From FY 2020-21 onwards, the income tax department has exempted certain non-residents and foreign investors from filing Income Tax Returns (ITRs), in an effort to reduce compliance burden. With Notification No. 119/2021, Central Board of Direct Taxes (CBDT) notified the exemptions.
Non-residents (corporates/ others) who do not earn any income other than income from investment in a “specified fund,” being an Alternate Investment Fund Category III located in an International Financial Services Centre (IFSC) or GIFT city, are not required to file ITR, according to a notification issued by the CBDT.
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In addition, eligible foreign investors (non-residents who operate in accordance with SEBI instructions) who only transacted in capital assets such as Global Depository Receipts, Rupee Denominated Bonds, derivatives, or other notified securities listed on a recognised stock exchange in IFSC during the financial year have been exempted from filing ITRs.
This is subject to the condition that the consideration for the transfer of such asset be paid in foreign currency and that such a class of persons receive no other income in India.
Non-residents in both of these categories, however, must ensure that they are excluded from the obligation of obtaining a PAN.
Read Also: Non-resident investor exempted from obtaining PAN having income only from transfer of specified capital asset
PAN is not required by I-T rules if tax has been properly deducted from non-residents’ income and remitted to the government by the ‘specified fund.’ The non-resident must also provide necessary information and papers, such as contact information, TIN, and a declaration of residence status to the ‘specified fund’.
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