the provisions of the Income Tax Act, income by way of dividend on shares issued under  GDR ADR mechanism would be taxed at the rate  f 0 per cent. The issuing company should er the net dividend payments after remitting tax at source to the ODB. On receipt of these

payments, the ODB should distribute them to non-resident investors, proportionate to their holdings   of GGDR ADRs evidencing relevant   hares. The holders may take credit fOR the tax deducted at source on the basis of certification by the ODB, if permitted hy the country of   heir residence, All trading transactions of GDR. /ADRsoutsideJndia, among non-resident investors, would be free’ from tiny liability to  income-tax in India on capital gam~ therefrom, If any capital gains anse from  the transfer of the aforesaid shares in India to the non- resident investor, he would be liable to income tax under the provisions of the Income Tax Act, If the’ aforesaid shares arc held by the  non- resident investor for a period of more than twelve months from the date of advice of their  redemption by the ODB, the capital gains arising  from the sale thereof would be treated as long term capital gains and would be subject to income tax, at the rate of 10 per cent under the  provisions of Section 115-AC of the Income Tax Act. If such shares are held for a period of less than twelve months from the date of   redemption advice. the capital gains arising from the sale thereof would be treated as short-term capital gains and would be subject to tax at   he normal rates of income tax applicable to non-residents under the provisions of the Income Tax Act. After  the redemption of GDR.VACRs  into underlying shares. during the period, if any, in which these,  shares are held by-the redeeming non-resident foreign investor who has  aid for them in foreign exchange at the time ofits purchase, the rate of taxation of income by way of dividend on these  shares would  continue to be at the rate of 10 per cent, in accordance with Section 115-AC(}) of the Income Tax ACt,The long-term capital gains on the sale   f these redeemed underlying shares held y non-resident investors in the domestic market would also be charged tax at the rate of 10 per  cent, in accordance with the provisions of Section 115-AC(1), ‘X’hen the redeemed shares arc sold  n Indian stock exchanges against  payment   n rupees. these shares would go out of the purview of Section 1I5-AC of the Income Tax Act and income therefrom would not be eligible for concessional tax treatment provided thereunder: After tilt’ transfer of shares, where consideration is  in terms of rupees payment,   normal tax rates would apply to the income arising or accruing from  these shares, Deduction of tax at source on the amount of capital gains  accruing from transfer-of  the shares would be made in accordance with Sections 195 and 196-C of the Income tax Act,

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