The Indian Income Tax Act is a complex set of laws that govern the taxation of income in India. One of the important sections of the Act is Section 9D, which deals with the taxation of income from transfer of certain assets by non-residents. In this blog, we will explore Section 9D of the Income Tax Act in detail and understand its provisions.
What is Section 9D of the Income Tax Act?
Section 9D of the Income Tax Act was introduced in 2012 as part of the Finance Act. It deals with the taxation of income arising from the transfer of certain assets located in India by non-residents. The section applies to transfer of assets such as shares, securities, and immovable property, among others.
Provisions of Section 9D of the Income Tax Act
Section 9D of the Income Tax Act contains the following provisions:
- Applicability of Section 9D: The section applies to transfer of assets located in India by a non-resident, regardless of whether the transfer is made to a resident or another non-resident.
- Capital Gains Tax: The income arising from the transfer of assets covered under Section 9D is subject to capital gains tax in India. The tax is calculated based on the gains made on the transfer.
- Taxation of Gains: The gains made on the transfer of assets are taxed as short-term or long-term capital gains, depending on the holding period of the asset. If the asset is held for less than 36 months, it is considered a short-term capital asset and taxed at the applicable rate. If the asset is held for more than 36 months, it is considered a long-term capital asset and taxed at a lower rate.
- Tax Exemptions: Section 9D provides for certain exemptions from capital gains tax for non-residents. For example, if the transfer of an asset is made as part of a business reorganization, it may be eligible for an exemption from capital gains tax.
- Tax Deduction at Source (TDS): If the transfer of an asset covered under Section 9D results in capital gains, the buyer of the asset is required to deduct tax at source (TDS) before making the payment to the non-resident. The TDS rate is generally 20%, but it may vary depending on the type of asset and the duration of its ownership.
Conclusion
Section 9D of the Income Tax Act is an important provision that governs the taxation of income arising from the transfer of certain assets by non-residents. It applies to transfer of assets such as shares, securities, and immovable property located in India. The section provides for taxation of gains as capital gains, exemptions from capital gains tax for non-residents, and TDS on capital gains. It is essential for non-residents who are planning to transfer assets located in India to be aware of the provisions of Section 9D and comply with the applicable tax laws.
Read more useful content:
- section 234e of income tax act
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Frequently Asked Questions (FAQs)
Q. Who does Section 9D of the Income Tax Act apply to?
Section 9D applies to non-residents who transfer certain assets located in India, such as shares, securities, and immovable property. The section applies regardless of whether the transfer is made to a resident or another non-resident.
Q. What is the tax rate for capital gains under Section 9D?
The tax rate for capital gains under Section 9D depends on the holding period of the asset. If the asset is held for less than 36 months, it is considered a short-term capital asset and taxed at the applicable rate. If the asset is held for more than 36 months, it is considered a long-term capital asset and taxed at a lower rate.
Q. Are there any exemptions from capital gains tax under Section 9D?
Yes, Section 9D provides for certain exemptions from capital gains tax for non-residents. For example, if the transfer of an asset is made as part of a business reorganization, it may be eligible for an exemption from capital gains tax.
Q. Is tax deducted at source (TDS) on capital gains under Section 9D?
Yes, if the transfer of an asset covered under Section 9D results in capital gains, the buyer of the asset is required to deduct tax at source (TDS) before making the payment to the non-resident. The TDS rate is generally 20%, but it may vary depending on the type of asset and the duration of its ownership.
Q. What are the consequences of non-compliance with Section 9D of the Income Tax Act?
Non-compliance with Section 9D can result in penalties and interest, as well as prosecution under the Income Tax Act. It is important for non-residents who are planning to transfer assets located in India to comply with the applicable tax laws to avoid any legal consequences.
Q. Can non-residents claim a tax credit for tax paid in India under Section 9D?
Yes, non-residents can claim a tax credit for tax paid in India on capital gains under Section 9D, subject to the provisions of the double taxation avoidance agreement (DTAA) between India and their country of residence.
