Section 115AD of Income Tax Act "Tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer"
115AD. (1) Where the total income of a 72a[Foreign
Institutional Investor] includes-
(a) income 73[other than income by way of dividends referred
to in section 115-O] received in respect of securities
(other than units referred to in section 115AB); or
(b) income by way of short-term or long-term capital gains
arising from the transfer of such securities,
the income-tax payable shall be the aggregate of-
(i) the amount of income-tax calculated on the income in
respect of securities referred to in clause (a), if any,
included in the total income, at the rate of twenty per cent
:
Provided that the amount of income-tax calculated on the
income by way of interest referred to in section 194LD shall
be at the rate of five per cent;
Following clause (i) shall be substituted for existing
clause (i) of sub-section (1) of section 115AD by the
Taxation and Other Laws (Relaxation and Amendment of Certain
Provisions) Act, 2020, w.e.f. 1-4-2021 :
(i) the amount of income-tax calculated on the income in
respect of securities referred to in clause (a), if any,
included in the total income,-
(A) at the rate of twenty per cent in case of Foreign
Institutional Investor;
(B) at the rate of ten per cent in case of specified fund;
(ii) the amount of income-tax calculated on the income by
way of short-term capital gains referred to in clause (b),
if any, included in the total income, at the rate of thirty
per cent :
Provided that the amount of income-tax calculated on the
income by way of short-term capital gains referred to in
section 111A shall be at the rate of fifteen per cent;
(iii) the amount of income-tax calculated on the income by
way of long-term capital gains referred to in clause (b), if
any, included in the total income, at the rate of ten per
cent:
Provided that in case of income arising from the transfer of
a long-term capital asset referred to in section 112A,
income-tax at the rate of ten per cent shall be calculated
on such income exceeding one lakh rupees; and
(iv) the amount of income-tax with which the 72a[Foreign
Institutional Investor] would have been chargeable had its
total income been reduced by the amount of income referred
to in clause (a) and clause (b).
Following sub-section (1A) shall be inserted after
sub-section (1) of section 115AD by the Taxation and Other
Laws (Relaxation and Amendment of Certain Provisions) Act,
2020, w.e.f. 1-4-2021 :
(1A) Notwithstanding anything contained in sub-section (1),
in case of specified fund, the provision of this section
shall apply only to the extent of income that is
attributable to units held by non-resident (not being a
permanent establishment of a non-resident in India)
calculated in the prescribed manner.
(2) Where the gross total income of the 72a[Foreign
Institutional Investor]-
(a) consists only of income in respect of securities
referred to in clause (a) of sub-section (1), no deduction
shall be allowed to it under sections 28 to 44C or clause (i)
or clause (iii) of section 57 or under Chapter VI-A;
(b) includes any income referred to in clause (a) or clause
(b) of sub-section (1), the gross total income shall be
reduced by the amount of such income and the deduction under
Chapter VI-A shall be allowed as if the gross total income
as so reduced, were the gross total income of the
72a[Foreign Institutional Investor].
(3) Nothing contained in the first and second provisos to
section 48 shall apply for the computation of capital gains
arising out of the transfer of securities referred to in
clause (b) of sub-section (1).
Explanation.-For the purposes of this section,-
(a) the expression "Foreign Institutional Investor" means
such investor as the Central Government may, by notification
in the Official Gazette, specify in this behalf;
(b) the expression "securities" shall have the meaning
assigned to it in clause (h) of section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956).
Following clauses (b), (c) and (d) shall be substituted for
existing clause (b) of Explanation to section 115AD by the
Taxation and Other Laws (Relaxation and Amendment of Certain
Provisions) Act, 2020, w.e.f. 1-4-2021 :
(b) the expression "permanent establishment" shall have the
meaning assigned to it in clause (iiia) of section 92F;
(c) the expression "securities" shall have the meaning
assigned to it in clause (h) of section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956)14;
(d) the expression "specified fund" shall have the same
meaning assigned to it in clause (c) of the Explanation to
clause (4D) of section 10.