November 20, 2001

'15'

    The Central Board of Direct Taxes has notified that Gross Depository Receipts (GDRs) issued to employees under Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 would be eligible for concessional rate of taxation under section 115 ACA of the I.T. Act. The dividend received on such GDRs, other than dividends referred to in section 115-O, would be taxed at the rate of 10%. Income earned by way of long-term capital gains on transfer of the GDRs would also be taxed at the rate of 10%.

    The concessional tax rate which upto assessment year 2000-2001 was applicable in respect of income from GDRs issued to employees of companies engaged in information technology, software and information technology service has now been extended with respect to GDRs issued to employees of companies engaged in other knowledge based industry or service, viz. entertainment service, pharmaceutical industry and biotechnology industry, also. The concessional tax rate is now also applicable in respect of GDRs issued to employees of subsidiary companies.

    The Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 has been specified for the purposes of section 115 ACA under delegated legislation to the Finance Act, 2001 in respect of assessment year 2001-2002 and subsequent assessment years.