Circular no 28/ 2017 - Income Tax Act

The matter has been examined by the Board and it has been decided that the provisions of section 9(1)(i) of the Act read with Explanation 5 thereof 
shall 
not 
apply 
in respect of income accruing or arising to a non-resident 
on account of redemption or buyback of its share or interest held indirectly (i.e. through upstream entities registered or incorporated outside India) in the specified funds 
if such income accrues or arises from or in consequence of transfer of shares or securities held in India by the specified funds 
and such income is chargeable to tax in India. 

However, the above benefit shall be applicable only in those cases where the proceeds of redemption or buyback arising to the nonresident do not exceed the pro-rata share of the non-resident in the total consideration realized by the specified funds from the said transfer of shares or securities in India. It is further clarified that a non-resident investing directly in the specified funds shall continue to be taxed as per the extant provisions of the Act. 


For reading full text of the circular please refer link - http://www.incometaxindia.gov.in/communications/circular/circular28_2017.pdf

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