Rule 143 — Determination of income of a specified fund attributable to investment division of an offshore banking unit under section 210(3). Made under s.210, s.263, s.196, s.198 of the Income-tax Act, 2025.
Rule 143 gives effect to Section 210, Section 263, Section 196 and Section 198 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
The rule computes the income of a specified fund that is attributable to the investment division of an offshore banking unit for the purposes of section 210(3).
Sub-rule (1) gives the formula A + B + C + D + E. A is income from securities held by the eligible investment division as referred to in section 210(1) [Table: Sl. No. 1]. B is short-term capital gain referred to in section 210(1) [Table: Sl. No. 2] accrued or arisen to, or received by, the eligible investment division on transfer of a security other than one referred to in section 196 and held by that division. C is short-term capital gain under Table Sl. No. 3 on transfer of a security referred to in section 196. D is long-term capital gain under Table Sl. No. 4 on transfer of a security other than one referred to in section 198. E is long-term capital gain under Table Sl. No. 5 on transfer of a security referred to in section 198.
Sub-rule (2) blocks a double use of expenditure: any expenditure incurred in relation to income referred to in A, B, C, D or E shall not be allowed as a deduction from any other income under any provision of the Act, even if that expenditure has not been allowed as a deduction from the income referred to in A to E.
Sub-rule (3) requires the eligible investment division to furnish an annual statement of income eligible for taxation under section 210(3), in Form No. 70, on or before the due date specified under section 263(1)(c). Sub-rule (4) attaches the consequence: income referred to in section 210(1) [Table: Sl. Nos. 1 to 5] is not eligible for the tax rates specified there unless the eligible investment division meets the requirement of sub-rule (3).
Sub-rule (5) defines the terms. An "eligible investment division" is an investment division of an offshore banking unit that fulfils the conditions in Schedule VI [Note 1(g)(ii)(A) and (B)]; "investment division of an offshore banking unit" has the meaning in Schedule VI [Note 1(b)]; "securities" has the meaning in section 2(h) of the Securities Contracts (Regulation) Act, 1956; and "specified fund" has the meaning in Schedule VI [Note 1(g)(ii)].
Section 210(3) taxes the income of a specified fund attributable to the investment division of an offshore banking unit at the concessional rates in the section 210(1) Table, but an investment division is not a separate person and its income has to be carved out of a wider fund. The rule does that carving with a five-component formula tracking the five Table entries, then guards the concession from two sides: sub-rule (2) stops the expenditure of the concessionally taxed stream sheltering other income, and sub-rule (4) makes the annual statement a condition of the rates rather than a formality.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Formula for the income of a specified fund attributable to the investment division | A + B + C + D + E | The five components correspond to Sl. Nos. 1 to 5 of the Table in section 210(1) | Sub-rule (1) |
| Time limit for the annual statement of income | On or before the due date specified under section 263(1)(c) | Statement of income eligible for taxation under section 210(3), in Form No. 70 | Sub-rule (3) |
Sub-rule (4) is the sharp end of this rule: the concessional rates in the section 210(1) Table are not available at all unless the Form No. 70 statement has been furnished by the section 263(1)(c) due date, so a late statement is not a procedural lapse but a loss of the rate. The five components are kept apart by the nature of the security transferred — B and C split short-term gains by whether the security is one referred to in section 196, and D and E split long-term gains by whether it is one referred to in section 198 — so the classification of each security drives which component the gain falls into and therefore which Table rate applies. Sub-rule (2) is wider than an ordinary disallowance: expenditure relating to the A to E income cannot be set against any other income under any provision of the Act, and that bar holds even where the expenditure was never allowed against the A to E income itself, so the expenditure can end up relieved nowhere. The rule computes and conditions; the rates themselves come from section 210(1).
An eligible investment division earns Rs 40 crore of income from securities, Rs 12 crore of short-term capital gain on securities other than those referred to in section 196, and Rs 25 crore of long-term capital gain on securities referred to in section 198. Those are components A, B and E, and the attributable income under sub-rule (1) is Rs 77 crore, each component taxed at the rate for its Table entry. If the Form No. 70 statement is furnished after the section 263(1)(c) due date, sub-rule (4) denies the Table rates to all of it.
A specified fund with an offshore banking unit investment division meets it in the annual Form No. 70 statement filed with the return, and in the working that allocates the year's income among the five Table entries.
Any expenditure incurred in relation to income referred to in A or B or C or D or E in sub-rule (1) shall not be allowed as a deduction from any other income under any provision of the Act
The income of an eligible investment division referred to in section 210(1) [Table: Sl. Nos. 1 to 5] shall not be eligible for tax rates specified therein unless the eligible investment division meets the requirement of sub-rule (3).