CBDT exempts certain non-residents, foreign investors from filing ITR FY21 onwards

The income tax department has exempted certain non-residents and foreign investors from filing Income Tax Return (ITR) from 2020-21 onwards, a move aimed at easing compliance burden.

Through a notification, the Central Board of Direct Taxes (CBDT) said non-residents (corporates/ otherwise) who do not earn any income other than income from investment in 'specified fund', being Alternate Investment Fund Category III located in International Financial Services Centres (IFSC) or GIFT city shall not be required to file ITR.

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Further, eligible foreign investors (non-residents who operate in accordance with SEBI instructions), who during the financial year, have only transacted in capital asset like Global Depository Receipts, Rupee Denominated Bonds, derivatives or other notified securities, listed on recognised stock exchange in IFSC, have also been exempted from ITR filing.

This is subject to the condition that the consideration for transfer of such asset is discharged in foreign currency and no other income is earned by such class of persons in India.

However, in both the cases above, these classes of non-residents shall have to ensure that they are exempted from the requirement of obtaining PAN.

As per I-T rules, PAN is not required if tax has been duly deducted on income of non-residents and remitted to the government by the 'specified fund'.

Additionally, requisite details and documents like contact information, TIN and residential status declaration, are submitted by the non-resident to the 'specified fund'.

Nangia Andersen LLP Director Neha Malhotra said since the government has all the tax related information regarding the taxpayers exempted from filing ITR and their income is also subject to deduction of tax at source, this move doesn't impact the government kitty.

"Exempting such non-residents from the obligation of filing the return of income, simply eases their compliance burden. Reducing the compliance burden on taxpayers reflects on the country's efficient tax administration, which will further improve investor confidence," Malhotra said.

Tax and consulting firm AKM Global, Tax Partner Amit Maheshwari said the notification has provided that the overseas investors who invest in a fund operating in Gift City and having income from such funds shall not be required to file the tax return in India provided they don't have any other income in India.

"Anyway, such investors are not required to have PAN in India and the relaxation further makes it easier to invest without much compliance hassles and this will help in further boosting the status of Gift city as a preferable investment destination," Maheshwari added.

BDO India Associate Partner (Tax & Regulatory Services) Raghunathan Parthasarathy said in both the cases where ITR filing exemption has been given, the tax officer could access the records of the entities as transactions are subject to Securities Transaction Tax and are carried out in the stock exchange.

"The notification aims at reducing the compliance burden of non-resident taxpayers in India and is a welcome move from the Government of India, and will promote the government's 'Ease of Doing Business' initiative," Parthasarathy said.

Dhruva Advisors LLP Partner Sandeep Bhalla said the notification provides exemption to following assessees to file their return of income --non-resident unit holders of a Category III AIF set-up in IFSC, while an exemption had been provided earlier from obtaining a PAN in India, there was no specific exemption granted to them for filing return of income in India.

"The notification also provides similar exemption to investors that are solely earning income from trading in debt and derivative securities listed on IFSC exchange, the income from which is exempted from tax u/s 47(viiab) of the Act," Bhalla added.