Rule 141: Offshore-banking investment division exempt income
Rule 141 calculates the specified exempt income of an eligible investment division of an offshore banking unit. It adds four defined income categories, prevents related expenditure being deducted against other income, and requires an annual Form 70 statement.
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Bare law
Rule 141 - Computation of exempt income of specified fund, attributable to investment division of an offshore banking unit under Schedule VI [Table: Sl. Nos. 1 to 4] to Act
(1) For the purposes of Schedule VI [Table: Sl. Nos. 1 to 4] to the Act, exempt income of specified fund attributable to the investment division of an offshore banking unit shall be computed in accordance with the following formula: — A + B + C + D Where, — A = any income accrued or arisen to, or received by the eligible investment division as a result of transfer of a capital asset referred to in section 70(1)(r) held by it, on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in convertible foreign exchange; B = any income accrued or arisen to, or received by the eligible investment division as a result of transfer of securities held by it (other than shares in a company resident in India); C = any income accrued or arisen to, or received by the eligible investment division from securities held by it and issued by a non-resident (not being a permanent establishment of a non-resident in India) and where such income otherwise does not accrue or arise in India; and D = any income accrued or arisen to, or received by the eligible investment division from a securitisation trust, which is chargeable under the head ―Profits and gains of business or profession‖.
(2) Any expenditure incurred in relation to income referred to in A or B or C or D referred to in sub-rule (1) shall not be allowed as deduction from any other income under any provision of the Act, irrespective of the fact that such expenditure has not been allowed as deduction against income referred to in the said A or B or C or D.
(3) The eligible investment division shall furnish an annual statement of exempt income in Form No. 70 electronically under digital signature on or before the due date specified under section 263(1)(c) and duly verified in the manner indicated therein.
(4) For the purposes of this rule, — (a) ―eligible investment division‖ means a registered investment division which fulfils the conditions specified in rule 142; (b) ―investment division of an offshore banking unit‖ shall have the meaning assigned to it in Schedule VI [Note 1(b)] to the Act; (c) ―securities‖ shall have the meaning assigned to it in Schedule VI [Note (1)(e)]; (d) ―specified date‖, in relation to the accounts of the registered investment division of any tax year, means a date one month prior to the due date specified under section 263(1)(c) for the said tax year; and (e) ―specified fund‖ shall have the meaning assigned to it in Schedule VI [Note (1)(g)] to the Act.
Rule breakdown
Add the four qualifying categories
The formula is A + B + C + D. A covers the specified IFSC-exchange asset transfer with convertible-foreign-exchange consideration. B covers transfers of securities other than shares in an Indian-resident company.
C covers the specified non-resident-issued securities income otherwise not accruing or arising in India; D covers the stated securitisation-trust business income. Apply each category’s conditions before summing.
The investment division must be eligible
The rule defines an eligible investment division as a registered division satisfying Rule 142. The relevant Schedule VI definitions also apply.
Registration alone should not be treated as proof that the accounts, audit and documentation conditions have all been satisfied.
Related expenses cannot be shifted to other income
Expenditure relating to any A–D income cannot be deducted from other income under any Act provision, even where it was not allowed against the A–D income itself.
Maintain a clear allocation of direct and indirect costs; the absence of a deduction in one computation does not authorise moving it to another.
Annual Form 70 and the related audit
The eligible division files the verified annual exempt-income statement electronically under digital signature in Form 70 by the prescribed return-linked date. Read Rule 142’s separate Form 71 audit requirement and earlier specified date.
The notified cross-reference prints section 263(1)(c); verify the current applicable return deadline and calculate the audit date separately.
Build an evidence trail for the claim
Retain qualifying transaction records, foreign-exchange consideration evidence where relevant, securities classification, separate accounts and expense allocations.
Reconcile the annual statement with the audited division accounts and applicable exemption conditions.
Key takeaways
Four defined income streams
Only qualifying A–D income enters the formula.
No expense shifting
Related expenditure cannot reduce other income.
Read Rule 142 as well
Eligibility includes its audit and record requirements.
Practical checklist
- Classify each qualifying income stream.
- Maintain separate expense allocations.
- Coordinate the statement and audit dates.
Avoid
- Do not shift related expenditure to other income.
FAQs
Can an expense disallowed against this income be deducted against other income instead?
Sub-rule (2) expressly prevents that deduction for expenditure relating to the specified income.
Which annual statement is prescribed?
Form 70, electronically under digital signature and duly verified.
Is registration the only eligibility condition?
The rule also requires the registered division to satisfy Rule 142.
Glossary
- Eligible investment division
- A registered investment division fulfilling the conditions in Rule 142.