The New Income Tax Bill was introduced in the Lok Sabha on February 13 by the Union Finance Minister Nirmala Sitharaman. The FM introduced the Income Tax Bill 2025 in the Lok Sabha and proposed that Speaker Om Birla refer it to a select committee.
The Bill was introduced through a voice vote, over objections raised by the Opposition.
This bill, if passed with be brought into force from April 2025. This landmark bill replace the old Income Act of 1961.
Some of the key elements of the new bill are oriented in the idea of simplifying the taxation system in India.
Some key highlights of the bill arethat Under the previous law, Sections 5 and 9 of the Income Tax Act, 1961, stated that Indian residents were taxed on their global income, while non-residents were taxed only on the income they earned in India.
As a result of this, the non-resident, who earn more than Rs 15 lakh in India will be deemed as Residents.
- The new bill, in Clauses 332 to 355, establishes a more detailed framework, clearly defining taxable income, compliance rules, and restrictions on commercial activities. This introduces a stricter compliance regime while also providing well-defined exemptions.
- For non-profit organizations, the previous law, under Sections 11 to 13, provided income tax exemptions for certain charitable purposes but had limited compliance guidelines.
In addition, for more details, one can refer to the rest of the bill below.
AS INTRODUCED IN LOK SABHA
Bill No. 24 of 2025
THE INCOME-TAX BILL, 2025
ARRANGEMENT OF CLAUSES
CHAPTER I
PRELIMINARY
CLAUSES
1. Short title, extent and commencement.
2. Definitions.
3. Definition of “tax year”.
CHAPTER II
BASIS OF CHARGE
4. Charge of income-tax.
5. Scope of total income.
6. Residence in India.
7. Income deemed to be received.
8. Income on receipt of capital asset or stock-in-trade by specified person from specified entity.
9. Income deemed to accrue or arise in India.
10. Apportionment of income between spouses governed by Portuguese Civil Code.
CHAPTER III
INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
A.—Incomes not to be included in total income
11. Incomes not included in total income.
B.—Incomes not to be included in total income of political parties and electoral trusts
12. Incomes not included in total income of political parties and electoral trusts.
CHAPTER IV
COMPUTATION OF TOTAL INCOME
A.—Heads of income
13. Heads of income.
14. Income not forming part of total income and expenditure in relation to such income.
B.—Salaries
15. Salaries.
16. Income from salary.
17. Perquisite.
18. Profits in lieu of salary.
(ii)
CLAUSES
19. Deductions from salaries.
C.—Income from house property
20. Income from house property.
21. Determination of annual value.
22. Deductions from income from house property.
23. Arrears of rent and unrealised rent received subsequently.
24. Property owned by co-owners.
25. Interpretation.
D.—Profits and gains of business or profession
26. Income under head “Profits and gains of business or profession”. 27. Manner of computing profits and gains of business or profession. 28. Rent, rates, taxes, repairs and insurance.
29. Deductions related to employee welfare.
30. Deduction on certain premium.
31. Deduction for bad debt and provision for bad and doubtful debt. 32. Other deductions.
33. Deduction for depreciation.
34. General conditions for allowable deductions.
35. Amounts not deductible in certain circumstances.
36. Expenses or payments not deductible in certain circumstances. 37. Certain deductions allowed on actual payment basis only.
38. Certain sums deemed as profits and gains of business or profession. 39. Computation of actual cost.
40. Special provision for computation of cost of acquisition of certain assets. 41. Written down value of depreciable asset.
42. Capitalising the impact of foreign exchange fluctuation.
43. Taxation of foreign exchange fluctuation.
44. Amortisation of certain preliminary expenses.
45. Expenditure on scientific research.
46. Capital expenditure of specified business.
47. Expenditure on agricultural extension project and skill development project.
48. Tea development account, coffee development account and rubber development account.
49. Site Restoration Fund.
50. Special provision in the case of trade, profession or similar association. 51. Amortisation of expenditure for prospecting certain minerals.
(iii)
CLAUSES
52. Amortisation of expenditure for telecommunications services, amalgamation, demerger, scheme of voluntary retirement, etc.
53. Full value of consideration for transfer of assets other than capital assets in certain cases.
54. Business of prospecting for mineral oils.
55. Insurance business.
56. Special provision in case of interest income of specified financial institutions.
57. Revenue recognition for construction and service contracts.
58. Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents.
59. Chargeability of royalty and fee for technical services in hands of non-residents.
60. Deduction of head office expenditure in case of non-residents.
61. Special provision for computation of income on presumptive basis in respect of certain business activities of certain non-residents.
62. Maintenance of books of account.
63. Tax audit.
64. Facilitating payments in electronic modes.
65. Special provision for computing deductions in case of business reorganisation of co-operative banks.
66. Interpretation.
E.—Capital gains
67. Capital gains.
68. Capital gains on distribution of assets by companies in liquidation.
69. Capital gains on purchase by company of its own shares or other specified securities.
70. Transactions not regarded as transfer.
71. Withdrawal of exemption in certain cases.
72. Mode of computation of capital gains.
73. Cost with reference to certain modes of acquisition.
74. Special provision for computation of capital gains in case of depreciable assets.
75. Special provision for cost of acquisition in case of depreciable asset.
76. Special provision for computation of capital gains in case of Market Linked Debenture.
77. Special provision for computation of capital gains in case of slump sale. 78. Special provision for full value of consideration in certain cases.
79. Special provision for full value of consideration for transfer of share other than quoted share.
(iv)
CLAUSES
80. Fair market value deemed to be full value of consideration in certain cases.
81. Advance money received.
82. Profit on sale of property used for residence.
83. Capital gains on transfer of land used for agricultural purposes not to be charged in certain cases.
84. Capital gains on compulsory acquisition of lands and buildings not to be charged in certain cases.
85. Capital gains not to be charged on investment in certain bonds.
86. Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house.
87. Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area.
88. Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone.
89. Extension of time for acquiring new asset or depositing or investing amount of capital gains.
90. Meaning of “adjusted”, “cost of improvement” and “cost of acquisition”. 91. Reference to Valuation Officer.
F.—Income from other sources
92. Income from other sources.
93. Deductions.
94. Amounts not deductible.
95. Profits chargeable to tax.
CHAPTER V
INCOME OF OTHER PERSONS, INCLUDED IN TOTAL INCOME OF ASSESSEE 96. Transfer of income without transfer of assets.
97. Chargeability of income in transfer of assets.
98. “Transfer” and “revocable transfer” defined.
99. Income of individual to include income of spouse, minor child, etc.
100. Liability of person in respect of income included in income of another person.
CHAPTER VI
AGGREGATION OF INCOME
101. Total income.
102. Unexplained credits.
103. Unexplained investment.
104. Unexplained asset.
105. Unexplained expenditure.
(v)
CLAUSES
106. Amount borrowed or repaid through negotiable instrument, hundi, etc. 107. Charge of tax.
CHAPTER VII
SET OFF, OR CARRY FORWARD AND SET OFF OF LOSSES
108. Set off of losses under the same head of income.
109. Set off of losses under any other head of income.
110. Carry forward and set off of loss from house property.
111. Carry forward and set off of loss from capital gains.
112. Carry forward and set off of business loss.
113. Set off and carry forward of losses from speculation business. 114. Set off and carry forward of losses from specified business. 115. Set off and carry forward of losses from specified activity.
116. Treatment of accumulated losses and unabsorbed depreciation in amalgamation or demerger, etc.
117. Treatment of accumulated losses and unabsorbed depreciation in scheme of amalgamation in certain cases.
118. Carry forward and set off of losses and unabsorbed depreciation in business reorganisation of co-operative banks.
119. Carry forward and set off of losses not permissible in certain cases.
120. No set off of losses against undisclosed income consequent to search, requisition and survey.
121. Submission of return for losses.
CHAPTER VIII
DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME
A.—General
122. Deductions to be made in computing total income.
B.—Deductions in respect of certain payments
123. Deduction for life insurance premia, deferred annuity, contributions to provident fund, etc.
124. Deduction in respect of employer contribution to pension scheme of Central Government.
125. Deduction in respect of contribution to Agnipath Scheme. 126. Deduction in respect of health insurance premia.
127. Deduction in respect of maintenance including medical treatment of a dependant who is a person with disability.
128. Deduction in respect of medical treatment, etc.
129. Deduction in respect of interest on loan taken for higher education.
130. Deduction in respect of interest on loan taken for residential house property.
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CLAUSES
131. Deduction in respect of interest on loan taken for certain house property.
132. Deduction in respect of purchase of electric vehicle.
133. Deduction in respect of donations to certain funds, charitable institutions, etc.
134. Deductions in respect of rents paid.
135. Deduction in respect of certain donations for scientific research or rural development.
136. Deduction in respect of contributions given by companies to political parties.
137. Deduction in respect of contributions given by any person to political parties.
C.—Deductions in respect of certain incomes.
138. Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 139. Deductions in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone. 140. Special provision in respect of specified business.
141. Deduction in respect of profits and gains from certain industrial undertakings.
142. Deductions in respect of profits and gains from housing projects. 143. Special provisions in respect of certain undertakings in North-Eastern States.
144. Special provisions in respect of newly established Units in Special Economic Zones.
145. Deduction for businesses engaged in collecting and processing of bio-degradable waste.
146. Deduction in respect of additional employee cost.
147. Deductions for income of Offshore Banking Units and Units of International Financial Services Centre.
148. Deduction in respect of certain inter-corporate dividends.
149. Deduction in respect of income of co-operative societies.
150. Deduction in respect of certain income of Producer Companies. 151. Deduction in respect of royalty income, etc., of authors of certain books other than text-books.
152. Deduction in respect of royalty on patents.
D.—Deductions in respect of other incomes
153. Deduction for interest on deposits.
E.—Other deductions
154. Deduction in case of a person with disability.
(vii)
CHAPTER IX
REBATES AND RELIEFS
A.—Rebates and reliefs
CLAUSES
155. Rebate to be allowed in computing income-tax.
156. Rebate of income-tax in case of certain individuals.
157. Relief when salary, etc., is paid in arrears or in advance.
158. Relief from taxation in income from retirement benefit account maintained in a notified country.
B.—Double taxation relief
159. Agreement with foreign countries or specified territories and adoption by Central Government of agreement between specified associations for
double taxation relief.
160. Countries with which no agreement exists.
CHAPTER X
SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX
161. Computation of income from international transaction and specified domestic transaction having regard to arm’s length price.
162. Meaning of associated enterprise.
163. Meaning of international transaction.
164. Meaning of specified domestic transaction.
165. Determination of arm’s length price.
166. Reference to Transfer Pricing Officer.
167. Power of Board to make safe harbour rules.
168. Advance pricing agreement.
169. Effect to advance pricing agreement.
170. Secondary adjustment in certain cases.
171. Maintenance, keeping and furnishing of information and document by certain persons.
172. Report from an accountant to be furnished by persons entering into international transaction or specified domestic transaction. 173. Definitions of certain terms relevant to determination of arm’s length price, etc.
174. Avoidance of income-tax by transactions resulting in transfer of income to non-residents.
175. Avoidance of tax by certain transactions in securities.
176. Special measures in respect of transactions with persons located in notified jurisdictional area.
177. Limitation on interest deduction in certain cases.
CHAPTER XI
GENERAL ANTI-AVOIDANCE RULE
178. Applicability of General Anti-Avoidance Rule.
179. Impermissible avoidance arrangement.
(viii)
CLAUSES
180. Arrangement to lack commercial substance.
181. Consequences of impermissible avoidance arrangement.
182. Treatment of connected person and accommodating party. 183. Application of this Chapter.
184. Interpretation.
CHAPTER XII
MODE OF PAYMENT IN CERTAIN CASES, ETC.
185. Mode of taking or accepting certain loans, deposits and specified sum. 186. Mode of undertaking transactions.
187. Acceptance of payment through prescribed electronic modes. 188. Mode of repayment of certain loans or deposits.
189. Interpretation.
CHAPTER XIII
DETERMINATION OF TAX IN SPECIAL CASES
A.—Determination of tax in certain special cases
190. Determination of tax where total income includes income on which no tax is payable.
191. Tax on accumulated balance of recognised provident fund. 192. Tax in case of block assessment of search cases.
193. Tax on income from Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer.
194. Tax on certain incomes.
195. Tax on income referred to in section 102 or 103 or 104 or 105 or 106. B.—Special provisions relating to tax on capital gains
196. Tax on short-term capital gains in certain cases.
197. Tax on long-term capital gains.
198. Tax on long-term capital gains in certain cases.
C.—New tax regime
199. Tax on income of certain manufacturing domestic companies. 200. Tax on income of certain domestic companies.
201. Tax on income of new manufacturing domestic companies. 202. New tax regime for individuals, Hindu undivided family and others. 203. Tax on income of certain resident co-operative societies.
204. Tax on income of certain new manufacturing co-operative societies.
205. Conditions for tax on income of certain companies and cooperative societies.
D.––Special provisions relating to minimum alternate tax and alternate minimum tax 206. Special provision for minimum alternate tax and alternate minimum tax.
(ix)
E.—Special provisions relating to non-residents and foreign company CLAUSES
207. Tax on dividends, royalty and technical service fees in case of foreign companies.
208. Tax on income from units purchased in foreign currency or capital gains arising from their transfer.
209. Tax on income from bonds or Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer.
210. Tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer.
211. Tax on non-resident sportsmen or sports associations.
212. Interpretation.
213. Special provision for computation of total income of non-residents. 214. Tax on investment income and long-term capital gains.
215. Capital gains on transfer of foreign exchange assets not to be charged in certain cases.
216. Return of income not to be furnished in certain cases.
217. Benefit to be available in certain cases even after assessee becomes resident.
218. Provisions not to apply if the assessee so chooses.
219. Conversion of an Indian branch of foreign company into subsidiary Indian company.
220. Foreign company said to be resident in India.
F.—Special provisions relating to pass-through entities
221. Tax on income from securitisation trusts.
222. Tax on income in case of venture capital undertakings.
223. Tax on income of unit holder and business trust.
224. Tax on income of investment fund and its unit holders.
G.––Special provisions relating to income of shipping companies 225. Income from the business of operating qualifying ships.
226. Tonnage tax scheme.
227. Computation of tonnage income.
228. Relevant shipping income and exclusion from book profit. 229. Depreciation and gains relating to tonnage tax assets.
230. Exclusion of deduction, loss, set off, etc.
231. Method of opting of tonnage tax scheme and validity.
232. Certain conditions for applicability of tonnage tax scheme. 233. Amalgamation and demerger.
234. Avoidance of tax and exclusion from tonnage tax scheme. 235. Interpretation.
(x)
CHAPTER XIV
TAX ADMINISTRATION
A.—Authorities, jurisdiction and functions
CLAUSES
236. Income-tax authorities.
237. Appointment of income-tax authorities.
238. Control of income-tax authorities.
239. Instructions to subordinate authorities.
240. Taxpayer’s Charter.
241. Jurisdiction of income-tax authorities.
242. Jurisdiction of Assessing Officers.
243. Power to transfer cases.
244. Change of incumbent of an office.
245. Faceless jurisdiction of income-tax authorities.
B.—Powers
246. Power regarding discovery, production of evidence, etc. 247. Search and seizure.
248. Powers to requisition.
249. Reasons not to be disclosed.
250. Application of seized or requisitioned assets.
251. Copying, extraction, retention and release of books of account and documents seized or requisitioned.
252. Power to call for information.
253. Powers of survey.
254. Power to collect certain information.
255. Power to inspect registers of companies.
256. Power of competent authority.
257. Proceedings before income-tax authorities to be judicial proceedings. 258. Disclosure of information relating to assessees.
259. Power to call for information by prescribed income-tax authority. 260. Faceless collection of information.
261. Interpretation.
CHAPTER XV
RETURN OF INCOME
A.––Allotment of Permanent Account Number
262. Permanent Account Number.
B.––Filing of return of income and processing
263. Return of income.
264. Scheme for submission of returns through tax return preparers.
(xi)
CLAUSES
265. Return by whom to be verified.
266. Self-assessment.
267. Tax on updated return.
CHAPTER XVI
PROCEDURE FOR ASSESSMENT
A.—Procedure for assessment
268. Inquiry before assessment.
269. Estimation of value of assets by Valuation Officer.
270. Assessment.
271. Best judgment assessment.
272. Power of Joint Commissioner to issue directions in certain cases. 273. Faceless Assessment.
274. Reference to Principal Commissioner or Commissioner in certain cases. 275. Reference to Dispute Resolution Panel.
276. Method of accounting.
277. Method of accounting in certain cases.
278. Taxability of certain income.
279. Income escaping assessment.
280. Issue of notice.
281. Procedure before issuance of notice under section 280.
282. Time limit for notices under sections 280 and 281.
283. Provision for cases where assessment is in pursuance of an order on appeal, etc.
284. Sanction for issue of notice.
285. Other provisions.
286. Time limit for completion of assessment, reassessment and recomputation. 287. Rectification of mistake.
288. Other amendments.
289. Notice of demand.
290. Modification and revision of notice in certain cases.
291. Intimation of loss.
B.––Special procedure for assessment of search cases
292. Assessment of income pertaining to the block period.
293. Computation of total income of block period.
294. Procedure for block assessment.
295. Undisclosed income of any other person.
296. Time-limit for completion of block assessment.
297. Certain interests and penalties not to be levied or imposed.
(xii)
CLAUSES
298. Levy of interest and penalty in certain cases.
299. Authority competent to make assessment of block period. 300. Application of other provisions of Act.
301. Interpretation.
CHAPTER XVII
SPECIAL PROVISIONS RELATING TO CERTAIN PERSONS
A.––Association of persons, firm, Hindu undivided family, etc. 1.––Legal representatives
302. Legal representative.
2.–– Representative assesses—General provisions
303. Representative assessee.
304. Liability of representative assessee.
305. Right of representative assessee to recover tax paid.
3.––Representative assesses—Special cases
306. Who may be regarded as agent.
307. Charge of tax where share of beneficiaries unknown.
308. Charge of tax in case of oral trust.
4.––Association of persons and body of individuals
309. Method of computing a member's share in income of association of persons or body of individuals.
310. Share of member of an association of persons or body of individuals in income of association or body.
311. Charge of tax where shares of members in association of persons or body of individuals unknown, etc.
5.––Executors
312. Executor.
6.––Succession to business or profession
313. Succession to business or profession otherwise than on death. 314. Effect of order of tribunal or court in respect of business reorganisation. 7.––Partition
315. Assessment after partition of a Hindu undivided family.
8.––Profits of non-residents from occasional shipping business 316. Shipping business of non-residents.
9.––Persons leaving India
317. Assessment of persons leaving India.
10.—Association of persons or body of individuals or artificial juridical person formed for a particular event or purpose
318. Assessment of association of persons or body of individuals or artificial juridical person formed for a particular event or purpose.
(xiii)
CLAUSES
11.—Persons trying to alienate their assets
319. Assessment of persons likely to transfer property to avoid tax. 12.––Discontinuance of business, or dissolution
320. Discontinued business.
321. Association dissolved or business discontinued.
322. Company in liquidation.
13.—Private companies
323. Liability of directors of private company.
14.––Assessment of firms
324. Charge of tax in case of a firm.
325. Assessment as a Firm.
326. Assessment when section 325 not complied with.
15.––Change in constitution, succession and dissolution
327. Change in constitution of a firm.
328. Succession of one firm by another firm.
329. Joint and several liability of partners for tax payable by firm. 330. Firm dissolved or business discontinued.
16.––Liability of partners of limited liability partnership in liquidation 331. Liability of partners of limited liability partnership in liquidation. B.––Special Provisions for Registered non-profit organisation 1.––Registration
332. Application for registration.
333. Switching over of regimes.
2.––Income of registered non-profit organisation
334. Tax on income of registered non-profit organisation.
335. Regular income.
336. Taxable regular income.
337. Specified income.
338. Income not to be included in regular income.
339. Corpus donation.
340. Deemed corpus donation.
341. Application of income.
342. Accumulated income.
343. Deemed accumulated income.
3.––Commercial activities by registered non-profit organisation 344. Business undertaking held as property.
(xiv)
CLAUSES
345. Restriction on commercial activities by a registered non-profit organisation.
346. Restriction on commercial activities by registered non-profit organisation carrying out advancement of any other object of general public utility.
4.––Compliances
347. Books of account.
348. Audit.
349. Return of income.
350. Permitted modes of investment.
5.––Violations
351. Specified violation.
352. Tax on accreted income.
353. Other violations.
6.––Approval for purpose of deduction under section 133(1)(b)(ii) 354. Application for approval for purpose of section 133(1)(b)(ii). 7.––Interpretation
355. Interpretation.
CHAPTER XVIII
APPEALS, REVISION AND ALTERNATE DISPUTE RESOLUTIONS
A.––Appeals
1.––Appeals to Joint Commissioner (Appeals) and Commissioner (Appeals) 356. Appealable orders before Joint Commissioner (Appeals).
357. Appealable orders before Commissioner (Appeals).
358. Form of appeal and limitation.
359. Procedure in appeal.
360. Powers of Joint Commissioner (Appeals) or Commissioner (Appeals). 2.—Appeals to Appellate Tribunal
361. Appellate Tribunal.
362. Appeals to Appellate Tribunal.
363. Orders of Appellate Tribunal.
364. Procedure of Appellate Tribunal.
3.—Appeals to High Court.
365. Appeal to High Court.
366. Case before High Court to be heard by not less than two Judges. 4.––Appeals to Supreme Court.
367. Appeal to Supreme Court.
368. Hearing before Supreme Court.
(xv)
5.––General
CLAUSES
369. Tax to be paid irrespective of appeal, etc.
370. Execution for costs awarded by Supreme Court.
371. Amendment of assessment on appeal.
372. Exclusion of time taken for copy.
373. Filing of appeal by income-tax authority.
374. Interpretation of “High Court”.
B.––Special provisions for avoiding repetitive appeals
375. Procedure when assessee claims identical question of law is pending before High Court or Supreme Court.
376. Procedure where an identical question of law is pending before High Courts or Supreme Court.
C.––Revision by the Principal Commissioner or Commissioner. 377. Revision of orders prejudicial to revenue.
378. Revision of other orders.
D.––Alternate dispute resolutions
1.––Dispute Resolution Committee in certain cases
379. Dispute Resolution Committee.
2.––Advance rulings
380. Interpretation.
381. Board for Advance Rulings.
382. Vacancies, etc., not to invalidate proceedings.
383. Application for advance ruling.
384. Procedure on receipt of application.
385. Appellate authority not to proceed in certain cases.
386. Advance ruling to be void in certain circumstances.
387. Powers of the Board for Advance Rulings.
388. Procedure of Board for Advance Rulings.
389. Appeal.
CHAPTER XIX
COLLECTION AND RECOVERY OF TAX
A.––General
390. Deduction or collection at source and advance payment. 391. Direct payment.
B.––Deduction and collection at source
392. Salary and accumulated balance due to an employee.
393. Tax to be deducted at source.
394. Collection of tax at source.
(xvi)
CLAUSES
395. Certificates.
396. Tax deducted is income received.
397. Compliance and reporting.
398. Consequences of failure to deduct or pay or, collect or pay. 399. Processing.
400. Power of Central Government to relax provisions of this Chapter. 401. Bar against direct demand on assessee.
402. Interpretation.
C.––Advance payment of tax
403. Liability for payment of advance tax.
404. Conditions of liability to pay advance tax.
405. Computation of advance tax.
406. Payment of advance tax by assessee on his own accord.
407. Payment of advance tax by assessee in pursuance of order of Assessing Officer.
408. Instalments of advance tax and due dates.
409. When assessee is deemed to be in default.
410. Credit for advance tax.
D.––Collection and recovery
411. When tax payable and when assessee deemed in default.
412. Penalty payable when tax in default.
413. Certificate by Tax Recovery Officer and Validity thereof. 414. Tax Recovery Officer by whom recovery is to be effected.
415. Stay of proceedings in pursuance of certificate and amendment or cancellation thereof.
416. Other modes of recovery.
417. Recovery through State Government.
418. Recovery of tax in pursuance of agreements with foreign countries. 419. Recovery of penalties, fine, interest and other sums.
420. Tax clearance certificate.
421. Recovery by suit or under other law not affected.
422. Recovery of tax arrear in respect of non-resident from his assets. E.––Interest chargeable in certain cases
423. Interest for defaults in furnishing return of income.
424. Interest for defaults in payment of advance tax.
425. Interest for deferment of advance tax.
426. Interest on excess refund.
(xvii)
F.––Levy of fee in certain cases
CLAUSES
427. Fee for default in furnishing statements.
428. Fee for default in furnishing return of income.
429. Fee for default relating to statement or certificate.
430. Fee for default relating to intimation of aadhaar number.
CHAPTER XX
REFUNDS
431. Refunds.
432. Person entitled to claim refund in certain special cases.
433. Form of claim for refund and limitation.
434. Refund for denying liability to deduct tax in certain cases. 435. Refund on appeal, etc.
436. Correctness of assessment not to be questioned.
437. Interest on refunds.
438. Set off and withholding of refunds in certain cases.
CHAPTER XXI
PENALTIES
439. Penalty for under-reporting and misreporting of income.
440. Immunity from imposition of penalty, etc.
441. Failure to keep, maintain or retain books of account, documents, etc.
442. Penalty for failure to keep and maintain information and document, etc., in respect of certain transactions.
443. Penalty in respect of certain income.
444. Penalty for false entry, etc., in books of account.
445. Benefits to related persons.
446. Failure to get accounts audited.
447. Penalty for failure to furnish report under section 172.
448. Penalty for failure to deduct tax at source.
449. Penalty for failure to collect tax at source.
450. Penalty for failure to comply with the provisions of section 185. 451. Penalty for failure to comply with provisions of section 186. 452. Penalty for failure to comply with provisions of section 187. 453. Penalty for failure to comply with provisions of section 188.
454. Penalty for failure to furnish statement of financial transaction or reportable account.
455. Penalty for furnishing inaccurate statement of financial transaction or reportable account.
(xviii)
CLAUSES
456. Penalty for failure to furnish statement or information or document by an eligible investment fund.
457. Penalty for failure to furnish information or document under section 171. 458. Penalty for failure to furnish information or document under section 506.
459. Penalty for failure to furnish report or for furnishing inaccurate report under section 511.
460. Penalty for failure to submit statement under section 505. 461. Penalty for failure to furnish statements, etc.
462. Penalty for failure to furnish information or furnishing inaccurate information under section 397(3)(d).
463. Penalty for furnishing incorrect information in reports or certificates. 464. Penalty for failure to furnish statements, etc.
465. Penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections, etc.
466. Penalty for failure to comply with the provisions of section 254. 467. Penalty for failure to comply with the provisions of section 262. 468. Penalty for failure to comply with the provisions of section 397(1). 469. Power to reduce or waive penalty, etc., in certain cases.
470. Penalty not to be imposed in certain cases.
471. Procedure.
472. Bar of limitation for imposing penalties.
CHAPTER XXII
OFFENCES AND PROSECUTION
473. Contravention of order made under section 247.
474. Failure to comply with section 247(1)(b)(ii).
475. Removal, concealment, transfer or delivery of property to prevent tax recovery.
476. Failure to pay tax to credit of Central Government under Chapter XIX-B. 477. Failure to pay tax collected at source.
478. Wilful attempt to evade tax, etc.
479. Failure to furnish returns of income.
480. Failure to furnish return of income in search cases.
481. Failure to produce accounts and documents.
482. False statement in verification, etc.
483. Falsification of books of account or document, etc.
484. Abetment of false return, etc.
485. Punishment for second and subsequent offences.
486. Punishment not to be imposed in certain cases.
487. Offences by companies.
(xix)
CLAUSES
488. Offences by Hindu undivided family.
489. Presumption as to assets, books of account, etc., in certain cases. 490. Presumption as to culpable mental state.
491. Prosecution to be at instance of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
492. Certain offences to be non-cognizable.
493. Proof of entries in records or documents.
494. Disclosure of particulars by public servants.
495. Special Courts.
496. Offences triable by Special Court.
497. Trial of offences as summons case.
498. Application of Bharatiya Nagarik Suraksha Sanhita, 2023 to proceedings before Special Court.
CHAPTER XXIII
MISCELLANEOUS
499. Certain transfers to be void.
500. Provisional attachment to protect revenue in certain cases. 501. Service of notice, generally.
502. Authentication of notices and other documents.
503. Service of notice when family is disrupted or firm, etc., is dissolved. 504. Service of notice in case of discontinued business.
505. Submission of statement by a non-resident having liaison office.
506. Furnishing of information or documents by an Indian concern in certain cases.
507. Submission of statements by producers of cinematograph films or persons engaged in specified activity.
508. Obligation to furnish statement of financial transaction or reportable account.
509. Obligation to furnish information on transaction of crypto-asset. 510. Annual information statement.
511. Furnishing of report in respect of international group.
512. Publication of information respecting assessees in certain cases. 513. Appearance by registered valuer in certain matters.
514. Registration of Valuers.
515. Appearance by authorised representative.
516. Rounding off of amount of total income, or tax payable or refundable. 517. Receipt to be given.
518. Indemnity.
519. Power to tender immunity from prosecution.
(xx)
CLAUSES
520. Cognizance of offences.
521. Probation of Offenders Act, 1958 and section 401 of Bharatiya Nagarik Suraksha Sanhita, 2023, not to apply.
522. Return of income, etc., not to be invalid on certain grounds. 523. Notice deemed to be valid in certain circumstances.
524. Presumption as to assets, books of account, etc.
525. Authorisation and assessment in case of search or requisition. 526. Bar of suits in civil courts.
527. Power to make exemption, etc., in relation to participation in business of prospecting for, extraction, etc., of mineral oils.
528. Power of Central Government or Board to condone delays in obtaining approval.
529. Power to withdraw approval.
530. Act to have effect pending legislative provision for charge of tax.
531. Power to rescind exemption in relation to certain Union territories already granted under section 294A of the Income-tax Act, 1961.
532. Power to frame Schemes.
533. Power to make rules.
534. Laying before Parliament.
535. Removal of difficulties.
536. Repeal and savings.
SCHEDULE I
SCHEDULE II
SCHEDULE III
SCHEDULE IV
SCHEDULE V
SCHEDULE VI
SCHEDULE VII
SCHEDULE VIII
SCHEDULE IX
SCHEDULE X
SCHEDULE XI
SCHEDULE XII
SCHEDULE XIII
SCHEDULE XIV
SCHEDULE XV
SCHEDULE XVI
AS INTRODUCED IN LOK SABHA
Bill No. 24 of 2025
THE INCOME-TAX BILL, 2025
A
BILL
to consolidate and amend the law relating to income-tax.
BE it enacted by Parliament in the Seventy-sixth Year of the Republic of India, as follows:––
CHAPTER I
PRELIMINARY
1. (1) This Act may be called the Income-tax Act, 2025.
5
(2) It extends to the whole of India.
(3) Save as otherwise provided in this Act, it shall come into force on the 1st April, 2026.
Short title,
extent and
commencement.
2
Definitions. 2. In this Act, unless the context otherwise requires,—
(1) “accountant” shall have the meaning assigned to it in section 515(3)(b);
(2) “Additional Commissioner” means a person appointed to be an
Additional Commissioner of Income-tax under section 237(1);
5
(3) “Additional Director” means a person appointed to be an Additional
Director of Income-tax under section 237(1);
(4) “advance tax” means the advance tax payable as per
Chapter XIX-C;
(5) “agricultural income” means—
(a) any rent or revenue derived from a land which is situated in
10
India and is used for agricultural purposes;
(b) any income derived from such land by—
(i) agriculture; or
(ii) the performance by a cultivator or receiver of rent-in-kind
15
of any process ordinarily employed by a cultivator or receiver of
rent-in-kind to render the produce raised or received by him fit to
be taken to market; or
(iii) the sale by a cultivator or receiver of rent-in-kind of the
produce raised or received by him, in respect of which no process
20
has been performed other than a process of the nature described in
item (ii);
(c) any income derived from any building owned and occupied by
the receiver of the rent or revenue of any such land, or occupied by the
cultivator or the receiver of rent-in-kind of any such land with respect to
which, or the produce of which, any process mentioned in
25
sub-clause(b) (ii) or (b)(iii) is carried on, where such building––
(i) is on or in the immediate vicinity of such land and that
land is assessed to land revenue in India, or is subject to a local
rate assessed and collected by officers of the Government as such,
or where the land is not so assessed to land revenue or subject to a
30
local rate, it is not situated in any area as specified in
clause (22)(iii)(A) or (B);and
(ii) is required as a dwelling house, or as a store-house, or
other out-building, by the receiver of the rent or revenue or the
cultivator, or the receiver of rent-in-kind, by reason of his
35
connection with the land;
(d) any income derived from saplings or seedlings grown in a nursery,
but shall not include––
(i) the income derived from any building or land referred to in
sub-clause (c) arising from the use of such building or land for any
40
purpose (including letting for residential purpose or for the purpose of
any business or profession) other than agriculture falling under
sub-clause (a) or (b); or
3
(ii) any income arising from the transfer of any land referred to in clause (22)(iii)(A) or (B);
(6) “amalgamation”, in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge
5
being referred to as the amalgamating company, and the companies and the company with which they merge or which is formed as a result of such merger being referred to as the amalgamated company) in such a manner that—
(a) all the property of the amalgamating company or companies
10
immediately before the amalgamation become the property of the amalgamated company by virtue of the amalgamation;
(b) all the liabilities of the amalgamating company or companies
immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation;
15
(c) the shareholders holding not less than three-fourths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation,
20
otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the first-mentioned company;
(7) “annual value”, in relation to any property, means its annual value as
25
determined under section 21;
(8) “Appellate Tribunal” means the Appellate Tribunal constituted under section 361;
(9) “approved gratuity fund” means a gratuity fund, which is approved and continues to be approved by the approving authority as per Part B of
30
Schedule XI;
(10) “approved superannuation fund” means a superannuation fund or any part of a superannuation fund, which is approved and continues to be approved by the approving authority as per Part B of Schedule XI;
35
(11) “assessee” means a person by whom any tax or any other sum of money is payable under this Act, and includes––
(a) every person in respect of whom any proceeding under this Act has been taken––
(i) for the assessment of his income or of the loss sustained
40
by him or refund due to him; or
(ii) for the assessment of the income of any other person in
respect of which he is assessable, or of the loss sustained by such other person or refund due to such other person;
4
(b) every person who is deemed to be an assessee under this Act;
(c) every person who is deemed to be an assessee in default under this Act;
(12) “Assessing Officer” means—
(a) the Assistant Commissioner or Deputy Commissioner or
5
Assistant Director or Deputy Director or the Income-tax Officer, who is vested with the relevant jurisdiction by virtue of directions or orders issued under section 241(1) or (2) or (3), or any other provision of this Act; or
(b) the Additional Commissioner or Additional Director or Joint
10
Commissioner or Joint Director, who is directed under section 241(5)(b) to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;
(13) “assessment” includes reassessment and recomputation;
15
(14) “Assistant Commissioner” means a person appointed to be an Assistant Commissioner of Income-tax or a Deputy Commissioner of Income-tax under section 237(1);
(15) “Assistant Director” means a person appointed to be an Assistant Director of Income-tax or a Deputy Director of Income-tax under section 237(1);
20
(16) “average rate of income-tax” means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income;
(17) “block of assets” means a group of assets falling within a class of assets comprising of—
(a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights,
25
trademarks, licences, franchises or any other business or commercial rights of similar nature, not being goodwill of a business or profession,
in respect of which the same percentage of depreciation is prescribed;
(18) “Board” means the Central Board of Direct Taxes constituted under 30
the Central Boards of Revenue Act, 1963;
(19) “books or books of account” includes ledgers, day-books, cash books, account-books or other books, whether kept––
(a) in written form; or
(b) in electronic or any digital form, or on cloud based storage, or on any electromagnetic data storage device, such as floppy, disc, tape,
35
portable data storage device, external hard drives, or memory cards; or
(c) as print-outs of data stored in electronic or digital form or on storage devices mentioned in sub-clause (b);
(20) “business” includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture;
40
54 of 1963.
15 of 1992. 15 of 1992.
15 of 1992.
5
(21) “business trust” means a trust registered as—
(a) an Infrastructure Investment Trust under the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992; or
5
(b) a Real Estate Investment Trust under the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014, made under the Securities and Exchange Board of India Act, 1992;
(22) “capital asset” means—
(a) property of any kind held by an assessee, whether or not
10
connected with his business or profession;
(b) any securities held by a Foreign Institutional Investor or held by an investment fund specified in section 224(10)(a) which has invested in such securities as per the regulations made under the Securities and Exchange Board of India Act, 1992;
15
(c) any unit linked insurance policy issued on or after 1st February, 2021 to which exemption under Schedule II (Table: Sl. No. 2) does not apply,
but does not include—
(i) any stock-in-trade, other than the securities referred to in sub-clause (b),
20
consumable stores or raw materials held for business or profession; (ii) personal effects;
(iii) agricultural land in India, not being a land situated––
(A) in any area comprised within the jurisdiction of a municipality 25
(whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or
(B) in any area within the distance as specified in column C of the 30
following Table, measured aerially from the local limits of any municipality or cantonment board referred to in item (A) and having population as referred to in column B of the said Table:—
Table
35
Sl.
No.
Population of municipality or cantonment board
Within distance, measured aerially, from local limits of any municipality or
cantonment board not being more than
A B C
1. More than 10,000 but less than
40
1,00,000.
2. 1,00,000 and above, but less than 10,00,000.
Two kilometres. Six kilometres.
3. 10,00,000 and above. Eight kilometres.
6
(iv) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetisation Scheme, 2015 as notified by the Central Government,
where,––
(A) “Foreign Institutional Investor” shall have the meaning assigned to it in
5
section 210(6)(a);
(B) “personal effects” means any movable property (including wearing apparel and furniture) held for personal use by the assessee or any dependent family member, but excludes––
10
(I) jewellery, which includes––
(a) ornaments made of gold, silver, platinum, or any other precious metal or any alloy of such precious metals, with or without precious or semi-precious stones, and whether or not worked or sewn into any wearing apparel;
(b) precious or semi-precious stones, whether or not set in any
15
furniture, utensil or other article or worked or sewn into any wearing apparel;
(II) archaeological collections;
(III) drawings;
20
(IV) paintings;
(V) sculptures; and
(VI) any work of art;
(C) “population” shall mean the population according to the last preceding census of which the relevant figures have been published before the first day of the 25
tax year;
(D) “property” includes any rights in or in relation to an Indian company, including rights of management or control or any other rights; and
(E) “securities” shall have the same meaning as assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956;
30
(23) “charitable purpose” includes––
(a) relief of the poor;
(b) education;
(c) yoga;
(d) medical relief;
35
(e) preservation of environment (including watersheds, forests and wildlife);
(f) preservation of monuments or places or objects of artistic or historic interest;
42 of 1956.
43 of 1961.
18 of 2013. 18 of 2013.
7
(g) the advancement of any other object of general public utility;
(24) “Chief Commissioner” means a person appointed to be a Chief Commissioner of Income-tax or a Director General of Income-tax or a Principal Chief Commissioner of Income-tax or a Principal Director General of Income-tax under section 237(1);
5
(25) “child”, in relation to an individual, includes a step-child and an adopted child of that individual;
(26) “Commissioner” means a person appointed to be a Commissioner of Income-tax or a Director of Income-tax or a Principal Commissioner of Income-tax or a Principal Director of Income-tax under section 237(1);
10
(27) “Commissioner (Appeals)” means a person appointed to be a Commissioner of Income-tax (Appeals) under section 237(1);
(28) “company” means—
(a) any Indian company; or
15
(b) any body corporate incorporated by or under the laws of a country outside India; or
(c) any institution, association or body which is or was assessable or was assessed as a company under the Income-tax Act, 1961, as it stood immediately before its repeal by this Act (hereinafter referred to 20
as the Income-tax Act,1961), for any assessment year so referred to in that Act; or
(d) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by order of the Board to be a company for such period as specified in such declaration;
25
(29) “company in which the public are substantially interested” means,—
(a) a company owned by the Government or the Reserve Bank of India or in which at least 40% of the shares of the company are held (individually or collectively) by the Government or the Reserve Bank of India or a corporation owned by that bank; or
30
(b) a company which is registered under section 8 of the Companies Act, 2013; or
(c) a company having no share capital and if, having regard to its objects, the nature and composition of its membership and other relevant considerations, the Board by order declares it to be such a company for 35
the period as specified in the declaration; or
(d) a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under section 406 of the Companies Act, 2013, to be a 40
Nidhi or Mutual Benefit Society; or
(e) a company, wherein shares (excluding those entitled to a fixed rate of dividend, with or without a further right to participate in profits) carrying not less than 50% of the voting power, have been unconditionally, allotted to or acquired by, and were beneficially held 45
throughout the relevant tax year by, one or more co-operative societies; or
8
(f) a company which is not a private company as defined in the Companies Act, 2013, and the following conditions are fulfilled:—
(i) shares in the company (not being shares entitled to a fixed
rate of dividend, with or without a further right to participate in profits) were, as on the last day of the relevant tax year, listed in a
5
recognised stock exchange in India as per the Securities Contracts (Regulation) Act, 1956 and any rules made thereunder;
(ii) shares in the company (not being those entitled to a fixed
rate of dividend, with or without a further right to participate in profits) carrying not less than 50% of the voting power, have been
10
unconditionally, allotted to or acquired by, and were beneficially held throughout the relevant tax year by––
(A) the Government; or
(B) a corporation established by a Central Act State Act
15
or Provincial Act; or
(C) any company to which this clause applies or any
subsidiary company of such company, if the entire share
capital of such subsidiary company has been held by the
parent company or by its nominees throughout the tax year,
and in respect of an Indian company whose business consists
20
mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, the expression “not less than 50%” shall be read as if the expression 25
“not less than 40%” had been substituted;
(30) “convertible foreign exchange” means foreign exchange which is treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999, and any rules made thereunder or any other corresponding law;
(31) “co-operative bank” shall have the same meaning as specified in
30
Part V of the Banking Regulation Act, 1949;
(32) “co-operative society” means a co-operative society registered under the Co-operative Societies Act, 1912, or under any other law in force in any State or Union territory for the registration of co-operative societies;
35
(33) “currency” shall have the same meaning as assigned to it in section 2(h) of the Foreign Exchange Management Act, 1999;
(34) “demerged company” means the company whose undertaking is transferred, pursuant to a demerger, to a resulting company;
(35) “demerger”, in relation to companies, means the transfer, pursuant to a scheme of arrangement under sections 230 to 232 of the Companies
40
Act, 2013, by a demerged company of its one or more undertakings to any resulting company in such a manner that—
18 of 2013. 42 of 1956.
42 of 1999.
10 of 1949. 2 of 1912.
42 of 1999. 18 of 2013.
18 of 2013.
9
(a) all the property of the undertaking, being transferred by the
demerged company, immediately before the demerger, becomes the property of the resulting company by virtue of the demerger;
(b) all the liabilities relatable to the undertaking, being transferred
5
by the demerged company, immediately before the demerger, become the liabilities of the resulting company by virtue of the demerger;
(c) the property and the liabilities of the undertaking or
undertakings being transferred by the demerged company are transferred at values appearing in its books of account immediately before the 10
demerger, except in compliance to the Indian Accounting Standards specified in Annexure to the Companies (Indian Accounting Standards) Rules, 2015 made under the Companies Act, 2013;
(d) the resulting company issues, in consideration of the demerger,
its shares to the shareholders of the demerged company on a 15
proportionate basis, except where the resulting company itself is a shareholder of the demerged company;
(e) the shareholders holding not less than three-fourths in value of the shares in the demerged company (other than shares already held therein immediately before the demerger, or by a nominee for, the 20
resulting company or, its subsidiary) become shareholders of the resulting company or companies by virtue of the demerger, otherwise than as a result of the acquisition of the property or assets of the demerged company or any undertaking thereof by the resulting company;
25
(f) the transfer of the undertaking is on a going concern basis;
(g) the demerger is as per the conditions, if any, notified under
section 116(7) by the Central Government,
where,––
(i) “undertaking” shall include any part of an undertaking, or a unit or 30
division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity;
(ii) “liabilities relatable to the undertaking”, referred to in sub-clause (b), shall include—
35
(A) the liabilities which arise out of the activities or operations of
the undertaking;
(B) the specific loans or borrowings (including debentures) raised,
incurred and utilised solely for the activities or operations of the undertaking; and
40
(C) the amount “N”, as computed below, in cases other than those
referred to in item (A) or (B),––
N = K x (LM)
where,––
45
K = the amount of general or multipurpose
borrowings of demerged company;
10
L = the value of the assets transferred in a demerger;
and
M = the total value of the assets of such demerged
company immediately before the demerger;
(iii) any change in the value of assets consequent to their revaluation
5
shall be ignored for determining the value of the property referred to in sub-clause (c);
(iv) the splitting up or the reconstruction of any authority or a body constituted or established under a Central Act or State Act or Provincial Act, or a local authority or a public sector company, into separate authorities or
10
bodies or local authorities or companies, as the case may be, shall be deemed to be a demerger if it fulfils such conditions as the Central Government may, by notification, specify;
(v) the reconstruction or splitting up of a company, which ceased to be a public sector company as a result of transfer of its shares by the Central
15
Government, into separate companies, shall be deemed to be a demerger, if it has been made to give effect to any condition attached to the said transfer of shares and also fulfils such other conditions as the Central Government may, by notification, specify;
(vi) the reconstruction or splitting up of a public sector company into
20
separate companies shall be deemed to be a demerger, if it has been made to transfer any asset of the demerged company to the resulting company and the resulting company—
(A) is a public sector company on the appointed day indicated in 25
such scheme approved by the Central Government or any other body authorised under the Companies Act, 2013 or any other applicable law governing such public sector companies; and
(B) fulfils such other conditions as the Central Government may, by notification, specify in this behalf;
(36) “Deputy Commissioner” means a person appointed to be a Deputy
30
Commissioner of Income-tax under section 237(1);
(37) “Deputy Director” means a person appointed to be a Deputy Director of Income-tax under section 237(1);
(38) “director” and “manager”, in relation to a company, shall have the same meanings as respectively assigned to them in sections 2(34) and (53) of
35
the Companies Act, 2013;
(39) “Director General or Director” means a person appointed to be a Director General of Income-tax or a Director of Income-tax, under section 237(1), and includes a Principal Director General or a Principal 40
Director or an Additional Director or a Joint Director or a Deputy Director or an Assistant Director;
(40) “dividend” includes—
(a) any distribution by a company of accumulated profits, capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company;
45
18 of 2013. 18 of 2013.
18 of 2013.
11
(b) any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated 5
profits, whether capitalised or not;
(c) any distribution made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not;
10
(d) any distribution to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits whether capitalised or not;
(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing 15
a part of the assets of the company or otherwise),––
(i) as an advance or loan to a shareholder, being a person who
is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend, with or without a right to participate in profits) holding not less than 10% of the voting power; or
20
(ii) as an advance or loan to any concern in which such
shareholder is a member or a partner and in which he has a substantial interest (herein referred to as the said concern); or
(iii) made on behalf, or for the individual benefit, of any such
shareholder,
25
to the extent to which the company in either case possesses accumulated profits;
(f) any payment by a company on purchase of its own shares from a shareholder as per section 68 of the Companies Act, 2013,
but does not include—
30
(i) a distribution made under sub-clause (c) or (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets;
(ii) any advance or loan made to a shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is 35
a substantial part of the business of the company;
(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off;
40
(iv) any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company);
(v) any advance or loan between two group entities, where,––
(A) one of the group entity is a “Finance Company” or a “Finance 45
Unit”; and
12
(B) the parent entity or principal entity of such group is listed on stock exchange in a country or territory outside India other than the country or territory outside India as specified by the Board in this behalf,
where,––
5
(A) “accumulated profits” for the purposes of––
(I) sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses;
(II) sub-clause (c), shall include all profits of the company up to the date of liquidation, but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation
10
owned or controlled by the Government under any law in force, include any profits of the company before three successive tax years immediately preceding the tax year in which such acquisition took place;
(B) in respect of an amalgamated company, the accumulated profits, whether capitalised or not, or loss, as the case may be, shall be increased by the accumulated
15
profits, whether capitalised or not, of the amalgamating company on the date of amalgamation;
(C) “concern” means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company;
(D) a person shall be deemed to have a substantial interest in a concern, other
20
than a company, if he is, at any time during the tax year, beneficially entitled to not less than 20% of the income of such concern;
(E) for the purposes of sub-clause (v),—
(I) “Finance Company” and “Finance Unit” shall have the same meaning as respectively assigned to them in regulation 2(1)(e) and (f) of the
25
International Financial Services Centres Authority (Finance Company) Regulations,2021 made under the International Financial Services Centres Authority Act, 2019, and is set up as a global or regional corporate treasury centre for undertaking treasury activities or treasury services as per the relevant regulations made by the International Financial Services Centres
30
Authority established under section 4 of the said Act;
(II) “group entity”, “parent entity” and “principal entity” shall be such entities which satisfy such conditions as prescribed in this behalf;
(41) “document” includes an electronic record as defined in section 2(1)(t) 35
of the Information Technology Act, 2000;
(42) “domestic company” means an Indian company as defined in clause (53), or any other company, which for its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference 40
shares) payable out of such income;
(43) “electoral trust” means a trust so approved by the Board as per the scheme made by the Central Government;
(44) “fair market value”, in relation to a capital asset, means—
(a) the price that the capital asset would ordinarily fetch on sale in 45
the open market on the relevant date; and
(b) where the price referred to in sub-clause (a) is not ascertainable, such price as determined in the manner, as prescribed;
50 of 2019. 21 of 2000.
9 of 1932. 6 of 2009.
42 of 1999.
13
(45) “firm” shall have the same meaning as assigned to it in section 4 of the Indian Partnership Act, 1932, and shall include a “limited liability partnership” as defined in section 2(1)(n) of the Limited Liability Partnership Act, 2008;
5
(46) “foreign company” means a company which is not a domestic company;
(47) “foreign currency” shall have the same meaning as assigned to it in section 2(m) of the Foreign Exchange Management Act, 1999;
(48) “hearing” includes communication of data and documents through 10
electronic mode;
(49) “income” includes—
(a) profits and gains;
(b) dividend;
(c) voluntary contributions received by––
15
(i) a registered non-profit organisation; or
(ii) an association referred to in Schedule III (Table: Sl. No. 23); or
(iii) any University or other educational institution or any
hospital or other institution referred to in Schedule III (Table: Sl. No. 19); or
20
(iv) an electoral trust;
(d) the value of any perquisite or profit in lieu of salary taxable under sections 17 and 18;
(e) any special allowance or benefit, other than perquisite included under sub-clause (d), specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the
25
duties of an office or employment of profit;
(f) any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living;
30
(g) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company, either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in 35
respect of any obligation which, but for such payment, would have been payable by the director or that person;
(h) the value of any benefit or perquisite, whether convertible into money or not, obtained by any representative assessee mentioned in section 303(1)(c) or (d) or by any person on whose behalf or for whose benefit any income is receivable by the representative assessee (such
40
person being herein referred to as the beneficiary) and any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been payable by the beneficiary;
14
(i) any sum chargeable to income-tax under—
(A) section 26(2)(b) or (c) or (d) or section 38 or 95;
(B) section 26(2)(e) or (g);
(j) the value of any benefit or perquisite taxable under 5
section 26(2)(f);
(k) any capital gains chargeable under section 67;
(l) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed as per section 55 or any surplus taken to be such profits and gains as per 10
Schedule XIV;
(m) the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members;
(n) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling
15
or betting of any form or nature;
(o) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees’ State Insurance Act, 1948, 20
or any other fund for the welfare of such employees;
(p) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy;
(q) any sum referred to in section 26(2)(h);
(r) the fair market value of inventory referred to in section 26(2)(j); (s) any sum referred to in section 92(2)(k) or (l);
25
(t) any sum of money referred to in section 92(2)(h);
(u) any sum of money or value of property referred to in section 92(2)(m);
(v) any compensation or other payment referred to in 30
section 92(2)(j);
(w) assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency, in cash or kind, to the 35
assessee other than—
(i) the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset as per sections 39(1)(d) and (3); or
(ii) the subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the
40
Central Government or a State Government;
(x) any other income referred to in section 2(24) of the Income-tax Act, 1961,
34 of 1948. 43 of 1961.
where,––
15
(A) “card game and other game of any sort” includes any game show, an
80 of 1976. 18 of 2013.
42 of 1999.
43 of 1961. 43 of 1961.
entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game;
(B) “Keyman insurance policy” shall have the same meaning as assigned
5
in Schedule II.(Table: Sl. No.2);
(C) “lottery” includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner, under any scheme or arrangement, called by any name;
10
(50) “Income Computation and Disclosure Standards” means such standards as notified under section 276(2);
(51) “Income-tax Officer” means a person appointed to be an Income-tax Officer under section 237(1);
(52) “India” means the territory of India as referred to in article 1 of the 15
Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976, and the air space above its territory and territorial waters;
20
(53) “Indian company” means a company formed and registered under the Companies Act, 2013 and includes––
(a) company formed and registered under any law relating to companies formerly or currently in force in any part of India; or
(b) corporation established by or under a Central Act or State Act 25
or Provincial Act; or
(c) institution or association or body which is declared by the Board to be a company under clause (28),
the registered or principal office of which is in India;
(54) “Indian currency” shall have the same meaning as assigned to it in 30
section 2(k) of the Foreign Exchange Management Act, 1999;
(55) “infrastructure capital company” means a company which makes investments by acquiring shares or providing long-term finance to––
(a) any enterprise or undertaking wholly engaged in the business referred to in section 80-IA(4) or 80-IAB(1) of the Income-tax Act, 1961; or
35
(b) an undertaking developing and building––
(i) a housing project referred to in section 80-IB(10) of the
Income-tax Act, 1961; or
(ii) a project for constructing a hotel of not less than three star
40
category as classified by the Central Government; or
(iii) a project for constructing a hospital with at least
one hundred beds for patients;
16
(56) “infrastructure capital fund” means a fund operating under a trust deed registered under the Registration Act, 1908 established to raise monies by the trustees for investment by acquiring shares or providing long-term finance to enterprises or undertakings referred to in clause (55);
(57) “Inspector of Income-tax” means a person appointed to be an
5
Inspector of Income-tax under section 237(1);
(58) “insurer” means an insurer, being an Indian insurance company, as defined under section 2(7A) of the Insurance Act, 1938, which has been granted a certificate of registration under section 3 of that Act;
(59) “interest” means interest payable in any manner for moneys
10
borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes service fee or any other charges for the moneys borrowed or debt incurred or for any credit facility that has not been utilised;
(60) “interest on securities” means—
(a) interest on any security of the Central Government or a State
15
Government;
(b) interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a corporation established by a Central Act or State Act or Provincial Act;
(61) “International Financial Services Centre” shall have the same meaning
20
as assigned to it in section 2(q) of the Special Economic Zones Act, 2005;
(62) “Joint Commissioner” means a person appointed to be a Joint Commissioner of Income-tax or an Additional Commissioner of Income-tax under section 237(1);
25
(63) “Joint Commissioner (Appeals)” means a person appointed to be a Joint Commissioner of Income-tax (Appeals) or an Additional Commissioner of Income-tax (Appeals) under section 237(1);
(64) “Joint Director” means a person appointed to be a Joint Director of Income-tax or an Additional Director of Income-tax under section 237(1);
(65) “legal representative” shall have the same meaning as assigned to it
30
in section 2(11) of the Code of Civil Procedure,1908;
(66) “liable to tax”, in relation to a person and with reference to a country, means that there is an income-tax liability on such person under the law of that country for the time being in force and shall include a person who has subsequently been exempted from such liability under the law of
35
that country;
(67) “long-term capital asset” means a capital asset which is not a short-term capital asset;
(68) “long-term capital gain” means capital gains arising from the 40
transfer of a long-term capital asset;
(69) “manufacture”, with its grammatical variations and cognate expressions, means a change in a non-living physical object or article or thing—
16 of 1908. 4 of 1938.
28 of 2005. 5 of 1908.
2 of 1934.
9 of 1932.
6 of 2009.
9 of 1932. 6 of 2009.
17
(a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or
(b) bringing into existence of a new and distinct object or article or 5
thing with a different chemical composition or integral structure;
(70) “maximum marginal rate” means the rate of income-tax (including surcharge on income-tax) applicable in relation to the highest slab of income for an individual, association of persons or, as the case may be, body of individuals, as specified in the Finance Act of the relevant year;
10
(71) “non-banking financial company” shall have the same meaning as assigned to it in section 45-I(f) of the Reserve Bank of India Act, 1934;
(72) “non-resident” means a person who is not a “resident”, and for the purposes of sections 161,174 and 312, and includes a person who is not ordinarily resident as per section 6(13);
15
(73) “notification” means a notification published in the Official Gazette and the expression “notify” with its grammatical variations and cognate expressions shall be construed accordingly;
(74) “partner” shall have the same meaning as assigned to it in section 4 of the Indian Partnership Act, 1932, and shall include—
(a) any person who, being a minor, has been admitted to the
20
benefits of partnership; and
(b) a partner of a limited liability partnership as defined in section 2(1)(q) of the Limited Liability Partnership Act, 2008;
(75) “partnership” shall have the same meaning as assigned to it in 25
section 4 of the Indian Partnership Act, 1932, and shall include a “limited liability partnership” as defined in section 2(1)(n) of the Limited Liability Partnership Act, 2008;
(76) “Permanent Account Number (PAN)” means a unique number consisting of ten alphanumeric characters, allotted by the Assessing Officer to a person for the purpose of identification under this Act, and includes a
30
Permanent Account Number allotted under the new series;
(77) “person” includes—
(a) an individual;
(b) a Hindu undivided family (HUF);
35
(c) a company;
(d) a firm;
(e) an association of persons or a body of individuals, whether incorporated or not;
(f) a local authority; and
(g) every artificial juridical person, not falling within any of the
40
preceding sub-clauses,
whether or not such an association of persons or a body of individuals or a local authority or an artificial juridical person was formed or established or incorporated with the object of deriving income, profits, or gains;
18
(78) “person of Indian origin” means an individual who or either of his parents or any of his grand-parents, was born in undivided India;
(79) “person who has a substantial interest in the company”, in relation to a company means a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend, whether with or without a right to
5
participate in profits, carrying not less than 20% of the voting power; (80) “prescribed” means prescribed by rules made under this Act;
(81) “Principal Chief Commissioner” means a person appointed to be a Principal Chief Commissioner of Income-tax under section 237(1);
(82) “Principal Commissioner” means a person appointed to be a
10
Principal Commissioner of Income-tax under section 237(1);
(83) “Principal Director” means a person appointed to be a Principal Director of Income-tax under section 237(1);
(84) “Principal Director General” means a person appointed to be a 15
Principal Director General of Income-tax under section 237(1);
(85) “principal officer”, with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means—
(a) the secretary, treasurer, manager or agent of the authority, 20
company, association or body; or
(b) any person connected with the management or administration of the local authority, company, association or body upon whom the Assessing Officer has served a notice of his intention of treating him as the principal officer thereof;
25
(86) “profession” includes vocation;
(87) “public sector bank” means the State Bank of India constituted under the State Bank of India Act, 1955, a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 and a bank included in
30
the category “other public sector banks” by the Reserve Bank of India;
(88) “public sector company” means any corporation established by or under any Central Act or State Act or Provincial Act or a Government company as defined in section 2(45) of the Companies Act, 2013;
(89) “public servant” shall have the same meaning as assigned to it in
35
section 2(28) of the Bharatiya Nyaya Sanhita, 2023;
(90) “rate or rates in force” or “rates in force”, in relation to a tax year, for the purposes of––
(a) (i) computing the income-tax chargeable under section 316(5) 40
or 317(2) or 319 or 320(2); or
(ii) deducting income-tax under sections 392(1) to (6) from income chargeable under the head “Salaries”; or under section 393(1) [Table: Sl. No.8(iii)]; or
23 of 1955.
5 of 1970. 40 of 1980.
18 of 2013. 45 of 2023.
19 of 1952. 42 of 1956.
2 of 1934.
19
(iii) computing the advance tax payable under Chapter XIX-C in a case not falling under section 207 or 194(1)(Table: Sl. No. 1) or 194(1)(Table: Sl. No. 6) or 214 or 307 or 308 or 311; or
(iv) deducting tax under section 393(1)[Table: Sl. No. 1(i)],
5
[Table: Sl. No. 5(i)], [Table: Sl. No. 5(ii)], [Table: Sl. No. 5(iii)] and (Table: Sl. No. 7) or in section 393(3)(Table: Sl. No. 1), (Table: Sl. No. 2) and (Table: Sl. No. 3),
means the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year;
10
(b) computing the advance tax payable under Chapter XIX-C in a case falling under section 207 or 194(1)(Table: Sl. No. 1) or 194(1)(Table: Sl. No. 6) or 214 or 307 or 308 or 311 the rate or rates specified in the said respective section, or the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant tax year, 15
whichever is applicable;
(c) deducting tax under section 393(2)(Table: Sl. No. 6), (Table: Sl.No. 7), (Table: Sl. No. 8), (Table: Sl. No. 9) and (Table: Sl. No. 17), the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant tax year or the rate or rates of income-tax 20
specified in an agreement entered into by the Central Government under section 159(1), or an agreement notified by the Central Government under section 159(2), whichever is applicable;
(91) “recognised provident fund” means a provident fund which has been and continues to be recognised by the approving authority as per Part A of the Schedule XI, and includes a provident fund established under a scheme
25
framed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952;
(92) “recognised stock exchange” means a recognised stock exchange as referred to in section 2(f) of the Securities Contracts (Regulation) Act, 1956 and which fulfils such conditions, as prescribed, and notified by the Central
30
Government for this purpose;
(93) “regular assessment” means the assessment made under section 270(10) or 271;
(94) “relative”, in relation to an individual, means the husband, wife, brother, sister or any lineal ascendant (maternal as well as paternal) or
35
descendant of that individual;
(95) “Reserve Bank of India” means the Bank constituted under section 3(1) of the Reserve Bank of India Act, 1934;
(96) “resident” means a person who is resident in India as per section 6; 40
(97) “resulting company” means one or more companies (including a wholly owned subsidiary thereof) to which the undertaking of the demerged company is transferred in a demerger and, the resulting company in consideration of such transfer of undertaking, issues shares to the shareholders of the demerged company and includes any authority or body or local authority 45
or public sector company or a company established, constituted or formed as a result of demerger;
20
(98) “scheduled bank” shall have the same meaning as assigned to it in section 2(e) of the Reserve Bank of India Act, 1934;
(99) “Securities and Exchange Board of India” shall have the same meaning as assigned to it in section 2(1)(a) of the Securities and Exchange 5
Board of India Act, 1992;
(100) “senior citizen” means an individual resident in India who is of the age of sixty years or more at any time during the relevant tax year; (101)(a) “short-term capital asset” means a capital asset held by an assessee for not more than twenty-four months immediately preceding the date of its transfer; 10
(b) in respect of the following capital assets:––
(i) security listed in a recognised stock exchange in India; or (ii) unit of the Unit Trust of India;
(iii) units of an equity-oriented fund; or
(iv) zero-coupon bonds,
the provisions of sub-clause (a) shall have effect, as if for the words
15
“twenty-four months”, the words “twelve months” had been substituted; (c) in determining the period for which capital asset is held by the assessee—
(A) there shall be excluded the period subsequent to the date on 20
which the company goes into liquidation;
(B) there shall be included,––
(I) the period for which the asset was held by the previous
owner referred to in section 73(1) (Table: Sl. No. 1), for a capital asset which becomes the property of the assessee in the 25
circumstances mentioned in said section;
(II) the period for which the share or shares in the
amalgamating company were held by the assessee, for a capital asset being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a transfer referred 30
to in section 70(1)(f);
(III) the period for which the share or shares held in the
demerged company were held by the assessee, for a capital asset being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a demerger;
(IV) the period for which the person was a member of a
35
recognised stock exchange in India immediately before such demutualisation or corporatisation, for a capital asset, being trading or clearing rights of a recognised stock exchange in India, acquired by a person pursuant to demutualisation or 40
corporatisation of the recognised stock exchange in India;
(V) the period for which the person was a member of a
recognised stock exchange in India immediately before such demutualisation or corporatisation, for a capital asset being equity share or shares in a company allotted pursuant to demutualisation or corporatisation of a recognised stock exchange in India;
45
(VI) the period for which the share or shares were held by the
assessee, for a capital asset being a unit of a business trust, allotted pursuant to transfer of share or shares as referred to in section 70(1)(zi);
2 of 1934. 15 of 1992.
21
(VII) the period for which the unit or units in the consolidating
scheme of the mutual fund were held by the assessee, for a capital asset being a unit or units, which becomes the property of the assessee in consideration of a transfer referred to in section 70(1)(zj);
5
(VIII) the period for which the preference shares were held
by the assessee, for a capital asset being equity shares in a company, which becomes the property of the assessee in consideration of a transfer referred to in section 70(1)(zb);
(IX) the period for which the unit or units in the consolidating
plan of a mutual fund scheme were held by the assessee, for a capital
10
asset being a unit or units, which becomes the property of the assessee in consideration of a transfer referred to in section 70(1)(zk);
(X) the period for which the original unit or units in the main
portfolio were held by the assessee, for a capital asset being a unit or units in a segregated portfolio referred to in section 73(1) (Table: Sl. No. 11);
15
(XI) the period for which such gold was held by the assessee
before conversion into the Electronic Gold Receipt, for a capital asset being Electronic Gold Receipt issued in respect of gold deposited as referred to in section 70(1)(y);
20
(XII) the period for which such Electronic Gold Receipt was
held by the assessee before its conversion into gold for a capital asset being gold released in respect of an Electronic Gold Receipt as referred to in section 70(1)(y);
(C) there shall be reckoned,––
25
(I) the period from the date of its conversion or treatment, for
a capital asset referred to in section 26(2)(j);
(II) the period from the date of allotment of a share or any
other security (herein referred to as the financial asset), for a 30
capital asset being such financial asset subscribed to by the assessee on the basis of his right to subscribe to such financial asset or subscribed to by the person in whose favour the assessee has renounced his right to subscribe to such financial asset;
(III) the period from the date of the offer of the right to
35
subscribe to any financial asset which is renounced in favour of any other person by the company or institution, as the case may be, making such offer, for a capital asset, being such right;
(IV) the period from the date of the allotment of a financial asset
allotted without any payment and on the basis of holding of any other
financial asset, for a capital asset being such financial asset;
40
(V) the period from the date of allotment or transfer of any
specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer free of cost or at concessional rate to his employees (including former employee or employees), for a capital asset being such specified security or sweat equity shares;
45
(VI) the period from the date on which a request for the
redemption was made, for a capital asset, being share or shares of a company, which is acquired by the non-resident assessee on redemption of Global Depository Receipts referred to in section 209(1)(Table: Sl. No. 2) held by such assessee;
50
22
(D) for capital assets other than those mentioned in items (A) to (C), the period for which any capital asset is held by the assessee shall be determined in such manner, as prescribed,
where,––
(A) “equity oriented fund” shall have the meaning assigned to it in
5
section198(8);
(B) “security” shall have the same meaning as assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956;
(C) “specified security” means the securities as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956 and, where
10
employees’ stock option has been granted under any plan or scheme therefor, includes the securities offered under such plan or scheme;
(D) “sweat equity shares” means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual
15
property rights or value additions, by whatever name called;
(102) “short-term capital gain” means capital gains arising from the transfer of a short-term capital asset;
(103) (a) “slump sale” means the transfer of one or more undertaking, by any means, for a lump sum consideration without values being assigned to
20
the individual assets and liabilities in such transfer;
(b) for the purpose of sub-clause (a)—
(i) “undertaking” shall have the meaning assigned to it in clause (35)(i); and
(ii) the determination of the value of an asset or liability for the
25
sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities;
(104) “Special Economic Zone” shall have the same meaning as assigned 30
to it in section 2(za) of the Special Economic Zones Act, 2005;
(105) “stamp duty value” means the value adopted or assessed or assessable by any authority of the Central Government or State Government for the payment of stamp duty in respect of an immovable property;
(106) “tax” means income-tax chargeable under this Act;
(107) “Tax Recovery Officer” means an Income-tax Officer authorised
35
in writing by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, to exercise––
(a) the powers of a Tax Recovery Officer; and
(b) the powers and functions conferred on, or assigned to, an 40
Assessing Officer under this Act, or as prescribed;
(108) “total income” means the total amount of income referred to in section 5, computed in the manner as laid down in this Act;
(109) “transfer” in relation to a capital asset, includes—
(a) the sale, exchange or relinquishment of the asset; or
45
(b) the extinguishment of any rights therein; or
(c) the compulsory acquisition thereof under any law in force; or
42 of 1956. 42 of 1956.
28 of 2005.
4 of 1882.
23
(d) where the asset is converted by the owner into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or
(e) the maturity or redemption of a zero coupon bond; or
5
(f) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner) which has the effect of transferring, or enabling the enjoyment of, any immovable property; or
(g) any transaction involving the allowing of the possession of any
10
immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882; or
(h) disposing of or parting with an asset or any interest therein, or 15
creating any interest in any asset in any manner, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, irrespective of whether such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India,
20
where, the expression “immovable property” means—
(i) any land or any building or part of a building, and includes, where any land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also, such that the land, building, part of a
25
building, machinery, plant, furniture, fittings and other things include any rights therein;
(ii) any rights in or with respect to any land or any building or a part of a building (whether or not including any machinery, plant, 30
furniture, fittings or other things therein), which has been constructed or which is to be constructed, accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in, a co operative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a 35
transaction by way of sale, exchange or lease of such land, building or part of a building;
(110) “Valuation Officer” means a person appointed by the Central Government as a Valuation Officer who shall exercise powers as specified in section 269(3), and includes a Regional Valuation Officer, a District Valuation Officer and an Assistant Valuation Officer;
40
(111) “virtual digital asset” means—
(a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, called by any name, providing a digital representation of value exchanged with or without consideration, with the promise or
45
representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically;
Definition of “tax year”.
Charge of
income-tax.
Scope of total income.
24
(b) a non-fungible token or any other token of similar nature, by whatever name called;
(c) any other digital asset, as the Central Government may, by notification, specify,
(d) any crypto-asset being a digital representation of value that
5
relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions, whether or not such asset is included in sub-clause (a) or (b) or (c),
where,––
(i) “non-fungible token” means such digital asset as the Central
10
Government may, by notification, specify;
(ii) the Central Government may, by notification, exclude any digital asset from this definition, subject to such conditions as specified therein; (112) “zero coupon bond” means a bond—
(a) issued by any infrastructure capital company or infrastructure
15
capital fund or infrastructure debt fund or public sector company or scheduled bank on or after the 1st June, 2005;
(b) for which no payment and benefit is received or receivable before maturity or redemption from infrastructure capital company or infrastructure capital fund or infrastructure debt fund or public sector
20
company or scheduled bank; and
(c) which the Central Government may, by notification, specify,
where, the expression “infrastructure debt fund” means the infrastructure debt fund notified by the Central Government under Schedule VII 25
(Table: Sl. No. 46).
3. (1) For the purposes of this Act, “tax year” means the twelve months period of the financial year commencing on the 1st April.
(2) In the case of a business or profession newly set up, or a source of income newly coming into existence in any financial year, the tax year shall be the period 30
beginning with—
(a) the date of setting up of such business or profession; or
(b) the date on which such source of income newly comes into existence, and,
ending with the said financial year.
35
CHAPTER II
BASIS OF CHARGE
4. (1) Income-tax for any tax year shall be charged as per the provisions of this Act at the rate or rates which are enacted by a Central Act for such tax year.
(2) The charge of income-tax under sub-section (1) shall be on the total income 40
of the tax year of every person as per the provisions of this Act.
(3) Income-tax shall also include any additional income-tax, by whatever name called, levied under this Act.
(4) If this Act provides that income-tax is to be charged in respect of income of a period other than the tax year, it shall be charged accordingly. (5) For the income chargeable under sub-section (2), income-tax shall be
45
deducted or collected at source or paid in advance as provided under this Act. 5. (1) Subject to the provisions of this Act, the total income of any tax year of a person, who is a resident, includes all income from whatever source derived, which—
[44 of 1958.
25
(a) is received or deemed to be received in India in that year by or on behalf of the person; or
(b) accrues or arises, or is deemed to accrue or arise, to the person in India in that year; or
5
(c) accrues or arises to the person outside India in that year, but when such person is “not ordinarily resident” in India under section 6(13), it shall be included only when it is derived from a business controlled in or a profession set up in India. (2) Subject to the provisions of this Act, the total income of a tax year of a person,
who is a non-resident, includes all income from whatever source derived, which–– (a) is received or deemed to be received in India in that year by or on
10
behalf of the person; or
(b) accrues or arises, or is deemed to accrue or arise, to the person in India in that year.
(3) Income accruing or arising outside India shall not be deemed to be 15
received in India under this section by reason only of the fact that it is taken into account in a balance sheet prepared in India.
(4) If an income has been included in a person’s total income on the basis that it–– (a) has accrued or arisen; or
(b) is deemed to have accrued or arisen,
20
to the person, it shall not again be included on the basis that it is received or deemed to be received by the person in India.
6. (1) For the purposes of this Act, residence of a person in India shall be determined as per this section.
(2) An individual shall be resident in India in a tax year, if he––
25
(a) is in India for a total period of one hundred and eighty-two days or more in that tax year; or
(b) is in India cumulatively for sixty days or more during that year and has been in India cumulatively for three hundred and sixty-five days or more in the four years preceding such tax year.
30
(3) The provisions of sub-section (2)(b) shall not apply in the case of an individual who is a citizen of India and leaves India in any tax year–– (a) as a member of the crew of an Indian ship, as defined in section 3(18) of the Merchant Shipping Act, 1958; or
(b) for employment outside India.
(4) The provisions of sub-section (2)(b) shall not apply in the case of an individual––
35
(a) who is a citizen of India or a person of Indian origin; and
(b) who being outside India, comes on a visit to India in any tax year; (5) Where the person referred to in sub-section (4) has a total income exceeding fifteen lakh rupees during that tax year (other than the income from foreign sources), sub-section (2)(b) shall apply as if the words “sixty days” had
40
been substituted with “one hundred and twenty days” for that year; (6) For the purposes of sub-section (2), if the individual is––
(a) a citizen of India; and
(b) a member of the crew of a foreign-bound ship leaving India,
45
the total number of days in India, in respect of that voyage, shall be determined in such manner and subject to such conditions, as prescribed.
Residence in India.
26
(7) Irrespective of the provisions of sub-sections (2) to (6), an individual shall be deemed to be resident in India for a tax year, if he––
(a) is a citizen of India;
(b) is not liable to tax in any other country or territory due to domicile, 5
residence, or similar criteria; and
(c) has total income exceeding fifteen lakh rupees during the tax year (other than the income from foreign sources).
(8) sub-section (7) shall not apply to an individual, who is resident in India for a tax year under sub-sections (2) to (6).
(9) A Hindu undivided family, firm or other association of persons shall be
10
resident in India in any tax year unless the control and management of its affairs is situated wholly outside India during such tax year.
(10)(a) A company is resident in India in any tax year, if—
(i) it is an Indian company; or
15
(ii) its place of effective management is in India in that tax year; and
(b) for the purposes of this sub-section, “place of effective management” means a place where key management and commercial decisions necessary for the conduct of business of the company as a whole are, in substance, made.
(11) Every other person is resident in India in any tax year unless the control and management of its affairs is situated wholly outside India in that year.
20
(12) If a person is resident in India in a tax year for any source of income, he shall be deemed to be resident in India in that tax year for each of the other sources of income.
(13) A person is not ordinarily resident in India in any tax year, if that person is—
25
(a) an individual who has been, or a Hindu undivided family, whose manager has been––
(i) a non-resident in India in nine out of the ten tax years preceding that year; or
(ii) has been in India cumulatively for seven hundred and
30
twenty-nine days or less in seven tax years preceding that year; or (b) a citizen of India or a person of Indian origin,––
(i) whose total income excluding income from foreign sources exceeds fifteen lakh rupees during the tax year, as mentioned in 35
sub-section (5); and
(ii) who has been in India cumulatively for one hundred and twenty days or more but less than one hundred and eighty-two days; or
(c) a citizen of India who is deemed to be resident in India under 40
sub-section (7).
(14) In this section, “income from foreign sources” means the income, which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India) and which is not deemed to accrue or arise in India.
27
7. (1) The following incomes shall be deemed to be received in the tax year:—
(a) the annual accretion in that year to the balance at the credit of an employee participating in a recognised provident fund, to the extent provident in paragraph 6 of Part A of the Schedule XI;
(b) the transferred balance in a recognised provident fund, to the extent
5
provided in paragraph 11(4) and (5) of Part A of the Schedule XI;
(c) the contribution made by the Central Government or any other employer in that year to the account of an employee under a pension scheme mentioned in section 124.
10
(2) For inclusion in the total income of an assessee,—
(a) any dividend declared by a company or distributed or paid by it within the meaning of section 2(40)(a) or (b) or (c) or (d) or (e) or (f) shall be deemed to be the income of the tax year in which it is so declared, distributed or paid, as the case may be;
(b) any interim dividend shall be deemed to be the income of the tax
15
year in which the amount of such dividend is unconditionally made available by the company to the member who is entitled to it.
8. (1) Where a specified person receives during the tax year any capital asset or stock-in-trade or both from a specified entity in connection with the dissolution or reconstitution of such specified entity, then the specified entity shall be
20
deemed to have transferred such capital asset or stock-in-trade, or both, to the specified person in the year in which such capital asset or stock-in-trade, or both, are received by the specified person.
(2) Any profits and gains arising from the deemed transfer mentioned in sub-section (1) by the specified entity shall be—
25
(i) deemed to be the income of such specified entity of the tax year in which such capital asset or stock-in-trade or both were received by the specified person; and
(ii) chargeable to income-tax as income of such specified entity under the head “Profits and gains of business or profession” or under the head
30
“Capital gains”, as per this Act.
(3) In this section, fair market value of the capital asset or stock-in-trade, or both, on the date of its receipt by the specified person shall be deemed to be the full value of the consideration received or accruing as a result of such deemed transfer mentioned in sub-section (1).
35
(4) If any difficulty arises in giving effect to the provisions of this section and section 67(10), the Board may, with the previous approval of the Central Government issue guidelines for removing the difficulty.
(5) No guideline under sub-section (4) shall be issued after the expiration of two years from the 1st April, 2026.
40
(6) Every guideline issued by the Board under sub-section (4) shall be laid before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive session aforesaid, both houses agree in making any modification
45
in such guideline or both Houses agree that the guideline, should not be issued, the guideline shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that guideline.
50
Income
deemed to be received.
Income on
receipt of
capital asset or stock in trade by specified person from specified
entity.
28
(7) In this section,—
Income
deemed to
accrue or arise in India.
(a) “specified entity” means a firm or other association of persons or body of individuals (not being a company or a co-operative society);
(b) “specified person” means a person, who is a partner of a firm or member of other association of persons or body of individuals (not being a
5
company or a co-operative society) in any tax year;
(c) “reconstitution of the specified entity” means, where—
(i) one or more of its partners or members, of such specified entity ceases to be partners or members; or
10
(ii) one or more new partners or members are admitted in such specified entity in such circumstances that one or more of the persons who were partners or members, of the specified entity, before the change, continue as partner or partners or member or members after the change; or
(iii) all the partners or members, of such specified entity
15
continue with a change in their respective share or in the shares of some of them.
9. (1) Income deemed to accrue or arise in India shall be the incomes mentioned in sub-sections (2) to (10).
(2) Any income accruing or arising, directly or indirectly, through or from–– 20
(a) any asset or source of income in India;
(b) any property in India;
(c) any business connection in India; or
(d) the transfer of a capital asset situated in India,
25
shall be deemed to accrue or arise in India.
(3) Any income falling under the head “Salaries”, if it is payable,–– (a) for services rendered in India; or
(b) for the rest period or leave period which is preceded and succeeded by services rendered in India and forms part of the service contract of 30
employment; or
(c) by the Government to an Indian citizen for services rendered outside India,
shall be deemed to accrue or arise in India.
(4) Any dividend paid by an Indian company outside India shall be deemed 35
to accrue or arise in India.
(5)(a) Income by way of interest payable by––
(i) the Government;
(ii) a resident, except where it is payable in respect of any debt incurred, or moneys borrowed and used, for—
(A) a business or profession carried on by that person outside
40
India; or
(B) making or earning any income from any source outside India; or
(iii) a non-resident, if it is in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on
45
by that non-resident in India,
29
shall be deemed to accrue or arise in India;
(b) for the purposes of clause (a)(iii),––
(i) any interest payable by the permanent establishment in India of a non-resident person engaged in the business of banking, to the head office or any other permanent establishment or any other part of such non-resident
5
outside India shall be deemed to accrue or arise in India;
(ii) shall be chargeable to tax in addition to any income attributable to the permanent establishment in India; and
(iii) the permanent establishment in India shall––
(A) be deemed to be a person separate from, and independent of,
10
the non-resident person of which it is a permanent establishment; and
(B) the provisions of this Act relating to computation of total
income, determination of tax and collection and recovery shall apply, accordingly;
(iv) “permanent establishment” shall have the meaning assigned to it
15
in section 173(c).
(6)(a) Income by way of royalty payable by––
(i) the Government;
(ii) a resident, except where the royalty is payable for––
(A) a business or profession carried on by the resident outside
20
India; or
(B) making or earning any income from any source outside
India; or
(iii) a non-resident, if the royalty is payable in respect of any right, 25
property or information used or services utilised for the purposes of—
(A) a business or profession carried on by the non-resident in
India; or
(B) making or earning any income from any source outside India,
shall be deemed to accrue or arise in India;
(b) in this sub-section, “royalty” means consideration (including any
30
lump-sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains”) for the following––
(i) the transfer or grant of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or
35
process or trade mark or similar property;
(ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property;
(iii) the use of any patent, invention, model, design, secret formula or
40
process or trade mark or similar property;
(iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill;
30
(v) the use or right to use any industrial, commercial or scientific equipment except the amounts referred in section 61(2) (Table: Sl. No. 5);
(vi) the transfer or grant of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including––
5
(A) films or video tapes for use in connection with television; or
(B) tapes for use in connection with radio broadcasting;
(vii) the rendering of services in connection with the activities referred to in sub-clauses (i) to (vi);
(c) for the purposes of clause (b),––
10
(i) the transfer or grant of all or any rights in respect of any right, property or information includes transfer or grant of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which that right is transferred;
(ii) royalty includes consideration in respect of any right, property or
15
information, whether or not––
(A) the possession or control of that right, property or information is with the payer;
(B) that right, property or information is used directly by the payer;
20
(C) the location of that right, property or information is in India;
(iii) the expression “process” includes transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not that process is secret;
25
(iv) the expression “computer software” means any computer programme recorded on any disc, tape, perforated media or other information storage device and includes any such programme or any customised electronic data.
(7)(a) Income by way of fees for technical services payable by–– 30
(i) the Government;
(ii) a resident, except where it is payable for—
(A) a business or profession carried on by the resident outside India; or
(B) making or earning any income from any source outside
35
India; or
(iii) a non-resident, if it is payable in respect of services utilised for—
(A) a business or a profession carried on by that non-resident in India; or
(B) making or earning any income from any source in India,
40
shall be deemed to accrue or arise in India;
31
(b) in this sub-section, “fees for technical services”—
(i) means any consideration (including any lump sum consideration) payable, for rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel);
(ii) does not include consideration for any construction, assembly,
5
mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”.
(8)(a) In of this section, a “business connection” in India shall include— (i) any business carried out in India; or
10
(ii) a significant economic presence in India;
(b) in clause (a), a business carried out in India shall include––
(i) business activity carried out through a person who, acting on behalf of the non-resident,—
(A) has and habitually exercises in India, an authority to
conclude contracts on behalf of the non-resident or habitually
15
concludes contracts or habitually plays the principal role leading to conclusion of contracts by that non-resident and the contracts are—
(I) in the name of the non-resident; or
(II) for the transfer of the ownership of, or for the granting
of the right to use, property owned by that non-resident or that
20
the non-resident has the right to use; or
(III) for the provision of services by the non-resident; or
(B) has no such authority, but habitually maintains in India a
stock of goods or merchandise from which he regularly delivers goods 25
or merchandise on behalf of the non-resident; or
(C) habitually secures orders in India, mainly or wholly for the
non-resident or for that non-resident and other non-residents controlling, controlled by, or subject to the same common control, as that non-resident;
(ii) a business activity carried out through a person who is a broker,
30
general commission agent or any other agent, through whom such activity is carried out, and who is working mainly or wholly on behalf of––
(A) a non-resident (referred to as the principal non-resident); or
(B) such non-resident and other non-residents who—
(I) are controlled by the principal non-resident; or
35
(II) have a controlling interest in the principal
non-resident; or
(III) are subject to the same common control as the
principal non-resident,
and such person shall not be deemed as having an independent status; 40
(c) in of clause (a), a business carried out in India shall not include any business activity or operations––
(i) carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general commission 45
agent or any other agent is acting in the ordinary course of his business;
32
(ii) which are confined to––
(A) the purchase of goods in India for the purposes of export out of India; or
(B) the collection of news and views in India for transmission out of India, in the case of a person who is engaged in the business of
5
running a news agency or of publishing newspapers, magazines or journals; or
(C) the display of uncut and unassorted diamond in any special zone notified by the Central Government, in the case of a foreign company engaged in the business of mining of diamonds; or
10
(D) the shooting of any cinematographic film in India, in the case of that person being––
(I) an individual who is not an Indian citizen; or
(II) a firm which does not have a partner who is an Indian
citizen or who is resident in India; or
15
(III) a company which does not have a shareholder who is
an Indian citizen or who is resident in India;
(d) a non-resident shall have a significant economic presence in India, where there is—
(i) transaction in respect of any goods, services or property carried out
20
by such non-resident with any person in India including provision of download of data or software in India, if the aggregate of payments arising from such transaction or transactions during the tax year exceeds such amount as prescribed; or
(ii) systematic and continuous soliciting of business activities or
25
engaging in interaction with such number of users in India, as prescribed,
irrespective of whether the agreement for such transactions or activities is entered in India, or the non-resident has a residence or place of business in India, or the non-resident renders any services in India;
(e) the provisions of clause (d) shall not apply to the transactions or activities
30
which are confined to the purchase of goods in India for the purpose of export; (f) in this sub-section, only the income which is attributable to––
(i) operations carried out in India, when all operations of the business are not carried out in India;
(ii) transactions or activities referred to in sub-section (8)(d),
35
shall be deemed to accrue or arise in India from any business connection;
(g) the income attributable to operations of any business or significant economic presence in this sub-section shall also include income from––
(i) such advertisement which targets a customer who resides in India or a customer who accesses the advertisement through internet protocol
40
address located in India;
(ii) sale of data collected from a person who resides in India or from a person who uses internet protocol address located in India; and
(iii) sale of goods or services using data collected from a person who resides in India or from a person who uses internet protocol address located
45
in India.
33
(9) In sub-section (2)(d)––
(a) an asset or a capital asset, being any share of, or interest in, a company or entity registered or incorporated outside India shall be deemed to be situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets (whether tangible or intangible)
5
located in India;
(b) the share or interest, referred to in clause (a), shall be deemed to derive its value substantially from the assets (whether tangible or intangible) located in India, if on the specified date, the value of such assets,––
10
(i) exceeds the amount of ten crore rupees; and
(ii) represents at least 50% of the value of all the assets owned
by the company or entity, as the case may be;
(c) the value of an asset shall be the fair market value on the specified date of such asset without reduction of liabilities, if any, in respect of the 15
asset, determined in the manner, as prescribed;
(d) the expression “specified date” in clause (c) means—
(i) the date on which the accounting period of the company or,
as the case may be, the entity ends preceding the date of transfer of a share or an interest; or
(ii) the date of transfer, if the book value of the assets of the
20
company or, as the case may be, the entity on the date of transfer exceeds the book value of the assets as on the date referred to in sub-clause (i), by 15%;
(e) the expression “accounting period” in clause (d) means––
25
(i) each period of twelve months ending with the 31st March;
(ii) each period of twelve months ending with a date other than
the 31st March, in a case where a company or an entity, referred to in clause (a), regularly adopts a period of twelve months ending on a day other than the 31st March for—
(A) complying with the provisions of the tax laws of the
30
territory, of which it is a resident, for tax purposes; or
(B) reporting to persons holding the share or interest;
(iii) the period beginning with the date of registration or
incorporation of a company or entity and ending with the 31st March or such other day referred to in sub-clause (ii), in a
35
case where a company or entity comes into existence and the later accounting period shall be the successive periods of twelve months; or
(iv) the period beginning with the 1st April or such other day
referred to in sub-clause (ii) and ending with the date immediately
40
preceding the date on which the company or entity ceases to exist, in a case where the company or the entity ceases to exist before the end of the accounting period;
(f) in case of assets mentioned in clause (a), if––
(i) there is a transfer outside India of any share of, or interest in,
45
a company or an entity registered or incorporated outside India by a non-resident transferor; and
34
(ii) all the assets owned by that company or entity are not located in India,
then the income referred to in sub-section (2)(d) shall be only such part of the income attributable to assets located in India and determined in the manner, as prescribed;
5
(g) the income referred to in sub-section (2)(d) shall not include income from transfer, outside India, of any share of, or interest in, a company or an entity registered or incorporated outside India,––
(i) if such share of, or interest in, a company or an entity registered or incorporated outside India is held by a non-resident by
10
way of investment, directly or indirectly,––
(A) in Category I or Category II foreign portfolio investor
under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014, prior to their repeal, made under the Securities and Exchange Board of India Act, 1992;
15
(B) in Category I foreign portfolio investor under the
Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019, made under the Securities and Exchange Board of India Act, 1992;
(ii) if such company or entity directly owns the assets situated in
20
India and the transferor (whether individually or along with its associated enterprises), at any time in the twelve months preceding the date of transfer,––
(A) does not hold the right of management or control in
25
relation to such company or the entity; and
(B) does not hold voting power or share capital or interest
exceeding 5%, of the total voting power or total share capital or total interest, as the case may be, of such company or entity; or
(iii) if such company or entity indirectly owns the assets situated in India and the transferor (whether individually or along with its
30
associated enterprises), at any time in the twelve months preceding the date of transfer,––
(A) does not hold the right of management or control in
relation to such company or the entity;
(B) does not hold any right in, or in relation to, such
35
company or entity which would entitle it to the right of management or control in the company or entity which directly owns the assets situated in India; and
(C) does not hold such percentage of voting power or share
capital or interest in such company or entity which results in
40
holding of (either individually or along with associated enterprises) a voting power or share capital or interest exceeding 5% of the total voting power or total share capital or total interest, as the case may be, of the company or entity, which 45
directly owns the assets situated in India;
(iv) in of sub-clause (iii), “associated enterprises” shall have the meaning assigned to it in section 159.
15 of 1992. 15 of 1992.
35
(10) Income arising outside India, in the nature of a sum referred to in section 2(49)(u), paid by a person resident in India,––
(a) to a non-resident, not being a company, or to a foreign company; or (b) to a person not ordinarily resident in India under section 6(13), 5
shall be deemed to accure or arise in India.
(11) In sub-sections (5), (6) and (7), income of a non-resident shall be deemed to accrue or arise in India and shall be included in his total income, whether or not,––
(a) the non-resident has a residence or place of business or business connection in India; or
10
(b) the non-resident has rendered services in India.
(12)(a) In this section, the fund management activity carried out by an eligible investment fund through an eligible fund manager acting on behalf of such fund, shall not constitute business connection in India of that fund;
(b) the eligible investment fund mentioned in clause (a) shall not be said
15
to be resident in India under section 6 merely because the eligible fund manager, undertaking fund management activities on its behalf, is situated in India;
(c) nothing contained in this section shall apply to exclude any income from the total income of the eligible investment fund, which would have been so included irrespective of whether the activity of the eligible fund manager
20
constituted the business connection in India of such fund or not;
(d) nothing contained in this section shall have any effect on the scope of total income or determination of total income in the case of the eligible fund manager;
(e) the conditions for being an eligible investment fund or an eligible fund
25
manager, or furnishing of requisite statements shall be subject to the provision of Schedule I;
(f) the Central Government may, by notification, specify that any one or more of the conditions shall not apply, or shall apply, with such modifications, as specified, in case of an eligible investment fund and its eligible fund
30
manager, if––
(i) the eligible fund manager is located in an International Financial Services Centre; and
(ii) has commenced its operations on or before the 31st March, 2030. (13) In sub-section (2), the expression “through” shall mean and include “by
35
means of”, “in consequence of” or “by reason of”.
10. If a husband and wife are governed by the community of property system (known as “COMMUNIAO DOS BENS” under the Portuguese Civil Code of 1860) in the State of Goa and the Union territories of Dadra and Nagar Haveli and Daman and Diu, then––
40
(a) their income under any head of income shall not be assessed together as that of community of property;
(b) the income mentioned in clause (a) under each head of income other than “Salaries” shall be divided equally between the husband and the wife;
45
Apportionmet of income between
spouses
governed by Portuguese Civil Code.
.
Incomes not
included in total income.
Incomes not
included in total income of
political parties and electoral trusts.
Heads of income.
36
(c) the income so divided shall be included separately in the total income of the husband and the wife, and the remaining provisions of this Act shall apply accordingly; and
(d) where either the husband or the wife, has any income under the head “Salaries”, that income shall be included in the total income of the
5
spouse who has actually earned it.
CHAPTER III
INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
A.—Incomes not to be included in total income
11. (1) In computing the total income of any person for a tax year under
10
this Act, any income enumerated in Schedules II, III, IV, V, and VI shall not be included, subject to fulfilment of conditions specified therein.
(2) Wherever the conditions referred to in the Schedules referred in sub-section (1) are not satisfied in any tax year in respect of any income enumerated in the said Schedules, such income shall be charged to tax under
15
this Act for that tax year.
(3) The persons enumerated in Schedule VII shall, subject to fulfilment of the conditions specified therein, not be chargeable to tax under this Act for a tax year.
(4) Wherever the conditions referred to in Schedule VII are not satisfied
20
in respect of the persons enumerated in the said Schedule, the income of such person shall be charged to tax under the provisions of this Act.
(5) The Central Government may make rules or issue notifications for the purposes of this section as specified in the Schedules II, III, IV, V, VI and VII.
B.—Incomes not to be included in total income of political parties and
25
electoral trusts
12. (1) In computing the total income of any political party or an electoral trust for a tax year under this Act, any income enumerated in Schedule VIII shall not be included, subject to fulfilment of conditions 30
specified therein.
(2) Wherever the conditions referred to in Schedule VIII are not satisfied in any tax year in respect of any income enumerated in the said Schedule, such income shall be charged to tax under this Act for that tax year.
(3) The Central Government may make rules or issue notifications for 35
the purposes of this section as specified in the Schedule VIII. CHAPTER IV
COMPUTATION OF TOTAL INCOME
A.—Heads of income
13. Save as otherwise provided in this Act, all incomes shall, for the purposes of charge of income-tax and computation of total income, be
40
classified under the following heads of income:—
(a) Salaries;
(b) Income from house property;
(c) Profits and gains of business or profession;
(d) Capital gains; and
45
(e) Income from other sources.
37
14. (1) Irrespective of anything to the contrary contained in this Act, for the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income.
(2) Where the Assessing Officer, having regard to the accounts of the
5
assessee, is not satisfied with—
(a) the correctness of the claim of expenditure incurred by the assessee; or
(b) the claim made by the assessee that no expenditure has been 10
incurred,
in relation to income which does not form part of the total income under this Act, he shall determine such amount of expenditure in accordance with any method, as prescribed.
(3) Irrespective of anything to the contrary contained in this Act, the provisions of this section shall apply in a case where any expenditure has been
15
incurred during any tax year in relation to income which does not form part of the total income under this Act, but such income has not accrued or arisen or has not been received during that tax year.
B.—Salaries
15. (1) The following income shall be chargeable to income-tax under the
20
head “Salaries”:—
(a) any salary due from an employer to an assessee in the tax year, whether paid or not;
(b) any salary paid or allowed to him in the tax year by or on behalf of 25
an employer though not due or before it became due to him;
(c) any arrears of salary paid or allowed to him in the tax year by or on behalf of an employer, if not charged to income-tax for any earlier tax year.
(2) For the purposes of sub-section (1), employer includes former employer. (3) If any salary paid in advance is included in the total income of any person
30
for any tax year, it shall not be included again in the total income of such person when the salary becomes due.
(4) Any salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as salary for the purposes of this section.
35
16. For the purposes of this Part, “salary” includes—
(a) wages;
(b) any annuity or pension;
(c) any gratuity;
40
(d) any fees or commission;
(e) perquisites;
(f) profits in lieu of, or in addition to, any salary or wages;
(g) any advance of salary;
(h) any payment received by an employee in respect of any period of 45
leave not availed of by him;
Income not
forming part of total income and
expenditure in relation to such income.
Salaries.
Income from salary.
Perquisite.
38
(i) the annual accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax as per paragraph 6 of Part A of Schedule XI;
(j) the aggregate of all sums that are comprised in the transferred balance as referred to in paragraph 11(2) of Part A of Schedule XI of an
5
employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under sub-paragraphs (4) and (5) thereof;
(k) the contribution made by the Central Government or any other employer in any tax year, to the account of an employee under a pension scheme referred to in section 124; and
10
(l) the contribution made by the Central Government in any tax year, to the Agniveer Corpus Fund account of an individual enrolled in the Agnipath Scheme referred to in section 125.
17. (1) For the purposes of this Part, “perquisite” includes— 15
(a) the value of rent-free accommodation provided to the assessee by his employer computed in such manner, as prescribed;
(b) the value of any accommodation provided to the assessee by his employer at a concessional rate which is in excess of rent recoverable from, or payable by, the assessee, computed in such manner, as prescribed;
(c) the value of any benefit or amenity granted or provided free of cost
20
or at concessional rate in the following cases:—
(i) by a company to an employee, who is a director thereof or who has a substantial interest in the company;
(ii) by any employer (including a company) to an employee whose income under the head “Salaries” by way of monetary payment
25
(from one or more employers) exceeds such amount as prescribed;
(d) the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the current employer, or former employer, free of cost or at concessional rate to the assessee;
30
(e) the value of any other benefit or amenity, as prescribed;
(f) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee;
(g) any sum payable by the employer to effect an assurance on the life of the assessee or to effect a contract for an annuity, whether directly or through a fund, other than––
35
(i) a recognised provident fund; or
(ii) an approved superannuation fund; or
(iii) a Deposit-linked Insurance Fund established under––
(A) section 3G of the Coal Mines Provident Fund and
Miscellaneous Provisions Act, 1948; or
40
(B) section 6C of the Employees’ Provident Funds and
Miscellaneous Provisions Act, 1952;
(h) aggregate amount of any contribution, in excess of seven lakh and fifty thousand rupees in a tax year, made to the account of the assessee by the employer—
45
(i) in a recognised provident fund;
(ii) in the scheme referred to in section 124(1); and
(iii) in an approved superannuation fund;
46 of 1948. 19 of 1952.
41 of 1999. 41 of 1999.
39
(i) the annual accretion by way of interest, dividend or any other amount of similar nature during the tax year to the balance at the credit of the fund or scheme referred to in clause (h), computed in such manner, as prescribed (to the extent it relates to the contribution referred to in the said 5
clause in any tax year).
(2) Nothing in sub-section (1) shall apply to––
(a) the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer;
(b) any sum paid by the employer in respect of any expenditure 10
actually incurred by the employee on his medical treatment or treatment of any member of his family—
(i) in any hospital maintained by the Government, or any local
authority, or any other hospital approved by the Government for the purposes of medical treatment of its employees;
15
(ii) in respect of the prescribed diseases or ailments, in any
hospital approved by the Principal Chief Commissioner or Chief Commissioner having regard to such guidelines as specified;
(c) any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved, for the purposes of section 30(c),
20
by the––
(i) Central Government; or
(ii) Insurance Regulatory and Development Authority
established under section 3(1) of the Insurance Regulatory and 25
Development Authority Act, 1999;
(d) any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family under any scheme, approved for the purposes of section 126, by the—
30
(i) Central Government; or
(ii) Insurance Regulatory and Development Authority
established under section 3(1) of the Insurance Regulatory and Development Authority Act, 1999;
(e) any expenditure incurred by the employer for the use of any vehicle for journey by the assessee from his residence to his office or other place of
35
work, or from such office or place to his residence;
(f) any expenditure incurred by the employer, or any sum paid by the employer in respect of any expenditure actually incurred by the employee, on—
(i) medical treatment of the employee or any family member of
40
such employee outside India;
(ii) travel and stay abroad for the employee or any member of
the family of such employee for medical treatment;
(iii) travel and stay abroad of one attendant who accompanies
the patient in connection with such treatment.
45
Profits in lieu of salary.
40
(3) For the purposes of sub-section (2)(f),—
(a) the expenditure on medical treatment and stay abroad shall be excluded from the perquisite only to the extent permitted by the Reserve Bank of India; and
(b) the expenditure on travel shall be excluded from perquisite only in
5
the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed such amount as prescribed.
(4) In this section,—
(a) “fair market value” means the value determined in accordance with
10
the method, as prescribed;
(b) “family”, in relation to an individual, shall have the meaning assigned to it in Schedule III (Note 2);
(c) “gross total income” shall have the meaning assigned to it in 15
section 122(10);
(d) “hospital” includes a dispensary or a clinic or a nursing home;
(e) “option” means a right but not an obligation, granted to an employee to apply for the specified security or sweat equity shares at a predetermined price;
(f) “specified security” means the securities as defined in section 2(h)
20
of the Securities Contracts (Regulation) Act, 1956 and, where employees’ stock option has been granted under any plan or scheme, includes the securities offered under such plan or scheme;
(g) “sweat equity shares” means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash
25
for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called;
(h) the value of any specified security or sweat equity shares shall be the fair market value of the specified security or sweat equity shares, on the date on which the option is exercised by the assessee, as reduced by the
30
amount actually paid by, or recovered from, the assessee in respect of such security or shares.
18. (1) For the purposes of this Part, “profits in lieu of salary” includes,—
(a) any amount of any compensation due to or received by an assessee 35
from his employer or former employer at or in connection with the— (i) termination of his employment; or
(ii) modification of the terms and conditions relating thereto;
(b) any amount due to or received, whether in lump-sum or otherwise, by any assessee from any person—
(i) before his joining any employment with that person; or
40
(ii) after cessation of his employment with that person;
(c) any payment due to or received by an assessee—
(i) from an employer or a former employer; or
(ii) from a provident or other fund, to the extent to which it does 45
not consist of contributions by the assessee or interest on such contributions; or
42 of 1956.
41
(iii) any sum received under a Keyman insurance policy as defined in Schedule II (Note 1), including the sum allocated by way of bonus on such policy.
(2) The payment referred in sub-section (1)(c) shall not include any payment referred to in––
(a) Schedule II (Table: Sl. No. 3);
5
(b) Schedule II (Table: Sl. No. 4);
(c) Schedule II (Table: Sl. No. 8); and
(d) Schedule III (Table: Sl. No. 11).
19. (1) The income chargeable under the head “Salaries” shall be computed 10
after making the deductions of the nature as mentioned in column B of the following Table, to the extent as mentioned in column C of the said Table:—
Table
Sl. No. Nature of sum Amount of deduction A B C
Deductions from salaries.
1. Sum paid by the assessee as a
15
tax on employment as per article
276(2) of the Constitution,
leviable by or under any law.
Entire amount.
2. Standard deduction. (a) ₹ 75,000 or the salary, 20
whichever is less, where
income-tax is computed under
section 202(1);
(b) ₹ 50,000 or the salary,
whichever is less, in any other
case.
25
3. Death-cum-retirement gratuity received as referred to in
sub-section (2)(g).
4. Payment of retiring gratuity 30
received under the Pension Code
or Regulations applicable to the
members of the defence services.
5. Gratuity received under the Payment of Gratuity Act, 1972
35
(39 of 1972).
6. Any other gratuity received by an employee—
(i) on his retirement; or
40
(ii) on his becoming
incapacitated before such
retirement; or
(iii) on termination of his
employment.
45
Entire amount.
Entire amount.
Amount received, as restricted to the amount calculated as per the provisions of section 4(2) and (3) of that Act.
Amount being minimum of—
(a) actual gratuity received;
(b) amount specified by the Central Government, by notification, having regard to the limit applicable in this behalf to the employees of the Central Government; and
42
A B C
(c) half month’s salary for
each completed year of
service, calculated as
under:—
5
1
Amount = (A x B)
2
where,—
A = average salary for
ten months immediately
10
preceding the month when
event occurs;
B = number of such
completed years.
7. Payment in commutation of pension received—
(a) under the Civil Pensions
(Commutation) Rules of the Central Government; or
(b) under any similar scheme
applicable to––
(i) the members of the civil
services of the Union or
holders of posts connected
with defence or of civil posts
under the Union, [such
members or holders not
covered under (a)];
(ii) the members of the all
India services;
(iii) the members of the
defence services;
(iv) the members of the civil
services of a State, or the
holders of civil posts under a
State; or
(v) the employees of a local
authority or a corporation
established by a Central Act or
State Act or Provincial Act.
8. Payment in commutation of pension is received under any scheme from any other employer.
Entire amount.
(a) If the employee has received gratuity, the commuted value of one-third of the pension, which he is normally entitled to receive;
(b) in any other case, the commuted value of one-half of such pension;
15
20
25 30
35 40
45
43
A B C
(c) such commuted value
being determined having
regard to the age of the
recipient, the state of his
5
health, the rate of interest and
officially recognised tables of
mortality.
9. Payment in commutation of pension received from a fund as
10
specified in Schedule VII
(Table: Sl. No. 3).
10. Compensation received by a workman at the time of his
retrenchment—
15
(a) under the Industrial
Disputes Act, 1947
(14 of 1947); or
(b) under any other Act or
20
rules, orders or notifications
issued thereunder; or
(c) under any standing
orders; or
(d) under any award,
25
contract of service or
otherwise.
11. Compensation received by a workman in accordance with any
scheme which the Central
30
Government may approve in this
behalf, having regard to––
(a) the need for extending
special protection to the
workmen in the undertaking to
which such scheme applies; and
35
(b) other relevant circumstances.
12. Amount received or receivable on voluntary retirement or
termination of service under a
scheme or schemes of voluntary
40
retirement, by an employee as
referred to in sub-section (2)(h).
13. Payment received by an employee of the Central
45
Government or a State Government
as the cash equivalent of the leave
salary in respect of the period of
earned leave at his credit at the time
of his retirement whether on
50
superannuation or otherwise.
Entire amount.
Minimum of—
(a) compensation received;
(b) amount calculated as per provisions of section 25F(b) of the Industrial Disputes Act, 1947 (14 of 1947);
(c) such amount, not being less than ₹ 50,000 as notified by the Central Government.
Compensation received.
Minimum of—
(a) compensation received; and
(b) ₹ 5,00,000.
Entire amount.
44
A B C
14. Payment of the nature referred
against serial number 13 received
by an employee who is not a
Central Government or State
Government employee.
.
Amount being minimum of —
(a) the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement, whether on superannuation or otherwise (entitlement of earned leave shall not exceed thirty days for every year of actual service);
(b) amount “A”,
where,—
A =10×B;
B = average monthly salary for the ten months immediately preceding his retirement whether on superannuation or otherwise;
(c) amount as the Central Government may, by notification, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government; and
(d) actual payment received.
5
10 15
20 25 30
(2) For the purposes of the Table referred to in sub-section (1),—
(a) in respect of the entries against serial number 6 thereof, if gratuity or gratuities was or were received from one or more than one employer in the same tax year (whether or not any gratuity or gratuities was or were
35
received in any earlier tax year), the aggregate amount of deduction shall not exceed—
A – B,
where,—
A = the limit specified by the Central Government, by
40
notification; and
B = the aggregate amount of gratuity or gratuities which was or were received in any one or more earlier tax years and allowed as an exemption or a deduction (whether whole or part) from the total 45
income of any such tax year or years;
14 of 1947.
45
(b) in respect of the entries against serial numbers 6 and 14 thereof, “Salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites;
(c) in respect of the entries against serial numbers 10 and 11 thereof, the following amounts shall be deemed to be compensation received at the
5
time of retrenchment:––
(i) compensation received by a workman at the time of the
closing down of the undertaking in which he is employed;
(ii) compensation received by a workman, at the time of the
transfer (whether by agreement or by operation of law) of the
10
ownership or management of the undertaking in which he is employed from the employer in relation to that undertaking to a new employer, if—
(A) the service of the workman has been interrupted by
such transfer; or
15
(B) the terms and conditions of service applicable to the
workman after such transfer are in any way less favourable to the workman than those applicable to him immediately before the transfer; or
(C) the new employer is, under the terms of such transfer
20
or otherwise, legally not liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the
transfer;
25
(d) in respect of the entries against serial numbers 10 and 11 thereof, the expressions “employer” and “workman” shall have the same meanings as respectively assigned to them in the Industrial Disputes Act, 1947;
(e) the provisions of the entries against serial number 12 thereof shall be subject to the following conditions:––
(i) the applicable schemes of the said companies or authorities
30
or societies or Universities or the institutes referred to in clauses (h)(vii)(x) and (j) in column B of the said serial number, governing the payment of such amount are made as per such guidelines (including, inter alia, criteria of economic viability) as prescribed;
(ii) where deduction has been allowed to an employee in respect
35
of the said item for any tax year, no deduction thereunder shall be allowed to him in relation to any other tax year; and
(iii) where any relief under section 157 has been allowed to an
assessee for any tax year in respect of any amount referred to in the said item, such amount shall not be allowed as a deduction from the
40
compensation received or receivable in any tax year;
(f) in respect of the entries against serial number 14 thereof, if any payment on account of cash equivalent to leave salary is received from one or more than one employer in the same tax year (whether or not any such payment or payments was or were received in any earlier tax year), the
45
aggregate amount of deduction shall not exceed—
A – B,
46
Where,—
Income from house property.
A = the limit specified by the Central Government, by
notification; and
B = the aggregate amount of payment or payments which
was received in any one or more earlier tax years and allowed as
5
an exemption or a deduction (whether whole or part) from total income of any such tax year or years;
(g) the death-cum-retirement gratuity referred to in sub-section (1) (Table: Sl. No. 3) shall be––
(A) received under the revised pension rules of the Central
10
Government, or the Central Civil Services (Pension) Rules, 2021; or (B) received under any similar scheme applicable––
(i) to the members of the civil services of the Union or
holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed
15
by the said rules);
(ii) to the members of the All-India services;
(iii) to the members of the civil services of a State or
holders of civil posts under a State; or
20
(iv) to the employees of a local authority;
(h) the schemes of voluntary retirement or termination of service as referred to in sub-section (1)(Table: Sl. No. 12) shall be for the employees of––
(i) a public sector company (under a scheme of voluntary
25
separation); or
(ii) any other company; or
(iii) an authority established under a Central Act or State Act or Provincial Act; or
30
(iv) a local authority; or
(v) a co-operative society; or
(vi) a University established or incorporated by or under a Central Act or State Act or Provincial Act and an institution declared to be a University under section 3 of the University Grants 35
Commission Act, 1956; or
(vii) an Indian Institute of Technology within the meaning of section 3(g) of the Institutes of Technology Act, 1961; or
(viii) the Central or any State Government; or
(ix) an institution, having importance throughout India or in any
40
State or States, as the Central Government may, by notification, specify in this behalf; or
(x) such institute of management, as the Central Government may, by notification, specify in this behalf.
45
C.— Income from house property
20. (1) The annual value of property consisting of any buildings or lands appurtenant thereto, owned by the assessee shall be chargeable to income-tax under the head “Income from house property”.
3 of 1956. 59 of 1961.
47
(2) The provisions of sub-section (1) shall not apply to such portions of the property, as occupied by the assessee for his business or profession, the profits of which are chargeable to income-tax.
21. (1) For the purposes of section 20, the annual value of any property shall be deemed to be the higher of the following:—
5
(a) the sum for which it might reasonably be expected to let from year to year; or
(b) the actual rent received or receivable by the owner, if the property or any part of it is let.
(2) In case the property or any part of it is let in normal course and was
10
vacant for the whole or any part of the tax year, the annual value of such property shall be computed as per sub-section (1)(b).
(3) The annual value of the property shall be reduced by the taxes (including service taxes) levied by a local authority in respect of such property, actually paid during the tax year by the owner, irrespective of when such taxes became payable.
15
(4) The rent which cannot be realised by the owner shall not be included in computing the actual rent received or receivable, subject to the rules as may be made in this behalf.
(5) In respect of a property or its part held as stock-in-trade and not let wholly or partly at any time during the tax year, the annual value shall be nil for
20
two years from the end of the financial year in which completion certificate is obtained from the competent authority.
(6) The annual value of the property consisting of a house or any part thereof shall be taken as nil, if the owner occupies it for his own residence or cannot actually occupy it due to any reason.
25
(7) The provisions of sub-section (6)––
(a) shall apply only in respect of two of such houses as specified by the assessee in this behalf;
(b) shall not apply, if the house or any part thereof is actually let during any time of the tax year, or if the owner derives any other benefit from it.
30
22. (1) The income under the head “Income from house property” shall be computed after allowing the following deductions:––
(a) 30% of the annual value;
(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest
35
payable on such capital.
(2) In case of property or properties referred to in section 21(6), the aggregate amount of deduction under sub-section (1)(b) shall not exceed—
(a) two lakh rupees, subject to the following conditions:––
(i) the property has been acquired or constructed with borrowed
40
capital and such acquisition or construction is completed within five years from the end of tax year in which capital was borrowed;
(ii) if capital is borrowed during any period prior to the tax year in which the property has been acquired or constructed, any interest payable for the said prior period shall be allowed as a deduction in five
45
equal instalments for the said tax year and for each of the four immediately succeeding tax years;
(iii) the assessee furnishes a certificate from the person to whom interest is payable on such capital; and
Determination of annual
value.
Deductions from income from house property.
Arrears of rent and unrealised rent received subsequently.
Property owned by co-owners.
Interpretation.
48
(b) thirty thousand rupees in any other case.
(3) The deduction under sub-section (2)(a)(ii) shall be computed after reducing any amount already allowed as a deduction under any other provisions of this Act.
(4) The certificate referred to in sub-section (2) shall specify–– (a) the amount of interest payable on capital borrowed; and
(b) the interest payable on any new loan, where subsequent to the capital borrowed, the assessee has taken any such loan for repayment of whole or any part of such capital.
(5) The aggregate of the amounts of deduction under sub-section (2) in respect of properties of the nature referred to in section 21(6) shall not exceed two lakh rupees.
(6) Any interest chargeable under this Act which is payable outside India shall not be allowed as a deduction under this section, if—
(a) tax has not been paid or deducted on such interest under Chapter XIX-B; and
(b) in respect of such interest, there is no agent in India as per section 306.
23. (1) The amount of arrears of rent received from a tenant or the unrealised rent realised subsequently from a tenant shall deemed to be the income from house property in respect of the tax year in which such rent is received or realised.
(2) The amount deemed to be income from house property under sub-section (1) shall be included in the total income of the assessee under the head “Income from house property”, whether the assessee is the owner of the property or not in that tax year.
(3) A sum equal to 30% of the arrears of rent or the unrealised rent referred to in sub-section (1) shall be allowed as deduction.
24. (1) For property co-owned with definite and ascertainable share, the co-owners shall not be assessed as an association of persons and their income computed separately as per their respective share under this Chapter shall be included in their total income.
(2) The relief available under section 21(6) shall be provided as if each co-owner is individually entitled to the said relief.
25. For the purposes of sections 20 to 24, the “owner” in relation to a property shall include––
(a) an individual who transfers without adequate consideration, any property to the spouse (except under an agreement to live apart), or to a minor child (other than a married daughter);
(b) the holder of an impartible estate;
(c) a member of a co-operative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association;
(d) a person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882;
(e) a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or its part—
5
10
15
20
25
30
35
40
454 of 1882.
49
(i) by virtue of transfer of such property by way of sale or
exchange or original or extendible lease for a term of not less than twelve years; or
(ii) accruing or arising from any transaction (whether by
way of becoming a member of, or acquiring shares in, a
5
co-operative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease which has the effect of enabling the enjoyment of such property.
D.— Profits and gains of business or profession
10
26. (1) The income from any business or profession carried on by the assessee at any time during the tax year shall be chargeable to income-tax under the head “Profits and gains of business or profession”.
(2) The income under sub-section (1) shall include––
(a) the profits and gains of any business or profession
15
carried on by the assessee at any time during the tax year;
(b) any compensation or other payment, due to, or received,
by any person by whatever named called,––
(i) wholly or substantially managing the affairs —
(A) of an Indian company; or
20
(B) in India, of any other company; or
(ii) holding any agency in India for any part of
business activities of any other person; or
(iii) for any contract relating to business,
in connection with termination of management, office or agency
25
or contract, as the case may be, or modification of terms and conditions relating thereto;
(c) any compensation or payment, due to, or received by,
any person for vesting of the management of any property or business in the Government, including any corporation owned or
30
controlled by the Government under any law in force;
(d) income derived by a trade, professional or similar
association from specific services performed for its members;
(e) the amount of any profit on sale of input licence, cash
assistance against export, duty drawback or duty remission or any
35
other export incentive, received or receivable;
(f) the value of any benefit or perquisite arising from
business or the exercise of a profession, whether—
(i) convertible into money or not; or
(ii) in cash or in kind or partly in cash and partly in kind;
40
(g) an amount being interest, salary, bonus, commission or
remuneration, by whatever name called, which is due to, or received by, a partner of a firm from such firm to the extent allowed under Chapter IV-D as a deduction in computing the income of the firm;
45
(h) any sum, received or receivable, in cash or in kind––
(i) under an agreement for not carrying out any
activity in relation to any business or profession, not being–
Income under head “Profits and gains of business or profession”.
Manner of
computing
profits and gains of business or profession.
Rent, rates, taxes, repairs and
insurance.
50
(A) a consideration received on account of transfer
of the right to manufacture, produce or process any article
or thing or right to carry on any business or profession
which is chargeable under the head “Capital gains”;
(B) any sum received as compensation from the
5
multilateral fund of the Montreal Protocol on Substances
that Deplete the Ozone layer under the United Nations
Environment Programme, as per the terms of agreement
entered into with the Government of India; or
(ii) under an agreement for not sharing any know-how,
10
patent, copyright, trade-mark, licence, franchise or any other business or commercial right of similar nature, or information or technical know-how likely to assist in the manufacture or processing of goods or provision for services;
(i) any sum received under a Keyman insurance policy including the
15
sum allocated by way of bonus on such policy;
(j) the fair market value of inventory as on the date on which it is converted into, or treated as, a capital asset determined in the manner, as prescribed; and
(k) any sum which is received or receivable in cash or kind, when–– 20
(i) a capital asset other than land or goodwill or financial instrument, is demolished, destroyed, discarded or transferred; and
(ii) the whole of the expenditure on it has been allowed as a deduction under section 46.
(3) Where speculative transactions carried on by an assessee are of such
25
nature to constitute a business, the business (herein referred to as speculation business) shall be deemed to be distinct and separate from any other business.
(4) Any income from letting out of a residential house or a part of it by the owner shall not be included in income under sub-section (1) and shall be 30
chargeable only under the head “Income from house property”.
27. The income referred to in section 26 shall be computed as per the provisions of sections 28 to 60, except section 58.
28. (1) The following amounts shall be allowed as deduction in respect of premises, machinery, plant or furniture, wholly and exclusively, used for the 35
purposes of the business or profession:––
(a) any premium paid in respect of insurance against risk of damage or destruction thereof;
(b) land revenue, local rates or municipal taxes paid;
(c) rent paid, when the premises are occupied by the assessee as a tenant; (d) amount paid on account of current repairs, not being capital
40
expenditure, when the premises are occupied by the assessee otherwise than as a tenant; and
(e) cost of repairs, not being capital expenditure, when the premises occupied by the premises occupied by the assessee as a tenant.
(2) In case where the premises, building, machinery, plant or furniture is
45
partly used or not wholly and exclusively used for the purposes of the business or profession, the deduction allowable under sub-section (1) shall be restricted to the fair proportionate part thereof as determined by the Assessing Officer, having regard to the usage for the purposes of the business or profession.
21 of 1860.
51
29. (1) The following sums, when paid by the assessee as an employer, shall be allowed as deduction in computing income chargeable under section 26:––
(a) any contribution paid to a recognised provident fund or an approved superannuation fund, subject to––
(i) the limits as prescribed for recognising the provident fund
5
or approving the superannuation fund; and
(ii) the conditions, as the Board may specify, for cases where
the contributions are not made annually either as fixed amounts, or annual contributions fixed on some definite basis by reference to the income chargeable under the head “Salaries” or the contributions or
10
to the number of members of the fund;
(b) any contribution paid to a pension scheme referred to in section 124, for an employee up to 14% of the salary of the employee in the tax year, where such salary includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites;
15
(c) any contribution paid to an approved gratuity fund created by the assessee for the exclusive benefit of his employees under an irrevocable trust;
(d) any provision made for the purpose of making contribution towards approved gratuity fund or for the purpose of payment of any gratuity that has become payable during the tax year;
20
(e)(i) the amount of contribution received from an employee by the assessee to which the provisions of section 2(49)(o) apply, if it is credited by the assessee to the account of the employee in the relevant fund or funds by the due date;
(ii) for the purposes of sub-clause (i), “due date” means the date by
25
which the assessee is required as an employer to credit employee contribution to the account of an employee in the relevant fund under any Act, rule, order or notification issued under it or under any standing order, award, contract of service or otherwise and the provisions of section 37 shall not apply for determining the “due date” under this clause.
30
(2) (a) For the purposes of sub-section (1)(d), no deduction shall be allowed for any provision made for the payment of gratuity to the employees on their retirement or termination for any reason; and
(b) in case deduction has been allowed for any provision made under sub-section (1)(d), then no deduction shall be allowed on actual payment made
35
from such provision.
(3) No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards setting up or formation of, or as contribution to, any fund, trust, company, association of persons, body of individuals, society registered under the Societies Registration Act, 1860, or other institution for any
40
purpose, except where such sum is so paid, for the purposes and to the extent provided by or under sub-section (1)(a) or (b) or (c), or as required by or under any other law in force.
30. The following sums shall be allowed as deduction in computing income chargeable under section 26, being premium paid:––
45
(a) by any assessee in respect of insurance against risk of damage or destruction of stocks or stores used for the purposes of business or profession;
(b) by a federal milk co-operative society to effect or to keep in force an insurance on the life of the cattle owned by a member of a co-operative society, being a primary society engaged in supplying milk raised by its
50
members to such federal milk co-operative society;
Deductions
related to
employee
welfare.
Deduction on certain premium.
Deduction for bad debt and provision for bad and doubtful
debt.
52
(c) by the assessee, as an employer, through any mode of payment other than cash, to effect or to keep in force an insurance on the health of its employees under a scheme framed in this behalf by—
(i) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation)
5
Act, 1972 and approved by the Central Government; or
(ii) any other insurer and approved by the Insurance Regulatory and Development Authority established under section 3(1) of the Insurance Regulatory and Development Authority Act, 1999.
31. (1) The amount mentioned in column C of the Table below, in respect
10
of any provision for bad and doubtful debts made by the assessee specified in column B thereof, shall be allowed as a deduction in computation of income chargeable under section 26.
Table
57 of 1972. 41 of 1999.
Sl
No.
Specified assessee Amount of deduction 15
A B C
1. (a) A scheduled bank, other than a bank incorporated by or under the laws of a country outside India; or
(b) a non-scheduled bank; or
(c) a co-operative bank, other than—
(i) a primary agricultural credit
society; or
(ii) a primary co-operative
agricultural and rural development bank.
2. (a) A bank incorporated by or under the laws of a country outside India; or
(b) a public financial institution or a State Financial Corporation or a State Industrial Investment Corporation; or
(c) a non-banking financial company.
(a) not more than 8.5% of the total income of the tax year computed before making any deduction under this clause and Chapter VIII, and an additional amount up to 10% of the aggregate average advances made by rural branches computed in the manner as prescribed;
(b) for an assessee mentioned in clauses (a) and (b) of column B, at its option, an additional amount in excess of clause (a) of this column
but not more than the income from redemption of securities as per a scheme framed by the Central Government, when such income has been disclosed in the return of income under the head “Profits and gains of business or profession”.
Not more than 5% of the total income of a tax year computed before making any deduction under this clause and Chapter VIII.
20 25 30
35 40 45
50
53
(2) Any amount of bad debt, or part of it, in the tax year in which such amount is written off as irrecoverable in the accounts of the assessee, shall be allowed as deduction in computation of income chargeable under section 26, subject to the following conditions:––
(a) it has been taken into account in computing the income of the
5
assessee of the tax year in which it is written off, or any earlier tax year, or represents the money lent in the ordinary course of the business of banking or money lending which is carried on by the assessee;
(b) if the amount ultimately recovered on any such debt or part of debt is less than the difference between the debt or part and the amount so
10
deducted, the deficiency shall be deductible in the tax year in which the ultimate recovery is made;
(c) where it relates to an assessee to which sub-section (1) applies,––
(i) only that amount which exceeds the credit balance in the
provision for bad and doubtful debts account made under that
15
sub-section shall be allowed as deduction;
(ii) it shall be allowed only when the assessee has debited such
amount in that tax year to the provision for bad and doubtful debts account made under that sub-section; and
(d) the account referred to in clause (c) shall be only one such account 20
under sub-section (1) and such account shall be related to all types of advances, including advances made by rural branches.
(3) For the purposes of this sub-section (2),––
(a) any bad debt or part of it written off as irrecoverable shall not include any provision for bad and doubtful debt;
25
(b) any amount of bad debt or part of it, which has been taken into account in computing the income of the assessee of the tax year in which the amount of bad debt or part of it becomes irrevocable or of an earlier tax year, as per income computation and disclosure standards notified under section 276(2) without recording it in the accounts, shall be allowed as a deduction in
30
computing the income of the assessee of the tax year in which it becomes irrecoverable and such bad debt or part of it shall be deemed to be written off as irrevocable in the accounts for the purposes of sub-section (2).
32. (1) The following amounts shall be allowed as deduction in computing income chargeable under section 26:––
35
(a) bonus or commission paid to an employee for services rendered, but only when such sum would not have been payable to the employee as profits or dividend if it had not been paid as bonus or commission;
(b) interest paid in respect of capital borrowed for the purposes of business or profession, where––
40
(i) interest shall not include interest on capital borrowed for
acquisition of an asset, whether capitalised in the books of account or not, for any period beginning from the date the capital was borrowed for acquisition of the asset till the date that asset was first put to use;
(ii) recurring subscriptions paid periodically by shareholders or
45
subscribers in Mutual Benefit Societies fulfilling the conditions as prescribed, shall be deemed to be capital borrowed;
(c) contribution paid by a public financial institution to the credit guarantee fund trust for small industries as the Central Government may, by notification, specify;
50
Other
deductions.
54
(d) the pro rata amount of discount on a zero coupon bond having regard to the period of life of such bond calculated in the manner, as prescribed, where––
(i) “discount” means the difference between the amount received or receivable by the infrastructure capital company or
5
infrastructure capital fund or public sector company or scheduled bank issuing the bond, and the amount payable on maturity or redemption of such bond;
(ii) “period of life of bond” means the period commencing from the date of issue of the bond and ending on the date of the maturity
10
or redemption of such bond;
(e) the amount carried to a special reserve created and maintained by a specified entity, subject to the following conditions:––
(i) the deduction shall not exceed 20% of the profits derived from an eligible business computed under the head “Profits and gains of
15
business or profession” before any deductions under this clause; and
(ii) when the aggregate of such amounts carried to such reserve account from time to time exceeds twice the amount of paid-up share capital and of general reserves of the specified entity, no deduction 20
shall be allowable on such excess,
and for the purposes of this clause,––
(A) “specified entity” means—
(I) a financial corporation as specified in section 2(72) of the Companies Act, 2013;
(II) a financial corporation which is a public sector company; 25
(III) a banking company;
(IV) a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank;
(V) a housing finance company; and
(VI) any other financial corporation including a public
30
company;
(B) “eligible business” means,—
(I) in respect of any of the specified entities referred to in clauses (e)(A)(I) to (IV), the business of providing long-term finance for—
(a) industrial or agricultural development;
35
(b) development of infrastructure facility in India; or
(c) development of housing in India;
(II) in respect of the specified entity referred to in clause (e)(A)(V), the business of providing long-term finance for the construction or purchase of houses in India for residential purposes; and
40
(III) in respect of the specified entity referred to in clause (e)(A)(VI), the business of providing long-term finance for development of infrastructure facility in India;
(C) “infrastructure facility” means—
(I) an infrastructure facility as defined in Explanation to
45
section 80-IA(4)(i) of the Income-tax Act, 1961 or any other public facility of a similar nature as notified by the Board in this behalf and which fulfils the conditions as prescribed;
18 of 2013. 43 of 1961.
43 of 1961.
5
10
15
20
25
30
35
40
45
55
(II) an undertaking referred to in section 80-IA(4)(ii) or (iii) or (iv) or (vi) of the Income-tax Act, 1961; and
(III) an undertaking referred to in section 141(5);
(f) any expenditure, not being capital expenditure, incurred by a corporation or a body corporate, by whatever name called, if,—
(i) it is constituted or established by a Central Act or State Act or Provincial Act;
(ii) it is notified by the Central Government for the purposes of this clause having regard to the objects and purposes of the Act referred to in sub-clause (i); and
(iii) the expenditure is incurred for the objects and purposes authorised by the Act under which it is constituted or established;
(g) the expenditure incurred by a co-operative society engaged in the business of manufacture of sugar, on purchase of sugarcane at a price equal to or less than the price fixed or approved by the Government;
(h) marked to market loss or other expected loss as computed as per the income computation and disclosure standards notified under section 276(2) and no deduction or allowance for such loss shall be allowed under any other provision of this Act;
(i) any expenditure bona fide incurred by a company for the purpose of promoting family planning amongst its employees, subject to the following conditions:––
(i) if such expenditure or any part of it is of capital nature, one-fifth of it shall be deducted for the tax year in which it was incurred and the balance shall be deducted in equal instalments for each of the four immediately succeeding tax years;
(ii) the provisions of sections 33(11) and 112(3) shall apply to deduction under this clause as they apply in relation to deductions allowable in respect of depreciation;
(iii) the provisions of sections 38(1)(c), 39(4) (Table: Sl. No. 9) and 45(6), shall apply to an asset representing capital expenditure for promoting family planning, to the extent they apply to an asset representing capital expenditure on scientific research;
(j) the amount being difference between the cost of animals used for the purposes of the business or profession otherwise than as stock-in-trade, as reduced by the amount realised from the carcasses or animals, where such animals have died or become permanently useless; and
(k) the amount paid as securities transaction tax or commodities transaction tax, if––
(i) the taxable securities transactions or taxable commodities transactions are entered into the course of the business during the tax year; and
(ii) the income arising from such taxable securities transactions or taxable commodities transactions is included in the income computed under the head “Profits and gains of business or profession”.
56
Deduction for
depreciation.33. (1) A deduction in respect of depreciation of—
(a) buildings, machinery, plant or furniture, being tangible assets;
(b) know-how, patents, copyrights, trademarks, licences, franchises
or any other business or commercial rights of similar nature, being
5
intangible assets acquired, not being goodwill of a business or profession,
owned wholly or partly by the assessee and used wholly and exclusively for the purposes of the business or profession, shall be allowed, as per the provisions of this section.
(2) In case of assets referred to in sub-section (1) of an undertaking
engaged in generation or generation and distribution of power, the depreciation
10
shall be a percentage of its actual cost to the assessee, as prescribed.
(3) (a) In case of any block of assets, depreciation shall be a percentage of
its written down value, as prescribed;
(b) when any asset forming part of the block of assets is partly, or not
wholly and exclusively, used for the purposes of the business or profession, the
15
deduction allowable shall be restricted to the fair proportionate part thereof as determined by the Assessing Officer, having regard to the usage for the purposes of the business or profession;
(c) when deduction of actual cost in respect of any machinery or plant has been
20
allowed under section 54, no deduction under this sub-section shall be allowed.
(4) The deduction under this section shall be restricted to 50% of the prescribed
rate, if such asset, being asset referred to in sub-sections (1), (2) and (8) is––
(a) acquired by the assessee during the tax year; and
(b) put to use for the purposes of business or profession for less than
25
one hundred and eighty days in that tax year.
(5) The allowable deduction calculated at the prescribed rates under this
section shall be allowed on pro rata basis based on number of days for which assets were used by the following:––
(a) predecessor and successor, in case of a succession under
30
section 70(1)(zd) or (ze) or (zf), or section 313; or
(b) amalgamating company and the amalgamated company in case
of an amalgamation; or
(c) demerged company and the resulting company in case of a demerger.
(6) Where a building, not owned by the assessee, is held on lease or by any
other right of occupancy is used for the purposes of business or profession, and
35
if any capital expenditure is incurred by the assessee for the purposes of business or profession on construction of any structure or any work by way of renovation, extension or improvement to such building, then such structure or work shall be treated as a building owned by the assessee for the purposes of this section.
(7) The provisions of this section shall apply even when the assessee has
40
not claimed deduction for depreciation in computing the total income.
(8) Further sum in addition to deduction under sub-section (3) shall be
allowed, when–—
(a) the assessee is engaged in the business of manufacture or
production of any article or thing or in the business of generation,
45
transmission or distribution of power;
(b) the assessee acquires and installs any new machinery or plant;
57
(c) the new machinery or plant is first put to use by the assessee for the purposes of business; and
(d) the new machinery or plant—
(i) is not a ship or an aircraft;
(ii) was not used either within or outside India by any other
5
person before its installation by the assessee;
(iii) is not installed in any office premises or any residential
accommodation, including accommodation in the nature of a guest house;
(iv) is not in the nature of any office appliances or road
10
transport vehicle; and
(v) is not of a class of asset on which the whole of the actual
cost is allowable as a deduction (whether by way of depreciation or otherwise) in computing the income under the head “Profits and gains of business or profession” of any tax year.
15
(9) The additional deduction referred to in sub-section (8) shall be––
(a) 20% of the actual cost of the new machinery or plant in the tax year when it is acquired and put to use; or
(b) 10% of the actual cost, if the new machinery or plant is acquired and put to use for less than one hundred and eighty days in the relevant tax year, and 20
the remaining 10% shall be allowed in the immediately succeeding tax year.
(10) The difference between the written down value and the money payable including the scrap value, if any, shall be allowed as deduction when any tangible asset in respect of which depreciation is claimed and allowed under sub-section (2)––
25
(a) is sold, discarded, demolished or destroyed in the tax year not being the tax year in which it is first put into use;
(b) the money payable including the scrap value, if any, is less than its written down value; and
(c) such deficiency is actually written off in the books of account of 30
the assessee.
(11) (a) Where the profits and gains chargeable for the tax year before allowing the deduction under sub-section (1) is less than the allowable deduction under that sub-section, then––
(i) if such profits and gains is not a loss, the deduction under sub-section (1) 35
shall be allowed to the extent of the available profits and gains;
(ii) if such profits and gains is a loss, no deduction under sub-section (1) shall be allowed;
(b) the amount of deduction which has not been allowed under clause (a) shall be added to the allowable deduction under this section, whether available or not, for the succeeding tax year and the total amount shall be deemed to be
40
eligible for deduction in that year, and so on for the succeeding tax years;
(c) the provisions of this sub-section shall be subject to the provisions of sections 112(3) and 113(4); and
(d) any deduction in respect of any depreciation carried forward to the succeeding tax year under this sub-section shall be deemed to be depreciation,
45
actually allowed.
(12) In this section,––
58
(a) “assets” mean—
General
conditions for allowable
deductions.
(i) tangible assets, being buildings, machinery, plant or furniture;
(ii) intangible assets being––
(A) know-how;
5
(B) patents;
(C) copyrights;
(D) trademarks;
(E) licences;
(F) franchises; or
10
(G) any other similar business or commercial rights, but
not being goodwill of a business or profession;
(b) “know-how” means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil-well or other sources of mineral deposits (including
15
searching for discovery or testing of deposits for the winning of access thereto);
(c) “sold” includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating
20
company to the amalgamated company where the amalgamated company is an Indian company or in a scheme of amalgamation of a banking company, as referred to in section 5(c) of the Banking Regulation Act, 1949 with a banking institution as referred to in section 45(15) of the said Act, sanctioned and brought into force by the Central Government under section 45(7) of that Act,
25
of any asset by the banking company to the banking institution;
(d) “written down value of the block of assets” shall have the same meaning as in section 41(1)(Table: Sl. No. 3)
34 (1) Any expenditure (not being an expenditure of the nature specified in sections 28 to 33 and not being in the nature of capital expenditure or personal
30
expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession”.
(2) For the purposes of sub-section (1), an expenditure laid out or expended wholly and exclusively for business or profession by the assessee shall not include
35
any of the following:––
(a) an expenditure incurred for any purpose which is an offence or is prohibited by law; or
(b) an expenditure incurred on the activities relating to corporate social 40
responsibility referred to in section 135 of the Companies Act, 2013; or
(c) an expenditure incurred on advertisement in any souvenir, brochure, tract, pamphlet or the like, published by a political party.
(3) The expenditure mentioned in sub-section (2)(a) shall include expenditure incurred for––
(a) any purpose which is an offence under, or is prohibited by, any law
45
in force in or outside India; or
(b) providing a benefit or perquisite in any form to a person, who may or may not be carrying on a business or exercising a profession, when its acceptance by the person is in violation of any law or rule or regulation or 50
guideline governing the conduct of that person; or
10 of 1949. 18 of 2013.
59
(c) compounding an offence under any law in force in or outside India; or
(d) settling proceedings initiated in relation to contravention under any law notified by the Central Government in this behalf.
35.Irrespective of any other provision of ChapterIV-D, the following amounts 5
shall not be allowed as deduction in computing the income chargeable under the head “Profits and gains of business or profession”:—
(a) any amount on account of––
(i) tax paid on income; or
(ii) tax paid by employer referred to in Schedule III
10
(Table: Sl. No. 10); or
(iii) tax paid in any other country for which relief is eligible under
section 159 or 160,
and shall include any surcharge or cess on such tax, by whatever name called;
(b)(i) 30% of any sum payable to a resident on which tax is deductible at source under Chapter XIX-B and during the tax year, such tax has not been
15
deducted or after deduction, has not been paid up to the due date specified in section 263(1), where—
(A) tax is deducted and paid during any subsequent tax year,
deduction of such sum shall be allowed as a deduction in computing the income in any subsequent tax year, in which such tax has been paid;
20
(B) the assessee is required to and fails to deduct whole or any
part of the tax under Chapter XIX-B but he is not deemed to be an assessee in default under section 398(2), then for the purposes of this sub-clause, the assessee shall be deemed to have deducted and paid the tax on such sum on the date on which the return has been filed by
25
the payee referred to in section 398(2);
(ii) any interest, royalty, fees for technical services or other sum chargeable under this Act which is payable––
(A) outside India; or
(B) in India to a non-resident (which is not a company) or to a
30
foreign company,
on which tax is deductible at source under Chapter XIX-B and during the tax year, such tax, has not been deducted or after deduction, has not been paid up to the due date specified in section 263(1), where––
(I) tax is deducted and paid during any subsequent tax year,
35
deduction of such sum shall be allowed as a deduction in computing the income in any subsequent tax year, in which such tax has been paid;
(II) the assessee is required to and fails to deduct whole or any part
of the tax under Chapter XIX-B but he is not deemed to be an assessee in default under section 398(2), then for the purposes of this sub-clause
40
the assessee shall be deemed to have deducted and paid the tax on such sum on the date on which the return has been filed by the payee as referred to in section 398(2);
(iii) any payment to a provident or other fund established for the benefit of employees of the assessee, unless the assessee has made effective arrangements to
45
secure that tax shall be deducted at source under Chapter XIX-B from any payments made from the fund which are chargeable to tax under the head “Salaries”;
Amounts not deductible in certain
circumstances.
60
(c) any payment chargeable under the head “Salaries”, payable outside India or to a non-resident on which tax is deductible at source under Chapter XIX-B and such tax has not been deducted or, after deduction, has not been paid;
(d)(i) any consideration paid or payable to a non-resident for a specified service on which equalisation levy is deductible under Chapter VIII of the
5
Finance Act, 2016 and such levy has not been deducted or, after deduction, has not been paid up to the due date specified in section 263(1);
(ii) deduction of such consideration shall be allowed in any subsequent tax year, in which such levy has been paid;
10
(e) any amount––
(i) paid by way of royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge, by whatever name called, which is levied exclusively on; or
(ii) which is appropriated, directly or indirectly, from a State Government undertaking, by the State Government;
15
(f) the expenditure incurred by a firm, assessable as such––
(i) in the nature of salary, bonus, commission or remuneration, by whatever name called (herein referred as remuneration) to a partner, who is not a working partner; or
(ii) on the remuneration to a working partner and interest to any
20
partner, if it is––
(A) not authorised by the partnership deed applicable for the
period for which such remuneration or interest is paid; or
(B) authorised by and is as per the terms of partnership deed
but relates to the period prior to the date of such partnership deed,
25
or which was not authorised by the earlier partnership deed; or
(iii) on the aggregate remuneration to all working partners as authorised by the partnership deed, exceeding the amount computed as under:––
(A) on the first six lakh rupees of the book profit or in case
30
of a loss, three lakh rupees or 90% of the book profit, whichever is higher;
(B) on the balance of the book profit at the rate of 60%; or
(iv) on interest to any partner as authorised by the partnership deed, exceeding 12% simple interest per annum, and where an individual is a
35
partner in a firm, on behalf of or for the benefit of any other person, such partner and any other person shall be referred as a “representative partner” and the “person so represented”, respectively, then the provisions of sub-clause (ii) and this sub-clause––
(A) shall not be applicable in respect of interest paid to such
40
individual not as a representative partner;
(B) shall be applicable in respect of interest paid to an
individual as a representative partner and the person so represented;
(C) shall not be applicable in respect of interest paid to a
partner, otherwise than as a representative partner, on behalf of or
45
for the benefit of any other person; or
28 of 2016.
