The Central Board of Direct Taxes (CBDT) vide its Notification No 136/2021 [G.S.R. 851(E)] dated 10th December 2021 notify the conditions for the purpose of exemption of income accrued or arise or received by a non-resident from non-deliverable forward contract under clause (4E) of Section 10 of Income Tax Act 1961.
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 Centers Authority (Banking) Regulations, 2020 by the International Financial Services Centers Authority and such contract is not entered into by the non-resident through or on behalf of its permanent establishment in India.
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 10th December, 2021
INCOME-TAX
G.S.R. 851(E).—In exercise of the powers conferred by clause (4E) of section 10 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:─
1. Short title and commencement.—(1) These rules may be called the Income-tax (33rd Amendment) Rules, 2021.
(2) They shall come into force from the date of their publication in the Official Gazette.
2. In the Income-tax Rules, 1962, after rule 21AJ, the following rule shall be inserted, namely:—
“21AK. Conditions for the purpose of clause (4E) of section 10.- (1) 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 following conditions, namely:─
(i) 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 Centers Authority (Banking) Regulations, 2020 by the International Financial Services Centers Authority; and
(ii) such contract is not entered into by the non-resident through or on behalf of its permanent establishment in India .
(2) The offshore banking unit shall ensure that the condition provided in clause (ii) of sub-rule (1) is complied with.
Explanation.- For the purpose of this rule, the expression,-
(i) “permanent establishment” shall have the meaning assigned to it in clause (iiia) of section 92F;
(ii) “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
(iii) “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.”.
[Notification No. 136/2021/F. No. 370142/53/2021-TPL (Part-II)] UMME FARDINA ADIL, Under Secy.
Note : The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Subsection (ii), vide notification number S.O. 969 (E) dated the 26th March, 1962 and were last amended vide notification number G.S.R. 831(E) dated 23rd November, 2021.
