Conditions for the purpose of Schedule VI [Table: Sl. No. 5] to the Act

Conditions for the purpose of Schedule VI [Table: Sl. No. 5] to the Act

284. (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-the-counter derivatives; or

(b) distribution of income on offshore derivative instruments or over-the-counter derivatives, under Schedule VI [Table: Sl. No. 5] of the Act, shall be exempted subject to fulfilment of the following conditions:—

(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 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019), by the International Financial Services Centres Authority or any foreign portfolio investor being a unit of an International Financial Services Centre; 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 or the foreign portfolio investor shall ensure that the condition provided in sub-rule (1)(ii) is complied with.

(3) For the purposes of this rule,—

(a) "derivative" shall have the same meaning as assigned to it in section 2(ac) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(b) "foreign portfolio investor" means a person registered under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(c) "non-deliverable forward contract" means 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;

(d) "offshore banking unit" means a banking branch Unit located in an International Financial Services Centre;

(e) "offshore derivative instrument" shall have the same meaning as assigned to it in regulation 2(1)(o) of the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(f) "over-the-counter derivatives" means a derivative contract that is not traded on an exchange but instead is privately negotiated between a purchaser and a seller; and

(g) "permanent establishment" shall have the meaning assigned to it in section 173(c).