NRI Tax Services

Advance Ruling

With a view to avoiding dispute in respect of assessment of income tax liability in the case of a non-resident, a scheme of Advance 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 Rulings on issues which could arise in determining their tax liabilities.

The scheme of advance ruling will help to improve the relationship between the tax Department and the tax payer, and reduce/avoid Time-consuming and expensive litigation.

Such issues may relate to transactions undertaken or proposed to be undertaken by the non-resident applicant. Such advance ruling:

Helps non-residents in planning their income tax affairs well in advance.
Brings certainty in determining tax liability.
Helps avoiding long drawn and expensive litigation.

The advance ruling can be sought on any question of law or fact specified in the applications in relation to a transaction which has been undertaken or is proposed to be undertaken by the non-resident applicant.

However, 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.

The applicant may seek advance ruling by making an application to the Authority in quadruplicate in the prescribed form No. 34C either in the person or by an authorised representative or by registered post. 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 authorised representatives, a duly authenticated document authorising him to appear for the applicant should be enclosed. The applicant may withdraw his application within 30 days from the date of filing the application.

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 Ruling payable at New Delhi.

The advance ruling is required to be pronounced by the Authority within six months of the receipt of the application.

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.

The Advance ruling is binding unless there is change in law or facts on the basis of which the advance ruling has been pronounced.