not apply for the computation of long-term capital gains arising out of the transfer of long term bonds or long term GDRs.

International Taxation Services

d) Filing of Return of Income not Required

The non-resident shall not be required to furnish return under section 139(1), if  –

  • his total assessable income under the Act  consists only of aforesaid interest or dividend income, and
  • the tax deductible at source under Chapter XVII-B has been deducted from such income .

Tax on Income from Bonds or Global Depository Receipts acquired in course of amalgamation/demerger – Section 115AC(5) of Income tax act

Where the GDR or bonds referred to in Section 115AC of Income tax act, are acquired by the NR in the

  • Amalgamated company by reason of amalgamation; or
  • Resulting company by reason of demerger

by virtue of his holding GDR or bonds in the amalgamating or demerged company, concessional tax treatment would apply to such GDR or bonds.

Meaning of Global Depository Receipts

“Global Depository Receipts” means any instrument in the form of a depository receipt or certificate (by whatever name called) , created by the Overseas Depository Bank outside India and issued to investors against the issue of —

(a) ordinary shares of company listed on a recognised stock exchange in India; or
(b) foreign currency convertible bonds of issuing company;

Related Content

For any queries, please write them in the Comment Section or Talk to our tax expert

Arinjay Jain

Bio of author

Arinjay is a Chartered Accountant with more than 20 years of post-qualification experience. He worked as Director, in the M&A Tax Division at KPMG in India. Presently, he is advising several MNCs in UAE on Economic Substance Regulations and impact of the UAE Corporate Tax Law on their business and clients across globe on International Tax issues . He is a well recognised Trainer of International Tax and UAE Corporate Tax. The areas of service include the following : - Advise and Compliance relating to International Tax Issues; Advise relating to UAE Corporate Tax Issues; Advise and Compliance relating to UAE Economic Substance Regulations; Advise and Compliance relating to Indian Income Tax Issues; Other connected matters from a Regulatory perspective.

LATEST ARTICLES

Section 194M of Income Tax Act

Section 194M of Income Tax Act - TDS from Payment

Tax Deduction at Source (TDS) | TDS Rate FY 2022-23 | Dates

Chapter XVII-B of the Income Tax Act, 1961, (hereinafter referred

Deductions under UAE Corporate Tax Law

Introduction - Deductions under UAE Corporate Tax Law A Taxable

Cabinet Resolution on Tax Residency in the UAE

Cabinet Resolution on Tax Residency in the UAE Introduction The

Leave a Reply

Your email address will not be published. Required fields are marked *

Have query and need a consultation with
tax expert?

Arinjay Jain

M&A | International Tax | Direct Tax

We provide consultation to resolve your queries in the Area of International Tax, Merger, Demerger and Foreign Investment, though call with our Tax Expert Mr. Arinjay Jain for a 15 minutes session.