Shriram City Union Finance Limited - Karvy

provisions of Chapter XII-A shall continue to apply to him in relation to such income for that assessment year andfor every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money ofsuch assets.2. In accordance with and subject to the provisions of section 115I of the I.T. Act, Non-Resident Indian may opt notto be governed by the provisions of Chapter XII-A of the I.T. Act. In that case, please refer to para A (2, 3 and 4) forthe tax implications arising on transfer of debentures.3. Under Section 195 of the I.T. Act, the company is required to deduct tax at source at the rate of 20% oninvestment income and at the rate of 10% on any long-term capital gains as prescribed in section 115E; at thenormal rates for Short Term Capital Gains if the payee Debenture Holder is a Non Resident Indian. 2% educationcess and 1% secondary and higher education cess on the total income tax is also deductible.4. As per section 90(2) of the I.T. Act read with the circular no. 728 dated October 30, 1995 issued by the CBDT, inthe case of a remittance to a country with which a Double Tax Avoidance Agreement (DTAA) is in force, the taxshould be deducted at the rate provided in the Finance Act of the relevant year or at the rate provided in the DTAA,whichever is more beneficial to the assessee.5. Alternatively, to ensure non deduction or lower deduction of tax at source, as the case may be, the DebentureHolder should furnish a certificate under section 197(1) of the I.T. Act, from the Assessing Officer before theprescribed date of closure of books for payment of debenture interest.III To the Foreign Institutional Investors (FIIs):In accordance with and subject to the provisions of section 115AD of the I.T. Act on transfer of debentures by FIIs,long term capital gains are taxable at 10% (plus applicable surcharge and education and secondary and highereducation cess) and short-term capital gains are taxable at 30% (plus applicable surcharge and education andsecondary and higher education cess). The cost indexation benefit will not be available.Further, benefit of provisions of the first proviso of section 48 of the I.T. Act will not apply. Income other thancapital gains arising out of debentures is taxable at 20% in accordance with and subject to the provisions containedtherein. In addition to the aforesaid tax, in case of foreign corporate FIIs where the income exceeds ` 1,00,00,000 asurcharge of 2% of such tax liability is also payable. A 2% education cess and 1% secondary and higher educationcess on the total income tax (including surcharge) is payable by all categories of FIIs.In accordance with and subject to the provisions of section 196D(2) of the I.T. Act, no deduction of tax at source isapplicable in respect of capital gains arising on the transfer of debentures by FIIs.The provisions at para II (4 and 5) above would also apply to FIIs.IV. To the Other Eligible Institutions:All mutual funds registered under Securities and Exchange Board of India or set up by public sector banks or publicfinancial institutions or authorised by the Reserve Bank of India are exempt from tax on all their income, includingincome from investment in Debentures under the provisions of Section 10(23D) of the I.T. Act subject to and inaccordance with the provisions contained therein.B. WEALTH TAXWealth-tax is not levied on investment in debentures under section 2(ea) of the Wealth-tax Act, 1957.C. GIFT TAXGift-tax is not levied on gift of debentures in the hands of the donor as well as the donee because the provisions ofthe Gift-tax Act, 1958 have ceased to apply in respect of gifts made on or after October 1, 1998. HOWEVER, IFANY INDIVIDUAL OR HUF, RECEIVES THESE DEBENTURES OF THE AGGREGATE VALUE OVER` 50,000 FROM ANY PERSON OR PERSONS WITHOUT CONSIDERATION OR RECEIVES THESE61