TaxTMI 
TaxTMI 
Legislative framework governing the taxation of income derived by non-residents from bonds and Global Depository Receipt : Clause 209 of Income Tax Bill, 2025 Vs. Section 115AC of the Income-tax Act, 1961
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.... non-residents from bonds and Global Depository Receipts (GDRs) purchased in foreign currency, as well as capital gains arising from their transfer. This provision is the legislative successor to Section 115AC of the Income-tax Act, 1961, which, together with a series of government notifications, has historically regulated the tax treatment of such instruments. The present commentary provides a comprehensive and detailed analysis of Clause 209, juxtaposing it with the extant Section 115AC, and critically examines the interplay with key notifications, namely S.O.1032(E) dated 24-12-1993, Notification No. 28/2008 dated 21-02-2008, and Notification No. 243/2002 dated 10-09-2002. This analysis is undertaken in the context of India's broader....
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.... of Clause 209 of the Income Tax Bill, 2025 1. Structure and Scope Clause 209 is structured to specify the tax rates applicable to different types of income accruing to non-residents from specified securities. The provision is comprehensive, covering: * Interest income from bonds issued by Indian companies or public sector companies. * Dividend income from GDRs issued against shares of Indian companies or public sector companies. * Long-term capital gains from the transfer of such bonds or GDRs. The provision is operative only where the securities are purchased in foreign currency and, for GDRs, through an "approved intermediary" as per a government-notified scheme. 2. Tax Rates and Income Categories The Clause prescribes the fol....
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....een deducted at source as per Chapter XIX-B. This eases compliance for passive investors and aligns with international best practices. 6. Amalgamation/Demerger Provisions Where securities are acquired in an amalgamated or resulting company by virtue of holding in the amalgamating or demerged company, the concessional regime continues to apply, ensuring continuity of tax treatment in corporate restructurings. 7. Definitions The Clause defines "approved intermediary" and references the meaning of "Global Depository Receipts" as assigned in section 190(4)(a), ensuring consistency across the legislative framework. Comparative Analysis with Section 115AC of the Income-tax Act, 1961 1. Structural Parity and Legislative Continuity Cla....
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....209, unless new notifications are issued under the 2025 Act. * Return Filing Exemption: * Section 115AC(4) refers to section 139(1) for return filing, whereas Clause 209(4) refers to section 263(1) of the new Bill. Functionally, both achieve the same objective: exemption from return filing where only specified income is earned and TDS is deducted. * Definitions: * Section 115AC refers to the definition of GDRs in section 115ACA, while Clause 209 refers to section 190(4)(a). This reflects a renumbering and possible consolidation of definitions in the new Bill. * Restriction on Set-off: * Section 115AC(3) excludes the application of the first and second provisos to section 48 (indexation, foreign exchange fluctuation adjustment), ....
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....sment years, ensuring continuity and legal certainty for investors and issuers. It also references subsequent amendments to the principal scheme, reflecting the dynamic nature of regulatory oversight in this area. 4. Ambiguities and Issues in Interpretation * Scheme Notification Requirement: * Both Section 115AC and Clause 209 require that eligible bonds or GDRs be issued "in accordance with" or "as per" a scheme notified by the Central Government. The language in Clause 209 ("as per with such scheme as notified by the Central Government") is more streamlined, but the substance remains unchanged. However, the continued reliance on notifications means that the scope of eligible instruments is at the discretion of the executive, which co....
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....-resident investors with a predictable, concessional tax regime for specified investments in Indian bonds and GDRs. The exemption from return filing, provided TDS is deducted, significantly reduces compliance burdens for passive investors. The clear specification of eligible instruments and intermediaries, subject to government notification, provides regulatory clarity, though the need for updated notifications remains. 2. For Indian Companies and Public Sector Undertakings The provision incentivizes Indian issuers-both private and public sector-to raise capital from global markets by making their securities more attractive to non-resident investors. The certainty of tax treatment is a key selling point in international capital raising. ....