Tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer.
(1) Where the total income of a specified fund or Foreign Institutional Investor includes—
(a) income received in respect of securities (other than units referred to in section 115AB); or
(b) income by way of short-term or long-term capital gains arising from the transfer of such securities,
the income-tax payable shall be the aggregate of—
(i) the amount of income-tax calculated on the income in respect of securities referred to in clause (a), if any, included in the total income,—
(A) at the rate of twenty per cent in case of Foreign Institutional Investor;
(B) at the rate of ten per cent in case of specified fund:
Provided that the amount of income-tax calculated on the income by way of interest referred to in section 194LD shall be at the rate of five per cent;
(ii) the amount of income-tax calculated on the income by way of short-term capital gains referred to in clause (b), if any, included in the total income, at the rate of thirty per cent :
[Provided that the amount of income-tax calculated on the income by way of short-term capital gains referred to in section 111A shall be at the rate of—
(A) fifteen per cent for any transfer which takes place before the 23rd day of July, 2024; and
(B) twenty per cent for any transfer which takes place on or after the 23rd day of July, 2024;]
(iii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, at the rate of [twelve and one-half] per cent:
[Provided that in case of income arising from the transfer of a long-term capital asset referred to in section 112A which exceeds one lakh and twenty-five thousand rupees, income-tax shall be calculated at the rate of—
(A) ten per cent where transfer of such asset takes place before the 23rd day of July, 2024; and
(B) twelve and one-half per cent where transfer of such asset takes place on or after the 23rd day of July, 2024:
Provided further that the limit of one lakh twenty-five thousand rupees mentioned in the first proviso shall apply on aggregate of the long-term capital gains referred to in clauses (A) and (B); and]
(iv) the amount of income-tax with which the specified fund or Foreign Institutional Investor would have been chargeable had its total income been reduced by the amount of income referred to in clause (a) and clause (b).
(1A) Notwithstanding anything contained in sub-section (1), in case of specified fund, the provision of this section shall apply only to the extent of income that is attributable to units held by non-resident (not being a permanent establishment of a non-resident in India) calculated in the prescribed manner.
(1B) Notwithstanding anything contained in sub-section (1), where the specified fund is investment division of an offshore banking unit, the provisions of this section shall apply to the extent of income that is attributable to the investment division of such banking units, referred to in sub-clause (ii) of clause (c) to the Explanation to clause (4D) of section 10, as a Category-I portfolio investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), calculated in such manner as may be prescribed.
(2) Where the gross total income of the specified fund or Foreign Institutional Investor—
(a) consists only of income in respect of securities referred to in clause (a) of sub-section (1), no deduction shall be allowed to it under sections 28 to 44C or clause (i) or clause (iii) of section 57 or under Chapter VI-A;
(b) includes any income referred to in clause (a) or clause (b) of sub-section (1), the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced, were the gross total income of the specified fund or Foreign Institutional Investor.
(3) Nothing contained in the first and second provisos to section 48 shall apply for the computation of capital gains arising out of the transfer of securities referred to in clause (b) of sub-section (1).
Explanation.—For the purposes of this section,—
(a) the expression "Foreign Institutional Investor" means such investor as the Central Government may, by notification in the Official Gazette, specify in this behalf;
(aa) the expression "investment division of offshore banking unit" shall have the meaning assigned to it in clause (aa) of the Explanation to clause (4D) of section 10;
(b) the expression "permanent establishment" shall have the meaning assigned to it in clause (iiia) of section 92F;
(c) the expression "securities" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(d) the expression "specified fund" shall have the same meaning assigned to it in clause (c) of the Explanation to clause (4D) of section 10.