No need for filing income tax returns if 2 conditions are met’
Non-resident individuals and foreign companies have now been given a compliance relief as part of the government’s efforts to attract more investment fund activity in the International Financial Services Centre (IFSC) located in India.

These class of persons have been exempted from filing income tax returns so long as they meet two conditions, the Central Board of Direct Taxes (CBDT) has said.

The conditions are that tax deducted at source (TDS) on income of these class of persons (from funds set up in IFSC) should have been deducted and remitted to the Central Government by the investment fund. Secondly, there should be no other income during the previous year for which these class of persons are otherwise liable to file the income tax returns.

However, the exemption from filing of return would not be available to these categories of persons where a notice under Section 142 (1)/148/153A/153C has been issued for filing a return of income.

Sunil Gidwani, Partner, Nangia Advisors (Andersen Global), said that CBDT has now responded favourably to the industry’s demand by exempting non-resident investors from burdensome tax compliances. “This relief would certainly make it easy for investors to invest in funds set up in IFSC, as well as help fund managers to set up AIF I and II category funds in IFSC,” Gidwani said.

‘No other income’ clause
Amit Maheshwari, Partner, Ashok Maheshwary & Associates LLP, said: “Now, investors of IFSC funds will not be required to file a return of income if appropriate taxes have been withheld and deposited and they have no other income apart from this.”

This will be an additional relaxation from IFSC and will further enhance its appeal, Maheshwari added.

It may be recalled that investment funds set up in IFSC (AIFs and MFs) having non-residents as investors are obliged to deduct tax at source on payments to non-resident investors.

There was a demand from the funds industry and investor community that since the tax liability of the investors is deducted by the funds, non-resident investors should be exempted from compliance such as return filing, assessments, etc.

The Finance Bill made certain relaxations in respect of funds in IFSC but did not cover this aspect. CBDT has now responded favourably to this industry demand, according to Gidwani.