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Non-Residents having Capital Gains u/s 47(viiab) Exempt from Obtaining PAN

non-residents-having-capital-gains-us-47-viiab-exempt-from-obtaining-pan

CBDT vide Notification No. 42/2021 dated 4th May 2021 through Income-tax (14th Amendment) Rules, 2021 provided that non-residents having income only from transfer of capital asset referred to in section 47(viiab) shall be exempt from obtaining PAN in India under section 139A subject to certain conditions. The stock broker shall be required to furnish Form No. 49BA to report such transactions to the income tax department.


For this purpose, a new sub-rule 2A to Rule 114AAB has been inserted to provide that a non-resident, being an eligible foreign investor, who has made transaction only in a capital asset referred to in clause (viiab) of section 47 which are listed on a recognised stock exchange located in any International Financial Services Centre (IFSC) and the consideration on transfer of such capital asset is paid or payable in foreign currency, shall be exempt from obtaining PAN in India if the following conditions are fulfilled, namely-



(i) the eligible foreign investor does not earn any income in India, other than the income from transfer of a capital asset referred to in clause (viiab) of section 47; 


(ii) the eligible foreign investor furnishes the following details and documents to the stock broker through which the transaction is made namely:— 


(a) name, e-mail id, contact number; 


(b) address in the country or specified territory outside India of which he is a resident; 


(c) a declaration that he is a resident of a country or specified territory outside India; and 


(d) Tax Identification Number in the country or specified territory of his residence and in case no such number is available, then a unique number on the basis of which the non-resident is identified by the Government of that country or the specified territory of which he claims to be a resident.


Further, the stock broker shall furnish a quarterly statement for the quarter of the financial year, in which the details and documents of such non-resident investor are received by it, in Form No.49BA to the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) or the person authorised by him, electronically and upload the declaration within 15 days from the end of the quarter of the financial year to which such statement relates in accordance with the procedures, formats and standards specified by the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems).


Section 139A provides for compulsory obtaining Permanent Account Number (PAN) in certain cases. Section 139A(8)(d) empowers the Board to make rules to exempt class or classes of persons from the applicability of the provisions of section 139A.


Section 47 deals with certain transactions which are not regarded as transfer for the purpose of capital gains. Section 47(viiab) exempts capital gains arising from any transfer of a capital asset, being—


(a) bond or Global Depository Receipt referred to in sub-section (1) of section 115AC; or


(b) rupee denominated bond of an Indian company; or


(c) derivative; or


(d) such other securities as may be notified by the Central Government in this behalf,


made by a non-resident on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency.


Further, section 206AA provides for a higher rate of TDS in the absence of a valid PAN of the deductee. However, sub-section (7) of section 206AA provides that this rule shall not apply to a non-resident in respect of—


(i) payment of interest on long-term bonds as referred to in section 194LC; and


(ii) any other payment subject to such conditions as may be prescribed.


Rule 114AAB prescribes the class or classes of person to whom the provisions of section 139A shall not apply.


Read the full text of Notification No. 42/2021 dated 4-5-2021 on Exemption to non-residents from obtaining PAN


MINISTRY OF FINANCE 

(Department of Revenue) 


(CENTRAL BOARD OF DIRECT TAXES) 


NOTIFICATION 


New Delhi, 4th May, 2021 


G.S.R. 318(E).—In exercise of the powers conferred by clause (d) of sub-section (8) of section 139A and clause (ii) of sub-section (7) of section 206AA 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:—


1. Short title and commencement.–(1) These rules may be called the Income-tax (14th Amendment) Rules, 2021. 


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


2. In the Income-tax Rules, 1962 (hereinafter referred to as the principal rules), in rule 114AAB,––


(I) after sub-rule (2), the following sub-rules shall be inserted, namely:–


“(2A) The provisions of section 139A shall not apply to a non-resident, being an eligible foreign investor, who has made transaction only in a capital asset referred to in clause (viiab) of section 47 which are listed on a recognised stock exchange located in any International Financial Services Centre and the consideration on transfer of such capital asset is paid or payable in foreign currency, if the following conditions are fulfilled, namely:—


(i) the eligible foreign investor does not earn any income in India, other than the income from transfer of a capital asset referred to in clause (viiab) of section 47; 


(ii) the eligible foreign investor furnishes the following details and documents to the stock broker through which the transaction is made namely:—


(a) name, e-mail id, contact number; 


(b) address in the country or specified territory outside India of which he is a resident; 


(c) a declaration that he is a resident of a country or specified territory outside India; and


(d) Tax Identification Number in the country or specified territory of his residence and in case no such number is available, then a unique number on the basis of which the non-resident is identified by the Government of that country or the specified territory of which he claims to be a resident.


(2B) The stock broker shall furnish a quarterly statement for the quarter of the financial year, in which the details and documents referred to in sub-rule (2A) are received by it, in Form No.49BA to the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) or the person authorised by him, electronically and upload the declaration referred to in sub-clause (c) of clause (ii) of sub-rule (2A) within fifteen days from the end of the quarter of the financial year to which such statement relates in accordance with the procedures, formats and standards specified by the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) under sub-rule (3).”;


(II) in sub-rule (3), for the words, brackets and figure “in accordance with the provisions of sub rule (2)” the words, brackets, figures and letter “ in accordance with the provisions of sub-rule (2) or sub-rule (2B)” shall be substituted;


(III) in the Explanation ,––


(A) for clause (a), the following clause shall be substituted , namely :––


‘(a) ‘‘specified fund’’ means any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or Category II Alternative Investment Fund and is regulated 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) or International Financial Services Centres Authority Act, 2019 (50 of 2019) and which is located in any International Financial Services Centre or a specified fund referred to in sub-clause (i) of clause (c) of Explanation to clause (4D) of section 10;’;


(B) after clause (b) the following clauses shall be inserted, namely:––


‘(c) “eligible foreign investor” means a non-resident who operates in accordance with the Securities and Exchange Board of India, circular IMD/HO/FPIC/CIR/P/2017/003 dated 04th January, 2017;


(d) ‘‘stock broker’’ means a person having trading rights in a recognised stock exchange located in any International Financial Services Centre and the member of such exchange.’.


3. In the principal rules, in Appendix II, for Form No. 49BA, the following Form shall be substituted , namely:–


“FORM NO. 49BA 


[See rule 114AAB] 


Quarterly statement to be furnished by specified fund or stock broker in respect of a non-resident referred to in rule 114AAB for the quarter of ………… of ….. (Financial Year) 


1. Name of the fund/ stock broker: 


2. Category (specified fund/stock broker): 


3. Permanent Account Number/Aadhaar Number: 


4. Details of non-resident referred to in sub-rule (1)/ sub-rule (2A) of rule114AAB


Sl No.

Name

E-mail Address

Contact Number

Address in the country or specified territory outside India of which the non-resident is resident

Tax Identification Number, if any

Unique number on the basis of which the non-resident is identified by the Government of that the country or specified territory of which he claims to be a resident (to be furnished if Tax Identification Number is not available)









Verification 

I ……………… (full name in block letters), son/daughter of …………… having permanent account number/ Aadhaar number ………………, solemnly declare that to the best of my knowledge and belief, the information given above are correct and complete. 


Signature ..........…………… 

Name and designation ….......................... 

Place …………….. 

Date ……………… 


Attachments (to be uploaded):


Declaration received from the non-resident as referred to in sub-clause (c) of clause (iii) of sub-rule (1) or sub-clause (c) of clause (ii) of sub-rule (2A), as the case may be, of rule 114AAB.”.


[Notification No. 42/2021 F. No. 370133/08/2020-TPL] 

KAMLESH CHANDRA VARSHNEY, Jt. Secy. (Tax Policy and Legislation)


Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II Section-3, Sub Section (ii) vide number S.O. 969(E) dated the 26th march, 1962 and were last amended by the Income-tax (13th Amendment) Rules, 2021 vide notification No. G.S.R. 314(E), dated the 03rd May, 2021.


Download Copy of Notification No. 42/2021 dated 4-5-2021 on Exemption to non-residents from obtaining PAN in pdf format



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