The Central Board of Direct Taxes (CBDT) has extended the tax benefits under section 115AD of the Income-tax Act, 1961 to the ‘Eligible Foreign Investors’ and clarified that they can enjoy the tax benefits for security transactions made on recognized stock exchanges located in IFSC.

“A non-resident being an Eligible Foreign Investor which operates in accordance with the Securities and Exchange Board of India, circular IMD/HO/FPIC/CIR/P/2017/003 dated 04th January 2017, shall be deemed as Foreign Institutional Investor (FII) for the purposes of transactions in securities made on a recognized stock exchange located in any International Financial Services Centre (IFSC), where the consideration for such transaction is paid or payable in foreign currency,” the notification said.

Last month, the Budget 2020 also proposed to exempt levy of stamp duty on transactions in stock exchanges established in the International Financial Services Centre (IFSC).

The provision 115AD was introduced in the year 1993 to grant tax benefits to the Foreign institutional investors. The beneficial regime was introduced following a policy decision that was taken by the government with a view to attracting foreign investment to India.

Over the years, the concessional regime has been expanded and now the provision covers income from the transfer of shares and other securities, dividends (other than certain specified dividends), and interest.

In the year 2014, the Central Government amended the Act and clarified that any securities that are held by FIIs that have been invested in such securities in accordance with the regulations as stipulated under the Securities and Exchange Board of India Act 1992, would be treated as capital assets.