Annual Information Statement (AIS)- Income and long-term capital gain (LTCG) from foreign currency bonds or shares of Indian companies under section 115AC

Rule 31AB covering the provisions relating to Form 26AS was omitted vide the Income Tax (Eleventh Amendment) Rules, 2020. Correspondingly, rule 114-I was inserted in the Income Tax Rules.

According to new rule 114-I, the income tax authorities will now upload the Annual Information Statement in Form 26AS. Said statement will be uploaded to the registered account of the assessee.

As per rule 114-I, the Annual Information Statement will consist of the following information-

  • Information relating to tax payments;
  • Information relating to TDS or TCS;
  • Information relating to SFT (Specified Financial Transaction);
  • Information relating to demand as well as refund;
  • Information relating to pending and completed proceedings.

One such information covered under the Annual Information Statement is ‘income and long-term capital gain from foreign currency bonds or shares of Indian Companies u/s 115AC’ which is taken up and discussed in the current article.

Income covered under section 115AC and TDS deduction thereon-

Section 115AC of the Income Tax Act covers the following types of income earned by a non-resident-

  • Interest earned on specified bonds of an Indian Company or a public sector company which were purchased by the assessee in foreign currency;
  • Dividend income on specified Global Depository Receipts;
  • Long-term capital gain earned on the transfer of specified bonds or global depository receipts.

Notably, the above income is taxable as per provisions and rates specified under section 115AC.

Accordingly, the person responsible for paying income arising under section 115AC is required to deduct TDS as per provisions of section 196C. Section 196C states that the deductor is liable to deduct TDS @10% within earlier of the following dates-

  • At the time of credit of specified income to the account of the payee; or
  • At the time of payment of the specified income by whatever mode.

AIS information source for the information category- Income and long-term capital gain (LTCG) from foreign currency bonds or shares of Indian companies under section 115AC

The person deducting TDS under section 196C is also required to carry out the following two duties-

1. File TDS return/ statement in Form 27Q on a quarterly basis; and

2. Issue TDS certificate to the deductee in Form 16A.

The information/ details furnished by the TDS deductor via TDS return in Form 27Q will be taken as an information source in the Annual Information Statement.

AIS information processing under the information category- Income and long-term capital gain (LTCG) from foreign currency bonds or shares of Indian companies under section 115AC

The details received from Form 27Q filed by the deductor will be processed in the Annual Information Statement in the following manner-

1. Firstly, the income will be taxable in the hands of the recipient; and

2. Such income will be reflected under the head ‘Income from other sources’.

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