Income-tax (33rd Amendment) Rules, 2021 – Rule 21AK
Income-tax (33rd Amendment) Rules, 2021 – Rule 21AK
The Central Board of Direct Taxes (CBDT) has published the Income-tax (33rd Amendment) Rules, 2021, which seek to update the Income-tax Rules, 1962. With this amendment. the CBDT has notified Rule 21AK prescribing conditions to be fulfilled to claim an exemption under section 10(4E) of the Income Tax Act. This rule shall come into effect from December 10, 2021. The current article briefs the Income-tax (33rd Amendment) Rules, 2021.
The Gist of Income-tax (33rd Amendment) Rules, 2021
As mentioned above, vide the Income-tax (33rd Amendment) Rules, CBDT notifies conditions to claim exemption on the transfer of income accrued or received by a non-resident as a result of the transfer of non-deliverable forward contracts under section 10(4E) of the Income-tax Act.
The official notification about the Income-tax (33rd Amendment) Rules, 2021is attached here for reference.
notification-136-2021Section 10(4E) of the Income Tax Act
The Finance Act, 2021 has inserted a new clause (4E) under section 10 to exempt any income received by a non-resident due to the transfer of non-deliverable forward contracts entered into with an offshore banking unit of IFSC.
Any income accrued received by a non-resident as a result of the transfer of non-deliverable forward contracts shall be exempt from tax. However, such non-deliverable forward contracts shall be entered into with an offshore banking unit of Indian Financial Services Center (IFSC) which commenced operations on or before the 31st March 2024 and fulfills prescribed conditions.
New Rule 21AK of Income Tax Rules
CBDT has now notified the Rule 21AK of Income Tax Rules prescribing conditions to be fulfilled to claim an exemption under section 10(4E) of the Income Tax Act.
Conditions to claim Exemption under Section 10(4E)
The income accrued or received by a non-resident as a result of the transfer of non-deliverable forward contracts under clause (4E) of section 10 of the Income Tax Act, shall be exempted subject to fulfillment of the following conditions:
- The non-resident enters into a non-deliverable forward contract with an offshore banking unit of an International Financial Services Centre that holds a valid certificate of registration granted by the International Financial Services Centres Authority under the International Financial Services Centres Authority (Banking) Regulations, 2020
- The non-resident does not engage in such a contract through or on behalf of its permanent establishment in India.
Note: The offshore banking unit is responsible for ensuring that the criteria specified here are met.
Non-Deliverable Forward Contract
A non-deliverable forward contract is defined as a contract for the difference between an agreed-upon exchange rate and the actual spot rate at maturity, with the spot rate being the domestic rate or a market-determined rate, and such contract being settled with a single payment in a foreign currency;
Offshore Banking Unit
The term “offshore banking unit” refers to a banking branch Unit located in an International Financial Services Centre, as defined in section 80LA sub-section (1A) of the Act.
