TaxTMI 
TaxTMI 
2008 (12) TMI 18
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....is period he proposes to extend the maturity of the existing NRO accounts and also to open new NRO accounts, with convertible foreign exchange. But he does not mention the name of the bank in which new NRO accounts will be opened. He also proposes to file a declaration under section 115-H after his return to India. In the light of these facts, the applicant seeks advance ruling on the following points: (1) Whether investment income derived from the NRO deposit with State Bank of India made out of the convertible foreign inward remittances in foreign exchange is liable to be taxed at a concessional rate of 20% + applicable surcharge and cess under the provisions of Section 115-A/115-E read with provisions of Section 115-C, 115D? (2) Whether the above investment in NRO deposits will continue to be taxed @ 20% + applicable surcharge and cess till its maturity after the applicant becomes the resident on his return to India on complying procedural requirement under section 115-H? (3) Whether the interest income from investment made in NRO account is not liable to be clubbed with other Indian income and will continue to be taxed @ 20% under section 115-H in case the ....
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.... provisions of the Act and the relevant RBI circular. 6. The provisions of sections 115C, 115D, 115E and 115H of Chapter XII-A of the Act, which are relevant for the present consideration, are being given below- Special provisions relating to certain incomes of non-residents 115C Definitions . In this Chapter, unless the context otherwise requires,— (a) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder; (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; (d) "long-term capital gains" means income chargeable under the head "Capital gains" relating to a capital asset, being a foreign exchange asset which is not a short-term capital asset; (e) "non-resident Indian" means an individual, being a citizen of India or a person of ....
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....income, at the rate of ten per cent; and (iii) the amount of income-tax with which he would have been chargeable had his total income been reduced by the amount of income referred to in clauses (a) and (b). 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 (ii) or sub-clause (iii) 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 mon....
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....pany' and 'public company'. The main attributes of a private company are that there is restriction on the transfer of its shares; the number of members is limited to 50; and invitation to public for subscription is prohibited. A public company is a company, which is not a private company. Thus a deposit made in a banking company which is not a private company, would be regarded as 'specified asset' within the meaning of section 115C(f) of the Act." We also held in that case that NRO account would be foreign exchange asset and the interest income arising from it would be investment income liable to be taxed @ 20%. 9. Though the applicant in the present case has opened NRO accounts in SBI as well as other banks, he seeks ruling in respect of accounts opened with convertible foreign exchange in SBI only. As SBI is a public company, such accounts would be 'specified asset' and interest arising therefrom would be taxable @ 20%. 10. Section 115H gives an option to a person who was previously a non-resident but has subsequently become a resident, of asking for continued treatment of his income from specified asset for concessional rate of tax as specified in se....
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....e assessee has acquired or purchased in convertible foreign exchange. The applicant states that he would open new NRO accounts with remittances from convertible foreign currency. Thus, the second requirement is also satisfied. But the applicant has not mentioned in which bank he will open fresh NRO accounts. If he opens such accounts in SBI or a bank which is a public company, then his case would be fully covered under section 115E. 12. We may at this stage refer to section 6 of the Foreign Exchange Management Act, 1999 (FEMA). This section specifies the powers of the Reserve Bank of India (RBI) to regulate capital account transactions involving foreign currency. The relevant provisions of this section are extracted below: "Capital account transaction 6(1) Subject to the provisions of sub-section(2), any person may sell or draw foreign exchange to or from an authorized person for a capital account transaction. (2) The Reserve Bank may, in consultation with the Central Government, specify- (a) any class or classes of capital account transactions which are permissible; (b) the limit up to which foreign exchange shall be admissible for such transactions: Provided that th....