Page 69 - DHC Budget Book 2021-22 Final

investment would not amount to participation in day to day operation. The term “investee” has been defined to mean a business trust or a company or an enterprise or an entity or a Category I or II AIF or an InvIT or a domestic company or an IFC or an IDF, in which the SWF or PF, as the case may be, has made the investment, directly or indirectly, under the provisions of this clause.
ƒ Liable to Tax
Presently, some PFs are liable to tax in their country though they are given exemption subsequently. The said clause has now been proposed to be amended to provide that if PF is liable to tax but exemption from taxation for all its income has been provided by the foreign country under whose laws it is created or established, then such PF shall also be eligible.
— Hitherto, the income accrued to a person resident in India from notified overseas retirement funds [opened when such person was a non-resident] may be taxable in India on accrual basis, while the same may be taxable in the overseas country on withdrawal or redemption only. The same may result in a mismatch in taxation as presently there is no provision to grant appropriate relief in such cases.
— To address such mismatch, Sec. 89A is now proposed to be inserted to provide that the income of a specified person from specified account shall be taxed in the manner and in the year as prescribed by the CG.
— It is proposed to define the expression “Specified Person” as a person resident in India who
ƒ Further, the CG shall prescribe the method of calculation of 50% or 75% or 90% investment/ lending threshold as referred above.
Comments
— With the objective of attracting foreign investment in the infrastructure sector, 100% tax exemption was granted, subject to certain conditions, to SWFs and PFs, on their income from investment in Indian infrastructure (vide Finance Act, 2020).
— However, it was noticed that few of such funds were facing difficulties in meeting some of the conditions prescribed. In order to ensure that a large number of Funds invest in India, some of the conditions have been proposed to be relaxed.
— By making it easier for SWFs and PFs to invest in India’s infrastructure, the proposed amendment has improved the outlook for infra development in the next few years at this critical juncture.
opened a specified account in a notified country while being non-resident in India and resident in that country.
— It is proposed to define the expression “Specified Account” as an account maintained in a notified country by the Specified Person in respect of his retirement benefits and the income from such account is not taxable on accrual basis but is taxed by such country at the time of withdrawal or redemption.
— Notified country is proposed to be defined to mean a country as may be notified by the CG.
Comments
— The manner of taxing such income and year of taxability shall be prescribed.
5.4
Addressing mismatch in taxation of income from notified overseas retirement fund [Sec.89A] [w.e.f. AY 2022-23]
Content International Taxation and Transfer Pricing Direct Tax 67