sarsrote NRIs cat claim concessional tax rate us "5H for interest Home ()) / Articles larticles!) 1 Income Tax (article_display_list_by_categoryasp?cat | 3) NRI's can't claim concessional tax rate u/s 115H for interest Recently Madras High Court in the case of Dr. M MANOHAR (Appeal No 759 of 2004) decided an important question “ Whether the interest on the deposit made out of the interest income also qualified for concessional rate as the investment income derived from foreign exchange asset, since the same is traceable to the foreign exchange asset originally made. The assessee herein originally made investment in Bank out of the funds brought by him from abroad. Periodically, the assessee renewed the matured deposits along with the interest amount. The interest accrued thereon on the interest portion of the deposit was also taken as foreign investment eligible for concessional rate of tax under section 115H in the returns filed for the assessment year 1996-97. The same was not accepted by the Commissioner Income Tax and he held that the interest on interest on the investment out of foreign funds, had accrued in India, the same did not acquire the status of an investment made with foreign exchange. To understand this case let us first understand that Chapter XIIA of the Income Tax Act,1961, contains special provision relating to Non-Resident Indians in respect of their investment income and/or long term capital gains arising from foreign exchange assets Section 115H gives a continued availability of the benefit to a Non-Resident Indian even hipdhwwrcaclubincia comlaticlesi-s-car-Lclaim-concessinal-tax-ral-u-t-11Srfr-inerest-107E8 asp verare NR crt claim ences rae 1151 ernest after the said person has become assessable as a resident in relation to the investment income derived from any foreign exchange asset of a nature referred to in Section 115C sub clauses (i) (il) iv) or (v) of Clause (f) Section 115H — Benefit under Chapter to be available in certain cases even after the assessee becomes resident Where a person, who is a non-resident Indian in any previous year, becomes assessable as resident in India in respect of the total income of any subsequent year, he may furnish to the Assessing Officer a declaration in writing along with his return of income under section 139 for the assessment year for which he is so assessable, to the effect that the provisions of this Chapter shall continue to apply to him in relation to the investment income derived from any foreign exchange asset being an asset of the nature referred to. in sub-clause (ji) or sub-clause (ii) or sub-clause (iv) or sub-clause (v) of clause (f) of section 115C; and if he does so, the provisions of this Chapter shall continue to apply to him in relation to such income for that assessment year and for every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money of such assets. Section 115H stipulates two conditions namely, (i) the assessee should file a declaration along with his return for the assessment year in which he first becomes assessable as a resident seeking such benefit. (ji) the benefit under this Chapter will continue only in respect of income derived from a foreign exchange asset falling within the definition of “specified assets” as given under Section 115C(f)(ii) to (v). Thus so long as the asset retained its character as foreign, each asset retaining the status as specified assets and defined in Section 115C(f)(ii) to (v), the income derived there from would continue to enjoy the concessional levy under Section 115H Section 115C defines foreign exchange asset investment income and specified assets as follows: hipdhwwrcaclubincia comlaticlesi-s-car-Lclaim-concessinal-tax-ral-u-t-11Srfr-inerest-107E8 asp 28rapsz018 NRt' can't cli concessional ax rate us 15 fr ites “(b) ‘foreign exchange asset’ means any specified asset which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange ; (c)'investment income’ means any income derived, other than dividends referred to in section 115-O from a foreign exchange asset.” (f) ‘specified asset’ means any of the following assets, namely (i) shares in an Indian company; (ji) debentures issued by an indian company which is not a private company as defined in the Companies Act, 1956 (1 of 1956); (iii) deposits with an Indian company which is not a private company as defined in the Companies Act, 1956 (1 of 1956); (iv) any security of the Central Government as defined in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944); (v) such other assets as the Central Government may specify in this behalf by notification in the Official Gazette, " Section 115E provides for concessional rate of income tax at 20% on the income earned from investment or income from long term capital gains of an asset other than a specified asset, In the appeal filed before the Tribunal it was held that the special treatment given to the interest on foreign investment could not be extended to the interest on interest redeposit with the original sum The Madras High Court held that :- hipdhwwrcaclubincia comlaticlesi-s-car-Lclaim-concessinal-tax-ral-u-t-11Srfr-inerest-107E8 aspsareszore NRt' can't cli concessional ax rate us 15 fr ites Thus going by the wording in Section 115H, we do not find any ground to accept the assessee's case. Leamed counsel for the assessee further made reference to the beneficial Circular No.4, dated 11.2.1987, of the Reserve Bank of India, reported in [1987] 165 ITR 320 (K.Thyagarajan Vs. Parur Municipality (Ker.), which, in our considered view, does not have relevance to the assessee herein. Given the fact that the Section is clear and there is no ambiguity that the levy of concessional rate of tax is available only to the investment income derived from the foreign exchange asset, we have no hesitation jhe y Confirming the order of te iARRBAGHIS (/include Online updated classes for mod_id=10766&module_name=articles&share_tit Taxation (CAIPCC) 115H fori CARB K Agrawal aktoni Sshars_luridahttpsSA%2Fa2Funiwie2ecac Ubindl a ea Ty PES AAS LEN SAAS SAN eg aa 023 ing/282-incomé-tax-service-tax-and-vat.as @ Have a Query? Ask it on CCI Forum (forumicreate_message.asp? cat_id=3&utm_source=articles&utm_medium=banner_strip&utm_campaign=forum_post_clicks) CA. Anuj Gupta (../profile.asp?member_id=20495) (0103 August 2011 (.Jprofile.asp?member_id=20495) Published in Income Tax Other Articles by- CA. Anuj Gupta (article_display_list_by_category.asp?cat_d=3) {article_display_list_by_member.asp?member_id=20485) Views : 4119 Report AbusedA (.report_abuse.asp?module=articles) + Previous (check_next.asp?article_id=10766&mode=0) Next — (check_next.asp7article_id=10766&mode=1) \Y__ Online ciasses for CA CS CMA (hitp!/'go0.gUhFKKIV) Invest as low as Rs 1000/month in Top Performing SIP, Free Register! Go to myuniverse.co.in/ZipSip SIP Investment Plans 0) hipdhwwrcaclubincia comlaticlesi-s-car-Lclaim-concessinal-tax-ral-u-t-11Srfr-inerest-107E8 asp a8sarsrote NNRI's cat claim concessional ax rate us 5H for interest ® Recent Comments (articles_comments.asp?article_id=10766) (articles_comments.asp?article_id=10766) Login to post comment close x @ SHARE THIS (finclude Online updated classes for ips -antantoneivlesamerantsespabe.it EY taaionccaseco) sone for sharing. 115H for i CA Raj K Agrawal lick nere » SHHfpk3ASb2F ZF www 2Ecaclubinday 0 ARIUS PES RS LN gS SRO ASS cesar a (ete apron 580) 60 August 209 This decision will certainly help to convince those assessee's covered uls 115H. (-iprofile.asp? memiber_id=85931) Related Articles ‘= What's the rate beyond which inflation hurts growth? (http:/www.caclubindia.com/articlesiwhat-s-the- rate-beyond-which-inflation-hurts-growth--11557.asp) + Deregulation of Savings Bank Deposit Interest Rate - Who is the real gainer? (http:/www.caclubindia com/articles/deregulation-of-savings-bank-deposit-interest-rate-who-is-the- real-gainer--11655.asp) + Analysis of Section 36(1)(i) Interest on Borrowed Capital (http://www.caclubindia.com/articles/analysis- of-section-36-1 -i-interest-on-borrowed-capital-13397 asp) ‘+ Determination of Date of which rate of service tax to be taken (http:/www.caclubindia com/articles/determination-of-date-of-which-rate-of-service-tax-to-be-taken- 13477.asp) ‘+ Determination of Rate of Service Tax (http://www.caclubindia.com/articles/determination-of-rate-of- service-tax-13526.asp) + SARFAES! Act - The importance of claim for Loss and Damages (http:www.caclubindia com/articles/sarfaesi-act-the-importance-of-claim-for-loss-and-damages- 13755.asp) ‘+ Point of Taxation Rules - Applicability of New or Old rate of Service Tax (http:/www.caclubindia.com/articles/point-of-taxation-rules-applicability-of-new-or-old-rate-of-service- hipdhwwrcaclubincia comlaticlesi-s-car-Lclaim-concessinal-tax-ral-u-t-11Srfr-inerest-107E8 asp 58sarsrote NRIs cat claim concessional tax rate us "5H for interest tax-13799.asp) ‘© GST - Fate of GST Tax rate structure (http://www.caclubindia. com/articles/gst-fate-of-gst-tax-rate- structure-13917.asp) + Savings Rate - An illusion (http://www.caclubindia.com/articles/savings-rate-an-illusion-14020.asp) ‘+ Critical study of Disclosure of interest by a Director u/s 299 of Companies Act (http:www.caclubindia com/articlesicritical-study-of-disclosure-of-interest-by-a-director-u-s-299-of- ‘companies-act-14098.asp) More » (article_display list_by_category.asp?cat_id=3) close x Other Latest Articteg*4"= THIS (finclude Online updated classes for mod, e&Module_Name=articles&share_til Taxation (CAIPCC) 115H fori CARB K Agrawal eehteiat- Bh arg RSTO Ra IeSE AS aN (EASY a CLR Hise ARIAS ES GIN SBRaSe VaR SA Veto (larticles/7th-gst-council-meet-agreement-on-cgst-sgst-laws-but-stuck-on-dual-controlissue- 28622.asp) * Goods & Services Tax - Introduction and Procedure (/articles!goods-services-tax-introduction-and- procedure-28616.asp) ‘+ A Watchdog on NGO's - Prevention of Money Laundering Act (/articles/a-watchdog-on-ngo-s- prevention-of-money-laundering-act-28612.asp) ‘+ Glitches during Migration to New Accounting System (/articles/gltches-during-migration-to-new- accounting-system--28610.asp) + Never be satisfied (/articlesinever-be-satisfied-28603.asp) + Digitalise the receipts and pay presumptive tax at 6% instead of 8% (/articles/digitalise-the-receipts- and-pay-presumptive-tax-al-6-instead-of-8--28602.asp) * Falling interest rates and the plight of senior citizens (/articles/falling-interest-rates-and-the-plight-of- senior-citizens--28601.asp) ‘* Common habits of the toppers (/articles/common-habits-of-the-toppers-28600.asp) ‘+ Mutual funds - Are ratings the real indicators? (/articles/mutual-funds-are-ratings-the-rea-indicators- -28598.asp) ‘+ Time of supply of goods under revised GST law (/articles/time-of-supply-of- goods-under-revised-gst- law-28597.asp) More » (default-asp) hipdhwwrcaclubincia comlaticlesi-s-car-Lclaim-concessinal-tax-ral-u-t-11Srfr-inerest-107E8 asp ae2ns2016 NRIs cart claim concessional nx rate ls “15H fer interest Invest in Top SIP Start Download - PDF Apply for PAN Card _Interview q Fund Now Online - PAN Card... asked at bi [ABM My Universe ‘romdctopatcom thepancard.com cocatindacap Jy *@ SHARE THIS (include Online updated classes for mod_id=107668module_name=articles&share_tit LOY taxation (casPce) 115H fori, (CA Raj K Agrawal ic here » Sshars_uridshitpsGA%2Pi2ruww%2ecaclubindl ame PES AAS LEN SRA TIS 280 tg aa Excel formula for Cash deposit limit Depreciation under Difference daily attendance calculation -.. Companies Act, 2013. CC and OD ccaclubindia com ccaclubrdia com ccaclubndia.com ccactubindia.com ( Submit Article (article_list_add.asp) Popular Picks (articles_popular.asp) GST Registration Step by Step (/articles/gst-registration-step-by-step-28566.asp) All about GST registration (/articles/all-about-gst-registration-28506.asp) GST in India - The basic study (/articles/gst-in-india-the-basic-study-28559.asp) Whether GST migration is mandatory? (/articles/whether-gst-migration-is-mandatory--28522.asp) Composition Scheme in Revised Model GST law (/articles/composition-scheme-in-revised-model- gst-law-28527 asp) All about GST retums (/articles/all-about-gst-returns-28540.asp) Presumptive Taxation For Professionals (/articles/presumptive-taxation-for-professionals- 28524.asp) Dont give up (/articles/dont-give-up-28487 asp) 5 financial planning tips that makes achieving your financial goals easy (/articles/5-financial- planning-tips-that-makes-achieving-your-financial-goals-easy-28531.asp) ipdhwwrcaclubincia comlaticlesi-s-car-claim-concessional-tax-ral-u-t- 11S for-inerest- 10786 5p 78an52016 Ris can'laim concessional x rate us “15H fr interest Registration under GST (larticles/registration-under-gst-28589.asp) view more » (articles_popular.asp) close x <' Online updated classes for =10766&module_name=articlARNBEY 4 OY teation (cairce) CA Ral K Agrawal eis esazinmzecusyazucan ye, icomé-tak service tax and-val asp} mod_i &share_url2=http%3A%2F%q Smart Test Prep SmarrerFrice EA Wiley’s CMA, CPA, CFA, rary (hitp:/bit ly/2h82ae9) =) FRM, CIA, PMP Courses [ERY SMM Starting at 12,750INR- witey Ultra Height Weight Loss. Similar Forum Post hipdhwwrcaclubincia comlaticlesi-s-car-Lclaim-concessinal-tax-ral-u-t-11Srfr-inerest-107E8 asp ae