CBDT Notifies the Conditions for Exemption of Income Accrued or Received by a Non-Resident as a Result of the Transfer of Non-deliverable Forward Contracts

The Central Board of Direct Taxes (CBDT) has issued notification of the conditions for the exemption of income accrued or received by a non-resident as a result of the transfer of non-deliverable forward contracts.

The Board of Revenue has published the Income-tax (33rd Amendment) Rules, 2021, which seek to update the Income-tax Rules, 1962.

For the purposes of section 10’s clause (4E), the Board has inserted Rule 21AK in relation to Conditions.

Income accruing or arising to, or received by, a non-resident as a result of the transfer of non-deliverable forward contracts under clause (4E) of section 10 of the Act is exempt subject to the satisfaction of two requirements.

First, the non-resident enters into a non-deliverable forward contract with an offshore banking unit of an International Financial Services Centre that holds a valid certificate of registration granted by the International Financial Services Centres Authority under the International Financial Services Centres Authority (Banking) Regulations, 2020; and

Second, the non-resident does not engage into such a contract through or on behalf of its permanent establishment in India. The offshore banking unit is responsible for ensuring that the criteria specified in clause (ii) of sub-rule (1) is met.

A non-deliverable forward contract is defined as a contract for the difference between an agreed-upon exchange rate and the actual spot rate at maturity, with the spot rate being the domestic rate or a market determined rate, and such contract being settled with a single payment in a foreign currency;

The term “offshore banking unit” refers to a banking branch Unit located in an International Financial Services Centre, as defined in section 80LA sub-section (1A) of the Act.

To Read the Notification Download PDF Given Below :