Certain non-residents and foreign investors are exempted from filing ITR

The CBDT has by a notification exempted certain classes of persons, such as non-residents and non-resident foreign investors, from filing return of income from the financial year 2020-21 onwards. 

As per the notification, the following class of persons are not required to file the income tax return:

  • A non-resident (not being a company) or a foreign company, who-
    • Does not earn any income in India, except income from investment in the ‘specified fund’ during the relevant financial year.
    • It is not required to obtain PAN if tax is duly deducted from the income of such person and remitted to the government by such specified fund. 
    • Who furnishes prescribed details and documents to the specified fund, such as name, contact details, TIN and residential status declaration.

‘Specified fund’ means a fund registered as a Category III Alternative Investment Fund that is regulated under SEBI and located in the International Financial Services Centre (IFSC), of which all the units, except units held by the sponsor, are held by non-residents.

  • A non-resident, being an eligible foreign investor, who-
    • Had transacted only in certain capital assets during the relevant financial year
    • Has paid the consideration for transfer of such capital assets in foreign currency, and the investor earns no other income during the relevant financial year
    • It is not required to obtain PAN if tax is duly deducted from the income of such person and remitted to the government by the stockbroker 
    • Furnishes details and documents to the stockbroker through which the transaction is made, such as name, contact details, TIN and residential status declaration

The capital assets above refer to bond or Global Depository Receipts (GDRs), Rupee denominated bond of an Indian company, derivatives, unit of Alternative Investment Fund (AIF), foreign currency-denominated bond/equity share of a company, unit of a mutual fund/business trust, and such other notified securities listed on a recognised stock exchange located in the IFSC. 

However, it is to be noted that exemption of filing the income tax return for a non-resident, being an eligible foreign investor, will not be available where a notice under Sections 142(1)/148/153A/153C of the Income Tax Act has been issued for filing ITR for the assessment year specified therein.

The relaxation of filing ITR will reduce the compliance burden from such investors and boost investments in the GIFT city.

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For any clarifications/feedback on the topic, please contact the writer at namita.shah@cleartax.in

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