Section 10(4D)

Section 10(4D) — the law in short

What the courts have decided on section 10(4D), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — section 10(4D): what a specified fund in an IFSC is exempt on, and how much of it survives the non-resident test CBDT Circulars & InstructionsCuts both ways
  Our Category III AIF is registered in GIFT City and some of its unit holders are Indian residents. What exactly is exempt under section 10(4D)?
  Section 10(4D) exempts income of a specified fund of four described kinds — income from the transfer of a capital asset referred to in section 47(viiab) on a recognised stock exchange located in an IFSC where the consideration is paid or payable in convertible foreign exchange; income from the transfer of securities other than shares in a company resident in India; income from securities issued by a non-resident, not being a permanent establishment of a non-resident in India, where that income does not otherwise accrue or arise in India; and income from a securitisation trust chargeable under the head 'Profits and gains of business or profession'. Crucially, the exemption runs only 'to the extent such income accrued or arisen to, or is received, is attributable to units held by non-resident (not being the permanent establishment of a non-resident in India) or is attributable to the investment division of offshore banking unit', computed in the prescribed manner.
• Statutory position — section 47(viiab): a non-resident's trade on a recognised exchange in an IFSC is not a transfer at all CBDT Circulars & InstructionsCuts both ways
  A non-resident client sold derivatives on the exchange in GIFT City and was paid in dollars. Is there any capital gains charge in India?
  No, if the transaction is within section 47(viiab). That clause provides that any transfer of a capital asset being a bond or Global Depository Receipt referred to in section 115AC(1), or a rupee denominated bond of an Indian company, or a derivative, or such other securities as may be notified by the Central Government, made by a NON-RESIDENT on a recognised stock exchange located in any International Financial Services Centre, and where the consideration for the transaction is paid or payable in foreign currency, is not regarded as a transfer for the purposes of section 45. Nothing being regarded as a transfer, no capital gain arises to be computed.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.