¹[21AK. Conditions for the purpose of clause (4E) of section 10.-

²[(1) The income accrued or arisen to, or received by, a non-resident as a result of  

 

(a) Transfer of non-deliverable forward contracts or offshore derivative instruments or over-thecounter derivatives; or  

 

(b) Distribution of income on offshore derivative instruments, under clause (4E) of section 10 of the Act, shall be exempted subject to fulfilment of the following conditions, namely:—

 

i. the non-deliverable forward contract or offshore derivative instrument or over-the-counter derivative 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

 

ii. such contract, instrument or derivative is not entered into by the non-resident through or on behalf of its permanent establishment in India.]

 

(2)  The offshore banking unit shall ensure that the condition provided in clause (ii) of sub-rule (1) is complied with.

 Explanation.- For the purpose of this rule, the expression,-

1. "permanent establishment" shall have the meaning assigned to it in clause (iiia) of section 92F;

 

2. "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; and

 

3. “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..]

 

 

 

 

 

Notes:

 

1. Inserted by the Income-tax (33^rd Amendment) Rules, 2021Notificaion No. 136/2021 dated 10.12.2021.

 

2. Substituted by the Income-tax (Twelvth Amendment) Rules, 2023 Notification No. 50/2023 dated 17.07.2023

For sub-rule (1)-

(1) 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:-

i. 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

ii. such contract is not entered into by the non-resident through or on behalf of its permanent establishment in India.

The following shall be substituted namely-

“(1) The income accrued or arisen to, or received by, a non-resident as a result of  

(a) Transfer of non-deliverable forward contracts or offshore derivative instruments or over-thecounter derivatives; or  

(b) Distribution of income on offshore derivative instruments, under clause (4E) of section 10 of the Act, shall be exempted subject to fulfilment of the following conditions, namely:—

i. the non-deliverable forward contract or offshore derivative instrument or over-the-counter derivative 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

ii. such contract, instrument or derivative is not entered into by the non-resident through or on behalf of its permanent establishment in India.”