CBDT amends conditions for exemption on income of non-resident on transfer of non-deliverable forward contracts

The Central Board of Direct Taxes(CBDT) issued Notification to notify Income Tax (Twenty Third Amendment) Rules 2022 and amends conditions for exemption on income of non-resident on transfer of non-deliverable forward contracts.

The Notification is Stated, “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:─

i) These rules may be called the Income-tax (Twenty Third Amendment) Rules, 2022.

ii) They shall come into force from the date of their publication in the Official Gazette.”

In the Income-tax Rules, 1962 (hereinafter referred to as the principal rules), in rule 21AK, -(A) in sub-rule (1), –

(a) in the opening paragraph, after the words “non-deliverable forward contracts”, the words “or offshore derivative instruments or over-the-counter derivatives,” shall be inserted;

(b) in clause (i), after the words “non-deliverable forward contract”, the words “or offshore derivative instrument or over-the-counter derivative” shall be inserted;

(c) in clause (ii), after the word “contract”, the words “, instrument or derivative” shall be inserted;

(B) for the Explanation, following shall be substituted, namely:-

“Explanation.—For the purpose of this rule, the expression,—

(i) “derivative” shall have the same meaning as assigned to it in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956(42 of 1956);

(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;

(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;

(iv) “offshore derivative instrument” shall have the same meaning as assigned to it in clause (o) of sub-regulation (1) of regulation (2) of the SEBI Foreign Portfolio Investor Regulations, 2019;

(v) “over-the-counter derivatives” shall mean a derivative contract that is not traded on an exchange but instead is privately negotiated between a purchaser and a seller; and

(vi) “permanent establishment” shall have the meaning as assigned to it in clause (iiia) of section 92F of the Act.

For Official Notification Download PDF Given Below: