TaxTMI 
TaxTMI 
Definitions
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....interests was established with a purpose of avoiding reporting in accordance with rule 239 and, in case of a U.S. reportable account, if the value of the debt or equity interest is determined, directly or indirectly, primarily by reference to assets that give rise to U.S. source with holdable payments; and (v) any cash value insurance contract and any annuity contract issued or maintained by a financial institution, other than a non-investment-linked, non-transferable immediate life annuity that is issued to an individual and monetises a pension or disability benefit provided under an account that is an excluded account. Explanation. - For the purposes of this clause, - (a) "depository account" includes any commercial, checking, savings, time, or thrift account, or an account that is evidenced by a certificate of deposit, thrift certificate, investment certificate, certificate of indebtedness, or other similar instrument maintained by a financial institution in the ordinary course of a banking or similar business and also an amount held by an insurance company pursuant to a guaranteed investment contract or similar agreement to pay or credit interest ther....
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....mium life insurance contract which does not permit an amount to be paid on surrender or termination of the contract and which does not allow amounts to be borrowed under or with regard to the contract, shall not constitute a cash value insurance contract; (g) "cash value" means the greater of- (i) the amount that the policyholder is entitled to receive upon surrender or termination of the contract (determined without reduction for any surrender charge or policy loan); and (ii) the amount the policyholder can borrow under or with regard to the contract, but does not include an amount payable under an insurance contract, - (A) solely by reason of the death of an individual insured under a life insurance contract including a refund of a previously paid premium provided such refund is a limited risk refund; or (B) as a personal injury or sickness benefit or other benefit providing indemnification of an economic loss incurred upon the occurrence of the event insured against; or (C) as a refund of a previously paid premium (less cost of insurance charges whether or not actually imposed) under an insurance contract (other than....
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....to satisfy such requirements solely because such financial account may receive assets or funds transferred from one or more financial accounts that meet the requirements of sub-clause (i) or (ii) or from one or more retirement or pension funds that meets with the requirements of clause (E), (F) or (G) of Explanation to clause (5); (ii) an account that satisfies the following requirements: - (A) the account is subject to regulation as a savings vehicle for purposes other than for retirement, or the account (other than U.S. reportable account) is subject to regulation as an investment vehicle for purposes other than for retirement and is regularly traded on an established securities market; (B) the account is tax-favoured where contributions to the account that will otherwise be subject to tax are deductible or excluded from the total income of the account holder or taxed at a reduced rate, or taxation of investment income from the account is deferred or taxed at a reduced rate; (C) withdrawals are conditioned on meeting specific criteria related to the purpose of the investment or savings account (for example, the provision of educational or medic....
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....ment, earnest money, deposit in an amount appropriate to secure an obligation directly related to the transaction, or a similar payment, or is funded with a financial asset that is deposited in the account in connection with the sale, exchange, or lease of the property; (b) the account is established and used solely to secure the obligation of the purchaser to pay the purchase price for the property, the seller to pay any contingent liability, or the lessor or lessee to pay for any damages relating to the leased property as agreed under the lease; (c) the assets of the account, including the income earned thereon, will be paid or otherwise distributed for the benefit of the purchaser, seller, lessor, or lessee (including to satisfy such person's obligation) when the property is sold, exchanged, or surrendered, or the lease terminates; (d) the account is not a margin or similar account established in connection with a sale or exchange of a financial asset; and (e) the account is not associated with a depository account referred to in sub-clause (vii); (C) an obligation of a financial institution servicing a loan secured by real proper....
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....the benefit of a customer, if the rolling average 90 day end-of-day aggregate account balance or value during any period of 90 consecutive days did not exceed USD 10,000 at any day during the calendar year or other appropriate reporting period; (2) "financial asset" includes a security (for example, a share of stock in a corporation; partnership or beneficial ownership interest in a widely held or publicly traded partnership or trust; note, bond, debenture, or other evidence of indebtedness), partnership interest, commodity, swap (for example, interest rate swaps, currency swaps, basis swaps, interest rate caps, interest rate floors, commodity swaps, equity swaps, equity index swaps, and similar agreements), insurance contract or annuity contract, or any interest (including a futures or forward contract or option) in a security, partnership interest, commodity, swap, insurance contract, or annuity contract but "financial asset" shall not include a non-debt and direct interest in an immovable property and for an account other than a U.S. reportable account, "financial asset" shall also include any interest (including a futures or forward contract or option) in a relevant crypto-a....
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....mpany, or an investment entity mentioned in sub-clause (A) of this clause; Explanation 1 .- An entity is treated as primarily conducting as a business one or more of the activities described in sub-clause (A) of this clause, or an entity's gross income is primarily attributable to investing, reinvesting, or trading in financial assets for purposes of sub-clause (B) of this clause, if the entity's gross income attributable to the relevant activities equals or exceeds fifty per cent of the gross income of the entity during the shorter of the three-year period ending on 31st March of the year preceding the year in which the determination is made or the period during which the entity has been in existence. Explanation 2 .- The term "investment entity" shall not include an entity that is an active non-financial entity merely because it meets any of the criteria provided in sub-clause (iv), (v), (vi) or (vii) of clause (A) of Explanation to clause (6) of this rule but for an account other than a U.S. reportable account, the provisions of sub-clause (B) and Explanation 1 shall apply with the effect that the phrase "financial assets" shall be substituted by the ph....
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....tuity fund or a provident fund; (d) an entity that is an Indian financial institution only because it is an investment entity, provided that each direct holder of an equity interest in the entity is a financial institution referred to in sub- clauses (a) to (c), and each direct holder of a debt interest in such entity is either a depository institution (with respect to a loan made to such entity) or a financial institution referred to in sub- clauses (a) to (c); (e) a qualified credit card issuer; (f) an investment entity established in India that is a financial institution only because it, - (I) renders investment advice to, and acts on behalf of; or (II) manages portfolios for, and acts on behalf of; or (III) executes trades on behalf of, a customer for the purposes of investing, managing, or administering funds or securities deposited in the name of the customer with a financial institution other than a non-participating financial institution; (g) an exempt collective investment vehicle; (h) a trust established under any law for the time being in force to the extent that the trustee of the trust is ....
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....edited to its own account or to the accounts of one or more Governmental entities, with no portion of its income inuring to the benefit of any private person; and (c) the entity's assets vest in one or more Governmental entities upon dissolution; (iii) the income does not inure to the benefit of private persons if such persons are the intended beneficiaries of a Governmental programme, and the programme activities are performed for the general public with respect to the common welfare or relate to the administration of a Department of Government; (iv) income is considered to inure to the benefit of private persons if the income is derived from Governmental entity engaged in a commercial business, such as a commercial banking business, which provides financial services to private persons; (B) "International Organisation" means any international organization or wholly owned agency or instrumentality thereof including any inter-Governmental organisation, - (a) that is comprised primarily of Governments; (b) that has in effect a headquarters or substantially similar agreement with India; and (c) the income of which does....
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....r penalties which apply to distributions or withdrawals made before such events; or (d) contributions (other than permitted make-up contributions) by employees to the fund are limited by reference to earned income of the employee or may not exceed an amount equivalent to fifty thousand U.S. dollars annually, applying the procedures set forth in rule 240 for account aggregation and currency translation; (F) "Narrow Participation Retirement Fund" means a fund established to provide retirement, disability, or death benefits to beneficiaries who are current or former employees (or persons nominated by such employees) of one or more employers in consideration for services rendered; so, however, that, - (i) the fund has less than fifty participants; (ii) the fund is sponsored by one or more employers who are not investment entities or passive non-financial entities; (iii) the employee and employer contributions to the fund other than transfer of assets from retirement and pension accounts referred to in sub-clause (i) of clause (h) of Explanation to clause (1) are limited by reference to earned income and compensation of the employee, respecti....
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.... than permitted make-up contributions) by employees to the fund are limited by reference to earned income of the employee or may not exceed an amount equivalent to fifty thousand U.S. dollars annually, applying the procedures set forth in rule 240 for account aggregation and currency translation; (L) "qualified credit card issuer" means a financial institution satisfying the following requirements: - (i) it is a financial institution only because it is an issuer of credit cards and accepts deposits only when a customer makes a payment in excess of a balance due with respect to the card and the overpayment is not immediately returned to the customer; and (ii) beginning on or before the 1st July, 2014, the financial institution implements policies and procedures either to prevent a customer from making an overpayment in excess of an amount equivalent to fifty thousand U.S. dollars or to ensure that any customer overpayment in excess of an amount equivalent to fifty thousand U.S. dollars is refunded to the customer within sixty days, in each case applying the rules set forth in rule 240 for account aggregation and currency translation. Explanation. ....
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....holders outside India merely because the financial institution,- (a) operates a website, provided that the website does not specifically indicate that the financial institution provides financial accounts or services to non-residents, and does not otherwise target or solicit customers or account holders who are resident of any country or territory outside India for tax purposes; or (b) advertises in print media or on a radio or television station which is distributed or aired primarily within India but is also incidentally distributed or aired in other countries, provided that the advertisement does not specifically indicate that the financial institution provides financial accounts or services to non-residents, and does not otherwise target or solicit customers or account holders who are resident of any country or territory outside India for tax purposes; (iv) the financial institution is required under any law for the time being in force to identify resident account holders for purposes of either information reporting or withholding of tax with respect to financial accounts held by residents or for purposes of satisfying the due diligence requirements u....
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.... and residents of India; (O) "local bank" means a financial institution satisfying the following requirements: - (i) the financial institution operates only as (and is licensed and regulated under any law for the time being in force) a bank, or a credit union or similar cooperative credit organisation which is operated without profit; (ii) the business of the financial institution consists primarily of receiving deposits from and making loans to, with respect to a bank, unrelated retail customers and, with respect to a credit union or similar cooperative credit organisation, members, provided that no member has a greater than five per cent interest in such credit union or cooperative credit organisation; (iii) the financial institution satisfies the requirements set forth in sub-clauses (ii) and (iii) of clause (N), provided that, in addition to the limitations on the website referred to in sub- clause (iii) of clause (N), the website does not permit the opening of a financial account; (iv) the financial institution does not have more than an amount equivalent to one hundred seventy-five million U.S. dollars in assets on its balance shee....
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....intermediary (being an intermediary that is a party to a withholding agreement with the United States of America), withholding foreign partnership, or withholding foreign trust; and (b) an entity has agreed with the financial institution to act as a sponsoring entity for the financial institution; (ii) a financial institution is a sponsored controlled foreign corporation if- (a) the financial institution is a controlled foreign corporation established under any law for the time being in force in India that is not a qualified intermediary (being an intermediary which is a party to a withholding agreement with the United States of America), withholding foreign partnership, or withholding foreign trust; (b) the financial institution is wholly owned, directly or indirectly, by a reporting U.S. financial institution referred to in Article 1 of the FATCA agreement that agrees to act, or requires an affiliate of the financial institution to act, as a sponsoring entity for the financial institution; and (c) the financial institution shares a common electronic account system with the sponsoring entity that enables the sponsoring entity to identif....
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....ign financial institution defined in Annex II of the FATCA agreement, is authorised to act on behalf of the financial institution (such as a professional manager, trustee, or managing partner), and agrees to perform, on behalf of the financial institution, all due diligence, withholding, reporting, and other requirements which the financial institution would have been required to perform if it were a reporting financial institution; (iii) the financial institution does not act as an investment vehicle for unrelated parties; (iv) twenty or less than twenty individuals own all the debt interests and equity interests in the financial institution (other than debt interests owned by participating foreign financial institution defined in Annex II of the FATCA agreement and non-reporting financial institutions and equity interests owned by an entity if that entity owns hundred per cent of the equity interests in the financial institution and is itself a sponsored financial institution described in this clause); and (v) the sponsoring entity complies with the following requirements: - (a) it has been registered as a sponsoring entity in terms of the Fore....
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....ified, pursuant to the due diligence procedures provided in rule 240, as held by, - (a) a reportable person; or (b) an entity, not based in United States of America, with one or more controlling persons that is a specified U.S. person; or (c) a passive non-financial entity with one or more controlling persons that is a person described in sub-clause (b) of clause (8) of this rule. Explanation. - For the purpose of this clause, - (A) "active non-financial entity" means any non-financial entity which fulfils any of the following criteria: - (i) less than fifty per cent of the entity's gross income for the preceding financial year is passive income and less than fifty per cent of the assets held by the entity during the preceding financial year are assets that produce or are held for the production of passive income; or (ii) the stock of the entity is regularly traded on an established securities market or the non-financial entity is a related entity of an entity, the stock of which is regularly traded on an established securities market. Explanation. - For the purpose of this sub-clause, an established securities m....
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...., civic league or an organisation operated exclusively for the promotion of social welfare; (b) it is exempt from income-tax in India; (c) it has no shareholders or members who have a proprietary or beneficial interest in its income or assets; (d) the applicable laws of the entity's country or territory of residence or the entity's formation documents do not permit any income or assets of the entity to be distributed to, or applied for the benefit of, a private person or non-charitable entity other than pursuant to the conduct of the entity's charitable activities, or as payment of reasonable compensation for services rendered, or as payment representing the fair market value of property which the entity has purchased; and (e) the applicable laws of the entity's country or territory of residence or the entity's formation documents require that, upon the entity's liquidation or dissolution, all of its assets must be distributed to a Governmental entity or other non-profit organization, or escheat to the Government of the entity's country or territory of residence or any political sub-division thereof. Explanati....
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....entity; (F) Subject to the provisions of clause (G), "passive income" includes income by way of, - (i) dividends; (ii) interest; (iii) income equivalent to interest; (iv) rents and royalties (other than rents and royalties derived in the active conduct of a business conducted, at least in part, by employees of the non-financial entity); (v) annuities; (vi) the excess of gains over losses from the sale or exchange of financial assets; (vii) the excess of gains over losses from transactions (including futures, forwards, options, and similar transactions) in any financial assets; (viii) the excess of foreign currency gains over foreign currency losses; (ix) net income from swaps; or (x) amounts received under cash value insurance contracts: (G) Passive income will not include, in the case of a non-financial entity that regularly acts as a dealer in financial assets, any income from any transaction entered into in the ordinary course of such dealer's business as such a dealer. (7) "relevant crypto-asset" shall have the same meaning as assigned in rule 241; (8) "reportin....
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....nstructions to facilitate the transfer, or, if no instructions are received, the funds connected with such product are held longer than 60 days after receipt of the funds; (iii) "fiat currency" shall have the same meaning as assigned in rule 241. (11) "specified U.S. person" means a U.S. person, other than the persons referred to in sub-clauses (i) to (xiii) of clause (ff) of Article 1 of the FATCA agreement; (12) "U.S. person" means, - (a) an individual, being a citizen or resident of the United States of America; (b) a partnership or corporation organized in the United States of America or under the laws of the United States of America or any State thereof; (c) a trust if, - (i) a court within the United States of America would have authority under applicable law to render orders or judgments concerning substantially all issues regarding administration of the trust; and (ii) one or more U.S. persons have the authority to control all substantial decisions of the trust; or (d) an estate of a decedent who was a citizen or resident of the United States of America; (13) "U.S. reportable account" means a financial ....