The Ministry of Finance vide its notification dated 10th December 2021 has published the Income-tax (33rd Amendment) Rules, 2021 through which it has notified the conditions for exemption of income accrued or received by non-resident as a result of transfer of non-deliverable forward contracts.
Through this amendment, a new rule 21AK, has been inserted as follows:
The income accrued or arisen to, or received by, a non-resident as a result of transfer of non-deliverable forward contracts under clause (4E) of section 10 of the Act, shall be exempted subject to fulfillment of the following conditions, namely:─
- the non-deliverable forward contract is entered into by the non-resident with an offshore banking unit of an International Financial Services Centre which holds a valid certificate of registration granted under International Financial Services Centres Authority (Banking) Regulations, 2020 by the International Financial Services Centres Authority; and
- such contract is not entered into by the non-resident through or on behalf of its permanent establishment in India .
A non-deliverable forward contract shall mean a contract for the difference between an exchange rate agreed before and the actual spot rate at maturity, with the spot rate being taken as the domestic rate or a market determined rate and such contract being settled with a single payment in a foreign currency.
The term “offshore banking unit” means a banking branch Unit located in an International Financial Services Centre, as referred to in sub-section (1A) of section 80LA of the Act.
