Frequently Asked Tax Questions by Qualified Foreign Investors (QFIs)
CBDT has released a "Frequently Asked Tax Questions by Qualified Foreign Investors (QFIs)".
Some of the questions and answers:
Q. What is Permanent Account Number (PAN) Card?
Ans: Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued by the Income Tax Department of India to any "person" to facilitate him in making tax payments filing, returns and claiming refunds. The number, along with other relevant details, is printed on a card called PAN card.
Q. What are the tax related responsibilities of Qualified Depository Participants (QDPs)?
Ans: In order to facilitate investments by QFIs, the QDPs have been assigned the responsibility to act as a single point of contact for QFIs for all purposes including tax. For tax purposes, a QDP will facilitate the QFI to obtain a PAN card. QDPs will be responsible for any withholding tax in India before making remittance to QFIs. QDPs will also be treated as a representative assessee/agent of the QFI. For this purpose, QDPs would be required to submit a declaration that they have no objection to being treated as a representative assessee/agent of QFI. A QDP may ensure that the broker engaged by it for undertaking QFI transactions deducts and deposits tax at source failing which the QDP should deduct and deposit the tax on such transactions.
Q. Whether profits earned by QFI from their investments in Indian securities market would be treated as Capital Gain or business income?
Ans: As per the Income-Tax Act, 1961, whether the profits earned from transaction in securities would be capital gains or business income will depend on facts and circumstances of each case like the number and frequency of transactions etc. Please refer to circular No.4/2007 dated 15/6/2007 issued by the Central Board of Direct Taxes.