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FAQs - Scheme of Advance Rulings for NRI under IT
Schemes of Advance Rulings for Non-Residents Under the Income-Tax Act, 1961

Contents

What is the Scheme of Advance Ruling?
With a view to avoiding a dispute in respect of assessment of income tax liability in the case of a non-resident, a Scheme of Advance Ruling has been introduced by incorporating Chapter XIX-B in the Income Tax Act, 1961 by the Finance Act, 1993. The Scheme now enables the non-residents to obtain, in advance, a binding ruling from the Authority for Advance Ruling on issues which could arise in determining their tax liabilities. Time- consuming and expensive appeals can, thus be avoided. Such issues may relate to transactions undertaken or proposed to be undertaken by the non-resident applicant.
What is the mechanisam for Pronouncing Advance Rulings?
The advance ruling is required to be pronounced by an authority known as the Authority for Advance Rulings, consisting of a Chairman, who is a retired Judge of the Supreme Court and two members of the rank of Additional Secretary to Government, one each from the Indian Revenue Service and the Indian Legal Service.
What are benefits of Advance Rulings?

(1) Helps non-residents in planning their income tax affairs well in advance.
(2) Brings certainty in determining the tax liability
(3) Helps avoiding long drawn and expensive litigation
(4) It is inexpensive, expeditious and binding.

Who can Seek Advance Rulings?
The Scheme of Advance Ruling enables a Non-Resident to seek advance ruling from the Authority by following the prescribed procedure.
Who is a Non-Resident

WHO IS A NON-RESIDENT?
Under the existing provisions of the Income Tax Act, 1961, the taxable entities are broadly divided into three groups, viz. Individual, Company, and all other persons such as Hindu Undivided Family, Firm, Association of Persons, etc.
These taxable entities are divided into three categories depending upon their residential status. These categories are:
(1) Resident
(2) Resident but not ordinarily resident; and
(3) Non-resident
As already explained above, the benefit of seeking advance ruling is available only to a non-resident. The resident status of each group of the taxable entities are, in brief, as under:
INDIVIDUAL:
An individual is a resident in India in any previous year:
(1) If he has been in India during the previous year for 182 days or more.
(2) If the individual (not being one of the categories mentioned in para 3 below) has been in India during the previous year for less than 182 days but has been in India for an aggregate of 365 days or more in the four years preceding the previous year and his stay in India during the previous year is 60 days or more.
(3) The categories of persons mentioned above are-
a) a citizen of India who has left India during the previous year as a member of the crew of an Indian ship or for the purposes of employment outside India, and
b) a citizen of India or a person of Indian origin* who, being outside India, has come to India on a visit during the pervious year.
(4) Persons falling under para 3 are resident only if their stay in India during the previous year is 182 days or more even where the duration of their stay in India during the earlier four year is 365 days or more.
A person of Indian origin is one if he, or either of his parents or any of his grand-parents, was born in undivided India.
Individuals, who are not resident in accordance with the above, are treated as non-resident under the Income-tax Act.
COMPANY:
A company is a non-resident if it is neither an Indian company nor one the control and management of whose affairs during the previous year is situated wholly in India.
EVERY OTHER PERSON:
Every other person is a non-resident if, during a previous year the control and management of its affairs is situated wholly outside India.
IF A PERSON IS RESIDENT IN INDIA :
In respect of any source of income in any previous year he shall be deemed to be resident in India in respect of each of his other sources of income in that previous year.

What are the Questions on which Advance Ruling can be sought ?

The advance ruling can be sought on any question of law or fact specified in the application in relation to a transaction which has been undertaken, or is proposed to be undertaken , by the non-resident applicant.
However, an advance ruling cannot be sought where the question.

  • is already pending in the case of the applicant before any income tax authority, the Appellate Tribunal or any court, or
  • involves determination of fair market value of any property, or
  • relates to a transaction which is designed prima facie for avoidance of income-tax.
How to seek Advance Rulings ?

The applicant may seek advance ruling by making an application to the Authority in the prescribed form and manner which is indicated below as an example:
PREPARATION AND PRESENTATION OF APPLICATION

  • The application, in quadruplicate, should be presented in the prescribed form (Form No. 34C) either by the applicant in person or by an authorised representative or may be sent by registered post to the Authority.
  • The application and the accompanying annexures may be neatly typed on one side of plain paper of A-4 size (210 x 297 mm) leaving a minimum margin of 30 mm on all the four sides and may be duly indexed and paged.
  • Only photocopies of the documents on A-4 size may be enclosed with the application except when a document cannot be legibly reduced to A-4 size on photocopier and, in the latter case, it should be folded to A-4 size.
  • All copies of the application along with annexures and documents may have loose sheets stapled on the left hand corner. These copies need not be in the form of paper books.
  • If the applicant is not assessed to tax in India, he may indicate in Annex-I to the application.
  • his head office in a country other than India; and
  • place where his office and residence are located or are likely to be located in India.
  • The question(s) of law or fact on which advance ruling is sought may be stated clearly in the application.

SIGNING OF APPLICATION
The application including the documents annexed thereto shall be signed in the manner indicated in Note 12 to Form No. 34C. Where a person signing the application and other documents claims to have been duly authorised to do so, the application must include a power of attorney, authorising him to sign and an affidavit setting out the unavoidable reasons which entitle him to sign it.
AUTHORISED REPRESENTATIVE
The applicant is entitled to represent his case before the Authority either personally or through an authorised representative. If the applicant desires to be represented by an authorised representative, a duly authenticated document authorising him to appear for the applicant should be enclosed in original.
PAYMENT OF FEE
The application should be accompanied by a fee of Rs.2,500 (two thousand five hundred Indian rupees through a bank draft drawn in favour of the 'Authority for Advance Rulings' payable at New Delhi.
WITHDRAWAL OF APPLICATION

The applicant may withdraw his application within 30 days from the date of filing the application.
WHAT IS THE TIME LIMIT FOR PRONOUNCING THE ADVANCE RULING ?
The advance ruling is required to be pronounced by the Authority within six months of the receipt of a valid application.
IS ADVANCE RULING BINDING?
Advance ruling pronounced by the Authority would be binding in respect of the transaction(s) in relation to which ruling has been sought:

  • On the Commissioner and the income tax authorities subordinate to him in respect of the applicant; and
  • on the applicant who had sought it.

CONFIDENTIALITY
The contents of the application would not be disclosed to unauthorised persons.

Where to get assistance ?

Request for application forms may be sent
on Fax No. 0091-11-611 3407 or
by mail to
The Additional Commissioner of Income Tax
Authority for Advance Rulings
5th floor, NDMC Building
Yashwant Place, Chanakya Puri
New Delhi-110 021 INDIA
For assistance, the above Additional Commissioner of Income- tax may be contacted personally or on Telephone No. 6113407 between 11.00 AM and 1.00 PM on any working day.

Source: Authority for Advance Rulings,
Department of Revenue,
Ministry of Finance

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