Income Tax Act

Official PDF pages 636–640

SOURCE PDF PAGE 636
Sl.
No.
Income not to be
included in total
income
Eligible
persons
Conditions
A   B   C   D
( a )   transfer of non-
deliverable for -
ward contracts
or offshore de -
rivative instru -
ments or over-
the-counter de -
rivatives; or
( b )   distribution   of
income on off -
shore derivative
instruments or
over-the-coun -
ter derivatives.
of an International Financial
Services Centre as referred to
in section 147 or any Foreign
Portfolio Investor being a unit
of an International Financial
Services Centre; and
( b )   it fulfils such conditions, as
may be prescribed.
6.   Any income by way of
royalty or interest on
account of lease of an
aircraft or a ship in a
tax year.
Non-resident.   ( a )   Such royalty or interest is paid
by a unit of an International
Financial Services Centre as
referred to in section 147;
and
( b )   such unit has commenced its
operations on or before the
31st March, 2030.
7.   Any income received
from––
( a )   portfolio of se -
curities or finan -
cial products or
funds, managed
or administered
by any portfo -
lio manager on
behalf   of   the
non-resident; or
( b )   such   activity
carried out by
such   person,
as may be no -
tified   by   the
Central   Gov -
ernment.
Non-resident.   ( a )   Such income is received in
an account maintained with
an Offshore Banking Unit in
any International Financial
Services Centre as referred to
in section 147; and
( b )   the income not to be included
in the total income shall be to
the extent such income accrues
or arises outside India and is
not deemed to accrue or arise
in India.

──────────

SOURCE PDF PAGE 637
Sl.
No.
Income not to be
included in total
income
Eligible
persons
Conditions
A   B   C   D
8.   Any income by way
of Capital gains aris -
ing from the transfer
of   equity   shares   of
domestic   company
where such domestic
company   is   a   Unit
of   an   International
Financial   Services
Centre as referred to
in section 147.
A   n o n - r e s   -
ident,   or   a
Unit   of   an
Internation -
al   Financial
Services Cen -
tre as referred
to in section
147, engaged
primarily   in
the   business
of leasing of
aircraft   or   a
ship.
( a )   The domestic company—
( i )   is engaged primarily in
the business of leasing
of an aircraft or a ship;
( ii )   has commenced oper -
ations on or before the
31st March, 2030; and
( b )   exclusion from total income
shall be available for capital
gains arising from the trans -
fer of equity shares of such
domestic company in a tax
year falling within—
( i )   ten tax years beginning
with the tax year in which
the domestic company
has commenced opera -
tions; or
( ii )   ten tax years beginning
with the tax year com -
mencing on the 1st April,
2023, where the period
referred to in sub-clause
( i ) ends before the 1st
April, 2033.
9.   Any   income   accru -
ing   or   arising   to,
or   received   from   a
specified   fund   or
on   transfer of units
in a specified fund.
A unit holder
of a specified
fund.
Nil .
10.   Any income of the na -
ture of Capital gains,
arising or received on
account of transfer of
share of a company
resident in India.
Any non-resi -
dent or a spec -
ified fund.
( a )   The Capital gain is on account
of transfer of shares by the
resultant fund or a specified
fund; and
( b )   such shares were transferred
from the original fund, or from
its wholly owned special pur -
pose vehicle, to the resultant
fund in relocation, and the
capital gains on such shares
were not chargeable to tax if
that relocation had not taken
place; and

──────────

SOURCE PDF PAGE 638
Sl.
No.
Income not to be
included in total
income
Eligible
persons
Conditions
A   B   C   D
( c )   income not to be included in
the total income shall be to
the extent attributable to units
held by non-residents (not be -
ing a permanent establishment
of a non-resident in India) in
such manner, as may be pre -
scribed.
11.   Any income by way
of dividends from a
company being a Unit
of   an   International
Financial   Services
Centre primarily en -
gaged in the business
of leasing of an air -
craft or a ship.
A Unit of any
International
Financial Ser -
vices Centre.
Such Unit is primarily engaged in
the business of leasing of an aircraft
or a ship.
12.   Any income by way of
interest payable.
Non- resident.   Such interest is payable by a Unit
of an International Financial Ser -
vices Centre in respect of moneys
borrowed by it on or after the 1st
September, 2019.
Note 1:   For the purposes of Sl. Nos. 1 to 4,––
( a )   “convertible foreign exchange” means foreign exchange which is for the time
being treated by the Reserve Bank of India as convertible foreign exchange for
the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999) and
the rules made thereunder;
( b )   “investment division of offshore banking unit” means an investment division of
a banking unit of a non-resident located in an International Financial Services
Centre as referred to in section 147 and which has commenced its operations on
or before the 31st March, 2030;
( c )   “manager” shall have the same meaning as assigned to it in regulation 2(1)( q )
of the Securities and Exchange Board of India (Alternative Investment Funds)
Regulations, 2012 made under the Securities and Exchange Board of India Act,
1992 (15 of 1992);
( d )   “permanent establishment” shall have the meaning assigned to it in section 173( c );
( e )   “securities” shall have the same meaning as assigned to it in section 2( h ) of the
Securities Contracts (Regulation) Act, 1956 (42 of 1956) and shall also include
such other securities or instruments as may be notified by the Central Government
in this behalf;

──────────

SOURCE PDF PAGE 639
( f )   “securitisation   trust”   shall   have   the   meaning   assigned   to   it   in   section
221 (6)( d );
( g )   “specified fund” means—
( i )   a fund established or incorporated in India in the form of a trust or a
company or a limited liability partnership or a body corporate and located
in International Financial Services Centres,—
( A )   which has been granted a certificate of registration as a Category III
Alternative Investment Fund and is regulated––
( I )   under   the   Securities   and   Exchange   Board   of   India
(Alternative Investment Funds) Regulations, 2012 made under
the Securities and Exchange Board of India Act, 1992 (15 of
1992);
( II )   under the International Financial Services Centres Authority
(Fund Management) Regulations, 2022 made under the Inter -
national Financial Services Centres Authority Act, 2019 (50 of
2019); or
( B )   which has been granted a certificate as a retail scheme or an Exchange
Traded Fund, and satisfies the conditions laid down for such schemes
or funds under the International Financial Services Centres Authority
(Fund Management) Regulations, 2022 made under the International
Financial Services Centres Authority Act, 2019 (50 of 2019);
41 [ ( C )   of which all the units other than the unit held by a sponsor or manager
are held by non-residents except,––
( I )   where such non-resident becomes resident under section 6(2) or
(3) or (4) or (5) or (6) or (7) in any tax year subsequent to that
tax year; and
( II )   the number of units held by such resident unit holder or holders
do not exceed 5% of the total units issued and shall fulfil such
other conditions as may be prescribed; or ]
( ii )   investment division of an offshore banking unit, which has been—
( A )   granted a certificate of registration as a Category-I foreign portfolio
investor under the Securities and Exchange Board of India (Foreign
Portfolio Investors) Regulations, 2019 made under the Securities
and Exchange Board of India Act, 1992 (15 of 1992) and which has
commenced its operations on or before the 31st March,   42 [ 2030 ] ; and
41.   Substituted for the following by the Finance Act, 2026, w.e.f.   1-4-2026   :
“of which all the units are held by non-residents except––
( I )   the unit held by a sponsor or manager;
( II )   where any unit holder or holders, being non-resident during the tax year when such
unit or units were issued, becomes resident under section 6(2) or (3) or (4) or (5) or
(6) or (7)   in any tax year subsequent to that year;
( III )   in case of sub-item ( II ), aggregate value and the number of units held by such resident
unit holder or holders do not exceed   5% of the total units issued and shall fulfil such
other conditions as may be prescribed; or”
42.   Substituted for “2025” by the Finance Act, 2026, w.e.f.   1-4-2026 .

──────────

SOURCE PDF PAGE 640
( B )   fulfils such conditions including maintenance of separate accounts
for its investment division, as may be prescribed;
( h )   “sponsor” shall have the same meaning as assigned to it in regulation 2(1)( w )
of the Securities and Exchange Board of India (Alternative Investment Funds)
Regulations, 2012 made under the Securities and Exchange Board of India Act,
1992 (15 of 1992);
( i )   “trust” means a trust established under the Indian Trusts Act, 1882 (2 of 1882)
or under any other law;
( j )   “units”   mean   beneficial   interest   of   an   investor   in   the   fund   and   shall
include shares or partnership interests.
Note 2:   For the purposes of Sl. No. 5,––
“Foreign Portfolio Investor” shall mean a person registered as per the provisions
of the Securities and Exchange Board of India (Foreign Portfolio Investors)
Regulations, 2019 made under the Securities and Exchange Board of India Act,
1992 (15 of 1992).
Note 3:   For the purposes of Sl. Nos. 6, 8 and 11,––
( a )   “aircraft” means an aircraft or a helicopter, or an engine of an aircraft or a heli -
copter, or any part thereof;
( b )   “ship” means a ship or an ocean vessel, engine of a ship or ocean vessel, or any
part thereof.
Note 4:   For the purposes of Sl. No. 7,––
“portfolio   manager”   shall   have   the   same   meaning   as   assigned   to   it
in   regulation   2(1)( z )   of   the   International   Financial   Services   Centres
Authority (Capital Market Intermediaries) Regulations, 2021 made under the
International Financial Services Centres Authority Act, 2019 (50 of 2019).
Note 5:   For the purposes of Sl. No. 9,––
( a )   “specified fund” shall have the same meaning as assigned to it in Note 1( g );
( b )   “unit”   means beneficial interest of an investor in the fund and shall include shares
or partnership interests.
Note 6:   For the purposes of Sl. No. 10,––
( a )   “original fund”, “relocation” and “resultant fund” shall have the meanings respec -
tively assigned to them in section 70(2);
( b )   “specified fund” shall have the meaning assigned to it in Note 1( g ).
Note 7:   For the purposes of Sl. No. 12,––
“Unit” shall have the same meaning as assigned to it in section 2( zc ) of the Special
Economic Zones Act, 2005 (28 of 2005).