The most important direct tax laws which affect the non-resident Indian and his investments and income in India are:
(a) Income Tax Act 1961. This is the main enactment which deals with the levy, assessment, and collection of income tax on residents as well as non-resident persons in India. It is supplemented by certain rules known as Income Tax Rules 1962.
(b) Wealth Tax Act 1957. This Act regulates the levy and collection of wealth tax of individuals, Hindu undivided families and companies in India. This is also supplemented by certain rules made under this Act which are known as Wealth Tax Rules 1957.
(c) Gift Tax Act 1958. This Act concerns the levy and collection of gift tax on the gifts made by donors till 30 September 1998. It allows various types of exemptions, including certain special exemptions in respect of gifts made by non-resident Indians. From 1-10-1998 there is no Gift-tax
(d) Finance Act. Every year the Parliament passes a Finance Bill which lays down the rates of income tax for a particular financial year, known as the assessment year. The rates of wealth tax and gift tax are contained in the respective enactments, concerning wealth tax and gift tax. Amendments to the various direct tax laws are also .inserted through the Finance Act and sometimes through the Direct Tax Law Amendment Act or the Tax Amendment Act.
(e) Board Circulars. The Central Board of Direct Taxes, New Delhi, is the apex administrative body for the different tax laws in India. It issues circulars giving relief and granting tax concessions as also interpreting the provisions of the different direct tax laws for the guidance of the taxpayers. The circulars issued by the Central Board of Direct Taxes are known as Board Circulars and are binding on the different income tax authorities administering various direct tax laws.
(f) Notifications. The Government of India issues notifications and publishes them in the Official Gazette from time to time. Some of the notifications have the effect of granting special exemption from income tax to certain specific items. Sometimes, a notification lays down a particular date or amount concerning a particular tax provision or concession. Hence, it is necessary for a taxpayer to be in touch with the important notifications affecting his own facts and circumstances.
In this book we have dealt with the relevant provisions of the direct tax laws which are of particular importance for non-resident Indians in enabling them to adopt proper tax planning for saving their taxes. The new law concerning foreign exchange transactions, etc., is known as FEMA, i.e., Foreign Exchange Management Act 1999, and is not a part of direct tax laws.