The Central Board of Direct Taxes (CBDT) has issued a Notification No. 17/2020 dated 13.03.2020 to specify a non-resident being an Eligible Foreign Investor which operates in accordance with a Securities and Exchange Board of India (SEBI) circular as Foreign Institutional Investor (FII).
Section 115AD deals with the tax on the income of Foreign Institutional Investors from securities or capital gains arising from their transfer. It provides for a special rate of tax on dividend income @ 20 per cent whereas Short Term Capital Gains (STCG) on the transfer of securities not covered u/s 111A shall be taxed @ 30 per cent whereas STCG on the transfer of securities covered u/s 111A shall be taxed @ 15 per cent.
The Long Term Capital Gains arising from the transfer of securities shall be taxable at 10 per cent.
Clause (a) to the Explanation to Section 115AD defines the term 'Foreign Institutional Investor' to mean such investor as the Central Government may, by notification in the Official Gazette, specify in this behalf.
Accordingly, CBDT has notified a Notification No. 17/2020 on 13.03.2020 to specify that a non-resident being an Eligible Foreign Investor which operates in accordance with the Securities and Exchange Board of India, circular IMD/HO/FPIC/CIR/P/2017/003 dated 04th January, 2017, shall be deemed as Foreign Institutional Investor (FII) for the purposes of transactions in securities made on a recognised stock exchange located in any International Financial Services Centre (IFSC), where the consideration for such transaction is paid or payable in foreign currency.
Earlier on 22.01.2014, vide Notification No. 9/2014, CBDT notified Foreign Portfolio Investors registered under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014, as Foreign Institutional Investor for the purposes of section 115AD.
Read the full text of the Notification No. 17/2020
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 13th March, 2020
S.O. 1057(E).—In exercise of the powers conferred by clause (a) of the Explanation to section 115 AD of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies that a nonresident being an Eligible Foreign Investor which operates in accordance with the Securities and Exchange Board of India, circular IMD/HO/FPIC/CIR/P/2017/003 dated 04th January, 2017, shall be deemed as Foreign Institutional Investor (FII) for the purposes of transactions in securities made on a recognised stock exchange located in any International Financial Services Centre (IFSC), where the consideration for such transaction is paid or payable in foreign currency.
Explanation. - for the purpose of this notification, -
(a) “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
(b) “recognised stock exchange” shall have the same meaning as assigned to it in clause (ii) of Explanation 1 to clause (5) of section 43 of the Income-tax Act, 1961;
(c) the expression “securities” shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956)
[Notification No. 17/2020/ F. No. 173/10/2014-ITA-I]
GULZAR AHMAD WANI, Under Secy.
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