AS INTRODUCED IN LOK SABHA

Bill No. 24 of 2025

THE INCOME-TAX BILL, 2025
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ARRANGEMENT OF CLAUSES
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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.
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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.
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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.
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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.
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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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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
5 1. (1) This Act may be called the Income-tax Act, 2025. Short title,
extent and
commencement.
(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.
 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);
(3) “Additional Director” means a person appointed to be an Additional 5
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
of any process ordinarily employed by a cultivator or receiver of 15
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
has been performed other than a process of the nature described in 20
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
5 companies to form one company (the company or companies which so merge
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
20 amalgamation,
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;
25 (7) “annual value”, in relation to any property, means its annual value as
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
30 and continues to be approved by the approving authority as per Part B of
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;

(14) “Assistant Commissioner” means a person appointed to be an Assistant 15

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);

(16) “average rate of income-tax” means the rate arrived at by dividing 20

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 54 of 1963.
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
 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
15 of 1992. 5 Act, 1992; or
(b) a Real Estate Investment Trust under the Securities and Exchange
Board of India (Real Estate Investment Trusts) Regulations, 2014, made
15 of 1992. under the Securities and Exchange Board of India Act, 1992;
(22) “capital asset” means—

10 (a) property of any kind held by an assessee, whether or not

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
15 of 1992. 15 Securities and Exchange Board of India Act, 1992;
(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—
20 (i) any stock-in-trade, other than the securities referred to in sub-clause (b),
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
Sl. Population of municipality or Within distance, measured
35 No. cantonment board aerially, from local limits of
any municipality or
cantonment board not being
more than
A B C
40 1. More than 10,000 but less than Two kilometres.
1,00,000.
2. 1,00,000 and above, but less than Six kilometres.
10,00,000.
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; 42 of 1956.

(23) “charitable purpose” includes–– 30

(a) relief of the poor;

(b) education;

(c) yoga;

(d) medical relief;

(e) preservation of environment (including watersheds, forests and 35

wildlife);

(f) preservation of monuments or places or objects of artistic or

historic interest;
 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
5 of Income-tax under section 237(1);
(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
10 Income-tax or a Principal Director of Income-tax under section 237(1);
(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
43 of 1961. 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
18 of 2013. 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
18 of 2013. 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:— 18 of 2013.

(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; 42 of 1956.

(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

or Provincial Act; or 15

(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 42 of 1999.
thereunder or any other corresponding law;

(31) “co-operative bank” shall have the same meaning as specified in 30

10 of 1949.
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 2 of 1912.
any State or Union territory for the registration of co-operative societies;

(33) “currency” shall have the same meaning as assigned to it in 35

section 2(h) of the Foreign Exchange Management Act, 1999; 42 of 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 18 of 2013.
resulting company in such a manner that—
 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)
18 of 2013. 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),––
L
N= Kx( )
M
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
such scheme approved by the Central Government or any other body 25
authorised under the Companies Act, 2013 or any other applicable law 18 of 2013.
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
18 of 2013.
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
Director or an Additional Director or a Joint Director or a Deputy Director or 40
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
 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,
18 of 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 50 of 2019.
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 21 of 2000.
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;
 13

(45) “firm” shall have the same meaning as assigned to it in section 4 of

9 of 1932. the Indian Partnership Act, 1932, and shall include a “limited liability
partnership” as defined in section 2(1)(n) of the Limited Liability Partnership
6 of 2009. 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
42 of 1999. 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
25 expenses wholly, necessarily and exclusively for the performance of the
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
30 resides or to compensate him for the increased cost of living;
(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
40 benefit any income is receivable by the representative assessee (such
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, 34 of 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, 43 of 1961.
 15

where,––
(A) “card game and other game of any sort” includes any game show, an
entertainment programme on television or electronic mode, in which people
compete to win prizes or any other similar game;
5 (B) “Keyman insurance policy” shall have the same meaning as assigned
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
80 of 1976. 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
18 of 2013. 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
42 of 1999. 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
43 of 1961. 35 Act, 1961; or
(b) an undertaking developing and building––
(i) a housing project referred to in section 80-IB(10) of the
43 of 1961. 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 16 of 1908.
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 4 of 1938.
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; 28 of 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);
(63) “Joint Commissioner (Appeals)” means a person appointed to be a 25
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; 5 of 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—
 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
2 of 1934. 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
9 of 1932. of the Indian Partnership Act, 1932, and shall include—
20 (a) any person who, being a minor, has been admitted to the
benefits of partnership; and
(b) a partner of a limited liability partnership as defined in
6 of 2009. section 2(1)(q) of the Limited Liability Partnership Act, 2008;
(75) “partnership” shall have the same meaning as assigned to it in
9 of 1932. 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
6 of 2009. Partnership Act, 2008;
(76) “Permanent Account Number (PAN)” means a unique number
consisting of ten alphanumeric characters, allotted by the Assessing Officer to
30 a person for the purpose of identification under this Act, and includes a
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

40 (g) every artificial juridical person, not falling within any of the
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 23 of 1955.
under section 3 of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970, or under section 3 of the Banking Companies 5 of 1970.
(Acquisition and Transfer of Undertakings) Act, 1980 and a bank included in 30 40 of 1980.
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; 18 of 2013.

(89) “public servant” shall have the same meaning as assigned to it in 35

section 2(28) of the Bharatiya Nyaya Sanhita, 2023; 45 of 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
 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
25 of the Schedule XI, and includes a provident fund established under a scheme
framed under the Employees’ Provident Funds and Miscellaneous Provisions
19 of 1952. Act, 1952;
(92) “recognised stock exchange” means a recognised stock exchange as
42 of 1956. referred to in section 2(f) of the Securities Contracts (Regulation) Act, 1956
30 and which fulfils such conditions, as prescribed, and notified by the Central
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,
35 brother, sister or any lineal ascendant (maternal as well as paternal) or
descendant of that individual;
(95) “Reserve Bank of India” means the Bank constituted under
2 of 1934. 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; 2 of 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
Board of India Act, 1992; 5 15 of 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
which the company goes into liquidation; 20

(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
corporatisation of the recognised stock exchange in India; 40

(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);
 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
10 plan of a mutual fund scheme 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)(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
15 in a segregated portfolio referred to in section 73(1) (Table: Sl. No. 11);
(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);
25 (C) there shall be reckoned,––
(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
40 financial asset, for a capital asset being such financial asset;
(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
45 a capital asset being such specified security or sweat equity shares;
(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
50 209(1)(Table: Sl. No. 2) held by such assessee;
 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; 42 of 1956.

(C) “specified security” means the securities as defined in

section 2(h) of the Securities Contracts (Regulation) Act, 1956 and, where 10 42 of 1956.
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 28 of 2005.
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
Assessing Officer under this Act, or as prescribed; 40

(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
 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
10 (g) any transaction involving the allowing of the possession of any
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
4 of 1882. 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
20 or shares of a company registered or incorporated outside India,
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,
25 furniture, fittings or other things also, such that the land, building, part of a
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
40 Officer and an Assistant Valuation Officer;
(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
45 value exchanged with or without consideration, with the promise or
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;
 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).
Definition of 3. (1) For the purposes of this Act, “tax year” means the twelve months period
“tax year”. 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
Charge of 4. (1) Income-tax for any tax year shall be charged as per the provisions of this
income-tax.
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.
Scope of total 5. (1) Subject to the provisions of this Act, the total income of any tax year of a
income. person, who is a resident, includes all income from whatever source derived, which—
 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––
10 (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.
(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 Residence in
India.
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
44 of 1958.
(b) for employment outside India.
35 (4) The provisions of sub-section (2)(b) shall not apply in the case of an individual––
(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
40 foreign sources), sub-section (2)(b) shall apply as if the words “sixty days” had
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.
 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,
residence, or similar criteria; and 5

(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
(ii) its place of effective management is in India in that tax year; and 15

(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
sub-section (5); and 35

(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:— Income
deemed to be
(a) the annual accretion in that year to the balance at the credit of an received.
employee participating in a recognised provident fund, to the extent
provident in paragraph 6 of Part A of the Schedule XI;
5 (b) the transferred balance in a recognised provident fund, to the extent
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;
15 (b) any interim dividend shall be deemed to be the income of the tax
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 Income on
receipt of
or stock-in-trade or both from a specified entity in connection with the dissolution capital asset or
20 or reconstitution of such specified entity, then the specified entity shall be stock in trade
deemed to have transferred such capital asset or stock-in-trade, or both, to the by specified
specified person in the year in which such capital asset or stock-in-trade, or both, person from
specified
are received by the specified person. entity.
(2) Any profits and gains arising from the deemed transfer mentioned in
25 sub-section (1) by the specified entity shall be—
(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
30 the head “Profits and gains of business or profession” or under the head
“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
35 transfer mentioned in sub-section (1).
(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
40 two years from the 1st April, 2026.
(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
45 or the successive session aforesaid, both houses agree in making any modification
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
50 guideline.
 28

(7) In this section,—

(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
(ii) one or more new partners or members are admitted in such 10
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.
Income 9. (1) Income deemed to accrue or arise in India shall be the incomes
deemed to
accrue or arise
mentioned in sub-sections (2) to (10).
in India. (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
5 or any other permanent establishment or any other part of such non-resident
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––
10 (A) be deemed to be a person separate from, and independent of,
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;
15 (iv) “permanent establishment” shall have the meaning assigned to it
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––
20 (A) a business or profession carried on by the resident outside
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;
30 (b) in this sub-section, “royalty” means consideration (including any
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
35 licence) in respect of a patent, invention, model, design, secret formula or
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;
40 (iii) the use of any patent, invention, model, design, secret formula or
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);
5 (ii) does not include consideration for any construction, assembly,
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
15 conclude contracts on behalf of the non-resident or habitually
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
20 of the right to use, property owned by that non-resident or that
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;
30 (ii) a business activity carried out through a person who is a broker,
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—
35 (I) are controlled by the principal non-resident; or
(II) have a controlling interest in the principal
non-resident; or
(III) are subject to the same common control as the
principal non-resident,
40 and such person shall not be deemed as having an independent status;
(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,
5 its value substantially from the assets (whether tangible or intangible)
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
20 (ii) the date of transfer, if the book value of the assets of the
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—
30 (A) complying with the provisions of the tax laws of the
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
35 31st March or such other day referred to in sub-clause (ii), in a
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
40 referred to in sub-clause (ii) and ending with the date immediately
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––
45 (i) there is a transfer outside India of any share of, or interest in,
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 15 of 1992.

(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; 15 of 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
relation to such company or the entity; and 25

(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.
 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
10 connection in India; or
(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;
15 (b) the eligible investment fund mentioned in clause (a) shall not be said
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
20 so included irrespective of whether the activity of the eligible fund manager
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;
25 (e) the conditions for being an eligible investment fund or an eligible fund
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,
30 as specified, in case of an eligible investment fund and its eligible fund
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.
35 (13) In sub-section (2), the expression “through” shall mean and include “by
means of”, “in consequence of” or “by reason of”.
10. If a husband and wife are governed by the community of property Apportionmet
of income
system (known as “COMMUNIAO DOS BENS” under the Portuguese Civil between
Code of 1860) in the State of Goa and the Union territories of Dadra and spouses
40 Nagar Haveli and Daman and Diu, then–– governed by
Portuguese
(a) their income under any head of income shall not be assessed Civil Code.
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
45 wife;
 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

Incomes not 11. (1) In computing the total income of any person for a tax year under 10
included in total
income.
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
Incomes not 12. (1) In computing the total income of any political party or an
included in total electoral trust for a tax year under this Act, any income enumerated in
income of
political parties Schedule VIII shall not be included, subject to fulfilment of conditions
and electoral specified therein. 30
trusts.
(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
the purposes of this section as specified in the Schedule VIII. 35

CHAPTER IV
COMPUTATION OF TOTAL INCOME

A.—Heads of income
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 Income not
forming part of
purposes of computing the total income under this Chapter, no deduction shall be total income
allowed in respect of expenditure incurred by the assessee in relation to income and
which does not form part of the total income. expenditure in
relation to such
5 (2) Where the Assessing Officer, having regard to the accounts of the income.
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
15 provisions of this section shall apply in a case where any expenditure has been
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
20 15. (1) The following income shall be chargeable to income-tax under the Salaries.
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.
30 (3) If any salary paid in advance is included in the total income of any person
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
35 regarded as salary for the purposes of this section.
16. For the purposes of this Part, “salary” includes— Income from
salary.
(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;
 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.
Perquisite.
17. (1) For the purposes of this Part, “perquisite” includes—
(a) the value of rent-free accommodation provided to the assessee by 15
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;
(e) the value of any other benefit or amenity, as prescribed; 30

(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 46 of 1948.

(B) section 6C of the Employees’ Provident Funds and

19 of 1952.
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;
 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
20 employee under any scheme approved, for the purposes of section 30(c),
by the––
(i) Central Government; or
(ii) Insurance Regulatory and Development Authority
established under section 3(1) of the Insurance Regulatory and
41 of 1999. 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
41 of 1999.
Development Authority Act, 1999;
(e) any expenditure incurred by the employer for the use of any vehicle
35 for journey by the assessee from his residence to his office or other place of
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—
40 (i) medical treatment of the employee or any family member of
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
45 the patient in connection with such treatment.
 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
section 122(10); 15

(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’ 42 of 1956.
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.
Profits in lieu 18. (1) For the purposes of this Part, “profits in lieu of salary” includes,—
of salary.
(a) any amount of any compensation due to or received by an assessee
from his employer or former employer at or in connection with the— 35

(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
not consist of contributions by the assessee or interest on such 45
contributions; or
 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––
5 (a) Schedule II (Table: Sl. No. 3);
(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 Deductions
10 from salaries.
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

15 1. Sum paid by the assessee as a Entire amount.

tax on employment as per article
276(2) of the Constitution,
leviable by or under any law.

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
25 case.
3. Death-cum-retirement gratuity Entire amount.
received as referred to in
sub-section (2)(g).

4. Payment of retiring gratuity Entire amount.

30
received under the Pension Code
or Regulations applicable to the
members of the defence services.
5. Gratuity received under the Amount received, as
Payment of Gratuity Act, 1972 restricted to the amount
35 (39 of 1972). calculated as per the provisions
of section 4(2) and (3) of that
Act.
6. Any other gratuity received by Amount being minimum
an employee— of—
(i) on his retirement; or (a) actual gratuity received;
40
(ii) on his becoming (b) amount specified by the
incapacitated before such Central Government, by
retirement; or notification, having regard to
the limit applicable in this
(iii) on termination of his behalf to the employees of the
45 employment. 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.
15
7. Payment in commutation of Entire amount.
pension received—
(a) under the Civil Pensions
(Commutation) Rules of the
Central Government; or
(b) under any similar scheme 20
applicable to––
(i) the members of the civil
services of the Union or
holders of posts connected
with defence or of civil posts 25
under the Union, [such
members or holders not
covered under (a)];
(ii) the members of the all-
30
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
35
State; or
(v) the employees of a local
authority or a corporation
established by a Central Act or
State Act or Provincial Act. 40

8. Payment in commutation of (a) If the employee has

pension is received under any received gratuity, the commuted
scheme from any other employer. value of one-third of the pension,
which he is normally entitled to
45
receive;
(b) in any other case, the
commuted value of one-half of
such pension;
 43

A B C
(c) such commuted value
being determined having
regard to the age of the
5 recipient, the state of his
health, the rate of interest and
officially recognised tables of
mortality.
9. Payment in commutation of Entire amount.
10 pension received from a fund as
specified in Schedule VII
(Table: Sl. No. 3).
10. Compensation received by a Minimum of—
workman at the time of his
(a) compensation
15 retrenchment—
received;
(a) under the Industrial
(b) amount calculated as
Disputes Act, 1947
per provisions of section
(14 of 1947); or
25F(b) of the Industrial
(b) under any other Act or Disputes Act, 1947
20 rules, orders or notifications (14 of 1947);
issued thereunder; or
(c) such amount, not
(c) under any standing being less than ₹ 50,000 as
orders; or notified by the Central
Government.
(d) under any award,
25
contract of service or
otherwise.
11. Compensation received by a Compensation received.
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
35 which such scheme applies; and
(b) other relevant circumstances.
12. Amount received or receivable Minimum of—
on voluntary retirement or
termination of service under a (a) compensation received;
40 scheme or schemes of voluntary and
retirement, by an employee as
(b) ₹ 5,00,000.
referred to in sub-section (2)(h).

13. Payment received by an Entire amount.

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.
 44

A B C
14. Payment of the nature referred Amount being minimum
against serial number 13 received of —
by an employee who is not a
Central Government or State (a) the cash equivalent of 5
Government employee. 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 10
(entitlement of earned leave
shall not exceed thirty days
for every year of actual
service);
(b) amount “A”, 15

where,—
A =10×B;
B = average monthly
salary for the ten months
immediately preceding his 20
retirement whether on
superannuation or otherwise;
(c) amount as the Central
Government may, by
notification, specify in this 25
behalf having regard to the
limit applicable in this behalf
to the employees of that
Government; and
(d) actual payment 30
. received.
(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;
 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,
5 the following amounts shall be deemed to be compensation received at the
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
10 transfer (whether by agreement or by operation of law) of the
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
15 such transfer; or
(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

20 (C) the new employer is, under the terms of such transfer
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
14 of 1947. 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:––
30 (i) the applicable schemes of the said companies or authorities
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;

35 (ii) where deduction has been allowed to an employee in respect

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
40 said item, such amount shall not be allowed as a deduction from the
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
45 payment or payments was or were received in any earlier tax year), the
aggregate amount of deduction shall not exceed—
A – B,
 46

Where,—
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 3 of 1956.
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 59 of 1961.

(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
Income from 20. (1) The annual value of property consisting of any buildings or lands
house property.
appurtenant thereto, owned by the assessee shall be chargeable to income-tax
under the head “Income from house property”.
 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 Determination
5 be deemed to be the higher of the following:— of annual
value.
(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.
10 (2) In case the property or any part of it is let in normal course and was
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
15 during the tax year by the owner, irrespective of when such taxes became payable.
(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
20 wholly or partly at any time during the tax year, the annual value shall be nil for
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
25 actually occupy it due to any reason.
(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
30 any time of the tax year, or if the owner derives any other benefit from it.
22. (1) The income under the head “Income from house property” shall be Deductions from
income from
computed after allowing the following deductions:–– house property.
(a) 30% of the annual value;
(b) where the property has been acquired, constructed, repaired,
35 renewed or reconstructed with borrowed capital, the amount of any interest
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:––
40 (i) the property has been acquired or constructed with borrowed
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
45 payable for the said prior period shall be allowed as a deduction in five
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
 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–– 5

(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 10
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 15
Chapter XIX-B; and
(b) in respect of such interest, there is no agent in India as per
section 306.
Arrears of rent 23. (1) The amount of arrears of rent received from a tenant or the
and unrealised unrealised rent realised subsequently from a tenant shall deemed to be the 20
rent received income from house property in respect of the tax year in which such rent is
subsequently.
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 25
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.
Property owned 24. (1) For property co-owned with definite and ascertainable share, the
by co-owners. co-owners shall not be assessed as an association of persons and their income 30
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.
Interpretation. 25. For the purposes of sections 20 to 24, the “owner” in relation to a 35
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; 40
(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 45
4 of 1882.
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—
 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
5 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 transaction by way of sale, exchange or lease which
has the effect of enabling the enjoyment of such property.
10 D.— Profits and gains of business or profession
26. (1) The income from any business or profession carried on by Income under
head “Profits
the assessee at any time during the tax year shall be chargeable to and gains of
income-tax under the head “Profits and gains of business or profession”. business or
profession”.
(2) The income under sub-section (1) shall include––
15 (a) the profits and gains of any business or profession
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 —

20
(A) of an Indian company; or
(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,
25 in connection with termination of management, office or agency
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
30 business in the Government, including any corporation owned or
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
35 assistance against export, duty drawback or duty remission or any
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
40 (ii) in cash or in kind or partly in cash and partly in kind;
(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
45 income of the firm;
(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–
 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
chargeable only under the head “Income from house property”. 30
Manner of
computing 27. The income referred to in section 26 shall be computed as per the
profits and gains provisions of sections 28 to 60, except section 58.
of business or
profession.
Rent, rates, taxes, 28. (1) The following amounts shall be allowed as deduction in respect of
repairs and premises, machinery, plant or furniture, wholly and exclusively, used for the
insurance. purposes of the business or profession:–– 35

(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.
 51

29. (1) The following sums, when paid by the assessee as an employer, shall Deductions
related to
be allowed as deduction in computing income chargeable under section 26:–– employee
(a) any contribution paid to a recognised provident fund or an welfare.
approved superannuation fund, subject to––
5 (i) the limits as prescribed for recognising the provident fund
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
10 income chargeable under the head “Salaries” or the contributions or
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
15 provide, but excludes all other allowances and perquisites;
(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
20 gratuity that has become payable during the tax year;
(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;
25 (ii) for the purposes of sub-clause (i), “due date” means the date by
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
30 shall not apply for determining the “due date” under this clause.
(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
35 sub-section (1)(d), then no deduction shall be allowed on actual payment made
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
21 of 1860. 40 registered under the Societies Registration Act, 1860, or other institution for any
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 Deduction on
certain premium.
45 chargeable under section 26, being premium paid:––
(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
50 society, being a primary society engaged in supplying milk raised by its
members to such federal milk co-operative society;
 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 57 of 1972.

(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. 41 of 1999.

Deduction for 31. (1) The amount mentioned in column C of the Table below, in respect 10
bad debt and of any provision for bad and doubtful debts made by the assessee specified in
provision for bad
and doubtful
column B thereof, shall be allowed as a deduction in computation of income
debt. chargeable under section 26.
Table
Sl Specified assessee Amount of deduction 15
No.
A B C
1. (a) A scheduled bank, other than a bank (a) not more than
incorporated by or under the laws of a 8.5% of the total income
country outside India; or of the tax year computed 20

(b) a non-scheduled bank; or before making any

deduction under this
(c) a co-operative bank, other than— clause and Chapter VIII,
(i) a primary agricultural credit and an additional amount
up to 10% of the 25
society; or
aggregate average
(ii) a primary co-operative advances made by rural
agricultural and rural development bank. branches computed in
the manner as
prescribed; 30

(b) for an assessee

mentioned in clauses (a)
and (b) of column B, at
its option, an additional
amount in excess of 35
clause (a) of this column
but not more than the
income from redemption
of securities as per a
scheme framed by the 40
Central Government,
when such income has
been disclosed in the
return of income under
the head “Profits and 45
gains of business or
profession”.
2. (a) A bank incorporated by or under the Not more than 5% of
laws of a country outside India; or the total income of a tax
(b) a public financial institution or a year computed before 50

State Financial Corporation or a State making any deduction

Industrial Investment Corporation; or under this clause and
Chapter VIII.
(c) a non-banking financial company.
 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:––
5 (a) it has been taken into account in computing the income of the
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
10 debt is less than the difference between the debt or part and the amount so
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
15 provision for bad and doubtful debts account made under that
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
20 (d) the account referred to in clause (c) shall be only one such account
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
25 include any provision for bad and doubtful debt;
(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
30 276(2) without recording it in the accounts, shall be allowed as a deduction in
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 Other
deductions.
35 income chargeable under section 26:––
(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
40 business or profession, where––
(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;
45 (ii) recurring subscriptions paid periodically by shareholders or
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,
50 by notification, specify;
 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
shall be allowable on such excess, 20

and for the purposes of this clause,––

(A) “specified entity” means—
(I) a financial corporation as specified in section 2(72) of the 18 of 2013.
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 43 of 1961.
facility of a similar nature as notified by the Board in this behalf and
which fulfils the conditions as prescribed;
 55

(II) an undertaking referred to in section 80-IA(4)(ii) or (iii) or

43 of 1961. (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
5 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
10 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
15 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;
20 (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
25 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;
30 (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
35 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
40 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
45 taxable commodities transactions is included in the income computed
under the head “Profits and gains of business or profession”.
 56

Deduction for 33. (1) A deduction in respect of depreciation of—

depreciation.
(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
intangible assets acquired, not being goodwill of a business or profession, 5

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
allowed under section 54, no deduction under this sub-section shall be allowed. 20

(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
one hundred and eighty days in that tax year. 25

(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
section 70(1)(zd) or (ze) or (zf), or section 313; or 30

(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;
5 (ii) was not used either within or outside India by any other
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
40 or not, for the succeeding tax year and the total amount shall be deemed to be
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
45 succeeding tax year under this sub-section shall be deemed to be depreciation,
actually allowed.
(12) In this section,––
 58

(a) “assets” mean—

(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 10 of 1949.
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)
General 34 (1) Any expenditure (not being an expenditure of the nature specified in
conditions for sections 28 to 33 and not being in the nature of capital expenditure or personal 30
allowable expenses of the assessee), laid out or expended wholly and exclusively for the
deductions.
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
responsibility referred to in section 135 of the Companies Act, 2013; or 40 18 of 2013.

(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
guideline governing the conduct of that person; or 50
 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 Chapter IV-D, the following amounts Amounts not
5 deductible in
shall not be allowed as deduction in computing the income chargeable under the certain
head “Profits and gains of business or profession”:— circumstances.
(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
15 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—
(A) tax is deducted and paid during any subsequent tax year,
deduction of such sum shall be allowed as a deduction in computing the
20 income in any subsequent tax year, in which such tax has been paid;
(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
25 the tax on such sum on the date on which the return has been filed by
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
30 (B) in India to a non-resident (which is not a company) or to a
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––
35 (I) 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;
(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
40 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 the payee as
referred to in section 398(2);
(iii) any payment to a provident or other fund established for the benefit of
45 employees of the assessee, unless the assessee has made effective arrangements to
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”;
 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, 28 of 2016.
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
 61

(v) In this clause––

(A) “book profit” means the net profit, as shown in the profit
and loss account for the relevant tax year, computed as per
Chapter IV-D as increased by the aggregate amount of the
5 remuneration to all the partners of the firm, if such amount has
been deducted while computing the net profit;
(B) “working partner” means an individual who is actively
engaged in conducting the affairs of the business or profession of
the firm of which he is a partner;
10 (g) the expenditure incurred by an association of persons or a body of
individuals (other than a company, or a co-operative society or society
21 of 1860. registered under the Societies Registration Act, 1860, or under any law
corresponding to that Act in force in any part of India)––

(i) in the nature of interest, salary, bonus, commission or

15 remuneration, by whatever name called, made to a member of such
association or body;
(ii) where the interest has been paid by the association or the body
to its member and such member has also paid interest to the association
or the body, then only such excess interest, if any, paid by the association
20 or body shall not be allowed under sub-clause (i);
(iii) where an individual is a member of an association or a body
on behalf, or for benefit of any other person, such member and any other
person shall be referred as “representative member” and “person so
represented”, respectively, then, the provisions of this clause––
25 (A) shall not be applicable in respect of interest paid to or
received from such individual not being a representative member;
(B) shall be applicable in respect of interest paid to or
received from an individual as a representative member and the
person so represented;
30 (C) shall not be applicable in respect of interest paid to a
member, otherwise than as representative member, on behalf or
for the benefit of any other person.
36. (1) The provisions of this section shall have effect irrespective of Expenses or
payments not
anything to the contrary contained in any other provision of this Act relating to deductible in
35 computation of income under the head “Profits and gains of business or certain
profession”. circmstances.

(2) If the assessee incurs any expenditure for which payment has been or
is to be made to any “specified person”, which in the opinion of the Assessing
Officer is excessive or unreasonable having regard to the––
40 (a) fair market value of the goods, services or facilities; or

(b) legitimate needs of the business or profession of the assessee; or

(c) benefit derived by or accruing to the assessee therefrom,

so much of the expenditure as considered excessive or unreasonable by him shall not

be allowed as a deduction.
 62

(3) For the purposes of sub-section (2),––

(a) “specified person”,––
(i) in relation to an assessee mentioned in column B of the Table
below, shall be the person referred to in column C thereof:—
Table 5

Sl. No. Assessee Specified person

A B C

1. Individual. Any relative of the assessee.

2. Company. Any director of the company or

his relative. 10

3. Firm. Partner of the firm or its relative.

4. Association of persons. Member of the association or its

relative.

5. Hindu undivided family. Member of the family or his

relative. 15

(ii) shall mean any person being an individual or company or firm

or association of persons or Hindu undivided family having substantial
interest in the business or profession of the assessee, or any director,
partner, member thereof or any relatives of such individual, director,
partner, member or any other company in which the first mentioned 20
company has substantial interest;
(iii) shall mean a company, firm, association of persons, or Hindu
undivided family whose director, partner or member has substantial
interest in the business or profession of the assessee, or any director,
partner or member thereof and their relatives, as the case may be; 25

(iv) shall mean any person carrying on a business or profession, in

which assessee, being––
(A) an individual or his relative; or
(B) a company, its directors or their relatives; or
(C) a firm, its partners or their relatives; or 30

(D) an association of persons, its members or their relatives; or

(E) a Hindu undivided family, its members or their relatives,
has substantial interest in the business or profession of such person;
(b) a person is deemed to have “substantial interest in the business or
profession” if, at any time during the tax year, such person is— 35

(i) the beneficial owner of shares (not being shares entitled to fixed
rate of dividend with or without a right to participate in profits) carrying
at least 20% of the voting power, in case of assessee being a company; and
 63

(ii) entitled to at least 20% of the profits of the business or

profession in any other case, at any time during the tax year.
(4) Where any expenditure is incurred by the assessee and payment or
aggregate of payments made in a day to a person is exceeding ten thousand rupees
5 and is not through specified banking or online mode, then the expenditure by way
of such payments shall not be allowed as deduction.
(5) Where any deduction was made in any preceding tax year for a liability
incurred for any expenditure and payment in respect of such liability is made during
a subsequent tax year and if such payment or aggregate of payments made in a day
10 to a person exceeds ten thousand rupees and is not through specified banking or
online mode, such payment shall be deemed to be the income under the head “Profits
and gains of business or profession” in such subsequent tax year.
(6) For the purposes of sub-sections (4) and (5), the figure “ten thousand
rupees” shall be read as “thirty-five thousand rupees” in case the payment is made
15 for plying, hiring or leasing of goods carriages.
(7) The provisions of sub-sections (4) and (5) shall not be applicable in
cases and circumstances, as prescribed, having regard to the nature and extent
of banking facilities available, considerations of business expediency and other
relevant factors.
20 (8) Nothing (with reference to mode of payment) contained in any other
law in force or in any contract, shall apply in respect of any payment which has
been made through specified banking or online mode, in compliance of
sub-sections (4) to (7), and no plea shall be allowed to be raised, in any suit or
other proceeding on the ground that the payment was not made or tendered in
25 cash or in mode other than through specified banking or online mode.
37. (1) The following sums payable, as specified in sub-section (2), shall be Certain
deductions
allowed as deduction while computing the income chargeable under section 26 only allowed on
in the tax year in which such sums are actually paid irrespective of–– actual payment
basis only.
(a) any provision to the contrary in this Act; or
30 (b) method of accounting regularly followed; or
(c) the tax year in which the liability was incurred.
(2) The sums payable by an assessee referred to in sub-section (1), shall be––
(a) tax, duty, cess, surcharge or fee, by whatever named called, levied
under any law in force;
35 (b) contribution of the employer to a provident fund or superannuation
fund or gratuity fund or any fund for the welfare of employees;
(c) amount payable by employer in lieu of any leave at the credit of the
employee;
(d) any sum referred to in section 32(a);
40 (e) interest on loans or borrowings from specified financial entities as
per the terms and conditions of the agreement governing such loans or
advances;
(f) amount payable to the Indian Railways for use of railway assets; or
 64

(g) amount payable by the assessee to a micro or small enterprise beyond

the time limit specified in section 15 of the Micro, Small and Medium
Enterprises Development Act, 2006. 27 of 2006.

(3) In case the amounts specified in sub-section (2), except the sum referred
to in clause (g) thereof, are paid after the end of the tax year in which the liability 5
was incurred, but on or before the due date of filing of return of income under
section 263(1) for such tax year, the deduction towards such sum shall be allowed
in such tax year.
(4) If interest on loans or advances specified in sub-section (2)(e) is converted into
a loan or advance or debenture or any other instrument by which the liability to pay is 10
deferred to a future date, then it shall not be deemed to have been actually paid.
(5) If a deduction in respect of any sum payable under sub-section (2) has
already been allowed in any tax year when such liability was incurred, it shall not
be allowed again in any subsequent tax year when paid.
(6) The provisions of this section shall not apply to a sum received by the 15
assessee from any employee as contribution towards any of the funds referred to in
section 2(49)(o).
(7) For the purposes of this section, “specified financial entities” means a
public financial institution or State Finance Corporation or State Industrial
Investment Corporation or notified class of non-banking financial companies or 20
scheduled banks or co-operative banks (other than a primary agricultural credit
society or a primary co-operative agricultural and rural development bank).
Certain sums 38. (1) The following sums shall be deemed to be profit and gains of business
deemed as
profits and gains
or profession and shall be chargeable to income-tax, in the manner specified below,
of business or subject to the provisions of sub-section (2):–– 25
profession.
(a) where an allowance or deduction has been allowed in respect of any
loss, expenditure or trading liability incurred by the assessee during any tax
year, then,—
(i) the value of any benefit accruing to the assessee by way of
cessation or remission of such trading liability, including a unilateral act 30
of write-off of such liability in his accounts, in the tax year in which such
benefit accrues; or
(ii) any amount obtained by the assessee, whether in cash or
otherwise, in respect of such loss or expenditure incurred, in the tax year
in which the amount is obtained, 35

whether the business or profession in respect of which the allowance or

deduction was made is in existence in that year or not;
(b) in a case where any tangible asset, which is owned by assessee, is
sold, discarded, demolished or destroyed, and the money payable for the asset,
together with the scrap value [A] exceeds the written down value of the assets 40
[C], the sum as computed below, in the tax year in which the money payable
for the tangible asset becomes due––
(i) where the money payable for the asset together with the scrap
value [A] is less than the actual cost of the asset [B], then—
[A] – [C]; or 45

(ii) in any other case,—

[B] – [C];
 65

(c) in a case where an asset representing expenditure of a capital nature on

scientific research, referred to in section 45(1)(a) or (c) is sold, without having
been used for other purposes, and the sale proceeds together with the total
deductions allowed under that section exceed the amount of capital expenditure,
5 the excess or the amount of deduction so made, whichever is less, in the tax year
in which the asset was sold;
(d) in a case where a deduction has been allowed for a bad debt (or part of it)
under the provisions of section 31(2), and any amount subsequently recovered
exceeds the difference between such debt and the amount allowed, then the
10 amount in excess, in the tax year in which recovery is made;
(e) in a case where a deduction has been allowed for any special reserve
created and maintained under the provisions of section 32(e), any amount
subsequently withdrawn from such reserve, in the tax year in which the
amount is withdrawn.
15 (2) The provisions of sub-section (1) shall apply subject to fulfilment of the
following conditions:—
(a) in respect of sub-section (1)(a), only when an allowance or deduction
has been made in assessment for any earlier tax year towards the trading
liability, loss or expenditure incurred;
20 (b) in respect of sub-section (1)(b), only when the asset owned by the
assessee, has been used for the purpose of business, and depreciation has been
claimed and allowed thereon under section 33;
(c) in respect of sub-section (1)(c) of the said sub-section, only when the
assets has not been used for other purposes.
25 (3) Where the business or profession referred to in this section is no longer in
existence and there is income chargeable to tax under of sub-section (1)(a), (c), (d)
and (e), in respect of that business or profession, any loss, not being a loss sustained
in speculation business, which arose in that business or profession during the tax
year in which it ceased to exist and which could not be set off against any other
30 income of that tax year shall, so far as may be, be set off against the income
chargeable to tax under the said clauses of that sub-section.
(4) In respect of sums referred to in sub-section (1)(a), if the benefit accrues to, or
amount is obtained, by the successor in business, the value of benefit or the amount shall
be chargeable to income-tax as income in the hands of successor in business.
35 (5) The provisions of sub-section (1)(b), (c), (d) and (e) shall apply in a tax year
even if the business is no longer in existence.
(6) In this section,––
(a) “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,
40 in a scheme of amalgamation, of any asset by the amalgamating company to the
amalgamated company where the amalgamated company is an Indian company;
(b) “successor in business”means and includes––
(i) the amalgamated company, where there has been an
amalgamation;
45 (ii) the resulting company, where there has been a demerger;
(iii) where the assessee is succeeded by any other person in that
business or profession, that other person;
(iv) where a firm carrying on a business or profession is succeeded by
another firm, that other firm.
 66

Computation of 39. (1) The actual cost of an asset used for the purposes of the business or profession
actual cost.
shall be the actual cost to the assessee as, reduced by the following amounts:—
(a) part of cost of asset, if any, met by any other person or authority,
directly or indirectly;
(b) goods and services tax paid in respect of which input tax credit has 5
been claimed and allowed under the relevant law;
(c) additional duty leviable under section 3 of the Customs Tariff Act, 1975 51 of 1975.
in respect of which a claim of credit has been made and allowed under the Central
Excise Rules, 1944;
(d) subsidy, grant or reimbursement, by whatever name called, if any, 10
relatable to the acquisition of the asset, received by the assessee from—
(i) the Central Government;
(ii) a State Government;
(iii) any authority established under any law; or
(iv) any other person. 15

(2) The payment or aggregate of payments exceeding ten thousand rupees in

a day for acquisition of an asset, made to a person in a mode otherwise than by
specified banking or online mode, shall be excluded from the actual cost of the asset.
(3) In a case where the subsidy, grant or reimbursement referred to in
sub-section (1)(d) is not directly relatable to the asset acquired, the amount of 20
reduction under sub-section (1)(d) shall be determined as under:
𝐵
𝐴×( )
𝐶
Where,—
A = total amount of subsidy, grant or reimbursement not directly relatable to 25
the asset;
B = cost of the asset acquired for which actual cost is to be determined;
C = cost of all the assets in respect of or in reference to which the subsidy or
grant or reimbursement is so received.
(4) In circumstances specified under column B of the Table below, the actual 30
cost of the capital asset shall be as specified in column C thereof.
Table
Sl. No. Specified circumstances Determination of actual cost
A B C
1. Where capital asset is transferred Actual cost to amalgamated 35
by an amalgamating company to an company shall be the same as it
amalgamated company being an would have been if the
Indian company in a scheme of amalgamating company had
amalgamation. continued to hold such capital asset
for the purpose of its own business. 40

2. Where capital asset is transferred Actual cost to resulting company

by a demerged company to a resulting shall be the same as it would have
company being an Indian company in been, if the demerged company had
a demerger. continued to hold such asset for the
purpose of its own business, which 45
shall not exceed the written down
value of such capital asset in the
hands of demerged company.
 67

A B C
3. Where inventory is converted Fair Market Value as on date of
into capital asset. conversion, as determined in the
manner as prescribed.
5 4. Where capital asset is acquired Actual cost to previous owner
by the assessee by way of gift or as reduced by the depreciation
inheritance. allowable up to the immediately
preceding tax year, as if such asset
was the only asset in the relevant
10
block of asset.
5. Where a building, being the Actual cost of the building as
property of the assessee, is put to use reduced by the depreciation—
for the purpose of business or
(a) that would have been
profession during the tax year.
15 allowable had the building
been used for the purpose of
business from the date of
acquisition; and
(b) calculated at the rate
20 in force on the date on
which such asset was put to
use for business.
6. Where capital asset is transferred Actual cost to the transferee-
by— company shall be the same as it
(a) a holding company to its would have been, if the transferor
25
subsidiary company; or company had continued to hold
such asset for the purpose of its
(b) a subsidiary company to its own business.
holding company,
30 and the conditions of section 70(1)(c)
and (d) are satisfied.
7. Where a capital asset, which (a) Actual cost of the asset in
previously belonged to the assessee, the hands of assessee, when it was
is reacquired by the assessee. first acquired, as reduced by the
35 depreciation allowable up to the
immediately preceding tax year,
as if such asset was the only asset
in the relevant block of asset; or
(b) actual price for which such
40 asset is reacquired by the assesse,
whichever is lower.
8. Where the capital asset is Actual cost of asset to the
acquired by the assessee from assessee shall be the written down
previous owner and subsequently value of the asset in the hands of
45 asset is given back to the previous the previous owner at the time of
owner by way of lease, hire or transfer by the previous owner.
otherwise, and—
(a) the asset was being used
for the purpose of business by the
50 previous owner; and
(b) depreciation has been
claimed by the previous owner.
 68

A B C
Where the capital asset is used in Actual cost of asset as reduced
9.
business after it ceases to be used for by deduction allowed for the
scientific research related to that capital asset under section 45(1)(a)
business and a deduction is made or (c) or under any corresponding 5
under section 33(3). provision of the Income-tax Act,
1961(43 of 1961).
10. Where the assessee had acquired Actual cost of the asset as
an asset outside India, as a non- reduced by the depreciation––
resident, and the asset is brought by (a) that would have been 10
him to India and put to use in allowable had the asset been
business or profession in India. used for the purpose of business
or profession in India since the
date of its acquisition; and
(b) calculated at the rate in 15
force.
11. Where capital asset is acquired Actual cost of the asset, as if
under the scheme of corporatisation there was no corporatisation.
of a recognised stock exchange
approved by the Securities and 20
Exchange Board of India.
12. (a) Where deduction under Actual cost shall be deemed to
section 46 was allowed or allowable be nil.
in respect of the capital asset—
(i) to the assessee; or 25
(ii) to any person and the
assessee acquires or receives
such asset through special modes
of acquisition from such person.
(b) Where deduction allowed Actual cost of the asset as 30
under section 46 in respect of a reduced by the depreciation,—
capital asset becomes deemed (a) that would have been
income as per section 46(9)(b). allowable had the asset been
used for the purpose of
business since date of 35
acquisition; and
(b) calculated at the rate in
force.
13. Where any amount is paid or Actual cost shall not include so
payable as interest in connection much of such amount as is 40
with the acquisition of an asset. relatable to any period after such
asset is first put to use.
(5) Irrespective of anything contained in sub-section (4), in a case where the asset
is acquired by the assessee, its actual cost shall be determined by the Assessing Officer
having regard to all circumstances of the case, subject to the following conditions:— 45

(a) the asset was used by any other person for the purposes of his
business, before such acquisition; and
(b) the Assessing Officer is satisfied that the main purpose of the transfer
of the asset was to reduce tax liability (by claiming depreciation on enhanced
actual cost). 50
 69

(6) The determination of actual cost under sub-section (5) shall be made with
the prior approval of the Joint Commissioner.
(7) In this section, “special modes of acquisition” means acquisition—
(a) by way of a gift or will or an irrevocable trust; or
5 (b) upon distribution on the liquidation of a company; or
(c) by such mode of transfer as is referred to in section 70(1)(a), (c), (d), (e),
(j), (zd), (ze) and (zf).
40. (1) For the purposes of computation of income under the head “Profits and Special
provision for
gains of business or profession”, cost of acquisition of an asset acquired by–– computation of
10 (a) an amalgamated company under a scheme of amalgamation; or cost of
acquisition of
(b) an assessee, under a gift, or will, or an irrevocable trust, or on total certain assets.
or partial partition of a Hindu undivided family,
when sold as stock-in-trade shall be the sum of—
(i) cost of acquisition of the said asset in the hands of the amalgamating
15 company in case of clause (a), or the transferor or donor in case of clause (b);
(ii) any cost of improvement made;
(iii) any expenditure incurred by the amalgamating company or
transferor or donor wholly and exclusively in connection with such transfer.
(2) This section shall not apply to an asset referred to in section 67(6).
20 41. (1) For the purposes of different provisions for computation of income under Written down
the head “Profits and gains of business or profession”, written down value for the tax value of
depreciable
year shall be as mentioned in column C of the Table below:— asset.
Table
Sl. No. Circumstances Written down value
25 A B C
1. In case the asset is Actual cost to the assessee.
acquired in the tax year.
2. In case the asset Actual cost to the assessee less depreciation
is acquired before actually allowed under this Act or the Income-tax
43 of 1961. 30 the tax year. Act, 1961.
3. In case of block [(A-D)+ B-C]-E.
of assets.

Note:–– In column C,—

A = the written down value of the block of assets in the immediately
35 preceding tax year;
B = actual cost of any asset falling within that block, acquired during the
tax year;
C = moneys payable together with scrap value, if any, in respect of any
asset falling within the block, which is sold, transferred, demolished, destroyed
40 or discarded during the tax year, where “C” shall not exceed (A-D)+B;
D = depreciation actually allowed in respect of block of assets in relation
to the said immediately preceding tax year;
E = in the case of a slump sale, the actual cost of the asset falling within
that block as reduced by depreciation allowable from the tax year 1988-1989
45 onwards, as if the asset was the only asset in the relevant block of assets, which
shall not exceed [(A-D)+B-C].
 70

A B C

4. Where any block of asset Written down value in the hands of

is transferred by— the transferee company or amalgamated
company is the same as written down
(a)(i) a holding
value in the hands of transferor company 5
company to its subsidiary
or amalgamating company, as the case
company; or
may be, at the beginning of the tax year
(ii) a subsidiary in which such transfer took place.
company to its holding
company and the 10
conditions of section
70(1)(c) and (d) are
satisfied; or
(b) amalgamating
15
company to the
amalgamated company
being an Indian
company.
5. Where any asset, forming Written down value of block of
part of a block of assets is assets–– 20
transferred by a demerged
(a) for demerged company (for
company to a resulting
the immediately preceding tax
company.
year), shall be the written down
value in the immediately preceding
tax year as reduced by the written 25
down value of the assets
transferred to the resulting
company pursuant to such
demerger;
(b) for resulting company, shall 30
be the written down value of the
assets transferred from the
demerged company immediately
before such demerger.
6. Where any block of assets Written down value in the hands of 35
is transferred by a private limited liability partnership shall be
company or unlisted public written down value in the hands of said
company to a limited liability company as on the date of conversion of
partnership and the conditions the company into limited liability
in section 70(1)(ze) are partnership. 40
satisfied.
7. Where any asset forming Written down value of the block of
part of the block of assets is assets in the hands of resulting company,
transferred to a company shall be the written down value of the
under the scheme of assets transferred immediately before 45
corporatisation of a such transfer.
recognised stock exchange in
India approved by the
Securities and Exchange
50
Board of India.
 71

A B C
8. In a case of succession in Written down value of any asset or
business or profession under block of assets shall be the amount
section 313, where an which would have been taken as its
5 assessment is made in the written down value, if the assessment
hands of successor under had been made directly on the person
section 313 (2). succeeded to.

(2) Any allowance in respect of any depreciation carried forward under

10 section 33(11) shall be deemed to be the depreciation actually allowed.
(3) Where an assessee was not required to compute his total income for the
purposes of this Act for any tax year or tax years preceding the tax year under
consideration,—
(a) the actual cost of an asset shall be adjusted by the amount attributable
15 to the revaluation of such asset, if any, in the books of account;
(b) the total amount of depreciation on such asset provided in the books
of account of the assessee in respect of such tax year or tax years preceding
the tax year under consideration shall be deemed to be the depreciation
actually allowed under this Act for the purposes of this clause; and
20 (c) the depreciation actually allowed under clause (b) shall be adjusted
by the amount of depreciation attributable to such revaluation of the asset.
(4) For the purposes of this section, where the income of an assessee is derived,
in part from agriculture and in part from business chargeable to income-tax under
the head “Profits and gains of business or profession”, for computing the written
25 down value of assets acquired before the tax year, the total amount of depreciation
shall be computed as if the entire income is derived from the business of the assessee
under the head “Profits and gains of business or profession” and the depreciation so
computed shall be deemed to be the depreciation actually allowed under this Act or
43 of 1961. under the Income-tax Act, 1961.
30 (5) In this section, “sold” shall have the meaning assigned to it in
section 38(6)(a).
42. (1) Irrespective of anything contained in any other provision of this Act, Capitalising the
where at the time of making payment during the tax year, there is a variation in impact of
foreign
liability of an assessee as expressed in Indian currency due to change in rate of exchange
35 exchange in relation to an asset acquired for the purpose of business or profession fluctuation.
in foreign currency from a country outside India, it shall be dealt with in the manner
specified in sub-sections (2) and (3).
(2) For this section, “variation in liability” shall be computed as—
A = B-C
40 where,—
A = variation in the liability;
B = amount paid in Indian currency (excluding any part met, directly or
indirectly, by any other person or authority) during the tax year for acquisition
of the asset for—
45 (a) the whole or part of the cost of asset; or
(b) repayment of money borrowed along with interest in foreign
currency, specifically for acquiring such asset;
 72

C = liability, corresponding to the amount referred in B, in Indian

currency at the time of acquisition of such asset.
(3) The variation in liability shall be added or reduced from the—
(a) actual cost of the asset as referred in section 39; or
(b) expenditure of capital nature referred to in section 45(1)(a) or (c) or 5
32(i); or
(c) cost of acquisition of a capital asset (not being capital asset referred
to in section 74) for the purpose of section 72,
and the amount arrived at after such addition or deduction shall be taken to be
the actual cost of the asset or the amount of expenditure of a capital nature or, as the 10
case may be, the cost of acquisition of the capital asset.
(4) Where the assessee has entered into a contract with an authorised dealer as
defined in section 2 of the Foreign Exchange Management Act, 1999, for providing him 42 of 1999.
with a specified sum in a foreign currency on or after a stipulated future date at the rate
of exchange specified in the contract to enable him to meet the whole or any part of the 15
said liability, the amount, if any, to be added to, or deducted from, the actual cost of the
asset or the amount of expenditure of a capital nature or, as the case may be, the cost of
acquisition of the capital asset under this section shall, in respect of so much of the sum
specified in the contract as is available for discharging the said liability, be computed
with reference to the rate of exchange specified therein. 20

Taxation of 43. (1) Subject to the provisions of section 42 any gain or loss arising on
foreign account of change in foreign exchange rates on foreign currency transactions shall
exchange
fluctuation. be treated as income or loss, and shall be computed as per the income computation
and disclosure standards notified under section 276(2).
(2) The provisions of sub-section (1) shall be applicable to all foreign currency 25
transactions including—
(a) monetary items and non-monetary items;
(b) translation of financial statements of foreign operations;
(c) forward exchange contracts; and
(d) foreign currency translation reserves. 30

Amortisation of 44. (1) If an assessee, being an Indian company or a person (other than a
certain company), who is resident in India, incurs any expenditure specified in sub-section (2)—
preliminary
expenses. (a) before the commencement of its business; or
(b) after the commencement of its business, in connection with the
extension of its undertaking or in connection with its setting up a new unit, 35

the assessee shall be allowed a deduction of an amount equal to one-fifth of such

expenditure for each of the five successive tax years beginning with—
(i) the tax year in which the business commences, for clause (a); or
(ii) the tax year in which the extension of the undertaking is completed
or the new unit commences production or operation, for clause (b). 40

(2) The expenditure referred to in sub-section (1) shall be—

(a) the expenditure in connection with—
(i) preparation of feasibility report;
(ii) preparation of project report;
(iii) conducting market survey or any other survey necessary for 45
the business;
 73

(iv) engineering services relating to the business;

(b) legal charges for drafting any agreement between the assessee and any
other person for any purpose relating to the setting up or conduct of the business;
(c) if the assessee is a company,—
5 (i) legal charges for drafting and printing of the Memorandum and
Articles of Association of the company;
(ii) fees for registering the company under the provisions of the
18 of 2013. Companies Act, 2013;
(iii) expenditure in connection with the issue, for public
10 subscription, of shares in or debentures of the company, being
underwriting commission, brokerage and charges for drafting, typing,
printing and advertisement of the prospectus; and
(d) such other items of expenditure (not being expenditure eligible for any
allowance or deduction under any other provision of this Act), as prescribed.
15 (3) In relation to expenditure specified in sub-section (2)(a), the assessee shall
furnish a statement containing the particulars of the expenditure in such form and
manner, as prescribed.
(4) The total expenditure referred to in sub-section (2) shall be restricted to 5%—
(a) of the cost of the project; or
20 (b) of the capital employed in the business of the company, where the
assessee is an Indian company, at its option.
(5) In this section,—
(a) “cost of the project” means the actual cost of the fixed assets, being
land, buildings, leaseholds, plant, machinery, furniture, fittings and railway
25 sidings (including expenditure on development of land and buildings) and—
(i) for cases under sub-section (1)(a), the cost is calculated as of
the last day of the tax year when the business commences;
(ii) for cases under sub-section (1)(b), the cost is calculated as of
the last day of the tax year when either the extension of the undertaking
30 is completed, or the new unit commences production or operations,
which only includes fixed assets acquired or developed in connection
with the extension of the undertaking or setting up of new unit;
(b) “capital employed in the business of the company” means—
(i) in cases under sub-section (1)(a), the aggregate of the issued
35 share capital, debentures and long-term borrowings as on the last day of
the tax year in which the business of the company commences;
(ii) in a case under sub-section (1)(b), the aggregate of the issued
share capital, debentures and long-term borrowings as on the last day of
the tax year in which the extension of the undertaking is completed or,
40 as the case may be, the new unit commences production or operation, in
so far as such capital, debentures and long-term borrowings have been
issued or obtained in connection with the extension of the undertaking
or the setting up of the new unit of the company;
(c) “long-term borrowings” means—

45 (i) any moneys borrowed by the company from Government or IFCI

Ltd., or ICICI Ltd., or any other financial institution which is eligible for
deduction under section 32(e) or any banking institution (not being a
financial institution referred to above); or
 74

(ii) any loan or debt incurred by it in a foreign country in respect

of the purchase outside India of capital plant and machinery, where the
tenure of loan or debt is not less than seven years.
(6) If the assessee is a person, other than a company or a co-operative society,
no deduction shall be admissible under sub-section (1) unless,— 5

(a) the accounts of the assessee for the year or years in which the
expenditure specified in sub-section (2) is incurred have been audited by an
accountant before the specified date referred to in section 63; and
(b) the assessee furnishes for the first year in which the deduction under this
section is claimed, the report of such audit by such date in such form duly signed 10
and verified by such accountant and setting forth such particulars, as prescribed.
(7) If an undertaking of Indian company entitled for deduction under
sub-section (1) is transferred before expiry of five years specified in the said
sub-section, in a scheme of amalgamation, to another Indian company, then—
(a) no deduction under sub-section (1) shall be allowed to the amalgamating 15
company for the tax year in which amalgamation takes place; and
(b) all provisions of this section shall continue to apply to the
amalgamated company as they would have applied to the amalgamating
company, as if the amalgamation has not taken place.
(8) If an undertaking of Indian company entitled for deduction under 20
sub-section (1) is transferred before five years specified in the said sub-section, in a
scheme of demerger to another company, then—
(a) no deduction under sub-section (1) shall be allowed to the demerged
company for the tax year in which demerger takes place; and
(b) all provisions of this section shall continue to apply to the resulting 25
company as they would have applied to the demerged company, as if the
demerger has not taken place.
(9) If a deduction under this section is claimed and allowed for any tax year in
respect of any expenditure referred to in sub-section (2), deduction shall not be
allowed for such expenditure under any other provision of this Act for the same or 30
any other tax year.
Expenditure on 45. (1) A deduction shall be allowed for any expenditure, being in the
scientific
research. nature of––
(a) capital expenditure, but not on acquisition of land, as such or as part
of any property; or 35

(b) revenue expenditure; or

(c) both,
incurred on scientific research related to the business of the assessee subject to
provisions of this section.
(2)(a) A deduction shall be allowed under sub-section (1) in respect of the 40
aggregate of expenditure (not being in the nature of capital expenditure), related to
business, incurred on—
(i) salary to an employee engaged in such scientific research; or
(ii) purchase of materials used in such scientific research,
where such expenditure is incurred within three years immediately preceding the 45
commencement of business, to the extent certified by the prescribed authority as
incurred on such research, expenditure shall be deemed to have been incurred in the
tax year in which the business is commenced.
 75

(b) For the purposes of sub-section (1), the aggregate of capital expenditure
incurred within three years immediately preceding the commencement of
business shall be deemed to have been incurred in the tax year in which the
business is commenced.
5 (c)(i) A deduction shall be allowed under sub-section (1), in respect of any
expenditure incurred (not being expenditure in the nature of cost of any land or
building) by a company engaged in the business of—
(A) bio-technology; or
(B) manufacture or production of any article or thing, which is not
10 specified in Schedule XIII,
on in-house research and development facility as approved by the prescribed
authority, subject to the conditions and manner, as prescribed;
(ii) No deduction shall be allowed under this clause to a company approved
under sub-section (3)(b)(ii);
15 (iii) No deduction shall be allowed in respect of the expenditure mentioned in
sub-clause (i) under any other provision of this Act;
(iv) The expenditure under sub-clause (i) shall be allowed subject to such
conditions and on furnishing of documents in such form and manner, as prescribed;
(d) For the purposes of clause (c), expenditure on “scientific research”, in relation
20 to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial,
obtaining approval from any regulatory authority under any Central Act or State Act or
39 of 1970. Provincial Act and filing an application for a patent under the Patents Act, 1970.
(3) A deduction shall be allowed for any sum, paid to—
(a)(i) a research association having the object of undertaking scientific
25 research or to a University, college or institution to be used for scientific
research; or
(ii) a research association having the object of undertaking research in
social science or statistical research or to a University, college or institution to
be used for research in social science or statistical research;
30 (b) a company which is––
(i) registered in India having the main object of scientific research
and development; and
(ii) approved by such authority, in such manner and subject to such
conditions, as prescribed;
35
(c)(i) a national laboratory; or
(ii) a University; or
(iii) an Indian Institute of Technology; or
(iv) a specified person,
with a specific direction that the said sum shall be used for scientific research
40 undertaken under a programme approved in this behalf by the prescribed authority.
(4) For the purposes of sub-section (3),––
(a) the expenditure shall be allowed subject to such conditions and on
furnishing of documents in such form and manner, as prescribed; and
(b) in respect of clause (a) of the said sub-section, only such association,
45 University, college or other institution shall be eligible for deduction, which for
the time being is approved in the manner and subject to such conditions, as
prescribed, and is specified by the Central Government, by notification.
 76

(5) The deduction for any sum under sub-section (3) shall not be denied merely
on the ground that subsequent to the payment of such sum by the assessee, the
approval granted to such entities or the programme undertaken by entities as
mentioned in sub-section(3)(c), has been withdrawn.
(6) Where a deduction is allowed for any tax year under this section in respect of 5
expenditure, represented wholly or partly by an asset, no deduction shall be allowed under
section 33(3) for the same or any other tax year in respect of that asset.
(7) The provisions of section 33(11) in respect of depreciation shall apply
in relation to deductions allowable for capital expenditure under sub-section (1).
(8) No deduction in respect of the sum mentioned in sub-section (3)(c) shall be 10
allowed under any other provision of this Act.
(9) If any question arises under this section as to whether, and if so, to what extent
any activity constitutes or constituted scientific research, or any asset is or was being
used, for scientific research, the Board shall refer the question to—
(a) the Central Government, when such question relates to any activity 15
under sub-section (3)(a), and its decision shall be final;
(b) the prescribed authority, when such question relates to any other activity,
whose decision shall be final.
(10) When an amalgamating company, in a scheme of amalgamation, sells or
otherwise transfers to the amalgamated company (being an Indian company) any asset 20
representing capital expenditure on scientific research, the provisions of this section
shall apply to the amalgamated company as they would have applied to the
amalgamating company if the latter had not so sold or otherwise transferred the asset.
(11) In this section,—
(a) “National Laboratory” means a scientific laboratory functioning at the 25
national level under the aegis of the Indian Council of Agricultural Research, the
Indian Council of Medical Research, the Council of Scientific and Industrial
Research, the Defence Research and Development Organisation, the Department
of Electronics, the Department of Bio-Technology or the Department of Atomic
Energy and which is approved as a National Laboratory by such authority and in 30
such manner, as prescribed;
(b) “specified person” means such person approved by the prescribed
authority;
(c) “land” includes any interest in land.
Capital 46. (1) An assessee, at his option, shall be allowed a deduction of the whole of the 35
expenditure of capital expenditure incurred, wholly and exclusively, for the purposes of any specified
specified
business.
business carried on by him during the tax year in which such expenditure is incurred.
(2) Where the expenditure referred to in sub-section (1) is incurred prior to the
commencement of its operations and such expenditure is capitalised in the books of
account as on the date of commencement of its operations, it shall be allowed during the 40
tax year in which such business is commenced.
(3) This section shall apply to the specified business fulfilling the following
conditions:—
(a) it is not set up by splitting up, or the reconstruction, of an already existing
business; 45

(b) it is not set up by the transfer of machinery or plant previously used for
any purpose to the specified business;
(c) if the business is of the nature referred to in sub-section (11)(d)(iii) and
such business—
 77

(i) is owned by a company formed and registered in India under the

18 of 2013. Companies Act, 2013 or by a consortium of such companies or by an
authority or a board or a corporation established or constituted under any
Central Act or State Act;
5 (ii) has been approved by the Petroleum and Natural Gas Regulatory
Board established under section 3(1) of the Petroleum and Natural Gas
19 of 2006. Regulatory Board Act, 2006 and notified by the Central Government in
this behalf;
(iii) has made not less than such proportion of its total pipeline
10 capacity as specified by regulations made by the Petroleum and Natural
Gas Regulatory Board established under section 3(1) of the Petroleum and
19 of 2006. Natural Gas Regulatory Board Act, 2006 available for use on common
carrier basis by any person other than the assessee or an associated person;
and
15 (iv) fulfils any other condition as prescribed;
(d) if the business is of the nature referred to in sub-section (11)(d)(xiv),
such business,—
(i) is owned by a company registered in India or by a consortium of
such companies or by an authority or a board or corporation or any other
20 body established or constituted under any Central Act or State Act;
(ii) entity referred to in sub-clause (i) has entered into an agreement
with the Central Government or a State Government or a local authority
or any other statutory body for developing or operating and maintaining
or developing, operating and maintaining a new infrastructure facility.
25 (4) No deduction shall be allowed under the provisions of section 144 and
Chapter VIII-C in relation to such specified business for the same or any other tax
year, if a deduction under sub-section (1) is claimed and allowed.
(5) No deduction in respect of the expenditure referred to in sub-section (1) shall
be allowed to the assessee under any other section in any tax year or under this section
30 in any other tax year, if the deduction has been claimed and allowed to him under this
section.
(6) The provisions of this section shall apply to the specified business referred
to in column B of the Table below if it commences its operations as specified in
column C thereof.
35 Table
Sl. No. Nature of specified business Date of commencement
of operations being on or
after
A B C
40 1. Laying and operating a cross- 1st April, 2007.
country natural gas pipeline network for
distribution, including storage facilities
being an integral part of such network.
2. Building and operating a new hotel 1st April, 2010.
45 of two-star or above category as classified
by the Central Government.
3. Building and operating a new 1st April, 2010.
hospital with at least 100 beds for
patients.
 78

A B C
4. Developing and building a housing 1st April, 2010.
project under a scheme for slum
redevelopment or rehabilitation framed
by the Central Government or a State 5
Government, as notified by the Board, as
per the guidelines as notified by the
Board.
5. Developing and building a housing 1st April, 2011.
project under a scheme for affordable 10
housing framed by the Central
Government or a State Government, as
notified by the Board, as per the
guidelines notified by the Board.
6. A new plant or a newly installed 1st April, 2011. 15
capacity in an existing plant for
production of fertilizer.
7. Setting up and operating an inland 1st April, 2012.
container depot or a container freight
station notified or approved under the 20
Customs Act, 1962 (52 of 1962).
8. Bee-keeping and production of 1st April, 2012.
honey and beeswax.
9. Setting up and operating a 1st April, 2012.
warehousing facility for storage of sugar. 25

10. Laying and operating a slurry 1st April, 2014.

pipeline for the transportation of iron ore.
11. Setting up and operating a semi- 1st April, 2014.
conductor wafer fabrication
manufacturing unit, as notified by the 30
Board, and as per such guidelines as
notified by the Board.
12. Developing, or operating and 1st April, 2017.
maintaining, or developing, operating and
maintaining, any infrastructure facility. 35

13. In all other cases. Th 1st April, 2009.

(7) Where the assessee builds a hotel of two star or above category as classified
by the Central Government and subsequently, transfers the hotel operation thereof to
another person while retaining its ownership, the assessee shall be deemed to be
carrying on the specified business referred to in sub-section (11)(d)(iv). 40

(8) The provisions contained in sections 122(6) and 138(18) and (23) shall, so
far as may be, apply to this section in respect of goods or services or assets held for
the purposes of the specified business.
(9) Any asset for which a deduction is claimed and allowed under this section––
(a) shall be used only for the specified business for a period of eight years 45
beginning with the tax year in which such asset is acquired or constructed;
 79

(b) is used for the purpose and period other than that referred to in
clause (a), and is not chargeable to tax under section 26(2)(k), then the total
amount of deduction so claimed and allowed in one or more tax years, as
reduced by the amount of depreciation allowable under section 33, as if no
5 deduction under this section was allowed, shall be the income chargeable under
the head “Profits and gains of business or profession” of the tax year in which
the asset is so used.
(10) The provisions of sub-section (9)(b) shall not apply to a company which
has become a sick industrial company under section 17(1) of the Sick Industrial
1 of 1986. 10 Companies (Special Provisions) Act, 1985, as it stood before its repeal by the Sick
1 of 2004. Industrial Companies (Special Provisions) Repeal Act, 2003 during the period
specified in sub-section (9)(a).
(11) In this section,—
(a) “associated person”, in relation to the assessee, means a person,—
15 (i) who participates, directly or indirectly, or through one or more
intermediaries in the management or control or capital of the assessee;
(ii) who holds, directly or indirectly, shares carrying at least 26% of
the voting power in the capital of the assessee;
(iii) who appoints more than half of the board of directors or
20 members of the governing board, or one or more executive directors or
executive members of the governing board of the assessee; or
(iv) who guarantees at least 10% of the total borrowings of the assessee;
(b) “cold chain facility” means a chain of facilities for storage or transportation
of agricultural and forest produce, meat and meat products, poultry, marine and
25 dairy products, products of horticulture, floriculture and apiculture and processed
food items under scientifically controlled conditions including refrigeration and
other facilities necessary for the preservation of such produce;
(c) “infrastructure facility” shall have the meaning assigned to it in the
43 of 1961. Explanation to section 80-IA(4) of the Income-tax Act, 1961;
30 (d) “specified business” means any one or more of the following
businesses:—
(i) setting up and operating a cold chain facility;
(ii) setting up and operating a warehousing facility for storage of
agricultural produce;
35 (iii) laying and operating a cross-country natural gas or crude or
petroleum oil pipeline network for distribution, including storage facilities
being an integral part of such network;
(iv) building and operating, anywhere in India, a hotel of two star or
above category as classified by the Central Government;
40 (v) building and operating, anywhere in India, a hospital with at least
100 beds for patients;
(vi) developing and building a housing project under a scheme for
slum redevelopment or rehabilitation framed by the Central Government
or a State Government as per the guidelines notified by the Board;
 80

(vii) developing and building a housing project under a scheme for

affordable housing framed by the Central Government or a State
Government as per the guidelines notified by the Board;
(viii) production of fertilizer in India;
(ix) setting up and operating an inland container depot or a container 5
freight station notified or approved under the Customs Act, 1962; 52 of 1962.

(x) bee-keeping and production of honey and beeswax;

(xi) setting up and operating a warehousing facility for storage of sugar;
(xii) laying and operating a slurry pipeline for the transportation of
iron ore; 10

(xiii) setting up and operating a semiconductor wafer fabrication

manufacturing unit as per the guidelines notified by the Board;
(xiv) developing, or maintaining and operating, or developing,
maintaining and operating, a new infrastructure facility;
(e) any machinery or plant which was used outside India by any person 15
other than the assessee shall not be regarded as machinery or plant previously
used for any purpose, if—
(i) such machinery or plant was not, at any time before the date of
the installation by the assessee, used in India;
(ii) such machinery or plant is imported into India; and 20

(iii) no deduction of depreciation for such machinery or plant has

been allowed or is allowable under the provisions of this Act in computing
the total income of any person for any period before the date of installation
of the machinery or plant by the assessee;
(f) if any machinery or plant or its part previously used for any purpose is 25
transferred to the specified business and its total value does not exceed 20% of the
total value of the machinery or plant used in such business, then the conditions
specified in sub-section (3)(b) shall be deemed to be complied with;
(g) any expenditure of capital nature shall not include any expenditure––
(i) for which the payment or aggregate of payments made to a person 30
in a day, is not through specified banking or online mode, exceeds
ten thousand rupees; or
(ii) incurred on the acquisition of any land or goodwill or financial
instrument.
Expenditure on 47. (1) Any expenditure (excluding cost of any land or building) incurred, on–– 35
agricultural
extension project (a) agricultural extension project by any assessee; or
and skill
development (b) any skill development project by a company,
project.
shall be allowed as a deduction, in the tax year in which such expenditure is incurred
provided such project is notified as per the guidelines issued by the Board.
(2) If a deduction under this section is claimed and allowed for any tax year in 40
respect of any expenditure referred to in sub-section (1), deduction shall not be
allowed for such expenditure under any other provision of this Act for the same or
any other tax year.
 81

48. (1) Where an assessee is carrying on business of growing and manufacturing Tea development
account, coffee
tea or coffee or rubber in India, such assessee shall be allowed a deduction on the development
basis of deposits into the tea development account, coffee development account or account and
rubber development account or any other designated account and computed as per the rubber
development
5 provisions of the Schedule IX. account.
(2) Any amount withdrawn or utilised or released at the time of closure or
otherwise shall be charged to tax in the year in which the amount is transferred or
withdrawn as per the provisions of the Schedule IX.
(3) Where any asset acquired as per the scheme or the deposit scheme is sold or
10 otherwise transferred in any tax year by the assessee to any person at any time before the
expiry of eight years from the end of the tax year in which it was acquired, such part of
the cost of such asset as is relatable to the deduction allowed under sub-section (1) shall
be deemed to be the profits and gains of business or profession of the tax year in which
the asset is sold or otherwise transferred and shall accordingly be chargeable to
15 income-tax as the income of that tax year.
49. (1) An assessee carrying on a business of prospecting, extracting, or Site Restoration
producing petroleum or natural gas, or both, in India, and who has an agreement with Fund.
the Central Government for this business, shall be allowed a deduction on the basis of
deposit to special account or the site restoration account, computed as per the
20 provisions of the Schedule X.
(2) Any amount withdrawn or transferred at the time of closure or otherwise
shall be charged to tax in the year in which the amount is transferred or withdrawn as
per the provisions of the Schedule X.
(3) Where any asset acquired as per the scheme or the deposit scheme is sold or
25 otherwise transferred in any tax year by the assessee to any person at any time before the
expiry of eight years from the end of the tax year in which it was acquired, such part of
the cost of such asset as is relatable to the deduction allowed under sub-section (1) shall
be deemed to be the profits and gains of business or profession of the tax year in which
the asset is sold or otherwise transferred and shall accordingly be chargeable to
30 income-tax as the income of that tax year.
50. (1) Irrespective of anything to the contrary contained in this Act, if, during Special provision
the tax year, the amount received by a specified association from its members falls in case of trade,
profession or
short of the expenditure incurred by such association solely for the protection or similar
advancement of common interest of its members, then the amount so falling short association.
35 shall be allowed as deduction from the income of such association under the head
“Profits and gains of business or profession” and the remaining amount, if any, from
its income under any other head.
(2) For the purposes of sub-section (1),––
(a) “specified association” means any trade, professional or similar
40 association, not covered in Schedule III (Table: Sl. No. 24), whose income or its part
is not distributed to its members (other than as grants to any associations or
institutions affiliated to it);
(b) the amount received by the specified association from its members
shall include amount by way of subscription or otherwise, and shall not include
45 any remuneration received by the association for rendering any specific services
to such members;
(c) expenditure incurred by specified association shall not include––
(i) expenditure deductible under any other provision of this Act; and
(ii) any capital expenditure.
 82

(3) The effect of other provisions of this Act relating to carry forward and
set off of brought forward losses or allowances shall be given before allowing
deduction under sub-section (1).
(4) The maximum allowable deduction under this section shall not exceed 50%
of the total income as computed before allowing deduction under this section. 5

Amortisation of 51. (1) An assessee, being an Indian company or a person (other than a
expenditure for company) who is resident in India, who is engaged in any operations relating to
prospecting certain
minerals. prospecting for, or extraction or production of, any mineral, shall be allowed a
deduction of an amount equal to one-tenth of the amount of expenditure referred to in
sub-section (2), in each of the relevant tax years. 10

(2) The expenditure referred to in sub-section (1) is the expenditure incurred by

the assessee at any time during the year of commercial production and any one or
more of the four tax years immediately preceding that year, wholly and exclusively
on any operations relating to prospecting for any mineral or group of associated
minerals specified in Part A or Part B, respectively, of the Schedule XII or on the 15
development of a mine or other natural deposit of any such mineral or group of
associated minerals.
(3) The expenditure under sub-section (2) shall be reduced by such expenditure
which is met directly or indirectly by any other person or authority and any sale, salvage,
compensation or insurance moneys realised by the assessee in respect of any property 20
or rights brought into existence as a result of the expenditure.
(4) For the purposes of sub-sections (2) and (3), the following expenditure shall be
excluded:––
(a) any expenditure on the acquisition of the site of the source of any
mineral or group of associated minerals referred to in the said sub-sections or of 25
any rights in or over such site; or
(b) any expenditure on the acquisition of the deposits of such mineral or
group of associated minerals or of any rights in or over such deposits; or
(c) any expenditure of a capital nature in respect of any building,
machinery, plant or furniture for which allowance by way of depreciation is 30
admissible under section 33.
(5) The deduction to be allowed under sub-section (1) for any relevant tax year
shall be—
(a) an amount equal to one-tenth of the expenditure specified in sub-sections (2)
and (3) (such one-tenth being herein referred to as the instalment); or 35

(b) such amount as is sufficient to reduce to nil the income (as computed
before making the deduction under this section) of that tax year arising from the
commercial exploitation [whether or not such commercial exploitation is as a
result of the operations or development referred to in sub-sections (2) and (3)]
of any mine or other natural deposit of the mineral or any one or more of the 40
minerals in a group of associated minerals under this section in respect of which
the expenditure was incurred,
whichever is less.
(6) If any part of the instalment for a relevant tax year is not fully allowed, it
shall be carried forward to the next year, becoming part of the instalment of that tax 45
year and such carrying forward may continue for each following year, but no
instalment shall be carried forward beyond the tenth year from the year in which
commercial production began.
(7) Where the assessee is a person other than a company or a co-operative
society, no deduction shall be admissible under sub-section (1) unless,–– 50
 83

(a) the accounts of the assessee for the year or years in which the
expenditure specified in sub-sections (2) and (3) are incurred have been audited
by an accountant, before the specified date referred to in section 63; and
(b) the assessee furnishes for the first year in which the deduction under
5 this section is claimed, the report of such audit, by such date, in such form and
duly signed and verified by such accountant, as prescribed.
(8) If an undertaking of an Indian company, entitled for deduction under
sub-section (1), is transferred before ten years specified in the said sub-section in a
scheme of amalgamation or demerger, to another Indian company, then,––
10 (a) no deduction shall be allowed to the amalgamating or demerged company
for the year in which such amalgamation or demerger takes place; and
(b) all the provisions of this section shall continue to apply to the
amalgamated or resulting company as it would have applied to the
amalgamating or demerged company, as if the amalgamation or demerger has
15 not taken place.
(9) If a deduction under this section is claimed and allowed for any tax year in
respect of any expenditure referred to in sub-sections (2) and (3), deduction shall not
be allowed for such expenditure under any other provision of this Act for the same or
any other tax year.
20 (10) In this section,—
(a) “operation relating to prospecting” means any operation undertaken
for the purposes of exploring, locating or proving deposits of any mineral and
includes any such operation which proves to be infructuous or abortive;
(b) “year of commercial production” means the tax year in which as a
25 result of any operation relating to prospecting, commercial production of any
mineral or any one or more of the minerals in a group of associated minerals
specified in Part A or Part B, respectively, of Schedule XII, commences;
(c) “relevant tax years” means the ten tax years beginning with the year of
commercial production.
30 52. (1) Where an expenditure of the nature specified in column B of the Table Amortisation of
expenditure for
given below is incurred during the tax year, a deduction or part thereof shall be telecommunications
allowed in equal instalments in each of the tax years as mentioned in column D of the services,
said Table, beginning from the initial tax year specified in column C thereof. amalgamation,
demerger, scheme
Table of voluntary
retirement, etc.
35 Sl. No. Nature of expenditure Initial tax year Number of tax years
over which deduction
of expenditure is
allowable in equal
instalments
40 A B C D
1. Expenditure incurred by Tax year in Five tax years.
an Indian company, wholly which such
and exclusively for the amalgamation or
purposes of amalgamation demerger takes
45 or demerger of an place.
undertaking.
 84

A B C D
2. Amount paid to an Tax year in Five tax years.
employee in connection which such
with his voluntary payment is made.
5
retirement as per any
scheme of voluntary
retirement.
3. Capital expenditure Tax year in Number of years
incurred and actually paid which,— commencing from
for acquiring any right to the initial tax year 10
use spectrum for (a) the and ending in the tax
telecommunication business to year up to which the
services (spectrum fee). operate spectrum for which
telecom the fee is paid
services is remains in force. 15
commenced;
or
(b) spectrum
fee is actually
paid,
whichever is later. 20

4. Capital expenditure Tax year in Number of years

incurred and actually paid which,— commencing from
for acquiring any right to the initial tax year
operate telecommunication (a) the and ending in the tax
services (herein referred to business to year up to which the 25
as licence fee). operate licence for which the
telecom fee is paid remains in
services is force.
commenced;
30
or
(b) licence
fee is actually
paid,
whichever is later.
(2) Where the rights referred to in sub-section (1) (Table: Sl. No. 3 or 4) are 35
transferred and—
(a) where the proceeds of the transfer (so far as they consist of capital
sums) are less than the expenditure though incurred, but remaining unallowed,
a deduction equal to such expenditure remaining unallowed, as reduced by the
proceeds of the transfer, shall be allowed in respect of the tax year in which the 40
licence is transferred;
(b) where the whole or part of the right is transferred, the proceeds of the
transfer (so far as they consist of capital sums) exceed the amount of the
expenditure though incurred, but remaining unallowed, so much of the excess
as does not exceed the difference between the expenditure incurred to obtain the 45
licence and the amount of such expenditure remaining unallowed, shall be
chargeable to income-tax as profits and gains of the business in the tax year in
which the licence has been transferred;
 85

(c) where the rights under clause (b) is transferred in a tax year in which
the business is no longer in existence, the provisions of this sub-section shall
apply as if the business is in existence in that tax year;
(d) where the whole or part of the right is transferred, the proceeds of the
5 transfer (so far as they consist of capital sums) are equal or greater than the
amount of expenditure incurred remaining unallowed, no deduction for such
expenditure shall be allowed under sub-section (1) in respect of the tax year in
which the licence is transferred or in respect of any subsequent tax year or years;
(e) such transfer is in a scheme of amalgamation or demerger to the
10 amalgamated company or resulting company, being an Indian company,—
(i) the provisions of clauses (a), (b), (c) and (d) shall not apply to the
amalgamating or demerged company; and
(ii) all the provisions of this section shall continue to apply to the
amalgamated or resulting company as it would have applied to the
15 amalgamating or demerged company, as if the transfer has not taken place.
(3) Where a part of the rights is transferred in a tax year and sub-section (2)(b)
and (c) does not apply, the deduction to be allowed under sub-section (1) for the
expenditure incurred remaining unallowed shall be arrived at by—
(a) subtracting the proceeds of transfer (so far as they consist of capital
20 sums) from the expenditure remaining unallowed; and
(b) dividing the remainder by the number of relevant tax years which have not
expired at the beginning of the tax year during which the licence is transferred.
(4) No deduction shall be allowed––
(a) for depreciation under section 33(1) to (10) in respect of expenditure
25 mentioned in sub-section (1) (Table: Sl. No. 3 or 4), where deduction under this
section is claimed and allowed for any tax year;
(b) under any other provision of this Act in respect of the expenditure
mentioned in sub-section (1) (Table: Sl. No. 1 or 2).
(5) In case any deduction has been claimed and granted in respect of an
30 expenditure referred in sub-section (1) (Table: Sl. No. 3) and there is subsequent
failure on part of the assessee to comply with any of the provisions of this
section, then,—
(a) the deduction shall be deemed to have been wrongly allowed;
(b) the Assessing Officer may, irrespective of any other provisions of this
35 Act, recompute the total income of the assessee for the said tax year by making
necessary rectification;
(c) the provisions of section 287 shall, so far as may be, apply; and
(d) the period of four years specified in section 287(8) shall be counted
from the end of the tax year in which such failure takes place.
40 (6) Where a specified business reorganisation takes place before the expiry of
the period specified in sub-section (1) (Table: Sl. No. 2.D), in case of an expenditure
referred against serial number 2 thereof, then,—
(a) the provisions of this section shall continue to apply to the successor
entity for the tax year in which the business reorganisation took place and
45 subsequent tax years; and
(b) no deduction shall be allowed to the predecessor entity under this
section for the tax year in which such reorganisation takes place.
 86

(7) In this section,––

(a) “actually paid” means the actual payment of expenditure irrespective
of the tax year in which the liability for the expenditure was incurred according
to the method of accounting regularly employed by the assessee or payable in
such manner, as prescribed; 5

(b) “equal installments” shall be calculated by taking numerator as 1 and

denominator as the tax years mentioned in column D of the Table in sub-section (1);
(c) “specified business reorgnisation” means––
(i) amalgamation of an Indian company and its undertaking with
another Indian company; or 10

(ii) demerger of an undertaking of an Indian company to another

company; or
(iii) succession of a firm or proprietorship concern to a company
fulfilling conditions as laid down in section 70(1)(zd); or
(iv) conversion of a private company or unlisted public company to a 15
limited liability partnership fulfilling conditions laid down in section 70(1)(ze).
Full value of 53. (1) In case of transfer of an asset (other than a capital asset), being land or
consideration for building or both, if the consideration received or accrued from such transfer is less
transfer of assets
other than capital than the stamp duty, then such stamp duty value for computing profits and gains from
assets in certain transfer of such asset shall be deemed to be the full value of consideration. 20
cases.
(2) The provisions of sub-section (1) shall not apply if the stamp duty value does
not exceed 110% of the consideration received or accrued and in such a case, the
consideration received or accrued shall be deemed to be the full value of
consideration.
(3) If the date of agreement fixing the value of consideration for transfer of asset 25
and date of registration for transfer of such asset are different, then the stamp duty
value as on date of agreement may be taken to be the full value of consideration under
sub-section (1).
(4) The provisions of sub-section (3) shall apply only in a case where the amount
of consideration or a part thereof has been received by specified banking or online 30
mode on or before the date of agreement for transfer of such asset.
(5) For the determination of the value adopted or assessed or assessable under
sub-section (1), the provisions of section 78(2) and (4) shall apply.

Business of 54. (1) Where the assessee undertakes specified oil exploration business, then
prospecting for deduction specified in sub-sections (3) and (4) shall be allowed while computing the 35
mineral oils. income under the head “Profits and gains of business or profession”.
(2) In this section, “specified oil exploration business” means business consisting of
prospecting for or extraction or production of mineral oils where the following conditions
are fulfilled:—
(a) the assessee has entered into an agreement with the Central Government; 40

(b) such agreement is entered for association or participation of the Central

Government or any person authorised by it; and
(c) such agreement is laid before each House of Parliament.
(3) The deduction referred to in sub-section (1) shall be––
(a) for the period before the beginning of commercial production, expenditure 45
towards infructuous or abortive exploration incurred in respect of any surrendered
area;
 87

(b) for the period after the commencement of commercial production,

expenditure (whether before or after such production) in respect of drilling or
exploration activities or services or in respect of physical assets used in that
connection;

5 (c) for the tax year of commencement of commercial production and such
succeeding tax years as specified in the agreement, towards depletion of mineral oil
in the mining area.
(4) The deductions referred to in sub-section (1) shall be––

(a) either in lieu of, or in addition to, any allowance admissible under this Act
10 as specified in the agreement; and
(b) computed and made in the manner specified in the agreement and the other
provisions of this Act shall be deemed to have been modified to such extent.
(5) Where the business or any interest therein as referred to in sub-section (1) is
wholly or partly transferred as per the provisions of the agreement, the profit shall be
15 charged to tax or deduction shall be allowed in the following manner:—
(a) where A is less than C, then (C-A) shall be allowed as deduction in the tax
year in which such business or interest is transferred;
(b) where A is greater than C,––

(i) but less than B, then (A-C) shall be the profit chargeable under the
20 head “Profits and gains of business or profession” for the tax year in which
such transfer takes place;

(ii) in any other case, only (B-C) shall be the profit chargeable under the
said head for the tax year in which such transfer takes place; and
(iii) no deduction shall be allowed for the expenditure incurred
25 remaining unallowed in the tax year in which such transfer takes place or any
subsequent tax year,

where,––

A = proceeds of the transfer (so far as they consist of capital sums);

B = total amount of expenditure incurred in connection with the business or
30 to obtain interest therein;
C = amount of expenditure incurred remaining unallowed.

(6) If the business or interest therein is no longer in existence in the year of transfer,
the provisions of sub-section (5) shall apply as if such business is in existence during the
said year.
35 (7) Where the business or interest therein is transferred in a scheme of amalgamation
or demerger and the resulting entity is an Indian company, then the provisions of
sub-section (5) shall—

(a) not apply to the amalgamating or demerged company; and

(b) continue to apply to the amalgamated or resulting company as it would
40 have applied to the amalgamating or demerged company as if the transfer has
not taken place.
(8) In this section, “mineral oil” includes petroleum and natural gas.
 88

Insurance business. 55. Irrespective of anything to the contrary contained in the provisions of this Act
for computing income under the head “Income from house property”, “Capital gains” or
“Income from other sources”, or in section 390(5) and (6), or in sections 26 to 54, the
profits and gains of any business of insurance, including any such business carried on by
a mutual insurance company or by a co-operative society, shall be computed as per the 5
provisions of Schedule XIV.
Special provision in 56. (1) Irrespective of anything to the contrary contained in this Act, the interest
case of interest income in relation to bad or doubtful debts of a specified financial institution shall be
income of specified
financial
chargeable to tax under the head “Profits and gains of business or profession” in the tax
institutions. year in which such interest is— 10

(a) credited to the profit and loss account; or

(b) actually received,
whichever is earlier.
(2) In this section,––
15
(a) “specified financial institution” means––
(i) a public financial institution; or
(ii) a scheduled bank; or
(iii) a co-operative bank, other than––
(A) a primary agricultural credit society; or
(B) a primary co-operative agricultural and rural development 20
bank; or
(iv) a State Financial Corporation; or
(v) a State Industrial Investment Corporation; or
(vi) any such class of non-banking financial companies, as notified by
the Central Government; 25

(b) “bad or doubtful debts” shall be such categories of debts, as prescribed,

having regard to the guidelines issued in relation to such debts by the Reserve Bank
of India.
Revenue 57. (1) The profits and gains arising from a construction contract or a contract
recognition for for providing services shall be determined on the basis of percentage of completion 30
construction and
service contracts.
method, as per the income computation and disclosure standards notified under
section 276(2).
(2) The profits and gains arising from a contract for providing services under
sub-section (1) shall be determined—
(a) on the basis of project completion method, if the duration of such contract 35
is not more than ninety days;
(b) on the basis of straight line method, if the contract involves indeterminate
number of acts over a specified period of time.
(3) For the purposes of percentage of completion method, project completion
method or straight line method under this section,— 40

(a) the contract revenue shall include retention money;

(b) the contract costs shall not be reduced by any incidental income in the
nature of interest, dividends or capital gains.
 89

58. (1) The provisions of sections 26 to 54, to the extent contrary to this section, Special provision
for computing
shall not apply to the specified business or profession mentioned in column B of the Table profits and gains
in sub-section (2). of business
profession on
(2) The profits and gains of any specified business or profession as presumptive basis
5 mentioned in column B of the Table below, carried on by an assessee specified in in case of certain
residents.
column C of the said Table, having total turnover or gross receipts of business or
profession during the tax year specified in column D and computed in the manner
specified in column E thereof, shall be deemed to be the profits and gains of such
business or profession chargeable to tax under the head “Profits and gains of
10 business or profession”.
Table
Sl. No. Specified Assessee Total turnover or Manner of
business or gross receipts of computation
profession business or
15 profession
during tax year
A B C D E
1. Any Eligible (a) Does not (A) (i) 6% of total
business other assessee. exceed turnover or gross
20 than the ₹2,00,00,000; or receipts realised in
business specified banking or
(b) does not
specified online mode; and
exceed
against serial
₹3,00,00,000, (ii) 8% of total
number 2.
25 where the turnover or gross
amount or receipts realised in
aggregate of any mode other than
amounts specified banking or
received, in online mode; or
30 cash, does not
(B) profit claimed
exceed 5% of
to have been actually
the total
earned,
turnover or gross
receipts. whichever is higher.
35 2. Business of An (a) The
plying, hiring assessee, aggregate of
or leasing who owns income from goods
goods not more than carriage:—
carriage. ten goods
40 (i) being a
carriages at
heavy goods
any time
vehicle,
during the tax
calculated at the
year.
rate of ₹1,000
per ton of gross
45
vehicle weight
or unladen
weight for each
vehicle; or

50
(ii) being a
vehicle other
than heavy
goods vehicle,
calculated at the
 90

(1) (2) (3) (4) (5)

rate of ₹ 7,500
for each goods
carriage for
every month or 5
part of a month
during which the
vehicle is owned
by the assessee in
the tax year; or 10

(b) income
claimed to have been
actually earned,

whichever is higher.

3. Any Specified (a) Does 50% of the 15

profession assessee. not exceed gross receipts or
as referred ₹50,00,000; or profit claimed to have
to in section been actually earned,
62(1)(a). (b) does
not exceed whichever is
20
₹75,00,000, higher.

where the
amount or
aggregate of
amounts
received in cash 25
does not exceed
5% of the total
turnover or gross
receipts.

(3) Any assessee mentioned in column C of the Table in sub-section (2), who 30
claims that––
(a) the profits or gains actually earned from the specified business or
profession are lower than the profits or gains computed in the manner
mentioned in column E of the said Table; and
(b) whose total income exceeds the maximum amount which is not 35
chargeable to tax,
shall be required to––
(i) keep and maintain such books of account and other documents as
required under section 62; and
(ii) get the accounts audited and furnish a report of such audit as required 40
under section 63.
(4) Any loss, allowance or deduction allowable under the provisions of this Act, shall
not be allowed against the income computed in the manner specified in sub-section (1).
(5) For the purposes of sub-section (2) (Table: Sl. No. 2), where the assessee is a firm,
the salary and interest paid to its partners shall be deducted from the income computed 45
under sub-section (1) subject to the conditions and limits specified in section 35(f).
 91

(6) The written down value of any asset used for the purposes of specified business
or profession shall be computed as if the assessee mentioned in column C of the Table in
sub-section (2) had claimed and was actually allowed depreciation thereon for each of the
relevant tax years.
5 (7) Where an eligible assessee declares profit for any tax year as per the provisions
of sub-section (2) (Table: Sl. No. 1) and he declares profit for any of the five tax years
succeeding such tax year in contravention of the provisions of sub-section (1), then he
shall not be eligible to claim the benefit of the provisions of this section for five tax years
subsequent to the tax year in which the profit has not been declared as per the provisions
10 of the said sub-section.

(8) Irrespective of anything contained in foregoing provision of this section, where

provisions of sub-section (7) are applicable to an eligible assessee and his total income
exceeds the maximum amount which is not chargeable to income-tax, he shall be required
to keep and maintain such books of account and other documents as required under
15 section 62(2) and get them audited and furnish a report of such audit as required under
section 63.

(9) For the purposes of sub-section (2) (Table: Sl. Nos. 1 and 3), the receipt of
amount or aggregate of amounts by a cheque drawn on a bank or by a bank draft, which
is not account payee, shall be deemed to be the receipt in cash.
20 (10) In this section,––

(a) “eligible assessee” means an individual, a Hindu undivided family, or a

firm other than a limited liability partnership, who is resident in India, who––

(i) has not claimed any deduction under section 141; or

(ii) has not claimed any deduction under Chapter VIII-C for the relevant
25
tax year; or

(iii) does not carry on specified profession as defined in

section 62(1)(a), and (c); or

(iv) does not earn any income in the nature of commission or

brokerage; or
30
(v) does not carry on any agency business;

(b) “specified assessee” means an individual or a firm, other than a limited

liability partnership, who is a resident in India;

(c) “limited liability partnership” shall have the same meaning as assigned to
6 of 2009. it in section 2(n) of the Limited Liability Partnership Act, 2008;
35 (d) the expressions “goods carriage”, “gross vehicle weight” and “unladen
weight” shall have the same meaning as respectively assigned to them in section 2
59 of 1988. of the Motor Vehicles Act, 1988;

(e) “heavy goods vehicle” means any goods carriage, the gross vehicle weight
of which exceeds 12,000 kilograms; and
40 (f) an assessee, who is in possession of a goods carriage, whether taken on hire
purchase or on instalments and for which the whole or part of the amount payable
is still due, shall be deemed to be the owner of such goods carriage.
 92

Chargeability of 59. (1) Income in the nature of royalty or fees for technical services received
royalty and fee
for technical
by a specified assessee during a tax year, shall be charged to income-tax under the
services in head “Profits and gains of business or profession” under this Act, if the following
hands of non- conditions are satisfied:––
residents.
(a) income is received from the Government or an Indian concern; 5

(b) income is in pursuance to an agreement made by the specified

assessee with the Government or the Indian concern;
(c) the specified assessee carries on business in India through a
permanent establishment, or performs professional services from a fixed
10
place of profession, situated in India; and
(d) the right, property or contract in respect of which the royalties or
fees for technical services are paid is effectively connected with such
permanent establishment or fixed place of profession.
(2) No deduction shall be allowed against the income chargeable under
15
sub-section (1) in respect of the following amounts:—
(a) any expenditure or allowance which is not wholly and exclusively
incurred for the business of such permanent establishment or fixed place of
profession in India; or
(b) amounts, if any, paid (otherwise than towards reimbursement of
actual expenses) by the permanent establishment to its head office or to any 20
of its other offices.
(3) The provisions of section 61 in so far as it relates to business referred to
in section 61(2) (Table: Sl. No. 5), shall not apply in respect of the income referred
to in this section.
(4) The specified assessee shall keep and maintain books of account and 25
other documents as per the provisions of section 62, get his accounts audited on
or before the specified date referred to in section 63 by an accountant, and furnish
report of audit in the prescribed form, duly signed and verified by the accountant.
(5) In this section, “specified assessee” means a non-resident (not being a
30
company) or a foreign company.
Deduction of
head office 60. (1) Irrespective of anything to the contrary contained in sections 26 to 54, in
expenditure in the case of a non-resident assessee, deduction of head office expenditure incurred by
case of non- such assessee as is attributable to his business or profession in India, shall be
residents.
allowed in computing the income chargeable under the head “Profits and gains of
35
business or profession” subject to provisions of sub-section (2).
(2) The deduction allowable under sub-section (1) shall be restricted to—
(a) if the adjusted total income of the assessee is a loss, to an upper
monetary limit of 5% of the average adjusted total income of the assessee; or
(b) in any other case, to an upper monetary limit of 5% of the adjusted
40
total income of the assessee.
(3) In this section,—
(a) “adjusted total income” means the total income computed under this
Act, without giving effect to the allowance referred to in this section or in
section 33(11) or the deduction referred to in section 32(i)(i) or any loss 45
carried forward under section 112(1) or 113(2) or 115(1) or the deductions
under Chapter VIII;
 93

(b) “average adjusted total income” means,—

(i) if the assessee is assessable for each of the three tax years
immediately preceding the relevant tax year, the arithmetic mean of
his adjusted total income over those three tax years;
5 (ii) if the assessee is assessable only for two of the said three tax
years, the arithmetic mean of his adjusted total income over those two
tax years;
(iii) if the assessee is assessable only for one of the said three tax
years, his adjusted total income for that tax year;
10 (c) “head office expenditure” means executive and general administration
expenditure incurred by the assessee outside India, including expenditure
incurred in respect of—
(i) rent, rates, taxes, repairs or insurance of any premises outside
India used for the business or profession;
15 (ii) salary, wages, annuity, pension, fees, bonus, commission,
gratuity, perquisites or profits in lieu of, or in addition to, salary,
whether paid or allowed to any employee or other person employed
in, or managing the affairs of, any office outside India;
(iii) travelling by any employee or other person employed in, or
20 managing the affairs of, any office outside India; and
(iv) such other matters connected with executive and general
administration, as prescribed.
61. (1) The provisions of sections 26 to 54, to the extent contrary to this Special
section, shall not apply to the specified business mentioned in column B of the provision for
computation of
25 Table in sub-section (2). income on
presumptive
(2) The profits and gains of any specified business as mentioned in basis in respect
column B of the Table below, carried on by a specified assessee as mentioned of certain
in column C of the said Table during a tax year, shall be computed in the manner business
activities of
specified in column D thereof, and charged to income-tax for the said tax year certain non-
30 under the head “Profits and gains of business or profession”. residents.

Table
Sl No. Specified business Specified Profits and gains of
assessee business or profession
A B C D
35 1. Business of Non- 7.5% of (A+B),
operation of ships, resident.
where,––
other than cruise ships
referred to in Serial A = sum on account of
number 2. carriage of passenger,
40 livestock, mail or goods
shipped at any port in India,
whether paid or payable, in
or outside India, to the
assessee or any other person
45 on his behalf (including
demurrage, handling or other
similar charges);
 94

A B C D
B = sum on account of
carriage of passenger,
livestock, mail or goods
shipped at any port outside 5
India, whether received or
deemed to be received in
India, by the assessee or any
other person on his behalf
(including demurrage, 10
handling or other similar
charges).
2. Business of Non-resident. 20% of (A+B),
operation of cruise where,––
ships (subject to
the conditions as A = sum on account of 15
prescribed). carriage of passenger, paid or
payable to the assessee or any
other person on his behalf;
B = sum on account of
carriage of passenger 20
received or deemed to be
received by the assessee or
any other person on his
behalf.
3. Business of Non-resident. 5% of (A+B), 25
operation of where,––
aircraft.
A = sum on account of
carriage of passenger,
livestock, mail or goods
from any place in India, paid 30
or payable (in or outside
India) to the assessee or any
other person on his behalf;
B = sum on account of
carriage of passenger, 35
livestock, mail or goods
from any place outside India,
received or deemed to be
received in India, by the
assessee or any other person 40
on his behalf.
4. Business of civil Foreign 10% of the amount
construction or company. towards such civil
erection or testing construction, erection,
or commissioning, testing, or commissioning, 45
of plant or paid or payable, to the
machinery, in assessee or to any other
connection with a person on his behalf,
turnkey power whether in or outside India.
project, approved 50
by the Central
Government.
 95

A B C D
5. Business of Non-resident 10% of (A+B),
providing services person.
where,––
or facilities
5 (including supply A = sum on account of
of plant and business of providing services
machinery on hire) and facilities in connection
for prospecting, with, or supply of plant and
extraction or machinery on hire used, or to be
10 production of used, in the prospecting for, or
mineral oils. extraction or production of
mineral oils in India, paid or
payable (in or outside India), to
the assessee or any other person
15 on his behalf;
B = sum on account of
business of providing services
and facilities in connection
with, or supply of plant and
20 machinery on hire used, or to be
used, in the prospecting for, or
extraction or production of
mineral oils outside India,
received or deemed to be
25 received in India, by the
assessee or any other person on
his behalf.
6. Business of Non- 25% of (A+B),
providing services resident.
30 where,––
or technology in
India, for the A = the amount paid or
purposes of setting payable to the non-resident
up an electronics assessee or to any person on his
manufacturing behalf on account of providing
35 facility or in services or technology;
connection with
B = the amount received or
manufacturing or
deemed to be received by the
producing
non-resident assessee or on
electronic goods,
behalf of non-resident assessee
40 article or thing in
on account of providing
India to a resident
services or technology.
company.
(3) For the purposes of (Table: Sl. Nos. 1 to 5) of sub-section (2), the
specified assessee may claim that the profits actually earned from the specified
45 business are lower than the business profits computed under sub-section (2),
if,––
(a) he keeps and maintains such books of account and other documents
as required under section 62; and
(b) gets his accounts audited and furnish a report of such audit as
50 required under section 63.
(4) Any loss, allowance or deduction allowable under the provisions of this
Act shall not be allowed against the income computed in the manner specified in
sub-section (2).
 96

(5) The written down value of any asset used for the purposes of specified
business or profession shall be computed, as if the assessee mentioned in
column C of the Table in sub-section (2) had claimed and was actually allowed
depreciation thereon for each of the relevant tax years.
(6) For the purposes of sub-section (2) (Table: Sl. No. 5) the provisions of 5
this section shall not apply where the provisions of section 54 or 59 or 207 or 527
apply for the purposes of computing profits and gains or any other income referred
to in the said sections.
(7) In this section, “plant” includes ships, aircrafts, vehicles, drilling units,
scientific apparatuses and equipments, used for the purposes of the specified 10
business as mentioned in sub-section (2) (Table: Sl. No. 5).
(8) For the purposes of sub-section (2) (Table: Sl. No. 6), resident company
shall satisfy the following:—
(a) it is establishing or operating electronics manufacturing facility or
a connected facility for manufacturing or producing electronic goods, article 15
or thing in India, under a scheme notified by the Central Government in the
Ministry of Electronics and Information Technology; and
(b) it satisfies the conditions prescribed in this behalf.
Maintenance of 62. (1) (a) Any person carrying on specified profession; or
books of
account. (b) any person carrying on, business; or any profession [not being a 20
profession referred to in clause (a)] and satisfying the conditions referred to in
sub-section (2); or
(c) any other person carrying on profession notified by the Board in this behalf,
shall keep and maintain such books of account and other documents to enable the
Assessing Officer to compute his total income under this Act. 25

(2) The conditions in respect of persons referred to in sub-section (1)(b) shall

be the following:––
(a) where the income from business or profession exceeds one lakh and
twenty thousand rupees or its total sales, turnover or gross receipts from such
business or profession exceeds ten lakh rupees in any one of the three years 30
immediately preceding the tax year; or
(b) where business or profession is newly set up in the tax year, the
income from business or profession is likely to exceed one lakh and twenty
thousand rupees or its total sales, turnover or gross receipts from such business
or profession is likely to exceed ten lakh rupees during such tax year; or 35

(c) where during the tax year, the assessee, other than the assessee referred
to in section 61(2) (Table: Sl. No. 6), has claimed income from business or
profession to be lower than the deemed profits as referred to in section 58(2) or
section 61(2); or
(d) in case of an individual or Hindu undivided family, clauses (a) and 40
(b) shall be modified to the extent of income from such business or
profession exceeding two lakh and fifty thousand rupees and its total sales,
turnover or gross receipts from such business or profession exceeding two
lakh and fifty thousand rupees.
45
(3) For the purposes of this section, the Board may prescribe––
(a) the books of account and other documents (including inventories,
wherever necessary) to be kept and maintained;
(b) particulars to be contained therein;
(c) the form, manner and place at which they shall be kept and
maintained; and 50
 97

(d) the period for which such books of account and other documents
are to be retained.
(4) In this section, “specified profession” means––
(a) legal, medical, engineering, architectural, accountancy, technical
5 consultancy, interior decoration, information technology or company
secretary; or
(b) any other profession, as notified by the Board.
63. (1) Every person, carrying on the business or profession fulfilling the Tax audit.
conditions specified in column B of the Table below, shall get his accounts of the
10 tax year audited by an accountant, before the specified date.
Table
Sl. No. Conditions for getting books of account audited
A B
1. Where the total sales, turnover or gross receipts from business or
15 profession during the tax year of any person who––
(a) is carrying on business and at least 95% of aggregate of all
the receipts and payments from the business during the tax year are
through specified banking or online mode, is more than
₹10,00,00,000;
20 (b) is carrying on business and not covered under serial number
1, is more than ₹1,00,00,000;
(c) is carrying on profession, is more than ₹50,00,000.
2. If the person is carrying on business or profession, referred to in
section 58(2) or 61(2) (other than that referred to in section 61(2)
25 [Table: Sl. No. 6]) and the profits and gains from such business or
profession are claimed to be lower than the deemed profits as
referred to in these sections.
(2) The provisions of this section shall not apply,––
(a) where profits and gains of business or profession, declared by the
30 assessee are as per section 58(2);
(b) where the person, other than that referred in section 61(2)
(Table: Sl. No. 6), is deriving income of the nature referred to in section 61(2).
(3) The assessee shall furnish by the specified date, the report of such audit
in such form, duly signed and verified by the accountant and setting forth such
35 particulars, as prescribed.
(4) Where a person is required, by or under any other law, to get his accounts
audited, then it shall be sufficient compliance of this section, if such person––
(a) gets the accounts of such business or profession audited under such
law before the specified date; and
40 (b) furnishes by that specified date the report of such audit along with
the report of the accountant in the form as prescribed.
(5) In this section, “specified date” in relation to the accounts of the assessee
of the tax year, means the date one month prior to the due date for furnishing the
return of income under section 263(1).
45 64. Any person carrying on business with total sales, turnover, or gross Facilitating
receipts exceeding fifty crore rupees in the preceding tax year shall provide payments in
electronic
facility for accepting payments through prescribed electronic methods, in addition modes.
to any other electronic payment methods, already offered.
 98

Special 65. (1) The deduction under section 33 or 44 or 52(1) (Table: Sl. No. 1 or 2)
provision for
computing
shall, in a case where business reorganisation of a co-operative bank has taken
deductions in place during the tax year, be allowed as per provisions of this section.
case of business
reorganisation (2) The amount of deduction allowable to the predecessor co-operative bank
of co-operative or to the successor co-operative bank or to the converted banking company under 5
banks.
section 33 or 44 or 52(1) (Table: Sl. No. 1 or 2) shall be determined as per the
formula—
(i) for predecessor co-operative bank:—
A×B
C 10

(ii) for successor co-operative bank or converted banking company:—

A×D
C
where,—
A = the amount of deduction allowable to the predecessor 15
co-operative bank, if the business reorganisation had not taken place;
B = the number of days comprised in the period beginning with the 1st
day of the tax year and ending on the day immediately preceding the date of
business reorganisation; and
C = the total number of days in the tax year in which the business 20
reorganisation has taken place.
D = the number of days comprised in the period beginning with the
date of business reorganisation and ending on the last day of the tax year.
(3) The provisions of section 44 or 52(1) (Table: Sl. No. 1 or 2) shall, in a case
where an undertaking of the predecessor co-operative bank entitled to the 25
deduction under the said section is transferred before the expiry of the period
specified therein to a successor co-operative bank or to a converted banking
company on account of business reorganisation, apply to the successor
co-operative bank or to the converted banking company in the tax years
subsequent to the year of business reorganisation as they would have applied to 30
the predecessor co-operative bank, as if the business reorganisation had not taken
place.
(4) In this section,––
(a) “amalgamation” means the merger of an amalgamating
co-operative bank with an amalgamated co-operative bank, if—
(i) all the assets and liabilities of the amalgamating co-operative 35
bank or banks immediately before the merger (other than the assets
transferred, by sale or distribution on winding up, to the amalgamated
co-operative bank) become the assets and liabilities of the
amalgamated co-operative bank;
(ii) the members holding 75% or more voting rights in the 40
amalgamating co-operative bank become members of the
amalgamated co-operative bank; and
(iii) the shareholders holding 75% or more in value of the shares
in the amalgamating co-operative bank (other than the shares held by
 99

the amalgamated co-operative bank or its nominee or its subsidiary,

immediately before the merger) become shareholders of the
amalgamated co-operative bank;
(b) “amalgamating co-operative bank” means—
5 (i) a co-operative bank which merges with another co-operative
bank; or
(ii) every co-operative bank merging to form a new co-operative
bank;
(c) “amalgamated co-operative bank” means—
10 (i) a co-operative bank with which one or more
amalgamating co-operative banks merge; or
(ii) a co-operative bank formed as a result of merger of
two or more amalgamating co-operative banks;
(d) “business reorganisation” means reorganisation of business
15 involving the amalgamation or demerger of a co-operative bank or
conversion of a primary co-operative bank;
(e) “conversion” means transition of a primary co-operative bank to a
banking company under the scheme of the Reserve Bank of India as notified
vide its circular number DCBR. CO. LS. PCB. Cir. No. 5/07.01.000/2018-19,
20 dated 27th September, 2018;
(f) “converted banking company” means a banking company formed
as a result of conversion from primary co-operative bank;
(g) “demerger” means the transfer by a demerged co-operative bank
of one or more of its undertakings to any resulting co-operative bank, in
25 such manner that—
(i) all the assets and liabilities of the undertaking or undertakings
immediately before the transfer become the assets and liabilities of the
resulting co-operative bank;
(ii) the assets and the liabilities are transferred to the resulting
30 co-operative bank at values (other than change in the value of assets
consequent to their revaluation) appearing in its books of account
immediately before the transfer;
(iii) the resulting co-operative bank issues, in consideration of
the transfer, its membership to the members of the demerged co-
35 operative bank on a proportionate basis;
(iv) the shareholders holding 75% or more in value of the shares
in the demerged co-operative bank (other than shares already held by
the resulting bank or its nominee or its subsidiary immediately before
the transfer), become shareholders of the resulting cooperative bank,
40 otherwise than as a result of the acquisition of the assets of the
demerged cooperative bank or any undertaking thereof by the resulting
co-operative bank;
(v) the transfer of the undertaking is on a going concern
basis; and
45 (vi) the transfer is as per the conditions specified by the Central
Government, by notification, having regard to the necessity to ensure
that the transfer is for genuine business purposes;
 100

(h) “demerged co-operative bank” means the co-operative bank whose

undertaking is transferred, pursuant to a demerger, to a resulting bank;
(i) “predecessor co-operative bank” means the amalgamating
co-operative bank or the demerged co-operative bank, or the primary
co-operative bank, which has been succeeded as a result of conversion; 5

(j) “resulting co-operative bank” means—

(i) one or more co-operative banks to which the undertaking of
the demerged co-operative bank is transferred in a demerger; or
(ii) any co-operative bank formed as a result of demerger;
(k) “successor co-operative bank” means the amalgamated 10
co-operative bank or the resulting bank.
Interpretation. 66. In sections 26 to 66,—
(1) “agreement”, for the purposes of section 26(2)(h), includes any
arrangement or understanding or action in concert,—
(A) whether or not such arrangement, understanding or action is 15
formal or in writing; or
(B) whether or not such arrangement, understanding or action is
intended to be enforceable by legal proceedings;
(2) “banking company” means a company to which the Banking
Regulation Act, 1949 applies and includes any bank or banking institution 20 10 of 1949.
referred to in section 51 of that Act;
(3) “commission or brokerage” shall have the meaning assigned to it
in section 402(7);
(4) “commodity derivative” shall have the same meaning as assigned
to it in Chapter VII of the Finance Act, 2013; 25 17 of 2013.

(5) “commodities transaction tax” shall have the same meaning as

assigned to it under Chapter VII of the Finance Act, 2013; 17 of 2013.

(6) “fees for technical services” shall have the meaning assigned to it
in section 9(7)(b);
(7) “housing finance company” means a public company formed or 30
registered in India with the main object of carrying on the business of
providing long-term finance for construction or purchase of houses in India
for residential purposes;
(8) “Indian Institute of Technology” shall have the same meaning as that
of “Institute” defined in section 3(g) of the Institutes of Technology Act, 1961; 35 59 of 1961.

(9) “Keyman insurance policy” shall have the meaning assigned to it

in Schedule II (Note 1);
(10) “limited liability partnership” shall have the same meaning as
assigned to it in section 2(1)(n) of the Limited Liability Partnership Act, 2008; 6 of 2009.

(11) “long-term finance”, for the purposes of section 32(e), means any 40
loan or advance where the terms under which moneys are loaned or advanced
provide for repayment along with interest thereof during a period of not less
than five years;
(12) “micro enterprise” shall have the same meaning as assigned to it in
section 2(h) of the Micro, Small and Medium Enterprises Development 45
27 of 2006.
Act, 2006;
 101

(13) “mineral oil” includes petroleum and natural gas;

(14) “moneys payable” in respect of any tangible asset includes—
(a) any insurance, salvage or compensation moneys payable in
respect thereof;
5 (b) where the asset is sold, the price for which it is sold;
(15) “National Housing Bank” means the National Housing Bank
53 of 1987. established under section 3 of the National Housing Bank Act, 1987;
(16) “non-scheduled bank” means a banking company as defined in
10 of 1949. section 5(c) of the Banking Regulation Act, 1949, which is not a scheduled
10 bank;
(17) “paid” means, except for section 37, actually paid or incurred
according to the method of accounting upon the basis of which the profits or
gains are computed under the head “Profits and gains of business or
profession”;
15 (18) “permanent establishment” shall have the meaning assigned to it in
section 173(c);
(19) “plant” includes ships, vehicles, books, scientific apparatus and
surgical equipment used for the business or profession but does not include
tea bushes or livestock or buildings or furniture and fittings;
20 (20) “predecessor entity” means––
(a) the amalgamating Indian company in the case of
amalgamation;
(b) the demerged Indian company, in the case of demerger;
(c) a firm, in the case of a succession of a firm by a company as
25 referred to in section 70(1)(zd);
(d) a private company or unlisted public company, in case of
conversion as referred to in section 70(1)(ze);
(e) a sole proprietary concern, in the case of succession of sole
proprietorship concern by a company, as referred to in section 70(1)(zf);
30 (21) “primary agricultural credit society” shall have the same meaning
10 of 1949. as assigned to it in Part V of the Banking Regulation Act, 1949;
(22) “primary co-operative agricultural and rural development bank”
means a society having its area of operation confined to a taluk and the
principal object of which is to provide for long-term credit for agricultural
35 and rural development activities;
(23) “professional services” shall have the meaning assigned to it in
section 402(28);
(24) “public company” shall have the same meaning as assigned to it
18 of 2013. in section 2(71) of the Companies Act, 2013;
40 (25) “public financial institution” shall have the same meaning as
18 of 2013. assigned to it in section 2(72) of the Companies Act, 2013;
(26) “rate of exchange” means the rate of exchange determined or
recognised by the Central Government for the conversion of Indian currency
into foreign currency or foreign currency into Indian currency;
 102

(27) “recognised commodity exchange" means a recognised

association as defined in section 2(j) of the Forward Contracts (Regulation)
Act, 1952 and which fulfils such conditions, as prescribed, and is notified 17 of 1952.
by the Central Government for this purpose;
(28) “rent”, for the purposes of section 35(b)(i), shall have the meaning 5
assigned to it in section 402(29);
(29) “royalty” shall have the same meaning as assigned to it in
section 9(6)(b);
(30) “rural branch” means a branch of a scheduled bank or a
non-scheduled bank situated in a place which has a population of not more 10
than ten thousand according to the last preceding census, of which the
relevant figures have been published before the first day of the tax year;
(31) “scientific research” means—
(a) any activity for the extension of knowledge in the fields of
natural or applied science including agriculture, animal husbandry or 15
fisheries; and
(b) the references to expenditure incurred on scientific research
shall include all expenditure incurred for the prosecution, or the
provision of facilities for the prosecution, of scientific research, but
does not include any expenditure incurred in the acquisition of rights 20
in, or arising out of, scientific research,
and the references to scientific research related to a business or class of
business shall include any scientific research—
(i) which may lead to or facilitate an extension of that business
or, all businesses of that class; 25

(ii) of a medical nature which has a special relation to the welfare

of workers employed in that business or, all businesses of that class;
(32) “securities transaction tax” shall have the meaning assigned to it
23 of 2004.
under Chapter VII of the Finance (No. 2) Act, 2004;
(33) “service”, for the purposes of section 26(2)(h), means a service of 30
any description which is made available to potential users and includes the
provision of services in connection with business of any industrial or
commercial nature such as––
(a) accounting;
(b) banking; 35

(c) communication;
(d) conveying of news or information;
(e) advertising;
(f) entertainment;
(g) amusement; 40
(h) education;
(i) financing;
(j) insurance;
(k) chit funds;
 103

(l) real estate;

(m) construction;
(n) transport;
(o) storage;
5 (p) processing;
(q) supply of electrical or other energy; and
(r) boarding and lodging;
(34) “small enterprise” shall have the same meaning as assigned to it
in section 2(m) of the Micro, Small and Medium Enterprises Development
27 of 2006. 10 Act, 2006;
(35) “speculative transaction” means a transaction in which a contract
for the purchase or sale of any commodity, including stocks and shares, is
periodically or ultimately settled otherwise than by the actual delivery or
transfer of the commodity or scrips, other than the following transactions:—
15 (a) a specified derivative transaction as defined in clause (37);
(b) a contract in respect of raw materials or merchandise entered
into by a person in the course of his manufacturing or merchandising
business to guard against loss through future price fluctuations in
respect of his contracts for actual delivery of goods manufactured, or
20 merchandise sold by him;
(c) a contract in respect of stocks and shares entered into by a
dealer or investor therein to guard against loss in his holdings of stocks
and shares through price fluctuations;
(d) a contract entered into by a member of a forward market or a
25 stock exchange in the course of any transaction in the nature of jobbing
or arbitrage, to guard against loss which may arise in the ordinary
course of his business as such member;
(36) “Specified Banking or Online Mode” shall mean transaction by
an account payee cheque or an account payee bank draft or use of electronic
30 clearing system through a bank account or through such other electronic
mode, as prescribed;
(37) “specified derivative transaction” means any transaction in
derivatives, if—
(a) it is carried out electronically on screen-based systems of a
35 recognised stock exchange or a recognised commodity exchange;
(b) it is carried out by a bank or mutual fund or any other person,
through a broker, member or such other intermediary; and
(c) it is supported by a time stamped contract note issued by the
intermediary to every client indicating in the contract note—
40
(i) the unique client identity number allotted under any law
in force; and
(ii) the Permanent Account Number allotted under this Act;
(38) “State Government undertaking” includes—
(a) a corporation established by or under any State Act;
45 (b) a company in which more than 50% of the paid-up equity
share capital is held by the State Government;
 104

(c) a company in which more than 50% of the paid-up equity

share capital is held by the entity referred to in clause (a) or (b)
(whether singly or taken together);
(d) a company or corporation in which the State Government has
the right to appoint the majority of the directors or to control the 5
management or policy decisions, directly or indirectly, including by
virtue of its shareholding or management rights or shareholders
agreements or voting agreements or in any other manner;
(e) an authority, a board or an institution or a body established
or constituted by or under any State Act, or owned or controlled by the 10
State Government;
(39) “State Industrial Investment Corporation” means a Government
company within the meaning of section 2(45) of the Companies Act, 2013, 18 of 2013.
engaged in the business of providing long-term finance for industrial
projects; 15

(40) “State Financial Corporation” means a Financial Corporation

established under section 3 or 3A or an institution notified under section 46
of the State Financial Corporations Act, 1951; 63 of 1951.

(41) “successor entity” means––

(a) the amalgamated Indian company, in the case of 20
amalgamation;
(b) the resulting Indian company, in the case of demerger;
(c) a company, in case of a succession of a firm by a company
as referred to in section 70(1)(zd);
(d) a limited liability partnership, in case of conversion of private 25
company or unlisted public company to a limited liability partnership,
as referred to in section 70(1)(ze);
(e) company, in case of succession of sole proprietorship
concern by a company, as referred to in section 70(1)(zf);
(42) “taxable commodities transaction” shall have the meaning 30
assigned to it under Chapter VII of the Finance Act, 2013; 17 of 2013.
(43) “taxable securities transaction” shall have the meaning assigned
to it under Chapter VII of the Finance Act, 2004; 13 of 2004.

(44) “University” shall have the meaning assigned to it in

section 70(2) (Table: Sl. No. 7); and 35

(45) “work”, for the purposes of section 35(b)(i), shall have the
meaning assigned to it in section 402(47).
E.—Capital gains
Capital gains.
67. (1) Any profits or gains arising from the transfer of a capital asset
effected in a tax year shall, save as otherwise provided in sections 82, 83, 84, 86, 40
87, 88 and 89, be chargeable to income-tax under the head “Capital gains” and
shall be deemed to be the income of the tax year in which the transfer took place.
(2) Irrespective of anything contained in sub-section (1), if a person receives
during any tax year any money or other assets under an insurance from an insurer
on account of damage to, or destruction of, any capital asset, as a result of 45
circumstances mentioned in sub-section (3), then,––
(a) any profits or gains arising from receipt of such money or other
assets shall be chargeable to income-tax under the head “Capital gains” and
shall be deemed to be the income of such person of the tax year in which
such money or other asset was received; and 50
 105

(b) for the purposes of section 72, the value of any money or the fair
market value of other assets on the date of such receipt shall be deemed to be
the full value of the consideration received or accruing as a result of the
transfer of such capital asset.
5 (3) The following shall be the circumstances referred to in sub-section (2):––
(a) flood, typhoon, hurricane, cyclone, earthquake or any other
convulsion of nature; or
(b) riot or civil disturbance; or

(c) accidental fire or explosion; or

10 (d) action by an enemy or action taken in combating an enemy (whether
with or without a declaration of war).
(4) In sub-section (2), “insurer” shall have the same meaning as assigned to it
4 of 1938. in section 2(9) of the Insurance Act, 1938.

(5) Irrespective of anything contained in sub-section (1), if any profits or gains

15 arises to a person from receipt of any amount, including a bonus, under a unit linked
insurance policy to which the exemption specified at Schedule II (Table: Sl. No. 2)
does not apply, then,––
(a) such profits and gains shall be chargeable to income-tax under the
head “Capital gains” and shall be deemed to be the income of such person in
20 the tax year in which such amount was received; and
(b) the income taxable shall be calculated in such manner, as prescribed.

(6) Irrespective of anything contained in sub-section (1), if the profits or gains

arising from the transfer by way of conversion of a capital asset into, or its treatment
by the owner as, stock-in-trade of a business carried on by him, then,––
25 (a) such profits and gains shall be chargeable to income-tax as his
income in the tax year in which such stock-in-trade is sold (or otherwise
transferred by any other means); and
(b) for the purposes of section 72, the fair market value of the asset on
the date of such conversion or treatment shall be deemed to be the full value
30 of the consideration received or accruing as a result of the transfer of such
capital asset.

(7) If any person, at any time during the tax year, had any beneficial interest
in any securities and any profits or gains arise from transfer made by the depository
or participant of such beneficial interest in respect of securities, then,––
35 (a) such profits and gains shall be chargeable to income-tax as the
income of the beneficial owner of the tax year in which such transfer took
place;
(b) such profits and gains shall not be regarded as income of the
depository who is deemed to be the registered owner of securities by virtue of
22 of 1996. 40 section 10(1) of the Depositories Act, 1996; and
(c) for the purposes of section 72 and section 2(100)(b), the cost of
acquisition and the period of holding of any securities shall be determined on
the basis of the first-in-first-out method.
 106

(8) In sub-section (7), “beneficial owner”, “depository” and “security” shall

have the same meanings as respectively assigned to them in section 2(1)(a), (e) and
22 of 1996.
(l) of the Depositories Act, 1996.

(9) If any profits or gains arise from the transfer of a capital asset by a person,
to a firm or other association of persons or body of individuals (not being a company 5
or co-operative society) in which he is or becomes a partner or member, by way of
capital contribution or otherwise, then,––

(a) such profits and gains shall be chargeable to tax as his income in the
tax year of such transfer; and

(b) for the purposes of section 72 the amount recorded in the books of 10
account of the firm, association or body as the value of the capital asset shall
be deemed to be the full value of the consideration received or accruing as a
result of the transfer of such capital asset.

(10) Irrespective of anything contained in sub-section (1), if a specified

person receives during the tax year, any money or capital asset, or both, from a 15
specified entity in connection with the reconstitution of such specified
entity, then,––

(a) any profits or gains arising from such receipt shall be deemed as
income of the specified entity of the tax year of such receipt by the specified
person and chargeable to income-tax under the head “Capital gains”; and 20

(b) such profits or gains shall be determined irrespective of anything to

the contrary contained in this Act as follows:—

A = B + C – D,

where,

A = income chargeable to income-tax under this sub-section as 25

income of the specified entity under the head “Capital gains”;

B = value of any money received by the specified person from the

specified entity on the date of such receipt;

C = amount of fair market value of the capital asset received by the

specified person from the specified entity on the date of such 30
receipt; and

D = amount of balance in the capital account (represented in any

manner) of the specified person in the books of account of the specified
entity at the time of its reconstitution;

(c) for the purposes of the formula in clause (b),–– 35

(i) if the value of “A” in the said formula is negative, its value shall
be deemed to be zero;

(ii) the balance in the capital account of the specified person in the
books of account of the specified entity shall be calculated without
considering any increase in the capital account of the specified person 40
due to revaluation of any asset or due to self-generated goodwill or any
other self-generated asset; and
 107

(d) the provisions of this sub-section shall operate in addition to the

provisions of section 8 and the taxation under the said section shall be
worked out independently, when a capital asset is received by a specified
person from a specified entity in connection with the reconstitution of such
5 specified entity.

(11) In sub-section (10),—

(a) “reconstitution of the specified entity”, “specified entity” and

“specified person” shall have the meanings respectively assigned to them in
section 8;
10 (b) “self-generated goodwill” and “self-generated asset” mean goodwill
or asset, as the case may be, which has been acquired without incurring any
cost for purchase or which has been generated during the course of the
business or profession.

(12) Irrespective of anything contained in sub-section (1), if the capital gain

15 arises from the transfer of a capital asset by way of compulsory acquisition under
any law, or a transfer the consideration for which was determined or approved by
the Central Government or the Reserve Bank of India, and the compensation or the
consideration for such transfer is enhanced or further enhanced by any court,
tribunal or other authority, the capital gain shall be dealt with in the following
20 manner:––

(a) the capital gains computed with reference to the compensation

awarded in the first instance or as the case may be, consideration determined
or approved by the Central Government or the Reserve Bank of India in the
first instance, shall be chargeable as income under the head “Capital gains” of
25 the tax year in which such compensation or part thereof, or such consideration
or part thereof, was first received;

(b) the amount by which the compensation or consideration is enhanced

or further enhanced by the court, tribunal or other authority shall be deemed
to be income chargeable under the head “Capital gains” of the tax year in
30 which such amount is received;

(c) any compensation as referred to in clause (b) received in pursuance

of an interim order of a court, tribunal or other authority shall be deemed as
income chargeable under the head “Capital gains” of the tax year in which the
final order of such court, tribunal or other authority is made; and
35 (d) the capital gain assessed for any tax year under clause (a) or (b)
shall be recomputed where the compensation or consideration referred to
in clauses (a) to (c) is reduced by any court, tribunal or other authority
and such reduced value shall be taken to be the full value of the
consideration.
40 (13) In relation to the amount referred to in sub-section (12)(b) and (c),—

(a) the cost of acquisition and the cost of improvement shall be taken as
nil; and

(b) in a case, where the enhanced compensation or consideration is

received by any other person due to the death of the person who made the
45 transfer, or for any other reason, such amount shall be deemed as the income
chargeable to tax under the head “Capital gains” in the hands of such other
person.
 108

(14) Irrespective of anything contained in sub-section (1), if the capital gains

arises to a person (being an individual or a Hindu undivided family), from the
transfer of a capital asset, being land or building or both, under a specified
agreement, then,––
(a) such capital gains shall be chargeable to income-tax for the tax year 5
in which the certificate of completion for the whole or part of the project is
issued by the competent authority; and
(b) for the purposes of section 72, the stamp duty value, on the date of
issue of the said certificate, of the share of such person, being land or building,
or both, in the project, as increased by any consideration received in cash or 10
by a cheque or draft or by any other mode shall be deemed to be the full value
of the consideration received or accruing as a result of the transfer of such
capital asset.
(15) In sub-section (14),––
(a) “competent authority” means the authority empowered to approve 15
the building plan under any law;
(b) “specified agreement” means a registered agreement in which a
person owning land or building, or both, agrees to allow another person to
develop a real estate project on such land or building, or both, in consideration
of a share, being land or building, or both, in such project, whether with or 20
without payment of part of the consideration in cash.
(16) The provisions of sub-section (14) shall not apply, if the person transfers
his share in the project on or before the date of issue of the certificate of completion,
and then,––
(a) the capital gains shall be deemed to be the income of the tax year of 25
such transfer; and
(b) the provisions of this Act, other than sub-section (14), shall apply for
the purpose of determination of full value of consideration.
(17) Irrespective of anything contained in sub-section (1), the difference
between the repurchase price of the units referred to in section 80CCB(2) of the 30
Income-tax Act, 1961 and the capital value of such units shall be taxed considering 43 of 1961.
it to be the capital gains arising to the assessee in the tax year in which––
(a) such repurchase takes place; or
(b) the plan referred to in that section is terminated.
(18) For the purposes of sub-section (17), “capital value of such units” means 35
any amount invested by the assessee in the units referred to in section 80CCB(2) of
43 of 1961.
the Income-tax Act, 1961.
Capital gains on 68. (1) Irrespective of anything contained in section 67, where the assets
distribution of
assets by
of a company are distributed to its shareholders on its liquidation, such
companies in distribution shall not be regarded as a transfer by the company for the purposes 40
liquidation. of the said section.
(2) If a shareholder, on the liquidation of a company, receives any money or
other assets from the company, then,––
(a) such shareholder shall be chargeable to income-tax under the head
“Capital gains”, in respect of the money so received or the market value of the 45
other assets on the date of distribution, as reduced by the amount assessed as
dividend within the meaning of section 2(40)(c); and
(b) the sum so arrived at shall be deemed to be the full value of the
consideration for the purposes of section 72.
 109

69. (1) If a shareholder or a holder of other specified securities receives any Capital gains on
consideration from any company for the purchase of its own shares or other purchase by
company of its
specified securities held by such shareholder or holder of other specified securities, own shares or
then, subject to the provisions of section 72, the difference between the cost of other specified
5 acquisition and the value of consideration so received shall be deemed to be the securities.
“Capital gains” arising to such shareholder or the holder in the year in which the
company purchases the shares or other specified securities.
(2) If the shareholder receives any consideration of the nature referred to in
section 2(40)(f), from any company in respect of buy-back of shares, then for the
10 purposes of this section, the value of such consideration shall be deemed to be nil.
(3) For the purposes of this section, “specified securities” shall have the same
18 of 2013. meaning as assigned to it in Explanation 1 to section 68 of the Companies Act, 2013.
70. (1) The provisions of section 67 shall not apply to transfer— Transactions not
regarded as
(a) of distribution of capital assets on the total or partial partition of a transfer.
15 Hindu undivided family;
(b) of a capital asset by an individual or a Hindu undivided family, under
a will or a gift or an irrevocable trust;
(c) of a capital asset, not being stock-in-trade, by a company to its
subsidiary company, if—
20 (i) the parent company or its nominees hold the whole of the share
capital of the subsidiary company; and
(ii) the subsidiary company is an Indian company;
(d) of a capital asset, not being stock-in-trade, by a subsidiary company
to the holding company, if––
25 (i) the whole of the share capital of the subsidiary company is held
by the holding company; and
(ii) the holding company is an Indian company;
(e) in a scheme of amalgamation, of a capital asset by the amalgamating
company to the amalgamated company, if the amalgamated company is an
30 Indian company;
(f) by a shareholder, in a scheme of amalgamation, of a capital asset
being a share or shares held in the amalgamating company, if—
(i) the transfer is made in consideration of allotment of any share
or shares in the amalgamated company, except when the shareholder
35 itself is the amalgamated company; and
(ii) the amalgamated company is an Indian company;
(g) in a scheme of amalgamation, of a capital asset being a share or
shares held in an Indian company, by the amalgamating foreign company to
the amalgamated foreign company, if—
40 (i) at least 25% of the shareholders of the amalgamating foreign
company continue to remain shareholders of the amalgamated foreign
company; and
(ii) such transfer does not attract tax on capital gains in the country,
in which the amalgamating company is incorporated;
 110

(h) in a scheme of amalgamation, of a capital asset, being a share of a

foreign company, referred to in section 9(9)(a), which derives directly or
indirectly, its value substantially from the share or shares of an Indian
company, held by the amalgamating foreign company to the amalgamated
foreign company, if— 5

(i) at least 25% of the shareholders of the amalgamating foreign

company continue to remain shareholders of the amalgamated foreign
company; and
(ii) such transfer does not attract tax on capital gains in the country
in which the amalgamating company is incorporated; 10

(i) of a capital asset by a banking company to a banking institution under

a scheme of amalgamation sanctioned and brought into force by the Central
Government under section 45(7) of the Banking Regulation Act, 1949; 10 of 1949.

(j) in a demerger, of a capital asset by the demerged company to the

resulting company, if the resulting company is an Indian company; 15

(k) of shares by the resulting company or issue of shares by such

company, in a scheme of demerger to the shareholders of the demerged
company, if the transfer or issue is made in consideration of demerger of the
undertaking;
(l) in a demerger (where the provisions of sections 230 to 232 of the 20
Companies Act, 2013 do not apply), of a capital asset, being a share or shares 18 of 2013.
held in an Indian company, by the demerged foreign company to the resulting
foreign company, if—
(i) the shareholders holding not less than 75% in value of the shares
of the demerged foreign company continue to remain shareholders of the 25
resulting foreign company; and
(ii) such transfer does not attract tax on capital gains in the country,
in which the demerged foreign company is incorporated;
(m) in a demerger (where the provisions of sections 230 to 232 of the
Companies Act, 2013 do not apply), of a capital asset, being a share of a 30 18 of 2013.
foreign company, referred to in section 9(9)(a), which derives directly or
indirectly, its value substantially from the share or shares of an Indian
company, held by the demerged foreign company to the resulting foreign
company, if—
(i) the shareholders, holding not less than 75% in value of the 35
shares of the demerged foreign company, continue to remain
shareholders of the resulting foreign company; and
(ii) such transfer does not attract tax on capital gains in the country
in which the demerged foreign company is incorporated;
(n) in a business reorganisation, of a capital asset by the predecessor 40
co-operative bank to the successor co-operative bank or to the converted
banking company;
(o) by a shareholder, in a business reorganisation, of capital asset being
share or shares held in the predecessor co-operative bank, if the transfer is
made in consideration of the allotment to the shareholder of share or shares in 45
the successor co-operative bank or the converted banking company;
 111

(p) of a capital asset, being bonds or Global Depository Receipts as

referred to in section 209(1), made outside India by a non-resident to another
non-resident;
(q) made outside India, of a capital asset, being rupee denominated bond
5 of an Indian company issued outside India, by a non-resident to another
non-resident;
(r) of a capital asset made by a non-resident on a recognised stock
exchange located in any International Financial Services Centre, where the
consideration for such transaction is paid or payable in foreign currency, and
10 such capital asset is—
(i) bond or Global Depository Receipt referred to in
section 209(1); or
(ii) rupee denominated bond of an Indian company; or
(iii) derivative; or
15 (iv) such other securities as notified by the Central Government;
(s) of a capital asset, being a Government security carrying a periodic
payment of interest, made outside India through an intermediary dealing in
settlement of securities, by a non-resident to another non-resident;
(t) in a relocation, of a capital asset by the original fund to the
20 resulting fund;
(u) by a shareholder or unit holder or interest holder, in a relocation, of
a capital asset being share or unit or interest held in the original fund in
consideration for the share or unit or interest in the resultant fund;
(v) of a capital asset by India Infrastructure Finance Company Limited
25 to an institution established for financing the infrastructure and development,
set up under an Act of Parliament and notified by the Central Government for
the purposes of this clause;
(w) of a capital asset, under a plan approved by the Central Government,
by a public sector company, to––
30 (i) another public sector company notified by the Central
Government for the purposes of this clause; or
(ii) the Central Government; or
(iii) a State Government;
(x) of Sovereign Gold Bond issued by the Reserve Bank of India under
35 the Sovereign Gold Bond Scheme, 2015, by way of redemption, by an
individual;
(y) of a capital asset, being conversion of gold into Electronic Gold
Receipt issued by a Vault Manager, or conversion of Electronic Gold Receipt
into gold;
40 (z) by way of conversion of bonds or debentures, debenture-stock or
deposit certificates in any form, of a company into shares or debentures of that
company;
(za) by way of conversion of bonds referred to in section 209(1)
(Table: Sl. No. 1) into shares or debentures of any company;
45 (zb) by way of conversion of preference shares of a company into equity
shares of that company;
 112

(zc) of a capital asset, being any work of art, archaeological, scientific

or art collection, book, manuscript, drawing, painting, photograph or
print, to—
(i) the Government; or
(ii) a University; or 5

(iii) the National Museum, National Art Gallery or National

Archives; or
(iv) such other public museum or institution as notified by the
Central Government to be of national importance or of renown
throughout any State; 10

(zd) of a capital asset or intangible asset by a firm to a company as a

result of succession of the firm by a company in the business carried on by the
firm, if––
(i) all the assets and liabilities of the firm relating to the business
immediately before the succession become the assets and liabilities of 15
the company;
(ii) all the partners of the firm, immediately before the succession,
become the shareholders of the company in the same proportion in which
their capital accounts stood in the books of the firm on the date of the
succession; 20

(iii) the partners of the firm do not receive any consideration or

benefit, directly or indirectly, in any form or manner, other than by way
of allotment of shares in the company; and
(iv) the aggregate of the shareholding of the partners in the
company is at least 50% of the total voting power and such shareholding 25
remains the same for five years from the date of succession;
(ze) of a capital asset or intangible asset by a private company or unlisted
public company (herein referred to as the company) to a limited liability
partnership or transfer of a share or shares held in the company by a
shareholder as a result of conversion of the company into a limited liability 30
partnership under the provisions of section 56 or 57 of the Limited Liability
6 of 2009.
Partnership Act, 2008, if––
(i) all the assets and liabilities of the company, immediately before
the conversion, become the assets and liabilities of the limited liability
35
partnership;
(ii) all the shareholders of the company, immediately before the
conversion, become the partners of the limited liability partnership and
their capital contribution and profit sharing ratio in the limited liability
partnership are in the same proportion as their shareholding in the
company on the date of conversion; 40

(iii) the shareholders of the company do not receive any

consideration or benefit, directly or indirectly, other than by way of share
in profit and capital contribution in the limited liability partnership;
(iv) the aggregate of the profit sharing ratio of the shareholders of
the company in the limited liability partnership shall not be less than 45
50% at any time during five years from the date of conversion;
 113

(v) the total sales, turnover or gross receipts in the business of the
company in any of the three tax years preceding the tax year in which
the conversion takes place does not exceed sixty lakh rupees;
(vi) the total value of the assets, as appearing in the books of
5 account of the company in any of the three tax years preceding the tax
year in which the conversion takes place does not exceed five crore
rupees; and
(vii) no amount is paid, either directly or indirectly, to any partner
out of balance of accumulated profit standing in the accounts of the
10 company on the date of conversion for three years from the date of
conversion;
(zf) of a capital asset or intangible asset (by way of sale or otherwise) by
a sole proprietorship concern to a company in case of succession of the sole
proprietorship concern by the company in the business carried on by it, if––
15 (i) all the assets and liabilities related to the business of the sole
proprietary concern, immediately before the succession, become the
assets and liabilities of the company;
(ii) the shareholding of the sole proprietor in the company is not
less than 50% of the total voting power in the company and this
20 shareholding continues to remain the same for five years from the date
of the succession; and
(iii) the sole proprietor does not receive any consideration or
benefit, directly or indirectly, except through allotment of shares in
the company;
25 (zg) in a scheme for lending of any securities under an agreement or
arrangement, entered into by the assessee with the borrower of such securities
and which is subject to the guidelines issued by the Securities and Exchange
Board of India or the Reserve Bank of India;
(zh) of a capital asset in a transaction of reverse mortgage under a
30 scheme notified by the Central Government;
(zi) of a capital asset, being share or shares of a special purpose vehicle
to a business trust in exchange of units allotted by that trust to the transferor;
(zj) of a capital asset, being a unit or units, held by a unit holder in the
consolidating scheme of a mutual fund, in consideration of the allotment to
35 the unit holder of a capital asset, being a unit or units, in the consolidated
scheme of the mutual fund subject to the condition that the consolidation is of
two or more schemes––
(i) of an equity-oriented fund; or
(ii) of a fund other than equity-oriented fund;
40 (zk) of a capital asset, being a unit or units, held by a unit holder in the
consolidating plan of a mutual fund scheme, in consideration of the allotment
to the unit holder of a capital asset, being a unit or units, in the consolidated
plan of that scheme of the mutual fund;
(zl) of a capital asset, being an interest in a joint venture, by a public
45 sector company, in exchange for shares of a company incorporated outside
India by the government of a foreign State, as per the laws of that
foreign State.
 114

(2) In sub-section (1), the definitions of the expressions mentioned in

column C of the Table below shall apply to the corresponding clauses of the said
sub-section mentioned in column B of the said Table.

Table

Sl. No. Clause Definitions 5

A B C
1. (i) The expressions––

(a) “banking company” shall have the same meaning

as assigned to it in section 5(c) of the Banking
Regulation Act, 1949 (10 of 1949); 10

(b) “banking institution” shall have the same meaning

as assigned to it in section 45(15) of the Banking
Regulation Act, 1949 (10 of 1949).

2. (n) and “business reorganisation”, “converted banking

(o) company”, “predecessor co-operative bank” and 15
“successor co-operative bank” shall have the meanings
respectively assigned to them in section 65.

3. (r) (a) “derivative” shall have the same meaning as

assigned to it in section 2(ac) of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956); 20

(b) “securities” shall have the same meaning as

assigned to it in section 2(h) of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956).

4. (s) “Government Security” shall have the same meaning as

assigned to it in section 2(b) of the Securities Contracts 25
(Regulation) Act, 1956 (42 of 1956).

5. (t) and (a) “original fund” means—

(u)
(A) a fund established or incorporated or registered
outside India, which collects funds from its members 30
for investing it for their benefit and fulfils the following
conditions:—

(i) the fund is not a person resident in India;

(ii) the fund is a resident of a country or a specified

territory with which an agreement referred to in 35
section 159(1) or (2) has been entered into; or is
established or incorporated or registered in a country
or a specified territory as notified by the
Central Government;

(iii) the fund and its activities are subject to 40

applicable investor protection regulations in the
country or specified territory where it is established
or incorporated or is a resident; and

(iv) fulfils other conditions as prescribed;

 115

A B C
(B) an investment vehicle, in which Abu Dhabi
Investment Authority is the direct or indirect sole
shareholder or unit holder or beneficiary or interest
5 holder and such investment vehicle is wholly owned
and controlled, directly or indirectly, by the Abu Dhabi
Investment Authority or the Government of Abu
Dhabi; or
(C) a fund notified by the Central Government subject
10 to conditions as specified;
(b) “relocation” means transfer of assets of the
original fund, or of its wholly owned special purpose
vehicle, to a resultant fund on or before the 31st
March, 2025, where consideration for such transfer is
15 discharged in the form of share or unit or interest in the
resulting fund to—
(i) a shareholder or unit holder or interest holder of
the original fund, in the same proportion in which the
share or unit or interest was held by such shareholder or
20 unit holder or interest holder in such original fund,
in lieu of their shares or units or interests in the
original fund; or
(ii) the original fund, in the same proportion as
referred to in sub-clause (i), in respect of which the
25 share or unit or interest is not issued by resultant fund
to its shareholder or unit holder or interest holder;
(c) “resultant fund” means a fund established or
incorporated in India in the form of a trust or a company
or a limited liability partnership, which is located in an
30 International Financial Services Centre as referred to in
section 147 and has been granted—
(i) a certificate of registration as a Category I or
Category II or Category III Alternative Investment
Fund, and is regulated under the Securities and
35 Exchange Board of India (Alternative Investment
Funds) Regulations, 2012 made under the Securities
and Exchange Board of India Act, 1992 (15 of 1992)
or regulated under the International Financial
Services Centres Authority (Fund Management)
40 Regulations, 2022 made under the International
Financial Services Centres Authority Act, 2019
(50 of 2019); or
(ii) a certificate as a retail scheme or an Exchange
Traded Fund as per Schedule VI (Note 1) and which
45 fulfils the conditions specified in Schedule VI
(Table: Sl. No. 1).
6. (y) “Electronic Gold Receipt” and “Vault Manager” shall
have the same meanings as respectively assigned to them
in regulation 2(1)(h) and (l) of the Securities and
50 Exchange Board of India (Vault Managers)
Regulations, 2021 made under the Securities and
Exchange Board of India Act, 1992 (15 of 1992).
 116

A B C
7. (zc) “University” means a University established or
incorporated by or under a Central Act or State Act or
Provincial Act and includes an institution declared under
section 3 of the University Grants Commission Act, 1956 5
(3 of 1956), to be a University for the purposes of that
Act.
8. (ze) “private company” and “unlisted public company” shall
have the same meanings as respectively assigned to them
in the Limited Liability Partnership Act, 2008 (6 of 2009). 10

9. (zi) “special purpose vehicle” shall have the meaning

assigned to it in Schedule V (Note 2).
10. (zj) (a) “consolidated scheme” means the scheme with
which the consolidating scheme merges or which is
15
formed as a result of such merger;
(b) “consolidating scheme” means the scheme of a
mutual fund which merges under the process of
consolidation of the schemes of mutual fund as per the
Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996 made under the Securities and 20
Exchange Board of India Act, 1992 (15 of 1992);
(c) “equity oriented fund” means a fund—
(i) where the investible funds are invested by way of
equity shares in domestic companies to the extent of
more than 65% of the total proceeds of such fund, for 25
which the percentage of equity shareholding shall be
computed with reference to the annual average of the
monthly averages of the opening and closing figures; and
(ii) which has been set up under a scheme of Mutual
Fund specified in Schedule VII (Table: Sl. No. 20 or 21); 30
(d) “mutual fund” means a mutual fund specified in
Schedule VII (Table: Sl. No. 20 or 21).
11. (zk) (a) “consolidating plan” means the plan within a scheme
of a mutual fund which merges under the process of
consolidation of the plans within a scheme of mutual fund 35
as per the Securities and Exchange Board of India (Mutual
Funds) Regulations, 1996 made under the Securities and
Exchange Board of India Act, 1992 (15 of 1992);
(b) “consolidated plan” means the plan with which the
consolidating plan merges or which is formed as a result 40
of such merger;
(c) “mutual fund” means a mutual fund specified in
Schedule VII (Table: Sl. No. 20 or 21); and
12. (zl) “joint venture” means a business entity, as notified by
the Central Government. 45

Withdrawal of 71. (1) The profits or gains arising from the transfer of capital asset not
exemption in charged under section 67 by virtue of section 70(1)(c) and (d) shall, irrespective of
certain cases.
anything contained in the said clauses, be deemed to be income chargeable under
the head “Capital gains” of the tax year in which such transfer took place, if at any
time before the expiry of eight years from the date of such transfer,— 50
 117

(a) the transferee company converts the capital asset into, or treats it as,
stock-in-trade of its business; or
(b) the parent company or its nominees or the holding company, ceases
or cease to hold the whole of the share capital of the subsidiary company.
5 (2) If any of the conditions laid down in section 70(zd) or (zf) are not complied
with, the profits or gains arising from the transfer of such capital asset or intangible
asset not charged under section 67 by virtue of such conditions shall be deemed to
be the profits and gains chargeable to tax under the head “Capital gains” of the
successor company for the tax year in which such conditions are not complied with.
10 (3) If any of the conditions laid down in section 70(ze) are not complied with,
the profits or gains arising from the transfer of such capital asset or intangible assets
or share or shares not charged under section 67 by virtue of such conditions shall be
deemed to be the profits and gains chargeable to tax under the head “Capital gains”of
the successor limited liability partnership or the shareholder of the predecessor
15 company, for the tax year in which such conditions are not complied with.
72. (1) Income chargeable under the head “Capital gains” shall be computed, Mode of
by deducting from the full value of the consideration received or accruing as a result computation of
capital gains.
of the transfer of the capital asset, the following amounts:—
(a) expenditure incurred wholly and exclusively in connection with such
20 transfer; and
(b) the cost of acquisition of the asset and the cost of any improvement
thereto.
(2) In cases, as prescribed, the provisions of sub-section (1) shall have effect
as if for the words “cost of acquisition” and “cost of any improvement”, the words
25 “indexed cost of acquisition” and “indexed cost of any improvement” had
respectively been substituted.
(3) In computing the income chargeable under the head “Capital gains”, the
following amounts shall not be allowed as a deduction:—
(a) the interest claimed as deduction under section 22(1)(b) or under
30 Chapter VIII;
(b) any sum paid as securities transaction tax under Chapter VII of the
23 of 2004. Finance (No.2) Act, 2004.
(4) If a unit holder receives any amount from a business trust with respect to
a unit that is not in the nature of income under Schedule V (Table: Sl. No. 3. or 4)
35 and is not chargeable to tax under section 92(2)(k) or 223(2), then,––
(a) such amount shall be reduced from the cost of acquisition of such
unit; and
(b) if the transaction of transfer of a unit is not considered as transfer
under section 70 and cost of acquisition of such unit is determined under
40 section 73, the amount received with respect to such unit before as well as
after such transaction, shall be reduced from the cost of acquisition.
(5) In case of value of any money or capital asset received by a specified
person from a specified entity, as referred to in section 67(10), the specified entity
is entitled to a deduction calculated in such manner, as prescribed for computing the
45 amount chargeable to income-tax in its hands under that sub-section which is
attributable to the transfer of such capital asset.
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(6) In the case of an assessee, who is a non-resident, capital gains arising from
the transfer of a capital asset being shares in, or debentures of, an Indian company
(other than equity shares referred to in section 198) shall be computed––
(a) by converting the cost of acquisition, expenditure incurred, wholly
and exclusively, in connection with such transfer and the full value of the 5
consideration received or accruing as a result of the transfer of the capital asset
into the same foreign currency as was initially utilised in the purchase of the
shares or debentures; and
(b) the capital gains so computed in such foreign currency shall be
reconverted into Indian currency, so, however, that the said manner of 10
computation of capital gains shall be applicable in respect of capital gains
accruing or arising from every reinvestment thereafter in, and sale of, shares
in, or debentures of, an Indian company.
(7) In the case of an assessee who is a non-resident, any gains arising on
account of appreciation of rupee against a foreign currency at the time of 15
redemption of rupee denominated bond of an Indian company held by the
assessee, shall be ignored for the purpose of computing the full value of
consideration.
(8) In this section, the expressions––
(a) “Cost Inflation Index”, in relation to a tax year, means such Index as 20
the Central Government may, having regard to 75% of average rise in the
Consumer Price Index (urban) for the immediately preceding tax year to such
tax year, by notification, specify, in this behalf;
(b) “indexed cost of acquisition” means an amount which bears to the
cost of acquisition, the same proportion as Cost Inflation Index for the year in 25
which the asset is transferred bears to the Cost Inflation Index for the first year
in which the asset was held by the assessee or for the year beginning on
1st April, 2001, whichever is later; and
(c) “indexed cost of any improvement” means an amount which bears to
the cost of improvement, the same proportion as Cost Inflation Index for the 30
year in which the asset is transferred bears to the Cost Inflation Index for the
year in which the improvement to the asset took place.
Cost with 73. (1) In the case of a capital asset specified in column B of the Table
reference to below, the cost of acquisition of the asset shall be deemed to be the cost as
certain modes of
acquisition. mentioned in column C of the said Table. 35

Table
Sl. No. Description of the capital asset Cost of acquisition
A B C
1. If the capital asset became the The cost for which
property of the assessee–– the previous owner of the 40

(a) under a gift or will; or property acquired it, as

increased by the cost of
(b) by succession, inheritance any improvement
or devolution; or
incurred or borne by the
previous owner or the 45
assessee.
 119

A B C
(c) on any distribution of assets on
the liquidation of a company; or
(d) under a transfer to a revocable
5 or an irrevocable trust; or
(e) being a Hindu undivided
family, by the mode referred to
in section 99(3) after the
31st December, 1969; or
10 (f) under any such transfer as is
referred to in section 70(1)(a), (c),
(d), (e), (g), (h), (i), (j), (l), (m), (n),
(o), (t), (u), (v), (w), (zd), (ze) or (zf).
2. Capital asset, being a share or shares in The cost of
15 an amalgamated company which is an acquisition to him of the
Indian company that became the property share or the shares in the
of the assessee in consideration of a amalgamating company.
transfer referred to in section 70(1)(f).
3. Capital asset being a share or debenture That part of the cost of
20 of a company, which became the property debenture, debenture-
of the assessee in consideration of a stock, bond or deposit
transfer referred to in section 70(1)(z) or certificate for which such
(za). asset is acquired by the
assesse.

25 4. Capital asset, being specified security or Fair market value

sweat equity shares, referred to in taken into account for the
section 17(2). purposes of the said
clause.
5. Capital asset, being rights of a partner The cost of
30 referred to in section 42 of the Limited acquisition of the share
Liability Partnership Act, 2008 (6 of 2009), or shares in the company
which became the property of the assessee immediately before its
on conversion as referred to in conversion.
section 70(1)(ze).
35 6. Capital asset, being share or shares of a The price of the said
company acquired by a non-resident share or shares
assessee on redemption of Global prevailing on any
Depository Receipts referred to in section recognised stock
209(1) (Table: Sl. No. 2) held by such exchange on the date on
40 assessee. which a request for
redemption was made.
7. Capital asset, being a unit of a business The cost of
trust, which became the property of the acquisition of the share
assessee in consideration of a transfer as referred to in the said
45 referred to in section 70(1)(zi). clause.
 120

A B C

8. Capital asset, being a unit or units in a The cost of

consolidated scheme of a mutual fund, acquisition of the unit or
which became the property of the assessee units in the consolidating
in consideration of a transfer referred to in scheme of the mutual 5
section 70(1)(zj). fund.

9. Capital asset, being equity share of a That part of the cost of

company, which became the property of the preference shares in
the assessee in consideration of a transfer relation to which such
referred to in section 70(1)(zb). asset is acquired. 10

10. Capital asset, being a unit or units in a The cost of

consolidated plan of a mutual fund scheme, acquisition of the unit or
which became the property of the assessee units in the consolidating
in consideration of a transfer referred to in plan of the scheme of the
section 70(1)(zk). mutual fund. 15

11. Capital asset being a unit or units in the Computed as per the
segregated portfolio. following formula:––

X =AxB,
C

where,––
20
X = cost of
acquisition of the unit or
units in segregated
portfolio;

A = cost of 25
acquisition of unit or
units in the total
portfolio;

B = Net Asset
Value of the asset 30
transferred to the
segregated portfolio; and

C = Net Asset
Value of the total
portfolio immediately 35
before segregation.

12. Capital asset being original units held The cost of

by the unit holder in the main portfolio. acquisition as reduced
by the amount as so
arrived at under serial 40
number 11.
 121

A B C
13. Capital asset, being shares as referred to The cost of
in section 70(1)(zl) which became the acquisition to it of the
property of the assessee. interest in the joint
5 venture referred to in the
said clause.

14. Shares in the resulting company as a Computed as per the

result of demerger. following formula:––
X =AxB,
10 C
where,––

X = cost of
acquisition of
shares in the
15 resulting company;
A = cost of
acquisition of
shares in demerged
company;
20 B = net book
value of assets
transferred in
demerger; and
C = net worth of
25
demerged
company
immediately before
demerger.

15. Original shares held by the shareholder As reduced by the

30 in the demerged company. amount so arrived at
under serial number 14.
16. Capital asset deemed to be chargeable to Cost for which such
tax according to the provisions of section asset was acquired by the
71(1). transferee company.
35 17. Capital asset being property, where the The value taken
capital gain arises from the transfer of into account under
such property the value of which has been section 92(2)(m).
subject to income-tax under
section 92(2)(m).
40 18. Capital asset declared under the Income The fair market value
Declaration Scheme, 2016, where the tax, of the asset taken into
surcharge and penalty have been paid as account for the purposes
per the provisions of such Scheme on the of the said Scheme.
fair market value as on the date of the
45 commencement of that Scheme.
 122

A B C

19. Specified capital asset referred to in The stamp duty value

clause (c) of the Explanation to as on the last day of the
section 10(37A) of the Income-tax second tax year after the
Act, 1961 (43 of 1961), which has been end of the tax year in 5
transferred after the expiry of two years which the possession of
from the end of the tax year in which the the said specified capital
possession of such asset was handed over asset was handed over to
to the assessee. the assessee.

20. Capital asset, being share in the project, The amount deemed 10
in the form of land or building, or both, as full value of
under section 67(14). consideration under
section 67(14).
21. Capital asset, being the asset held by a The fair market value
trust or an institution in respect of which of the asset considered 15
accreted income has been computed and for computation of
tax paid thereon as per section 352. accreted income as on
specified date as per
section 352(3).

22. Capital asset referred to in section The fair market value 20

26(2)(j). for section 26(2)(j).
23. Capital asset, being an Electronic Gold The cost of gold for
Receipt issued by a Vault Manager, which the person in whose
became the property of the person as name Electronic Gold
consideration of a transfer, as referred to in Receipt is issued. 25
section 70(1)(y).
24. Capital asset being gold released against The cost of the
an Electronic Gold Receipt, which became Electronic Gold Receipt
the property of the person as consideration for such person.
for a transfer as referred to in 30
section 70(1)(y).
(2) For the purposes of the Table in sub-section (1), in respect of the entries
against––
(a) serial number 1, “previous owner of the property” for any capital
asset owned by an assessee, means the last previous owner of the capital asset 35
who acquired it by a mode of acquisition other than that referred to in
column B thereof;
(b) serial numbers 11 and 12, “main portfolio”, “segregated
portfolio” and “total portfolio” shall have the same meanings as
respectively assigned to them in the Circular No. 40
SEBI/HO/IMD/DF2/CIR/P/2018/160, dated the 28th December, 2018,
issued by the Securities and Exchange Board of India;
(c) serial numbers 14 and 15, “net worth” means the total of the paid-up
share capital and general reserves as appearing in the books of account of the
demerged company immediately before the demerger; 45

(d) serial numbers 2, 14 and 15, the provisions as contained therein,

shall, as far as may be, also apply in relation to business reorganisation of a
co-operative bank as referred to in section 65.
 123

74. (1) Irrespective of anything contained in section 2(101), for a capital Special
provision for
asset forming part of a block of assets on which depreciation has been allowed computation of
43 of 1961. under this Act or under the Income-tax Act, 1961 or under the Indian Income-tax capital gains in
11 of 1922. Act, 1922, the provisions of sections 72 and 73 shall be subject to the provisions case of
depreciable
5 of sub-sections (2), (3) and (4). assets.

(2) If, during the tax year, the full value of consideration received or accruing
for the transfer of one or more assets in a block of assets exceeds the total of the
following:––

(a) expenditure incurred wholly and exclusively for such transfer;

10 (b) the written-down value of the block of assets at the start of the tax
year; and
(c) the actual cost of any asset falling within the block of assets acquired
during the tax year,

such excess shall be deemed to be capital gains arising from the transfer of
15 short-term capital assets.
(3) If any block of assets ceases to exist for the reason that all the assets in that
block are transferred during the tax year, then,––
(a) the cost of acquisition of the block of assets shall be the written down
value of the block of assets at the beginning of the tax year, as increased by
20 the actual cost of any asset falling within that block of assets, acquired by the
assessee during the tax year; and

(b) the income received or accruing as a result of such transfer or

transfers shall be deemed to be short-term capital gains.
75. If depreciation has been obtained under section 33(2) for a capital asset in Special
25 any tax year, the provisions of sections 72 and 73 shall apply subject to the provision for
cost of
modification that the written down value, as defined in section 41, of the asset, as acquisition in
adjusted, shall be taken as the cost of acquisition of the asset. case of
depreciable
asset.

76. (1) Irrespective of anything contained in section 2(101) or section 72, the Special
provision for
gains on the transfer or redemption or maturity, of a capital asset as mentioned in computation of
30 sub-section (2) shall be treated as short-term capital gains and shall be computed as capital gains in
per sub-section (3). case of Market
Linked
Debenture.
(2) For the purposes of sub-section (1), the capital asset shall be—
(a) a unit of a Specified Mutual Fund acquired on or after 1st April, 2023
or a Market Linked Debenture; or
35 (b) an unlisted bond or an unlisted debenture which is transferred or
redeemed or matures on or after the 23rd July, 2024.
(3) For the purposes of sub-section (1), the short-term capital gains shall be
computed as per the following formula:––

X = A – B – C,
40 where,––
X = short-term capital gains;
 124

A = full value of consideration received or accruing as a result of the

transfer or redemption or maturity of the debenture or unit or bond;
B = the cost of acquisition of the debenture or unit or bond; and
C = the expenditure incurred wholly and exclusively for such transfer or
redemption or maturity. 5

(4) No deduction shall be allowed for any sum paid as securities transaction
tax as per Chapter VII of the Finance (No. 2) Act, 2004. 23 of 2004.

(5) In this section,—

(a) “Market Linked Debenture” means a security, by whatever name
called, which has an underlying principal component in the form of a debt 10
security and where the returns are linked to market returns on other underlying
securities or indices, and include any security classified or regulated as a
market linked debenture by the Securities and Exchange Board of India; and
(b) “Specified Mutual Fund” means a Mutual Fund, by whatever name
called, which invests more than 65% of its total proceeds in debt and money 15
market instruments or a fund which invests 65% or more of its total proceeds
in units of such Mutual Fund, subject to the following:––
(i) the percentage of investment in debt and money market
instruments or in units of a fund shall be computed with reference to the
annual average of the daily closing figures; 20

(ii) “debt and money market instruments” shall include any

securities, by whatever name called, classified or regulated as debt and
money market instruments by the Securities and Exchange Board of
India.
Special 77. (1) Any profits or gains arising from the slump sale effected in the tax year 25
provision for shall be chargeable to income-tax as long-term capital gains and shall be deemed to
computation of
capital gains in be the income of the tax year in which the transfer took place, subject to the
case of slump provisions of sub-section (2).
sale.
(2) The profits and gains arising from a slump sale involving the transfer of a
capital asset, being one or more undertakings or divisions owned and held by an 30
assessee for 36 months or less, immediately before the date of its transfer, shall be
treated as short-term capital gains.
(3) In relation to capital assets, being an undertaking or division transferred by
way of slump sale,—
(a) the “net worth” of the undertaking or division shall be deemed as the 35
cost of acquisition and the cost of improvement for sections 72 and 73; and
(b) the fair market value of the capital assets on the date of transfer,
calculated in such manner, as prescribed, shall be deemed to be the full value
of the consideration received or accruing as a result of such transfer.
(4) Every assessee, in the case of slump sale, shall furnish in the prescribed 40
form a report of an accountant, before the specified date referred to in section 63,
and the report shall––
(a) include the computation of the net worth of the undertaking or
division; and
 125

(b) certify that the net worth has been correctly arrived at as per the
provisions of this section.

(5) For the purposes of this section,––

(a) the “net worth” shall be the “aggregate value of total assets” of the
5 undertaking or division, as reduced by the value of its liabilities as appearing
in the books of account, and for computing net worth, any change in the value
of assets due to revaluation shall be ignored;

(b) the “aggregate value of total assets” shall,—

(i) for depreciable assets, be the written down value of the block
10 of assets determined under section 41(1) (Table: Sl. No.3);

(ii) for capital asset being goodwill of a business or profession,

which was not acquired by the assessee by purchase from a previous
owner, be nil;

(iii) for capital assets for which the entire expenditure has been
15 allowed or is allowable as a deduction under section 46, be nil; and

(iv) for other assets, be the book value.

78. (1) If the consideration received or accruing from the transfer of a capital Special
provision for full
asset, being land or building or both, is less than the stamp duty value, then, for value of
the purposes of section 72, the stamp duty value shall be deemed to be the full consideration in
20 value of the consideration received or accruing as a result of such transfer, subject certain cases.
to the following:––

(a) the stamp duty value on the date of agreement may be taken as the
full value of consideration, if––

(i) the date of the agreement fixing the consideration and the date
25 of registration for the transfer of the capital asset are not the same; and

(ii) part or full consideration is received on or before the date of

the agreement by an account payee cheque or account payee bank draft
or electronic clearing system through a bank account or any other
electronic mode, as prescribed;
30 (b) if the stamp duty value does not exceed 110% of the consideration
received or accruing, such consideration shall be deemed to be the full value
of the consideration for section 72.

(2) Without prejudice to the provisions of sub-section (1), the Assessing

Officer may refer the valuation of the capital asset to a Valuation Officer, and
35 the provisions of sections 269(3) to (8), shall, with necessary modifications,
apply in relation to such reference, where––

(a) the assessee claims that the stamp duty value exceeds the fair market
value of the property as on the date of transfer; and

(b) the stamp duty value has not been disputed in any appeal or revision
40 or no reference has been made before any other authority, court or the High
Court.
 126

(3) In this section, “assessable” means the value which any authority of the
Government would have adopted or assessed as if it were referred to such authority
for the purposes of payment of stamp duty, regardless of anything to the contrary
contained in any other law in force.
(4) If the value determined by the Valuation Officer on a reference made under 5
sub-section (2) exceeds the stamp duty value, such stamp duty value shall be taken
as the full value of consideration.
Special 79. (1) If the consideration received or accruing from the transfer of a capital
provision for full asset, being share of a company other than a quoted share, is less than the fair market
value of
consideration for value of such share determined in the manner as prescribed, the value so determined 10
transfer of share shall be deemed as the full value of consideration received or accruing as a result of
other than the transfer for the purposes of computing income under the head “Capital gains”.
quoted share.
(2) The provisions of sub-section (1) shall not apply to any consideration
received or accruing as a result of transfer by such class of persons and subject to
such conditions, as prescribed. 15

(3) In this section, “quoted share” means the share quoted on any recognised stock
exchange with regularity from time to time, where the quotation of such share is based
on current transaction made in the ordinary course of business.
Fair market 80. If the consideration received or accruing from the transfer of a capital asset
value deemed to is not ascertainable or is unable to be determined, its fair market value on the date 20
be full value of
consideration in of transfer shall be deemed as the full value of consideration received or accruing
certain cases. as a result of the transfer for the purposes of computing income under the head
“Capital gains”.

Advance money 81. Where any capital asset was, on any previous occasion, the subject of
received. negotiations for its transfer, any advance or other money received and retained by 25
the assessee in respect of such negotiations––
(a) shall be deducted from the cost for which the asset was acquired or
the written down value or the fair market value, as the case may be, in
computing the cost of acquisition;
(b) shall not be deducted from the said cost, where such advance or other 30
money has been included in the total income of the assessee for any tax year
as per the provisions of section 92(2)(h).

Profit on sale of 82. (1) Where an individual or Hindu undivided family––

property used for
residence. (a) has long-term capital gains arising from the transfer of a capital asset,
being buildings or lands appurtenant thereto, and being a residential house, the 35
income of which is chargeable under the head “Income from house property”
(original asset); and
(b) has within one year before or two years after the date of such transfer
purchased, or has within three years after that date constructed, one residential
house in India (new asset), 40

then, instead of the capital gain being charged to income-tax as income of the tax
year in which the transfer took place, it shall be dealt with as follows:—

(i) if the capital gains exceeds the cost of the new asset, such excess shall
be charged under section 67, and for computing capital gains arising from the
transfer of the new asset within three years of its purchase or construction, the 45
cost shall be nil; or
 127

(ii) if the capital gains is equal to or less than the cost of the new asset,
no capital gains shall be charged under section 67 and for computing capital
gains from the transfer of the new asset within three years of its purchase or
construction, the cost shall be reduced by the amount of the capital gains.
5 (2) If the capital gains is not used by the assessee to purchase the new asset
within one year before the transfer of the original asset, or is not utilised for the
purchase or construction of a new asset before filing the return of income under
section 263, then—
(a) the unutilised amount shall be deposited in a specified bank or
10 institution and utilised as per the scheme notified by the Central Government;
(b) such deposit shall be made not later than the due date applicable in the
case of the assessee for filing the return of income under section 263(1); and
(c) the proof of deposit shall be submitted along with the return on or
before the due date of filing of the return.
15 (3) For the purposes of sub-section (1), the amount, already utilised for
purchasing or constructing the new asset, together with the deposited amount under
sub-section (2) shall, subject to sub-section (7), be deemed to be the cost of the new
asset.
(4) If the amount deposited under sub-section (2) is not fully utilised for
20 purchasing or constructing the new asset within the period specified in
sub-section (1), then,—
(a) the unutilised amount shall be charged to tax under section 67 as the
income of the tax year in which the period of three years from the date of the
transfer of the original asset expires; and
25 (b) the assessee shall be entitled to withdraw the unused amount
according to the said scheme.
(5) If the capital gains under sub-section (1) does not exceed two crore rupees,
the assessee may, at his option, purchase or construct two residential houses in India,
and where such option has been exercised,—
30 (a) for the purposes of sub-section (1)(b), “one residential house in
India” shall be read as “two residential houses in India”; and
(b) for the purposes of sub-sections (1)(b) and (2), “new asset” shall
mean two residential houses in India.
(6) If during any tax year, the assessee has exercised the option mentioned in
35 sub-section (5), he shall not be entitled to exercise such option for the same tax year
or any other tax year.
(7) If the cost of new asset exceeds ten crore rupees, the amount exceeding
ten crore rupees shall not be taken into account for the purposes of sub-section (1).
(8) If the capital gains on the transfer of original asset exceeds ten crore
40 rupees, the amount exceeding ten crore rupees shall not be taken into account for
the purposes of sub-section (2).
83. (1) Where an assessee, being an individual or a Hindu undivided Capital gains on
family,–– transfer of land
used for
(a) has capital gains arising from the transfer of a capital asset, being agricultural
purposes not to
45 land, which was used by the assessee or his parent, or the Hindu undivided be charged in
family for agricultural purposes (original asset), in two years immediately certain cases.
preceding the date of transfer; and
 128

(b) has, within two years after that date, purchased any other land for
being used for agricultural purposes (new asset),
then, instead of the capital gains being charged to income-tax as income of the tax
year in which the transfer took place, it shall be dealt with as follows:—
(i) if the capital gains exceed the cost of the new asset, such excess shall 5
be charged under section 67, and for computing any capital gains arising from
the transfer of the new asset within three years of its purchase, the cost shall
be nil; or
(ii) if the capital gains is equal to or less than the cost of the new asset,
no capital gains shall be charged under section 67, and for computing any 10
capital gains arising from the transfer of the new asset within three years of its
purchase, the cost shall be reduced by the amount of the capital gains.
(2) If the capital gains is not utilised by the assessee to purchase the new asset
before filing the return of income under section 263, then––
(a) the unutilised amount shall be deposited in a specified bank or 15
institution and utilised as per the scheme notified by the Central Government;
(b) such deposit shall be made not later than the due date applicable in
the case of the assessee for filing the return of income under section 263(1);
and
(c) the proof of deposit shall be submitted along with the return on or 20
before the due date of filing of the return.
(3) For the purposes of sub-section (1), the amount already utilised for
purchasing the new asset together with the deposited amount under sub-section (2),
shall be deemed to be the cost of the new asset.
(4) If the amount deposited under sub-section (2) is not fully utilised for 25
purchase of the new asset within the period specified in sub-section (1), then,—
(a) the unutilised amount shall be charged under section 67 as the
income of the tax year in which two years from the date of the transfer of the
original asset expires; and
(b) the assessee shall be entitled to withdraw the unused amount 30
according to the scheme referred to in sub-section (2).
Capital gains on 84. (1) Where an assessee has––
compulsory
acquisition of (a) capital gains arising from the transfer by way of compulsory
lands and acquisition under any law, of a capital asset being land or building or any right
buildings not to
be charged in in land or building, forming part of an industrial undertaking belonging to him, 35
certain cases. which was being used by the assessee for the business of the said undertaking
in the two years immediately preceding the date of transfer (original asset);
and
(b) within three years after that date, purchased any other land or
building or any right in any other land or building or constructed any other 40
building for shifting or re-establishing the said undertaking or setting up
another industrial undertaking (new asset),
then, instead of the capital gain being charged to income-tax as income of the tax
year in which the transfer took place, it shall be dealt with as follows:—
(i) if the capital gains exceeds the cost of new asset, such excess shall be 45
charged under section 67, and for computing any capital gains arising from
the transfer of the new asset within three years of its purchase or construction,
the cost shall be nil; or
 129

(ii) if the capital gains is equal to or less than the cost of new asset, no
capital gains shall be charged under section 67 and for computing capital gains
from the transfer of the new asset within three years of its purchase or
construction, the cost shall be reduced by the amount of the capital gains.
5 (2) If the capital gains is not utilised by the assessee to purchase the new asset
before filing the return of income under section 263, then––
(a) the unutilised amount shall be deposited not later than the due date
for filing the return of income under sub-section (1) of the said section in a
specified bank or institution and utilised as per the scheme notified by the
10 Central Government;
(b) such deposit shall be made not later than the due date applicable in
the case of the assessee for filing the return of income under the said
sub-section; and
(c) the proof of deposit shall be submitted along with the return on or
15 before the due date for filing the return.
(3) For the purposes of sub-section (1), the amount already utilised for
purchasing or constructing the new asset together with the deposited amount under
sub-section (2), shall be deemed to be the cost of the new asset.
(4) If the amount deposited under sub-section (2) is not fully utilised for the
20 purchase or construction of the new asset within the period specified in
sub-section (1), then,—
(a) the unutilised amount shall be charged under section 67 as the
income of the tax year in which three years from the date of the transfer of the
original asset expires; and
25 (b) the assessee shall be entitled to withdraw the unused amount
according to the said scheme.
85. (1) Where an assessee has–– Capital gains not
to be charged on
(a) long-term capital gains arising from the transfer of land or building, investment in
or both, (original asset); and certain bonds.

30 (b) within six months after the date of such transfer, invested whole or
part of the capital gains in a long-term specified asset (new asset),
then, the capital gains shall be dealt with as follows:—
(i) if the capital gains exceed the investment in the new asset, the
amount of capital gains as exceeds such investment shall be charged under
35 section 67; or
(ii) if the capital gains is equal to or less than the investment in the new
asset, the whole of such capital gains shall not be charged under section 67.
(2) For the purposes of sub-section (1), investment made in the long-term
specified asset from capital gain arising from transfer of one or more original asset
40 shall not exceed fifty lakh rupees,––
(a) during any tax year; or
(b) in the year of transfer of the original asset or assets and in the
subsequent tax year.
(3) If the new asset is transferred or converted (otherwise than by transfer) into
45 money within five years of its acquisition, the capital gains not charged under
section 67 as per sub-section (1), shall be deemed to be income chargeable as
long-term capital gains in the tax year of its transfer or conversion.
 130

(4) Any loan or advance taken on the security of the new asset shall be
regarded as transfer of the new asset on the date of such loan or advance.
(5) Where the investment in the new asset has been taken into account for
sub-section (1), no deduction under section 123 for any tax year shall be allowed for
such investment. 5

(6) In this section, “new asset” means any bond, redeemable after five years
and as notified by the Central Government for the purposes of this section with such
conditions (including a condition for providing a limit on the amount of investment
by an assessee in such bond).
Capital gains on 86. (1) If an individual or a Hindu undivided family has–– 10
transfer of
certain capital (a) capital gains arising from the transfer of any long-term capital asset,
assets not to be not being a residential house (original asset); and
charged in case
of investment in (b) within one year before, or two years after, the date of such transfer,
residential
house. purchased, or has within three years after that date constructed, one residential
house in India (new asset), 15
then, the capital gains shall be dealt with as follows:—
(i) if the net consideration is more than the cost of the new asset, so much
of the capital gains as bears to the whole of the capital gains, the same
proportion as the cost of the new asset bears to the net consideration, shall not
be charged under section 67; or 20

(ii) if the net consideration is equal to or less than the cost of the new
asset, no capital gains shall be charged under section 67.
(2) If the capital gains is not utilised by the assessee to purchase the new asset
within one year before the transfer of the original asset, or is not utilised for the
purchase or construction of a new asset before filing the return of income under 25
section 263, then,––
(a) the unutilised amount shall be deposited in a specified bank or
institution and utilised as per the scheme notified by the Central Government;
(b) such deposit shall be made not later than the due date applicable in
the case of the assessee for filing the return of income under sub-section (1) 30
of the said section; and
(c) the proof of deposit shall be submitted along with the return on or
before the due date for filing the return.
(3) For the purposes of sub-section (1), the amount already utilised for
purchasing or constructing the new asset together with the deposited amount under 35
sub-section (2) shall, subject to the sub-section (8), be deemed to be the cost of the
new asset.
(4) If the amount deposited under sub-section (2) is not wholly or partly
utilised for purchasing or constructing the new asset within the period specified in
sub-section (1), then,–– 40

(a) the amount determined as per with the following formula shall be
charged under section 67 as income of the tax year in which three years from
the date of the transfer of the original asset expires:––
X - Y, 45
where,––
X = the capital gains not charged under section 67 as per sub-section (1).
 131

Y = the capital gains that would not have been charged under section 67,
if the cost of the new asset had been taken to be the amount actually utilised
for purchase or construction of the new asset;
(b) the assessee shall be entitled to withdraw the unused amount
5 according to the said scheme.
(5) The provisions of sub-section (1) shall not apply, if––
(a) the assessee—
(i) owns more than one residential house, other than the new asset,
on the date of transfer of the original asset; or
10 (ii) purchases any residential house, other than the new asset,
within two years of transfer of the original asset; or
(iii) constructs any residential house, other than the new asset,
within three years of transfer of the original asset; and
(b) the income from such residential house, other than the one residential
15 house owned on the date of transfer of the original asset, is chargeable under
the head “Income from house property”.
(6) If the assessee purchases within two years of the transfer of the original
asset, or constructs within three years after such date, any residential house, the
income from which is chargeable under the head “Income from house property”,
20 other than the new asset, the capital gains not charged under section 67 on the
basis of cost of such new asset as per sub-section (1), shall be charged as
long-term capital gains of the tax year in which such residential house is
purchased or constructed.
(7) If the new asset is transferred within three years of its purchase or its
25 construction, the capital gains not charged under section 67 on the basis of cost of
such new asset as per sub-section (1) shall be charged as long-term capital gains of
the tax year in which such new asset is transferred.
(8) If the cost of the new asset exceeds ten crore rupees, the amount exceeding
ten crore rupees, shall not be taken into account for the purposes of sub-section (1).
30 (9) If the net consideration on the transfer of original asset exceeds
ten crore rupees, the amount exceeding ten crore rupees, shall not be taken into
account for the purposes of sub-section (2).
(10) In this section, “net consideration” means the full value of the
consideration received or accruing as a result of the transfer of the original asset as
35 reduced by any expenditure incurred wholly and exclusively in connection with
such transfer.
87. (1) If the assessee has–– Exemption of
capital gains on
transfer of assets
(a) capital gains arising from the transfer of capital asset, being in cases of
machinery or plant or building or land or any rights in building or land used shifting of
40 for the business of an industrial undertaking situated in an urban area, effected industrial
undertaking
in the case of shifting of an industrial undertaking situated in an urban area from urban area.
(original asset) to any non-urban area (new area); and
(b) within one year before or three years after the date of such transfer,—
(i) purchased new machinery or plant for business of the industrial
45 undertaking in the new area;
 132

(ii) acquired building or land or constructed building for his

business in the said area;
(iii) shifted the original asset and transferred its establishment to
such area; and
(iv) incurred expenses on such other purpose as specified in a 5
scheme notified by the Central Government for this section,
then, instead of the capital gains being charged to income tax as income of the
tax year in which the transfer took place, it shall be dealt with as follows:—
(A) if the cost and expenses incurred in on all or any of the purposes
mentioned in clauses (i) to (iv) (new asset),–– 10

(I) is less than the capital gains, the difference shall be

charged under section 67 as the income of the tax year; or
(II) is equal to or more than the capital gain, no capital gain
shall be charged under section 67;
(B) for computing any capital gain arising from transfer of the 15
new asset within three years of its being purchased, acquired,
constructed or transferred, the cost shall be nil in case of clause (a)
or shall be reduced by the amount of the capital gain in case of
clause (b).
(2) If the capital gain is not used by the assessee for the new asset within one 20
year before the transfer of the original asset, or before filing the return of income
under section 263, then––
(a) the unutilised amount shall be deposited in a specified bank or
institution and utilised as per the scheme notified by the Central
Government; 25

(b) such deposit shall be made not later than the due date applicable in
the case of the assessee for filing the return of income under sub-section (1)
of the said section; and
(c) the proof of deposit shall be submitted along with the return on or
before the due date for filing the return. 30

(3) For the purposes of sub-section (1), the amount already utilised for
purchasing or constructing the new asset together with the deposited amount under
sub-section (2) shall be deemed to be the cost of the new asset.
(4) If the amount deposited under sub-section (2) is not wholly or partly
utilised for the new asset within the period specified in sub-section (1), then,— 35

(a) the unutilised amount shall be charged under section 67 as the

income of the tax year in which the period of three years from the date of the
transfer of the original asset expires; and
(b) the assessee shall be entitled to withdraw the unused amount
according to the said scheme. 40

(5) In this section, the expression “urban area” means any area within the
limits of a municipal corporation or municipality, declared to be an urban area by
the Central Government for the purposes of this section, having regard to––
(a) the population;
(b) concentration of industries; and 45
 133

(c) need for proper planning of the area and other relevant factors.
88. (1) Irrespective of anything contained in section 87 if the assessee has–– Exemption of
capital gains on
(a) capital gains arising from the transfer of a capital asset, being transfer of assets
in cases of
machinery or plant or building or land or any rights in building or land used shifting of
5 for the business of an industrial undertaking situated in an urban area, effected industrial
in the course of or in consequence of shifting of such industrial undertaking undertaking
(original asset) to any Special Economic Zone in any area; and from urban area
to any Special
Economic Zone.
(b) has within one year before or three years after the date of such
transfer,—
10 (i) purchased machinery or plant for the business of the industrial
undertaking in such Special Economic Zone;
(ii) acquired building or land or constructed building for his
business in such Special Economic Zone;
(iii) shifted the original asset and transferred the establishment to
15 such Special Economic Zone; and
(iv) incurred expenses on such other purposes specified by a
scheme notified by the Central Government in this behalf,
then, instead of capital gain being charged to income-tax as income of the tax
year in which the transfer took place, it shall be dealt with as follows:—
20 (A) if the cost and expenses incurred in on all or any of the purposes
mentioned in clauses (i) to (iv) (new asset)––
(I) is less than the capital gains, the difference shall be
charged under section 67 as the income of the tax year; or
(II) is equal to or more than the capital gains, no capital gain
25 shall be charged under section 67;
(B) for computing any capital gain arising from transfer of the new
asset within three years of its being purchased, acquired, constructed or
transferred, the cost shall be nil in case of clause (a), or shall be reduced
by the amount of the capital gain in case of clause (b).
30 (2) If the capital gain is not utilised by the assessee for the new asset within
one year before the transfer of the original asset, or before filing the return of income
under section 263, then,––
(a) the unutilised amount shall be deposited not later than the due date
for filing the return of income under sub-section (1) of the said section in a
35 specified bank or institution and utilised as per the scheme notified by the
Central Government;
(b) such deposit shall be made not later than the due date applicable in
the case of the assessee for filing the return of income under the said
sub-section; and
40 (c) the proof of deposit shall be submitted along with the return on or
before the due date for filing the return.
(3) For the purposes of sub-section (1), the amount already utilised for
purchasing or constructing the new asset together with the deposited amount under
sub-section (2) shall be deemed to be the cost of the new asset.
 134

(4) If the amount deposited under sub-section (2) is not wholly or partly
utilised for the new asset within the period specified in sub-section (1), then,—
(a) the unutilised amount shall be charged under section 67 as the
income of the tax year in which the period of three years from the date of the
transfer of the original asset expires; and 5

(b) the assessee shall be entitled to withdraw the unused amount

according to the said scheme.
(5) In this section “urban area” shall have the meaning assigned to it in
section 87.
Extension of 89. Irrespective of anything contained in sections 82, 83, 84, 85, and 86,–– 10
time for
acquiring (a) if the transfer of the original asset mentioned in those sections is by
new asset or way of compulsory acquisition under any law; and
depositing or
investing (b) if the compensation awarded for such acquisition is not received by
amount of
capital gains.
the assessee on the date of transfer, then, the period available to him under
those sections for acquisition of the new asset or investment or deposit of 15
capital gain in specified bank or institution shall be reckoned from the date
of receipt of compensation.
Meaning of 90. (1) For the purposes of sections 72 and 73, “cost of improvement”,—
“adjusted”,
“cost of (a) in relation to a capital asset being goodwill or any intangible asset
improvement” of a business, or a right to manufacture, produce or process any article or 20
and “cost of
acquisition”.
thing, or right to carry on any business or profession, or any other right, shall
be taken to be nil; and
(b) in relation to any other capital asset,—
(i) if the capital asset became the property of the previous owner
or the assessee before the 1st April, 2001, means all expenditure of a 25
capital nature incurred on or after the said date in making any additions
or alterations to the capital asset by the previous owner or the assessee;
and
(ii) in any other case, all expenditure of a capital nature incurred
in making any additions or alterations to the capital asset by the 30
assessee after it became his property, and, where the capital asset
became the property of the assessee by any of the modes specified in
section 73 (Table: Sl. No. 1), by the previous owner.
(2) For the purposes of sub-section (1)(b), the cost of improvement does not
include any expenditure which is deductible in computing the income chargeable 35
under the head “Income from house property”, “Profits and gains of business or
profession” or “Income from other sources”.
(3) For the purposes of sections 72 and 73, “cost of acquisition”, of a capital
asset (being goodwill of a business or profession, or a trade mark or brand name
associated with a business or profession, or any other intangible asset, or a right to 40
manufacture, produce or process any article or thing, or a right to carry on any
business or profession, or tenancy rights, or stage carriage permits, or loom hours,
or any other right) means—
(a) purchase price, if acquisition of such asset by the assessee is by
purchase from the previous owner; and 45
 135

(b) purchase price for the previous owner, in the case covered in section
73 (Table: Sl. No. 1), where such asset was acquired by purchase by the
previous owner as defined in sub-section (2) of the said section; and
(c) nil, in any other case.
5 (4) For the purposes of sub-section (3)(a) or (b), if—
(a) the capital asset is goodwill of a business or profession; and
(b) the assessee has obtained a deduction on account of depreciation
43 of 1961. under section 32(1) of the Income-tax Act, 1961 in a tax year preceding the
10 tax year commencing on the 1st April, 2020,
then the total amount of depreciation obtained before the tax year
commencing on the 1st April, 2020 shall be reduced from the amount of
purchase price.
(5) For the purposes of sections 72 and 73(a) and (b), and subject to the
15 provisions of sub-sections (9)(a) and (b), “cost of acquisition” shall be as per
sub-section (6), in a case where, by virtue of holding a capital asset, being a share or
any other security, within the meaning of section 2(h) of the Securities Contracts
42 of 1956. (Regulation) Act, 1956 (herein referred to as the financial asset), the assessee—
(a) becomes entitled to subscribe to any additional financial asset; or
20 (b) is allotted any additional financial asset without any payment.
(6) In a case referred to in sub-section (5), “cost of acquisition”, in relation to––
(a) the original financial asset, on the basis of which the assessee
becomes entitled to any additional financial asset, means the amount actually
paid for acquiring the original financial asset;
25 (b) any right to renounce the said entitlement to subscribe to the
financial asset, when such right is renounced by the assessee in favour of any
person, shall be taken to be nil in the case of such assessee;
(c) the financial asset, to which the assessee has subscribed on the basis
of the said entitlement, means the amount actually paid for acquiring such
30 asset;
(d) the financial asset allotted to the assessee without any payment and
on the basis of holding of any other financial asset, shall be taken to be nil;
and
(e) any financial asset purchased by any person in whose favour the
35 right to subscribe to such asset has been renounced, means the total amount
of the purchase price paid to the person renouncing such right and the amount
paid to the company or institution, for acquiring such financial asset.
(7) For the purposes of sections 72 and 73, “cost of acquisition”, subject to
sub-sections (9)(a) and (b), in relation to a long-term capital asset, being an equity
40 share in a company or a unit of an equity oriented fund or a unit of a business trust
referred to in section 198, acquired before the 1st February, 2018, shall be higher
of—
(a) the cost of acquisition of such asset; and
(b) lower of—
45 (i) the fair market value of such asset; and
(ii) the full value of consideration received or accruing as a result
of the transfer of the capital asset.
 136

(8) For the purposes of sub-section (7),—

(a) “Cost Inflation Index”, shall have the meaning assigned to it in
section 72(8)(ii);
(b) “fair market value” means,—
(i) in a case where the capital asset is listed on any recognised 5
stock exchange as on the 31st January, 2018, the highest price of the
capital asset quoted on such exchange on that date;
(ii) irrespective of sub-clause (i), if there is no trading in such
asset on such exchange on the 31st January, 2018, the highest price
of such asset on such exchange on a date immediately preceding the 10
31st January, 2018 when such asset was traded shall be the fair
market value;
(iii) if the capital asset is a unit which is not listed on a recognised
stock exchange as on the 31st January, 2018, the net asset value of such
unit as on that date; 15

(iv) if the capital asset is an equity share in a company which is—

(A) not listed on a recognised stock exchange as on the 31st
January, 2018 but listed on the date of transfer;
(B) not listed on a recognised stock exchange as on the 31st 20
January, 2018, or which became the property of the assessee in
consideration of share which is not listed on such exchange as on
the 31st January, 2018 by way of transaction mentioned in
section 70, but listed on such exchange subsequent to the date of
transfer (where such transfer is in respect of sale of unlisted equity 25
shares under an offer for sale to the public included in an initial
public offer);
(C) listed on a recognised stock exchange on the date of
transfer and which became the property of the assessee in
consideration of share which is not listed on such exchange as on 30
the 31st January, 2018 by way of transaction mentioned in
section 70,
an amount which bears to the cost of acquisition the same proportion as Cost
Inflation Index for the tax year 2017-18 bears to the Cost Inflation Index for
the first year in which the asset was held by the assessee or for the year 35
beginning on the 1st April, 2001, whichever is later.
(9) For the purposes of sections 72 and 73, cost of acquisition in relation to
any other capital asset,—
(a) if the capital asset became the property of the assessee before the
1st April, 2001, subject to sub-section (10), shall be the cost of acquisition of 40
the asset to the assessee or its fair market value on the 1st April, 2001, at the
option of the assessee;
(b) if the capital asset became the property of the assessee by any of
the modes specified in section 73 (Table: Sl. No. 1), and the capital asset
became the property of the previous owner before the 1st April, 2001, 45
subject to sub-section (10), shall be the cost of the capital asset to the
previous owner or its fair market value on the 1st April, 2001, at the
option of the assessee;
 137

(c) if the capital asset became the property of the assessee on the
distribution of the capital assets of a company on its liquidation and the
assessee has been assessed to income-tax under the head “Capital gains” in
respect of that asset under section 68, means the fair market value of the asset
5 on the date of distribution;
(d) if the capital asset, being a share or a stock of a company, became
the property of the assessee on—
(i) the consolidation and division of all or any of the share capital
of the company into shares of larger amount than its existing shares; or
10 (ii) the conversion of any shares of the company into stock; or
(iii) the re-conversion of any stock of the company into shares; or
(iv) the sub-division of any of the shares of the company into
shares of smaller amount; or

(v) the conversion of one kind of shares of the company into

15 another kind,
means the cost of acquisition of the asset calculated with reference to the cost of
acquisition of the shares or stock from which such asset is derived.
(10) In case of a capital asset referred to in sub-sections (9)(a) and (9)(b),
being land or building, or both, the fair market value of such asset on the 1st April,
20 2001 for the said clauses shall not exceed the stamp duty value, wherever available,
of such asset as on the 1st April, 2001.

(11) If the cost for which the previous owner acquired the property is unable
to be ascertained, the cost of acquisition to the previous owner shall be the fair
market value on the date on which the capital asset became the property of the
25 previous owner.
91. (1) For ascertaining the fair market value of a capital asset for this Reference to
Valuation
Chapter, the Assessing Officer may refer the valuation of capital asset to a Officer.
Valuation Officer,—
(a) if the value of the asset claimed by the assessee is as per the estimate
30 by a registered valuer, but the Assessing Officer is of the opinion that the
value so claimed is at variance with its fair market value;

(b) in any other case, if the Assessing Officer is of the opinion that––
(i) the fair market value of the asset exceeds the value claimed
by the assessee by more than the percentage or amount, as
35 prescribed; or
27 of 1957. (ii) having regard to the nature of the asset and other relevant
circumstances, it is necessary so to do.
(2) The provisions of section 269(3) to (8) shall , with necessary
modifications, apply in relation to such reference made under sub-section (1).
40 F.— Income from other sources
92. (1) Income of every kind which is not to be excluded from the total Income from
other sources.
income, shall be chargeable to income-tax under the head “Income from other
sources”, if it is not chargeable to income-tax under any of the heads specified in
section 13(a) to (d).
 138

(2) In particular, and without prejudice to the generality of the provisions of

sub-section (1), the following incomes shall be chargeable to income-tax under the
head “Income from other sources”:––
(a) any dividend;
(b) any winning from lotteries, crossword puzzles, races including 5
horse races, card games and other games of any sort or from gambling or
betting of any form or nature;
(c) any sum received by the assessee from employees as contributions to
any provident fund, superannuation fund, any fund set up under the Employees’
State Insurance Act, 1948, or any other fund for the welfare of such employees, 10 34 of 1948.
if the income in not chargeable to income-tax under the head “Profits and gains
of business or profession”;
(d) any sum received under a Keyman insurance policy, as defined
Schedule II (Note 1) including the bonus allocated on such policy, if such
income is not chargeable to income-tax under the head “Profits and gains of 15
business or profession” or under the head “Salaries”;
(e) any income by way of interest on securities, if the income is not
chargeable to income-tax under the head “Profits and gains of business or
profession”;
(f) any income from machinery, plant or furniture belonging to the 20
assessee and let on hire, if the income is not chargeable to income-tax under
the head “Profits and gains of business or profession”;
(g) any income from letting on hire of machinery, plant or furniture,
belonging to the assessee and also buildings, where the letting of the building
is inseparable from the letting of such machinery, plant or furniture, if the 25
income is not chargeable to income-tax under the head “Profits and gains of
business or profession”;
(h) any sum of money received as an advance or otherwise during
negotiations for the transfer of a capital asset, if––
(i) such sum is forfeited; and 30

(ii) the negotiations do not result in transfer of such capital asset;

(i) any income by way of interest received on compensation or on
enhanced compensation referred to in section 278(1);
(j) any compensation or other payment, due to or received by any
person, by whatever name called, in connection with the termination of his 35
employment, or the modification of its terms and conditions;
(k) any specified sum received by a unit holder from a business trust
during the tax year with respect to a unit held by him at any time during such
tax year, the computation of which shall be––
specified sum = A-B-C (which shall be deemed to be zero, if the 40
sum of B and C is greater than A), where—
A = aggregate of the sum distributed by the business trust with
respect to such unit, during the tax year or during any earlier tax year
or years, to such unit holder, who holds such unit on the date of
distribution of sum or to any other unit holder who held such unit at 45
any time prior to the date of such distribution, which is—
(a) not in the nature of income referred to in Schedule
V (Table: Sl. No. 3 or 4); and
(b) not chargeable to tax under section 223(2);
 139

B = amount at which such unit was issued by the business

trust; and
C = amount charged to tax under this clause in any earlier
tax year;
5 (l) where any sum, including bonus allocated, is received, during a tax
year, under a life insurance policy, other than—

(a) sums received under a unit linked insurance policy; or

(b) income referred to in clause (d),

and such sum is not to be excluded from the total income of that tax year under
10 Schedule II (Table: Sl. No. 2), the sum exceeding the aggregate of the premium
paid, during the term of such policy, and not claimed as a deduction under this Act,
computed in such manner, as prescribed;
(m) where any person receives in any tax year, from any person or
persons––

15 (i) any sum of money without consideration, the total of which

exceeds fifty thousand rupees, the whole of such sum;
(ii) any immovable property—
(A) without consideration, the stamp duty value of which
exceeds fifty thousand rupees, the stamp duty value of such
20 property;
(B) for a consideration, the stamp duty value of such
property that exceeds such consideration, if this excess amount is
more than the higher of the following amounts:—
(I) fifty thousand rupees; or
25 (II) 10% of the consideration;
(iii) any property, other than immovable property,—
(A) without consideration, the aggregate fair market value
of which exceeds fifty thousand rupees, the whole of the
aggregate fair market value of such property;
30 (B) for a consideration which is less than the aggregate fair
market value of the property by an amount exceeding fifty
thousand rupees, the aggregate fair market value of such property
as exceeds such consideration.
(3) The provisions of sub-section (2)(m) shall not apply to any sum of money
35 or any property received—

(a) from any relative; or

(b) on the occasion of marriage of the individual; or

(c) under a will or by way of inheritance; or

(d) in contemplation of death of the payer or donor; or
40 (e) from any local authority as defined in Schedule III (Note 6); or
 140

(f) from or by any registered non-profit organisation as defined in

section 355(g), except when received by any person referred to in
section 355(i); or
(g) by way of a transaction not regarded as transfer under section 70(1)(a),
(c), (d), (e), (g), (i), (j), (l), (n), (o), (k), (f), (t), (u), (v) or (w); or 5

(h) from an individual by a trust created or established solely for the

benefit of relative of the individual; or
(i) from such class of persons and subject to such conditions, as
prescribed.
(4) For the purposes of sub-section (2)(m)(ii),–– 10

(a) if the date of agreement fixing the amount of consideration for the
transfer of immovable property and the date of registration are not the same,
the stamp duty value on the date of agreement shall apply, provided the
consideration, in whole or in part, has been paid by account payee cheque or
account payee bank draft or by electronic clearing system through a bank 15
account or through any prescribed electronic mode, on or before the date of
agreement for transfer of such immovable property;
(b) if the stamp duty value of immovable property is disputed by the
assessee on the grounds mentioned in section 78(2) the Assessing Officer may
refer the valuation of such property to a Valuation Officer, and the provisions 20
of sections 78(2) and 288 (Table: Sl. No. 8) shall, as far as may be, apply to
the stamp duty value of such property as they apply for valuation of capital
asset under those sections.
(5) In this section,––
(a) “assessable” shall have the meaning assigned to it in 25
section 78(3);
(b) “card game and other game of any sort” includes any game show,
an entertainment programme on television or electronic mode, where people
compete to win prizes or any similar game;
(c) “fair market value” of a property, other than an immovable property, 30
means the value determined in such method as prescribed;
(d) “jewellery” shall have the meaning assigned to it in
section 2(22);
(e) “lottery” includes winnings from prizes awarded by draw of lots, by
chance, or in any other manner under any scheme or arrangement by 35
whatever named called;
(f) “property” means the following capital asset of the assesse:—
(i) immovable property being land or building or both;
(ii) shares and securities;
(iii) jewellery; 40

(iv) archaeological collections;

(v) drawings;
 141

(vi) paintings;

(vii) sculptures;
(viii) any work of art;

(ix) bullion; or
5 (x) virtual digital asset;
(g) “relative” means—

(i) in case of an individual—

(A) spouse;

(B) brother or sister;

10 (C) brother or sister of the spouse;
(D) brother or sister of either of the parents;
(E) any lineal ascendant or descendant (maternal as well as
paternal);

(F) any lineal ascendant (maternal as well as paternal) or

15 descendant (maternal as well as paternal) of the spouse;
(G) spouse of the person referred to in items (B) to (F); and

(ii) for a Hindu undivided family, any member thereof;

(h) “unit linked insurance policy” shall have the meaning assigned to it
in Schedule II (Note 1).
20 93. (1) The income chargeable under the head “Income from other sources” Deductions.
shall be computed after making the following deductions:—

(a) for dividends [excluding those referred to in section 2(40)(f) or

interest on securities, any reasonable sum paid as commission or
remuneration to a banker or any other person for the purpose of realising such
25 dividend or interest on behalf of the assessee;
(b) for income of the nature referred to in section 92(2)(c), so far as
may be, an amount as per section 29(1)(e);
(c) for income of the nature referred to in section 92(2)(f) and
(g), so far as may be, an amount as per section 28(1)(a), (b), (d), section 33,
30 and subject to the provisions of section 28(2);
(d) for income in the nature of family pension (a regular monthly
amount payable by the employer to a family member of an employee upon
the death of such employee),––
(i) an amount equal to one-third of such income or twenty-five
35 thousand rupees, whichever is less, where income-tax is computed
under section 202(1); and
(ii) an amount equal to one-third of such income or fifteen
thousand rupees, whichever is less, in any other case;
 142

(e) any other expenditure (not being in the nature of capital

expenditure) laid out or expended wholly and exclusively for making or
earning such income;
(f) for income of the nature referred to in section 92(2)(i), an amount
equal to 50% of such income and no other deduction shall be allowed under 5
this section.

(2) In respect of––

(a) dividend income of the nature referred to in section 2(40)(f), no
deduction shall be allowed;
(b) any other dividend income [other than in clause (a)], or income from 10
units of a Mutual Fund specified under Schedule VII (Table: Sl. No. 20 or 21) or
income from units of a specified company as referred to in section 2(h) of the
Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002, only
deduction allowed shall be interest expense which, for any tax year, shall be 58 of 2002.
limited to 20% of such income (included in the total income for that year, 15
without deduction under this section).

Amounts not 94. (1) Irrespective of anything contained in section 93, the following
deductible. amounts shall not be deductible in computing the income of any assessee
chargeable under the head “Income from other sources”:—

(a) any personal expenses of the assessee; or 20

(b) any interest chargeable under this Act, payable outside India,
on which tax has not been paid or deducted under Chapter XIX-B; or
(c) any payment chargeable under the head “Salaries”, if it is
payable outside India, unless tax has been paid or deducted under
Chapter XIX-B. 25

(2) The provisions of sections 29, 35(b)(i), and 36 shall apply in computing
the income chargeable under the head “Income from other sources” as they apply
in computing the income chargeable under the head “Profits and gains of business
or profession”.
(3) For an assessee, being a foreign company, the provisions of section 59 30
shall apply in computing the income chargeable under the head “Income from other
sources”, as they apply in computing the income chargeable under the head “Profits
and gains of business or profession”.
(4) In computing the income from winnings from lotteries, crossword
puzzles, races including horse races, card games and other games of any sort, or 35
from gambling or betting of any form or nature, no deduction for any expenditure
or allowance related to such income shall be allowed under this Act.
(5) Sub-section (4) shall not apply in computing the income of an assessee,
being the owner of horses maintained for running in horse races, from the activity
of owning and maintaining such horses. 40

(6) In this section, “horse race” means a horse race upon which wagering or
betting may be lawfully made.

Profits 95. The provision of section 38(1)(a) shall apply in computing the income of
chargeable to an assessee under section 92, as they apply in computing the income of an assessee
tax.
under the head “Profits and gains of business or profession”. 45
 143

CHAPTER V
INCOME OF OTHER PERSONS, INCLUDED IN TOTAL INCOME OF ASSESSEE

96. All income arising to any person by virtue of transfer,–– Transfer of

income without
5 (a) whether revocable or not, and whether effected before or after the transfer of
commencement of this Act; and assets.
(b) where there is no transfer of assets from which such income arises,
shall be chargeable to income-tax as the income of the transferor and shall be
included in his total income.
10 97. (1) All income arising to any person by virtue of a revocable transfer of Chargeability of
assets shall be chargeable to income-tax as income of the transferor and shall be income in
transfer of
included in his total income. assets.
(2) The provisions of sub-section (1) shall not apply, if such transfer—
(a) is by way of trust which is not revocable during the lifetime of the
15 beneficiary; or
(b) and in case of any other transfer, is not revocable during the lifetime
of the transferee,
and the transferor does not derive any direct or indirect benefit from such income
in cases referred to in clauses (a) and (b).
20 (3) Irrespective of the provisions of sub-section (2), all income arising to any
person by virtue of such transfer shall be chargeable to income-tax as income of
the transferor as and when the power to revoke such transfer arises, and shall than
be included in his total income.
98. For the purposes of sections 96 and 97, and this section,— “Transfer” and
“revocable
25 (a) “transfer” includes any settlement, trust, covenant, agreement or transfer”
arrangement; defined.

(b) a transfer shall be considered to be revocable, if––

(i) it contains any provision for the direct or indirect re-transfer of
the whole or any part of the income or assets to the transferor; or
30 (ii) it, in any way, gives the transferor a right to re-assume power
directly or indirectly over the whole or any part of the income or
assets.
99. (1) The total income of any individual, for a tax year, shall include the Income of
income arising directly or indirectly,–– individual to
include income
35 (a) to the spouse,— of spouse, minor
child, etc.
(i) by way of salary, commission, fees or any other form of
remuneration, whether in cash or kind, from a concern in which such
individual has a substantial interest but shall not exclude income solely
attributable to the application of technical or professional knowledge,
40 experience and professional qualification of the spouse;
(ii) from assets transferred directly or indirectly to him or her by such
individual otherwise than for adequate consideration or in connection with
an agreement to live apart, subject to the provisions of section 25(a);
(iii) from assets transferred directly or indirectly to any person or
45 association of persons otherwise than for adequate consideration to the
extent to which the income from such assets is for the immediate or
deferred benefit of the spouse;
 144

(b) to the son’s wife,––

(i) from assets transferred directly or indirectly on or after the
1st June, 1973, to her by such individual, otherwise than for adequate
consideration; or
(ii) from assets transferred directly or indirectly on or after the 5
1st June, 1973, to any person or association of persons otherwise than
for adequate consideration to the extent to which the income from such
assets is for the immediate or deferred benefit of the son’s wife;
(c) to the minor child of the individual but shall not include in the total
income of the individual where the income arising or accruing to the minor 10
child is from manual work done by such child, or from activities where his
skill, talent, specialised knowledge or experience is applied, or where such
minor child is suffering from disability of the nature specified in section 154.
(2) If the asset transferred under sub-section (1)(a) or (b) is invested by the
spouse or son’s wife, in any business or capital contributed as a partner in a firm, 15
or, as the case may be, for being admitted to the benefits of partnership in a firm,
then, the income to be included in the hands of the individual for the tax year shall
be as follows:––
𝐶
A=B×( )
𝐷
where,–– 20

A = Income to be included in the hands of individual for the tax year;

B = Income and interest or both, arising to the spouse or son’s wife
from the business or the firm, as applicable during the tax year;
C = Value of such assets invested, or contributed as capital by the
spouse or son’s wife as on the first day of the tax year; 25

D = Total investment or total capital contribution, as the case may be,

by the spouse or son’s wife as on the day for which A is being computed.
(3) Where a property owned by an individual is converted into property
belonging to the Hindu undivided family of which he is a member, through––
(a) the act of impressing such separate property with the character of 30
property belonging to the family; or
(b) throwing it into the common stock of the family; or
(c) transfer, directly or indirectly to the family,
without adequate consideration, then, irrespective of any other provision of this Act
or any other law in force for computing the total income of such individual,–– 35

(i) the individual shall be deemed to have transferred such property,

through the family, to the members of such family for being held jointly, and
the income derived from such property or part thereof, shall be deemed to be
income of the individual;
(ii) upon partition (whether partial or total) of the family, the income 40
derived from such property as is received by the spouse of the individual on
partition, shall be deemed to arise to the spouse from assets transferred
indirectly to the spouse and the provisions of sub-section (1)(a) shall apply;
(iii) the income referred to in clauses (i) and (ii) shall, on being included
in the total income of the individual, be excluded from the total income of 45
the family or, the spouse.
(4) The provisions of sub-section (3) shall not apply where the property of
the individual has been converted into property belonging to the family on or before
the 31st December, 1969.
 145

(5) In this section,––

(a) for sub-section (1)(a),––
(i) the income referred to in that clause shall be included in the
hands of either of the spouse whose total income before such inclusion
5 is greater; and
(ii) such income, once included in the total income of either
spouse, for a tax year, shall not be included in the income of the other
spouse for any succeeding tax year, unless the Assessing Officer is so
satisfied, after giving the other spouse an opportunity of being heard;
10 (iii) “substantial interest in a concern” means,—
(A) in case of a company, if its shares (not being shares
entitled to a fixed rate of dividend whether with or without a
further right to participate in profits) carrying not less than 20%
of the voting power are, at any time during the tax year, owned
15 beneficially by the individual or jointly with one or more of his
relatives;
(B) in any other case, if such person is entitled, or such
person and one or more of his relatives are jointly entitled, to
atleast 20% of the profits of such concern at any time during the
20 tax year;
(b) for sub-section (1)(d), income of minor child shall be included—
(i) in the income of that parent whose total income before such
inclusion is greater in case where the marriage of his parents subsists; or
(ii) in the income of the parent who maintains such child during
25 the tax year in case where marriage of his parents does not subsist,
and such income, once included in the total income of either parent, for a tax year,
shall not be included in the income of the other parent for any succeeding tax year,
unless the Assessing Officer is so satisfied, after giving the other parent an
opportunity of being heard;
30 (c) for sub-section (3), “property” includes––
(i) interest in property; or
(ii) movable or immovable property; or
(iii) proceeds of sale of such property and any money, property or
investment representing such proceeds; or
35 (iv) where property is converted into any other property by any
method, such other property;
(d) for this section, “income” includes loss.
100. Where, income of a person, other than the assessee, arising from any Liability of
asset, or income from membership of a firm, is included in the total income of the person in respect
of income
40 assessee under this Chapter or under section 25(a), then, irrespective of anything included in
to the contrary contained in any other law in force,–– income of
another person.
(a) such person, in whose name such asset stands, shall be liable to pay,
that portion of the tax levied on the assessee which is attributable to the
income so included, upon service of notice of demand by the Assessing
45 Officer in this behalf;
(b) where any such asset is held jointly by more than one person, they
shall be jointly and severally liable to pay such tax; and
(c) the provisions of Chapter XIX-D shall apply accordingly.
 146

CHAPTER VI
AGGREGATION OF INCOME
Total 101. In computing the total income of an assessee, there shall be included all
income. income on which no income-tax is payable under Chapter XVIIA-4.
Unexplained 102. (1) Where any sum is found credited in the books of account maintained 5
credits. by the assessee for any tax year, and––
(a) the assessee offers no explanation about the nature and source of
such credit; or
(b) the explanation offered by assessee is not satisfactory in the opinion
of the Assessing Officer, 10

then, the sum so credited shall be charged to income-tax as income of the assessee
of that tax year.
(2) If the sum so credited consists of loan or borrowing, or any such amount,
by whatever name called, the explanation offered by such assessee shall be deemed
to be not satisfactory, unless,— 15

(a) the person in whose name such credit is recorded in the books of
such assessee also offers an explanation about the nature and source of such
sum so credited; and
(b) such explanation, in the opinion of the Assessing Officer referred to
in sub-section (1), has been found to be satisfactory. 20

(3) If the assessee is a company (not being a company in which the public are
substantially interested), and the sum so credited consists of share application
money, share capital, share premium, or any such amount, by whatever name
called, the explanation offered by such assessee company shall be deemed to be
not satisfactory, unless— 25

(a) the person, being a resident in whose name such credit is recorded
in the books of such company also offers an explanation about the nature and
source of such sum so credited; and
(b) such explanation, in the opinion of the Assessing Officer referred to
in sub-section (1), has been found to be satisfactory. 30
(4) Nothing contained in sub-section (2) or (3) shall apply if the person, in
whose name the sum referred to in those sub-sections is recorded, is a venture capital
fund or a venture capital company as referred to in Schedule V (Table: Sl. No. 6).
Unexplained 103. Where in any tax year, any investment has been made by the assessee which
investment. is not recorded in the books of account, if any, maintained by such assessee, or, the 35
Assessing Officer finds that the amount of such investment exceeds the amount recorded
in such books of account where the investment is found recorded, and the assessee––
(a) offers no explanation about the nature and source of such
investment, or such excess amount, as the case may be; or
(b) the explanation offered by the assessee, is not satisfactory in the 40
opinion of the Assessing Officer,
then, the value of such investment, or such excess amount, as the case may be, shall
be deemed to be the income of the assessee of that tax year.
Unexplained 104. (1) Where in any tax year, any asset has been found to be owned by or
asset. belonging to the assesse which is not recorded in the books of account, if any, 45
maintained by such assessee, or the Assessing Officer finds that the amount of such
asset exceeds the amount recorded in such books of account where the asset is
found recorded, and the assesse––
 147

(a) offers no explanation about the nature and source of acquisition of

such asset, or such excess amount, as the case may be; or
(b) the explanation offered by the assessee, is not satisfactory in the
opinion of the Assessing Officer,
5 then, the value of such asset, or such excess amount, as the case may be, shall be
deemed to be the income of the assessee of the tax year in which such asset has
been found to be owned by, or belonging to, the assessee.
(2) In this section, “asset” includes money, bullion, jewellery, virtual digital
asset or other valuable article.
10 105. (1) Where any expenditure has been incurred by the assessee in any tax Unexplained
year, and–– expenditure.

(a) the assessee offers no explanation about the source of such

expenditure or part thereof; or
(b) the explanation offered by the assessee is not satisfactory in the
15 opinion of the Assessing Officer,
then, the amount covered by such expenditure or part thereof, shall be deemed to
be the income of the assessee for that tax year.
(2) Irrespective of any other provision of this Act, the amount deemed as
income in sub-section (1) shall not be allowed as a deduction under this Act.
20 106. (1) Where any amount (including interest thereof) is borrowed or repaid Amount
through a negotiable instrument or a hundi, other than an account payee cheque, or borrowed or
repaid through
through any mode as specified by the Board in this behalf, the amount so borrowed negotiable
or repaid shall be deemed to be the income of the person borrowing or repaying, instrument,
as the case maybe, for the tax year in which the amount was borrowed or repaid. hundi, etc.

25 (2) Where the amount borrowed under sub-section (1) has been deemed to be
the income of any person, such person shall not be liable to be assessed again in
respect of such amount under that sub-section on repayment of such amount.
107. Income referred to in sections 102, 103, 104, 105 and 106 shall be Charge of tax.
charged to tax as per the provisions of section 195.
30 CHAPTER VII
SET OFF, OR CARRY FORWARD AND SET OFF OF LOSSES
108. (1) Unless provided otherwise in this Act, for any tax year, if net result Set off of losses
under the same
of computation from any source under any head of income (other than “Capital head of income.
gains”) is a loss, then assessee shall be entitled to set off such loss against his
35 income from any other source under the same head for that tax year.
(2) Any loss, as a result of computation made under sections 72 to 90, for any
tax year, arising from transfer of a capital asset as arrived at under a similar
computation made for the tax year in respect of any other capital asset being,––
(a) a long-term capital asset, shall be set off only against gains, if any,
40 from transfer of another long-term capital asset; and
(b) a short-term capital asset, shall be set off against gains, if any, from
transfer of any capital asset.
109. (1) Subject to the provisions of this Chapter, for any tax year, if income Set off of losses
under any other
computed under any head of income (other than “Capital gains”) is a loss, such head of income.
45 loss shall be set off against income of the assessee under any other head, including
“Capital gains”, if any, assessable for that tax year, subject to the following
conditions:––
 148

(a) loss under the head “Profits and gains of business or profession”
shall not be set off against income chargeable under the head “Salaries”; and
(b) loss under the head “Income from house property” shall be set off
to the extent of two lakh rupees against income under any other head;
(2) For any tax year, the loss under the head “Capital gains” shall not be set 5
off against income under any other head.
Carry 110. (1) The unabsorbed loss from house property for any tax year shall
forward and be carried forward to the subsequent tax year, and shall be set off only against
set off of
loss from
income from house property, if any, computed for such subsequent tax year,
house and so on. 10
property.
(2) The unabsorbed loss from house property referred to in sub-section (1)
shall be carried forward to the following tax year, not being more than eight tax
years immediately succeeding the tax year in which such loss was first computed.
(3) In this section, “unabsorbed loss from house property” means, loss
computed under the head “Income from house property” for the tax year, which 15
has not been, or is not wholly, set off against income from any other head, under
section 107, for the said tax year.
Carry 111. (1) The unabsorbed capital loss for any tax year shall be carried forward
forward and to the subsequent tax year and shall be set off in the manner provided in
set off of
loss from
sub-section (2). 20
Capital
gains. (2) The unabsorbed capital loss arising from transfer of capital asset, being––
(a) a long-term capital asset, may be set off only against capital gains,
if any, from transfer of any other long-term capital asset during the
subsequent tax year and so on; and
(b) a short-term capital asset, shall be set off against capital gains, if 25
any, from transfer of any other capital asset during the subsequent tax year
and so on.
(3) The unabsorbed capital loss referred to in sub-section (1), shall be carried
forward to the following tax year, not being more than eight tax years immediately
succeeding the tax year in which such loss was first computed. 30

(4) In this section, “unabsorbed capital loss” means loss computed under the
head “Capital gains” for any tax year, which has not been, or is not wholly, set off
under section 108 for the said tax year.
Carry 112. (1) The unabsorbed business loss (other than loss from speculation
forward and business) for any tax year shall be carried forward to the subsequent tax year and 35
set off of
business shall be set off only against the profits and gains of business or profession, carried
loss. on by him and assessable for that tax year, if any, computed for such subsequent
tax year, and so on.
(2) The unabsorbed business loss referred to in sub-section (1), shall be
carried forward to the following tax year, not being more than eight tax years 40
immediately succeeding the tax year in which such loss was first computed.
(3) The unabsorbed business loss referred to in sub-section (1) shall first be
allowed to be set off before allowing set off of any carried forward allowance under
section 33(11) or 45(7).
(4) In this section, “unabsorbed business loss” means, loss computed under 45
the head “Profits and gains of business or profession” (other than loss from
speculation business) for the tax year, which has not been, or is not wholly, set off
against income from any other head, under section 109 for the said tax year.
 149

113. (1) Any loss computed from a speculation business carried on by the Set off and carry
forward of
assessee, during any tax year, shall be set off only against profits and gains, if any, losses from
of another speculation business for the said tax year. speculation
business.
(2) The unabsorbed speculation business loss for any tax year shall be carried
5 forward to the subsequent tax year and shall be set off only against the profits and
gains of speculation business, if any, computed for such subsequent tax year, and
so on.
(3) The unabsorbed speculation business loss referred to in sub-section (2)
shall not be carried forward for more than four tax years immediately succeeding
10 the tax year in which such loss was first computed.
(4) The unabsorbed speculation business loss referred to in sub-section (2)
shall first be allowed to be set off before allowing set off of any carried forward
allowance under section 33(11) or 45(7).
(5) In this section,––
15 (a) where any part of the business of the assessee (being a company)
consist of purchase and sale of shares of other companies, then the assessee
shall be deemed to be carrying on a speculation business, to the extent to
which its business consists of purchase and sale of such shares;
(b) “unabsorbed speculation business loss” means any loss computed
20 in respect of a speculation business carried on by the assessee during the tax
year, which has not been, or is not wholly, set off against profits and gains,
if any, of another speculation business under sub-section (1) for the said tax
year.
(6) The provisions of sub-section (5)(a) shall not apply to an assessee, being
25 a company, if—
(a) its gross total income consists mainly of income which is chargeable
under the heads “Income from house property”, “Capital gains” or “Income
from other sources”; or
(b) its principal business is of trading in shares or banking or the
30 granting of loans and advances.
114. (1) Any loss computed from a specified business carried on by the Set off and carry
forward of
assessee, during any tax year, shall be set off only against profits and gains, if any, losses from
of any other specified business for the said tax year. specified
business.
(2) The unabsorbed loss from the specified business for any tax year shall be
35 carried forward to the subsequent tax year and shall be set off only against the
profits and gains of any specified business, if any, computed for such subsequent
tax year, and so on.
(3) In this section,––
(a) “specified business” means any specified business referred to in
40 section 46;
(b) “unabsorbed loss from the specified business” means, any loss
computed in respect of a specified business carried on by the assessee during
the tax year, which has not been, or is not wholly, set off against profits and
gains, if any, of another specified business under sub-section (1) for the said
45 tax year.
 150

Set off and 115. (1) Any loss incurred by the assessee in the specified activity during
carry forward of
losses from
any tax year, shall not be set off against the income, if any, from any source other
specified than specified activity for the said tax year.
activity.
(2) The unabsorbed loss from the specified activity for any tax year shall be
carried forward to the subsequent tax year and shall be set off,–– 5

(a) only against the income from specified activity, if any, computed
for such subsequent tax year, and so on; and
(b) only when the specified activity is carried on by the assessee in that
tax year.
(3) The unabsorbed loss from the specified activity referred to in 10
sub-section (2) shall not be carried forward for more than four tax years
immediately succeeding the tax year in which such loss was first computed.
(4) In this section,––
(a) “income by way of stake money” means the gross amount of prize
money received by the owner of race horses participating in horse races on 15
their winning a particular position in such race;
(b) “loss incurred by the assessee in the specified activity” means the
amount by which the income by way of stake money, if any, falls short of
the expenditure, not being capital expenditure, incurred wholly and
exclusively for maintaining race horses; 20

(c) “race horse” means a horse upon which wagering or betting may
be lawfully made in a horse race;
(d) “specified activity” means the activity of owning and maintaining
race horses;
(e) “unabsorbed loss from the specified activity” means any loss 25
computed in respect of the specified activity carried on by the assessee
during the tax year, which has not been, or is not wholly, set off against
income, if any, of the specified activity under sub-section (1) for the said tax
year.
Treatment of 116. (1) Where there has been an amalgamation of,—
accumulated 30
losses and (a) a company owning an industrial undertaking or a ship or a hotel
unabsorbed
depreciation in
with another company; or
amalgamation or
demerger, etc.
(b) a banking company referred to in section 5(c) of the Banking
10 of 1949.
Regulation Act, 1949 with a specified bank; or
(c) one or more public sector company with one or more other public 35
sector company; or
(d) an erstwhile public sector company with one or more company or
companies, if the share purchase agreement entered into under strategic
disinvestment restricted immediate amalgamation of the said public sector
company and the amalgamation is carried out within five years from the end 40
of the tax year in which the restriction on amalgamation in the share
purchase agreement ends,
then, irrespective of anything in any other provision of this Act, the accumulated
loss and unabsorbed depreciation of the amalgamating company shall be deemed
to be the loss or, allowance for unabsorbed depreciation of the amalgamated 45
company for the tax year in which the amalgamation was effected, and other
provisions of this Act relating to set off and carry forward of loss and allowance
for depreciation shall apply accordingly.
 151

(2) The accumulated loss and the unabsorbed depreciation of the

amalgamating company, in case of an amalgamation referred to in
sub-section (1)(d), which is deemed to be the loss or, as the case may be, the
unabsorbed depreciation of the amalgamated company, shall not exceed the
5 accumulated loss and unabsorbed depreciation of the public sector company as on
the date on which it ceases to be a public sector company due to such
strategic disinvestment.
(3) For sub-section 1(d),—
(a) “control” shall have the same meaning as assigned to it in
18 of 2013. 10 section 2(27) of the Companies Act, 2013;
(b) “erstwhile public sector company” means a company which was a
public sector company in earlier tax years and ceases to be so due to strategic
disinvestment by the Government;
(c) “strategic disinvestment” means sale of shareholding by the
15 Central Government or State Government or a public sector company, in a
public sector company or in a company, which results in—
(i) reduction of its shareholding to below 51%; and
(ii) transfer of control to the buyer;
(d) for clause(c)(i), the reduction of shareholding shall apply only
20 where shareholding of the Central Government or the State Government or
the public sector company exceeded 51% before the sale of shareholding;
(e) the transfer of control referred to in clause (c)(ii) may be effected
by the Central Government or the State Government or the public sector
company or any two or all of them.
25 (4) Irrespective of anything contained in sub-section (1), the accumulated
loss shall not be set off or carried forward and the unabsorbed depreciation shall
not be allowed in the assessment of the amalgamated company unless,—
(a) the amalgamating company—
(i) has been engaged in the business, in which the accumulated
30 loss occurred or depreciation remains unabsorbed, for three or
more years;
(ii) has held continuously as on the date of the amalgamation, at
least three-fourths of the book value of fixed assets held by it two years
preceding the date of amalgamation;
35 (b) the amalgamated company—
(i) holds continuously for a minimum five years from the date of
amalgamation at least three-fourths of the book value of fixed assets
of the amalgamating company acquired in a scheme of amalgamation;
(ii) continues the business of the amalgamating company for a
40 minimum five years from the date of amalgamation;
(iii) fulfils such other conditions as prescribed to ensure the
revival of the business of the amalgamating company or to ensure that
the amalgamation is for genuine business purpose.
(5) If any of the conditions laid down in sub-section (4) are not complied
45 with, the set off of loss or allowance of depreciation made in any tax year in the
hands of the amalgamated company shall be treated as the income of the
amalgamated company chargeable to tax for the year in which the
non-compliance occurs.
 152

(6) Irrespective of anything contained in any other provisions of this Act, in

the case of a demerger, the accumulated loss and the allowance for unabsorbed
depreciation of the demerged company shall,—
(a) if directly relatable to the undertakings transferred to the resulting
company, be allowed to be carried forward and set off in the hands of the 5
resulting company;
(b) if not directly relatable to the undertakings transferred to the
resulting company, be apportioned between the demerged company and the
resulting company in the same proportion in which the assets of the
undertakings have been retained by the demerged company and transferred 10
to the resulting company, and shall be allowed to be carried forward and set
off in the hands of the demerged company or the resulting company, as
applicable.
(7) The Central Government may, by notification, specify such conditions
to ensure that the demerger is for genuine business purposes. 15

(8) If there has been a business reorganisation where, a firm is succeeded

by a company fulfilling the conditions laid down in section 70(1)(zd) or a
proprietary concern is succeeded by a company fulfilling the conditions laid down
in section 70(1)(zf), then, irrespective of anything contained in this Act, the
accumulated loss and the unabsorbed depreciation of the predecessor firm or the 20
proprietary concern, shall be deemed to be the loss or allowance for depreciation
of the successor company for the tax year in which business reorganisation was
effected and other provisions of this Act relating to set off and carry forward of
loss and allowance for depreciation shall apply.
(9) If any of the conditions laid down in section 70(1)(zd) or (zf) are not 25
complied with, the set off of loss or allowance of depreciation made in any tax
year in the hands of the successor company, shall be deemed to be the income of
the company chargeable to tax in the year in which the non-compliance occurs.
(10) If there has been reorganisation of business whereby a private company
or unlisted public company is succeeded by a limited liability partnership 30
fulfilling the conditions laid down in section 70(1)(ze), then, irrespective of
anything contained in any other provision of this Act, the accumulated loss and
the unabsorbed depreciation of the predecessor company, shall be deemed to be
the loss or allowance for depreciation of the successor limited liability partnership
for the tax year in which business reorganisation was effected and other provisions 35
of this Act relating to set off and carry forward of loss and allowance for
depreciation shall apply accordingly.
(11) If any of the conditions laid down in section 70(1)(ze) are not complied
with, the set off of loss or allowance of depreciation made in any tax year in the
hands of the successor limited liability partnership, shall be deemed to be the 40
income of the limited liability partnership chargeable to tax in the year in which
the non-compliance occurs.
(12) For any amalgamation referred to in sub-section (1) or reorganisation
of business referred to in sub-section (8) or (10) effected on or after the
1st April, 2025, any loss forming part of the accumulated loss of the predecessor 45
entity, being—
(i) the amalgamating company; or
(ii) the firm or proprietary concern; or
(iii) the private company or unlisted public company,
as the case may be, which is deemed to be the loss of the successor entity, being— 50
 153

(a) the amalgamated company; or

(b) the successor company; or
(c) the successor limited liability partnership,
as the case may be, shall be carried forward for not more than eight tax years
5 immediately succeeding the tax year for which such loss was first computed for
the original predecessor entity.
(13) In this section,—
(a) “accumulated loss” means so much of the loss of the predecessor
firm or the proprietary concern or the private company or unlisted public
10 company before conversion into limited liability partnership or the
amalgamating company or the demerged company, under the head “Profits
and gains of business or profession” (excluding loss in a speculation
business) which would have been eligible for carry forward and set off to
such predecessor under section 112, had the reorganisation of business or
15 conversion or amalgamation or demerger not occurred.
(b) “industrial undertaking” means any undertaking which is
engaged in—
(i) the manufacture or processing of goods; or
(ii) the manufacture of computer software; or
20 (iii) the business of generation or distribution of electricity or
any other form of power; or
(iv) the business of providing telecommunication services,
whether basic or cellular, including radio paging, domestic satellite
service, network of trunking, broadband network and internet
25 services; or
(v) mining; or
(vi) the construction of ships, aircrafts or rail systems;
(c) “original predecessor entity” means predecessor entity in respect
of the first amalgamation for sub-section (1) or first business reorganisation
30 for sub-sections (8) and (10), as the case may be.
(d) “specified bank” means the State Bank of India constituted under
23 of 1955. the State Bank of India Act, 1955 or a corresponding new bank constituted
under section 3 of the Banking Companies (Acquisition and Transfer of
5 of 1970. Undertakings) Act, 1970 or under section 3 of the Banking Companies
40 of 1980. 35 (Acquisition and Transfer of Undertakings) Act, 1980;
(e) “unabsorbed depreciation” means so much of the allowance for
depreciation of the predecessor firm or the proprietary concern or the private
company or unlisted public company before conversion into limited liability
partnership or the amalgamating company or the demerged company, which
40 remains to be allowed and which would have been allowed to such
predecessor under this Act, had the reorganisation of business or conversion
or amalgamation or demerger not occurred.
117. (1) Irrespective of anything contained in section 2(6)(a) to (c) or Treatment of
section 116, where there has been an amalgamation of,— accumulated
losses and
45 (a) one or more banking company with— unabsorbed
depreciation in
(i) any other banking institution under a scheme sanctioned and scheme of
amalgamation in
brought into force by the Central Government under section 45(7) of certain cases
10 of 1949. the Banking Regulation Act, 1949; or
 154

(ii) any other banking institution or a company following a

strategic disinvestment, wherein the amalgamation occurs within five
years from the end of the tax year during which such disinvestment is
carried out; or
(b) one or more corresponding new bank or banks with any other 5
corresponding new bank under a scheme brought into force by the Central
Government under section 9 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970 or under section 9 of the Banking 5 of 1970.
Companies (Acquisition and Transfer of Undertakings) Act, 1980, or 40 of 1980.
10
both; or
(c) one or more Government company or companies with any other
Government company under a scheme sanctioned and brought into force by
the Central Government under section 16 of the General Insurance Business
(Nationalisation) Act, 1972, 57 of 1972.

the accumulated loss and unabsorbed depreciation of such banking company or 15

companies or amalgamating corresponding new bank or banks or amalgamating
Government company or companies, shall be deemed to be the loss or, allowance
for depreciation of the banking institution or company or amalgamated
corresponding new bank or amalgamated Government company for the tax year
in which the scheme of amalgamation was brought into force and other provisions 20
of this Act relating to set off and carry forward of loss and allowance for
depreciation shall apply accordingly.
(2) Where any scheme of such amalgamation is brought into force on or
after the 1st April, 2025, any loss forming part of the accumulated loss of the
predecessor entity, being— 25

(i) the banking company or companies;

(ii) the amalgamating corresponding new bank or banks; or
(iii) the amalgamating Government company or companies,
as the case may be, which is deemed to be the loss of the successor entity, being—
(a) the banking institution or company; or 30

(b) the amalgamated corresponding new bank or banks; or

(c) the amalgamated Government company or companies,
as the case may be, shall be carried forward in the hands of the successor entity
for not more than eight tax years immediately succeeding the tax year for which
such loss was first computed for original predecessor entity. 35

(3) In this section,—

(a) “accumulated loss” means so much of the loss of the amalgamating
banking company or companies or amalgamating corresponding new bank
or banks or amalgamating Government company or companies under the
head “Profits and gains of business or profession” (excluding losses of a 40
speculation business) which such amalgamating company or companies
would have been entitled to carry forward and set off under section 112 had
the amalgamation not occurred;
(b) “banking company” shall have the same meaning as assigned to it
45 10 of 1949.
in section 5(c) of the Banking Regulation Act, 1949;
(c) “banking institution” shall have the same meaning as assigned to it
in section 45(15) of the Banking Regulation Act, 1949; 10 of 1949.
 155

(d) “corresponding new bank” shall have the same meaning as

assigned to it in section 2(d) of the Banking Companies (Acquisition and
5 of 1970. Transfer of Undertakings) Act, 1970, or section 2(b) of the Banking
40 of 1980. Companies (Acquisition and Transfer of Undertakings) Act, 1980;
5 (e) “general insurance business” shall have the same meaning as
assigned to it in section 3(g) of the General Insurance Business
57 of 1972. (Nationalisation) Act, 1972;
(f) “Government company” means a Government company as defined
18 of 2013. in section 2(45) of the Companies Act, 2013, engaged in the general
10 insurance business and established under section 4 or 5 or 16 of the General
57 of 1972. Insurance Business (Nationalisation) Act, 1972;
(g) “original predecessor entity” means predecessor entity in respect
of the first amalgamation;
(h) “strategic disinvestment” shall have the meaning assigned to it in
15 section 116(3)(c);
(i) “unabsorbed depreciation” means the allowance for depreciation of
the amalgamating banking company or companies or amalgamating
corresponding new bank or banks or amalgamating Government company
or companies which remains to be allowed and which would have been
20 allowed to such entity, had the amalgamation not occurred.
118. (1) In a case of a co-operative bank, where amalgamation takes place Carry forward
and set off of
during the tax year, the accumulated business loss and unabsorbed depreciation, losses and
if any, of the predecessor co-operative bank, shall be allowed to be set off against unabsorbed
the income of the assessee, being a successor co-operative bank for that tax year, depreciation in
25 as if the business reorganisation had not taken place and all other provisions of business
reorganisation
this Act relating to set off and carry forward of loss and allowance for of co-operative
depreciation, shall apply accordingly. banks.

(2) In case of a co-operative bank where demerger takes place during the tax
year, and where the accumulated loss or unabsorbed depreciation––

30 (a) is directly relatable to the undertaking transferred, the whole of

such loss and depreciation shall be allowed to be carried forward and set off
against the income of the resulting co-operative bank; and
(b) is not directly relatable to the undertaking transferred, then such
loss and depreciation shall first be apportioned between the demerged
35 co-operative bank and the resulting co-operative bank in the same
proportion in which assets of the undertaking are distributed between the
demerged co-operative bank and the resulting co-operative bank, and be
allowed to be carried forward and set off against their respective incomes.
(3) The accumulated loss shall be carried forward only up to eight tax years
40 immediately succeeding the tax year in which such loss was first computed in the
hands of the predecessor-in-business.
(4) The provisions of this section shall apply, if—
(a) the predecessor co-operative bank—
(i) has been engaged in the business of banking for three or more
45 years; and
(ii) has held at least three-fourths of the book value of fixed
assets as on the date of the business reorganisation, continuously for
two years before to the date of business reorganisation;
 156

(b) the successor co-operative bank,—

(i) holds at least three-fourths of the book value of fixed assets
of the predecessor co-operative bank acquired through business
reorganisation, continuously for a minimum five years immediately
succeeding the date of business reorganisation; 5

(ii) continues the business of the predecessor co-operative bank

for a minimum five years from the date of business reorganisation; and
(iii) fulfils such other conditions, as prescribed, to ensure the
revival of the business of the predecessor co-operative bank or to
ensure that the business reorganisation is for genuine business 10
purpose.
(5) The Central Government may, by notification, specify such other
conditions as it may consider necessary, other than the condition referred to in
sub-section (4)(b)(iii), for the purposes of ensuring that the specified business
reorganisation is for genuine business purposes. 15

(6) In a case where any of the conditions referred to in sub-section (4) or (5)
are not complied with, the set off of accumulated business loss or unabsorbed
depreciation made in any tax year in the hands of the successor co-operative bank
shall be deemed to be the income of the successor co-operative bank chargeable
to tax for the year in which such conditions are not complied with. 20

(7) The period commencing from the beginning of the tax year and ending
on the date immediately preceding the date of business reorganisation, and the
period commencing from the date of such business reorganisation and ending with
the tax year, shall be deemed to be two different tax years for the purposes of
set off and carry forward of loss and allowance for depreciation. 25

(8) In this section,––

(a) “accumulated business loss” means so much of the loss of
amalgamating co-operative bank or demerged co-operative bank as referred
to in section 112 in the hands of predecessor co-operative bank, which such
predecessor co-operative bank would have been entitled to carry forward 30
and set off under the said section, as if the business reorganisation had not
taken place;
(b) “amalgamated co-operative bank”, “amalgamating co-operative
bank”, “amalgamation”, “business reorganisation”, “demerged co-operative
bank”, “demerger”, “predecessor co-operative bank”, “successor 35
co-operative bank” and “resulting co-operative bank” shall have the
meanings respectively assigned to them in section 65;
(c) “unabsorbed depreciation” means so much of the allowance for
depreciation in the hands of amalgamating co-operative bank or demerged
co-operative bank, which remains to be allowed and which would have been 40
allowed to such banks, if the business reorganisation had not taken place.
Carry forward 119. (1) In case of change in constitution of a firm during a tax year, such
and set off of
losses not firm shall not be entitled to carry forward and set off so much of the loss
permissible in proportionate to the share of retired or deceased partner as reduced by his share
certain cases. of profit, if any, from the firm for that tax year. 45

(2) If any person carrying on any business or profession has been succeeded
in such capacity by another person, otherwise than by inheritance, nothing in this
Chapter shall entitle any person other than the person incurring the loss to have it
carried forward and set off against his income.
 157

(3) In case of change in shareholding of a company, not being a company in

which public are substantially interested, during any tax year, loss brought
forward from any preceding tax year shall not be allowed to be set off against the
income of the said tax year and subsequent tax years unless the following
5 conditions are satisfied:––
(a) if the beneficial owners of shares of the company carrying at least
51% of voting power, as on the last day of tax year in which loss was
incurred, shall continue to be the beneficial owner of shares carrying at least
51% of voting power, as on the last day of the tax year in which such change
10 in shareholding takes place; or
(b) even if conditions referred to in clause (a) are not satisfied in case
of a company, being an eligible start-up referred to in section 140,—
(i) all shareholders of the company holding shares carrying
voting power, as on the last day of tax year in which loss was incurred,
15 continue to hold those shares as on the last day of the tax year in which
such change in shareholding takes place; and
(ii) such loss was incurred during the first ten years beginning
from the year of incorporation of the company.
(4) The provisions of sub-section (3) shall not apply––
20 (a) where a change in the voting power and shareholding takes place
in the tax year referred to in that sub-section due to death of shareholder or
transfer of shares by way of gift to any relative of the shareholder; or
(b) where change in shareholding of Indian company, being a
subsidiary of foreign company, takes place due to amalgamation or
25 demerger of the foreign company and 51% of the shareholders of
amalgamating or demerged foreign company are shareholders of
amalgamated or resulting foreign company; or
(c) where change in shareholding takes place in a tax year consequent
to a resolution plan approved under the Insolvency and Bankruptcy
31 of 2016. 30 Code, 2016 and a reasonable opportunity of being heard was afforded to the
jurisdictional Principal Commissioner or Commissioner; or
(d) to a company, its subsidiary and subsidiary of such subsidiary, if––
(i) the Board of Directors of such company were suspended by
the Tribunal on an application moved by the Central Government
18 of 2013. 35 under section 241 of the Companies Act, 2013 and new directors were
appointed by the Central Government under section 242 of the said
Act; and
(ii) the change in shareholding of such company and its
subsidiary, and subsidiary of such subsidiary has taken place
40 consequent to a resolution plan approved by the Tribunal under
18 of 2013. section 242 of the Companies Act, 2013 and a reasonable opportunity
of being heard was afforded to the jurisdictional Principal
Commissioner or Commissioner; or
(e) to a company to the extent that a change in the shareholding has
45 taken place during the tax year on account of relocation referred to in
section 70(2); or
(f) to an erstwhile public sector company where ultimate holding
company of such company, immediately after the completion of strategic
disinvestment, continues to hold, directly or through its subsidiary or
50 subsidiaries, at least 51% of the voting power of such company in aggregate.
 158

(5) Irrespective of anything contained in sub-section (4), if the conditions

specified in sub-section 4(f) is not complied with in any tax year after the
completion of strategic disinvestment, the provisions of sub-section (3) shall
apply for such tax year and subsequent tax years.
(6) In this section,— 5
(a) a company shall be a subsidiary of another company, if such other
company holds more than half in nominal value of the equity share capital
of the company;
(b) the expression “erstwhile public sector company” shall have the
meaning assigned to it in section 116(3)(b); 10

(c) “strategic disinvestment” shall have the meaning assigned to it in

section 116(3)(c);
(d) “Tribunal” shall have the same meaning as assigned to it in
18 of 2013.
section 2(90) of the Companies Act, 2013.
No set off of 120. (1) Irrespective of anything to the contrary contained in any other 15
losses against provision of this Act, any loss, whether brought forward or otherwise or
undisclosed
income unabsorbed depreciation, shall not be allowed to be set off against any undisclosed
consequent to income which is included in the total income of any tax year, consequent to a
search, search conducted under section 247 or a requisition under section 248 or a survey
requisition and
survey.
conducted under section 253, not being a survey under section 253(4). 20

(2) In this section, the expression “undisclosed income” for any tax year
shall have the meaning assigned to it in section 301.
Submission of 121. Irrespective of anything contained in this Chapter, no loss which has
return for losses. not been determined in pursuance of a return filed under section 263(1), shall be
carried forward and set off under section 111(1) and 111(2), or 112(1), or 113(2), 25
or 114(2) or 115(1).
CHAPTER VIII
DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME
A.—General
Deductions to 121. (1) In computing the total income of an assessee, the deductions 30
be made in specified in this Chapter shall be allowed from his gross total income, as per and
computing total
income.
subject to the provisions of this Chapter.
(2) The aggregate amount of the deductions under this Chapter shall not, in
any case, exceed the gross total income of the assessee.
(3) If the deduction under section 133 or 135 or 137 or 138 or 141 or 142 35
or 143 is admissible in computing the total income of an association of persons or
a body of individuals, no deduction under the same provision shall be made in
relation to the share of income of a member of such association of persons or body
of individuals while computing the total income of such member.
(4) Irrespective of anything to the contrary contained in any of the provisions 40
of this Chapter under the heading “Deductions in respect of certain incomes”,
where, in the case of an assessee, any amount of profits and gains of an
undertaking or unit or enterprise or eligible business is claimed and allowed as a
deduction under those provisions for any tax year,––
(a) deduction in respect of, and to the extent of, such profits and gains 45
shall not be allowed under any other provision of this Act for such tax year; and
(b) shall in no case exceed the profits and gains of such undertaking
or unit or enterprise or eligible business.
 159

(5) Deduction under the provisions of Part C of this Chapter shall not be
allowed to an assessee, who fails to—
(a) furnish a return of income on or before the due date specified under
section 263(1); or
5 (b) make a claim of deduction in return furnished under section 263(1).
(6) For the purposes of any deduction under this Chapter, irrespective of
anything to the contrary contained in Part C of this Chapter, if any goods or
services held for the purposes of––
(a) the undertaking, unit, enterprise or eligible business carried on by the
10 assessee are transferred to any other business carried on by the assessee; or
(b) any other business carried on by the assessee are transferred to the
undertaking or unit or enterprise or eligible business of the assessee; and
(c) the consideration, if any, for such transfer as recorded in the accounts
of the undertaking or unit or enterprise or eligible business does not
15 correspond to the market value of such goods or services as on the date of
transfer,
the profits and gains of such undertaking or unit or enterprise or eligible business
carried on by the assessee, shall be computed as if the transfer in clause (a) or (b),
had been made at the market value of such goods or services as on that date.
20 (7) For the purposes of sub-section (6), “market value”,—
(a) in relation to any goods or services sold or supplied, means the
price that such goods or services would fetch, if these were sold by the
undertaking or unit or enterprise or eligible business in the open market,
subject to statutory or regulatory restrictions, if any;
25 (b) in relation to any goods or services acquired, means the price that
such goods or services would cost if these were acquired by the undertaking
or unit or enterprise or eligible business from the open market, subject to
statutory or regulatory restrictions, if any; and
(c) in relation to any goods or services sold, supplied or acquired
30 means the arms length price of such goods or services as defined in section
173(a), if it is a specified domestic transaction referred to in section 164.
(8) Where a deduction under Part C of this Chapter, is claimed and allowed
in respect of profits of a specified business as referred to in section 46(11)(d) for
any tax year, no deduction shall be allowed for such specified business under
35 section 46 for the same or any other tax year.
(9) Where any deduction is required to be made or allowed under Part C of
this Chapter, in respect of any income of the nature specified in that section and
included in the gross total income of the assessee, then, irrespective of anything
contained in that section, for the purpose of computing the deduction under that
40 section, the amount of income of that nature as computed under the provisions of
this Act (before making any deduction under this Chapter) shall alone be deemed
to be the amount of income of that nature which is derived or received by the
assessee and which is included in his gross total income.
(10) In this Chapter, “gross total income” means the total income computed
45 as per the provisions of this Act, before making deduction under this Chapter.
B.—Deductions in respect of certain payments
123. An individual or a Hindu undivided family, shall be allowed a Deduction for life
insurance premia,
deduction of the whole of the amount paid or deposited in the tax year, being the deferred annuity,
aggregate of the sums enumerated in Schedule XV, but not exceeding one lakh contributions to
50 fifty thousand rupees, while computing the total income for that year, subject to provident fund,
etc.
the conditions specified in that Schedule.
 160

Deduction in 124. (1) Where in the case of an assessee, being an individual employed by
respect of
employer
any employer, if an employer makes any contribution in his account under a
contribution to pension scheme notified by the Central Government, the assessee shall be allowed
pension scheme a deduction in the computation of his total income, of the whole of the amount
of Central
Government.
contributed by such employer as does not exceed— 5

(a) 14%, where such contribution is made by the employer being the
Central Government or the State Government; and
(b) 10%, where such contribution is made by an employer other than
an employer referred to in clause (a),
of his salary in the tax year. 10

(2) Where the total income of the assessee is chargeable to tax under
section 202(1), the provisions of sub-section (1) shall have effect as if for “10%”
referred to in clause (b) of that sub-section, “14%” had been substituted.
(3) An assessee referred to in sub-section (1), or any other assessee, being
an individual, shall be allowed a deduction in computation of his total income of 15
the whole of the amount paid or deposited in the tax year in his account under a
pension scheme notified or as notified by the Central Government, which shall
not exceed fifty thousand rupees.
(4) The deduction under sub-section (3) shall also be allowed where any
payment or deposit is made to the account of a minor under the said pension 20
scheme, by the assessee, being the guardian of such minor, subject to the condition
that the aggregate amount of deduction under sub-section (3) and this sub-section
shall not exceed fifty thousand rupees.
(5) No deduction under sub-section (3) shall be allowed in respect of the amount
on which a deduction has been claimed and allowed under section 123. 25

(6) Any amount standing to the credit of the assessee or a minor, in his
account or the account of a minor, as the case may be, referred to in
sub-sections (1), (3) and (4), in respect of which a deduction has been allowed
together with the amount accrued thereon, received by the assessee or his
nominee, in whole or in part, in any tax year,— 30

(a) on account of closure or his opting out of the pension scheme

referred to in sub-sections (1) and (3); or
(b) as pension received from the annuity plan purchased or taken on
such closure or opting out,
the whole of the amount referred to in clause (a) or (b) shall be deemed to be the 35
income of the individual or his nominee, in the tax year in which such amount is
received, and shall accordingly be charged to tax as income of that tax year.
(7) The amount received by the nominee, on the death of the assessee, under
the circumstances referred to in sub-section (6)(a), shall not be deemed to be the
income of the nominee. 40

(8) The amount received by a person, being the guardian or nominee of a

minor on account of closure of the pension scheme due to the death of the minor
referred to in sub-section (4), shall not be deemed to be the income of such person.
(9) For the purposes of this section, the assessee shall not be deemed to have
received any amount in the tax year, if such amount is used for purchasing an 45
annuity plan in the same tax year.
 161

(10) Where any amount paid or deposited by the assessee has been allowed
as a deduction under sub-section (3), no deduction with reference to such amount
shall be allowed as deduction under section 123 for that tax year.
(11) For the purposes of this section, “salary” includes dearness allowance,
5 if the terms of employment so provide, but excludes all other allowances and
perquisites.
125. (1) An assessee, being an individual who has enrolled in the Agnipath Deduction in
respect of
Scheme and subscribes to the Agniveer Corpus Fund on or after the contribution to
1st November, 2022, shall be allowed a deduction in the computation of his total Agnipath
10 income, of the whole of the amount paid or deposited in his account in the said Scheme.
Fund during the tax year.
(2) Where the Central Government makes any contribution to the account
of an assessee in the Fund referred to in sub-section (1), the assessee shall be
allowed a deduction in the computation of his total income of the whole of the
15 amount so contributed.
(3) In this section,—
(a) “Agnipath Scheme” means the scheme for enrolment in the Indian
Armed Forces introduced vide letter No. 1(23)2022/D(Pay/Services), dated the
29th December, 2022, of the Government of India in the Ministry of Defence;
20 (b) “Agniveer Corpus Fund” means a fund in which consolidated
contributions of all the Agniveers and matching contributions of the Central
Government along with interest on both these contributions are held.
126. (1) An assessee, being an individual or a Hindu undivided family, shall Deduction in
respect of health
be allowed a deduction of a sum as specified in sub-sections (2) to (8), payment insurance
25 of which is made by any mode as specified in sub-section (9), out of his income premia.
chargeable to tax in the tax year.
(2) In the case of an assessee, being individual, the sum referred to in
sub-section (1), shall be the aggregate of the whole of the amount paid—
(a) to effect or keep in force an insurance on the health (herein referred
30 to as health insurance) of the assessee or his family, or any contributions
made to the Central Government Health Scheme or such other scheme, as
notified by the Central Government in this behalf, or any payment made for
preventive health check-up of the assessee or his family, up to twenty-five
thousand rupees in aggregate;
35 (b) to effect or to keep in force the health insurance, or any payment
made for preventive health check-up, for the parent or parents of the
assessee, up to twenty-five thousand rupees in aggregate;
(c) on account of medical expenditure incurred on the health of the
assessee or any member of his family, up to fifty thousand rupees in
40 aggregate; and
(d) on account of medical expenditure incurred on the health of any
parent of the assessee, up to fifty thousand rupees in aggregate.
(3) The deduction in respect of amounts referred to in sub-section (2)(a) or
(2)(b), which are paid on account of preventive health check-up, shall be allowed
45 up to five thousand rupees in aggregate.
(4) The amount of sum referred to in sub-section (2) shall not exceed
fifty thousand rupees in aggregate of the sum specified under sub-sections 2(a)
and 2(c) or aggregate of the sum specified under sub-sections 2(b) and 2(d).
(5) In the case of assessee, being Hindu undivided family, the sum referred to
50 in sub-section (1), shall be the aggregate of the whole of the amount paid––
 162

(a) to effect or keep in force an insurance on the health of any member

of that family, up to twenty-five thousand rupees in the aggregate; and
(b) on account of medical expenditure incurred on the health of any
member of that family, up to fifty thousand rupees in the aggregate.
(6) The amount of sum under sub-section (5) shall not exceed fifty thousand 5
rupees in the aggregate of the sum specified under sub-section (5)(a) and (b); or
(7) For the purposes of this section, where the amount is paid on account of
medical expenditure incurred on the health of senior citizen under
sub-section (2)(c) or (d) or (5)(b), deduction shall be allowed, if no amount has
been paid to effect or to keep in force the health insurance of such person. 10

(8) Where the sum specified in sub-section (2)(a) or (b) or (5)(a) is paid to effect
or keep in force the health insurance of any person specified therein, and—
(a) such person is a senior citizen, the amount of sum as provided in
such clauses, shall be substituted with fifty thousand rupees for twenty-five
thousand rupees; and 15

(b) such sum is paid in lump sum in the tax year for more than a year,
a deduction shall be allowed for each of the relevant tax year equal to the
appropriate fraction of such amount.
(9) For the purposes of deduction under section (1), the payment shall be
made by any mode,— 20

(a) including cash, in respect of any sum paid on account of preventive

health check-up; or
(b) other than cash in all other cases not falling under clause (a).
(10) In this section,—
(a) “appropriate fraction” means the fraction where the numerator is 25
one, and the denominator is the total number of relevant tax year;
(b) “family” includes the spouse and dependant children of the
assesse; and
(c) “relevant tax year” means the tax year beginning with the tax year
in which such lump sum amount is paid and the subsequent tax year or years 30
during which the health insurance remains in force.
(11) The health insurance referred to in this section shall be as per the
scheme made in this behalf by—
(a) the General Insurance Corporation of India formed under
section 9 of the General Insurance Business (Nationalisation) Act, 1972 and 35 57 of 1972.
approved by the Central Government in this behalf; or
(b) any other insurer and approved by the Insurance Regulatory and
Development Authority established under section 3(1) of the Insurance
4 of 1999.
Regulatory and Development Authority Act, 1999.
Deduction in 127. (1) An assessee being an individual or a Hindu undivided family, who 40
respect of
maintenance
is a resident in India, shall be allowed a deduction up to seventy-five thousand
including rupees from his gross total income of a tax year, subject to the provisions of this
medical section, if during that year he has––
treatment of a
dependant who (a) incurred expenditure for the medical treatment (including nursing),
is a person with
disability.
training, or rehabilitation of a dependant, being a person with disability; or 45
 163

(b) paid or deposited any amount, under a scheme framed by the Life
Insurance Corporation or any other insurer or the Administrator, or the
specified company, for the maintenance of a dependant, being a person with
disability, subject to the conditions specified in sub-section (2) and approved
5 by the Board in this behalf.
(2) The deduction under sub-section (1)(b) shall be allowed only if the
following conditions are fulfilled:––
(a) the scheme referred to in sub-section (1)(b) provides for payment
of an annuity or lump sum amount for the benefit of a dependant, being a
10 person with disability––
(i) on the death of the individual or the member of the Hindu
undivided family, in whose name the scheme was subscribed; or
(ii) on attaining the age of sixty years or more by such individual
or the member of the Hindu undivided family, and the payment or
15 deposit to such scheme has been discontinued;
(b) the assessee nominates the dependant, being a person with
disability or another person or a trust to receive the payments on behalf and
for the benefit of such dependant.
(3) If the dependant as referred to in sub-section (1) is a person with severe
20 disability, the amount of deduction as referred to in sub-section (1) shall be
substituted with one lakh and twenty-five thousand rupees for seventy-five
thousand rupees.
(4) In the event of death of the dependant, being a person with disability
before the individual or member of the Hindu undivided family mentioned in
25 sub-section (2), the amount paid or deposited under sub-section (1)(b) shall be
deemed to be the income of the assessee of the tax year in which it is received and
shall accordingly be chargeable to tax.
(5) The provisions of sub-section (4) shall not apply to the amount received
by the dependant, being a person with disability, before his death, as an annuity
30 or lump sum, by application of the condition referred to in sub-section (2)(a)(ii).
(6) The assessee claiming deduction under this section, shall furnish a copy
of the medical certificate issued by the medical authority in such form and manner
as prescribed, along with the return of income under section 263 for the tax year
in which the deduction is claimed.
35 (7) If the certificate referred to in sub-section (6), specifies that the condition
of disability requires reassessment of its extent after a period stipulated in it, the
deduction under this section shall not be allowed for any tax year succeeding the
tax year in which the said certificate expires, unless a new certificate is obtained
from the medical authority in such form and manner, as prescribed, and a copy
40 thereof is submitted along with the return of income under section 263.
(8) The dependant mentioned in this section shall not include a person who
has claimed deduction under section 154 in computing his total income for the
tax year.
(9) In this sections,—
45 (a) “Administrator” means the Administrator as referred to in section 2(a)
58 of 2002. of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002;
(b) “dependant” means—
(i) in the case of an individual, the spouse, children, parents,
brothers and sisters of the individual or any of them;
 164

(ii) in the case of a Hindu undivided family, a member of the

Hindu undivided family,
dependant wholly or mainly on such individual or Hindu undivided family
for his support and maintenance;
(c) “disability” shall have the same meaning as assigned to it in 5
section 2(i) of the Persons with Disabilities (Equal Opportunities, Protection
of Rights and Full Participation) Act, 1995 and includes “autism”, “cerebral 1 of 1996.
palsy” and “multiple disability” respectively referred to in section 2(a), (c)
and (h) of the National Trust for Welfare of Persons with Autism, Cerebral
Palsy, Mental Retardation and Multiple Disabilities Act, 1999; 10 44 of 1999.

(d) “Life Insurance Corporation” means the Life Insurance

Corporation of India established under the Life Insurance Corporation
31 of 1956.
Act, 1956;
(e) “medical authority” means the medical authority as referred to in
section 2(p) of the Persons with Disabilities (Equal Opportunities, 15
Protection of Rights and Full Participation) Act, 1995 or such other medical 1 of 1996.
authority as may, by notification, be specified by the Central Government
for certifying “autism”, “cerebral palsy”, “multiple disabilities”, “person
with disability” and “severe disability” respectively referred to in
section 2(a), (c), (h), (j) and (o) of the National Trust for Welfare of Persons 20
with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
Act, 1999; 44 of 1999.

(f) “person with disability” means a person as referred to in

section 2(t) of the Persons with Disabilities (Equal Opportunities, Protection
of Rights and Full Participation) Act, 1995 or section 2(j) of the National 25 1 of 1996.
Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple Disabilities Act, 1999; 44 of 1999.

(g) “person with severe disability” means—

(i) a person with 80% or more of one or more disabilities, as
referred to in section 56(4) of the Persons with Disabilities (Equal 30
Opportunities, Protection of Rights and Full Participation)
Act, 1995; or 1 of 1996.

(ii) a person with severe disability referred to in section 2(o) of

the National Trust for Welfare of Persons with Autism, Cerebral Palsy,
Mental Retardation and Multiple Disabilities Act, 1999; 35 44 of 1999.

(h) “specified company” shall have the same meaning as assigned to

it in section 2(h) of the Unit Trust of India (Transfer of Undertaking and
Repeal) Act, 2002. 58 of 2002.

Deduction in 128. (1) An assessee who is resident in India, shall be allowed a

respect of deduction of the amount actually paid during the tax year or a sum of 40
medical
treatment, etc. forty thousand rupees, whichever is less, from income chargeable to tax of that
tax year, for the medical treatment of such disease or ailment as prescribed—
(a) for himself or a dependant, in case the assessee is an individual; or
(b) for any member of a Hindu undivided family, in case the assessee
is a Hindu undivided family. 45

(2) A deduction shall be allowed under this section only if the assessee
obtains the prescription for the medical treatment from a neurologist, oncologist,
urologist, haematologist, immunologist, or any other specialist, as prescribed.
 165

(3) The deduction under this section shall be reduced by any amount received
under an insurance from an insurer, or reimbursed by an employer, for the medical
treatment of the person as referred to in sub-section (1)(a) or (b).
(4) If the amount actually paid is in respect of the assessee or his dependant
5 or any member of a Hindu undivided family of the assessee and who is senior
citizen, the amount of deduction as referred to in sub-section (1) shall be
substituted with one lakh rupees for forty thousand rupees.
(5) In this section,––
(a) “dependant” shall have the meaning as provided in section 127;
10 (b) “insurer” shall have the meaning assigned to it in section 2(9) of the
4 of 1938. Insurance Act, 1938.
129. (1) An assessee, being an individual, shall be allowed a deduction of Deduction in
respect of
amount paid as interest during a tax year, subject to the provisions of this section, interest on loan
on a loan taken by him from any financial institution or any approved charitable taken for higher
15 institution, if the–– education.

(a) loan taken is for the purpose of pursuing higher education of

himself or his relative; and
(b) payment is made out of his income chargeable to tax.
(2) The deduction referred to in sub-section (1) shall be allowed in
20 computing the total income in respect of the initial tax year and seven tax years
immediately succeeding the initial tax year, or until the interest on the loan is fully
paid by the assessee, whichever is earlier.
(3) In this section,—
(a) “approved charitable institution” means a registered non-profit
25 organisation where it was approved earlier under the provisions of
43 of 1961. section 10(23C) of the Income-tax Act, 1961, or an institution referred to in
section 80G(2)(a) of the said Act;
(b) “financial institution” means a banking company to which the
10 of 1949. Banking Regulation Act, 1949 applies (including any bank or banking
30 institution referred to in section 51 of that Act) or any other financial
institution which the Central Government may, by notification, specify;
(c) “higher education” means any course of study pursued after
passing the Senior Secondary Examination or its equivalent from a school,
board, or University recognised by the Central Government or State
35 Government, local authority, or by any authority authorised by the Central
Government or State Government or local authority to do so;
(d) “initial tax year” means the tax year in which the assessee starts
paying the interest on the loan; and
(e) “relative”, in relation to an individual, means the spouse and
40 children of that individual, or the student for whom the individual is the legal
guardian.
130. (1) An assessee, being an individual, shall be allowed a deduction of Deduction in
interest payable on loan taken by him from any financial institution for the respect of
interest on loan
purpose of acquisition of a residential house property as per the provisions of taken for
45 this section. residential house
property.
(2) The deduction under sub-section (1) shall not exceed fifty thousand
rupees and shall be allowed in computing the total income of the individual for
the tax year beginning on the 1st April, 2016 and subsequent tax years.
 166

(3) The deduction under sub-section (1) shall be subject to the following
conditions:—
(a) the loan has been sanctioned by the financial institution during the
period beginning on the 1st April, 2016 and ending on the 31st March, 2017;
(b) the amount of loan sanctioned for acquisition of the residential 5
house property does not exceed thirty-five lakh rupees;
(c) the value of residential house property does not exceed fifty lakh
rupees; and
(d) the assessee does not own any residential house property on the
date of sanction of loan. 10

(4) Where a deduction under this section is allowed for any interest referred
to in sub-section (1), deduction shall not be allowed in respect of such interest
under any other provision of this Act for the same or any other tax year.
(5) In this section,—
(a) “financial institution” means a banking company to which the 15
Banking Regulation Act, 1949 applies, or any bank or banking institution 10 of 1949.
referred to in section 51 of that Act or a housing finance company; and
(b) “housing finance company” means a public company formed or
registered in India with the main object of carrying on the business of
providing long-term finance for construction or purchase of houses in India 20
for residential purposes.
Deduction in 131. (1) An assessee, being an individual not eligible to claim deduction
respect of under section 130, shall be allowed a deduction on interest payable on loan taken
interest on loan
taken for certain by him from any financial institution for the purpose of acquisition of a residential
house property. house property, subject to a maximum limit of one lakh and fifty thousand rupees 25
in a tax year and on fulfilment of conditions specified in sub-section (2), for the
tax year beginning on the 1st April, 2019 and subsequent tax years.
(2) The deduction under sub-section (1) shall be subject to the following
conditions:—
(a) the loan has been sanctioned by the financial institution during 30
the period beginning on the 1st April, 2019 and ending with the
31st March, 2022;
(b) the stamp duty value of residential house property does not exceed
forty-five lakh rupees; and
(c) the assessee does not own any residential house property on the 35
date of sanction of loan.
(3) Where a deduction under this section is allowed for any interest referred
to in sub-section (1), deduction shall not be allowed in respect of such interest
under any other provision of this Act for the same or any other tax year.
(4) In this section, “financial institution” shall have the meaning assigned to 40
it in section 130(5)(a).
Deduction in 132. (1) An assessee, being an individual, shall be allowed a deduction of
respect of interest payable on loan taken by him from any financial institution for the
purchase of
electric vehicle.
purpose of purchase of an electric vehicle, as per the provisions of this section.
(2) The deduction under sub-section (1) shall be subject to the condition that 45
the loan has been sanctioned by the financial institution during the period
beginning on the 1st April, 2019 and ending with the 31st March, 2023.
 167

(3) The deduction under sub-section (1) shall not exceed one lakh fifty
thousand rupees and shall be allowed in computing the total income of the
individual for the tax year beginning on the 1st April, 2019 and subsequent tax
years.
5 (4) Where a deduction under this section is allowed for any interest referred
to in sub-section (1), deduction shall not be allowed in respect of such interest
under any other provision of this Act for the same or any other tax year.
(5) In this section,—
(a) “electric vehicle” means a vehicle powered exclusively by an
10 electric motor, whose traction energy is supplied exclusively by traction
battery installed in the vehicle and has such electric regenerative braking
system, which during braking provides for the conversion of vehicle kinetic
energy into electrical energy; and
(b) “financial institution” means a banking company to which the
10 of 1949. 15 Banking Regulation Act, 1949 applies, or any bank or banking institution
referred to in section 51 of that Act and includes a non-banking financial
company.
133. (1) In computing the total income of an assessee, there shall be Deduction in
deducted, as per and subject to the provisions of this section,— respect of
donations to
20 (a) the whole of the aggregate of the sum or the sums paid by the certain funds,
charitable
assessee, in the tax year as donations to–– institutions, etc.
(i) the National Defence Fund set up by the Central
Government; or
(ii) the Prime Minister’s National Relief Fund or the Prime
25 Minister’s Citizen Assistance and Relief in Emergency Situations
Fund (PM CARES FUND); or
(iii) the Prime Minister’s Armenia Earthquake Relief Fund; or
(iv) the Africa (Public Contributions-India) Fund; or
(v) the National Children’s Fund; or
30 (vi) the National Foundation for Communal Harmony; or
(vii) a University or any educational institution of national
eminence as may be approved by the prescribed authority in this
behalf; or
(viii) any fund set up by the State Government of Gujarat
35 exclusively for providing relief to the victims of earthquake in
Gujarat; or
(ix) any Zila Saksharta Samiti constituted in any district under
the chairmanship of the Collector of that district for improving
primary education in villages and towns (having a population up to
40 one lakh) according to the last published census of which figures are
available before the first day of the relevant tax year), in such district
and for literacy and post-literacy activities; or
(x) the National Blood Transfusion Council or any State Blood
Transfusion Council, which has its sole object the control, supervision,
45 regulation or encouragement in India of the services related to
operation and requirements of blood banks; or
(xi) any fund set up by a State Government to provide medical
relief to the poor; or
 168

(xii) the Army Central Welfare Fund or the Indian Naval

Benevolent Fund or the Air Force Central Welfare Fund established
by the armed forces of the Union for the welfare of the past and present
members of such forces or their dependants; or
(xiii) the Andhra Pradesh Chief Minister’s Cyclone Relief 5
Fund, 1996; or
(xiv) the National Illness Assistance Fund; or
(xv) the Chief Minister’s Relief Fund or the Lieutenant
Governor’s Relief Fund, if the fund meets all the following
conditions:–– 10

(A) it is the only fund of its kind established in the State or

the Union territory;
(B) it is under the overall control of the Chief Secretary or
the Department of Finance of the respective State or the Union
territory; 15

(C) it is administered in a manner specified by the State

Government or the Lieutenant Governor; or
(xvi) the National Sports Development Fund to be set up by the
Central Government; or
(xvii) the National Cultural Fund set up by the Central 20
Government; or
(xviii) the Fund for Technology Development and Application
set up by the Central Government; or
(xix) the National Trust for Welfare of Persons with Autism,
Cerebral Palsy, Mental Retardation and Multiple Disabilities 25
constituted under section 3(1) of the National Trust for Welfare of
Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple
44 of 1999.
Disabilities Act, 1999; or
(xx) the Swachh Bharat Kosh, set up by the Central Government,
other than the sum spent by the assessee in pursuance of Corporate 30
Social Responsibility under section 135(5) of the Companies
18 of 2013.
Act, 2013; or
(xxi) the Clean Ganga Fund, set up by the Central Government,
where such assessee is a resident and such sum is other than the sum
spent by the assessee in pursuance of Corporate Social Responsibility 35
under section 135(5) of the Companies Act, 2013; or 18 of 2013.

(xxii) the National Fund for Control of Drug Abuse constituted

under section 7A of the Narcotic Drugs and Psychotropic Substances
Act, 1985; or 61 of 1985.

(xxiii) the Government or to any such local authority, institution 40

or association as may be approved in this behalf by the Central
Government, to be utilised for the purpose of promoting
family planning; or
(xxiv) the Indian Olympic Association or any other association
or institution established in India, as the Central Government may, 45
having regard to the prescribed guidelines, by notification specify in
this behalf for—
(A) the development of infrastructure for sports and games
in India; or
 169

(B) the sponsorship of sports and games in India,

and where the assessee is a company;
(b) an amount equal to 50% of the aggregate of the sums paid as
donation by an assessee during the tax year to––
5 (i) the Prime Minister’s Drought Relief Fund;
(ii) any fund or any institution to which this section applies, if:—
(A) it is established in India for a charitable purpose; and
(B) it is a registered non-profit organisation or an
institution or fund mentioned in Schedule VII (Table: Sl. No. 1)
10 and approved under section 354;
(iii) the Government or any local authority, to be utilised for any
charitable purpose other than the purpose of promoting family
planning;
(iv) an authority constituted in India by or under any law enacted
15 either for the purpose of dealing with and satisfying the need for
housing accommodation or for the purpose of planning, development
or improvement of cities, towns and villages, or for both;
(v) a corporation established by the Central Government or any
State Government for promoting the interests of the members of a
20 minority community;
(vi) for the purposes of sub-clause (v), “minority community”
means a community notified as such by the Central Government;
(vii) any entity, for the renovation or repair of any temple,
mosque, gurudwara, church or other place which is notified by the
25 Central Government to be of historic, archaeological or artistic
importance or to be a place of public worship of renown throughout
any State or States.
(2) Where the aggregate of the sums referred to in sub-section (1)(a)(xxiii)
and (xxiv), sub-section (1)(b)(ii) to (v) and (vii) exceeds 10% of the adjusted gross
30 total income, then the amount in excess of 10% of the gross total income shall be
ignored for the purpose of computing the aggregate of the sums in respect of
which deduction is to be allowed under sub-section (1).
(3) Where deduction under this section is claimed and allowed for any tax
year in respect of any sum specified in sub-section (1), the sum in respect of which
35 deduction is so allowed shall not qualify for deduction under any other provision
of this Act for the same or any other tax year.
(4) The deduction under this section shall be allowed only for donation made
as a sum of money.
(5) Any deduction for a donation over two thousand rupees shall be allowed
40 only if the payment is made by a mode other than cash.
(6) Any claim of deduction by the assessee in his return of income filed for
any tax year in case of a donation made to an institution or fund referred in
sub-section (1)(b)(ii), shall be allowed only on the basis of––
 170

(a) the information relating to such donation furnished by such

institution or fund to the prescribed authority or person authorised by such
authority; and
(b) subject to verification as per the risk management strategy formulated
by the Board from time to time. 5

(7) For the purposes of this section,––

(a) “adjusted gross total income” means gross total income as reduced
by any portion thereof on which income-tax is not payable under any
provision of this Act and by any amount in respect of which the assessee is
entitled to a deduction under any other provision of this Chapter; 10

(b) “charitable purpose” does not include any purpose the whole or
substantially the whole of which is of a religious nature;
(c) “National Blood Transfusion Council” means a society registered
under the Societies Registration Act, 1860 and has an officer of the rank of 21 of 1860.
an Additional Secretary to the Government of India or higher to deal with 15
the AIDS Control Project as its Chairman;
(d) “State Blood Transfusion Council” means a society registered, in
consultation with the National Blood Transfusion Council, under the
Societies Registration Act, 1860 or under any law corresponding to that Act 21 of 1860.
in force in any part of India and has a Secretary to the Government of that 20
State dealing with the Department of Health, as its Chairman; and
(e) an association or institution having as its object the control,
supervision, regulation or encouragement in India of such games or sports
as notified by the Central Government, shall be considered to be an
institution established in India for a charitable purpose. 25

Deductions in 134. (1) In computing the total income of an assessee, subject to other
respect of rents
paid.
provisions of this section, there shall be deducted any expenditure incurred by him
towards payment of rent (by whatever name called) in respect of any furnished or
unfurnished accommodation occupied by him for the purposes of his own
residence. 30

(2) The deduction under sub-section (1) shall be allowable on such rent
exceeding 10% of his total income, subject to a maximum of five thousand rupees
per month, or 25% of total income for tax year, whichever is less.
(3) For the purposes of deduction under sub-section (1), such other
conditions or limitations having regard to the area or place in which such 35
accommodation is situated and other relevant consideration, as prescribed, shall
be taken into account.
(4) No deduction under this section shall be allowed to an assessee in any
case, where—
(a) any residential accommodation is— 40
(i) owned by the assessee or by his spouse or minor child or,
where such assessee is a member of a Hindu undivided family, by such
family at the place where he ordinarily resides or performs duties of
his office or employment or carries on his business or profession; or
(ii) owned by the assessee at any other place, being 45
accommodation in the occupation of the assessee, the value of which
is to be determined under section 21(6) or (7)(a); or
(b) the assessee has any income falling in Schedule III (Table:
Sl. No. 11).
 171

(5) For the purposes of this section, the expressions “10% of his total
income” and “25% of his total income” shall mean 10% or 25%, as the case may
be, of the total income of the assessee before allowing deduction for any
expenditure under this section.
5 135. (1) In computing the total income of an assessee, there shall be Deduction in
respect of
deducted, as per the provisions of this section, any sum paid by the assessee in the certain
tax year to,–– donations for
scientific
(a) a research association which has as its object the undertaking of research or rural
scientific research, or to a University, college or other institution approved development.
10 for the purposes of section 45(3)(a)(i) to be used for scientific research;
(b) a research association which has as its object the undertaking of
research in social science or statistical research, or to a University, college
or other institution approved for the purposes of section 45(3)(a)(ii) to be
used for research in social science or statistical research;
15 (2) Deduction for contributions made as per sub-section (1) shall not be
allowed, if—
(a) the gross total income of the assessee includes income which is
chargeable under the head “Profits and gains of business or profession”; or
(b) the contribution is made in cash exceeding two thousand rupees.
20 (3) Deduction under sub-section (1)(a) and (1)(b) shall not be denied merely
on the ground that subsequent to the payment of such sum by the assessee,
approval to such association, University, college, other institution referred there
in to whom the payment was made has been withdrawn.
(4) The claim of the assessee for a deduction in respect of any sum referred
25 to in sub-section (1) in the return of income for any tax year filed by him, shall be
allowed on the basis of information relating to such sum furnished by the payee
to the prescribed income-tax authority or the person authorised by such authority,
subject to verification as per the risk management strategy formulated by the
Board from time to time.
30 136. (1) An assessee, being an Indian company, shall be allowed a deduction Deduction in
respect of
for the amount contributed by it, other than by way of cash, during a tax year to a contributions
political party registered under section 29A of the Representation of the People given by
43 of 1951. Act, 1951 or an electoral trust. companies to
political parties.
(2) In this section, the word “contribute”, with its grammatical variations
35 and cognate expressions shall have the same meaning as assigned to it in
18 of 2013. section 182 of the Companies Act, 2013.
137. An assessee, (other than a local authority and an artificial juridical Deduction in
respect of
person wholly or partly funded by the Government), shall be allowed a deduction contributions
for the amount contributed by him, other than by way of cash, during a tax year given by any
40 to a political party registered under section 29A of the Representation of the person to
43 of 1951. People Act, 1951, or an electoral trust. political parties.

C.—Deductions in respect of certain incomes.

138. In respect of any tax year beginning on or after the 1st April, 2026, Deductions in
where–– respect of
profits and
45 (a) the gross total income of an assessee includes any profits and gains gains from
industrial
derived by an undertaking or an enterprise from any business referred to in undertakings or
43 of 1961. section 80-IA of the Income-tax Act, 1961; and enterprises
engaged in
infrastructure
development,
etc.
 172

(b) such assessee is eligible to claim a deduction from the profits and
gains derived from such business for such tax year under the provisions of
the said section, if the said Act had not been repealed,
there shall be allowed, in computing the total income of the assessee, a deduction
from the profits and gains derived from such business, subject to the 5
conditions that—
(i) the amount of deduction is calculated as per the provisions of
section 80-IA of the Income-tax Act,1961; and 43 of 1961.

(ii) the deduction under this Act shall be allowed only for such tax
years, as would have been allowed under section 80-IA of the Income-tax 10
Act,1961, as if the said Act had not been repealed. 43 of 1961.

Deductions in 139. In respect of any tax year, where––

respect of
profits and gains (a) the gross total income of an assessee, being a Developer, includes
by an
undertaking or any profits and gains derived by an undertaking or an enterprise from any
enterprise business of developing a Special Economic Zone, notified on or after the 15
engaged in 1st April, 2005 under the Special Economic Zones Act, 2005 referred to in 28 of 2005.
development of
Special section 80-IAB of the Income-tax Act, 1961; and 43 of 1961.
Economic Zone.
(b) such assessee is eligible to claim a deduction from the profits and
gains derived from such business for such tax year under the provisions of
the said section, if the said Act had not been repealed, 20

there shall be allowed, in computing the total income of the assessee, a deduction
from the profits and gains derived from such business, subject to the
conditions that—
(i) the amount of deduction is calculated as per the provisions of
section 80-IAB of the Income-tax Act, 1961; and 25 43 of 1961.

(ii) the deduction under this Act shall be allowed only for such tax
years, as would have been allowed under section 80-IAB of the Income-tax
Act, 1961, if the said Act had not been repealed. 43 of 1961.

Special 140. (1) Where the gross total income of an assessee, being an eligible
provision in start-up, includes any profits and gains derived from eligible business, there shall, 30
respect of
specified as per and subject to the provisions of this section, be allowed, in computing the
business. total income of the assessee, a deduction of an amount equal to 100% of the profits
and gains derived from such business for three consecutive tax years.
(2) The deduction specified in sub-section (1) may, at the option of the
assessee, be claimed by him for any three consecutive tax years out of ten years 35
beginning from the year in which the eligible start-up is incorporated.
(3) This section applies to a start-up which fulfils the following
conditions:—
(a) it is not formed by splitting up, or the reconstruction, of a business
already in existence; 40

(b) it is not formed by the transfer to a new business of machinery or

plant previously used for any purpose.
(4) Where the business of any undertaking carried on in India is discontinued
in any tax year by reason of extensive damage to, or destruction of, any building,
machinery, plant or furniture owned by the assessee and used for the purposes of 45
such business as a direct result of—
 173

(a) flood, typhoon, hurricane, cyclone, earthquake or other convulsion

of nature; or
(b) riot or civil disturbance; or

(c) accidental fire or explosion; or

5 (d) action by an enemy or action taken in combating an enemy

(whether with or without a declaration of war),
and thereafter, at any time before the expiry of three years from the end of such
tax year, the business of such undertaking is re-established, re-constructed or
revived by the assessee, the condition referred to in sub-section (3)(a) shall not
10 apply to such undertaking which is so re-established, reconstructed or revived.
(5) For the purposes of sub-section (3)(b), any machinery or plant which
was used outside India by any person other than the assessee shall not be regarded
as machinery or plant previously used for any purpose, if all the following
conditions are fulfilled:—

15 (a) such machinery or plant was not, at any time previous to the date
of the installation by the assessee, used in India;
(b) such machinery or plant is imported into India; and
(c) no deduction on account of depreciation in respect of such
machinery or plant has been allowed or is allowable under the provisions of
20 this Act in computing the total income of any person for any period before
to the date of the installation of the machinery or plant by the assessee.

(6) Where in the case of a start-up, any machinery or plant or any part thereof
previously used for any purpose is transferred to a new business and the total value
of the machinery or plant or part so transferred does not exceed 20% of the total
25 value of the machinery or plant used in the business, then, for the purposes of
sub-section (3)(b), the condition specified therein shall be considered to have been
complied with.
(7) Irrespective of anything contained in any other provision of this Act, the
profits and gains of an eligible business to which the provisions of sub-section (1)
30 apply shall, for the purposes of determining the quantum of deduction under that
sub-section for the tax year immediately succeeding the initial tax year or any
subsequent tax year, be computed as if such eligible business were the only source
of income of the assessee during the initial tax year and to every subsequent tax
year up to and including the tax year for which the determination is to be made.
35 (8) The deduction under sub-section (1) from profits and gains derived from
an eligible business shall not be admissible unless the accounts of the eligible
business for the tax year for which the deduction is claimed have been audited by
an accountant, before the specified date referred to in section 63 and the assessee
furnishes by that date the report of such audit in the prescribed form duly signed
40 and verified by such accountant.

(9) In a case where,—

(i) any goods or services held for the purposes of the eligible business
are transferred to any other business carried on by the assessee; or
(ii) where any goods or services held for the purposes of any other
45 business carried on by the assessee are transferred to the eligible business,
 174

and, in either case, the consideration, if any, for such transfer as recorded in the
accounts of the eligible business does not correspond to the market value of such
goods or services as on the date of the transfer, then, for the purposes of the
deduction under this section, the profits and gains of such eligible business shall
be computed as if the transfer, in either case, had been made at the market value 5
of such goods or services as on that date.
(10) For the purposes of sub-section (9), where, in the opinion of the
Assessing Officer, the computation of the profits and gains of the eligible business
in the manner hereinbefore specified presents exceptional difficulties, the
Assessing Officer may compute such profits and gains on such reasonable basis 10
as he may deem fit.
(11) For the purposes of sub-section (9), “market value”, in relation to any
goods or services, means—
(i) the price that such goods or services would ordinarily fetch in the
open market; or 15

(ii) the arm's length price as defined in section 173(a), where the
transfer of such goods or services is a specified domestic transaction referred
to in section 164.
(12) Where any amount of profits and gains of an undertaking or of an
enterprise in the case of an assessee is claimed and allowed under this section for 20
any tax year, deduction to the extent of such profits and gains shall not be allowed
under any other provisions of Part C of this Chapter and shall in no case exceed
the profits and gains of such eligible business of undertaking or enterprise, as the
case may be.
(13) Where it appears to the Assessing Officer that,–– 25

(i) owing to the close connection between the assessee carrying on the
eligible business to which this section applies and any other person; or
(ii) for any other reason,
the course of business between them is so arranged that the business transacted
between them produces to the assessee more than the ordinary profits which might 30
be expected to arise in such eligible business, the Assessing Officer shall, in
computing the profits and gains of such eligible business for the purposes of the
deduction under this section, take the amount of profits as may be reasonably
considered to have been derived therefrom.
(14) Where the arrangement as mentioned in sub-section (13) involves a 35
specified domestic transaction referred to in section 164, the amount of profits
from such transaction shall be determined having regard to arm's length price as
defined in section173(a).
(15) The Central Government may, after making such inquiry as it may think
fit, direct, by notification, that the exemption conferred by this section shall not 40
apply to any class of industrial undertaking or enterprise with effect from such
date as it may specify in the notification.
(16) In this section,––
(a) “eligible business” means a business carried out by an eligible
start-up engaged in innovation, development or improvement of products or 45
processes or services or a scalable business model with a high potential of
employment generation or wealth creation;
 175

(b) “eligible start-up” means a company or a limited liability

partnership engaged in eligible business which fulfils the following
conditions:—
(i) it is incorporated on or after the 1st April, 2016 but before the
5 1st April, 2030;
(ii) the total turnover of its business does not exceed one hundred
crore rupees in the tax year relevant to the tax year for which deduction
under sub-section (1) is claimed; and
(iii) it holds a certificate of eligible business from the Inter-
10 Ministerial Board of Certification as notified by the Central
Government; and
(c) “limited liability partnership” means a partnership referred to in
6 of 2009. section 2(1)(n) of the Limited Liability Partnership Act, 2008.
Deduction in
141. In respect of any tax year, where–– respect of
profits and gains
15 (a) the gross total income of an assessee, includes any profits and gains from certain
derived from any business referred to in section 80-IB of the Income-tax industrial
43 of 1961. Act, 1961; and undertakings.

(b) such assessee is eligible to claim a deduction from the profits and
gains derived from such business for such tax year under the provisions of
20 the said section, if the said Act had not been repealed,
there shall be allowed, in computing the total income of the assessee, a deduction
from the profits and gains derived from such business, subject to the
conditions that—
(i) the amount of deduction is calculated as per the provisions of
43 of 1961. 25 section 80-IB of the Income-tax Act, 1961; and
(ii) the deduction under this Act shall be allowed only for such tax
years, as would have been allowed under section 80-IB of the Income-tax
43 of 1961. Act, 1961, if the said Act had not been repealed.
Deductions in
142. In respect of any tax year, where–– respect of
30 profits and gains
(a) the gross total income of an assessee, includes any profits and gains from housing
derived from the business of developing and building housing projects or projects
rental housing projects referred to in section 80-IBA of the Income-tax
43 of 1961. Act,1961; and
(b) such assessee is eligible to claim a deduction from the profits and
35 gains derived from such business for such tax year under the provisions of
the said section, if the said Act had not been repealed,
there shall be allowed, in computing the total income of the assessee, a deduction
from the profits and gains derived from such business, subject to the conditions
that—
40 (i) the amount of deduction is calculated as per the provisions of
43 of 1961. section 80-IBA of the Income-tax Act, 1961; and
(ii) the deduction under this Act shall be allowed only for such tax
years, as would have been allowed under section 80-IBA of the Income-tax
43 of 1961. Act, 1961, if the said Act had not been repealed.
 176

Special 143. (1) Where the gross total income of an assessee includes any profits and gains
provisions in derived by an undertaking, to which this section applies, from any business referred to
respect of certain
undertakings in in sub-section (2), there shall be allowed, in computing the total income of the assessee,
North-Eastern a deduction of an amount equal to 100% of the profits and gains derived from such
States. business for ten consecutive tax years commencing with the initial tax year. 5

(2) This section applies to any undertaking which has, during the period
beginning on the 1st April, 2007 and ending with the 1st April, 2017, begun or
begins, in any of the North-Eastern States,—
(a) to manufacture or produce any eligible article or thing;
(b) to undertake substantial expansion to manufacture or produce any 10
eligible article or thing; and
(c) to carry on any eligible business.
(3) This section applies to any undertaking which fulfils all the following
conditions:—
(a) it is not formed by splitting up, or the reconstruction, of a business 15
already in existence;
(b) it is not formed by the transfer to a new business of machinery or
plant previously used for any purpose;
(c) condition referred to in clause (a) shall not apply in respect of an
undertaking which is formed as a result of the re-establishment, reconstruction 20
or revival by the assessee of the business of any such undertaking as is referred
to in section 140(4),in the circumstances and within the period specified therein.
(4) For the purposes of sub-section (3)(b), the provisions of section 140(5) and
(6) shall apply.
(5) Irrespective of anything contained in any other provision of this Act, in 25
computing the total income of the assessee, no deduction shall be allowed under any
other section contained in this Chapter in relation to the profits and gains of the
undertaking.
(6) Irrespective of anything contained in this Act, no deduction shall be
allowed to any undertaking under this section, where the total period of deduction 30
inclusive of the period of deduction under this section or under second proviso to
section 80-IB(4) of the Income-tax Act, 1961 exceeds ten tax years. 43 of 1961.

(7) The provisions contained in section 140(7) to (15) shall, so far as may be,
apply to the eligible undertaking under this section.
(8) In this section,— 35

(a) “eligible article or thing” means the article or thing other than the
following:—
(i) goods falling under Chapter 24 of the First Schedule to the
Central Excise Tariff Act, 1985, which pertains to tobacco and 5 of 1986.
manufactured tobacco substitutes; 40

(ii) pan masala as covered under Chapter 21 of the First Schedule

to the Central Excise Tariff Act, 1985; 5 of 1986.

(iii) plastic carry bags of less than twenty microns as specified by

the Ministry of Environment and Forests vide notification numbers
S.O. 705(E), dated the 2nd September, 1999 and S.O. 698(E), dated the 45
17th June, 2003; and
 177

(iv) goods falling under Chapter 27 of the First Schedule to the

5 of 1986. Central Excise Tariff Act, 1985, produced by petroleum oil or gas
refineries;

(b) “eligible business” means the business of—

5 (i) hotel (not below two star category);

(ii) adventure and leisure sports including ropeways;
(iii) providing medical and health services in the nature of nursing
home with a minimum capacity of twenty-five beds;

(iv) running an old-age home;

10 (v) operating vocational training institute for hotel management,
catering and food craft, entrepreneurship development, nursing and
para-medical, civil aviation related training, fashion designing and
industrial training;

(vi) running information technology related training centre;

15 (vii) manufacturing of information technology hardware; and

(viii) bio-technolog;
(c) “initial tax year” means the tax year in which the undertaking begins
to manufacture or produce articles or things, or completes substantial
expansion;

20 (d) “North-Eastern States” means the States of Arunachal Pradesh,

Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura;

(e) “substantial expansion” means increase in the investment in the plant

and machinery by at least 25% of the book value of plant and machinery
(before taking depreciation in any year), as on the first day of the tax year in
25 which the substantial expansion is undertaken.
Special
144. In respect of any tax year , where–– provisions in
respect of newly
(a) in computing the total income of an assessee, being an entrepreneur established Units
28 of 2005. as referred to in section 2(j) of the Special Economic Zones Act, 2005, who in Special
Economic
begins to manufacture or produce articles or things or provide any services Zones.
43 of 1961. 30 referred to in section 10AA of the Income-tax Act, 1961; and
(b) such assessee is eligible to claim a deduction from the profits and
gains derived from the export, of such articles or things or from services for
such tax year under the provisions of the said section, if the said Act had not
been repealed,

35 there shall be allowed, in computing the total income of the assessee, a

deduction from the profits and gains derived from such business, subject to
the conditions that—
(i) the amount of deduction is calculated as per the provisions of
43 of 1961. section 10AA of the Income-tax Act, 1961; and

40 (ii) the deduction under this Act shall be allowed only for such tax years,
43 of 1961. as would have been allowed under section 10AA of the Income-tax Act, 1961,
if the said Act had not been repealed.
 178

Duction for 145. (1) If the gross total income of an assessee includes any profits and gains
businesses
engaged in
derived from the business of collecting and processing or treating of bio-degradable
collecting and waste for,—
processing of
bio-degradable (a) generating power; or
waste.
(b) producing bio-fertilizers, bio-pesticides or biological agents; or 5

(c) producing bio-gas; or

(d) making pellets or briquettes for fuel or organic manure,
there shall be allowed a deduction equal to the whole amount of such profits
and gains for five consecutive tax years, beginning with the tax year in which
such business commences. 10

Deduction in 146. (1) Subject to the conditions specified in sub-sections (2) and (3), if the
respect of gross total income of an assessee, to whom section 63 applies, includes any profits
additional
employee cost. and gains from business, a deduction of an amount equal to 30% of additional
employee cost incurred in the course of such business in the tax year shall be allowed.
(2) The deduction referred to in sub-section (1) shall be allowed for three 15
consecutive tax years, beginning from the tax year in which the employment is provided.
(3) The deduction under sub-section (1) shall not be allowed, if––
(a) the business is formed by splitting up, or the reconstruction, of an
existing business; or
(b) the business is acquired by the assessee through transfer from any 20
other person or as a result of any business reorganisation;
(c) the assessee does not furnish the report of an accountant, before the
specified date as referred to in section 63, giving the particulars in the report,
as prescribed.
(4) The condition referred to in sub-section (3)(a) shall not apply in respect of an 25
undertaking which is formed as a result of the re-establishment, reconstruction or revival
by the assessee of the business of any such undertaking as is referred to in section 140(4)
in the circumstances and within the period specified in that sub-section.
(5) In this section,—
(a) “additional employee cost” means— 30

(i) the total emoluments paid or payable to additional employees

employed during the tax year; or
(ii) emoluments paid or payable to employees employed during the
tax year, where that year is the first year of a new business,
and it shall be nil in the case of an existing business, if— 35

(A) there is no increase in the number of employees from the total

number employed as on the last day of the preceding tax year; or
(B) emoluments are paid otherwise than by an account payee cheque or
account payee bank draft or by use of electronic clearing system through a
bank account or through such other electronic mode, as prescribed; 40

(b) “additional employee” means an employee who has been employed

during the tax year and whose employment increases the total number of
employees employed by the employer as on the last day of the preceding tax
year, but does not include any employee—
(i) whose total emoluments exceed twenty-five thousand rupees 45
per month;
 179

(ii) for whom the Government pays the entire contribution under
the Employees’ Pension Scheme notified as per the provisions of the
Employees, Provident Funds and Miscellaneous Provisions Act,1952; 19 of 1952.

(iii) employed for less than one hundred and fifty days in case of
5 an assessee who is engaged in the business of manufacturing of apparel
or footwear or leather products, except where such employee is
employed for said number of days in the immediately succeeding tax
year, he shall be deemed as an additional employee of the succeeding
tax year and the provisions of this section shall apply accordingly;
10 (iv) employed for less than two hundred and forty days during the
tax year in case of any other assessee, except where such employee is
employed for said number of days in the immediately succeeding tax
year, he shall be deemed as an additional employee of the succeeding
tax year and the provisions of this section shall apply accordingly; and
15 (v) who does not participate in a recognised provident fund;
(c) “emoluments” means any sum paid or payable to an employee in lieu
of his employment, by whatever name called, but does not include––
(i) employer contributions to any pension or provident fund or any
other fund for the benefit of the employee as mandated by any law; and
20 (ii) lump sum payments paid or payable to an employee at the time
of termination of his service, superannuation, or voluntary retirement,
such as gratuity, severance pay, leave encashment, voluntary
retrenchment benefits, commutation of pension and the like.
147. (1) Where the following assessee has any income of the nature referred Deductions for
25 to in sub-section (3), there shall be allowed a deduction equal to 100% of such income of
Offshore
income:— Banking Units
and Units of
(a) a scheduled bank, or a bank incorporated under the laws of a country International
outside India, having an Offshore Banking Unit in a Special Economic Zone; Financial
Services Centre.
or
30 (b) a unit of an International Financial Services Centre.
(2) The deduction shall be allowed––
(a) for ten consecutive tax years beginning from the relevant tax year in
the case of an entity mentioned in sub-section (1)(a);
(b) for ten consecutive tax years within fifteen years beginning from the
35 relevant tax year, at the option of an assessee, in the case of an entity
mentioned in sub-section (1)(b).
(3) The income referred to in sub-section (3) shall be the income from—
(a) an Offshore Banking Unit located in a Special Economic Zone; or
(b) the business activities referred to in section 6(1) of the Banking
10 of 1949. 40 Regulation Act, 1949, with undertakings in a Special Economic Zone or
entities that develop, develop and operate, or develop, operate and maintain
Special Economic Zone; or
(c) the approved business activities of any Unit of an International
Financial Services Centre set up in a Special Economic Zone; or
 180

(d) transfer of an asset being, an aircraft or a ship, leased by a unit

referred to in clause (c) if such unit commenced its business operations by
31st March, 2030.
(4) The deduction under this section shall be allowed only if the assessee
submits along with the return of income–– 5

(a) a report in the form as prescribed, from an accountant certifying the

correctness of claim of deduction; and
(b) a copy of the––
(i) permission obtained under section 23(1)(a) of the Banking
Regulation Act, 1949; or 10 10 of 1949.

(ii) permission or registration obtained under the International

Financial Services Centres Authority Act, 2019. 50 of 2019.

(5) In this section,—

(a) “relevant tax year” shall be,—
(i) in case of an entity mentioned in sub-section (1)(a), the tax year 15
in which permission under section 23(1)(a) of the Banking Regulation
Act, 1949, or permission or registration under the Securities and Exchange 10 of 1949.
Board of India Act, 1992 or any other relevant law was obtained; or 15 of 1992.

(ii) in case of an entity mentioned in sub-section (1)(b), the tax year

in which permission under section 23(1)(a) of the Banking Regulation 20
Act, 1949, or permission or registration under the Securities and 10 of 1949.
Exchange Board of India Act, 1992, or permission or registration under 15 of 1992.
the International Financial Services Centre Authority Act, 2019 was 50 of 2019.
obtained;
(b) “Unit” shall have the same meaning as assigned to it in section 2(zc) 25
of the Special Economic Zones Act, 2005; 28 of 2005.

(c) “aircraft” and “ship” shall have the meanings respectively assigned
to them in Schedule VI Note 3.
Deduction in 148. (1) If the gross total income of a domestic company in any tax year
respect of certain includes any income by way of dividends from–– 30
inter-corporate
dividends. (a) any other domestic company; or
(b) a foreign company; or
(c) a business trust,
such domestic company shall, be allowed a deduction of an amount equal to so much
of the income by way of dividends received from the person mentioned in clause 35
(a) or (b) or (c) as does not exceed the amount of dividend distributed by it by the
date one month before the due date for filing the return of income under
section 263(1).
(2) Where any deduction, in respect of the amount of dividend distributed by
the domestic company, has been allowed under sub-section (1) in any tax year, no 40
deduction shall be allowed in respect of such amount in any other tax year.
Deduction in
respect of
149. (1) If the gross total income of an assessee, being a co-operative society,
income of includes any income referred to in sub-section (2), the sums specified in the said
co-operative sub-section shall, in accordance with and subject to the provisions of this section,
societies. be allowed as deduction in computing the total income of such assessee. 45
 181

(2) The sums referred to in sub-section (1) shall be the following:—

(a) in the case of a co-operative society engaged in—
(i) carrying on the business of banking or providing credit facilities
to its members; or

5 (ii) a cottage industry; or

(iii) the marketing of agricultural produce grown by its
members; or
(iv) the purchase of agricultural implements, seeds, livestock or
other articles intended for agriculture for the purpose of supplying them
10 to its members; or
(v) the processing, without the aid of power, of the agricultural
produce of its members; or
(vi) the collective disposal of the labour of its members; or
(vii) fishing or allied activities, that is to say, the catching, curing,
15 processing, preserving, storing or marketing of fish or the purchase of
materials and equipment in connection therewith for the purpose of
supplying them to its members,
the whole of the amount of profits and gains of business attributable to any
one or more of such activities;
20 (b) in the case of a co-operative society, being a primary society engaged
in supplying milk, oilseeds, fruits, or vegetables raised or grown by its
members to––
(i) a federal co-operative society, engaged in the business of
supplying milk, oilseeds, fruits or vegetables; or
25 (ii) the Government or a local authority; or
(iii) a Government company, as defined in section 2(45) of the
18 of 2013. Companies Act, 2013, or a corporation established by or under a Central
Act or State Act or Provincial Act, engaged in supplying milk, oilseeds,
fruits or vegetables, as the case may be, to the public,
30 the whole of the amount of profits and gains of such business;
(c) in the case of a co-operative society engaged in activities not
specified in clause (a) or (b), (either independently of, or in addition to, all or
any of the activities so specified), that amount of profits and gains attributable
to such activities as does not exceed––
35 (i) one lakh rupees, if the society is a consumers’ co-operative
society; and
(ii) fifty thousand rupees, in any other case;
(d) in respect of any income by way of interest or dividends derived by
the co-operative society from its investments with any other co-operative
40 society, the whole of such income;
(e) in respect of any income by derived by the co-operative society from
the letting of godowns or warehouses for storage, processing, or facilitating
the marketing of commodities, the whole of such income;
 182

(f) in the case of a co-operative society, not being––

(i) a housing society; or

(ii) an urban consumers’ society (being a society for the benefit of

the consumers within the limits of a municipal corporation, municipality,
municipal committee, notified area committee, town area, or 5
cantonment); or

(iii) a society carrying on transport business; or

(iv) a society engaged in performing manufacturing operations

with the aid of power,

where the gross total income does not exceed twenty thousand rupees, 10
the amount of income––

(i) by way of interest on securities; or

(ii) any income from house property chargeable under

section 20.

(3) In the case of a co-operative society as referred to in sub-section 15

(2)(a)(vi) or (vii), provisions of sub-section (2) shall apply when the rules and
bye-laws of the society restrict the voting rights to the following classes of
members:—

(i) the individuals who contribute their labour or carry on fishing or

allied activities; or 20

(ii) the co-operative credit societies which provide financial assistance

to the society; or

(iii) the State Government.

(4) The deduction under sub-section (1) in relation to the sums specified in
sub-section (2)(a)or (b) or (c) or sub-section (3), shall be allowed with reference to 25
the income referred to in those sub-sections included in the gross total income after
reducing the deduction under section 80-IA of the Income-tax Act, 1961, if the 43 of 1961.
assessee is also entitled to such deduction.

(5) The provision of this section shall not apply to any co-operative bank
which is not a primary agricultural co-operative society or a primary co-operative 30
agricultural and rural development bank.

(6) In this section,––

(a) “consumers’ co-operative society” means a society for the benefit of

the consumers;

(b) “co-operative bank” and “primary agricultural credit society” have 35

the same meanings as respectively assigned to them in Part V of the Banking
10 of 1949.
Regulation Act, 1949; and

(c) “primary co-operative agricultural and rural development bank”

means a society having an area of operation confined to a taluk, the principal
object of which is to provide long-term credit for agricultural and rural 40
development activities.
 183

150. (1) An assessee, who,–– Deduction in

respect of certain
income of
(a) is a Producer Company; Producer
Companies.
(b) has a total turnover of less than one hundred crore rupees in any
tax year; and

5 (c) has any profits and gains derived from eligible business included in
its gross total income,
shall be allowed a deduction of 100% of the profits and gains attributable to such
business for the tax year commencing on or after the 1st April, 2018, but before the
1st April, 2024.

10 (2) The deduction under this section shall be allowed after the gross total
income of the assessee mentioned in sub-section (1) is reduced by any other
deduction under this Chapter to which such assessee is entitled.
(3) For the purposes of this section,—

(a) “eligible business” means—

15 (i) the marketing of agricultural produce grown by the

members; or
(ii) the purchase of agricultural implements, seeds, livestock or
other articles intended for agriculture for the purpose of supplying them
to the members; or
20 (iii) the processing of the agricultural produce of the members;
(b) “Member” shall have the same meaning as assigned to it in
18 of 3013. section 378A(e) of the Companies Act, 2013;
(c) “Producer Company” shall have the same meaning as assigned to it
18 of 2013. in section 378A(1) of the Companies Act, 3013.
25 151. (1) Where, in the case of an individual resident in India, being an author, Deduction in
the gross total income includes any income, derived by him in the exercise of his respect of
royalty income,
profession, on account of any lump sum consideration for the assignment or grant etc., of authors
of any of his interests in the copyright of any book being a work of literary, artistic of certain books
or scientific nature, or of royalty or copyright fees (whether receivable in lump sum other than text-
books.
30 or otherwise) in respect of such book, there shall, as per and subject to the provisions
of this section, be allowed, in computing the total income of the assessee, a
deduction from such income, computed in the manner specified in sub-section (2).
(2) The deduction under this section shall be equal to the whole of such
income referred to in sub-section (1), or an amount of three lakh rupees,
35 whichever is less.
(3) Where the income by way of such royalty or the copyright fee, is not a
lump sum consideration in lieu of all rights of the assessee in the book, so much of
the income, before allowing expenses attributable to such income, as is in excess of
15% of the value of such books sold during the tax year shall be ignored.
40 (4) In respect of any income earned from any source outside India, so much
of the income shall be taken into account for the purpose of this section as is
brought into India by, or on behalf of, the assessee in convertible foreign
exchange within six months from the end of the tax year in which such income
is earned or within such further period as the competent authority may allow in
this behalf.
 184

(5) Deduction under this section shall not be allowed unless the assessee
furnishes a certificate in such form and manner, as prescribed, duly verified by any
person responsible for making such payment to the assessee as referred to in
sub-section (1), along with the return of income, setting forth such particulars, as
prescribed. 5

(6) Deduction under this section shall not be allowed in respect of any income
earned from any source outside India, unless the assessee furnishes a certificate, in
the prescribed form from the prescribed authority, along with the return of income
in the prescribed manner.
(7) Where a deduction for any tax year has been claimed and allowed in 10
respect of any income referred to in this section, no deduction in respect of such
income shall be allowed under any other provision of this Act in any tax year.
(8) In this section,—
(a) “author” includes a joint author;
(b) “books” shall not include brochures, commentaries, diaries, guides, 15
journals, magazines, newspapers, pamphlets, text-books for schools, tracts and
other publications of similar nature, by whatever name called;
(c) “competent authority” means the Reserve Bank of India or such other
authority as is authorised under any law in force for regulating payments and
dealings in foreign exchange; and 20

(d) “lump sum”, in regard to royalties or copyright fees, includes an advance

payment on account of such royalties or copyright fees which is not returnable.
Deduction in 152. (1) An assessee, being an individual, who is––
respect of
royalty on (a) a resident in India;
patents.
25
(b) a patentee;
(c) in receipt of income by way of royalty in respect of a patent
registered on or after the 1st April, 2003 under the Patents Act, 1970; and. 39 of 1970.

(d) having gross total income for the tax year which includes royalty,
shall be allowed a deduction from such income computed in the manner specified
in sub-sections (2) to (6). 30

(2) The deduction under this section shall be equal to the whole of such income
referred to in sub-section (1) or three lakh rupees, whichever is less.
(3) Where a compulsory licence is granted in respect of any patent under the
Patents Act, 1970, the income by way of royalty for the purpose of allowing 39 of 1970.
deduction under this section shall not exceed the amount of royalty under the terms 35
and conditions of a licence settled by the Controller under that Act.
(4) In respect of any income earned from any source outside India, so much of
the income, shall be taken into account for the purpose of this section as is brought
into India by, or on behalf of, the assessee in convertible foreign exchange within
six months from the end of the tax year in which such income is earned or within 40
such further period as the competent authority referred to in section 151(8)(c) may
allow in this behalf.
(5) No deduction under this section shall be allowed unless the assessee
furnishes a certificate in the prescribed form, duly signed by the authority as
prescribed, along with the return of income setting forth such particulars, as 45
prescribed.
 185

(6) No deduction under this section shall be allowed in respect of any income
earned from any source outside India, unless the assessee furnishes a certificate in
such form, from the authority or authorities, as prescribed, along with the return of
income.
5 (7) In this section,––
(a) “Controller” means the authority as defined in section 2(1)(b) of the
39 of 1970. Patents Act, 1970;
(b) “lump sum” includes a non-refundable advance payment for
royalties;
10 (c) “patent” means any patent granted, including a patent of addition,
39 of 1970. under the Patents Act, 1970;
(d) “patentee” means the true and first inventor recorded as the patentee
39 of 1970. under the Patents Act, 1970, including joint patentees recorded as such true
and first inventors;
15 (e) “patent of addition” shall have the same meaning as assigned to it in
39 of 1970. section 2(1)(q) of the Patents Act, 1970;
(f) “patented article” and “patented process” shall have the same
39 of 1970. meanings as assigned to them in section 2(1)(o) of the Patents Act, 1970;
(g) “royalty” in respect of a patent, means consideration for—
20 (i) the transfer of all or any rights (including the granting of a
licence) in respect of a patent; or
(ii) the imparting of any information concerning the working of, or
the use of, a patent; or
(iii) the use of any patent; or
25 (iv) the rendering of any services in connection with the activities
referred to in sub-clauses (i) to (iii), but does not include any
consideration,––
(A) which would be the income of the recipient chargeable
under the head “Capital gains”; or
30 (B) for sale of product manufactured with the use of patented
process or of the patented article for commercial use; and
(h) “true and first inventor” shall have the same meaning as assigned to
39 of 1970. it in section 2(1)(y) of the Patents Act, 1970.
D.—Deductions in respect of other incomes
35 153. (1) An assessee who is–– Deduction for
interest on
(a) an individual, not being a senior citizen; or deposits.

(b) an individual, being a senior citizen; or

(c) a Hindu undivided family,
shall be allowed a deduction from the gross total income, subject to conditions
40 specified in sub-section (2), where it includes income by way of interest on
deposits with––
10 of 1949. (i) a banking company to which the Banking Regulation Act, 1949,
applies (including any bank or banking institution referred to in
section 51 of that Act); or
 186

(ii) a co-operative society engaged in carrying on the business of

banking (including a co-operative land mortgage bank or a co-operative
land development bank); or
(iii) a Post Office as defined in section 2(k) of the Post Office Act, 2023. 43 of 2023.

(2) The deduction under sub-section (1) shall be allowed for a tax year as follows:— 5

(a) in case of assessee mentioned in sub-section 1(a) or (c), the whole of

the interest up to a maximum amount of ten thousand rupees on deposits in a
savings account, excluding time deposits;
(b) in case of assessee mentioned in sub-section (1)(b), the whole of the
interest up to a maximum amount of fifty thousand rupess on deposits in a 10
savings account, including time deposits.
(3) Where the income referred to in this section is derived from any deposit in
a savings account held by, or on behalf of, a firm, an association of persons or a
body of individuals, no deduction shall be allowed under this section in respect of
such income in computing the total income of any partner of the firm or any member 15
of the association or any individual of the body.
(4) In this section, “time deposits” means the deposits repayable on expiry of
fixed periods.
E.—Other deductions
Deduction in 154. (1) An individual, being resident in India, who is certified by a medical 20
case of a person authority, at any time during the tax year, as a person with disability or person with
with disability.
severe disability, shall be allowed a deduction of seventy-five thousand rupees or
one lakh and twenty-five thousand rupees, respectively, while computing his total
income.
(2) The deduction under sub-section (1) shall be allowed only if all of the 25
following conditions are fulfilled:––
(a) the individual furnishes a copy of the certificate issued by the medical
authority;
(b) if the certificate specifies that the disability needs reassessment of its
extent after a period stipulated in it, the deduction shall not be allowed for any 30
tax year succeeding the tax year in which the certificate expires, unless a new
disability certificate is obtained and submitted; and
(c) the certificate referred to in clauses (a) and (b) of this sub-section shall be
furnished in the form and manner, as prescribed, along with the return of income
]

under section 263 for the tax year in which the deduction is claimed. 35

(3) For the purposes of this section, “disability”, “medical authority”, “person
with disability” or “person with severe disability” shall have the same meanings as
provided in section 127.
CHAPTER IX
REBATES AND RELIEFS 40

A.—Rebates and reliefs

Rebate to be 155. (1) In computing income-tax on the total income of an assessee with which
allowed in
computing
he is chargeable for any tax year, there shall be allowed from income-tax (as computed
income-tax. before allowing the deductions under this Chapter), subject to the provisions of
section 156, the deductions specified therein. 45

(2) The deduction under section 156, shall not, in any case, exceed
income-tax (as computed before allowing the deductions under this Chapter) on the
total income of the assessee with which he is chargeable for any tax year.
 187

156. (1) A resident individual assessee shall be entitled to a deduction of 100% Rebate of
income-tax in
of income-tax payable or twelve thousand five hundred rupees, whichever is less, case of certain
from the income-tax (computed before allowing the deduction under this section) individuals.
chargeable on the total income for any tax year if the total income does not exceed
5 five lakh rupees.
(2) Where the total income of a resident individual assessee for any tax year is
chargeable to tax under section 202(1), then from income-tax (computed before
allowing the deduction under this section) following deductions shall be allowed, if—
(a) the income does not exceed twelve lakh rupees, 100% of the
10 income-tax payable or sixty thousand rupees, whichever is less;
(b) the income exceeds twelve lakh rupees, the income-tax payable on the
total income, reduced by total income which is in excess of twelve lakh rupees.
(3) The deduction under sub-section (2), shall not exceed income-tax payable as
per the rates provided in section 202(1).
15 157. (1) Where the total income of an assessee is assessed at a rate higher than the Relief when
salary, etc., is
rate at which it would otherwise have been assessed, due to the following receipts,— paid in arrears or
in advance.
(a) a sum in the nature of arrear or advance salary; or
(b) salary for more than twelve months in any one tax year; or
(c) a payment in the nature of “profits in lieu of salary” under
20 section 18(1); or
(d) arrears of “family pension” as defined in section 93(1)(d),
the Assessing Officer shall on an application made to him by the assessee in this
behalf, grant such relief, as prescribed.
(2) No relief shall be granted on any income on which deduction has been
25 claimed by the assessee in section 19(1)(Table: Sl. No. 12) for any amount
mentioned therein, for such, or any other, tax year.
158. (1) The income accrued in a specified account, maintained in a notified Relief from
taxation in
country by a specified person, shall be taxed in a tax year, as prescribed. income from
retirement
(2) In this section,— benefit account
maintained in a
30 (a) “notified country” means a country as notified by the Central Government; notified country.
(b) “specified account” means an account maintained in a notified country
by the specified person for his retirement benefits, which is taxed by that notified
country at the time of withdrawal or redemption and, not on accrual basis;
(c) “specified person” means a person resident in India having opened a
35 specified account in a notified country while being non-resident in India and
resident in that country.
B.—Double taxation relief
Agreement with
159. (1) The Central Government may enter into an agreement with the foreign countries
Government of— or specified
territories and
40 (a) any other country;or adoption by
Central
(b) any specified territory, Government of
agreement
for the purposes mentioned in sub-section (3), and may, by notification, make such between
provisions as necessary for implementing the agreement. specified
associations for
double taxation
relief.
 188

(2) Any specified association in India may enter into an agreement with any
specified association in the specified territory for the purposes mentioned in
sub-section (3) and the Central Government may, by notification, make such
provisions as may be necessary for adopting and implementing such agreement.
(3) The agreement mentioned in sub-section (1) or (2) may be entered for— 5

(a) the granting of relief in respect of—

(i) income on which income-tax has been paid both under this Act
and income-tax in that country or specified territory, as the case may
be; or
(ii) income-tax chargeable under this Act and under the 10
corresponding law in force in that country or specified territory, as the
case may be, to promote mutual economic relations, trade and
investment; or
(b) the avoidance of double taxation of income under this Act and under
the corresponding law in force in that country or specified territory, as the case 15
may be, without creating opportunities for non-taxation or reduced taxation
through tax evasion or avoidance (including through treaty-shopping
arrangements aimed at obtaining reliefs provided in the said agreement for the
indirect benefit to residents of any other country or territory);
(c) exchange of information for–– 20

(i) the prevention of evasion or avoidance of income-tax

chargeable under this Act or under the corresponding law in force in that
country or specified territory, as the case may be; or
(ii) investigation of cases of such evasion or avoidance; or
(d) recovery of income-tax under this Act and under the corresponding 25
law in force in that country or specified territory, as the case may be.
(4) Where,––
(a) the Central Government has entered into an agreement with the
Government of any country or specified territory, as the case may be, under
sub-section (1); or 30

(b) a specified association in India has entered into an agreement with a

specified association of any specified territory under sub-section (2) and such
agreement has been notified under that sub-section,
for granting relief of tax, or avoidance of double taxation, then, in relation to the
assessee to whom such agreement applies, the provisions of this Act shall apply to 35
the extent they are more beneficial to that assessee.
(5) The charge of tax,––
(a) in respect of a foreign company at a rate higher than the rate at which
a domestic company is chargeable; or
(b) in respect of a company incorporated in the specified territory at a 40
rate higher than the rate at which a domestic company is chargeable,
shall not be regarded as less favourable charge or levy of tax in respect of such
foreign company or such company incorporated in the specified territory, as the case
may be.
(6) Irrespective of anything contained in sub-section (4), the provisions of 45
Chapter XI shall apply to the assessee, even if such provisions are not beneficial to
him.
 189

(7) Where, any––

(a) term used in an agreement entered into under sub-section (1) or (2),
is defined under the said agreement, the said term shall have the same meaning
as assigned to it in that agreement and where the term is not defined in that
5 agreement, but defined in this Act, it shall have the same meaning as assigned
to it in this Act and the explanation, if any, given to it by the Central
Government, and shall be deemed to have effect from the date on which that
agreement came into force; or

(b) term is used but not defined in this Act or in the agreement referred to in
10 sub-section (1) or (2), it shall, unless the context otherwise requires, and is not
inconsistent with the provisions of this Act or the said agreement, have the same
meaning as assigned to it in the notification issued by the Central Government in
this behalf, and the meaning assigned to such term shall be deemed to have effect
from the date on which that agreement came into force; or

15 (c) term is used in any agreement entered into under sub-section (1) or
(2), and not defined under the said agreement or this Act, or in any notification
issued under clause (b), then, unless the context otherwise requires, it shall
have the same meaning as assigned to it––
(i) in any Act of the Central Government related to taxes; and
20 (ii) in any other case, in any other law of the Central Government,
and shall be deemed to have effect from the date on which the said agreement came
into force.
(8) An assessee, not being a resident, shall be entitled to claim any relief under
an agreement mentioned in sub-section (1) or (2), only when––
25 (a) a certificate of his being a resident in any country or specified
territory, is obtained by him from the Government of that country or
Government of that specified territory, as the case may be, and

(b) he provides such other documents and information, as prescribed.

(9) In this section,––
30 (a) “specified associations” means any institution, association or body,
whether incorporated or not––

(A) functioning under any law for the time being in force in India
or the laws of the specified territory; and
(B) which may be notified as such by the Central Government; and
35 (b) “specified territory” means any area outside India which may be
notified as such by the Central Government.
160. (1) If any person who is resident in India in any tax year proves that, in respect Countries with
of his income which accrued or arose during that tax year outside India (and which is which no
agreement
not deemed to accrue or arise in India), he has paid in any country with which there is exists.
40 no agreement under section 159 for the relief or avoidance of double taxation,
income-tax, by deduction or otherwise, under the law in force in that country, he shall
be entitled to the deduction from the Indian income-tax payable by him of a sum
calculated on such doubly taxed income,––
 190

(a) at the Indian rate of tax or the rate of tax of the said country, whichever
is the lower; or
(b) at the Indian rate of tax, if both the rates are equal.
(2) If any non-resident person is assessed on his share in the income of a
registered firm assessed as resident in India in any tax year and such share includes 5
any income accruing or arising outside India during that tax year (and which is not
deemed to accrue or arise in India) in a country with which there is no agreement
under section 159 for the relief or avoidance of double taxation and he proves that
he has paid income-tax by deduction or otherwise under the law in force in that
country in respect of the income so included he shall be entitled to a deduction from 10
the Indian income-tax payable by him of a sum calculated on such doubly taxed
income so included,––
(a) at the Indian rate of tax or the rate of tax of the said country, whichever
is the lower; or

(b) at the Indian rate of tax, if both the rates are equal. 15

(3) In this section,—

(a) “income-tax” in relation to any country includes any excess profits tax
or business profits tax charged on the profits by the Government of any part of
that country or a local authority in that country;

(b) “Indian income-tax” means income-tax charged as per this Act; 20

(c) “Indian rate of tax” means the rate determined by dividing Indian
income-tax after deduction of any relief due under the provisions of this Act but
before deduction of any relief due under this section, by the total income; and
(d) “rate of tax of the said country” means income-tax and super-tax
actually paid in the said country as per the corresponding laws in force in the 25
said country after deduction of all relief due, but before deduction of any relief
due in the said country in respect of double taxation, divided by the whole
amount of the income as assessed in the said country.
CHAPTER X
SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX 30

Computation of 161. (1) Any income arising from an international transaction or a specified
income from domestic transaction shall be determined having regard to the arm’s length price.
international
transaction and
specified (2) Any allowance for any expense or interest arising from an international
domestic transaction or a specified domestic transaction shall also be determined having regard to
transaction the arm’s length price. 35
having regard to
arm’s length
price.
(3) If in an international transaction or specified domestic transaction, two or more
associated enterprises enter into a mutual agreement or arrangement for––
(a) allocation or apportionment of any cost or expense incurred or to be
incurred in connection with a benefit, service or facility provided or to be provided
40
to any one or more of such enterprises; or
(b) any contribution to any cost or expense incurred or to be incurred in
connection with a benefit, service or facility provided or to be provided to any one
or more of such enterprises,
 191

the cost or expense allocated or apportioned to, or, contributed by, any such
enterprise shall be determined having regard to the arm’s length price of such
benefit, service or facility.
(4) The provisions of this section shall not apply if the determination under
5 sub-section (1) or (2) or (3) has the effect of reducing the income chargeable to tax
or increasing the loss, computed on the basis of entries made in the books of account
in respect of the tax year in which the international transaction or specified domestic
transaction was entered.

162. (1) In this Chapter, “associated enterprise”, in relation to another Meaning of

10 enterprise, means an enterprise— associated
enterprise.
(a) which participates, directly or indirectly, or through one or more
intermediaries, in the management or control or capital of the other
enterprise; or

(b) in respect of which one or more persons who participate, directly or

15 indirectly, or through one or more intermediaries, in its management or control
or capital, are the same persons who participate, directly or indirectly, or
through one or more intermediaries, in the management or control or capital
of the other enterprise.
(2) Without affecting the generality of the provisions of sub-section (1), two
20 enterprises shall be deemed to be associated enterprises if, at any time during the
tax year,—

(a) one enterprise holds, directly or indirectly, shares carrying

at least 26% of the voting power in the other enterprise; or
(b) any person or enterprise holds, directly or indirectly, shares carrying
25 at least 26% of the voting power in each of such enterprises; or
(c) a loan advanced by one enterprise to the other enterprise constitutes
at least 51% of the book value of the total assets of the other enterprise; or
(d) one enterprise guarantees at least 10% of the total borrowings of the
other enterprise; or

30 (e) more than half of the board of directors or members of the governing
board, or one or more executive directors or executive members of the
governing board of one enterprise, are appointed by the other enterprise; or
(f) more than half of the directors or members of the governing board, or
one or more of the executive directors or members of the governing board, of
35 each of the two enterprises are appointed by the same person or persons; or
(g) the manufacture or processing of goods or articles or business carried
out by one enterprise is wholly dependent on the use of know-how, patents,
copyrights, trademarks, licences, franchises or any other business or
commercial rights of similar nature, or any data, documentation, drawing or
40 specification relating to any patent, invention, model, design, secret formula
or process, of which the other enterprise is the owner or in respect of which
the other enterprise has exclusive rights; or

(h) 90% or more of the raw materials and consumables required for the
manufacture or processing of goods or articles carried out by one enterprise,
45 are supplied by the other enterprise, or by persons specified by the other
enterprise, and the prices and other conditions relating to the supply are
influenced by such other enterprise; or
 192

(i) the goods or articles manufactured or processed by one enterprise, are

sold to the other enterprise or to persons specified by the other enterprise, and
the prices and other conditions relating thereto are influenced by such other
enterprise; or
(j) where one enterprise is controlled by an individual, the other 5
enterprise is also controlled by such individual or his relative or jointly by such
individual and relative of such individual; or
(k) where one enterprise is controlled by a Hindu undivided family, the
other enterprise is controlled by a member of such Hindu undivided family or
by a relative of a member of such Hindu undivided family or jointly by such 10
member and his relative; or
(l) where one enterprise is a firm, association of persons or body of
individuals, the other enterprise holds at least 10% interest in such firm,
association of persons or body of individuals; or
(m) there exists between the two enterprises, any relationship of mutual 15
interest, as prescribed.
(3) In relation to a specified domestic transaction entered into by an assessee,
associated enterprise shall also include—

(a) other units or undertakings or businesses of such assessee in respect

of a transaction referred to in section 122 or 140(9); 20

(b) any other person referred to in section 140(13) or 205(4) in respect

of a transaction referred to therein; and
(c) other units, undertakings, enterprises or business of such assessee, or
other person referred to in section 140(13) in respect of a transaction referred
to in section 144 or the transactions referred to in Chapter VIII to which the 25
provisions of section 140(9) or (13) are applicable.

Meaning of 163. (1) In this Chapter, “international transaction” means a transaction

international between two or more associated enterprises, one of which is necessarily a
transaction.
non-resident, and includes—
(a) the purchase, sale, transfer, lease or use of tangible property, 30
including building, transportation vehicle, machinery, equipment, tools, plant,
furniture, commodity or any other article, product or thing;
(b) the purchase, sale, transfer, lease or use of intangible property,
including the transfer of ownership or the provision of use of rights regarding
land use, copyrights, patents, trademarks, licences, franchises, customer list, 35
marketing channel, brand, commercial secret, know-how, industrial property
right, exterior design or practical and new design or any other business or
commercial rights of similar nature;
(c) capital financing, lending and borrowing of money, including,––

(i) any type of long-term or short-term borrowing, lending or 40

guarantee; or
(ii) purchase or sale of marketable securities; or

(iii) any type of advance, payments or deferred payment or

receivable or any other debt arising during the course of business;
 193

(d) provision of services, including provision of market research, market

development, marketing management, administration, technical service,
repairs, design, consultation, agency, scientific research, legal or accounting
service;
5 (e) a transaction of business restructuring or reorganisation, entered into
by an enterprise with an associated enterprise, irrespective of the fact that it
has any bearing on the profit, income, losses or assets of such enterprises at
the time of the transaction or at any future date;
(f) a mutual agreement or arrangement between two or more associated
10 enterprises for the allocation or apportionment of, or any contribution to, any
cost or expense incurred or to be incurred in connection with a benefit,
service or facility provided or to be provided to any one or more of such
enterprises; and
(g) any other transaction having a bearing on the profits, income, losses
15 or assets of such enterprises.
(2) A transaction entered into by an enterprise with a person other than an
associated enterprise (“other person”) shall, for sub-section (1), be deemed to be an
international transaction entered into between two associated enterprises, if—
(a) there exists a prior agreement in relation to the relevant transaction
20 between such other person and the associated enterprise; or
(b) the terms of the relevant transaction are determined, in substance,
between such other person and the associated enterprise,
and the enterprise or the associated enterprise or both of them are non-residents,
irrespective of whether the other person is a non-resident or not.
25 (3) The expression “intangible property” shall include the following,—
(a) marketing related intangible assets, such as, trademarks, trade names,
brand names, logos;
(b) technology related intangible assets, such as, process patents, patent
applications, technical documentation such as laboratory notebooks, technical
30 know-how;
(c) artistic related intangible assets, such as, literary works and
copyrights, musical compositions, copyrights, maps, engravings;
(d) data processing related intangible assets, such as, proprietary
computer software, software copyrights, automated databases, and integrated
35 circuit masks and masters;
(e) engineering related intangible assets, such as, industrial design,
product patents, trade secrets, engineering drawing and schematics, blueprints,
proprietary documentation;
(f) customer related intangible assets, such as, customer lists, customer
40 contracts, customer relationship, open purchase orders;
(g) contract related intangible assets, such as, favourable supplier,
contracts, licence agreements, franchise agreements, non-compete
agreements;
(h) human capital related intangible assets, such as, trained and
45 organised work force, employment agreements, union contracts;
 194

(i) location related intangible assets, such as, leasehold interest, mineral
exploitation rights, easements, air rights, water rights;
(j) goodwill related intangible assets, such as, institutional goodwill,
professional practice goodwill, personal goodwill of professional, celebrity
goodwill, general business going concern value; 5

(k) methods, programmes, systems, procedures, campaigns, surveys,

studies, forecasts, estimates, customer lists or technical data; and
(l) any other similar item that derives its value from its intellectual
content rather than its physical attributes.
Meaning of 164. In this Chapter, “specified domestic transaction” in case of an assessee 10
specified
domestic means any of the following transactions, not being an international transaction—
transaction.
(a) any transaction referred to in section 122;
(b) any transfer of goods or services referred to in section 140(9);
(c) any business transacted between the assessee and other person as
referred to in section 140(13); 15

(d) any transaction, referred to in any other section under Chapter VIII
or section 144, to which provisions of section 140(9) or (13) are applicable;
(e) any business transacted between the persons referred to in
section 205(4);
(f) any other transaction as prescribed, 20

and where the aggregate of such transactions entered into by the assessee in a tax
year exceeds a sum of twenty crore rupees.
Determination of 165. (1) The arm’s length price in relation to an international transaction or
arm's length specified domestic transaction shall be determined by any of the following methods,
price.
being the most appropriate method–– 25

(a) comparable uncontrolled price method;

(b) resale price method;
(c) cost plus method;
(d) profit split method;
(e) transactional net margin method; 30

(f) such other method as prescribed by the Board.

(2) The most appropriate method referred to in sub-section (1) shall be,––
(a) selected having regard to the nature of transaction or class of
transaction or class of associated enterprise or functions performed by such
enterprises or such other relevant factors as the Board may prescribe; 35

(b) applied for determination of arm’s length price in such manner as

prescribed.
(3) The arm’s length price shall be—
(a) in case, only one price is determined by the most appropriate
method,–– 40

(i) the price determined by that method; or

 195

(ii) the price at which the international transaction or specified

domestic transaction has actually been undertaken, if the variation
between the arm’s length price so determined and price at which the
international transaction or specified domestic transaction has actually
5 been undertaken does not exceed such percentage not exceeding 3% of
the latter, notified by the Central Government in this behalf; or
(b) in case, more than one price is determined by the most appropriate
method, the price determined in such manner as prescribed.
(4) The Assessing Officer, during the course of any proceeding for the
10 assessment of income, may proceed to determine the arm’s length price in relation
to an international transaction or specified domestic transaction as per
sub-sections (1), (2) and (3) if, on the basis of material or information or document
in his possession, he is of the opinion that—
(a) the price charged or paid in an international transaction or specified
15 domestic transaction has not been determined as per sub-sections (1), (2) and (3); or
(b) any information and document relating to an international transaction
or specified domestic transaction has not been kept and maintained by the
assessee as per section 168(1); or
(c) the information or data used in determination of the arm’s length
20 price by the assessee is not reliable or correct; or
(d) the assessee has failed to furnish, within the specified time, any
information or document which he was required to furnish by a notice issued
under section 171(2).
(5) The Assessing Officer, before determining the arm’s length price under
25 sub-section (4), shall give a notice calling upon the assessee to show cause, on the
date and time to be specified in the notice, why the arm’s length price should not be
determined on the basis of material or information or document in his possession.
(6) The Assessing Officer, on determination of arm’s length price under
sub-section (4), may compute the total income of the assessee having regard to the
30 arm’s length price so determined.
(7) No deduction shall be allowed under section 144 or under Chapter VIII in
respect of income by which the total income of the assessee is enhanced after
computation of income under sub-section (6).
(8) When the total income of an associated enterprise is computed under
35 sub-section (6) on determination of the arm’s length price paid to another associated
enterprise from which tax has been deducted or was deductible under the provisions of
Chapter XIX-B, the income of the other associated enterprise shall not be recomputed
by reason of such determination of arm’s length price in the case of the first mentioned
enterprise.
166. (1) Where,— Reference to
40
Transfer Pricing
(a) the assessee has entered into an international transaction or specified Officer.
domestic transaction in any tax year; and
(b) the Assessing Officer considers it necessary or expedient so to do,
he may refer the determination of the arm’s length price in relation to such
45 transaction to the Transfer Pricing Officer, with the previous approval of the
Principal Commissioner or Commissioner.
(2) No reference under sub-section (1) for computation of the arm's length price
in relation to an international transaction or a specified domestic transaction shall be
made, if the Transfer Pricing Officer has declared that option exercised by the assessee
50 in sub-section (9) in relation to such transaction is valid for such tax year.
 196

(3) If any reference for an international transaction or a specified domestic

transaction under sub-section (1), in respect of a tax year, for which the option is
declared valid under sub-section (9) is made before or after such declaration by the
Transfer Pricing Officer, the provisions of sub-section (1) shall have the effect as if
no reference is made for such transaction. 5
(4) Where a reference is made under sub-section (1), the Transfer Pricing
Officer shall serve a notice on the assessee requiring him to produce or cause to be
produced on a date specified therein, any evidence on which the assessee may rely
in support of the determination made by him of the arm’s length price in relation to
such transaction. 10

(5) Where,—
(a) any international transaction or specified domestic transaction, other
than an international transaction or a specified domestic transaction referred
under sub-section (1); or
(b) any international transaction or a specified domestic transaction that 15
the assessee has not included in the report under section 172,
comes to the notice of the Transfer Pricing Officer during the course of the
proceedings before him, the provisions of this Chapter shall apply as if such
transaction is a transaction referred to him under sub-section (1).
(6) On the date specified in the notice under sub-section (4), or as soon 20
thereafter as may be,––
(a) after hearing such evidence as the assessee may produce, including
any information or documents referred to in section 171(2);
(b) after considering such evidence as the Transfer Pricing Officer may
require on any specified points; and 25

(c) after taking into account all relevant materials which he has gathered,
the Transfer Pricing Officer shall, by order in writing, determine the arm’s length
price in relation to the international transaction or specified domestic transaction as
per section 165(4) and send a copy of his order to the Assessing Officer and to the
assessee. 30

(7) Where a reference was made under sub-section (1), an order under
sub-section (6) may be made at any time before sixty days before the expiry of
limitation period referred to in section 286, or 296, for making the order of assessment
or reassessment or recomputation or fresh assessment.
(8) If the period of limitation available to the Transfer Pricing Officer for 35
making an order under sub-section (6) is less than sixty days in the circumstances
referred to in section 286(3)(b) or (i) ,such remaining period shall be extended to
sixty days and the aforesaid period of limitation shall be deemed to have been
extended accordingly.
(9) The arm’s length price, being determined in relation to the international 40
transaction or the specified domestic transaction under sub-section (6) for any tax
year shall apply to similar international transaction or specified domestic transaction
for the two consecutive tax years immediately following such tax year, on fulfilment
of the following conditions:––
(a) the assessee exercises an option or options to the above effect for the 45
said two consecutive tax years;
(b) such option or options are exercised in such form, manner and within
such period as prescribed; and,
 197

(c) the Transfer Pricing Officer shall, within one month from the end of
the month in which such option or options are exercised, by an order in
writing, declare that such option or options are valid subject to the conditions,
as prescribed.
5 (10) The provisions of sub-section (9) shall not apply to any proceedings
under Chapter XVI-B.
(11) On receipt of the order under sub-section (6), the Assessing Officer shall
compute the total income of the assessee under section 165(6) in conformity with
the arm’s length price as so determined by the Transfer Pricing Officer.
10 (12) Irrespective of anything contained in sub-section (11), where the Transfer
Pricing Officer has declared an option exercised by the assessee as valid option
under sub-section (9), he shall examine and determine the arm’s length price in
relation to such similar transaction for two consecutive tax years immediately
following such tax year, in the order referred to in sub-section (4) and on receipt of
15 such order, the Assessing Officer shall proceed to recompute the total income of the
assessee for the said two consecutive tax years as per the provisions of section 288.
(13) For rectifying any mistake apparent from the record, the Transfer Pricing
Officer,––
(a) may amend any order passed by him under sub-section (6), and the
20 provisions of section 287 shall, so far as may be, apply accordingly; and
(b) shall send a copy of such order to the Assessing Officer who shall
thereafter amend the order of assessment in conformity with such order of the
Transfer Pricing Officer.
(14) The Transfer Pricing Officer may exercise all or any of the powers
25 specified in section 246(1)(a) to (d) or 252(1)(a) or 253 for the purposes of
determining the arm’s length price under this section.
(15) If any difficulty arises in giving effect to the provisions of
sub-sections (9) and (12), the Board may, with the prior approval of the Central
Government, issue guidelines for the purpose of removing such difficulty.
30 (16) No guideline under sub-section (15) shall be issued after the expiration
of two years from the 1st April, 2026.
(17) Every guideline issued by the Board under sub-section (15) 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,
35 and if, before the expiry of the session immediately following the session or the
successive session aforesaid, both houses agree in making any modification 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
40 prejudice to the validity of anything previously done under that guideline.
(18) In this section, “Transfer Pricing Officer” means a Joint Commissioner
or Deputy Commissioner or Assistant Commissioner authorised by the Board to
perform all or any of the functions of an Assessing Officer specified in sections 165
and 171 in respect of any person or class of persons.
Power of Board
45 167. (1) The determination of— to make safe
(a) income referred to in section 9(2); or harbour rules.

(b) arm’s length price under section 165 or 166,

shall be subject to safe harbour rules.
(2) For the purposes of sub-section (1), the Board may make rules for safe harbour.
50 (3) In this section, “safe harbour” means circumstances in which the income-
tax authorities shall accept,––
 198

(a) the transfer price; or

(b) the income, deemed to accrue or arise under section 9(2),
declared by the assessee.
Advance pricing
168. (1) The Board, with the approval of the Central Government, may enter
agreement. into an advance pricing agreement with any person, determining the— 5

(a) arm’s length price or specifying the manner in which the arm’s length
price is to be determined, in relation to an international transaction to be
entered into by that person;
(b) income referred to in section 9(2), or specifying the manner in which the
said income is to be determined, as is reasonably attributable to the operations 10
carried out in India by or on behalf of that person, being a non-resident.
(2) The manner of determination of the arm’s length price referred to in
sub-section (1)(a) or (b) may include, respectively,––
(a) the methods referred to in section 165(1); or
(b) the methods provided by rules made under this Act, 15
with such adjustments or variations, as may be necessary or expedient so to do.
(3) Irrespective of anything contained in section 165 or 166 or the methods
provided by rules made under this Act,––
(a) the arm’s length price of any international transaction; or
(b) the income referred to in sub-section (1)(b), 20
in respect of which the advance pricing agreement has been entered into, shall be
determined as per the advance pricing agreement so entered.
(4) The agreement referred to in sub-section (1) shall be valid for such period
not exceeding five consecutive tax years as specified in the agreement.
(5) The advance pricing agreement entered into shall be binding— 25
(a) on the person in whose case, and in respect of the transaction in
relation to which, the agreement has been entered into; and
(b) on the Principal Commissioner or Commissioner, and the income-tax
authorities subordinate to him, in respect of the said person and the said transaction.
(6) The agreement referred to in sub-section (1) shall not be binding if there is 30
a change in law or facts having bearing on the agreement so entered.
(7) The Board may, with the approval of the Central Government, by an order,
declare an agreement to be void ab initio, if it finds that the agreement has been
obtained by the person by fraud or misrepresentation of facts.
(8) Upon declaring the agreement void ab initio,— 35
(a) all the provisions of the Act shall apply to the person as if such
agreement had never been entered into;
(b) irrespective of anything contained in the Act, the period beginning
with the date of such agreement and ending on the date of order under
sub-section (7) shall be excluded for the purpose of computing any period of 40
limitation under this Act; and
(c) if immediately after the exclusion of the aforesaid period, the period
of limitation, referred to in any provision of this Act, is less than sixty days,
such remaining period shall be extended to sixty days and the aforesaid period
of limitation shall be deemed to be extended accordingly. 45
(9) For the purposes of this section, the Board may prescribe a scheme
specifying therein the manner, form, procedure and any other matter in respect of
the advance pricing agreement.
 199

(10) The agreement referred to in sub-section (1), may, subject to such

conditions, procedure and manner as prescribed, provide for determining the––
(a) arm’s length price or specify the manner in which the arm’s length
price shall be determined in relation to the international transaction entered
5 into by the person;
(b) income referred to in section 9(2), or specifying the manner in which
the said income is to be determined, as is reasonably attributable to the
operations, transactions and activities carried out in India by or on behalf of
that non-resident person,
10 during any period not exceeding four tax years preceding the first of the tax
years referred to in sub-section (4).
(11) Where an application is made by a person for entering into an agreement
referred to in sub-section (1), the proceedings shall be deemed to be pending in the
case of the person for the purposes of this Act till such agreement is entered into, or
15 such proceedings are closed as per rules prescribed.
169. (1) If a return of income for any tax year covered by an advance pricing Effect to
agreement has been furnished by any person, before the date of entering into the advance pricing
agreement.
said agreement, he shall, irrespective of anything to the contrary contained in
section 263, furnish a modified return, in accordance with and limited to the
20 agreement, in respect of such tax years, within three months from the end of the
month in which the agreement was entered into.
(2) Except as provided in this section, all other provisions of this Act shall apply
accordingly as if the modified return is a return furnished under section 263.
(3) Where a modified return is furnished under sub-section (1), and assessment
25 or reassessment proceedings, in respect of a tax year to which the agreement applies,
were initiated before the filing of such return then,––
(a) if such proceedings have been completed, the Assessing Officer shall
pass an order modifying the total income of the relevant tax year; or
(b) if such proceedings are pending on the date of filing of modified
30 return, the Assessing Officer shall proceed to complete them,
as per the agreement after taking into consideration the modified return so furnished.
(4) Irrespective of anything contained in section 275 or 286 or 296,—
(a) the order in respect of a case falling under sub-section (3)(a) shall be
passed within one year from the end of the financial year in which the modified
35 return under sub-section (1) is furnished;
(b) in respect of a case falling under sub-section (3)(b), the period of limitation
as provided in section 275 or 286 or section 296 for completion of pending
assessment or reassessment proceedings shall be extended by twelve months.
(5) In this section,—
40 (a) “agreement” means an agreement referred to in section 168(1);
(b) the assessment or reassessment proceedings for a tax year shall be
deemed to have been completed where—
(i) an assessment or reassessment order has been passed; or
(ii) no notice has been issued under section 270(8) till the expiry
45 of the limitation period provided under the said section.
170. (1) An assessee shall make a secondary adjustment in every case where Secondary
primary adjustment of one crore rupees or more to transfer price— adjustment in
certain cases.
(a) has been made on his own in his return of income;
(b) made by the Assessing Officer has been accepted by him;
 200

(c) is determined by an advance pricing agreement entered into by him

under section 168;
(d) is made as per the safe harbour rules made under section 167; or
(e) is arising as a result of resolution of an assessment by way of the
mutual agreement procedure under an agreement entered into under 5
section 159 for avoidance of double taxation.
(2) The excess money or part thereof available with its associated enterprise shall
be deemed to be an advance made by the assessee to such associated enterprise if––
(a) as a result of primary adjustment to the transfer price, there is an
increase in the total income or reduction in the loss, as the case may be, of the 10
assessee; and
(b) such excess money or part thereof is not repatriated to India within
the time as prescribed.
(3) The excess money or part thereof referred to in sub-section (2) may be
repatriated from any of the associated enterprises of the assessee which is not a 15
resident in India.
(4) The interest on advance as referred to in sub-section (2) shall be computed
in such manner as prescribed.
(5) Without prejudice to the provisions of sub-section (2), where the excess
money or part thereof has not been repatriated within the prescribed time, the 20
assessee may, at his option, pay additional income-tax at the rate of 18% on such
excess money or part thereof, as the case may be.
(6) The tax on the excess money or part thereof so paid by the assessee under
sub-section (5) shall be treated as the final payment of tax in respect of the excess
money or part thereof not repatriated and no further credit thereof shall be claimed 25
by the assessee or by any other person in respect of tax so paid.
(7) Deduction under any other provision of this Act shall not be allowed to the
assessee in respect of the amount on which tax has been paid as per sub-section (5).
(8) In a case where the additional income-tax referred to in sub-section (5) is paid by
the assessee, he shall not be required to make secondary adjustment under sub-section (1) 30
and compute interest under sub-section (4) from the date of payment of such tax.
(9) In this section,—
(a) “arm’s length price” shall have the meaning assigned to it in
section 173(a);
(b) “excess money” means the difference between the arm’s length price 35
determined in primary adjustment and the price at which the international
transaction has actually been undertaken;
(c) “primary adjustment” to a transfer price, means the determination of
transfer price as per the arm’s length principle resulting in an increase in the total
income or reduction in the loss, as the case may be, of the assessee; 40
(d) “secondary adjustment” means an adjustment in the books of account of
the assessee and its associated enterprise to reflect that the actual allocation of
profits between the assessee and its associated enterprise are consistent with the
transfer price determined as a result of primary adjustment, thereby removing the
imbalance between cash account and actual profit of the assessee. 45

Maintenance, 171. (1) Every person,––

keeping and
furnishing of (a) who has entered into an international transaction or specified
information and domestic transaction; or
document by
certain persons. (b) is a constituent entity of an international group,
 201

shall keep and maintain such information and document in respect thereof and for
such period and in such manner, as prescribed.
(2) The Assessing Officer or the Commissioner (Appeals) may, during any
proceeding under this Act, require any person referred to in sub-section (1)(a) to
5 furnish any information or document referred therein within ten days from the date
of receipt of a notice issued in this regard.
(3) The Assessing Officer or the Commissioner (Appeals) may, on an
application made by such person, extend the period of ten days by a further period
not exceeding thirty days.
10 (4) Every person referred to in sub-section (1)(b) shall furnish the information
and document referred to in sub-section (1) to the authority prescribed under
section 511(1), in such manner, on or before such date, as prescribed.
(5) In this section,—
(a) “constituent entity” shall have the meaning assigned to it in
15 section 511 (10)(d);
(b) “international group” shall have the meaning assigned to it in
section 511 (10)(g).
172. Every person who has entered into an international transaction or Report from an
specified domestic transaction during a tax year shall obtain a report from an accountant to be
furnished by
20 accountant and furnish such report on or before the specified date in the prescribed persons entering
form duly signed and verified in the manner as prescribed by such accountant and into international
setting forth such particulars as prescribed. transaction or
specified
domestic
transaction.

173 In this section and sections 161, 162, 163, 165, 171 and 172, unless the Definitions of
context otherwise requires,— certain terms
relevant to
25 (a) “arm’s length price” means a price which is applied or proposed to determination of
be applied in a transaction between persons other than associated enterprises, arm’s length
price, etc.
in uncontrolled conditions;
(b) “enterprise” means a person (including a permanent establishment of such
person) who is, or has been, or is proposed to be, engaged in any activity relating to––
30 (i) the production, storage, supply, distribution, acquisition or
control of articles or goods; or
(ii) know-how, patents, copyrights, trade-marks, licences, franchises
or any other business or commercial rights of similar nature; or
(iii) any data, documentation, drawing or specification relating to
35 any patent, invention, model, design, secret formula or process of which
the other enterprise is the owner or in respect of which the other
enterprise has exclusive rights; or
(iv) provision of services of any kind; or
(v) carrying out any work in pursuance of a contract; or
40 (vi) investment or providing loan; or
(vii) business of acquiring, holding, underwriting or dealing with
shares, debentures or other securities of any other body corporate,
whether such activity or business is carried on, directly or through one or more of
its units or divisions or subsidiaries, or whether such unit or division or subsidiary
45 is located at the same place where the enterprise is located or at a different place
or places;
(c) “permanent establishment”, referred to in clause (b), includes a fixed place
of business through which the business of the enterprise is wholly or partly carried on;
 202

(d) “specified date” means the date one month before the due date for
furnishing the return of income under section 263 (1) for the relevant tax year;
(e) “transaction” includes an arrangement, understanding or action in
concert,—
(i) whether or not such arrangement, understanding or action is formal 5
or in writing; or
(ii) whether or not such arrangement, understanding or action is
intended to be enforceable by legal proceeding.
Avoidance of 174. (1) Where there is a transfer of assets before and after the commencement
income-tax by of this Act, and by virtue or in consequence of it,–– 10
transactions
resulting in (a) either alone; or
transfer of
income to (b) in conjunction with associated operations,
non-residents.
any income becomes payable to a non-resident, the provisions of this section shall apply.
(2) If any person (“first mentioned person”), by means of any transfer referred
to in sub-section (1), either alone or in conjunction with associated operations, 15
acquires any rights,––
(a) by virtue of which he has, within the meaning of this section, power
to enjoy, whether forthwith or in the future, any income of a non-resident; and
(b) such income would have been chargeable to income-tax if it were
such first mentioned person’s income, 20

then, that income shall, whether or not it would have been chargeable to income-tax
under any other provisions of this Act, be deemed to be the income of such first
mentioned person for all the purposes of this Act.
(3) If any such first mentioned person receives or is entitled to receive any
25
capital sum,––
(a) the payment of which is in any way connected with the transfer or
any associated operations; and
(b) whether before or after any such transfer,
then any income, which has become the income of a non-resident by virtue or in
consequence of such transfer, either alone or in conjunction with associated 30
operations, shall be deemed to be the income of such first mentioned person for all
the purposes of this Act, whether or not it would have been chargeable to
income-tax under any other provisions of this Act.
(4) Where any person has been charged to income-tax on any income deemed
to be his under the provisions of this section and that income is subsequently 35
received by him, whether as income or in any other form, it shall not again be
deemed to form part of his income for the purposes of this Act.
(5) The provisions of this section shall not apply if the first mentioned person in
sub-section (2) or (3) shows to the satisfaction of the Assessing Officer that—
(a) neither the transfer nor any associated operation had for its purpose 40
or for one of its purposes the avoidance of liability to taxation; or
(b) the transfer and all associated operations were bona fide commercial
transactions and were not designed for the purpose of avoiding liability to taxation.
(6) In this section,—
(a) references to assets representing any assets, income or accumulations 45
of income include references to shares in or obligation of any company to
which, or obligation of any other person to whom, those assets, that income or
those accumulations are or have been transferred;
(b) any body corporate incorporated outside India shall be treated as if it
50
were a non-resident;
 203

(c) a person shall be deemed to have power to enjoy the income of a non-
resident if—
(i) the income is in fact so dealt with by any person as to be
calculated at some point of time and, whether in the form of income or
5 not, to ensure for the benefit of the first mentioned person in
sub-section (2) or (3); or
(ii) the receipt or accrual of the income operates to increase the
value to such first mentioned person of any assets held by him or for his
benefit; or
10 (iii) such first mentioned person receives or is entitled to receive at
any time any benefit provided or to be provided out of that income or
out of moneys which are or shall be available for the purpose by reason
of the effect or successive effects of the associated operations on that
income and assets which represent that income; or
15 (iv) such first mentioned person has power by means of the
exercise of any power of appointment or power of revocation or
otherwise to obtain for himself, whether with or without the consent of
any other person, the beneficial enjoyment of the income; or
(v) such first mentioned person is able, in any manner whatsoever and
20 whether directly or indirectly, to control the application of the income;
(d) in determining whether a person has power to enjoy income, regard
shall be had to the substantial result and effect of the transfer and any
associated operations, and all benefits which may at any time accrue to such
person as a result of the transfer and any associated operations shall be taken
25 into account irrespective of the nature or form of the benefits.
(7) In this section,—
(a) “assets” includes property or rights of any kind and “transfer” in
relation to rights includes the creation of those rights;
(b) “associated operation” in relation to any transfer, means an operation
30 of any kind effected by any person in relation to—
(i) any of the assets transferred; or
(ii) any assets representing, whether directly or indirectly, any of
the assets transferred; or
(iii) the income arising from any such assets; or
35 (iv) any assets representing, whether directly or indirectly, the
accumulations of income arising from any such assets;
(c) “benefit” includes a payment of any kind;
(d) “capital sum” means—
(i) any sum paid or payable by way of a loan or repayment of a
40 loan; and
(ii) any other sum paid or payable otherwise than as income, being
a sum, which is not paid or payable for full consideration in money or
money’s worth.
175 (1) Where the owner of any securities (hereinafter referred to as “the Avoidance of
tax by certain
45 owner”) sells or transfers such securities and buys back or reacquires them or buys transactions in
or acquires any similar securities, any interest that becomes payable in respect of securities.
such securities,––
(a) is receivable by a person other than the owner, shall be deemed, for
all purposes of this Act, to be the income of the owner; and
 204

(b) shall not be the income of the other person,

irrespective of whether it would have been chargeable to income-tax under any other
provision of this Act.
(2) Where similar securities as referred to in sub-section (1) are bought or
acquired, the owner shall not be under greater liability to income-tax than he would 5
if the original securities had been bought back or reacquired.
(3) If any person has had a beneficial interest in any securities at any time
during a tax year, and the result of any transaction relating to such securities or the
income from it is that, in respect of such securities within such year,––
(a) either no income is received by him; or 10

(b) the income received by him is less than what would have been if the
income from such securities had accrued from day to day and been
apportioned accordingly,
the income from such securities for such year shall be deemed to be the income of
15
such person.
(4) The provisions of sub-sections (1), (2) and (3) shall not apply if the owner,
or the person who has had a beneficial interest in the securities, proves to the
satisfaction of the Assessing Officer that—
(a) there has been no avoidance of income-tax; or
(b) the avoidance of income-tax was exceptional and not systematic and 20
also that in any of the three preceding years any avoidance of income-tax by a
transaction of the nature referred to in sub-sections (1), (2) or (3) was not there
in his case.
(5) If a person carrying on a business which consists wholly or partly in
dealing in securities, buys or acquires any securities and sells back or retransfers the 25
securities, then, if the result of the transaction is that interest in respect of the
securities receivable by him is not deemed to be his income by reason of the
provisions contained in sub-section (1), no account shall be taken of the transaction
in computing the profits arising from or loss sustained in the business for any of the
30
purposes of this Act.
(6) The provisions of sub-section (5) shall have effect, subject to any necessary
modifications, as if references to selling back or retransferring the securities
included references to selling or transferring similar securities.
(7) The Assessing Officer may, by notice in writing, require any person to
provide within specified time, which shall not be less than twenty-eight days, details 35
in respect of all securities of which such person was the owner or in which he had a
beneficial interest at any time during the period specified in the notice, for the
purposes of this section and for the purpose of discovering whether income-tax has
been borne in respect of the interest on all those securities.
40
(8) If—
(a) any person buys or acquires any securities or unit within three
months before the record date;
(b) such person sells or transfers—
(i) such securities within three months after such date; or
(ii) such unit within nine months after such date; 45

(c) the dividend or income on such securities or unit received or

receivable by such person is exempt,
then, the loss, if any, arising to him on account of such purchase and sale of
securities or unit, to the extent such loss does not exceed dividend or income
received or receivable on such securities or unit, shall be ignored for the purposes 50
of computing his income chargeable to tax.
 205

(9) If—
(a) any person buys or acquires any securities or unit within three
months before the record date;
(b) such person is allotted additional securities or unit without any
5 payment on the basis of holding of such securities or unit on such date;
(c) such person sells or transfers all or any of the securities or unit
referred to in clause (a) within nine months after such date, while continuing
to hold all or any of the additional securities or unit referred to in clause (b),
then, the loss, if any, arising to him on account of such purchase and sale of all or
10 any of such securities or unit shall be ignored for the purposes of computing his
income chargeable to tax.
(10) Irrespective of any other provision of this Act, loss ignored as per
sub-section (9) shall be deemed to be the cost of purchase or acquisition of such
additional securities or unit referred to in sub-section (9)(b) as are held by him on
15 the date of such sale or transfer.
(11) In this section,—
(a) “interest” includes a dividend;
(b) “record date” means such date as may be fixed by—
(i) a company;
20 (ii) a Mutual Fund or the Administrator of the specified
undertaking or the specified company referred to in the Explanation to
43 of 1961. section 10(35) of the Income-tax Act, 1961; or
(iii) a business trust defined in section 2(21); or
(iv) an Alternative Investment Fund defined in regulation 2(1)(b)
25 of the Securities and Exchange Board of India (Alternative Investment
Funds) Regulations, 2012, made under the Securities and Exchange
15 of 1992. Board of India Act, 1992,
for the purposes of entitlement of the holder of the securities or unit to receive
dividend, income, or additional securities or unit without any consideration;
30 (c) “securities” includes stocks and shares;
(d) securities shall be deemed to be similar if they entitle their holders to
the same rights against the same persons as to capital and interest and the same
remedies for the enforcement of those rights, irrespective of any difference in
the total nominal amounts of the respective securities or in the form in which
35 they are held or in the manner in which they can be transferred;
(e) “unit” shall mean,—
(i) a unit of a business trust defined in section 2(21);
(ii) a unit defined in section 208(3)(c); or
(iii) beneficial interest of an investor in an Alternative Investment
40 Fund, referred to in clause (b)(iv), and shall include shares or partnership
interests.
176. (1) The Central Government may, by notification specify any country or Special
territory outside India, as a notified jurisdictional area, having regard to the lack of measures in
respect of
effective exchange of information with such jurisdiction. transactions with
45 (2) Irrespective of anything contrary in this Act, if an assessee enters into a persons located
in notified
transaction where one of the parties to the transaction is a person located in a notified jurisdictional
jurisdictional area, then,— area.

(a) all the parties to the transaction shall be deemed to be associated

enterprises within the meaning of section 162;
 206

(b) any transaction of the nature described in section 163(1) and (2)
shall be deemed to be an international transaction within the meaning of
section 163,
and the provisions of sections161, 162, 163, 165 except the benefit of variation
specified in sections 165(3)(a)(ii), 166, 167, 171, 172 and 173 shall apply 5
accordingly.
(3) Irrespective of anything to the contrary in this Act, no deduction shall
be allowed—
(a) for any payment made to any financial institution located in a notified
jurisdictional area, unless the assessee furnishes an authorisation in the 10
prescribed form authorising the Board or any other income-tax authority
acting on its behalf to seek relevant information from the said financial
institution on behalf of such assessee; and
(b) for any other expenditure or allowance (including depreciation)
arising from the transaction with a person located in a notified jurisdictional 15
area, unless the assessee maintains such other documents and furnishes such
information as prescribed, in this behalf.
(4) Irrespective of anything to the contrary in this Act, if, in any tax year, the
assessee has received or credited any sum from any person located in a notified
20
jurisdictional area and—
(a) the assessee does not provide any explanation about the source of the
said sum in the hands of such person or in the hands of the beneficial owner
(if such person is not the beneficial owner of the said sum); or
(b) the explanation provided by the assessee, in the opinion of the 25
Assessing Officer, is not satisfactory,
then such sum shall be deemed to be the income of the assessee for that tax year.
(5) Irrespective of anything to the contrary in this Act, if any person located
in a notified jurisdictional area is entitled to receive any sum or income or amount
on which tax is deductible under Chapter XIX-B, the tax shall be deducted at the
30
highest of the following rates––
(a) at the rate or rates in force;
(b) at the rate specified in the relevant provisions of this Act;
(c) at the rate of 30%.
(6) In this section,—
(a) “person located in a notified jurisdictional area” shall include,— 35

(i) a person who is resident of the notified jurisdictional area;

(ii) a person, not being an individual, which is established in the
notified jurisdictional area; or
(iii) a permanent establishment of a person not falling in sub-clause (i)
40
or (ii), in the notified jurisdictional area;
(b) “permanent establishment” shall have the meaning assigned to it in
section 173(c);
(c) “transaction” shall have meaning assigned to it in section 173(e).
Limitation on 177. (1) Irrespective of anything contrary in this Act, any expenditure by way
interest of interest or similar payment in respect of excess interest, as specified in 45
deduction in
certain cases. sub-section (4), shall not be deductible in computation of income chargeable under
the head “Profits and gains of business or profession”, if,—
 207

(a) it is paid or payable by an Indian company or a permanent

establishment of a foreign company in India, in respect of any debt issued by
an associated enterprise which is a non-resident; and
(b) the sum of such expenditure in a tax year exceeds one crore rupees.
5 (2) Where a lender, not being an associated enterprise, has issued a debt
referred to in sub-section (1), such debt shall be deemed to have been issued by an
associated enterprise if an associated enterprise has—
(a) provided an implicit or explicit guarantee to the lender in respect of
such debt; or
10 (b) deposited a corresponding and matching funds with such lender.
(3) The provisions of this section shall not apply to—
(a) interest paid in respect of a debt issued by a lender which is a permanent
establishment in India of a non-resident engaged in the business of banking;
(b) an Indian company or a permanent establishment of a foreign
15 company which is engaged in the business of banking or insurance or a
Finance Company located in any International Financial Services Centre, or
such class of non-banking financial companies as notified by the Central
Government in this behalf.
(4) In sub-section (1), the “excess interest” means––
20 (a) In total interest paid or payable in excess of 30% of earnings before
interest, taxes, depreciation and amortisation of the borrower in the tax year; or
(b) interest paid or payable to associated enterprises for that tax year,
whichever is less.
(5) Interest expenditure not wholly deducted against income under the head
25 “Profits and gains of business or profession” for any tax year shall be—
(a) carried forward to the following tax year or years; and
(b) allowed as a deduction against the profits and gains, if any, of any
business or profession carried on by it and assessable for such tax year, to the
extent of maximum allowable interest expenditure as per sub-section (4).
30 (6) The interest expenditure referred to in sub-section (5) shall not be carried
forward for more than eight tax years immediately succeeding the tax year for which
the excess interest expenditure was first computed.
(7) In this section,—
(a) “debt” means any loan, financial instrument, finance lease, financial
35 derivative, or any arrangement that gives rise to interest, discounts or other
finance charges that are deductible in the computation of income chargeable
under the head “Profits and gains of business or profession”;
(b) “Finance Company” means a finance company as defined in
regulation 2(1)(e) of the International Financial Services Centres Authority
40 (Finance Company) Regulations, 2021 made under the International Financial
50 of 2019. Services Centres Authority Act, 2019 and which satisfies such conditions and
carries on such activities, as prescribed;
(c) “permanent establishment” shall have the meaning assigned to it in
section 173(c).
 208

CHAPTER XI
GENERAL ANTI-AVOIDANCE RULE
Applicability of 178. (1) Irrespective of anything contained in this Act, an arrangement entered
General
Anti-Avoidance
into by an assessee may be declared to be an impermissible avoidance arrangement
Rule. and the consequence in relation to tax arising from it may be determined subject to 5
the provisions of this Chapter.
(2) The provisions of this Chapter may be applied to any step in, or a part of,
the arrangement as they are applicable to the arrangement.
Impermissible 179. (1) An impermissible avoidance arrangement means an arrangement, the
avoidance main purpose of which is to obtain a tax benefit, and it— 10
arrangement.
(a) creates rights, or obligations, which are not ordinarily created
between persons dealing at arm’s length;
(b) results, directly or indirectly, in the misuse, or abuse, of the
provisions of this Act;
(c) lacks commercial substance or is deemed to lack commercial 15
substance under section 180, in whole or in part; or
(d) is entered into, or carried out, by means, or in a manner, which are
not ordinarily employed for bona fide purposes.
(2) An arrangement shall be presumed, unless it is proved to the contrary by
the assessee, to have been entered into, or carried out, for the main purpose of 20
obtaining a tax benefit, if the main purpose of a step in, or a part of, the arrangement
is to obtain a tax benefit, irrespective of the fact that the main purpose of the whole
arrangement is not to obtain a tax benefit.
Arrangement to 180. (1) An arrangement shall be deemed to lack commercial
lack commercial 25
substance. substance, if––
(a) the substance or effect of the arrangement as a whole, is inconsistent
with, or differs significantly from, the form of its individual steps or a part; or
(b) it involves or includes—
(i) round trip financing; or
30
(ii) an accommodating party; or
(iii) elements that have effect of offsetting or cancelling each other; or
(iv) a transaction which is conducted through one or more persons
and disguises the value, location, source, ownership or control of funds
which is the subject matter of such transaction; or
(c) it involves the location of an asset or of a transaction or of the place 35
of residence of any party which is without any substantial commercial purpose
other than obtaining a tax benefit (but for the provisions of this Chapter) for a
party; or
(d) it does not have a significant effect upon the business risks or net
cash flows of any party to the arrangement apart from any effect attributable 40
to the tax benefit that would be obtained (but for the provisions of this
Chapter).
(2) In sub-section (1), round trip financing includes any arrangement in which,
through a series of transactions—
 209

(a) funds are transferred among the parties to the arrangement; and
(b) such transactions do not have any substantial commercial purpose
other than obtaining the tax benefit (but for the provisions of this Chapter),
without having any regard to—
5 (A) whether or not the funds involved in the round trip financing can be
traced to any funds transferred to, or received by, any party in connection with
the arrangement;
(B) the time, or sequence, in which the funds involved in the round trip
financing are transferred or received; or
10 (C) the means by, or manner in, or mode through, which funds involved
in the round trip financing are transferred or received.
(3) The following may be relevant but shall not be sufficient for determining
whether an arrangement lacks commercial substance or not:—
(a) the period of time for which the arrangement (including operations
15 therein) exists;
(b) the fact of payment of taxes, directly or indirectly, under the
arrangement;
(c) the fact that an exit route (including transfer of any activity or
business or operations) is provided by the arrangement.
20 181. (1) If an arrangement is declared to be an impermissible avoidance Consequences
arrangement, then, the consequences, in relation to tax, of the arrangement, of
impermissible
including denial of tax benefit or a benefit under a tax treaty, shall be determined, avoidance
in the manner as deemed appropriate. arrangement.

(2) The consequences of an arrangement declared to be an impermissible

25 avoidance arrangement as referred to in sub-section (1) shall include but shall not
be limited to the following:—
(a) disregarding, combining or recharacterising any step in, or a part or
whole of, the impermissible avoidance arrangement;
(b) treating the impermissible avoidance arrangement as if it had not
30 been entered into or carried out;
(c) disregarding any accommodating party or treating any
accommodating party and any other party as one and the same person;
(d) deeming persons who are connected persons in relation to each other
to be one and the same person for the purposes of determining tax treatment
35 of any amount;
(e) reallocating amongst the parties to the arrangement—
(i) any accrual, or receipt, of a capital nature or revenue nature; or
(ii) any expenditure, deduction, relief or rebate;
(f) treating—
40
(i) the place of residence of any party to the arrangement; or
(ii) the situs of an asset or of a transaction,
at a place other than the place of residence, location of the asset or location of the
transaction as provided under the arrangement; or
(g) considering or looking through any arrangement by disregarding any
45 corporate structure.
 210

(3) In this section,—

(a) any equity may be treated as debt or vice versa;
(b) any accrual, or receipt, of a capital nature may be treated as of
revenue nature or vice versa; or
(c) any expenditure, deduction, relief or rebate may be recharacterised. 5

Treatment of 182. In this Chapter, in determining whether a tax benefit exists,—

connected
person and (a) the parties who are connected persons in relation to each other may
accommodating
party. be treated as one and the same person;
(b) any accommodating party may be disregarded;
(c) the accommodating party and any other party may be treated as one 10
and the same person;
(d) the arrangement may be considered or looked through by
disregarding any corporate structure.
Application of 183. The provisions of this Chapter––
this Chapter.
(a) in addition to, or in lieu of, any other basis for determination of tax 15
liability;
(b) as per such guidelines and subject to such conditions, as prescribed.
Interpretation. 184. In this Chapter, unless the context otherwise requires,—
(1) “accommodating party” means a party to an arrangment, if the main
purpose of the direct or indirect participation of that party in the arrangement, 20
in whole or in part, is to obtain, directly or indirectly, a tax benefit (but for the
provisions of this Chapter) for the assessee whether or not the party is a
connected person in relation to any party to the arrangement;
(2) “arrangement” means any step in, or a part or whole of, any
transaction, operation, scheme, agreement or understanding, whether 25
enforceable or not, and includes the alienation of any property in such
transaction, operation, scheme, agreement or understanding;
(3) “asset” includes property, or right, of any kind;
(4) “benefit” includes a payment of any kind whether in tangible or
30
intangible form;
(5) “connected person” means any person who is connected directly or
indirectly to another person and includes,—
(a) any relative of the person, if such person is an individual;
(b) any director of the company or any relative of such director, if 35
the person is a company;
(c) any partner or member of a firm or association of persons or
body of individuals or any relative of such partner or member, if the
person is a firm or association of persons or body of individuals;
(d) any member of the Hindu undivided family or any relative of
40
such member, if the person is a Hindu undivided family;
(e) any individual who has a substantial interest in the business of
the person or any relative of such individual;
 211

(f) a company, firm or an association of persons or a body of

individuals, whether incorporated or not, or a Hindu undivided family
having a substantial interest in the business of the person or any director,
partner, or member of the company, firm or association of persons or
5 body of individuals or family, or any relative of such director, partner or
member;
(g) a company, firm or association of persons or body of individuals,
whether incorporated or not, or a Hindu undivided family, whose director,
partner, or member has a substantial interest in the business of the person,
10 or family or any relative of such director, partner or member;
(h) any other person who carries on a business, if—
(i) the person being an individual, or any relative of such
person, has a substantial interest in the business of that other
person; or
15 (ii) the person being a company, firm, association of persons,
body of individuals, whether incorporated or not, or a Hindu
undivided family, or any director, partner or member of such
company, firm or association of persons or body of individuals or
family, or any relative of such director, partner or member, has a
20 substantial interest in the business of that other person;
(6) “fund” includes—
(a) any cash;
(b) cash equivalents; and
(c) any right, or obligation, to receive or pay, the cash or cash equivalent;
25 (7) “party” includes a person or a permanent establishment which participates
or takes part in an arrangement;
(8) “relative” shall have the meaning assigned to it in section 92(5)(g);
(9) a person shall be deemed to have a substantial interest in the business, if,—
(a) in a case where the business is carried on by a company, such person
30 is, at any time during the financial year, the beneficial owner of equity shares
carrying at least 20% of the voting power; or
(b) in any other case, such person is, at any time during the financial
year, beneficially entitled to at least 20% of the profits of such business;
(10) “step” includes a measure or an action, particularly one of a series taken
35 in order to deal with or achieve a particular thing or object in the arrangement;
(11) “tax benefit” includes,—
(a) a reduction or avoidance or deferral of tax or other amount payable
under this Act; or
(b) an increase in a refund of tax or other amount under this Act; or
40 (c) a reduction or avoidance or deferral of tax or other amount that would
be payable under this Act, as a result of a tax treaty; or
(d) an increase in a refund of tax or other amount under this Act as a
result of a tax treaty; or
(e) a reduction in total income; or
45 (f) an increase in loss,
in the relevant tax year or any other tax year;
 212

(12) “tax treaty” means an agreement referred to in section 159(1) or (2).

CHAPTER XII
MODE OF PAYMENT IN CERTAIN CASES ETC.
Mode of taking 185.(1) No person shall take or accept from another person any loan or deposit
or accepting 5
certain loans,
or specified sum, except through—
deposits and (a) an account payee cheque;
specified sum.
(b) account payee bank draft;
(c) electronic clearing system through a bank account; or
(d) any other prescribed electronic mode,
if,–– 10

(i) the amount or the aggregate amount of such loan, deposit, or specified
sum; or
(ii) the amount or the aggregate amount of any previously taken or
accepted loan or deposit or specified sum by such person from such
another person, which is remaining unpaid, whether due for repayment 15
or not, as on the date of taking or accepting such amount as referred to in
clause (i); or
(iii) the aggregate of the amounts referred to in of clauses (i) and (ii),
is twenty thousand rupees or more.
(2) Sub-section (1) shall not apply to loans or deposits or specified sums taken 20
or accepted from or by,––
(a) the Government;
(b) any banking company, post office savings bank, or co-operative
bank;
(c) any corporation established by a Central, State or Provincial Act; 25

(d) any Government company as defined under section 2(45) of the

18 of 2013.
Companies Act, 2013;
(e) any institution, association, or body or class of institutions,
associations or bodies notified by the Central Government.
(3) The provisions of sub-section (1) shall not apply to any loan or deposit or 30
specified sum where, the person taking or accepting such loan or deposit or specified
sum and person from whom such loan or deposit or specified sum is taken or
accepted, both, have agricultural income and neither has any income chargeable to
tax under this Act.
(4) In sub-section (1), “two lakh rupees” shall be substituted for “twenty 35
thousand rupees” in the case of any deposit or loan, where—
(a) such deposit is accepted by a primary agricultural credit society or a
primary co-operative agricultural and rural development bank from its
member; or
(b) such loan is taken from a primary agricultural credit society or 40
primary co-operative agricultural and development bank by its member.
(5) In this section, “loan or deposit” means loan or deposit of money.
 213

186. (1) No person shall receive two lakh rupees or more–– Mode of
undertaking
(a) in aggregate from a person in a day; or transactions.

(b) in respect of a single transaction; or

(c) in respect of transactions relating to one event or occasion from a person,
5 except through—
(i) an account payee cheque;
(ii) account payee bank draft;
(iii) electronic clearing system through a bank account; or
(iv) any other electronic mode, as prescribed.
10 (2) Sub-section (1) shall not apply to—
(a) any receipt by Government, any banking company, post office
savings bank, or co-operative bank;
(b) transactions of the nature referred to in section 185;
(c) such other persons or class of persons or receipts, as notified by the
15 Central Government.
187.Every person shall provide facility for accepting payment, through Acceptance of
payment through
electronic modes as prescribed, in addition to other electronic modes, if any, being prescribed
provided by him, where–– electronic
modes.
(a) such person is carrying on business; and
20 (b) total sales, turnover, or gross receipts in such business exceeds
fifty crore rupees during the immediately preceding tax year.
188. (1) No branch of a banking company or co-operative bank and no other Mode of
repayment of
company or co-operative society and no firm or other person shall repay— certain loans or
deposits.
(a) any loan or deposit made with it; or
25 (b) any specified advance received by it,
except through––
(i) an account payee cheque; or
(ii) account payee bank draft drawn in the name of the person who has
made the loan or deposit or paid the specified advance; or
30 (iii) by use of electronic clearing system through a bank account, or any
other prescribed electronic mode,
if,––
(A) loan or deposit or specified advance, together with the interest, if
any, payable thereon; or
35 (B) the aggregate amount of the loans or deposits held by such person
with the branch of the banking company or co-operative bank or, as the case
may be, the other company or co-operative society or the firm or other person
(either individually or jointly) on the date of such repayment together with
interest, if any, payable thereon; or
40 (C) the aggregate amount of the specified advances received by such
person (either individually or jointly) on the date of such repayment together
with the interest, if any, payable thereon,
is twenty thousand rupees or more.
 214

(2) Irrespective of the provision in sub-section (1), a branch of a banking

company or co-operative bank, may also make the repayment by crediting such loan
or deposit to the savings bank account or current account, if any, with such branch
of the person to whom such loan or deposit has to be repaid.
(3) Sub-section (1) shall not apply to repayment of any loan, deposit, or 5
specified advance taken or accepted from—
(a) Government;
(b) any banking company, post office savings bank, or co-operative bank;
(c) any corporation established by a Central, State, or Provincial Act;
(d) any Government company as defined in section 2 (45) of the 10 18 of 2013.
Companies Act, 2013;
(e) any institution, association, or body or class of institutions,
associations or bodies notified by the Central Government.
(4) In sub-section (1), “two lakh rupees” shall be substituted for “twenty
thousand rupees” in the case of any deposit or loan where— 15

(a) such deposit is paid to a member by a primary agricultural credit

society or a primary co-operative agricultural and rural development bank; or
(b) such loan is repaid by a member to a primary agricultural credit
society or a primary co-operative agricultural and rural development bank.
(5) In this section, “loan or deposit” means any loan or deposit of money which 20
is repayable after notice or repayable after a period and, in the case of a person other
than a company, includes loan or deposit of any nature.
Interpretation. 189. In this Chapter, unless the context otherwise requires,—
(a) “banking company” means a company to which the provisions of the
Banking Regulation Act, 1949 applies and includes any bank or banking 25 10 of 1949.
institution referred to in section 51 of that Act;
(b) “primary agricultural credit society”, and “primary co-operative
agricultural and rural development bank” shall have the meanings respectively
assigned to them in section 149(6);
(c) “specified sum” means any sum of money receivable, whether as 30
advance or otherwise, in relation to transfer of an immovable property,
whether or not the transfer takes place;
(d) “specified advance” means any sum of money in the nature of
advance, by whatever name called, in relation to transfer of an immovable
property, whether or not the transfer takes place. 35

CHAPTER XIII
DETERMINATION OF TAX IN SPECIAL CASES
A.—Determination of tax in certain special cases
Determination 190. Where there is included in the total income of an assessee any income on
of tax where which no income-tax is payable under the provisions of this Act, the assessee shall 40
total income
includes be entitled to a deduction, from income-tax with which he is chargeable on his total
income on income, of an amount equal to the income-tax calculated at the average rate of
which no tax is income-tax on the amount on which no income-tax is payable.
payable.
Tax on 191. Where the accumulated balance due to an employee participating in a
accumulated recognised provident fund is included in his total income, owing to the provisions 45
balance of of paragraph 8 of Part A of Schedule XI not being applicable, the Assessing Officer
recognised
provident fund. shall calculate the total of the various sums of tax as per the provisions of
paragraph 9 thereof.
 215

192. (1) The total income of the block period, determined under section 294 Tax in case of
block
shall be chargeable to tax at the rate of 60%. assessment of
search cases.
(2) The tax chargeable under sub-section (1) shall be increased by a surcharge,
if any, levied by any Central Act.
5 193. (1) Where the total income of an assessee, being an individual, who is a Tax on income
resident and an employee of an Indian company engaged in specified knowledge from Global
Depository
based industry or service, or an employee of its subsidiary engaged in specified Receipts
knowledge based industry or service (hereafter in this section referred to as the purchased in
resident employee), includes income specified in column B of the Table below, the foreign currency
or capital gains
10 income-tax payable shall be the aggregate of income-tax specified in the column C arising from
thereof. their transfer.

Table
Sl. Income Income-tax payable
No.
15 A B C
1. Dividend on Global Depository Receipts of an 10%
Indian company engaged in specified knowledge
based industry or service, issued as per such
Employees’ Stock Option Scheme as the Central
20 Government may, by notification, specify in this
behalf and purchased by him in foreign currency.
2. Income from long-term capital gains arising 12.5%
from the transfer of Global Depository Receipts
referred to in serial number 1.
25 3. Total income as reduced by income referred to Income-tax
in serial numbers 1 and 2. chargeable on such
income
(2) Where the gross total income of the resident employee—
(a) consists only of income by way of dividends in respect of Global
30 Depository Receipts referred to in sub-section (1)(Table: Sl. No. 1), no
deduction shall be allowed to him under any other provision of this Act;
(b) includes any income referred to in sub-section (1)(Table: Sl. No. 1)
and (Table: Sl. No. 2),––
(i) the gross total income shall be reduced by such income; and
35 (ii) the deduction under any provision of this Act shall be allowed
as if the gross total income as so reduced were the gross total income of
the assessee.
(3) The section 72(6) shall not apply for computation of long-term capital
gains arising out of the transfer of long-term capital asset, being Global Depository
40 Receipts referred to in sub-section (1)(Table: Sl. No. 2).
(4) In this section,—
(a) “Global Depository Receipts” means any instrument in the form of a
depository receipt or certificate (by whatever name called) created by the
Overseas Depository Bank outside India or in an International Financial
45 Services Centre and issued to investors against the issue of,—
 216

(i) ordinary shares of issuing company, being a company listed on

a recognised stock exchange in India; or

(ii) foreign currency convertible bonds of issuing company;

(iii) ordinary shares of issuing company, being a company

incorporated outside India, if such depository receipt or certificate is 5
listed and traded on any International Financial Services Centre;

(b) “information technology service” means any service which results

from the use of any information technology software over a system of
information technology products for realising value addition;

(c) “information technology software” means any representation of 10

instructions, data, sound or image, including source code and object code,
recorded in a machine readable form and capable of being manipulated or
providing inter-activity to a user, by means of an automatic data processing
machine falling under heading information technology products but does not
include non-information technology products; 15

(d) “Overseas Depository Bank” means a bank authorised by the

issuing company to issue Global Depository Receipts against issue of
Foreign Currency Convertible Bonds or ordinary shares of the issuing
company;

(e) “specified knowledge based industry or service” means— 20

(i) information technology software;

(ii) information technology service;

(iii) entertainment service;

(iv) pharmaceutical industry;

(v) bio-technology industry; and 25

(vi) any other industry or service, as specified by the Central

Government, by notification; and

(f) “subsidiary” shall have the same meaning as assigned to it in

section 2(87) of the Companies Act, 2013 and includes subsidiary 18 of 2013.
30
incorporated outside India.
Tax on certain 194. (1) Irrespective of anything contained in any other provision of this
incomes.
Act, where the total income of an assessee as mentioned in column B of the
Table below, includes income of the nature specified in column C of the said
Table, the income-tax payable by such assessee, for a tax year, shall be the
35
aggregate of––

(a) income-tax calculated on income mentioned in column C, at the rate

mentioned in column D, subject to the conditions specified in the Notes
relating to the respective serial number; and

(b) income-tax with which the assessee would have been chargeable
had his total income been reduced by income mentioned in column C 40
thereof.
 217

Table
Sl.No. Assessee Income Rate Conditions
of tax
A B C D E
5 1. Any Winnings (other 30% Nil.
person. than from any online
game) from––
(a) lottery; or
(b) crossword
10 puzzle; or
(c) race including
horse race (not
being income from
the activity of
15 owning and
maintaining race
horses); or
(d) card game
and other game of
20 any sort; or
(e) gambling or
betting of any form
or nature.
2. A person, Royalty in respect 10% (a) No deduction
25 resident in of a patent developed in respect of any
India and and registered in India. expenditure or
who is a allowance shall be
patentee allowed to the
(herein eligible assessee
30 referred to as under any provision
an eligible of this Act in
assessee). computing his
income referred to in
column C;
35
(b) an option for
taxation of income
by way of royalty in
respect of a patent
developed and
40 registered in India is
exercised in the
prescribed manner,
on or before the due
date specified under
45 section 263(1) for
furnishing the return
of income for the
relevant tax year;
(c) where an
50 option is exercised
under clause (b) and
the eligible assessee
 218

A B C D E
does not offer its
income for taxation
as per the provisions
of columns C and D 5
for any of the five tax
years, succeeding
such tax year, then
such assessee shall
not be eligible to 10
claim the benefit of
the provisions of
columns C and D for
five tax years
subsequent to the tax 15
year in which such
income has not been
offered to tax as per
such provisions.
3. Any Income by way of 10% No deduction in 20
person. transfer of carbon respect of any
credits. expenditure or
allowance shall be
allowed to the
assessee under any 25
provision of this Act
in computing his
income referred to
column C.
4. Any Any income from 30% (a) No deduction 30
person. the transfer of any in respect of any
virtual digital asset. expenditure (other
than cost of
acquisition, if any) or
allowance or set off 35
of any loss shall be
allowed to the
assessee under any
provision of this Act
in computing the 40
income referred to in
column C; and
(b) no set off of
loss from transfer
of the virtual digital 45
asset computed
herein shall be
allowed against
income computed
under any provision 50
of this Act to the
assessee and such
loss shall not be
allowed to be carried
forward to 55
succeeding tax years.
 219

A B C D E
5. Any person. Any income by way 30% Nil.
of net winnings from
any online game,
5 computed in the
manner, as prescribed.
6. Any person. Any profits and 12.5% Nil.
gains from life
insurance business.
10 (2) In this section,––
(a) “carbon credit”, in respect of one unit, means reduction of one tonne
of carbon dioxide emissions or emission of its equivalent gases which is
validated by the United Nations Framework on Climate Change and which
can be traded in market at its prevailing market price;
15 (b) “computer resource” shall have the same meaning as assigned to it
21 of 2000. in section 2(1)(k) of the Information Technology Act, 2000;
(c) “developed” means at least 75% of the expenditure incurred in India
by the eligible assessee for any invention in respect of which patent is granted
39 of 1970. under the Patents Act, 1970 (herein referred to as the Patents Act);
20 (d) “horse race” shall have the meaning assigned to it in section 115;
(e) “internet” means the combination of computer facilities and
electromagnetic transmission media including related equipment and
software, comprising the interconnected worldwide network of computer
networks that transmits information based on a protocol for controlling such
25 transmission;
(f) “invention” shall have the same meaning as assigned to it in
section 2(1)(j) of the Patents Act;
(g) “lump sum” includes an advance payment on account of such
royalties which is not returnable;
30 (h) “online game” means a game that is offered on the internet and is
accessible by a user through a computer resource including any
telecommunication device;
(i) “patent” shall have the meaning assigned to it in section 2(1)(m) of
the Patents Act;
35
(j) “patented article” and “patented process” shall have the meanings as
respectively assigned to them in section 2(1)(o) of the Patents Act;
(k) “patentee” means the person, being the true and first inventor of the
invention, whose name is entered on the patent register as the patentee, as per
the Patents Act, and includes every such person, being the true and first
40 inventor of the invention, where more than one person is registered as patentee
under that Act in respect of that patent;
(l) “royalty”, in respect of a patent, means consideration (including any
lump sum consideration but excluding any consideration which would be the
income of the recipient chargeable under the head “Capital gains” or
45
consideration for sale of product manufactured with the use of patented
process or the patented article for commercial use) for the—
 220

(i) transfer of all or any rights (including the granting of a licence)

in respect of a patent; or

(ii) imparting of any information concerning the working of, or the

use of, a patent; or 5

(iii) use of any patent; or

(iv) rendering of any services in connection with the activities

referred to in sub-clauses (i) to (iii);

(m) “true and first inventor” shall have the same meaning as assigned to 10
it in section 2(1)(y) of the Patents Act; and

(n) for the purposes of sub-section (1)(Table: Sl. No. 4), the term
“transfer” as defined in section 2(109), shall apply to any virtual digital asset,
whether capital asset or not.
Tax on income 195. (1) Where the total income of an assessee— 15
referred to in
section 102 or
103 or 104 or (a) includes any income referred to in section 102 or 103 or 104 or
105. 105 or 106 and reflected in the return of income furnished under
section 263; or

(b) determined by the Assessing Officer includes any income 20

referred to in any of the said sections, if such income is not covered
under clause (a),

the income-tax payable shall be the aggregate of—

(i) income-tax calculated on the income referred to in clauses (a)

25
and (b), at the rate of 60%; and

(ii) income-tax with which the assessee would have been

chargeable had his total income been reduced by income referred to in
clause (i).

(2) Irrespective of anything contained in this Act, no deduction in respect of 30

any expenditure or allowance or set off of any loss shall be allowed to the assessee
under any provision of this Act in computing his income referred to in
sub-section (1)(a) and (b).

B.—Special provisions relating to tax on capital gains

35
Tax on short- 196. (1) Where the total income of an assessee includes any income chargeable
term capital
gains in certain
under the head “Capital gains”, arising from the transfer of a short-term capital
cases. asset––

(a) being an equity share in a company or a unit of an equity oriented

fund or a unit of a business trust; and
40
(b) the transaction of sale of such equity share or unit is chargeable
to securities transaction tax under Chapter VII of the Finance (No. 2) 23 of 2004.
Act, 2004, then,

the tax payable by the assessee on the total income, subject to the provisions of
sub-section (2), shall be the aggregate of— 45

(i) income-tax calculated on such short-term capital gains at the

rate of 20%;
 221

(ii) income-tax payable on the balance amount of the total income as if

such balance amount were the total income of the assessee.
(2) In the case of an individual or a Hindu undivided family, being a resident,
where the total income, as reduced by short-term capital gains computed under
5 sub-section (1), is below the maximum amount which is not chargeable to income-
tax, then,—
(a) such short-term capital gains shall be reduced by the amount by
which the total income as so reduced falls short of the maximum amount
which is not chargeable to income-tax; and
10 (b) the tax on the balance of such short-term capital gains shall be
computed at the rate as applicable in sub-section (1)(i).
(3) The provisions of sub-section (1)(b) shall not apply to a transaction
undertaken on a recognised stock exchange located in any International Financial
Services Centre and where the consideration for such transaction is paid or payable
15 in foreign currency.
(4) Where the gross total income of an assessee includes any short-term capital
gains referred to in sub-section (1), the deduction under Chapter VIII shall be
allowed from the gross total income as reduced by such capital gains.
(5) In this section, “equity oriented fund” shall have the meaning assigned to
20 it in section 198.
197. (1) Where the total income of an assessee includes any income arising Tax on long-term
from the transfer of a long-term capital asset which is chargeable under the head capital gains.
“Capital gains”, the tax payable by the assessee on the total income, subject to
sub-sections (2) and (3), shall be the aggregate of—

25 (a) income-tax payable on the total income as reduced by such long-term

capital gains, had the total income, as so reduced, been his total income; and
(b) income-tax calculated on such long-term capital gains at the
rate of 12.5%.
(2) In the case of an individual or a Hindu undivided family, being a resident,
30 where the total income as reduced by long-term capital gains computed under
sub-section (1) is below the maximum amount which is not chargeable to income-
tax, then,—
(a) such long-term capital gains shall be reduced by the amount by which
the total income as so reduced falls short of the maximum amount which is
35 not chargeable to income-tax; and
(b) the tax on the balance of such long-term capital gains shall be
computed at the rate as referred in sub-section (1).
(3) In the case of an individual or a Hindu undivided family, being a resident,
in the case of transfer of a long-term capital asset, being land or building, or both,
40 which is acquired before the 23rd July, 2024, the excess income-tax computed as
per the following formula shall be ignored:––
E=A–B
where––
E = excess income-tax to be ignored;
45 A = income-tax computed under clause (b) of sub-section (1);
 222

B = income-tax computed under clause (b) of sub-section (1) taking the

rate as 20% and the capital gains is computed by taking the cost of acquisition
as indexed cost of acquisition and the cost of improvement as indexed cost of
improvement.
(4) Where the gross total income of an assessee includes any income arising 5
from the transfer of a long-term capital asset, the gross total income shall be reduced
by such income and the deduction under Chapter VIII shall be allowed as if the gross
total income as so reduced were the gross total income of the assessee.
(5) In this section,—
(a) “securities” shall have the same meaning as assigned to it in 10
section 2(h) of the Securities Contracts (Regulation) Act, 1956; 42 of 1956.

(b) “listed securities” means the securities which are listed on any
recognised stock exchange in India;
(c) “unlisted securities” means securities other than listed securities;
(d) “indexed cost of acquisition” and “indexed cost of improvement” 15
shall have the meanings respectively assigned to them in section 72.
Tax on long- 198. (1) Irrespective of anything contained in section 197, the tax payable by
term capital
gains in certain an assessee on his total income shall be determined as per the provisions of
cases. sub-section (2), if—
(a) the total income includes any income chargeable under the head 20
“Capital gains”;
(b) the capital gains arise from the transfer of a long-term capital asset
being an equity share in a company or a unit of an equity oriented fund or a
unit of a business trust;
(c) securities transaction tax under Chapter VII of the Finance (No. 2) 25
23 of 2004.
Act, 2004 has—
(i) in a case where the long-term capital asset is in the nature of an
equity share in a company, been paid on acquisition and transfer of such
capital asset; or
(ii) in a case where the long-term capital asset is in the nature of a 30
unit of an equity oriented fund or a unit of a business trust, been paid on
transfer of such capital asset.
(2) The tax payable by the assessee on the total income referred to in
sub-section (1) shall be the aggregate of—
(a) income-tax calculated on such long-term capital gains exceeding one 35
lakh twenty five thousand rupees on long-term capital gains at the
rate of 12.5%; and
(b) income-tax payable on the total income as reduced by long-term
capital gains referred to in sub-section (1) as if the total income so reduced
were the total income of the assessee. 40

(3) In the case of an individual or a Hindu undivided family, being a resident,

where the total income as reduced by long-term capital gains computed under
sub-section (1) is below the maximum amount which is not chargeable to
income-tax, then,—
 223

(a) such long-term capital gains shall be reduced by the amount by which
the total income as so reduced falls short of the maximum amount which is
not chargeable to income-tax; and

(b) the tax on the balance of such long-term capital gains shall be
5 computed at the rate as referred to in sub-section (2).

(4) The condition specified in sub-section (1)(c) shall not apply to a transfer
undertaken on a recognised stock exchange located in any International Financial
Services Centre and where the consideration for such transfer is received or
receivable in foreign currency.

10 (5) The Central Government may, by notification, specify the nature of

acquisition in respect of which the provisions of sub-section (1)(c)(i) shall not
apply.

(6) Where the gross total income of an assessee includes any long-term capital
gains referred to in sub-section (1), the deduction under Chapter VIII shall be
15 allowed from the gross total income as reduced by such capital gains.

(7) Where the total income of an assessee includes any long-term capital
gains referred to in sub-section (1), the rebate under section 156 shall be allowed
from the income-tax on the total income as reduced by tax payable on such capital
gains.

20 (8) In this section, “equity oriented fund” means a fund set up under a
scheme of a mutual fund specified in Schedule VII (Table: Sl. No. 20 or 21) or
under a scheme of an insurance company comprising unit linked insurance
policies to which exemption in Schedule II (Table: Sl. No. 2) does not apply
and—
25 (i) in a case where the fund invests in the units of another fund which is
traded on a recognised stock exchange,—

(A) a minimum of 90% of the total proceeds of such fund is

invested in the units of such other fund; and

(B) such other fund also invests a minimum of 90% of its total
30 proceeds in the equity shares of domestic companies listed on a
recognised stock exchange; and

(ii) in any other case, a minimum of 65% of the total proceeds of such
fund is invested in the equity shares of domestic companies listed on a
recognised stock exchange,
35 and, for the purposes of this clause,––

(I) the percentage of equity shareholding or unit held in respect of the

fund, shall be computed with reference to the annual average of the monthly
averages of the opening and closing figures;

(II) in case of a scheme of an insurance company comprising unit linked

40 insurance policies to which exemption in Schedule II (Table: Sl. No. 2) does
not apply, the minimum requirement of 90% or 65%, as the case may be, is
required to be satisfied throughout the term of such insurance policy.
 224

C.—New tax regime

Tax on income 199. (1) Irrespective of anything contained in this Act, but subject to the
of certain
manufacturing
provisions of Parts A, B and this Part other than sections 200 and 201, the
domestic income-tax payable in respect of the total income of a person, being a domestic
companies. company, for any tax year, shall, at the option of such person, be computed at the 5
rate of 25% subject to the following conditions:––
(a) the company has been set-up and registered on or after the
1st March, 2016;
(b) the company is not engaged in any business other than the business
of manufacture or production of any article or thing and research in relation 10
to, or distribution of, such article or thing manufactured or produced by it; and
(c) the total income of the company has been computed,—
(i) without any deduction under––
(A) sections 45(2)(c) and 47(1)(b);
(B) Chapter VIII-C, other than the provisions of section 146; or 15

(C) sections specified in section 205(1)(a) to (g);

(ii) without set off of any loss carried forward from any earlier tax
year, if such loss is attributable to any of the deductions referred to in
sub-clause (i).
(2) The loss referred to in sub-section (1)(c)(ii) shall be deemed to have been 20
given full effect to and no further deduction for such loss shall be allowed for any
subsequent year.
(3) The provisions of this section shall not apply unless an option is exercised
by the person in the manner as prescribed on or before the due date specified under
section 263(1) for furnishing the first of the returns of income which such person is 25
required to furnish and such option once exercised, shall apply to subsequent
tax years.
(4) Once the option under sub-section (3) has been exercised for any tax year,
it cannot be subsequently withdrawn for the same or any other tax year, except
where the person exercises option under section section 200. 30

Tax on income
of certain 200. (1) Irrespective of anything contained in this Act but subject to the
domestic provisions of Parts A, B and this Part, other than sections 199 and 201, the
companies. income-tax payable for a tax year shall be at the rate of 22%, at the option of a
person being a domestic company, in respect of the total income of such person
computed in the following manner:–– 35

(a) without any deduction under––

(i) sections 45(2)(c) and 47(1)(b); or
(ii) Chapter VIII other than the provisions of section 146; or
(iii) sections specified in section 205(1)(a) to (g);
(b) without set off of any loss carried forward or depreciation from any 40
earlier tax year, if such loss or depreciation is attributable to any of the
deductions referred to in clause (a);
 225

(c) without set off of any loss or allowance for unabsorbed depreciation
deemed so under section 116(1), if such loss or depreciation is attributable to
any of the deductions referred to in clause (a).
(2) Where the person fails to satisfy the requirements contained in
5 sub-section (1) in any tax year, the option shall become invalid in respect of the said
tax year and subsequent years and other provisions of the Act shall apply, as if the
option had not been exercised for such tax year and for subsequent years.
(3) The loss and depreciation referred to in sub-section (1)(b) and (c) shall be
deemed to have been given full effect to and no further deduction for such loss or
10 depreciation shall be allowed for any subsequent year.
(4) In case of a person, having a Unit in the International Financial Services
Centre, which has exercised option under sub-section (5), the requirements
contained in sub-section (1) shall be modified to the extent that the deduction under
the said section shall be available to such Unit subject to fulfilment of the conditions
15 contained in that section.
(5) The provisions of this section shall not apply unless the option is exercised
by the person in the such manner as prescribed on or before the due date specified
under section 263(1) for furnishing the return of income and such option once
exercised, shall apply to subsequent tax years.
20 (6) Once the option under this section has been exercised for any tax year, it
shall not be subsequently withdrawn for the same or any other tax year.
(7) In case of a person, being a domestic company, where the option exercised by it
under section 201, has been rendered invalid due to violation of the conditions contained
in section 205(2)(b) or (c) or (d), such person may exercise the option under this section.
25 201. (1) Irrespective of anything contained in this Act, but subject to the Tax on income of
provisions of Parts A, B and this Part other than sections 199 and 200, the new
manufacturing
income-tax payable in respect of the total income of an assessee, being a domestic domestic
company, specified in column B of the Table below, shall, at the option of such companies.
assessee, be computed at the rates specified in column C, if the conditions contained
30 in column D thereof are fulfilled.
Table
Sl. Assessee Total income and rate of Conditions
No. tax
A B C D
35 1. A (a) 15% on the total Such domestic company––
domestic income other than the
(a) exercises the option in
company income mentioned in
the manner provided in sub-
engaged in clauses (b), (c) and (d);
section (2);
business of
40 (b) 22% (without any
manufacture (b) has been set-up and
deduction or allowance in
or registered on or after the 1st
respect of any expenditure
production October, 2019;
or allowance) on such
of any article
income,–– (c) has commenced
or thing.
45 manufacturing or production
(i) which has neither
of an article or thing on or
been derived from nor
before the 31st March, 2024;
is incidental to
manufacturing or
production of an article
50 or thing; and
 226

A B C D
(ii) in respect of (d) the total income of
which no specific rate which is computed as per the
of tax has been provisions of
provided separately sub-section (3); and 5
under this Part; (e) fulfils all the
(c) 22% on short-term conditions provided in
capital gains derived from sub-section (5) of this
transfer of a capital asset on section and section 205(2).
10
which no depreciation is
allowable under this Act;
(d) 30% on the income
deemed so under
section 205(4).
(2) The option under this section shall be exercised by the assessee in the 15
manner prescribed subject to the following conditions:––
(a) it shall be exercised on or before the due date specified under
section 263(1) for furnishing first of the returns of income for any tax year;
(b) such option, once exercised, shall apply to subsequent tax years;
(c) once the option has been exercised for any tax year, it shall not be 20
subsequently withdrawn for the same or any other tax year; and
(d) where the assessee fails to fulfil the conditions contained in
sub-section (1)(Table: Sl. No. 1.D) in any tax year,––
(i) the option shall become invalid in respect of such tax year and
25
subsequent tax years; and
(ii) the other provisions of this Act shall apply, as if the option had
not been exercised for that tax year and subsequent tax years.
(3) For the purposes of sub-section (1), the total income of the assessee shall
be computed,—
30
(a) without any deduction under—
(i) sections 45(2)(c) and 47(1)(b);
(ii) Chapter VIII other than sections 146 and 148; or
(iii) section 205(1)(a) to (g);
(b) without set off of any loss or allowance for unabsorbed depreciation
deemed so under section 116(1), if such loss or depreciation is attributable to any 35
of the deductions referred to in clause (a).
(4) While computing the income of the assessee, the loss and depreciation, or
both, as specified in sub-section (3)(b) shall be deemed to have been given full effect
to and no further deduction for such loss or depreciation, or both, shall be allowed
for any subsequent year. 40

(5) In case of an amalgamation, option under this section shall remain valid in case
of the amalgamated company only and if the conditions contained in sub-section (1)
(Table: Sl. No. 1.D) are continued to be fulfilled by such company.
New tax regime 202. (1) Irrespective of anything contained in this Act but subject to the
for individuals, provisions of Parts A, B and this Part the income-tax payable by a person, being— 45
Hindu undivided
family and (a) an individual; or
others.
(b) a Hindu undivided family; or
 227

(c) an association of persons (other than a co-operative society); or

(d) a body of individuals, whether incorporated or not; or
(e) an artificial juridical person referred to in section 2(77)(g),
in respect of the total income for a tax year, shall, unless the person exercises the
5 option in the manner provided under sub-section (4), be computed at the rate of tax
given in the following Table:—
Table
Sl.No. Total income Rate of tax
A B C
10 1. Upto ₹4,00,000 Nil
2. From ₹4,00,001 to ₹8,00,000 5%
3. From ₹8,00,001 to ₹12,00,000 10%
4. From ₹12,00,001 to ₹16,00,000 15%
5. From ₹16,00,001 to ₹20,00,000 20%
15 6. From ₹20,00,001 to ₹24,00,000 25%.
7. Above ₹24,00,000 30%
(2) For the purposes of sub-section (1), the total income of the assessee shall
be computed—
(a) without any exemption or deduction under the provisions of or in––
20 (i) Schedule III (Table: Sl. No. 5 or 6 or 7 or 8 or 11 or 17);
(ii) Schedule III (Table: Sl. No. 12 or 13) (other than those as
prescribed for this purpose);
(iii) section 144;
(iv) section 19(1) (Table: Sl. No. 1);
25 (v) section 22(1)(b), in respect of properties referred to in
section 21(6);
(vi) section 33(8);
(vii) section 48;
(viii) section 49;
30 (ix) section 45(3)(a) or (b) or (c);
(x) section 46;
(xi) section 47(1)(a);
(xii) of Chapter VIII other than the provisions of sections 124(1),
125(3) and 146; and
35 (b) without set off of—
(i) any loss carried forward or depreciation from any earlier tax
year, if such loss or depreciation is attributable to any of the
deductions referred to in clause (a); or
(ii) any loss under the head “Income from house property” with
40 any other head of income; and
 228

(c) without any exemption or deduction for allowances or perquisite,

called by any name, provided under any other law in force.
(3) The loss and depreciation referred to in sub-section (2)(b) shall be deemed
to have been given full effect to and no further deduction for such loss or
depreciation shall be allowed for any subsequent year. 5

(4) Nothing contained in sub-section (1) shall apply to a person, where an

option is exercised by such person under this section, in such manner as prescribed,
for any tax year, and such option is exercised,––
(a) in case of a person having income from business or profession,––
(i) on or before the due date specified under section 263(1) for 10
furnishing the returns of income for such tax year;
(ii) such option, once exercised, shall apply to subsequent tax
years;
(iii) such option, once exercised, may be withdrawn only once for
a tax year other than the tax year for which it was exercised; and 15

(iv) after such withdrawal, the person shall never be eligible to

exercise the option under this sub-section, except where such person
ceases to have any income from business or profession, and in such a
case the option under clause (b) shall be available;
(b) in case of a person not having income from business or profession, 20
along with the return of income to be furnished under section 263(1) for the
tax year.
(5) In case of a person, having a Unit in the International Financial Services
Centre, who has exercised the option under sub-section (4) for any tax year from
2020-21 to 2023-24, the provisions of sub-section (2) shall be modified to the extent 25
that deduction under the said section shall be available to such Unit subject to
fulfilment of the conditions contained in that section.
Tax on income 203. (1) Irrespective of anything contained in this Act but subject to the
of certain
resident co- provisions of Part A, B and this Part, other than section 204, the income-tax payable
operative for a tax year shall be at the rate of 22%, at the option of a person being a 30
societies. co-operative society resident in India, in respect of the total income of such person
computed in the following manner:––
(a) without any deduction under—
(i) Chapter VIII other than the provisions of section 146; or
(ii) sections specified in section 205(1)(a) to (g); 35

(b) without set off of any loss carried forward or depreciation from any
earlier tax year, if such loss or depreciation is attributable to any of the
deductions referred to in clause (a).
(2) Where a person fails to satisfy the requirements contained in sub-section (1)
in any tax year, the option shall become invalid in respect of the said tax year and 40
subsequent tax years and other provisions of the Act shall apply, as if the option had
not been exercised for such tax year and for subsequent tax years.
(3) The loss and depreciation referred to in clause (b) of sub-section (1) shall
be deemed to have been given full effect to and no further deduction for such loss
or depreciation shall be allowed for any subsequent tax year. 45
 229

(4) In case of a person, having a Unit in the International Financial Services

Centre, which has exercised option under this section, the requirements contained
in sub-section (1) shall be modified to the extent that the deduction under
section 147 shall be available to such Unit subject to fulfilment of the conditions
5 contained in the said section.
(5) The provisions of this section shall not apply unless the option is exercised
by the person in the prescribed manner on or before the due date specified under
section 263(1) for furnishing the return of income and such option once exercised
shall apply to subsequent tax years.
10 (6) Once the option under this section has been exercised for any tax year, it
shall not be subsequently withdrawn for the same or any other tax year.
204. (1) Irrespective of anything contained in this Act but subject to the Tax on income
of certain new
provisions of Part A, B and this Part other than section 203, the income-tax payable manufacturing
in respect of the total income of an assessee, being a co-operative society, resident co-operative
15 in India, engaged in the business of manufacture or production of any article or societies.
thing, shall at the option of such assessee, be computed at the rates specified in
column A of the said Table, if the conditions contained in column B thereof are
fulfilled.
Table
20 Total income and rate Conditions
of tax
A B
(a) 15% on the total Such co-operative society––
income other than the income
25 mentioned in clauses (b), (c) (a) exercises the option in the manner
and (d); provided in sub-section (2);

(b) 22% (without any (b) has been set-up and registered on or
deduction or allowance in after the 1st April, 2023; and
respect of any expenditure or (c) has commenced manufacturing or
30 allowance) on such income,— production of an article or thing on or before the
(i) which has 31st March, 2024; and
neither been derived (d) the total income of which is computed
from nor is incidental to as per the provisions of sub-section (3); and
manufacturing or
35 production of an article (e) fulfils all the conditions provided in
or thing; and section 205(2).
(ii) in respect of
which no specific rate of
tax has been provided
40 separately under this
Part;
(c) 22% on short-term
capital gains derived from
transfer of a capital asset on
45 which no depreciation is
allowable under this Act;
(d) 30% on the income
deemed so under section 205 (4).
 230

(2) The option under this section shall be exercised by the assessee in the
manner as prescribed subject to the following conditions:––
(a) it shall be exercised on or before the due date specified under
section 263(1) for furnishing the first of the returns of income for any tax year;
and 5

(b) such option, once exercised, shall apply to subsequent tax years;
(c) once the option has been exercised for any tax year, it shall not be
subsequently withdrawn for the same or any other tax year;
(d) where the assessee fails to fulfil the conditions contained in
10
sub-section (1)(Table: Sl. No. 1. B) in any tax year,––
(i) the option shall become invalid in respect of the tax year and
subsequent tax years; and
(ii) the other provisions of this Act shall apply, as if the option had
not been exercised for that tax year and subsequent tax years.
(3) For the purposes of sub-section (1), the total income of the assessee shall 15
be computed,—
(a) without any deduction under––
(i) Chapter VIII other than the provisions of section 146; or
(ii) sections specified in 205(1)(a) to (g);
(b) without set off of any loss carried forward or depreciation from 20
earlier tax year, if such loss or depreciation is attributable to any of the
deductions referred to in clause (a).
(4) While computing the income of the assessee, the loss and depreciation, or
both, as specified in sub-section (3)(b) be shall be deemed to have been given full
effect to and no further deduction for such loss or depreciation, or both, shall be 25
allowed for any subsequent year.
Conditions for 205. (1) For the purposes of sections 199(1)(c)(i)(C), 200(1)(a)(iii),
tax on income of 201(3)(a)(iii), 203(1)(a)(ii) and 204(3)(a)(ii), the total income shall be computed
certain
companies and
without any deduction or exemption, under the following provisions:––
co-operative
societies.
(a) section 33(8), determined in such manner, as prescribed; 30

(b) section 45(3)(a) or (b) or (c);

(c) section 46;
(d) section 47(1)(a).;
(e) section 48;
(f) section 49; and 35

(g) section 144.

(2) For the purposes of section 201 or 204, the following conditions shall apply
to the assessee:—
(a) its business is not formed by splitting up, or the reconstruction, of a
business already in existence, unless it is formed as a result of the 40
re-establishment, reconstruction or revival of the business of any such
undertaking as is referred to in section 140(4) in the circumstances and within
the period specified in the said section;
 231

(b) it does not use any machinery or plant, previously used for any
purpose, other than—
(i) permitted machinery or plant used outside India;
(ii) machinery or plant or any part thereof previously used for any
5 purpose and the total value of such machinery or plant or any part thereof
put to use by the assessee does not exceed 20% of the total value of the
machinery or plant used by such assessee;
(c) in case of a domestic company, it does not use any building previously
used as a hotel or a convention centre, in respect of which deduction under section
43 of 1961. 10 80-ID of the Income Tax Act, 1961 has been claimed and allowed;
(d) it is not engaged in any business other than the business of
manufacture or production of any article or thing and research in relation to,
or distribution of, such article or thing manufactured or produced by it,
and, if any difficulty arises in fulfilling any of the conditions contained in clause (b)
15 or (c) or (d), the Board may, with the previous approval of the Central Government,
issue guidelines for the purpose of removing the difficulty and to promote
manufacturing or production of article or thing using new plant and machinery.
(3) No guideline under sub-section (2) shall be issued after the expiration of
two years from the 1st April, 2026.
20 (4) Every guideline issued by the Board under sub-section (2) 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 in such
25 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.
(5) For the purposes of section 201,––
30 (a) where it appears to the Assessing Officer that, owing to the close
connection between the person to which the said section applies and any other
person, or for any other reason, the course of business between them is so
arranged that the business transacted between them produces to the assessee
more than the ordinary profits which might be expected to arise in such
35 business, then the Assessing Officer shall, in computing the profits and gains
of such business for the purposes of this section, take profits as may be
reasonably deemed to have been derived therefrom, and where the said
arrangement involves a specified domestic transaction referred to in
section 164, profits from such transaction shall be determined having regard
40 to the arm’s length price as defined in section 173(a); and
(b) the amount, being profits in excess of the profits determined by the
Assessing Officer under clause (a), shall be deemed to be the income of the
person and shall be chargeable at the rates specified in section 201(1)
[Table: Sl. No. 1.B(d)] or 204 (1)[Table: Sl. No. 1.A(d)], as the case may be.
45 (6) For the purposes of this Part,––
(a) the business of manufacture or production of any article or thing shall
include the business of generation of electricity but shall not include business of—
(i) development of computer software in any form or in any media; or
 232

(ii) mining; or
(iii) conversion of marble blocks or similar items into slabs;
or
(iv) bottling of gas into cylinder; or
(v) printing of books or production of cinematograph film; or 5

(vi) any other business as may be notified by the Central

Government in this behalf; and
(b) the expressions,––
(i) “hotel” and “convention centre” shall have the meanings
respectively assigned to them in clause (b) and clause (a) of section 10
43 of 1961.
80-ID(6) of the Income Tax Act, 1961;
(ii) “permitted machinery and plant used outside India”
means the machinery or plant, which was previously used outside
India by any other person, if the following conditions are
15
fulfilled:—
(A) such machinery or plant was not, at any time
previous to the date of the installation, used in India;
(B) such machinery or plant is imported into India from
any country outside India; and
(C) no deduction on account of depreciation in 20
respect of such machinery or plant has been allowed or
is allowable under the provisions of this Act in
computing the total income of any person for any period
before the date of installation of machinery or plant by
the person; 25

(iii) “unabsorbed depreciation” shall have the meaning

assigned to it in section 116(13)(e); and

(iv) “Unit” shall have the same meaning as assigned to it in

section 2(zc) of the Special Economic Zones Act, 2005. 28 of 2005.

D.—Special provisions relating to minimum alternate tax and alternate 30

minimum tax
Special 206. (1) Irrespective of anything contained in any other provision of
provision for
minimum this Act, where in the case of an assessee, referred to in column B of Table,
alternate tax and the income-tax payable on the total income as computed under this Act in
alternate respect of a tax year is less than the percentage referred to in column C of 35
minimum tax.
the said Table of book profit in the case of a company or of adjusted total
income in any other case, computed as per the provisions of Note to the said
Table, then––
(a) such book profit in the case of a company or such adjusted total
income in any other case shall be deemed to be the total income of that 40
assessee for such tax year; and
(b) the tax payable on such total income shall be at the rate
provided in column C of the said Table.
 233

Table

Sl. Assessee Percentage of book profit or

No. adjusted total income
A B C
5 1. A company, other than a unit 15% of book profit.
as referred to against serial
number 2.

2. A unit, being a company 9% of book profit.

located in an International
10 Financial Services Centre and
derives its income solely in
convertible foreign exchange.
3. A person, other than–– 18.5% of adjusted total
income.
(a) a company;
15 (b) a co-operative society;
(c) a unit as referred to
against serial number 4.
4. A unit, being a person other 9% of adjusted total
than a company located in an income.
20 International Financial Services
Centre and derives its income
solely in convertible foreign
exchange.
5. A co-operative society. 15% of adjusted total
25 income.

Note 1:—Adjusted total income, for the purposes of Sl. Nos. 3, 4 and 5 shall
be the total income before giving effect to this section, as increased by deductions
claimed, if any, under—
(a) any section (other than section 149) included in Chapter VIII-C;

30 (b) section 144; and

(c) section 46 as reduced by depreciation allowable as per the provisions
of section 33, as if no deduction was allowed in respect of the assets on which
the deduction under that section is claimed.
(2) The book profit under this section shall be computed in the following
35 manner:––
B = P + (I-R)
where,––
B = book profit for the purposes of this section;
P = profit, as shown in the statement of profit and loss for the
40 relevant tax year prepared as per sub-section (3);
I = amounts mentioned in column B of Table below;
R = amounts mentioned in column C of said Table.
 234

Table
Sl. Amounts (to be increased) Amounts (to be reduced)
No.
A B C
1. (a) Income-tax paid or payable (a) The amount withdrawn from 5
and the provision therefor, if any any reserve or provision, where,––
such amount is debited to the (i) any such amount is credited
statement of profit and loss, where to the statement of profit and loss
income-tax shall include— (excluding a reserve created
(i) any interest charged under before the 1st April, 1997 10
this Act; otherwise than by way of a debit
(ii) surcharge, if any, as to the statement of profit and
levied under the Central Acts; loss); and
(iii) Education Cess on (ii) the book profit of such
income-tax, if any, as levied year has been increased by those 15
under the Central Acts; and reserves or provisions out of
which the said amount was
(iv) Secondary and Higher
withdrawn;
Education Cess on income-tax,
if any, as levied under the (b) income to which any of the
Central Acts; provisions of section 11 apply or 20
any regular income of a registered
(b) the amounts carried to any
non-profit organisation referred in
reserves, called by any name, if
section 335, if any such amount is
any such amount is debited to the
credited to the statement of profit
statement of profit and loss; 25
and loss;
(c) the amount or amounts set
(c) depreciation debited to the
aside for meeting liabilities, other
statement of profit and loss
than ascertained liabilities, if any
excluding the depreciation on
such amount is debited to the
account of revaluation of assets;
statement of profit and loss;
(d) the amount withdrawn from 30
(d) the amount by way of
revaluation reserve and credited to
provision for losses of subsidiary
the statement of profit and loss, to
companies, if any such amount is
the extent it does not exceed
debited to the statement of profit
depreciation on account of
and loss;
revaluation of assets referred to in 35
(e) dividends paid or proposed, clause (c);
if any such amount is debited to the
(e) deferred tax, if any such
statement of profit and loss;
amount is credited to the statement
(f) expenditure relatable to any of profit and loss;
income to which provisions of 40
(f) loss brought forward
section 11 apply or any expenditure
(excluding depreciation) or
out of regular income of a registered
unabsorbed depreciation, whichever
non-profit organisation referred in
is less, as per books of account,
section 335, if any such amount is
except, where either of such amount
debited to the statement of profit and
is nil, in case of a company other 45
loss;
than the company referred to in
(g) depreciation, if any such sub-section (4) (Table: Sl. No. 6 or
amount is debited to the statement 7); and
of profit and loss;
(g) such amounts mentioned in
(h) deferred tax and the column D of the Table in 50
provision therefor, if any such sub-section (4), in case of an
amount is debited to the statement assessee mentioned in column B of
of profit and loss; the said Table.
 235

A B C
(i) the amount or amounts set
aside as provision for diminution in
the value of any asset, if any such
5 amount is debited to the statement
of profit and loss;
(j) the amount standing in
revaluation reserve relating to
revalued asset on the retirement or
10 disposal of such asset, if any such
amount is not credited to the
statement of profit and loss; and
(k) such amounts mentioned in
column C of the Table under
15 sub-section (4), in case of an
assessee mentioned in column B of
the said Table.
(3) For the purposes of this section, every company shall prepare its statement
of profit and loss for the relevant tax year in the following manner:––
20 (a) if it is an insurance or banking company, or a company engaged in
the generation or supply of electricity, or any other class of company for which
a form of financial statement has been specified under the enactment
governing such class of company, as per the provisions of such enactment;
(b) in all other cases, as per the provisions of Schedule III to the
18 of 2013. 25 Companies Act, 2013.
(4) While computing the book profit under sub-section (2), the following
amounts shall be further adjusted:––
Table
S. No. Assessee Amounts Amount
30 (to be increased) (to be decreased)
A B C D
1. A company The amount or Income referred to in
being a member amounts of Note if any such amount
of association of expenditure relatable is credited to the
35 persons or body to income referred to in statement of profit and
of individuals Note if any such loss.
amount is debited to
the statement of profit
and loss
40 Note : Income, being share of the assessee in the income of an association of
persons or body of individuals, on which no income-tax is payable as per the
provisions of section 310.
2. A foreign The amount or Income referred to in
45 company amounts of expenditure Note , if such income is
relatable to income credited to the
referred to in Note ,if statement of profit and
any such amount is loss.
debited to the statement
50 of profit and loss.
 236

A B C D

Note: Income, accruing or arising to an assessee from—

(a) the capital gains arising on transactions in securities; or

(b) the interest, dividend, royalty or fees for technical services
chargeable to tax at the rate or rates specified in Chapter XIII, 5

if the income-tax payable thereon as per the provisions of this Act, other than the
provisions of this Part, is at a rate less than the rate specified in sub-section (1).

3. A company, Amount referred to in Amount referred to

which has Note, if any such in Note,
transferred any amount is debited to
capital asset, the statement of profit if any such amount is 10

being share of a and loss. credited to the

special purpose statement of profit and
vehicle to a loss.
business trust

Note: The amount representing–– 15

(a) the notional loss on transfer of such capital asset, to a business trust
in exchange of units allotted by the trust referred to in section 70(1)(zi); or
(b) the notional loss resulting from any change in carrying amount of
the said units; or

(c) the loss on transfer of units referred to in section 70(1)(zi). 20

4. A company, Gain on transfer of Loss on transfer of

which has units referred to in units referred to in
transferred any Note Note.
capital asset, as
25
referred to
against serial
number 3

Note: Units referred to in section 70(1)(zi), computed by taking into account

the cost of the shares exchanged with units referred to in the said clause, or the
carrying amount of the shares at the time of exchange, where such shares are 30
carried at a value other than the cost through statement of profit and loss, as the
case may be.

5. Where total The amount or Income by way of

income amounts of such royalty.
35
includes expenditure relatable
income by way to such royalty income,
of royalty in if any such amount is
respect of a debited to the
patent which is statement of profit and
chargeable to loss 40
tax under
section
194(1)(Table:
Sl. No. 2).
 237

A B C D
6. A company, Nil The aggregate of
and its unabsorbed
subsidiary and depreciation and loss
5 the subsidiary of (excluding
such subsidiary, depreciation) brought
where, the forward.
Tribunal, on an
application
10 moved by the
Central
Government
under section
241 of the
15 Companies Act,
2013 has after
suspension of
the Board of
Directors of
such company
20
has nominated
new directors
under section
242 of the said
25 Act
7. A company Nil The aggregate of
against whom unabsorbed depreciation
corporate and loss (excluding
insolvency depreciation) brought
30 resolution forward.
process has
been admitted
by the .
Adjudicating
35
Authority under
section 7 or 9 or
10 of the
Insolvency and
Bankruptcy
40 Code, 2016
8. A sick Nil. Profits for the tax year
industrial in which the such
company under company has become a
section 17(1) of sick industrial company
45 the Sick and ending with the tax
Industrial year during which the
Companies entire net worth of such
(Special company becomes
Provisions) Act, equal to or exceeds the
50 1985, as it stood accumulated losses.
immediately
before its repeal
by the Sick
Industrial
55 Companies
(Special
Provisions)
Repeal Act, 2003
 238

A B C D
9. A company (a) All amounts (a) All amounts
whose financial credited to the debited to the statement
statements are statement of profit and of profit and loss as
drawn up in loss as referred in Note referred in Note 1; 5
compliance 1; (b) the amounts or
with the Indian aggregate of the
(c) the amounts or
Accounting amounts credited to the
aggregate of the
Standards, statement of profit and
amounts debited to the 10
specified in loss on distribution as
statement of profit and
Annexure to the referred in Note 2;
loss on distribution as
Companies (c) one-fifth of the
referred in Note 2;
(Indian transition amount, in the
Accounting (c) one-fifth of the year of convergence
Standards) transition amount, in and each of the 15
Rules, 2015 the year of following four tax
made under the convergence and each years, if such amount is
Companies Act, of the following four not increased;
2013. tax years, if such (d) the amount or the
amount is not aggregate of the 20
decreased; amounts referred to in
Note 3, if such amount
(d) the amount or
is not increased;
the aggregate of the
(f) the amount or
amounts referred to in 25
the aggregate of the
Note 3, if such amount
amounts referred to
is not decreased;
in Note 4, if such
(e) the amount or amount is not
the aggregate of the increased.
30
amounts referred to in
Note 4, if such amount
is not decreased.
Note 1: Other comprehensive income in the statement of profit and loss under
the head “Items that will not be re-classified to profit or loss”, excluding—
(i) revaluation surplus for assets as per the Indian Accounting Standards 35
16 and Indian Accounting Standards 38; or
(ii) gains or losses from investments in equity instruments designated at
fair value through other comprehensive income as per the Indian Accounting
Standards 109; and
the amount or the aggregate of the amounts referred to in clause (a) (i) and 40
(ii) for the tax year or any of the preceding tax years, and relatable to such asset or
investment, in the tax year in which the said asset or investment referred to in
clause (a) is retired, disposed, realised or otherwise transferred.
Note 2: on distribution of non-cash assets to shareholders in a demerger as 45
per Appendix A of the Indian Accounting Standards 10.
Note 3: sub-section (19)(f)(ii) to (v) relatable to such asset or investment, in
the tax year in which the asset or investment referred to in such sub-clauses is
retired, disposed, realised or otherwise transferred.
Note 4: sub-section (19)(f)(ii) to (v) relatable to such foreign operations, in
the tax year in which the foreign operation referred to in such sub-clause is disposed 50
or otherwise transferred.
 239

(5) In case of a person, being a company, while preparing the annual accounts
including statement of profit and loss,—
(a) the accounting policies;
(b) the accounting standards adopted for preparing such accounts
5 including statement of profit and loss; and
(c) the method and rates adopted for calculating the depreciation,
shall be the same as have been adopted for the purpose of preparing such accounts
including statement of profit and loss and laid before the company at its annual
general meeting as per the provisions of section 129 of the Companies Act, 2013,
10 or correspond to the accounting policies, accounting standards and the method and
rates for calculating the depreciation which have been adopted for preparing such
accounts including statement of profit and loss for, such financial year or part of
such financial year falling within the relevant tax year, where the company has
adopted or adopts the financial year under the which is different from the tax year
15 under this Act.
(6) The provisions of this section shall not be applicable to any assessee, being
a foreign company, where––
(a) the assessee is a resident of a country or a specified territory with
which India has an agreement referred to in section 159(1) or the Central
20
Government has adopted any agreement under section 159(2) and the assessee
does not have a permanent establishment in India as per the provisions of such
agreement; or
(b) the assessee is a resident of a country with which India does not have
an agreement of the nature referred to in clause (a) and the assessee is not
25 required to seek registration under any law in force relating to companies; or
(c) its total income comprises solely of profits and gains from business
referred to in section 61(2)(Table: Sl. Nos. 1, 3, 4 and 5), and such income has
been offered to tax at the rates specified in the respective sections.
(7) In the case of a resulting company, where the property and the liabilities
30 of the undertaking or undertakings being received by it are recorded at values
different from the values appearing in the books of account of the demerged
company immediately before the demerger, any change in such value shall be
ignored for the purpose of computation of book profit of the resulting company
under this section.
35 (8) In the case of an assessee being a company, where––
(a) there is an increase in book profit of the tax year due to income of past
year or years included in the book profit on account of––
(i) an advance pricing agreement entered into by the assessee under section
168; or
40 (ii) a secondary adjustment required to be made under section 170; and
(b) the assessee has not utilised the credit of tax paid under this section in
any subsequent tax year under sub-section (13),
the Assessing Officer shall, on an application made to him in this behalf
by the assessee,––
45 (i) recompute the book profit of the past year or years and tax payable, if
any, by the assessee during the tax year under sub-section (1) in such manner,
as prescribed; and
 240

(ii) the provisions of section 287 shall, so far as may be, apply and the
period of four years specified in sub-sections (7) and (8) of that section shall
be reckoned from the end of the tax year in which the said application is
received by the Assessing Officer.
(9) Irrespective of anything contained in any other provisions of this Act, no 5
interest shall be payable to an assessee on the refund arising on account of the
provisions of sub-section (8).
(10) In the case of an assessee being a company, nothing contained in
sub-section (1) shall affect the determination of the amounts in relation to the
relevant tax year to be carried forward to the subsequent year or years under the 10
provisions of––
(a) section 33(11); or
(b) section 111; or
(c) section 112(1); or
(d) section 113; or 15
(e) section 115.
(11) Every assessee to which this section applies, shall furnish a report in the
prescribed form from an accountant, certifying that the book profit in the case of a
company, or adjusted total income in any other case, has been computed as per the
provisions of this section–– 20

(a) before the specified date referred to in section 63; or

(b) along with the return of income furnished in response to a notice
under section 268(1) in the case of an assessee being a company.
(12) Save as otherwise provided in this section, all other provisions of this Act
25
shall apply to every assessee mentioned in this section.
(13) Where any tax is paid under sub-section (1) by an assessee, then, credit
shall be allowed to him of an amount which shall be the difference of the tax paid
for any tax year under sub-section (1) and tax payable by the assessee on his total
income computed as per the other provisions of this Act.
30
(14) While allowing credit under sub-section (13),––
(a) no interest shall be payable on the tax credit so allowed; and
(b) where tax credit in respect of any income-tax paid in any country or
specified territory outside India, under section 159(1) or (2), allowed against
the tax payable under the provisions of sub-section (1) exceeds such tax credit
admissible against the tax payable by the assessee on its income as per the 35
other provisions of this Act, then, while computing the credit under
sub-section (13), such excess amount shall be ignored.
(15) Tax credit determined under sub-section (13) shall be carried forward and––
(a) set off in a year, when tax becomes payable on the total income
computed as per the provisions of this Act exceeds tax determined under 40
sub-section (1); and
(b) such set off in respect of brought forward tax credit shall be allowed
for any tax year to the extent of the difference between the tax on his total
income and the tax which would have been payable under the provisions of
45
sub-section (1) for that tax year,
and such carry forward shall not be allowed beyond the fifteenth tax year
immediately succeeding the tax year in which the tax credit becomes allowable
under sub-section (13).
 241

(16) Where as a result of any order passed under this Act, tax payable under
this Act is reduced or increased, tax credit allowed under sub-section (13) shall also
be increased or reduced accordingly.
(17) In case of conversion of a private company or unlisted public company into
6 of 2009. 5 a limited liability partnership under the Limited Liability Partnership Act, 2008, the
provisions of this section shall not apply to the successor limited liability partnership.
(18) The provisions of this section shall not apply to––
(a) a person, being a company having income accruing or arising from
life insurance business referred to in section 194(1)(Table: Sl. No. 6); or
10 (b) a person, who has exercised the option under––
(i) section 200(5); or
(ii) section 201(2); or
(iii) section 203(5); or
(iv) section 204(2); or
15 (c) a person, whose income-tax payable in respect of the total income of
such person is computed under section 202(1); or
(d) an individual or a Hindu undivided family or an association of
persons or a body of individuals, whether incorporated or not, or an artificial
juridical person referred to in section 2(77)(g), if the adjusted total income of
20 such person does not exceed twenty lakh rupees; or
(e) any specified fund referred to in Schedule VI (Note 1).
(19) In this section,—
(a) “Adjudicating Authority” shall have the same meaning as
31 of 2016. assigned to it in section 5(1) of the Insolvency and Bankruptcy Code, 2016;
25 (b) “convergence date” means the first day of the first Indian Accounting
Standards reporting period as defined in the Indian Accounting Standards 101;
(c) “net worth” shall have the meaning assigned to it in section 3(1)(ga)
1 of 1986. of the Sick Industrial Companies (Special Provisions) Act, 1985, as it stood
immediately before its repeal by the Sick Industrial Companies (Special
1 of 2004. 30 Provisions) Repeal Act, 2003;
(d) “private company” and “unlisted public company” shall have the
meanings respectively assigned to them in the Limited Liability Partnership
6 of 2009. Act, 2008;
(e) “securities” shall have the same meaning as assigned to it in
42 of 1956. 35 section 2(h) of the Securities Contracts (Regulation) Act, 1956;
(f) “transition amount” means the amount or the aggregate of the
amounts adjusted in the other equity (excluding capital reserve and
securities premium reserve) on the convergence date, but not including the
following:—
40 (i) amount or aggregate of the amounts adjusted in the other
comprehensive income on the convergence date which shall be
subsequently re-classified to the profit or loss;
(ii) revaluation surplus for assets as per the Indian Accounting
Standards 16 and Indian Accounting Standards 38 adjusted on the
45 convergence date;
(iii) gains or losses from investments in equity instruments
designated at fair value through other comprehensive income as per the
Indian Accounting Standards 109 adjusted on the convergence date;
(iv) adjustments relating to items of property, plant and equipment
50 and intangible assets recorded at fair value as deemed cost as per
paragraphs D5 and D7 of the Indian Accounting Standards 101 on the
convergence date;
 242

(v) adjustments relating to investments in subsidiaries, joint

ventures and associates recorded at fair value as deemed cost as per
paragraph D15 of the Indian Accounting Standards 101 on the
convergence date; and
(vi) adjustments relating to cumulative translation differences of a 5
foreign operation as per paragraph D13 of the Indian Accounting
Standards 101 on the convergence date.
(g) “Tribunal” shall have the same meaning as assigned to it in
18 of 2013.
section 2(90) of the Companies Act, 2013;
(h) “Unit” means a unit established in an International Financial Services 10
Centre;
(i) “year of convergence” means the tax year within which the
convergence date falls; and
(j) a company shall be a subsidiary of another company, if such other
company holds more than half in the nominal value of equity share capital of 15
the company.
E.—Special provisions relating to non-residents and foreign companies
Tax on
dividends,
207. (1) The income-tax payable on the total income of a non-resident (not
royalty and being a company) or a foreign company, which includes any income specified in the
technical service column B of the Table below, shall be the aggregate of income-tax specified in the 20
fees in case of column C thereof.
foreign
companies. Table
Sl. Income Income-tax
No. payable
A B C 25

1. Dividend [other than dividends specified against 20%

serial number 2.
2. Dividend received from a unit in an International 10%
Financial Services Centre.
3. Interest received from Government or an Indian 20% 30
concern on monies borrowed or debt incurred by
Government or the Indian concern in foreign currency
not being interest referred to against serial numbers 4
and 5.
4. Interest received from an infrastructure debt fund 5% 35
referred to in Schedule VII (Table: Sl. No. 46).
5. Interest of the nature and extent referred to in section Rates
393(2) (Table: Sl. No. 2), (Table: Sl. No. 3 and 4). specified in
section 393(2)
(Table: Sl. No. 2, 40
3 and 4).
6. Distributed income being interest referred to in Rate specified
section 393(2) (Table: Sl. No. 6). in section 393(2)
(Table: Sl.
No. 6). 45

7. Income received in respect of units, purchased in 20 %

foreign currency, of a Mutual Fund specified in
Schedule VII (Table: Sl. No. 20 or 21) or of the Unit
Trust of India.
 243

A B C
8. Total income as reduced by income referred to Income-tax
against serial numbers 1 to 7. chargeable on
such income.
(2) Where the total income of a non-resident (not being a company) or of a
5 foreign company, includes any income by way of royalty or fees for technical
services received from Government or an Indian concern in pursuance of an
agreement made after the 31st March,1976, other than income referred to in section
59(1), and—
(a) the agreement is approved by the Central Government where such
10 agreement is with an Indian concern; or
(b) where the agreement relates to a matter included in the industrial
policy, for the time being in force, of the Government of India, it is as per that
policy,
then, subject to the provisions of sub-section (3), the income-tax payable shall be
15 the aggregate of income-tax specified in column C of the Table below:––
Table
Sl. Income Income-tax payable
No.
A B C
20 1. Royalty [other than income referred to in 20%
section 59(1)].
2. Fees for technical services [other than 20%
income referred to in section 59(1)].
3. Total income as reduced by income Income-tax chargeable on
25 referred to against serial numbers 1 and 2. such income.
(3) Where the royalty referred to in sub-section (2) is in consideration for the
transfer or grant of all or any rights (including the granting of a licence)––
(a) in respect of copyright in any book to an Indian concern; or
(b) in respect of any computer software to a person resident in India,
30 then the provisions of sub-section (2) shall apply in relation to such royalty without
application of provisions of clause (a) or (b) of that sub-section.
(4) In this section,––
(a) “computer software” means any computer programme recorded on
any disc, tape, perforated media or other information storage device; or any
35 customised electronic data or any product or service of similar nature as
notified by the Board, which is transmitted or exported from India to a place
outside India by any means;
(b) “fees for technical services” shall have the meaning assigned to it in
section 9;
40 (c) “royalty” shall have the meaning assigned to it in section 9.
(5) No deduction in respect of any expenditure or allowance shall be allowed
under sections 28 to 61 and section 93 for computing income referred to in
sub-sections (1) and (2).
(6) Where the gross total income of an assessee––
45 (a) consists only of the income referred to in sub-section (1)(Table: Sl. No.
1 to 7), no deduction shall be allowed under Chapter VIII;
(b) includes any income referred to in sub-section (1) (Table: Sl. No. 1
to 7), the gross total income shall be reduced by such income and the deduction
under Chapter VIII shall be allowed as if such reduced amount were the gross
50 total income of the assessee;
 244

(7) the provisions of sub-section (6) shall not apply to a deduction allowed to
Unit of an International Financial Services Centre under section 147.
(8) It shall not be necessary for an assessee to furnish a return of income under
section 263(1), if—
(a) the total income during the tax year consisted only of income referred 5
to in sub-sections (1)(Table: Sl. No. 1 to 7) and sub-section (2) (Table: Sl. No.
1 and 2); and
(b) the tax deductible at source under the provisions of Chapter XIX-B
has been deducted from such income at a rate not less than the rate specified
10
in sub-sections (1) and (2).
Tax on income
from units 208. (1) The income-tax payable on the total income of an assessee, being an
purchased in overseas financial organisation (herein referred to as Offshore Fund), which
foreign includes income specified in column B of the Table below, shall be the aggregate of
currency or
capital gains the amount specified in column C thereof.
arising from 15
their transfer. Table
Sl. Income Income-tax payable
No.
A B C
1. Income received in respect of units purchased in 10 %
foreign currency. 20

2. Long-term capital gains arising from the transfer 12.5%

of units purchased in foreign currency.
3. Total income as reduced by income referred to in Income-tax
against serial numbers 1 and 2. chargeable on such
income. 25

(2) Where the gross total income of the Offshore Fund—

(a) consists only of income from units or income by way of long-term
capital gains arising from the transfer of units, or both, no deduction shall be
allowed to the assessee under sections 26 to 61 or section 93(1)(a) and (e) or
30
under Chapter VIII;
(b) includes any income referred to in clause (a),––
(i) the gross total income shall be reduced by such income; and
(ii) the deduction under Chapter VIII shall be allowed as if the
gross total income so reduced were the gross total income of the
35
assessee.
(3) In this section,––
(a) “overseas financial organisation” means any fund,
institution, association or body, whether incorporated or not,
established under the laws of a country outside India,––
(i) which has entered into an arrangement for 40
investment in India with any public sector bank or public
financial institution or a mutual fund specified in
Schedule VII (Table: Sl. No. 20 or 21); and
 245

(ii) such arrangement is approved by the Securities and Exchange

Board of India, established under the Securities and Exchange Board of
15 of 1992. India Act, 1992, for this purpose;
(b) “public financial institution” shall have the same meaning as
18 of 2013.
5 assigned to it in section 2(72) of the Companies Act, 2013;
(c) “unit” means unit of,––
(i) a mutual fund specified in Schedule VII (Table: Sl. No. 20) or
(Table: Sl. No. 20 or 21); or
(ii) the Unit Trust of India.
10 209. (1) The income -tax payable, on the total income of an assessee, being a Tax on income
non- resident, which includes income specified in column B of the Table below, from bonds or
Global
shall be the aggregate of the amounts mentioned in column C thereof. Depository
Receipts
Table purchased in
foreign
Sl. Income Income-tax currency or
15 No. payable capital gains
arising from
A B C their transfer.

1. From interest on–– 10 %

(a) bonds of an Indian company issued in
accordance with such scheme as notified by the
20 Central Government; or
(b) bonds of a public sector company sold by the
Government,
and purchased in foreign currency.

2. From dividends on Global Depository Receipts— 10 %

25 (a) issued as per such scheme as the Central
Government may, notified, against the initial issue
of shares of an Indian company and purchased in
foreign currency through an approved intermediary;
or
30 (b) issued against the shares of a public sector
company sold by the Government and purchased by
him in foreign currency through an approved
intermediary; or
(c) issued or re-issued in accordance with a
35 scheme notified by the Central Government, against
the existing shares of an Indian company purchased
in foreign currency through an approved
intermediary.
3. Long-term capital gains arising from the transfer of 12. 5%
40 bonds referred to against serial number 1 or Global
Depository Receipts referred to against serial number 2.
4. Total income as reduced by income referred to against Income-
serial numbers 1 to 3. tax chargeable
on such
45 income.
 246

(2) Where the gross total income of the non-resident—

(a) consists only of income by way of interest or dividends in respect

of––

(i) bonds referred to in sub-section (1) (Table: Sl. No. 1); or

sub-section (1); or 5

(ii) Global Depository Receipts referred to in sub-section (1)

(Table: Sl. No. 2), no deduction shall be allowed under sections 26 to 61
or section 93(1)(a) or 93(1)(e) or under Chapter VIII;

(b) includes any income referred to in sub-section (1) (Table: Sl. No. 1)
10
to (Table: Sl. No. 3),––

(i) the gross total income shall be reduced by the such income;
and

(ii) the deduction under Chapter VIII shall be allowed as if the

gross total income so reduced, were the gross total income of the
15
assessee.

(3) The provisions of section 72(6) shall not apply for computation of long-term
capital gains arising out of the transfer of long-term capital asset being bonds or Global
Depository Receipts referred to in sub-section (1) (Table: Sl. No. 3).

(4) It shall not be necessary for a non-resident to furnish a return of his income
20
under section 263(1), if—

(a) his total income during the tax year consisted only of income referred
to in sub-sections (1) (Table: Sl. No. 1) and (Table: Sl. No. 2); and

(b) the tax deductible at source under the provisions of Chapter XIX-B
has been deducted from such income.

(5) Where the assessee acquired Global Depository Receipts or bonds in an 25

amalgamated or resulting company by virtue of his holding Global Depository
Receipts or bonds in the amalgamating or demerged company, as the case may be,
as per the provisions of sub-section (1), the provisions of that sub-section shall apply
to such Global Depository Receipts or bonds.

(6) In this section,–– 30

(a) “approved intermediary” means an intermediary which is approved

as per a scheme notified by the Central Government; and

(b) “Global Depository Receipts” shall have the meaning assigned to it

in section 190(4)(a).

Tax on income of 210. (1) The income-tax payable on total income of an assessee, being a 35
Foreign specified fund or Foreign Institutional Investor, which includes the income referred
Institutional
Investors from to in column B of the Table below, shall be the aggregate of the amounts mentioned
securities or in column C thereof.
capital gains
arising from their
transfer.
 247

Table

Sl. Income Income-tax

No. payable

A B C

5 1. Securities other than units referred to in section (a) 20 % in

208. case of Foreign
Institutional
Investor;

(b) 10 % in case
10 of specified fund.

2. Short-term capital gains (not being short-term 30 %

capital gains referred to in section 196) arising from
the transfer of such securities.

3. Short-term capital gains referred to in section 196 20 %

15 arising from the transfer of such securities

4. Long-term capital gains (not being long-term 12.5 %

capital gains referred to in section 198 arising from
the transfer of such securities

5. Long-term capital gains referred to in section 198 12.5 %

20 arising from the transfer of such securities which
exceeds ₹ 1,25,000.

6. Total income as reduced by income referred to Income-tax

against serial numbers 1 to 5. chargeable on such
income.

25 (2) In case of specified fund, provisions of this section shall apply only to the
extent of income that is attributable to units held by non-resident (not being a
permanent establishment of such non-resident in India) calculated in the manner as
prescribed, irrespective of the provisions of sub-section (1).

(3) Irrespective of anything contained in sub-section (1), where the

30 specified fund––

(a) is investment division of an offshore banking unit as specified against

serial number 1 of the Table in Schedule III.6; and

(b) fulfills the conditions referred to in clause (g)D(ii) of cell E1 of the

Table in Schedule VI (Note 1),

35 the provisions of this section shall apply to the extent of income that is attributable
to such investment division, calculated in the manner, as prescribed.

(4) Where the gross total income of the specified fund or Foreign
Institutional Investor—

(a) consists only of income in respect of securities referred in

45
sub-section (1) (Table: Sl. No. 1), no deduction shall be allowed to it under
sections 26 to 61 or section 93(1)(a) or (e) or under Chapter VIII;
(b) includes any income referred to in sub-section (1) (Table: Sl. No. 1)
to (Table: Sl. No. 5),––
 248

(i) the gross total income shall be reduced by the amount of such
income; and
(ii) the deduction under Chapter VIII shall be allowed as if the
gross total income as so reduced, were the gross total income of the
specified fund or Foreign Institutional Investor. 5

(5) The provisions of section 72(6) shall not apply for the computation of
capital gains arising out of the transfer of securities referred to in sub-section (1)
(Table: Sl. No. 2) to (Table: Sl. No. 5).
(6) In this section,––
(a) “Foreign Institutional Investor” means an investor so specified in a 10
notification by the Central Government;
(b) “permanent establishment” shall have the meaning assigned to it in
section 173(c);
(c) “securities” shall have the same meaning as assigned to it in
section 2(h) of the Securities Contracts (Regulation) Act, 1956; 15 42 of 1956.

(d) “specified fund” shall have the meaning assigned to it in Schedule VI

[Note 1]

Tax on non- 211. (1) Where the total income of an assessee,––

resident
sportsmen or (a) being a sportsman (including an athlete), who is not a citizen of
sports India and is a non-resident, includes any income received or receivable by 20
associations.
way of––
(i) participation in India in any game [other than a game the
winnings from which are taxable as specified in section 194(1) (Table:
Sl. No. 1)] or sport; or
(ii) advertisement; or 25

(iii) contribution of articles relating to any game or sport in India

in newspapers, magazines or journals; or
(b) being a non-resident sports association or institution, includes any
amount guaranteed to be paid or payable to such association or institution
in relation to any game, other than a game the winnings from which are 30
taxable as specified in section 194(1) (Table: Sl. No. 1) or sport played in
India; or
(c) being an entertainer, who is not a citizen of India and is a
non-resident, includes any income received or receivable from his
35
performance in India,
then, the income-tax payable by the assessee shall be the aggregate of amounts
mentioned in column C of the Table below:––
Table

Sl. No. Income Income-tax payable

A B C 40

1. Income referred to in clause (a) or (b) 20 %

or (c).
2. Total income as reduced by income Income-tax chargeable
referred to in clause (a) or (b) or (c). on such income.
 249

(2) No deduction in respect of any expenditure or allowance shall be allowed

under any provision of this Act in computing the income referred to in
sub-section (1).
(3) It shall not be necessary for the assessee to furnish a return of his income
5 under section 263(1), if—
(a) his total income during the tax year consisted only of income referred
to in sub-section (1); and
(b) the tax deductible at source under the provisions of Chapter XIX-B
has been deducted from such income.
10 212 In sections 213 to 218,— Interpretation

(a) “foreign exchange asset” means any specified asset which the
assessee has acquired or purchased with, or subscribed to in, convertible
foreign exchange;
(b) “investment income” means any income derived from a foreign
15
exchange asset;
(c) “long-term capital gains” means income chargeable under the head
“Capital gains” relating to a capital asset, being a foreign exchange asset
which is not a short-term capital asset;
(d) “non-resident Indian” means an individual, who is not a resident
20 and is—
(i) a citizen of India; or
(ii) a person of Indian origin;
(e) “specified asset” means any of the following assets:—
(i) shares in an Indian company; or
25 (ii) debentures issued by an Indian company which is not a private
18 of 2013. company as defined in the Companies Act, 2013; or

18 of 2013.
(iii) deposits with an Indian company which is not a private
company as defined in the Companies Act, 2013; or
(iv) any security of the Central Government as defined in
18 of 1944. 30 section 2(c) of the Public Debt Act, 1944; or
(v) such other assets as the Central Government may specify in this
behalf by notification.
213. (1) No deduction in respect of any expenditure or allowance shall be Special
provision for
allowed under any provision of this Act in computing the investment income of a computation of
35 non-resident Indian. total income of
non-residents.
(2) In the case of an assessee, being a non-resident Indian, where––

(a) the gross total income consists only of investment income or income
by way of long-term capital gains or both then no deduction shall be allowed
under Chapter VIII;
40 (b) the gross total income includes any income referred to in clause (a),––
 250

(i) the gross total income shall be reduced by such income; and

(ii) the deductions under Chapter VIII shall be allowed as if the

gross total income as so reduced was the gross total income of the
assessee.

Tax on 214. The Income-tax payable, on the total income of an assessee, being 5
investment a non-resident Indian, which includes income specified in column B of the
income and Table below, shall be the aggregate of the amounts mentioned in column C
long-term capital
gains. thereof.

Table

Sl. Income Income-tax payable 10

No.

A B C

1. Income from investment or income 20 %

from long-term capital gains of an asset
other than a specified asset. 15

2. Income from long-term capital gains 12.5%

on specified asset.

3. Total income as reduced by income Income-tax chargeable on

referred to against serial numbers 1 such income.
and 2. 20

Capital gains on 215. (1) Where, in case of an assessee, being a non-resident Indian,––
transfer of
foreign (a) any long-term capital gains arises from the transfer of a foreign
exchange assets
not to be exchange asset (herein referred as original asset); and
charged in
certain cases. (b) within six months after the date of such transfer, he has invested the
whole or any part of the net consideration in any specified asset (herein 25
referred as new asset),

then the capital gains shall be dealt with in the following manner:—

(i) if the cost of the new asset is not less than the net consideration in
respect of the original asset, the whole of such capital gain shall not be charged
30
under section 67;

(ii) if the cost of the new asset is less than the net consideration in respect
of the original asset, then the capital gain computed by the following formula
shall not be charged under section 67:––
A=B×C
D 35

Where,
A = the capital gains not to be charges being computed;
B = whole of the capital gain;
 251

C = cost of acquisition of the new asset;

D = net consideration in respect of the original asset.

(2) For the In sub-section (1),––

(a) “cost”, in relation to any new asset, being a deposit referred to in
5 section 212(e)(iii)(v), means the amount of such deposit;
(b) “net consideration” in relation to the transfer of the original asset,
means the full value of the consideration received or accruing as a result
of the transfer of such asset as reduced by any expenditure incurred wholly
and exclusively in connection with such transfer.
10
(3) Where the new asset is transferred or converted (otherwise than by
transfer) into money, within three years from date of its acquisition, the capital
gain arising from transfer of original asset not so charged under section 67 shall
be deemed to be income by way of capital gains of the tax year in which such
transfer or conversion takes place relating to capital assets other than short-term
15 capital assets of the tax year in which the new asset is transferred or converted
(otherwise than by transfer) into money.
216. It shall not be necessary for a non-resident Indian to furnish a return Return of
income not to
of his income under section 263(1), if— be furnished in
certain cases.
(a) his total income during the tax year consisted only of investment
20 income or income by way of long-term capital gains or both; and

(b) the tax deductible at source under the provisions of

Chapter XIX-B has been deducted from such income.
217. (1) Where a non-resident Indian in any tax year,–– Benefit to be
available in
(a) becomes assessable as a resident in India in a subsequent tax year; certain cases
even after
25 and assessee
becomes
(b) furnishes a declaration in writing to the Assessing Officer along resident.
with his return of income under section 263for the tax year for which he is
so assessable,to the effect that provisions of sections 212 to 218 shall
continue to apply to him in relation to the investment income derived from
30 any foreign exchange asset referred to in section 212(e) other than a share
in an Indian company,
then the provisions of this Chapter shall continue to apply in relation to such
income until the transfer or conversion (otherwise than by transfer) of such
assets into money.
35 218. (1) A non-resident Indian may choose not to be governed by the Provisions not to
apply if the
provisions of sections 212 to 217 for any tax year by declaring it in his return of assessee so
income under section 263 for such tax year. and if he does so,— chooses.

(a) the provisions of sections 212 to 217 shall not apply to him for
that tax year, and
40 (b) his total income for that tax year shall be computed and charged
to tax according to the other provisions of this Act.
 252

Conversion of an 219. (1) Where a foreign company is engaged in the business of banking in
Indian branch of India through its branch situated in India and such branch is converted into a
foreign company
into subsidiary subsidiary Indian company as per the scheme framed by the Reserve Bank of India,
Indian company. then, irrespective of anything contained in this Act and subject to the conditions as
notified by the Central Government,— 5

(a) the capital gains arising from such conversion shall not be chargeable
to tax in the tax year in which such conversion takes place; and
(b) the provisions of this Act relating to––
(i) treatment of unabsorbed depreciation, set off or carry forward
and set off of losses; 10

(ii) tax credit in respect of tax paid on deemed income relating to

certain companies; and
(iii) computation of income of the foreign company and subsidiary
Indian company,
shall apply with such exceptions, modifications and adaptations as specified in that 15
notification.
(2) In case of failure to comply with any of the conditions specified in the
scheme or in the notification issued under sub-section (1), all the provisions of this
Act shall apply to the foreign company and the said subsidiary Indian company
without any benefit, exemption or relief under the said sub-section. 20

(3) Where, in a tax year, any benefit, exemption or relief has been claimed and
granted as per the provisions of sub-section (1) and, subsequently, there is failure to
comply with any of the conditions specified in the scheme or in the notification
issued under the said sub-section then,—
(a) such benefit, exemption or relief shall be deemed to have been 25
wrongly allowed;
(b) the Assessing Officer may, irrespective of anything in this Act,
re-compute the total income of the assessee for the said tax year and make the
necessary amendment; and
(c) the provisions of section 287 shall, so far as may be, apply thereto 30
and the period of four years specified in sub-section (8) of that section being
reckoned from the end of the tax year in which the failure to comply with the
condition referred to in sub-section (1) takes place.
(4) Every notification issued under this section shall be laid before each House
35
of Parliament.

Foreign 220. (1) Where a foreign company is said to be a resident in India in any tax
company said to year and such company has not been a resident in India in earlier tax years, then,
be resident in
India.
irrespective of anything in this Act and subject to the conditions as notified by the
Central Government in this behalf, the provisions of this Act relating to—
40
(a) the computation of total income;
(b) treatment of unabsorbed depreciation;

(c) set off or carry forward and set off of losses;

(d) collection and recovery; and
 253

(e) special provisions relating to avoidance of tax,

shall apply with such exceptions, modifications and adaptations as specified in
that notification for such tax years;
(2) Where the determination regarding foreign company to be resident in
5 India has been made in the assessment proceedings for any tax year, then, the
provisions of sub-section (1) shall also apply to any other tax year succeeding
such tax year, which ends on or before the date of completion of such assessment
proceeding.
(3) Where, in a tax year, any benefit, exemption or relief has been claimed
10 and granted to the foreign company as per the provisions of sub-section (1), and,
subsequently, there is failure to comply with any of the conditions specified in
the notification issued under the said sub-section, then,—

(a) such benefit, exemption or relief shall be deemed to have been

wrongly allowed;
15 (b) the Assessing Officer may, irrespective of anything in this Act,
re-compute the total income of the assessee for the said tax year and make
the necessary amendment as if the exceptions, modifications and
adaptation referred to in sub-section (1) did not apply; and
(c) the provisions of section 287 shall, so far as may be, apply thereto
20 and the period of four years specified in sub-section (8) of that section
being reckoned from the end of the tax year in which the failure to comply
with the condition referred to in sub-section (1) takes place.
(4) Every notification issued under this section shall be laid before each
House of Parliament.
25 F.—Special provisions relating to pass-through entities

221. (1) Irrespective of anything contained in this Act, where a person Tax on income
being an investor of a securitisation trust, receives any income or any income from
securitisation
accrues or arises to him, out of investments made in the securitisation trust, such trusts.
income shall be chargeable to income-tax in the same manner as if, it were the
30 income accruing or arising to, or received by, such person, had the investments
by the securitisation trust been made directly by him.
(2) The income paid or credited by the securitisation trust shall be deemed
to be of the same nature and in the same proportion in the hands of the person
referred to in sub-section (1), as if it had been received by, or had accrued or
35 arisen to, the securitisation trust during the tax year.
(3) The income accruing or arising to, or received by, the securitisation
trust during a tax year, if not paid or credited to the person referred to in
sub-section (1), shall be deemed to have been credited to the account of the said
person––
40 (a) on the last day of the tax year; and
(b) in the same proportion in which such person would have been
entitled to receive the income had it been paid in the tax year.
 254

(4) The person responsible for crediting or making payment of the income on
behalf of securitisation trust, and the securitisation trust, shall furnish, within such
period, as prescribed, to the person who is liable to tax in respect of such income
and to the prescribed income-tax authority, a statement in such form and verified in
such manner, giving details of the nature of the income paid or credited during the 5
tax year and such other relevant details, as prescribed.
(5) Any income which has been included in the total income of the person
referred to in sub-section (1) in a tax year, on account of it having accrued or arisen
in the said tax year, shall not be included in the total income of such person in the
tax year in which such income is actually paid to him by the securitisation trust. 10

(6) In this section,—

(a) “investor” means a person who is holder of any securitised debt
instrument or securities or security receipt issued by the securitisation trust;
(b) “securities” means debt securities issued by a Special Purpose
Vehicle as referred to in the guidelines on securitisation of standard assets 15
issued by the Reserve Bank of India;
(c) “securitised debt instrument” shall have the same meaning as
assigned to it in regulation 2(1)(s) of the Securities and Exchange Board of
India (Public Offer and Listing of Securitised Debt Instruments) Regulations,
2008 made under the Securities and Exchange Board of India Act, 1992 and 20 15 of 1992.
the Securities Contracts (Regulation) Act, 1956; 42 of 1956.

(d) “securitisation trust” means a trust, being a—

(i) “special purpose distinct entity” as defined in regulation 2(1)(u)
of the Securities and Exchange Board of India (Public Offer and Listing
of Securitised Debt Instruments) Regulations, 2008 made under the 25
Securities and Exchange Board of India Act, 1992 and the Securities 15 of 1992.
Contracts (Regulation) Act, 1956 and regulated under the said 42 of 1956.
regulations; or
(ii) “Special Purpose Vehicle” as defined in, and regulated by, the
guidelines on securitisation of standard assets issued by the Reserve 30
Bank of India; or
(iii) trust set-up by a securitisation company or a reconstruction
company formed, for the purposes of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002, or in pursuance of any guidelines or directions issued for the 35 54 of 2002.
said purposes by the Reserve Bank of India,
which fulfils such conditions, as prescribed;
(e) “security receipt” shall have the same meaning as assigned to it in
section 2(1)(zg) of the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002. 40 54 of 2002.

Tax on income 222. (1) Irrespective of anything contained in any other provision of this Act,
in case of
venture capital
where a person, out of investments made in a venture capital company or venture
undertakings. capital fund, receives any income, or any income accrues or arises to him, such
income shall be chargeable to income-tax in the same manner as if, it were the
income accruing or arising to, or received by, such person, had he made investments 45
directly in the venture capital undertaking.
 255

(2) The person responsible for crediting or making payment of the income on
behalf of a venture capital company or a venture capital fund and the venture capital
company or venture capital fund shall furnish, within such time, as prescribed, to
the person who is liable to tax in respect of such income and to the prescribed
5 income-tax authority, a statement in the prescribed form and verified in the
prescribed manner, giving details of the nature of the income paid or credited during
the tax year and such other relevant details, as prescribed.
(3) The income paid or credited by the venture capital company and the
venture capital fund shall be deemed to be of the same nature and in the same
10 proportion in the hands of the person referred to in sub-section (1) as it had been
received by, or had accrued or arisen to, the venture capital company or the venture
capital fund, as the case may be, during the tax year.
(4) The provisions of Chapter XIX-B shall not apply to the income paid by a
venture capital company or venture capital fund under this Chapter.
15 (5) The income accruing or arising to or received by the venture capital
company or venture capital fund during a tax year from investments made in venture
capital undertaking, if not paid or credited to the person referred to in sub-section (1),
shall be deemed to have been credited to the account of the said person––
(a) on the last day of the tax year; and
20 (b) in the same proportion in which such person would have been
entitled to receive the income had it been paid in the tax year.
(6) Any income which has been included in total income of the person referred
to in sub-section (1) in a tax year, on account of it having accrued or arisen in the
said tax year, shall not be included in the total income of such person in the tax year
25 in which such income is actually paid to him by the venture capital company or the
venture capital fund.
(7) Nothing contained in this section shall apply in respect of any income
accruing or arising to, or received by, a person from investments made in a venture
capital company or venture capital fund, being an investment fund specified in
30 section 224(10)(a).
(8) For the purposes of this section, “venture capital company”, “venture capital
fund” and “venture capital undertaking” shall have the meanings respectively assigned
to them in Schedule V (Note 4).
223. (1) Irrespective of anything contained in any other provisions of this Act, Tax on income
of unit holder
35 any income distributed by a business trust to its unit holders shall be deemed to be and business
of the same nature and in the same proportion in the hands of the unit holder as it trust.
had been received by, or accrued to, the business trust.
(2) Subject to the provisions of sections 196 and 197, the total income of a
business trust shall be charged to tax at the maximum marginal rate.
40 (3) If in any tax year, the distributed income or any part thereof, received by a
unit holder from the business trust is of the nature as referred to in Schedule V
(Table: Sl. No. 3) or (Table: Sl. No. 4), then, such distributed income or part thereof
shall be deemed to be income of such unit holder and shall be charged to tax as
income of the tax year.
45 (4) The provisions of sub-section (1) shall not apply in respect of any sum
referred to in section 92(2)(k) received by a unit holder from a business trust.
(5) Any person responsible for making payment of the income distributed on
behalf of a business trust to a unit holder, shall furnish a statement to the unit holder
and the prescribed authority, within such time and in such form and manner, as
 256

prescribed, giving the details of the nature of the income paid during the tax year
and such other details, as prescribed.
Tax on income 224. (1) Irrespective of anything contained in any other provision of this Act
of investment and subject to the provisions of this section, where a person, being a unit holder of
fund and its unit
holders. an investment fund, out of investments made in the investment fund, receives any 5
income or any income accrues or arises to him, such income shall be chargeable to
income-tax in the same manner as if, it were the income accruing or arising to, or
received by, such person, had the investments made by the investment fund been
made directly by him.
(2) Where in any tax year, the net result of computation of total income of 10
the investment fund, without giving effect to the provisions of Schedule V
(Table: Sl. No. 1), is a loss under any head of income and such loss cannot be or
is not wholly set off against income under any other head of income of the said
tax year, then out of such loss,––
(a) the loss arising to the investment fund as a result of the computation 15
under the head “Profits and gains of business or profession”, if any, shall be—
(i) allowed to be carried forward and it shall be set off by the
investment fund as per the provisions of Chapter VII; and
(ii) ignored for the purposes of sub-section (1);
(b) the loss other than the loss referred to in clause (a), if any, shall also 20
be ignored for the purposes of sub-section (1), if such loss has arisen in respect
of a unit which has not been held by the unit holder for at least twelve months.
(3) The loss other than the loss under the head “Profits and gains of business
or profession”, if any, accumulated at the level of investment fund as on the
31st March, 2019, shall be— 25

(a) deemed to be the loss of a unit holder who held the unit on the 31st
March, 2019 in respect of the investments made by him in the investment fund,
in the same manner as provided in sub-section (1); and
(b) allowed to be carried forward by such unit holder for the remaining
period calculated from the year in which the loss had occurred for the first 30
time taking that year as the first year and shall be set off by him in as per the
provisions of Chapter VII.
(4) The loss so deemed under sub-section (3) shall not be available to the
investment fund on or after the 1st April, 2019.
(5) The income paid or credited by the investment fund shall be deemed to be 35
of the same nature and in the same proportion in the hands of the person referred to
in sub-section (1), as if it had been received by, or had accrued or arisen to, the
investment fund during the tax year subject to the provisions of sub-section (2).
(6) The total income of the investment fund shall be charged to tax—
(a) at the rate or rates as specified in the Finance Act of the relevant year, 40
where such fund is a company or a firm; or
(b) at maximum marginal rate, in any other case.
(7) The income accruing or arising to, or received by, the investment fund,
during a tax year, if not paid or credited to the person referred to in sub-section (1),
shall subject to the provisions of sub-section (2), be deemed to have been credited 45
to the account of the said person on the last day of the tax year in the same proportion
in which such person would have been entitled to receive the income had it been
paid in the tax year.
 257

(8) Any income, which has been included in total income of the person
referred to in sub-section (1) in a tax year, on account of it having accrued or arisen
in the said tax year, shall not be included in the total income of such person in the
tax year in which such income is actually paid to him by the investment fund.
5 (9) The person responsible for crediting or making payment of the income on
behalf of an investment fund and the investment fund shall furnish, within such time,
as prescribed, to the person who is liable to tax in respect of such income and to the
prescribed income-tax authority, a statement in the prescribed form and verified in
such manner, giving details of the nature of the income paid or credited during the
10 tax year and such other relevant details, as prescribed.
(10) In this section,—
(a) “investment fund” means any fund established or incorporated in
India in the form of a trust or a company or a limited liability partnership or a
body corporate which has been––
15 (i) granted a certificate of registration as a Category I or a
Category II Alternative Investment Fund and is regulated under the
Securities and Exchange Board of India (Alternative Investment Funds)
Regulations, 2012 made under the Securities and Exchange Board of
15 of 1992. India Act, 1992; or
20 (ii) regulated under the International Financial Services Centres
Authority (Fund Management) Regulations, 2022 made under the
50 of 2019. International Financial Services Centres Authority Act, 2019;
2 of 1882. (b) “trust” means a trust established under the Indian Trusts Act, 1882 or under
any other law in force; and
25 (c) “unit” means beneficial interest of an investor in the investment fund or a
scheme of the investment fund and shall include shares or partnership interests.
G.—Special provisions relating to income of shipping companies
225. Irrespective of anything contained in sections 26 to 54, in the case of a Income from
business of
company, the income from the business of operating qualifying ships–– operating
qualifying ships.
30 (a) may, at its option, be computed as per provisions of this Part; and
(b) such income shall be deemed to be the profits and gains of such
business chargeable to tax under the head “Profits and gains of business or
profession”.
226.(1) In this Part, a company shall— Tonnage tax
scheme.
35 (a) be regarded as operating a ship or inland vessel, as the case may be,
if it operates any ship whether owned or chartered by it and includes a case
where even a part of the ship or inland vessel, as the case may be, has been
chartered in by it in an arrangement such as slot charter, space charter or joint
charter; and
40 (b) not be regarded as operating a ship or inland vessel, as the case may
be, which has been chartered out by it on bareboat charter-cum-demise terms
or on bareboat charter terms for a period exceeding three years.
(2) A tonnage tax company engaged in the business of operating qualifying
ships shall compute the profits from such business under the tonnage tax scheme.
45 (3) The tonnage tax business shall be considered as a separate business distinct
from all other activities or business carried on by the company.
 258

(4) The profits referred to in sub-section (2) shall be computed separately from
the profits and gains from any other business.
(5) The tonnage tax scheme shall apply only if an option to that effect is made
as per section 231.
(6) Where a company engaged in the business of operating qualifying ships,–– 5

(a) is not covered under the tonnage tax scheme; or

(b) has not made an option in respect of the tonnage tax scheme as per
section 231,
the profits and gains of such company from such business shall be computed as per
10
other provisions of this Act.
(7) Subject to the other provisions of this Part,––
(a) the tonnage income, shall be––
(i) computed as per section 227; and
(ii) deemed to be the profits chargeable under the head “Profits and
gains of business or profession”; and 15

(b) the relevant shipping income referred to in section 228(1) shall not
be chargeable to tax.
Computation of 227. (1) The tonnage income of a tonnage tax company for a tax year shall be
tonnage income. the aggregate of the tonnage income of each qualifying ship computed as per
sub-sections (2) and (3). 20

(2) For the purposes of sub-section (1), the tonnage income of each qualifying
ship shall be computed as per the following formula:––
TI= DTI x N
where,—
TI = the tonnage income of each qualifying ship; 25

DTI = the daily tonnage income of each qualifying ship;

N = the number of days, in the tax year, or in part of the tax year in
case the ship is operated by the company as a qualifying ship for only part
of the tax year.
(3) For the purposes of sub-section (2), the daily tonnage income of a 30
qualifying ship having tonnage referred to in column A of the Table below shall be
the amount specified in the corresponding entry in column B thereof.
Table
Sl. No. Qualifying ship having net tonnage Amount of daily tonnage
income 35

A B C
1. Up to 1,000. ₹ 70 for each 100 tons.
2. Exceeding 1,000 but not more than ₹ 700 plus ₹ 53 for each
10,000. 100 tons exceeding 1,000
tons. 40

3. Exceeding 10,000 but not more than ₹ 5,470 plus ₹ 42 for each
25,000. 100 tons exceeding 10,000
tons.
4. Exceeding 25,000. ₹ 11,770 plus ₹ 29 for
each 100 tons exceeding 45
25,000 tons.
 259

(4) In this Part, the tonnage shall—

(a) mean the tonnage of a ship or inland vessel, as the case may be,
indicated in the certificate referred to in sub-section (9); and
(b) include the deemed tonnage, being the tonnage in respect of an
5 arrangement of purchase of slots, slot charter and an arrangement of sharing
of break-bulk vessel, computed in the manner, as prescribed.
(5) The tonnage shall be rounded off to the nearest multiple of hundred tons
and for this purpose any tonnage consisting of kilograms shall be ignored and if the
tonnage so rounded off, as per clause (a), is not a multiple of hundred, then, if the
10 last figure in that amount is,—
(a) fifty tons or more, the tonnage shall be increased to the next higher
tonnage;
(b) less than fifty tons, the tonnage shall be reduced to the next lower
tonnage,
15 which is a multiple of hundred and the tonnage so rounded off shall be the tonnage
of the ship for the purposes of this section.
(6) No deduction or set off shall be allowed in computing the tonnage income
under this Part, irrespective of anything contained in any other provision of this Act.
(7) Where a qualifying ship is operated by two or more companies by way of––
20 (a) joint interest in the ship; or
(b) an agreement for the use of the ship,
and their respective shares are definite and ascertainable, the tonnage income of
each such company shall be an amount equal to a share of income proportionate to
its share of that interest.
25 (8) Subject to the provisions of sub-section (7), where two or more companies
are operators of a qualifying ship, the tonnage income of each company shall be
computed as if each had been the only operator.
(9) In this Part,––
(a) the tonnage of a ship or inland vessel, as the case may be, shall be
30 determined as per the valid certificate indicating its tonnage;
(b) “valid certificate” means,—
(i) in case of ships registered in India,—
(A) having a length of less than twenty-four metres, a certificate
issued under the Merchant Shipping (Tonnage Measurement of Ship)
44 of 1958. 35 Rules, 1987 made under the Merchant Shipping Act, 1958;
(B) having a length of twenty-four metres or more, an
international tonnage certificate issued under the provisions of the
Convention on Tonnage Measurement of Ships, 1969, as specified
in the Merchant Shipping (Tonnage Measurement of Ship) Rules,
40 1987 made under the said Act;
(ii) in case of ships registered outside India, a licence issued by the
Director-General of Shipping under section 406 or 407 of the Merchant
44 of 1958. Shipping Act, 1958 specifying the net tonnage on the basis of Tonnage
Certificate issued by the Flag State Administration, where the ship is
45
registered or any other evidence acceptable to the Director-General of
Shipping produced by the ship owner while seeking permission for
chartering in the ship;
(iii) in case of inland vessel registered in India, a certificate issued
24 of 2021. under the Inland Vessels Act, 2021.
 260

Relevant 228. (1) In this Part, the relevant shipping income of a tonnage tax
shipping income
and exclusion company means—
from book
profit.
(a) its profits from core activities referred to in sub-section (3); and
(b) its profits from incidental activities referred to in sub-section (7).
(2) Where the aggregate of all such incomes specified in sub-section (1)(b) 5
exceeds 0.25% of the turnover from core activities referred to in sub-section (3),
such excess shall not form part of the relevant shipping income for the purposes of
this Part and shall be taxable under the other provisions of this Act.
(3) The core activities of a tonnage tax company shall be—
(a) its activities from operating qualifying ships; and 10

(b) other ship-related or inland vessel related activities, as the case may
be, as follows:—
(i) shipping contracts in respect of—
(A) earning from pooling arrangements;
(B) contracts of affreightment; 15

(ii) specific shipping trades, being—

(A) on-board or on-shore activities of passenger ships
comprising of fares and food and beverages consumed on-board;
(B) slot charters, space charters, joint charters, feeder
services and container box leasing of container shipping. 20

(4) In sub-section (3)(b)(i),––

(a) “pooling arrangement” means an agreement between two or more
persons for providing services through a pool or operating one or more ships or
inland vessels as the case may be, and sharing earnings or operating profits on
the basis of mutually agreed terms; and 25

(b) “contract of affreightment” means a service contract under which a

tonnage tax company agrees to transport a specified quantity of specified
products at a specified rate, between designated loading and discharging ports
over a specified period.
(5) The Central Government, if it considers necessary or expedient so to do, 30
may, by notification, exclude any activity referred to in sub-section 3(b) or prescribe
the limit up to which such activities shall be included in the core activities for the
purposes of this section.
(6) Every notification issued under this Part shall be laid, as soon as may be
after it is issued, before each House of Parliament, while it is in session for a total 35
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 sessions aforesaid, both Houses agree in making any
modification in the notification, or both Houses agree that the notification should
not be issued, the notification shall thereafter have effect only in such modified form 40
or be of no effect; so, however, that any such modification or annulment shall be
without prejudice to the validity of anything previously done under that notification.
(7) The incidental activities shall be the activities which are incidental to the
core activities and as prescribed for the purpose.
(8) Where a tonnage tax company operates any ship or inland vessels as the 45
case may be, which is not a qualifying ship, the income attributable to operating
such non-qualifying ship shall be computed under other provisions of this Act.
(9) Where any goods or services held for the purposes of—
 261

(a) tonnage tax business are transferred to any other business carried on
by a tonnage tax company; or
(b) any other business carried on by such tonnage tax company are
transferred to the tonnage tax business,
5 and, in either case, the consideration, if any, for such transfer as recorded in the
accounts of the tonnage tax business does not correspond to the market value of
such goods or services as on the date of the transfer, then, the relevant shipping
income under this section shall be computed as if the transfer, in either case, had
been made at the market value of such goods or services as on that date.
10 (10) In sub-section (9), “market value”, in relation to any goods or services,
means the price that such goods or services would ordinarily fetch on sale in the
open market.
(11) Where, in the opinion of the Assessing Officer, the computation of the
relevant shipping income in the manner specified in sub-section (9) presents
15 exceptional difficulties, he may compute such income on such reasonable basis as
he considers fit.
(12) Where it appears to the Assessing Officer that, owing to the close
connection between the tonnage tax company and any other person, or for any other
reason, the course of business between them is so arranged that the business
20 transacted between them produces to the tonnage tax company more than the
ordinary profits which might be expected to arise in the tonnage tax business, the
Assessing Officer shall, in computing the relevant shipping income of the tonnage
tax company for the purposes of this Part, take income as may reasonably be deemed
to have been derived therefrom.
25 (13) In this Part, in case the relevant shipping income of a tonnage tax
company is a loss, then, such loss shall be ignored for the purposes of computing
tonnage income.
(14) Where a tonnage tax company also carries on any business or activity
other than the tonnage tax business, common costs attributable to the tonnage tax
30 business shall be determined on a reasonable basis.
(15) Where any asset, other than a qualifying ship, is not exclusively used for
the tonnage tax business by the tonnage tax company, depreciation on such asset
shall be allocated between its tonnage tax business and other business on a fair
proportion to be determined by the Assessing Officer, having regard to the use of
35 such asset for the purposes of the tonnage tax business and for the other business.
(16) The book profit or loss derived from the activities of a tonnage tax
company, referred to in sub-section (1), shall be excluded from the book profit of
the company for the purposes of section 206.
229. (1) For the purposes of computing depreciation under section 230(1)(d), Depreciation and
gains relating to
40 the depreciation for the first tax year of the tonnage tax scheme (herein referred to tonnage tax
as the first tax year) shall be computed on the written down value of the qualifying assets.
ships as specified under sub-section (2).
(2) The written down value of the block of assets, being ships or inland vessels
as the case may be, as on the first day of the first tax year, shall be divided in the
45 ratio of the book written down value of the qualifying ships (herein referred to as
the qualifying assets) and the book written down value of the non-qualifying ships
(herein referred to as the other assets), as per the following formula:––
D=AxB
B+C
50 E=AxC
B+C
 262

where,—
D = the written down value of the block of qualifying assets as on the
first day of the tax year;
E = the written down value of the block of other assets as on the first day
of the tax year; 5

A = the written down value of the existing block of assets, being ships
as on the last day of the immediately preceding tax year;
B = the aggregate of book written down value of qualifying assets as on
the last day of the preceding tax year; and
C = the aggregate of the book written down value of other assets as on 10
the last day of the preceding tax year.
(3) The block of qualifying assets as determined under sub-section (2) shall
constitute a separate block of assets for the purposes of this Part.
(4) Where an asset forming part of a block of,—
(a) qualifying assets begins to be used for purposes other than the tonnage 15
tax business, an appropriate portion of the written down value allocable to such
asset shall be reduced from the written down value of that block and shall be added
to the block of other assets as per the following formula:—
A=BxC
20
D
where,––
A = the appropriate portion to be added to the block of the
other assets;
B = the written down value of block of qualifying assets as
on the first day of the tax year; 25

C = the book written down value of qualifying asset which

begins to be used for purpose other than the tonnage tax business; and
D = the aggregate of book written down value of all the assets
forming the block of qualifying assets;
(b) other assets, begins to be used for tonnage tax business, an 30
appropriate portion of the written down value allocable to such asset shall be
reduced from the written down value of the block of other assets and shall be
added to the block of qualifying asset as per the following formula:—
E= F x G
35
I
where,—
E = the appropriate proportion to be added to the block of qualifying
asset;
F = the written down value of block of other assets as on the first
day of the tax year; 40

G = book written down value of the other asset which begins to be

used for tonnage tax business; and
I = the aggregate of book written down value of all the assets
forming the block of other assets.
(5) For the purposes of computing depreciation under section 230(1)(d) in 45
respect of an asset mentioned in sub-sections (4)(a) and (b), the depreciation
computed for the tax year shall be allocated in the ratio of the number of days for
which the asset was used for the tonnage tax business and for purposes other than
tonnage tax business.
 263

(6) For the removal of doubts, it is hereby declared that for the purposes of
this Act, the depreciation on the block of qualifying assets and block of other assets
so created shall be allowed as if such written down value referred to in
sub-section (2) had been brought forward from the preceding tax year.
5 (7) In this section,—
(a) “book written down value” means the written down value as per
books of accounts; and
(b) “written down value” means the written down value as calculated for
purposes of income-tax.
10 (8) Any profits or gains arising from the transfer of a capital asset being an
asset forming part of the block of qualifying assets shall be chargeable to
income-tax as per sections 67 and 74, and the capital gains so arising shall be
computed as per sections 67 to 81.
(9) For the purposes of computing such profits or gains, as referred to in
15 sub-section (8), the provisions of section 74 shall have effect as if for the words
“written down value of the block of assets”, the words “written down value of the
block of qualifying assets” had been substituted.
(10) In this section, “written down value of the block of qualifying assets”
means the written down value computed as per sub-section (2).
20 230. (1) Irrespective of anything contained in any other provision of this Exclusion of
deduction, loss,
Act, in computing the tonnage income of a tonnage tax company for any tax year set off etc.,
(herein referred to as the “relevant tax year”) in which it is chargeable to tax as
per this Part—
(a) sections 28 to 52 shall apply as if every loss, allowance or deduction
25 referred to therein and relating to or allowable for any of the relevant tax years,
had been given full effect to for that tax year itself;
(b) no loss referred to in section 108(1) or (2)(a) or 109 or 112(1) or
116(1), in so far as such loss relates to the business of operating qualifying
ships of the company, shall be carried forward or set off where such loss
30 relates to any of the tax years when the company is under the tonnage tax
scheme;
(c) no deduction shall be allowed under Chapter VIII in relation to the
profits and gains from the business of operating qualifying ships; and
(d) in computing the depreciation allowance under section 33, the
35 written down value of any asset used for the purposes of the tonnage tax
business shall be computed as if the company has claimed and has been
actually allowed the deduction in respect of depreciation for the relevant
tax years.
(2) Section 112 shall apply in respect of any losses that have accrued to a
40 company before its option for tonnage tax scheme and which are attributable to its
tonnage tax business, as if such losses had been set off against the relevant shipping
income in any of the tax years when the company is under the tonnage tax scheme.
(3) The losses referred to in sub-section (2) shall not be available for set off
against any income other than relevant shipping income in any tax year beginning
45 on or after the company exercises its option under section 231.
 264

(4) Any apportionment necessary to determine the losses referred to in

sub-section (2) shall be made on a reasonable basis.
Method of 231. (1) A qualifying company may opt for the tonnage tax scheme by making
opting of an application to the Joint Commissioner having jurisdiction over the company in
tonnage tax 5
scheme and the form and manner, as prescribed, for such scheme.
validity.
(2) A qualifying company may make an application within three months, of
the date of its incorporation, or of the date on which it becomes a qualifying
company for the first time.
(3) A Unit of an International Financial Services Centre which has availed of
deduction under section 147 may make an application within three months from the 10
date on which such deduction ceases.
(4) On receipt of an application for option for tonnage tax scheme under
sub-section (1), the Joint Commissioner may call for such information or documents
from the company as he thinks necessary in order to satisfy himself about the
eligibility of the company and after satisfying himself about such eligibility of the 15
company to make such option for tonnage tax scheme, he shall pass an order in
writing––
(a) approving the option for tonnage tax scheme; or
(b) refusing to approve the option for tonnage tax scheme, if he is not so
satisfied, 20

and a copy of such order shall be sent to the applicant.

(5) No order under sub-section 4(b) shall be passed unless the applicant has
been given a reasonable opportunity of being heard.
(6) Every order under sub-section (4) shall be passed before the expiry of three
months from the end of the quarter in which the application under sub-section (1) 25
was received.
(7) Where an order granting approval is passed under sub-section (4), the
provisions of this Part shall apply from the tax year in which the option for tonnage
tax scheme is exercised.
(8) An option for tonnage tax scheme, after it has been approved under 30
sub-section (4), shall remain in force for ten years from the date on which such
option has been exercised and shall be taken into account from the tax year in which
such option is exercised.
(9) An option for tonnage tax scheme shall cease to have effect from the tax
year, in which— 35

(a) the qualifying company ceases to be a qualifying company;

(b) a default is made in complying with the provisions contained in
section 232(1) to (20);
(c) the tonnage tax company is excluded from the tonnage tax scheme
under section 234; 40

(d) the qualifying company furnishes to the Assessing Officer, a

declaration in writing to the effect that the provisions of this Part may not be
made applicable to it,
and the profits and gains of the company from the business of operating qualifying
ships shall be computed as per other provisions of this Act. 45

(10) An option for tonnage tax scheme approved under sub-section (4) may be
renewed within one year from the end of the tax year in which the option ceases to
have effect.
 265

(11) The provisions of sub-sections (1) to (10) shall apply in relation to a

renewal of the option for tonnage tax scheme in the same manner as they apply in
relation to the approval of option for tonnage tax scheme.
(12) A qualifying company,––
5 (a) which on its own, opts out of the tonnage tax scheme; or
(b) which makes a default in complying with the provisions contained in
sections 232(1) to (20); or
(c) whose option has been excluded from tonnage tax scheme in
pursuance of an order made under section 234(4),
10 shall not be eligible to opt for tonnage tax scheme for ten years from the date of
opting out or default or order.
232. (1) A tonnage tax company shall, subject to and as per the provisions of Certain
conditions for
this section, be required to credit to a reserve account (herein referred to as the applicability of
Tonnage Tax Reserve Account) an amount, being 20% or more of the book profit tonnage tax
15 derived from the activities referred to in section 228(1)(a) and (b) in each tax year scheme.
to be utilised in the manner laid down in sub-section (6).
(2) In this section, “book profit” shall have the meaning assigned to it in
section 206(2) so far as it relates to the income derived from the activities referred
to in section 228(1)(a) and (b).
20 (3) Where the company has––
(a) book profit from the business of operating qualifying ships; and
(b) book loss from any other sources,
and consequently, the company is not in a position to create the full or any part of
the reserves under sub-section (1), the company shall create the reserves to the
25 extent possible in that tax year and the shortfall, if any, shall be added to the reserves
required to be created for the following tax year and such shortfall shall be deemed
to be part of the reserve requirement of that following tax year.
(4) For the purposes of sub-section (3), to the extent the shortfall in creation
of reserves during a particular tax year is carried forward to the following tax year
30 under the said sub-section, the company shall be considered as having created
sufficient reserves for the first mentioned tax year.
(5) Nothing contained in sub-section (4) shall apply in respect of the second
year in case the shortfall in creation of reserves continues for two consecutive tax
years.
35 (6) The amount credited to the Tonnage Tax Reserve Account under
sub-section (1) shall be utilised by the company before the expiry of eight years
following the tax year in which the amount was credited—
(a) for acquiring a new ship or new inland vessel, as the case may be,
for the purposes of the business of the company; and
40 (b) until the acquisition of a new ship or new inland vessel, as the case
may be, for the purposes of the business of operating qualifying ships other
than for distribution by way of dividends or profits or for remittance outside
India as profits or for the creation of any asset outside India.
 266

(7) Where any amount credited to the Tonnage Tax Reserve Account under
sub-section (1),—
(a) has been utilised for any purpose other than that referred to in
sub-section (6); or
(b) has not been utilised for the purpose specified in sub-section (6)(a); or 5

(c) has been utilised for the purpose of acquiring a new ship or new
inland vessel, as the case may be, as specified in sub-section (6)(a), but such
ship or new inland vessel, as the case may be, is sold or otherwise transferred,
other than in any scheme of demerger by the company to any person at any
time before the expiry of three years from the end of the tax year in which it 10
was acquired,
an amount which bears the same proportion to the total relevant shipping income of
the year in which such reserve was created, as the amount out of such reserve so
utilised or not utilised bears to the total reserve created during that year under
sub-section (1) shall be taxable under the other provisions of this Act— 15

(i) in a case referred to in clause (a), in the year in which the amount was
so utilised; or
(ii) in a case referred to in clause (b), in the year immediately following
eight years specified in sub-section (6); or
(iii) in a case referred to in clause (c), in the year in which the sale or 20
transfer took place.
(8) The income so taxable under the other provisions of this Act, referred to
in sub-section (7), shall be reduced by the proportionate tonnage income charged to
tax in the year of creation of such reserves.
(9) Irrespective of anything contained in any other provision of this Part, 25
where the amount credited to the Tonnage Tax Reserve Account as per
sub-section (1) is less than the minimum amount required to be credited under
sub-section (1), an amount which bears the same proportion to the total relevant
shipping income, as the shortfall in credit to the reserves bears to the minimum
reserve required to be credited under sub-section (1), shall not be taxable under the 30
tonnage tax scheme and shall be taxable under the other provisions of this Act.
(10) If the reserve required to be created under sub-section (1) is not created
for any two consecutive tax years, the option of the company for tonnage tax scheme
shall cease to have effect from the beginning of the tax year following the second
consecutive tax year in which the failure to create the reserve under sub-section (1) 35
had occurred.
(11) In this section, “new ship” or “new inland vessel”, as the case may be,
includes a qualifying ship which, before the date of acquisition by the qualifying
company was used by any other person, if it was not at any time previous to the date
40
of such acquisition owned by any person resident in India.
(12) A tonnage tax company, after its option has been approved under
section 231(4), shall comply with the minimum training requirement in respect of
trainee officers as per the guidelines made by the Director-General of Shipping and
notified by the Central Government.
(13) The tonnage tax company shall be required to furnish a copy of the 45
certificate issued by the Director-General of Shipping in the form and manner as
prescribed, along with the return of income under section 263 to the effect that such
company has complied with the minimum training requirement as per the guidelines
referred to in sub-section (12) for the tax year.
 267

(14) If the minimum training requirement is not complied with for any five
consecutive tax years, the option of the company for tonnage tax scheme shall cease
to have effect from the beginning of the tax year following the fifth consecutive tax
year in which the failure to comply with the minimum training requirement as per
5 sub-section (12) had occurred.
(15) In the case of every company which has opted for tonnage tax scheme,
not more than 49% of the net tonnage of the qualifying ships operated by it during
any tax year shall be chartered in.
(16) The proportion of net tonnage referred to in sub-section (15) in respect of a
10 tax year shall be calculated based on the average of net tonnage during that tax year.
(17) For the purposes of sub-section (16), the average of net tonnage shall be
computed in such manner, as prescribed, in consultation with the Director-General
of Shipping.
(18) Where the net tonnage of ships or new inland vessel, as the case may be,
15 chartered in exceeds the limit under sub-section (15) during any tax year, the total
income of such company in relation to that tax year shall be computed as if the
option for tonnage tax scheme does not have effect for that tax year.
(19) Where the limit under sub-section (15) had exceeded in any two
consecutive tax years, the option for tonnage tax scheme shall cease to have effect
20 from the beginning of the tax year following the second consecutive tax year in
which the limit had exceeded.
(20) In this section, the term “chartered in” shall exclude a ship or new inland
vessel, as the case may be, chartered in by the company on bareboat charter-cum-
demise terms.
25 (21) An option for tonnage tax scheme by a tonnage tax company shall not
have effect in relation to a tax year unless such company—
(a) maintains separate books of account in respect of the business of
operating qualifying ships; and
(b) furnishes, before the specified date referred to in sections 63, the report
30 of an accountant, in the prescribed form, duly signed and verified by such
accountant.
(22) A temporary cessation (as against permanent cessation) of operating any
qualifying ship by a company shall not be considered as a cessation of operating of
such qualifying ship and the company shall be deemed to be operating such
35 qualifying ship for the purposes of this Part.
(23) Where a qualifying company continues to operate a ship or new inland
vessel, as the case may be, which temporarily ceases to be a qualifying ship, such
ship or inland vessel, as the care may be shall not be deemed as a qualifying ship
for the purposes of this Part.
40 233. (1) Where there has been an amalgamation of a company with another Amalgamation
and demerger.
company or companies, then, subject to the other provisions of this section, the
provisions relating to the tonnage tax scheme shall, as far as may be, apply to the
amalgamated company, if it is a qualifying company.
(2) Where the amalgamated company is not a tonnage tax company, it shall
45 exercise an option for tonnage tax scheme under section 231(1) within three months
from the date of the approval of the scheme of amalgamation.
(3) Where the amalgamating companies are tonnage tax companies, the
provisions of this Part shall, as far as may be, apply to the amalgamated company
for such period as the option for tonnage tax scheme which has the longest unexpired
50 period continues to be in force.
 268

(4) Where one of the amalgamating companies is a qualifying company as on

the 1st October, 2004 and which has not exercised the option for tonnage tax scheme
before the 1st January, 2005, the provisions of this Part shall not apply to the
amalgamated company and the income of the amalgamated company from the
business of operating qualifying ships shall be computed as per the other provisions 5
of this Act.
(5) Where in a scheme of demerger, the demerged company transfers its
business to the resulting company before the expiry of the option for tonnage tax
scheme, then, subject to the other provisions of this Part, the tonnage tax scheme
shall, as far as may be, apply to the resulting company for the unexpired period, if 10
it is a qualifying company.
(6) The option for tonnage tax scheme in respect of the demerged company
shall remain in force for the unexpired period of the tonnage tax scheme if it
continues to be a qualifying company.
Avoidance of tax 234. (1) Subject to the provisions of this Part, the tonnage tax scheme shall not 15
and exclusion apply where a tonnage tax company is a party to any transaction or arrangement
from tonnage tax
scheme.
which amounts to an abuse of the tonnage tax scheme.
(2) For the purposes of sub-section (1), a transaction or arrangement shall be
considered an abuse, if the entering into or the application of such transaction or
arrangement results, or would but for this section have resulted, in a tax advantage 20
being obtained for—
(a) a person other than a tonnage tax company; or
(b) a tonnage tax company in respect of its non-tonnage tax activities.
(3) In this section, “tax advantage” includes—
25
(a) the determination of—
(i) the allowance for any expense or interest; or
(ii) any cost or expense allocated or apportioned,
which has the effect of reducing the income or increasing the loss, from
activities other than tonnage tax activities chargeable to tax, computed on the
basis of entries made in the books of account in respect of the tax year in which 30
the transaction was entered into; or
(b) a transaction or arrangement which produces to the tonnage tax
company more than ordinary profits which might be expected to arise from
tonnage tax activities.
(4) Where a tonnage tax company is a party to any transaction or arrangement 35
referred to in sub-section (1), the Assessing Officer shall, by an order in writing,
exclude such company from the tonnage tax scheme.
(5) The Assessing Officer shall pass an order under sub-section (4), after––
(a) giving an opportunity to the company by serving a notice calling
upon such company to show cause, on a date and time to be specified in the 40
notice, why it should not be excluded from the tonnage tax scheme; and
(b) obtaining prior approval of the Principal Chief Commissioner or
Chief Commissioner.
(6) The provisions of this section shall not apply where the company satisfies
the Assessing Officer that the transaction or arrangement was a bona fide 45
commercial transaction and had not been entered into for the purpose of obtaining
tax advantage under this Part.
 269

(7) Where an order has been passed under sub-section (4) by the Assessing
Officer excluding the tonnage tax company from the tonnage tax scheme, the option
for tonnage tax scheme shall cease to be in force from the first day of the tax year
in which the transaction or arrangement was entered into.
5 235. In this Part,— Interpretation.

(a) “bareboat charter” means hiring of a ship or inland vessel, as the case
may be, for a stipulated period on terms which give the charterer possession
and control of the ship or new inland vessel, as the case may be, including the
right to appoint the master and crew;
10 (b) “bareboat charter-cum-demise” means a bareboat charter where the
ownership of the ship or inland vessel, as the case may be, is intended to be
transferred after a specified period to the company to whom it has been chartered;
(c) “Director-General of Shipping” means the Director-General of
Shipping appointed by the Central Government under section 7(1) of the
44 of 1958. 15 Merchant Shipping Act, 1958;
(d) “factory ship” includes a vessel providing processing services in
respect of processing of the fishing produce;
(e) “fishing vessel” shall have the meaning assigned to it in section 3(12)
44 of 1958. of the Merchant Shipping Act, 1958;
20 (f) “inland vessel” shall have the meaning assigned to it in section 3(q)
24 of 2021. of the Inland Vessels Act, 2021;
(g) “pleasure craft” means a ship or inland vessel, as the case may be, of
a kind whose primary use is for the purposes of sport or recreation;
(h) “qualifying company” means a company, if—
25 (i) it is an Indian company;
(ii) the place of effective management of the company is in India;
(iii) it owns at least one qualifying ship; and
(iv) the main object of the company is to carry on the business of
operating ships,
30 and for the purposes of sub-clause (ii), “place of effective management of the
company” means—
(A) the place where the board of directors of the company or its
executive directors, make their decisions; or
(B) in a case where the board of directors routinely approve the
35 commercial and strategic decisions made by the executive directors or
officers of the company, the place where such executive directors or
officers of the company perform their functions.
(i) “qualifying ship” means a ship or inland vessel, as the case may be, if—
(i) it is a seagoing ship or vessel or inland vessel, as the case may
40 be, of fifteen net tonnage or more;
44 of 1958. (ii) it is a ship registered under the Merchant Shipping Act, 1958,
or a ship registered outside India in respect of which a licence has been
issued by the Director-General of Shipping under section 406 or 407 of
said Act or an inland vessel registered under the Inland Vessels Act,
24 of 2021. 45 2021, as the case may be; and
(iii) a valid certificate in respect of such ship or inland vessel, as the
case may be, indicating its net tonnage is in force,
 270

but does not include—

(A) a seagoing ship or vessel or inland vessel, as the case may be,
if the main purpose for which it is used is the provision of goods or
services of a kind normally provided on land;
(B) fishing vessels; 5

(C) factory ships;

(D) pleasure crafts;
(E) harbour and river ferries;
(F) offshore installations; and
(G) a qualifying ship which is used as a fishing vessel for more 10
than thirty days during a tax year;
(j) “seagoing ship” means a ship, if it is certified as such by the
competent authority of any country;
(k) “tonnage income” means the income of a tonnage tax company
computed as per the provisions of this Part; 15

(l) “tonnage tax activities” means the activities referred to in section 228(3)
and (7);
(m) “tonnage tax business” means the business of operating qualifying
ships giving rise to relevant shipping income as referred to in section 228(1);
(n) “tonnage tax company” means a qualifying company in relation to 20
which tonnage tax option is in force;
(o) “tonnage tax scheme” means a scheme for computation of profits and
gains of business of operating qualifying ships under the provisions of this Part
CHAPTER XIV
TAX ADMINISTRATION 25

A.—Authorities, jurisdiction and functions

Income-tax 236. For the purposes of this Act, there shall be the following classes of
authorities. income-tax authorities:—
(a) the Central Board of Direct Taxes constituted under the Central
30 54 of 1963.
Boards of Revenue Act, 1963;
(b) Principal Directors General of Income-tax or Principal Chief
Commissioners of Income-tax;
(c) Directors General of Income-tax or Chief Commissioners of
Income-tax;
(d) Principal Directors of Income-tax or Principal Commissioners of 35
Income-tax;
(e) Directors of Income-tax or Commissioners of Income-tax or
Commissioners of Income-tax (Appeals);
(f) Additional Directors of Income-tax or Additional Commissioners of
Income-tax or Additional Commissioners of Income-tax (Appeals); 40

(g) Joint Directors of Income-tax or Joint Commissioners of Income-tax

or Joint Commissioners of Income-tax (Appeals);
(h) Deputy Directors of Income-tax or Deputy Commissioners of
Income-tax;
 271

(i) Assistant Directors of Income-tax or Assistant Commissioners of

Income-tax;
(j) Income-tax Officers;
(k) Tax Recovery Officers; and
5 (l) Inspectors of Income-tax.
237. (1) The Central Government may appoint such persons as it thinks fit to Appointment of
income-tax
be income-tax authorities. authorities.
(2) The Central Government may, subject to the rules and its orders regulating
the conditions of service of persons in public services and posts, authorise the Board,
10 or a Principal Director General or Director General, or a Principal Chief
Commissioner or Chief Commissioner, or a Principal Director or Director, or a
Principal Commissioner or Commissioner, to appoint income-tax authorities below
the rank of a Deputy Commissioner or Assistant Commissioner.
(3) Subject to the rules and orders of the Central Government regulating the
15 conditions of service of persons in public services and posts, an income-tax
authority authorised in this behalf by the Board, may appoint such executive or
ministerial staff as may be necessary to assist it in the execution of its functions.
238. The Board may, by notification, direct that any income-tax authority or Control of
income-tax
authorities specified in the notification shall be subordinate to such other authorities.
20 income-tax authority or authorities as specified in such notification.
239. (1) The Board may issue such orders, instructions and directions to other Instructions to
subordinate
income-tax authorities as it considers fit for the proper administration of this Act, authorities.
and such authorities and all other persons employed in the execution of this Act shall
observe and follow such orders, instructions and directions.

25 (2) No orders, instructions or directions under sub-section (1) shall be

issued to—
(a) require any income-tax authority to make a particular assessment or
to dispose of a particular case in a particular manner; or
(b) interfere with the discretion of the Joint Commissioner (Appeals) or
30 Commissioner (Appeals) in the exercise of his appellate functions.
(3) Without prejudice to the foregoing power, the Board may,—
(a) if it considers necessary or expedient so to do for the proper and
efficient management of the work of assessment and collection of revenue,
issue, from time to time (whether by way of relaxation of any of the provisions
35 of section 263, 270, 271, 279, 280, 287, 298, 398(3), 406, 407, 423, 424, 425,
427, 428, 439, 448, 449 or otherwise), general or special orders in respect of
any class of incomes or class of cases,––
(i) setting forth directions or instructions (not being prejudicial to
assessees) as to the guidelines, principles or procedures to be followed
40 by other income-tax authorities in the work relating to assessment or
collection of revenue or the initiation of proceedings for the imposition
of penalties; and
(ii) any such order may, if the Board is of the opinion that it is
necessary in the public interest so to do, be published and circulated in
45 the prescribed manner for general information;
 272

(b) if it considers desirable or expedient so to do for avoiding genuine

hardship in any case or class of cases, by general or special order, authorise
any income-tax authority, not being a Joint Commissioner (Appeals) or a
Commissioner (Appeals) to admit an application or claim for any exemption,
deduction, refund or any other relief under this Act after the expiry of the 5
period specified in this Act for making such application or claim and deal with
the same on merits as per law;
(c) if it considers desirable or expedient so to do for avoiding genuine
hardship in any case or class of cases, by general or special order for reasons
to be specified therein, relax any requirement contained in any of the 10
provisions of Chapter IV or VIII, where the assessee has failed to comply with
any requirement specified in such provision for claiming deduction
thereunder, subject to the following conditions:—
(i) the default in complying with such requirement was due to
circumstances beyond the control of the assessee; and 15

(ii) the assessee has complied with such requirement before the
completion of assessment in relation to the tax year in which such
deduction is claimed.
(4) The Central Government shall cause every order issued under
sub-section (3)(c) to be laid before each House of Parliament. 20

Taxpayer’s 240. The Board shall adopt and declare a Charter for Taxpayers and issue such
Charter. orders, instructions, directions or guidelines to other income-tax authorities as it
considers fit for the administration of such Charter.
Jurisdiction of 241. (1) The income-tax authorities shall exercise all or any of the powers and
income-tax perform all or any of the functions conferred on, or assigned to, such authorities 25
authorities.
under this Act as per such directions as the Board may issue for the exercise of the
powers and performance of the functions by all or any of those authorities.
(2) Any income-tax authority, being an authority higher in rank, may, if so
directed by the Board, exercise the powers and perform the functions of an
income-tax authority lower in rank and any such direction issued by the Board shall 30
be deemed to be a direction issued under sub-section (1).
(3) The directions of the Board under sub-section (1) may authorise any other
income-tax authority to issue orders in writing for the exercise of the powers and
performance of the functions by all or any of the other income-tax authorities who
are subordinate to it. 35

(4) In issuing the directions or orders referred to in sub-sections (1), (2) and (3),
the Board or other income-tax authority authorised by it may have regard to any one
or more of the following criteria:—
(a) territorial area;
40
(b) persons or classes of persons;
(c) incomes or classes of income; and
(d) cases or classes of cases.
(5) Without prejudice to sub-sections (1), (2) and (3), the Board may, by
general or special order, subject to such conditions, restrictions or limitations as
specified therein–– 45

(a) authorise any Principal Director General or Director General or

Principal Director or Director to perform such functions of any other
income-tax authority as may be assigned to him by the Board;
 273

(b) empower the specified income-tax authority to issue orders in writing

that the powers and functions assigned to the Assessing Officer under this Act
in respect of any specified area, or persons or classes of persons, or incomes
or classes of income, or cases or classes of cases, shall be exercised or
5 performed by an Additional Commissioner or an Additional Director or a Joint
Commissioner or a Joint Director.
(6) Where any order is made under sub-section (5)(b), references in any other
provision of this Act or in any rule made thereunder, to the Assessing Officer shall
be deemed to be references to such Additional Commissioner or Additional Director
10 or Joint Commissioner or Joint Director by whom the powers and functions are to
be exercised or performed under such order, and any provision of this Act requiring
approval or sanction of the Joint Commissioner shall not apply.
(7) The directions and orders referred to in sub-sections (1), (2) and (3) may,
wherever considered necessary or appropriate for the proper management of work,
15 require two or more Assessing Officers (whether or not of the same class) to exercise
and perform, concurrently, the powers and functions in respect of any area, or
persons or classes of persons, or incomes or classes of income, or cases or classes
of cases, and––
(a) where such powers and functions are exercised and performed
20 concurrently by the Assessing Officers of different classes, any authority
lower in rank amongst them shall exercise the powers and perform the
functions as any higher authority amongst them may direct; and
(b) references in any other provision of this Act or in any rule made
thereunder to the Assessing Officer shall be deemed to be references to such
25 higher authority and any provision of this Act requiring approval or sanction
of any such authority shall not apply.
(8) Irrespective of anything contained in any direction or order issued under
this section, or in section 242, the Board may, by notification, issue any direction
for the purposes of furnishing of the return of income or the doing of any other act
30 or thing under this Act or any rule made thereunder by any person or class of
persons.
(9) The income-tax authority exercising and performing the powers and
functions in relation to the person or class of persons referred to in sub-section
(8) shall be such authority as specified in the notification issued under that
35 sub-section.
242. (1) Where an Assessing Officer has been vested with jurisdiction over Jurisdiction of
Assessing
any area by virtue of any direction or order issued under section 241(1) or (2) or (3), Officers.
he shall have jurisdiction within the limits of such area,—
(a) in respect of any person carrying on a business or profession, if the
40 place at which he carries on his business or profession is situated within the
area, or where his business or profession is carried on in more places than one,
if the principal place of his business or profession is situated within the
area; and
(b) in respect of any other person residing within the area.
45 (2) Where a question arises under this section as to whether an Assessing
Officer has jurisdiction to assess any person, the question shall be determined by the
specified income-tax authority.
 274

(3) Where under this section, a question arises relating to areas within the
jurisdiction of different specified income-tax authorities, the question shall be
determined––
(a) by the concerned specified income-tax authority concerned; or
(b) if they are not in agreement, by the Board or by such specified 5
income-tax authority as the Board may, by notification, specify.
(4) No person shall call in question the jurisdiction of an Assessing Officer,––
(a) where he has made a return under section 263(1), after the expiry of
one month from the date on which he was served with a notice under
section 268(1) or 270(8) or after the completion of the assessment, whichever 10
is earlier;
(b) where he has made no such return, after the expiry of the time
allowed by the notice under section 268(1) or 280(2) for the making of the
return or by the notice under section 271(2) to show cause why the assessment
should not be completed to the best of the judgment of the Assessing Officer, 15
whichever is earlier;
(c) where an action has been taken under section 247 or 248, after the
expiry of one month from the date on which he was served with a notice under
section 153C(2) of the Income-tax Act, 1961 or section 294(1)(a) or after the
completion of the assessment, whichever is earlier. 20

(5) Subject to the provisions of sub-section (4), where an assessee calls in

question the jurisdiction of an Assessing Officer, then the Assessing Officer shall,
if not satisfied with the correctness of the claim, refer the matter for determination
under sub-section (2) or (3) before the assessment is made.
(6) Irrespective of anything contained in this section or in any direction or 25
order issued under section 241, every Assessing Officer shall have all the powers
conferred under this Act on an Assessing Officer in respect of the income accruing
or arising or received within the area, if any, over which he has been vested with
jurisdiction by virtue of the directions or orders issued under section 241(1) or.
(2) or (3) or section (4). 30

Power to transfer 243. (1) The specified income-tax authority may transfer any case from one or
cases. more Assessing Officers subordinate to him (whether with or without concurrent
jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or
without concurrent jurisdiction) subordinate to him.
(2) If the Assessing Officer or Assessing Officers, from whom the case is to 35
be transferred and the Assessing Officer or Assessing Officers, to whom the case is
to be transferred are not subordinate to the same specified income-tax authority, and
the concerned specified income-tax authorities––
(a) are in agreement, then the specified income-tax authority from whose
jurisdiction the case is to be transferred may pass the order; 40

(b) are not in agreement, the order transferring the case may be passed
by the Board or any such specified income-tax authority as the Board may, by
notification, specify.
(3) The order of transfer under sub-section (1) or (2) may be passed by the
specified income-tax authority after giving the assessee a reasonable opportunity of 45
being heard wherever it is possible to do so and after recording his reasons therefor.
 275

(4) Nothing in sub-section (1) or (2) or (3) shall be considered to require any
opportunity of being heard to be given, where the transfer is from any Assessing
Officer or Assessing Officers (whether with or without concurrent jurisdiction) to
any other Assessing Officer or Assessing Officers (whether with or without
5 concurrent jurisdiction) and the offices of all such officers are situated in the same
city, locality or place.
(5) The transfer of a case under sub-section (1) or (2) may be made at any
stage of the proceedings, and it shall not be necessary to re-issue any notice already
issued by the Assessing Officer or Assessing Officers from whom the case is
10 transferred.
(6) For the purposes of section 241 and this section, “case”, in relation to any
person whose name is specified in any order or direction issued thereunder, means
all proceedings under this Act in respect of any year, which may—
(a) be pending on the date of that order or direction; or
15 (b) have been completed on or before such date; or
(c) be commenced after the date of such order or direction in respect of
any year.
(7) For the purposes of sections 241, 242 and this section, “specified income-
tax authority” means the Principal Director General or Director General or Principal
20 Chief Commissioner or Chief Commissioner or Principal Commissioner or
Commissioner.
244. (1) Whenever, in respect of any proceeding under this Act, an Change of
incumbent of an
income-tax authority ceases to exercise jurisdiction and is succeeded by another office.
who has and exercises jurisdiction, the income-tax authority so succeeding may
25 continue the proceeding from the stage at which the proceeding was left by his
predecessor.
(2) Before the proceeding referred to in sub-section (1) is so continued, the
assessee concerned may demand that––
(a) the previous proceeding or any part thereof be reopened; or
30 (b) he be reheard before any order of assessment is passed against him.
245. (1) The exercise of following powers for the purposes mentioned in Faceless
jurisdiction of
sub-section (2) shall be as per a Scheme made by the Central Government:–– income-tax
authorities.
(a) all or any of the powers and performance of all or any of the functions
conferred on, or, assigned to, income-tax authorities under this Act referred to
35 in section 241; or
(b) vesting the jurisdiction with the Assessing Officer under
section 242; or
(c) power to transfer cases under section 243; or
(d) exercise of jurisdiction in case of change of incumbency under
40 section 244.
(2) The purposes of the Scheme referred to in sub-section (1) shall be to impart
greater efficiency, transparency and accountability by—
(a) eliminating the interface between the income-tax authority and the
assessee or any other person, to the extent technologically feasible;
45 (b) optimising utilisation of the resources through economies of scale
and functional specialisation;
 276

(c) introducing a team-based exercise of powers and performance of

functions by two or more income-tax authorities, concurrently, in respect of
any area, or persons or classes of persons, or incomes or classes of income, or
cases or classes of cases, with dynamic jurisdiction.
(3) The Central Government may, for the purpose of giving effect to the 5
Scheme made under sub-section (1), by notification, direct that any of the provisions
of this Act shall not apply or shall apply with such exceptions, modifications and
adaptations as specified in such notification.

(4) Every notification issued under sub-sections (1) and (3) shall, as soon as
may be after the notification is issued, be laid before each House of Parliament. 10

B.—Powers

Power regarding 246. (1) The Assessing Officer, Joint Commissioner, Joint Commissioner
discovery, (Appeals), Commissioner (Appeals), Commissioner or Principal Commissioner, or
production of
evidence, etc. Chief Commissioner or Principal Chief Commissioner and the Dispute Resolution
Panel referred to in section 275(17)(a), shall, for the purposes of this Act, have the 15
same powers as are vested in a court under the Code of Civil Procedure, 1908, when 5 of 1908.
trying a suit in respect of the following matters:––
(a) discovery and inspection;

(b) enforcing the attendance of any person, including any officer of a

banking company and examining him on oath; 20

(c) compelling the production of books of account and other

documents; and

(d) issuing commissions.

(2) The powers conferred under sub-section (1) may also be exercised, in
respect of any person or class of persons, even when there are no proceedings 25
pending with respect to such person or class of persons, by the following
income-tax authorities:––
(a) any income-tax authority (not below the rank of Assistant
Commissioner of Income-tax) notified by the Board, for the purposes of
making any inquiry or investigation in relation to an agreement referred to in 30
section 159;

(b) the Principal Director General or Director General or Principal

Director or Director or Joint Director or Assistant Director for the purposes of
making any inquiry or investigation, if he has the reason to suspect that any
income has been concealed, or is likely to be concealed; and 35

(c) the authorised officer referred to in section 247(1), before taking

action under section 247(1)(b)(i) to (viii), or during the course of such action.
(3) Any income-tax authority exercising the powers referred to in
sub-sections (1) and (2) may, subject to the rules made in this behalf, impound any
books of account or other documents produced before it in any proceeding under 40
this Act.
(4) The Assessing Officer or the Assistant Director shall record the reasons
for impounding any books of account or other documents under sub-section (3) and
may retain such impounded books of account or other documents up to fifteen days
(exclusive of holidays), or for such further period, with the prior sanction of the 45
approving authority.
 277

247. (1) Where the competent authority, in consequence of information in his Search and
seizure.
possession, has reason to believe that—
(a) any person to whom a summons under section 246(1) or a notice
under section 268(1),––
5 (i) was issued to produce, or cause to be produced, any books of
account or other documents or any information stored in any electronic
media or a computer system, has omitted or failed to produce, or cause
to be produced, such books of account or other documents or such
information as required by such summons or notice; or
10 (ii) has been issued or might be issued, will not, or would not,
produce or cause to be produced, any books of account or other
documents or any information stored in an electronic media or a
computer system which will be useful for, or relevant to, any
proceedings under this Act; or
15 (b) any person is in possession of any asset or information in relation to
any asset and such asset represents either wholly or partly, income or property
which has not been, or would not be, disclosed, for the purposes of this Act,
or the Black Money (Undisclosed Foreign Income and Assets) and Imposition
22 of 2015. of Tax Act, 2015, (herein referred to as the undisclosed income or property in
20 this section),
then the approving authority may authorise any Joint Director or Joint
Commissioner or Assistant Director or Assistant Commissioner or Income-tax
Officer, or any Joint Director or Joint Commissioner, so authorised, may authorise
any Assistant Director or Assistant Commissioner or Income-tax Officer,
25 hereinafter referred to as the authorised officer to––
(i) enter and search any building, place, vessel, vehicle, aircraft where
he has reason to suspect that such assets, books of account, other documents,
or any information stored in an electronic media or computer systems are kept;
(ii) require any person, who is found to be in possession or control of
30 any books of account or other documents maintained in the form of electronic
record [as defined in section 2(1)(ha), (i), (j), (k), (l), (r), and (t) of the
21 of 2000. Information Technology Act, 2000], on computer systems, any information
stored in an electronic media or computer systems, to afford the authorised
officer with such reasonable technical and other assistance (including access
35 code, by whatever name called) as may be necessary to enable the authorised
officer to inspect any information, electronic records and communication or
data contained in or available on such computer systems;
(iii) break open the lock of any door, box, locker, safe, almirah, or other
receptacle for exercising the powers conferred by clause (i), to enter and
40 search any building, place, etc., where the keys thereof or the access to such
building, place, etc., is not available, or gain access by overriding the access
code to any said computer system, or virtual digital space, where the access
code thereof is not available;
(iv) search any person who has got out of, or is about to get into, or is in,
45 the building, place, vessel, vehicle or aircraft, if the authorised officer has
reason to suspect that such person has secreted about his person any such
books of account, other documents, computer systems or asset;
(v) place marks of identification on any books of account or other
documents or make or cause to be made extracts or copies therefrom and also
50 from computer systems;
(vi) make a note or an inventory of any such asset, and stock-in-trade of
the business, found as a result of such search;
 278

(vii) seize any such books of account, other documents, computer

systems, or asset (other than stock-in-trade of the business), found as a result
of such search;
(viii) serve an order of deemed seizure, on the owner or the person who
is in immediate possession or control thereof, of any valuable article or thing, 5
which is not stock-in-trade, not to remove, part with or otherwise deal with it,
except with the previous permission of the authorised officer, if it is not
possible or practicable to take physical possession or removal to a safe place
of such article or thing, due to its volume, weight, or other physical
characteristics or it being of a dangerous nature. 10

(2) If any building, place, vessel, vehicle or aircraft referred to in sub-section (1)(i)
is within the area of jurisdiction of any Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner, but such income-tax
authority has no jurisdiction over the person referred to in sub-section (1)(a) or(b), then,
irrespective of the fact that he has no jurisdiction, it shall be competent for him to 15
exercise the powers under sub-section (1), where he has reason to believe that any delay
in getting the authorisation from the income-tax authority having jurisdiction over such
person may be prejudicial to the interests of the revenue.
(3) If any Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner, in consequence of information in his possession, 20
has reason to suspect that any books of account, other documents, or any
information stored in an electronic media or computer systems, or asset in respect
of which an officer has been authorised by the competent authority to take action
under sub-section (1)(i) to (viii) are or is kept in any building, place, vessel, vehicle
or aircraft not mentioned in the authorisation under sub-section (1), then such 25
Principal Chief Commissioner or Chief Commissioner or Principal Commissioner
or Commissioner may, irrespective of anything contained in section 241, authorise
the said officer to take action under any of the clauses aforesaid in respect of such
building, place, vessel, vehicle or aircraft.
(4) The authorised officer may, where it is not practicable to seize, any such books 30
of account, other documents, computer systems, asset, bank locker, bank account, for
reasons other than deemed seizure under of sub-section (1) (viii),––
(a) serve an order on the owner or the person who is in immediate
possession or control thereof, not to remove, part with or otherwise deal with
it except with the previous permission of such officer and take such steps as 35
may be necessary for ensuring compliance with the order; and
(b) such order shall not remain in force for a period exceeding sixty days
from the date of the order and serving of such order shall not be deemed to be
seizure of such books of account, other documents or assets under
sub-section (1)(vii), 40

(5) The authorised officer may requisition the services of—

(a) any police officer or any officer of the Central Government, or of
both; or
(b) any person or entity as may be approved by the Principal Chief
Commissioner or the Chief Commissioner or the Principal Director General 45
or the Director General, as per with such procedure, as prescribed,
to assist him for all or any of the purposes specified in sub-sections (1) and (3) and
it shall be the duty of every such officer or person or entity to comply with such
requisition.
 279

(6) The authorised officer may, during the course of any search or seizure,
examine on oath any person who is found to be in possession or control or access
holder of any computer systems, books of account, other documents or asset, or any
other person who is present in the premises or is being searched, and––
5 (a) any statement made by the such person, during such examination
may thereafter be used in evidence in any proceeding under this Act; and
(b) the examination of any such person may be not merely in respect of
any books of account, other documents or assets found as a result of the search,
but also in respect of all matters relevant for the purposes of any investigation
10 connected with any proceeding under this Act.
(7) Where any books of account (in physical form or electronic form), other
documents or asset, is found in the possession or control of any person in the course
of a search, it may be presumed—
(a) that such books of account, computer systems, virtual digital space,
15 other documents or asset, belong or belongs to such person;
(b) that the contents of such books of account, other documents,
electronic content, records or communication found on such computer systems
or virtual digital space, are true;
(c) that the signature and every other part of such books of account and
20 other documents which purport to be in the handwriting of any particular
person or which may reasonably be assumed to have been signed by, or to be
in the handwriting of, any particular person, are in the handwriting of that
person; and
(d) in the case of a document stamped, executed or attested, that it was
25 duly stamped and executed or attested by the person by whom it purports to
have been so executed or attested, and that the electronic records, data,
communication, and information exchange carried out using such electronic
devices is presumed to be exchanged between the parties thereto.
(8) The authorised officer may, by order in writing, provisionally attach any
30 property belonging to the assessee, during the course of the search or seizure, or
within sixty days from the date of execution of the last of the authorisations for the
search and such provisional attachment shall––
(a) be made, if the authorised officer is satisfied, after recording the
reasons in writing, that it is necessary to do so in the interest of the revenue,
35 with the prior approval of Principal Director General or Director General or
the Principal Director or Director;
(b) be valid for six months from the end of the month in which the order
of provisional attachment is made, and the rules prescribed as referred to in
section 413 shall, mutatis mutandis, apply to such provisional attachment.
40 (9) The authorised officer may, during the course of the search or seizure, or
within sixty days from the date on which the last of the authorisations for search was
executed, make a reference to a Valuation Officer, or any person registered as a value
under section 514, or any person or entity registered by or under any law enforce,
requiring him to––
45 (a) estimate the fair market value of the property in the manner, as
prescribed; and
(b) submit a report of the estimate to the authorised officer or the
Assessing Officer, within sixty days from the date of receipt of such
reference.
 280

(10) The provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 relating 46 of 2023.
to searches and seizure shall apply, so far as may be, to search and seizure under
this section.
(11) The Board may make rules in relation to any search or seizure under this
section including providing for the procedure to be followed by the authorised 5
officer—
(a) for obtaining ingress into any building, place, vessel, vehicle or
aircraft to be searched where free ingress thereto is not available; and
(b) for ensuring safe custody of any books of account or other documents
10
or assets seized.
Powers to 248. (1) Where the approving authority, in consequence of information in his
requisition. possession, has reason to believe that—
(a) any person to whom a summons under section 246(1), or notice under
section 268(1) was issued to produce, or cause to be produced, any books of
account or other documents or any information stored in an electronic media 15
or a computer systems has omitted or failed to produce, or cause to be
produced, such books of account or other documents, or any information
stored in an electronic media or a computer systems as required by such
summons or notice and the said books of account or other documents or such
electronic media or computer systems have been taken into custody by any 20
officer or authority under any other law in force; or
(b) any books of account or other documents or any information stored
in an electronic media or a computer systems will be useful for, or relevant to,
any proceeding under this Act and any person to whom a summons or notice
as aforesaid has been or might be issued will not, or would not, produce or 25
cause to be produced, such books of account or other documents or any
information stored in an electronic media or a computer system on the return
of such books of account or other documents or such electronic media or
computer system by any officer or authority by whom or which such books of
account or other documents or such electronic media or computer system have 30
been taken into custody under any other law in force; or
(c) any assets represent either wholly or partly income or property which
has not been, or would not have been, disclosed for the purposes of this Act
by any person from whose possession or control such assets have been taken
into custody by any officer or authority under any other law in force, 35

then, the approving authority may authorise any, Joint Director or Joint
Commissioner or Assistant Director or Assistant Commissioner or Income-tax
Officer (hereinafter in this section and in section 489(2) referred to as the
requisitioning officer) to require the officer or authority referred to in clause (a) or
(b) or (c), to deliver such assets or books of account, other documents or such 40
electronic media or computer system to the requisitioning officer.
(2) On a requisition being made under sub-section (1), the officer or authority
referred to in clause (a) or (b) or (c), of that sub-section, shall deliver such assets or
books of account or other documents or electronic media or computer system to the
requisitioning officer either forthwith or when such officer or authority is of the 45
opinion that it is no longer necessary to retain the same in his or its custody.
(3) Where any assets or books of account or other documents or electronic
media or computer system have been delivered to the requisitioning officer, the
provisions of sections 247(7) to (11), 250 and 251shall, so far as may be, apply as
 281

if such books of account or other documents or electronic media or computer system

or assets had been seized under section 247 by the requisitioning officer from the
custody of the person referred to in sub-section (1) (a) or (b) or (c), and as if for the
words “the authorised officer”, occurring in any of the aforesaid sections 247(7) to
5 (11), 250and 251, the words “the requisitioning officer” were substituted.
249. The reason to believe or reason to suspect, as referred to in section 247 Reasons not to
or 248, recorded by the income-tax authority shall not be disclosed to any person or be disclosed.
authority or the Appellate Tribunal.
250. (1) The Assessing Officer may recover the tax liability (including Application of
seized or
10 penalty or interest payable other than advance tax) out of the assets seized under requisitioned
section 247 or requisitioned under section 248, and such liability shall be the assets.
aggregate of––
(a) any existing liability under this Act, or under the Income-tax
43 of 1961. Act, 1961 or the Black Money (Undisclosed Foreign Income and Assets) and
22 of 2015. 15 Imposition of Tax Act, 2015;
(b) any liability determined under this Act or under the Acts referred to in
clause (a), up to the date of completion of the assessment or reassessment or
recomputation in consequence to the search or the requisition;
(c) any liability in respect of which such person is in default or deemed to
43 of 1961. 20 be in default under this Act or under the Income-tax Act, 1961, determined on or
after the completion of the assessment or reassessment or recomputation in
consequence of the search or the requisition, and till the date of release of the
assets; and
(d) any liability arising on an application made before the Interim Board
43 of 1961. 25 of Settlement under section 245C(1) of the Income-tax Act, 1961.
(2) The Assessing Officer may release the assets seized or portion of such asset
to the person from whose custody the assets were seized, on an application made by
the person concerned within thirty days from the end of the month in which the asset
was seized, after fulfilment of the following requirements:––
30 (a) satisfying himself about the nature and source of acquisition of any
such asset;
(b) recovering any existing liability referred to in sub-section (1);
(c) obtaining prior approval of the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner.
35 (3) The assets referred to in sub-section (2) shall be released within one
hundred and twenty days from the date on which the last of the authorisations for
the search or requisition was executed.
(4) If the assets consist solely of money, or partly of money and partly of other
assets, the Assessing Officer may apply such money in the discharge of the liabilities
40 referred to in sub-section (1) and the assessee shall be discharged of such liability
to the extent of the money so applied.
(5) The assets, other than money, may also be applied for discharge of
liabilities referred to in sub-section (1) as remains undischarged and shall be
deemed to be under distraint as if such distraint was effected by the Assessing
45 Officer or Tax Recovery Officer under authorisation from the Principal Chief
Commissioner or Chief Commissioner or Principal Commissioner or
Commissioner and the recovery of any liability out of such assets shall be effected
in the manner as prescribed.
 282

(6) The mode of recovery of liabilities under sub-section (1) shall not preclude
the recovery of liabilities aforesaid by any other mode laid down in this Act.
(7) Any assets or proceeds thereof, which remain after the liabilities referred
to in sub-section (1) are discharged shall be forthwith made over or paid to the
concerned person. 5

(8) The Central Government shall pay simple interest at the rate of 0.5% for
every month or part of a month for the period on the amount determined in
accordance with the following formula:––
(A-B)+(C-D)
10
where —
A = the aggregate amount of money seized under section 247 or
requisitioned under section 248;
B = the amount of money, if any, released under sub-section (2);
C = the proceeds, if any, of the assets sold towards the discharge of the
liability under sub-section (1); and 15

D = the aggregate amount required to meet the liabilities referred to in

sub-section (1).
(9) The interest referred to in sub-section (8) shall run from the date
immediately following the expiry of one hundred and twenty days from the date on
which the last of the authorisations for the search under section 247 or requisition 20
under section 248, was executed to the date of completion of the assessment or
reassessment or recomputation.
Copying, 251. (1) Where, the authorised officer, referred to in section 247(1)(b) has no
extraction, jurisdiction over the person from whom the assets or books of account or other
retention and
release of books documents or electronic media or computer system were seized or requisitioned 25
of account and under section 247(1) or 248, he shall hand over the seized or requisitioned assets or
documents books of account or other documents or electronic media or computer system to the
seized or
requisitioned. Assessing Officer having jurisdiction over such person and such Assessing Officer
thereupon shall exercise the powers under sub-sections (2) to (4).
(2) The authorised officer or the Assessing Officer referred in sub-section (1), 30
shall, on an application made by the person referred to therein, allow him to make
copies or take extracts from, the material seized or requisitioned, at such place and
time as appointed, and in the presence of a person empowered by such officer in this
behalf.
(3) The authorised officer may–– 35

(a) retain the material seized or requisitioned, under section 247 or 248,
up to one month from the end of the quarter in which the order of assessment
or reassessment or recomputation is made;
(b) retain such material seized or requisitioned, beyond the period
specified in clause (a), after recording reasons in writing and obtaining 40
approval from the approving authority.
(4) The approving authority shall not allow the retention of material seized or
requisitioned, beyond thirty days from the date on which all proceedings under this
Act in respect of the years for which the material seized or requisitioned are relevant,
are completed. 45
 283

(5) If a person legally entitled to the material seized or requisitioned under

section 247(1) or section 248, objects for any reason, to the approval given by
approving authority under sub-section (3)(b), he may make an application to the
Board stating therein the reasons for such objection and requesting for the return
5 of the material seized or requisitioned and the Board may, after giving the
applicant an opportunity of being heard, pass such orders as it thinks fit.
252. (1) The Assessing Officer, the Joint Commissioner or the Joint Power to call for
information.
Commissioner (Appeals) or the Commissioner (Appeals) may, for the purposes
of this Act, require any—

10 (a) person, including a banking company or any officer thereof, to

furnish, within such time, requisite information or to furnish statements of
account and affairs verified in such manner specified by such authority,
giving such information in relation to such matters as, in the opinion of such
authority, will be useful for, or relevant to, any enquiry or proceedings under
15 this Act;
(b) firm to furnish him with a return of the names and addresses of the
partners of the firm and their respective shares;
(c) Hindu undivided family to furnish him with a return of the names
and addresses of the manager and the members of the family;
20 (d) person whom he has reason to believe to be a trustee, guardian or
agent, to furnish him with a return of the names of the persons for or of
whom he is trustee, guardian or agent, and of their addresses;
(e) assessee to furnish a statement of the names and addresses of all
persons to whom he has paid in any tax year, rent, interest, commission,
25 royalty or brokerage, or any annuity, not being any annuity taxable under
the head “Salaries” amounting to more than ten thousand rupees, or such
higher amount as prescribed, together with particulars of all such payments
made;
(f) dealer, broker or agent or any person concerned in the
30 management of a stock or commodity exchange to furnish a statement of
the names and addresses of all persons to whom he or the exchange has
paid any sum in connection with the transfer, whether by way of sale,
exchange or otherwise, of assets, or on whose behalf or from whom he or
the exchange has received any such sum, together with particulars of all
35 such payments and receipts.
(2) The powers conferred under sub-section (1)(a) may also be exercised by
the competent authority or the Assistant Director.
(3) The powers under sub-section (1)––
(a) shall not be exercised by any income-tax authority below the rank
40 of Principal Director or Director or Principal Commissioner or
Commissioner, other than the Joint Director or Assistant Director, without
the prior approval of the Principal Director or Director or, as the case may
be, the Principal Commissioner or Commissioner, in a case where no
proceeding is pending.
45 (b) may be exercised by an income-tax authority notified under
section 246(2)(a), for the purposes of an agreement referred to in
section 159, even if no proceedings are pending before it or any other
income-tax authority.
 284

Powers of 253. (1) Irrespective of anything contained in any other provision of this
survey.
Act, an income-tax authority may enter any place at which a business or
profession, or activity for charitable purpose is carried on, whether such place be
the principal place or not of such business or profession or of such activity for
charitable purpose, where such place— 5

(a) is within the limits of the area assigned to such authority; or

(b) is occupied by any person in respect of whom such authority
exercises jurisdiction; or
(c) in respect of which such authority is authorised for the purposes of
this section by income-tax authority, who is assigned the area within which 10
such place is situated or who exercises jurisdiction in respect of any person
occupying such place,
and, upon entry into such a place, may require any proprietor, trustee, employee
or any other person who may at that time and place be attending in any manner
to, or helping in, the carrying on of such business or profession or such activity 15
for charitable purpose—
(i) to provide the necessary technical and other assistance (including
access code) to enable the inspection of such books of account or other
documents, or computer system, or any other material connected with such
system including virtual digital space, as may be required and which may 20
be available at such place;
(ii) to provide the necessary facility to check or verify the asset, stock,
which may be found therein; and
(iii) to furnish such information as such authority may require as to any
matter which may be useful for, or relevant to, any proceeding under this Act. 25

(2) For the purposes of this section, a place where a business or profession, or
activity for charitable purpose is carried on shall also include any other place, whether
any business or profession or activity for charitable purpose is carried on therein or
not, in which the person carrying on such business or profession or activity for
charitable purpose states that any of his books of account or other documents or any 30
part of his cash or stock or other valuable article or thing or computer system relating
to such business or profession or activity for charitable purpose, are or is kept.
(3) An income-tax authority may enter any place of business or profession
or activity for charitable purpose referred to in sub-section (1), only during the
hours at which such place is open for the conduct of business or profession or 35
activity for charitable purpose and, in the case of any other place, only after
sunrise and before sunset.
(4) An income-tax authority acting under this section may, for the purposes
of verifying that tax has been deducted or collected at source as per the provisions
of Chapter XIX-B of this Act, after sunrise and before sunset, enter–– 40

(a) any office, or any other place where business or profession or

activity for charitable purpose is carried on, within the limits of the area
assigned to such authority; or
(b) any place in respect of which such authority is authorised for the
purposes of this section by an income-tax authority who is assigned the area 45
within which such place is situated or where books of account or documents
are kept,
and on entry to such office or place, the income-tax authority may require the
deductor or the collector or any other person who may at that time and place be
attending in any manner to such work— 50
 285

(i) to provide the necessary facility to inspect such books of account

or other documents, and access to electronic media or computer system, or
virtual digital space, as may be required; and
(ii) to furnish such information as may be required in relation to such matter.
5 (5) An income-tax authority acting under this section may—
(a) place marks of identification on the books of account or other
documents inspected by such authority and make or cause to be made
extracts or copies therefrom or from electronic media or computer system;
(b) record the statement of any person on oath which may be useful
10 for, or relevant to, any proceeding under this Act;
(c) impound and retain in custody any books of account or other
documents inspected by it, after recording reasons for doing so, for a period––
(i) of fifteen days (exclusive of holidays); or
(ii) exceeding fifteen days (exclusive of holidays) with the prior
15 approval of the approving authority;
(d) make an inventory of any asset or stock checked or verified by such
authority.
(6) The income-tax authority acting under sub-section (4) shall only
undertake the actions referred under sub-sections (5)(a) and (5)(b).
20 (7) An income-tax authority acting under this section shall, on no account,
remove or cause to be removed from the place wherein it has entered, any asset
or stock.
(8) The income-tax authority having regard to the nature and scale of
expenditure incurred, for the purposes of verifying the expenditure made by the person
25 in connection with any function, ceremony or event, if it is of the opinion that it is
necessary and expedient to do so, after such function, ceremony or event, may—
(a) require the person by whom such expenditure has been incurred or
any other person who is likely to possess the information regarding such
expenditure, to furnish such information which may be useful for, or
30 relevant to, any proceeding under this Act;
(b) record the statements of the person or any other person on oath in
this behalf; and
(c) any statement so recorded may thereafter be used as evidence in
any proceeding under this Act.
35 (9) If a person is required to provide facility to the income-tax authority to
inspect books of account or other documents in any form or to check or verify any
cash, stock or other valuable article or thing or to furnish any information or to
have his statement recorded, either refuses or evades to do so, the income-tax
authority shall have all the powers under section 246(1) for enforcing compliance
40 with the requirement.
(10) The action under this section shall be taken by an income-tax authority
with the prior approval of the Principal Director General or the Director General
or the Principal Chief Commissioner or the Chief Commissioner.
(11) In this section, “income-tax authority” means—
45 (a) a Principal Commissioner or Commissioner, a Principal Director
or Director, a Joint Commissioner or Joint Director, an Assistant Director or
a Deputy Director or an Assessing Officer, or a Tax Recovery Officer; and
 286

(b) includes an Inspector of Income-tax, for the purposes of

sub-sections, (1)(i), (5)(a) and (8),
who is subordinate to the Principal Director General or the Director General or
the Principal Chief Commissioner or the Chief Commissioner, as specified by the
Board. 5

Power to collect 254. (1) Irrespective of anything contained in any other provision of this
certain Act, an income-tax authority may, for the purposes of collecting any information
information.
which may be useful for, or relevant to, the purposes of this Act, enter––
(a) any building or place within the limits of the area assigned to such
10
authority; or
(b) any building or place occupied by any person in respect of whom
such authority exercises jurisdiction,
at which a business or profession is carried on, regardless of the fact that such
place be the principal place or not of such business or profession and require any
proprietor or employee or any other person, who may at that time and place, be 15
attending in any manner to, or helping in, or carrying on of such business or
profession, to furnish such information as prescribed.
(2) The income-tax authority may enter any place of business or profession
referred to in sub-section (1) only during the hours at which such place is open for
20
the conduct of business or profession.
(3) The income-tax authority acting under this section shall, on no account,
remove or cause to be removed from the building or place wherein it has entered,
any books of account or other documents or any cash or stock or other valuable
article or thing.
(4) In this section, “income-tax authority” means–– 25

(a) a Joint Commissioner, or a Joint Director or an Assistant Director

or an Assessing Officer; and
(b) an Inspector of Income-tax, authorised by the Assessing Officer to
exercise the powers conferred under this section in relation to the area in
respect of which the Assessing Officer exercises jurisdiction or part thereof. 30

Power to inspect 255. The Assessing Officer, assessment unit, verification unit, the Joint
registers of Commissioner or the Joint Commissioner (Appeals) or the Commissioner
companies.
(Appeals), or any person subordinate thereof and authorised in writing in this
behalf by such officer or authority, may inspect, and if necessary, take copies, or
cause copies to be taken, of any register of the members, debenture holders or 35
mortgagees of any company or of any entry in such register.
Power of 256. The competent authority shall be competent to make any enquiry under
competent this Act, and for this purpose, shall have all the powers that an Assessing Officer
authority.
has under this Act in relation to the making of enquiries.
Proceedings 257. (1) Any proceeding under this Act before an income-tax authority shall 40
before be deemed to be a judicial proceeding within the meaning of sections 229 and 267
income-tax 45 of 2023.
authorities to be and for the purposes of section 233 of the Bharatiya Nyaya Sanhita, 2023.
judicial
proceedings. (2) Every income-tax authority shall be deemed to be a Civil Court for the
46 of 2023.
purposes of section 215 of the Bharatiya Nagarik Suraksha Sanhita, 2023.
Disclosure of 258. (1) The Board or any other income-tax authority specified by it by an 45
information
relating to
order in this behalf, may furnish or cause to be furnished to—
assessees.
 287

(a) any officer, authority or body performing any functions under any
law relating to the imposition of any tax, duty or cess, or dealings in foreign
exchange as defined in section 2(n) of the Foreign Exchange Management
42 of 1999. Act, 1999; or
5 (b) such officer, authority or body performing functions under any
other law, if in the opinion of the Central Government it is necessary so to
do in the public interest, as it may specify by notification in this behalf,
any such information received or obtained by any income-tax authority in the
performance of its functions under this Act, as may, in the opinion of the Board
10 or other income-tax authority, be necessary for the purpose of enabling the officer,
authority or body, to perform his or its functions under that law.
(2) The Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner may furnish or cause to be furnished to a person,
the information relating to any assessee received or obtained by any income-tax
15 authority in the performance of his functions under this Act,––
(a) on an application made by such person to the aforesaid authorities
in the prescribed form and on being satisfied that it is in the public interest
so to do; and
(b) the decision of the Principal Chief Commissioner or Chief
20 Commissioner or Principal Commissioner or Commissioner in this behalf,
shall be final and shall not be called in question in any court of law.
(3) Irrespective of anything contained in sub-section (1) or (2) or any other
law in force, the Central Government may, having regard to the practices and
usages, customary or any other relevant factors, by notification, direct that no
25 information or document shall be furnished or produced by a public servant in
respect of such matters relating to such class of assessees except to such
authorities as specified in that notification.
259. (1) For the purposes of verification of information in the possession of Power to call for
information by
the prescribed income-tax authority, such authority may issue a notice requiring prescribed
30 any person to furnish any information as may be useful for, or relevant to, any income-tax
inquiry or proceeding under this Act in such form and manner and within such authority.
time, as specified in such notice.
(2) The prescribed income-tax authority may process and utilise such information
and document received by him as per the scheme notified under section 260.
35 260. (1) The Central Government may make a scheme, by notification, for the Faceless
collection of
purposes of calling for information under section 252, collecting certain information information.
under section 254, or calling for information by prescribed income-tax authority
under section 259, or exercise of power to inspect register of companies under
section 255, or exercise of power of Assessing Officer under section 256 so as to
40 impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the income-tax authority and the
assessee or any other person to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale
and functional specialisation;
45 (c) introducing a team-based exercise of powers, including to call for,
or collect, or process, or utilise, the information, with dynamic jurisdiction.
(2) The Central Government may, for the purpose of giving effect to this
scheme made under sub-section (1), by notification, direct that any of the
provisions of this Act shall not apply or shall apply with such exceptions,
50 modifications and adaptations as specified in the notification.
(3) Every notification issued under sub-sections (1) and (2) shall, as soon as
may be after the notification is issued, be laid before each House of Parliament.
 288

Interpretation. 261. For the purposes of this Chapter, the expressions—

(a) “approving authority” means––
(i) the Principal Director General or the Director General; or
(ii) the Principal Chief Commissioner or the Chief Commissioner; or
(iii) the Principal Director or the Director; or 5

(iv) the Principal Commissioner or the Commissioner;

(b) “asset” includes any money, bullion, jewellery or other valuable
article or thing, held in physical or virtual form;
(c) “authorised officer” means––
10
(i) the Joint Director or the Additional Director;
(ii) the Joint Commissioner or the Additional Commissioner;
(iii) the Assistant Director or the Deputy Director;
(iv) the Assistant Commissioner or the Deputy Commissioner; or
(v) the Income-tax Officer or the Tax Recovery Officer;
15
(d) “competent authority” means––
(i) the Principal Director General or the Director General; or
(ii) the Principal Chief Commissioner or the Chief
Commissioner; o
(iii) the Principal Director or the Director; or
(iv) the Principal Commissioner or the Commissioner; or 20

(v) the Joint Director or the Additional Director; or

(vi) the Joint Commissioner or the Additional Commissioner;
(e) “computer system” means computers, computer systems, computer
networks, computer resources, communication devices, digital or electronic
data storage devices, used on stand-alone mode or part of a computer 25
system, linked through a network, or utilised through intermediaries for
information creation or processing or storage or exchange, and includes the
remote server or cloud server or virtual digital space;
(f) “date on which the last of the authorisations for search was ]
30
executed” means—
(i) in the case of search, the date of conclusion of search as
recorded in the last panchnama drawn in relation to any person in
whose case the warrant of authorisation has been issued; or
(ii) in the case of requisition under section 248, the date of actual
receipt of the books of account or other documents or assets by the 35
requisitioning officer;
(g) “material seized” means books of account or other documents or
digital data storage devices, computer systems, and extracts seized from a
person during the course of search under section 247 or requisitioned under
section 248, and includes seizure of backup taken from any specialised 40
programs like tally software, excel sheets, word files and all electronic
records including data and information in the electronic form containing
figures and any other relevant noting, and shall be construed to mean as
book of accounts maintained by the said person;
 289

(h) “proceeding” means any proceeding in respect of any year, whether

43 of 1961. under the Income-tax Act, 1961or under this Act, which may be pending on
the date on which a search under section 247 or requisition under
section 248 is authorised or powers under section 253 are exercised, as the
5 case may be, or which may have been completed on or before such date and
43 of 1961. includes all proceedings under this Act or the Income-tax Act, 1961which
may be commenced after such date in respect of any year;
(i) “virtual digital space” means an environment, area or realm, that is
constructed and experienced through computer technology and not the
10 physical, tangible world which encompasses any digital realm that allows
users to interact, communicate and perform activities using computer
systems, computer networks, computer resources, communication devices,
cyberspace, internet, worldwide web and emerging technologies, using data
and information in the electronic form for creation or storage or exchange
15 and includes––
(i) email servers;
(ii) social media account;
(iii) online investment account, trading account, banking
account, etc.;
20 (iv) any website used for storing details of ownership of any asset;
(v) remote server or cloud servers;
(vi) digital application platforms; and
(vii) any other space of similar nature.
CHAPTER XV
25
RETURN OF INCOME
A.—Allotment of Permanent Account Number
262.(1) Every person who has not been allotted a Permanent Account Permanent
Number shall, within such time as prescribed, apply to the Assessing Officer for Account
Number.
its allotment if he fulfils any of the following conditions:—
30 (a) his total income or the total income of any other person for which
he is assessable under this Act during any tax year exceeded the maximum
amount not chargeable to income-tax;
(b) he is carrying on any business or profession whose total sales, turnover
or gross receipts are or is likely to exceed five lakh rupees in any tax year;
35 (c) he is required to furnish a return of income under section 263 for
any tax year; or
(d) he is a resident, other than an individual, which enters into a
financial transaction aggregating to two lakh fifty thousand rupees or more
in a tax year; or
40 (e) he is the managing director, director, partner, trustee, author,
founder, karta, chief executive officer, principal officer or office bearer of
the person referred to in clause (d) or any person competent to act on behalf
of the person referred to in clause (d).
 290

(2) Any person, not covered under sub-section (1) may apply to the
Assessing Officer for the allotment of a Permanent Account Number after which
the Assessing Officer shall allot a Permanent Account Number to such person.
(3) Every person shall quote Permanent Account Number in all his returns
to, or correspondence with, any income-tax authority and in all challans for the 5
payment of any sum due under this Act.
(4) Every person shall intimate the Assessing Officer of any change in his
address or in the name and nature of his business on the basis of which the
Permanent Account Number was allotted to him.
(5) Every person who is eligible to obtain Aadhaar number shall quote such 10
number in the application form for allotment of Permanent Account Number and
in the return of income.
(6)(a) Every person who has been allotted Permanent Account Number and
who is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to
the prescribed income-tax authority in such form and manner, as prescribed; 15
(b) if a person fails to intimate his Aadhaar number as per clause (a), the
Permanent Account Number allotted to that person shall be made inoperative in
such manner as prescribed.
(7) Every person who is required to furnish or intimate or quote his
Permanent Account Number under this Act, and who— 20

(a) has not been allotted a Permanent Account Number but possesses
the Aadhaar number, may furnish or intimate or quote his Aadhaar number
in lieu of the Permanent Account Number, and such person shall be allotted
a Permanent Account Number in the manner, as prescribed;
(b) has been allotted a Permanent Account Number, and who has 25
intimated his Aadhaar number as per sub-section (6) may furnish or intimate
or quote his Aadhaar number in lieu of the Permanent Account Number.
(8) A person who has already been allotted a Permanent Account Number
cannot apply, obtain or possess another Permanent Account Number.
(9)(a) Every person entering into such transaction, as prescribed, shall quote 30
his Permanent Account Number or Aadhaar number, in the documents pertaining
to such transactions and also authenticate such Permanent Account Number or
Aadhaar number, in the manner, as prescribed;
(b) every person receiving any document relating to the transactions referred
to in clause (a), shall ensure that Permanent Account Number or Aadhaar number, 35
has been duly quoted in such document and that such Permanent Account Number
or Aadhaar number is authenticated as prescribed.
(10) The Board may make rules providing for—
(a) the form, manner and time in which an application may be made
for the allotment of Permanent Account Number and the particulars which 40
such application shall contain;
(b) class or classes of persons who shall be required to apply for
allotment of Permanent Account Number;
(c) categories of documents pertaining to business or profession in
which Permanent Account Number shall be quoted by every person; 45

(d) the form and manner in which the person who has not been allotted
a Permanent Account Number shall make his declaration;
(e) manner of authentication of Permanent Account Number or
Aadhaar number;
(f) class or classes of persons to whom the provisions of this section 50
shall not apply having regard to the transactions or the circumstances.
 291

(11)(a) The Central Government may, by notification, specify any class or

classes of persons who shall apply to the Assessing Officer for the allotment of
Permanent Account Number within such time as mentioned in such notification;
(b) the class or classes of persons in clause (a) may include such persons––
5 (i) by whom tax is payable under this Act; or
(ii) by whom any tax or duty is payable under any other law in force; or
(iii) being importers and exporters, even when no tax is payable by them.
(12) The provisions of sub-sections (5) and (6) shall not apply to such person
or class or classes of persons or any State or part of any State, as notified by the
10 Central Government.
(13) In this section,—
(a) “Aadhaar number” shall have the same meaning as assigned to it
in section 2(a) of the Aadhaar (Targeted Delivery of Financial and Other
18 of 2016. Subsidies, Benefits and Services) Act, 2016;
15 (b) “Assessing Officer” includes an income-tax authority who is
assigned the duty of allotting permanent account number;
(c) “authentication” means the process by which the Permanent
Account Number or Aadhaar number along with demographic information
or biometric information of an individual is submitted to the income-tax
20 authority or such other authority or agency as prescribed for its verification
and such authority or agency verifies the correctness, or the lack thereof, on
the basis of information available with it.
B.—Filing of return of income and processing
263. (1)(a) The following persons shall furnish a return of income for the Return of
income.
25 tax year under this Act, on or before the due date:—
(i) a company;
(ii) a firm;
(iii) a person other than a company or a firm, if his total income or the
total income of any other person in respect of which he is assessable under this
30 Act during the tax year, without giving effect to the provisions of
Chapter XVII-B or provisions of Schedule VIII (Table: Sl. No. 1) or deductions
allowable under Chapter IV-E (Capital Gains) or Chapter VIII, as the case may
be, exceeded the maximum amount which is not chargeable to income-tax;
(iv) a specified entity if its total income without giving effect to the
35 provisions of section 11, exceeds the maximum amount which is not
chargeable to income-tax;
(v) a University, college or other institution as referred to in section 45(3)(a);
(vi) a business trust;
(vii) an investment fund as referred to in section 224;
40 (viii) a person who has sustained a loss in the tax year under the head
“Profits and gains of business or profession” or under the head “Capital
gains” and who intends to claim that such loss, or any part thereof, is to be
carried forward as per this Act;
(ix) a person who intends to make a claim of refund under Chapter XX;
45 (x) a person, who is a resident, other than not ordinarily resident, and
who at any time during the tax year,––
(A) holds, as a beneficial owner or otherwise, any asset
(including any financial interest in an entity) located outside India, or
has signing authority in any account located outside India; or
 292

(B) is a beneficiary of any asset (including any financial interest

in an entity) located outside India, except where any income arising
from such asset is includible in the income of person referred to in
item (A);
(xi) a person, other than a company or firm, who during the tax year, 5
fulfils such conditions as prescribed;
(b) for the purposes of this section, “due date” means the date of the financial
year succeeding the relevant tax year as mentioned in the corresponding entry of
column C of the Table below in respect of the persons mentioned in column B of
10
the said Table below:
Table
Sl. No. Person Due date
A B C
1. Company. 31st October.
2. Person (other than a company) 31st October. 15
whose accounts are required to be
audited under this Act or under any other
law in force.
3. Partner of a firm whose accounts 31st October.
are required to be audited under this Act 20
or under any other law in force; or the
spouse of such partner (if section 10
applies to such spouse).
4. Assessee, including the partners of 30th November.
the firm or the spouse of such partner (if 25
section 10 applies to such spouse), who
is required to furnish a report referred to
in section 172.
5. Any other assessee. 31st July.
(2)(a) The Board may make rules providing for the prescribed form for 30
furnishing return of income, manner of its verification and such other particulars
including––
(i) the class or classes of persons who shall be required to furnish the
return in electronic form or otherwise;
(ii) the form and the manner in which the return may be furnished, 35
whether in electronic form or otherwise;
(iii) the documents, statements, receipts, certificates, audited reports
or any other documents which may not be furnished along with the return in
electronic form but shall be produced before the Assessing Officer on
40
demand;
(iv) the computer resource or the electronic record to which the return
in electronic form may be transmitted;
(b) the particulars prescribed under clause (a) may also include––
(i) income exempt from tax;
(ii) assets of the prescribed nature and value held by the assessee as a 45
beneficial owner or otherwise or in which he is a beneficiary;
(iii) bank account and credit card held by the assessee;
 293

(iv) expenditure exceeding the prescribed limit incurred by the

assessee under prescribed heads;
(v) such other outgoings as prescribed;
(vi) the report of any audit referred to in section 63 or a copy thereof;
5 (vii) the particulars of the location and style of the principal place of
the business or profession and all the branches thereof;
(viii) the names and addresses of the partners, if any, in the business
or profession;
(ix) the names of the other members of the association of person or the
10 body of individuals and the extent of the share of the assessee and the shares
of all such members, in the profits of the business or profession and any
branches thereof.
(3) The Central Government may, by notification, exempt any class or
classes of persons, from the obligation to file a return of income under this section,
15 subject to the conditions specified therein.
(4) Any person who has not furnished a return within the time allowed to
him under sub-section (1), may furnish the return for any tax year at any time
within nine months from the end of the relevant tax year, or before the completion
of the assessment, whichever is earlier.
20 (5) If any person, having furnished a return under sub-section (1) or
sub-section (4), discovers any omission or any wrong statement therein, he may
furnish a revised return at any time within nine months from the end of the relevant
tax year, or before the completion of the assessment, whichever is earlier.
(6)(a) Any person, whether or not he has furnished a return under
25 sub-section (1) or (4) or (5) for a tax year, may furnish an updated return of his
income or the income of any other person in respect of which he is assessable
under this Act, at any time within forty-eight months from the end of the financial
year succeeding the relevant tax year;
(b) the provisions of clause (a) shall continue to apply for a tax year if any person
30 has sustained a loss in the said tax year and has furnished a return of loss within the
due date specified under sub-section (1) and the updated return is a return of income;
(c) the provisions of clause (a) shall not apply for a tax year for any person, if––
(i) the updated return is a return of loss;
(ii) the updated return has the effect of decreasing the total tax liability
35 determined on the basis of return furnished under sub-section (1) or (4) or (5)
for the said tax year;
(iii) the updated return results in refund where no refund was due or
increases the refund due on the basis of return furnished under sub-section (1)
or (4) or (5) for the said tax year;
40 (iv) an updated return has already been furnished;
(v) any proceeding for assessment or reassessment or recomputation
or revision of income under this Act is pending or has been completed for
the said tax year;
(vi) the Assessing Officer is in the possession of information in respect
45 of such person for the said tax year regarding violation of specified laws and
the same has been communicated to him prior to the date of furnishing of
updated return;
 294

(vii) information for the said tax year has been received under an
agreement referred to in section 159 in respect of such person and the same has
been communicated to him, prior to the date of furnishing of updated return;
(viii) any prosecution proceedings under the Chapter XXII have been
initiated for the said tax year in respect of such person, prior to the date of 5
furnishing of updated return; or
(ix) thirty-six months have expired from the end of the financial year
succeeding the relevant tax year, and any notice to show-cause under
section 281has been issued in his case, except where an order has been
passed under section 281(3) determining that it is not a fit case to issue 10
notice under section 280; or
(x) he is such person or belongs to such class of persons, as notified
by the Board in this regard;
(d) a person shall also not be eligible to furnish an updated return of income,
15
where—
(i) a search has been initiated under section 247 or books of account
or other documents or any assets are requisitioned under section 248 in the
case of that person;
(ii) a survey has been conducted under section 253, other than
sub-section (4) of the said section, in the case of that person; or 20

(iii) a notice has been issued to the effect that any money, bullion,
jewellery, virtual digital asset or valuable article or thing, seized or
requisitioned under section 247 or 248 in the case of any other person, belongs
to that person; or
(iv) a notice has been issued to the effect that any books of account or 25
documents, seized or requisitioned under section 247 or 248 in the case of
any other person, pertain or pertains to, or any other information contained
therein, relate to, that person,
for the tax year in which such search is initiated or survey is conducted or
requisition is made and any tax year preceding such tax year. 30

(7) A return of income furnished under this section, shall be treated as

defective if it is not in conformity with all the conditions as prescribed and shall
be dealt with in the following manner:––
(a) where the Assessing Officer considers that the return of income
furnished by the assessee is defective, he may intimate the defect to the 35
assessee and give him an opportunity to rectify the defect within fifteen days
from the date of such intimation or within a further period as may be allowed
on an application made by the assessee in this behalf;
(b) if the defect is not rectified within the period allowed under clause (a),
then the return shall be treated as an invalid return and the provisions of this Act 40
shall apply as if the assessee had failed to furnish the return;
(c) where the assessee rectifies the defect after the expiry of the period
allowed under clause (a), but before the assessment is made, the Assessing
Officer may condone the delay and treat the return as a valid return.
(8)(a) The provisions of this section shall also apply to a return of income 45
which is furnished in pursuance of an order passed under section 239(4)(3)(b);
(b) the provisions of this section shall not apply to a specified senior citizen,
as referred to in section 402(39), for the relevant tax year in which tax has been
deducted at source under section 393(1) [Table: Sl. No. 8 (iii)].
(9) In this section,–– 50

(a) “beneficial owner”, in respect of an asset means an individual who has

 295

provided, directly or indirectly, consideration for the asset for the immediate or
future benefit, direct or indirect, of himself or any other person;
(b) “beneficiary”, in respect of an asset means an individual who
derives benefit from the asset during the tax year and the consideration
5 for such asset has been provided by any person other than such
beneficiary;
(c) “specified entity” means––
(i) research association referred to in Schedule III (Table: Sl. No. 23);
(ii) association or institution referred to in Schedule III
10 (Table: Sl. No. 24);
(iii) person referred to in Schedule VII (Table: Sl. No. 2);
(iv) institution referred to in Schedule III (Table: Sl. No. 25);
(v) any University or other educational institution or any hospital
or other medical institution referred to in Schedule VII
15 (Table: Sl. Nos. 17, 18 and 19);
(vi) Mutual Fund referred to in Schedule VII (Table: Sl. No. 20
and 21);
(vii) securitisation trust referred to in Schedule III (Table: Sl. No. 26);
(viii) Investor Protection Fund referred to in Schedule III
20 (Table: Sl. No. 28 and 29);
(ix) Core Settlement Guarantee Fund referred to in Schedule III
(Table: Sl. No. 30);
(x) venture capital company or venture capital fund referred to
in Schedule V (Table: Sl. No. 6);

25 (xi) trade union or association referred to in Schedule III

(Table: Sl. No. 31);
(xii) Board or Authority referred to in Schedule VII
(Table: Sl. No. 33 and 40);
(xiii) Body or Authority or Board or Trust or Commission (by
30 whatever name called) referred to in Schedule III (Table: Sl. No. 36);
(xiv) infrastructure debt fund referred to in Schedule VII
(Table: Sl. No. 46);
(d) “specified laws” shall refer to the Smugglers and Foreign
13 of 1976. Exchange Manipulators (Forfeiture of Property) Act, 1976, or the
45 of 1988. 35 Prohibition of Benami Property Transactions Act, 1988, or the Prevention
15 of 2003. of Money-laundering Act, 2002, or the Black Money (Undisclosed Foreign
22 of 2015. Income and Assets) and Imposition of Tax Act, 2015.
264. (1) The Board may make a Scheme for furnishing returns of income Scheme for
submission of
through a tax return preparer and such Scheme shall be notified, which— returns through
tax return
40 (a) may enable any specified class or classes of persons in preparing preparers.
and furnishing returns of income through a tax return preparer authorised to
act as such under the Scheme;
(b) may be made irrespective of provisions of section 263.
 296

(2) In this section,—

(a) “tax return preparer” means any individual, not being a person
referred to in section 515(3)(a)(ii) or an employee of the “specified class or
classes of persons”, who has been authorised to act as a tax return preparer
under the Scheme made under this section; 5

(b) “specified class or classes of persons” means any person, other

than a company or a person, whose accounts are required to be audited under
section 63 or under any other law, who is required to furnish a return of
income under this Act.

(3) Every notification for the Scheme referred to in sub-section (1) shall be 10
issued as per section 534 of this Act.
Return by whom 265. The return of income under section 263 required to be furnished by the
to be verified.
person specified in column B of the Table below shall be verified by the person
specified in corresponding entry in column C of the said Table:

Table 15

Sl. Person furnishing return To be verified

No. of income

A B C

1. An individual. (i) By the individual himself;

(ii) where the individual is mentally 20

incapacitated from attending to his affairs, by
his guardian or any other person competent
to act on his behalf;

(iii) where, for any other reason, it is not

possible for the individual to verify the 25
return, by any person duly authorised by him
through a valid power of attorney.

2. A Hindu undivided (i) By the karta;

family.
(ii) where the karta is absent from India or 30
is mentally incapacitated from attending to
his affairs, by any other adult member of
such family.

3. A company [in cases (i) By the managing director of the

other than those company; 35
mentioned at serial
numbers 4, 5,6 and 7]. (ii) where there is no managing director,
or the managing director is not able to
verify the return due to any unavoidable
reason, by any director of the company or
any other person as prescribed for 40
verifying the return.
 297

A B C
4. A company not being By any person holding a valid power of
resident in India. attorney from the company to do so.
5. A company which is By the liquidator as referred to in
5 being wound up by the section 322(1).
Court or otherwise, or
where any person has
been appointed as
receiver of any assets of
10 the company.
6. A company whose By the principal officer of the company.
management has been
taken over by the
Central Government or
15 any State Government
under any law.
7. A company, for which By the insolvency professional appointed
application seeking by such Adjudicating Authority, where—
corporate insolvency Note.––“Insolvency professional” and
20 resolution process has “Adjudicating Authority” shall have the
been admitted by the same meanings as assigned to them
Adjudicating Authority respectively in sections 3(19) and 5(1) of
under sections 7 or 9 or 10 the Insolvency and Bankruptcy Code,
of the Insolvency and 2016 (31 of 2016).
25 Bankruptcy Code, 2016
(31 of 2016).
8. A firm. (i) By the managing partner of the firm;
(ii) where the managing partner is not able
to verify the return due to any unavoidable
30 reason, or there is no managing partner as such,
by any partner of the firm, not being a minor.
9. A limited liability (i) By the designated partner of the limited
partnership. liability partnership;
(ii) where the designated partner of the
35
limited liability partnership is not able to
verify the return due to any unavoidable
reason, or where there is no designated
partner, by any partner of the limited liability
partnership or any other person as prescribed
40 for verifying the return.
10. A local authority. By the principal officer of the local
authority.
11. A political party as By the chief executive officer of such
referred to in section political party (whether the chief executive
45 263(1)(a)(iii). officer is known as secretary or by any other
designation).
12. Any other association. (i) By any member of the association; or
(ii) by the principal officer of the
association.
50 13. Any other person. (i) By the person himself; or
(ii) by any person competent to act on his
behalf.
 298

Self-assessment. 266. (1) Where, after taking into account the amounts referred to in
sub-section (2), any tax is payable on the basis of any return required to be
furnished under section 263 or 268 or 280 or 294, then––
(a) the assessee shall be liable to pay such tax together with interest
and fee payable under any provision of this Act for any delay in furnishing 5
the return or any default or delay in payment of advance tax, before
furnishing the return; and
(b) the return shall be accompanied by proof of payment of tax, interest
and fee.
(2) The amounts referred to in sub-section (1) shall be,— 10

(a) the amount of tax, if any, already paid under any provision of this Act;
(b) any tax deducted or collected at source;
(c) any relief of tax claimed under section 157;
(d) any relief of tax or deduction of tax claimed under
section 159(1) or 160 on account of tax paid in a country outside India; 15

(e) any relief of tax claimed under section 159(2) on account of tax paid in
any specified territory outside India referred to in that section;
(f) any tax credit claimed to be set off as per section 206(13); and
(g) any tax or interest payable according to the provisions of
20
section 391(2).
(3) Where the amount paid by the assessee under sub-section (1) falls
short of the aggregate of the tax, interest and fee as payable under the said
sub-section, the amount so paid shall be adjusted towards the fee payable and
thereafter towards the interest payable and the balance, if any, shall be
25
adjusted towards the tax payable.
(4) For the purposes of sub-section (1), interest payable under section 423
shall be computed on the tax on the total income as declared in the return as
reduced by the amount of,—
(a) advance tax, if any, paid;
30
(b) any tax deducted or collected at source;
(c) any relief of tax claimed under section 157;
(d) any relief of tax or deduction of tax claimed under
section 159(1) or 160 on account of tax paid in a country outside India;
(e) any relief of tax claimed under section 159(2) on account of tax
paid in any specified territory outside India referred to in that section; and 35

(f) any tax credit claimed to be set off as per the provisions of
section 206(13);
(5) For the purposes of sub-section (1), interest payable under section 424
shall be computed on an amount equal to the assessed tax or, as the case may be,
on the amount by which the advance tax paid falls short of the assessed tax. 40

(6) In sub-section (5), “assessed tax” means the tax on the total income as
declared in the return as reduced by the amount of,—
(a) tax deducted or collected at source, as per the provisions of
Chapter XIX-B, on any income which is subject to such deduction or
collection and which is taken into account in computing such total income; 45
 299

(b) any relief of tax claimed under section 157;

(c) any relief of tax or deduction of tax claimed under section 159(1)
or section 160 on account of tax paid in a country outside India;

(d) any relief of tax claimed under section 159(2) on account of tax
5 paid in any specified territory outside India referred to in that
section; and.

(e) any tax credit claimed to be set off as per the provisions of
section 206(13).

(7) After a regular assessment under section 270 or 271 or an

10 assessment under section 294 has been made, any amount paid under sub-
section (1) shall be deemed to have been paid towards such regular
assessment or assessment.

(8) If any assessee fails to pay the whole or any part of such tax, interest or
fee as per the provisions of sub-section (1), he shall be deemed to be an assessee
15 in default in respect of the tax, interest or fee remaining unpaid and all the
provisions of this Act shall apply accordingly.

(9) The provisions of sub-section (8) shall apply without prejudice to any
other consequences which the assessee may incur.

267. (1) Where no return of income under section 263(1) or (4) has been Tax on updated
20 furnished by an assessee and, after taking into account the amounts referred to in return.
sub-section (2), tax is payable on the basis of return to be furnished by such
assessee under section 263(6), then—

(a) the assessee shall be liable to pay such tax together with
interest and fee payable under any of the provisions of this Act for any
25 delay in furnishing the return or any default or delay in payment of
advance tax;

(b) such tax, interest and fee shall be payable along with the payment
of additional income-tax computed as per sub-section (5), before furnishing
the return; and

30 (c) the return shall be accompanied by proof of payment of such tax,

additional income-tax, interest and fee.

(2) The amounts referred to in sub-section (1) shall be,—

(a) the amount of tax, if any, already paid as advance tax;

(b) any tax deducted or collected at source;

35 (c) any relief of tax claimed under section 157;

(d) any relief of tax or deduction of tax claimed under

section 159(1) or 160 on account of tax paid in a country outside India;

(e) any relief of tax claimed under section 159(2) on account of tax
paid in any specified territory outside India referred to in that section; and

40 (f) any tax credit claimed to be set off as per the provisions of
section 206(13).
 300

(3) Where, return of income under section 263(1) or (4) or (5) (referred to
as earlier return) has been furnished by an assessee and, after taking into account
the amounts referred to in sub-section (4) [as increased by the amount of refund,
if any, issued in respect of such earlier return], tax is payable on the basis of return
to be furnished by such assessee under section 263(6) then— 5

(a) the assessee shall be liable to pay such tax together with interest
payable under any provision of this Act for any default or delay in payment
of advance tax;

(b) such tax, interest and fee shall be payable along with the payment
of additional income-tax, as computed as per sub-section (5), as reduced by 10
the amount of interest paid under the provisions of this Act in the earlier
return, before furnishing the return; and

(c) the return shall be accompanied by proof of payment of such tax,

additional income-tax, interest and fee.

(4) The sums referred to in sub-section (3) shall be the following,— 15

(a) the amount of relief or tax referred to in section 266(1), the credit
for which has been taken in the earlier return;

(b) tax deducted or collected at source, as per the provisions of

Chapter XIX-B, on any income which is subject to such deduction or
collection and which is taken into account in computing total income and 20
which has not been included in the earlier return;

(c) any relief of tax or deduction of tax claimed under section 159(1)
or 160 on account of tax paid in a country outside India on such income
which has not been included in the earlier return;

(d) any relief of tax claimed under section 159(2) on account of 25

tax paid in any specified territory outside India referred to in that
section on such income which has not been included in the earlier
return; and

(e) any tax credit claimed, to be set off as per the provisions of
section 206(13), which has not been claimed in the earlier return. 30

(5) For the purposes of sub-sections (1) and (3), the additional income-tax
payable at the time of furnishing the return under section 263(6) shall be equal
to,—

(a) 25% of aggregate of tax and interest payable, as determined in

sub-section (1) or (3), as the case may be, if such return is furnished after 35
expiry of the time available under section 263(4) or (5) and before
completion of twelve months from the end of the financial year succeeding
the relevant tax year; or

(b) 50% of aggregate of tax and interest payable, as determined in

sub-section (1) or (3), as the case may be, if such return is furnished after 40
the expiry of twelve months but before completion of twenty-four
months from the end of the financial year succeeding the relevant tax
year;
 301

(c) 60% of aggregate of tax and interest payable, as determined in

sub-section (1) or (3), as the case may be, if such return is furnished after the
expiry of twenty-four months, but before completion of thirty-six months,
from the end of the financial year succeeding the relevant tax year; or
5 (d) 70% of aggregate of tax and interest payable, as determined in
sub-section (1) or (3), as the case may be, if such return is furnished after the
expiry of thirty-six months, but before completion of forty-eight months, from
the end of the financial year succeeding the relevant tax year.
(6) For the purposes of computation of “additional income-tax” under this
10 section, tax shall include surcharge and cess, by whatever name called, on such tax.
(7) Irrespective of anything contained in section 424(2), for the purposes of
sub-section (3), interest payable under section 424 shall be computed on an amount
equal to the assessed tax where, “assessed tax” means the tax on the total income as
declared in the return to be furnished under section 263(6),—
15 (a) after taking into account,—
(i) the amount of relief or tax referred to in section 266(1), the credit
for which has been claimed in the earlier return, if any;
(ii) tax deducted or collected at source, as per the provisions of
Chapter XIX-B, on any income which is subject to such deduction or
20 collection and which is taken into account in computing such total income,
which has not been included in the earlier return;
(iii) any relief of tax or deduction of tax claimed under
section 159(1) or 160 on account of tax paid in a country outside
India on such income which has not been included in the earlier
25 return;
(iv) any relief of tax claimed under section 159(2) on account
of tax paid in any specified territory outside India referred to in that
section on such income which has not been included in the earlier
return;
30 (v) any tax credit claimed, to be set off as per section 206(13),
which has not been claimed in the earlier return; and
(b) as increased by refund, if any, issued in respect of such earlier return.
(8) If any difficulty arises in giving effect to the provisions of this section, the
Board may, with the previous approval of the Central Government, by notification,
35 issue guidelines removing the difficulty.
(9) No guidelines under sub-section (8) shall be issued after the expiration of
two years from the 1st April, 2026.
(10) Every guideline issued by the Board under sub-section (8) shall be laid
before each House of Parliament while it is in session for a total period of thirty
40 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 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
45 may be; so, however, that any such modification or annulment shall be without
prejudice to the validity of anything previously done under that guideline.
(11) For the purposes of this section,—
(a) interest payable under section 423, for the purposes of sub-section (1),
shall be computed on the amount of tax on the total income as declared in the
50 return, under section 263(6), as per section 266(4);
 302

(b) interest payable under section 425, for the purposes of sub-section (3),
shall be computed after taking into account the total income furnished in the
return under section 263(6) as the returned income;
(c) interest payable, for the purposes of sub-section (5), shall be the interest
chargeable under any provision of this Act, on the income as per return furnished 5
under section 263(6), as reduced by interest paid, as per the earlier return, if any.
(12) For the purposes of sub-section (11)(c), the interest paid in the earlier
return shall be nil if such return is an updated return referred to in sub-section (1).
CHAPTER-XVI
10
PROCEDURE FOR ASSESSMENT
A.—Procedure for assessment
Inquiry before 268. (1) For the purpose of making an assessment under this Act, the Assessing
assessment.
Officer may serve on any person who has made a return under section 263 or in whose
case the time allowed under section 263(1) for furnishing the return has expired, a
15
notice requiring him, on a date to be specified therein,—
(a) where such person has not made a return within the time allowed under
section 263(1) or before the end of the financial year succeeding the relevant tax
year, to furnish a return of his income or the income of any other person in
respect of which he is assessable under this Act, in such form and verified in
such manner and setting forth such other particulars as prescribed; 20

(b) to produce, or cause to be produced, such accounts or documents as

the Assessing Officer may require;
(c) to furnish in writing and verified in the manner as prescribed
information in such form and on such points or matters (including a statement
of all assets and liabilities of the assessee, whether included in the accounts or 25
not) as the Assessing Officer may require.
(2) For the purposes of sub-section (1),––
(a) the previous approval of the Joint Commissioner shall be obtained
by the Assessing Officer before requiring the assessee to furnish a statement
of all assets and liabilities not included in the accounts; 30

(b) the Assessing Officer shall not require the production of any accounts
relating to a period more than three years prior to the relavant tax year.
(3) A notice under sub-section (1)(a) may also be served by the prescribed
income-tax authority.
(4) For the purposes of obtaining full information in respect of the income or loss 35
of any person, the Assessing Officer may make such inquiry as he considers necessary.
(5) If, at any stage of the proceedings before him, the Assessing Officer,
having regard to––
(a) the nature and complexity of the accounts;
(b) volume of the accounts; 40

(c) doubts about the correctness of the accounts;

(d) multiplicity of transactions in the accounts; or
(e) specialised nature of business activity of the assessee,
and interests of the revenue, is of the opinion that it is necessary so to do, he may,
with the previous approval of the Principal Chief Commissioner or Chief 45
Commissioner or Principal Commissioner or Commissioner, after giving the
assessee a reasonable opportunity of being heard, direct him to get either or both of
the following—
 303

(i) to get the accounts audited by an accountant, and to furnish a report

of such audit in the such form duly signed and verified by such accountant and
setting forth such particulars, as prescribed, and such other particulars as the
Assessing Officer may require;
5 (ii) to get the inventory valued by a cost accountant, and to furnish a
report of such inventory valuation in the prescribed as duly signed and verified
by such cost accountant and setting forth such particulars, as prescribed, and
such other particulars as the Assessing Officer may require.
(6) The accountant or the cost accountant as referred to in sub-section (5) shall
10 be nominated by the Principal Chief Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner for the purposes of the said sub-section.
(7) The provisions of sub-section (5) shall have effect irrespective of whether or
not accounts of the assessee have been audited under any other law in force or otherwise.
(8) Every report under sub-section (5) shall be furnished by the assessee to the
15 Assessing Officer within such period as specified by the Assessing Officer.
(9) The Assessing Officer may, on his own motion, or on an application made
in this behalf by the assessee and for any good and sufficient reason, subject to the
provisions of sub-section (10), extend the period referred to in sub-section (8) by
such further period or periods as he thinks fit.
20 (10) The aggregate of the period originally fixed under sub-section (8) and the
period or periods so extended, as referred to in sub-section (9), shall not, in any
case, exceed six months from the end of the month in which the direction under
sub-section (5) is received by the assessee.
(11) The expenses of any audit or inventory valuation under sub-section (5)
25 (including incidental expenses and remuneration of the accountant or the cost
accountant) shall be—
(a) determined by the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner as per such
guidelines as prescribed; and
30 (b) paid by the Central Government.
(12) The assessee shall, except where the assessment is made under section 271,
be given an opportunity of being heard in respect of any material gathered on the basis
of any inquiry under sub-section (4), or any audit or inventory valuation under
sub-section (5) and proposed to be utilised for the purposes of the assessment.
35 (13) In this section, “cost accountant” means a cost accountant as defined in
23 of 1959. section 2(1)(b) of the Cost and Works Accountants Act, 1959 and who holds a valid
certificate of practice under section 6(1) of the said Act.
269. (1) The Assessing Officer may, for the purposes of assessment or Estimation of
reassessment, make a reference to a Valuation Officer to estimate the value, value of assets
40 including the fair market value, of any asset, property or investment and submit a by Valuation
Officer.
copy of report to him.
(2) The Assessing Officer may make a reference to the Valuation Officer
under sub-section (1) whether or not he is satisfied about the correctness or
completeness of the accounts of the assessee.
45
(3) (a) For estimating the value, including the fair market value, of the asset,
property, or investment, the Valuation Officer or any engineer, overseer, surveyor,
or assessor authorized by him, may, subject to any rules made in this regard and at
such reasonable times, as prescribed,––
(i) enter any land within the limits of the area assigned to the Valuation
50
Officer; or
 304

(ii) enter any land, building, or other place belonging to or occupied by

any person in connection with whose assessment a reference has been made
to the Valuation Officer; or
(iii) inspect any asset, property, or investment in respect of which a
5
reference has been made to the Valuation Officer.
(b) The Valuation Officer or any engineer, overseer, surveyor, or assessor,
may require any person in charge of, or in occupation or possession of, such land,
building, or other place or such asset, property, or investment to afford the necessary
facility to:
(i) survey or inspect such land, building, or other place or such asset, 10
property, or investment;
(ii) estimate its value; or
(iii) inspect any books of account, document, or record relevant for the
valuation of such asset, property, or investment and gather other particulars
15
relating to it.
(c) No Valuation Officer, engineer, overseer, surveyor, or assessor shall enter
any land, building or place referred to in clause (a)(ii), or inspect any asset, property,
or investment referred to in clause (a)(iii), except with the consent of the person in
charge of, or in occupation or possession of, such land, building, place, or asset,
property, or investment, without providing such person at least two days' notice in 20
writing of their intention to do so.
(d) If a person who, under this sub-section, is required to afford any facility to
the Valuation Officer or the engineer, overseer, surveyor, or assessor, either refuses
or evades to afford such facility, the Valuation Officer shall have all the powers as
are vested in a court under the Code of Civil Procedure, 1908, when trying a suit in 25
respect of the following matters,—
(i) discovery and inspection;
(ii) enforcing the attendance of any person, including any officer of a
banking company, and examining him on oath;
(iii) compelling the production of books of account and other 30
documents; and
(iv) issuing commissions.
(4) The Valuation Officer shall, estimate the value of the asset, property or
investment after taking into account such evidence as the assessee may produce and
any other evidence in his possession gathered, after giving an opportunity of being 35
heard to the assessee.
(5) The Valuation Officer may estimate the value of the asset, property or
investment to the best of his judgment, if the assessee does not co-operate or comply
with his directions.
(6) The Valuation Officer shall send the report of the estimate made under 40
sub-section (4) or (5), to the Assessing Officer and the assessee.
(7) With a view to rectifying any mistake apparent from the record, the
Valuation Officer may amend any report made by him, as per section 287.
(8) The Assessing Officer may, on receipt of the report from the Valuation
Officer, and after giving the assessee an opportunity of being heard, take into 45
account such report in making the assessment or reassessment.
(9) The Valuation officer shall send the report referred to in sub-section (6)
within six months from the end of the month in which the reference is made under
sub-section (1).
 305

(10) For the purposes of this Act,––

(a) the Central Government may appoint as many Valuation Officers, as
necessary; and
(b) subject to the rules and orders of the Central Government regulating
5 the conditions of service of persons in public services and posts, a Principal
Chief Commissioner, or a Chief Commissioner, or a Principal Commissioner
or a Commissioner may appoint as many engineers, overseers, surveyors and
assessors as may be necessary to assist the Valuation Officers in the
performance of their functions.
10 270. (1) Where a return has been made under section 263, or in response to a Assessment.
notice under section 268(1) such return shall be processed in the following
manner:—
(a) the total income or loss shall be computed after making the
adjustments towards the following:—
15 (i) any arithmetical error in the return;
(ii) an incorrect claim, if such incorrect claim is apparent from any
information in the return;
(iii) disallowance of loss claimed, if return of the tax year for which
set off of loss is claimed was furnished beyond the due date specified
20 under section 263(1);
(iv) disallowance of expenditure or increase in income indicated in
the audit report but not taken into account in computing the total income
in the return; or
(v) disallowance of deduction claimed under section 144 or under
25 any of the provisions of Chapter VIII if the return is furnished beyond
the due date specified under section 263(1);
(b) the tax, interest and fee, if any, shall be computed on the basis of the
total income computed under clause (a);
(c) the sum payable by, or the amount of refund due to, the assessee shall
30 be determined after adjustment of the tax, interest and fee, if any, computed
under clause (b) by—
(i) any tax deducted at source;
(ii) any tax collected at source;
(iii) any advance tax paid;
35 (iv) any rebate or relief allowable under Chapter IX;
(v) any tax paid on self-assessment; and
(vi) any amount paid otherwise by way of tax, interest or fee;
(d) an intimation shall be prepared or generated and sent to the assessee
specifying the sum determined to be payable by, or refund due to, the assessee
40 under clause (c); and
(e) the amount of refund due to the assessee in pursuance of the
determination under clause (c) shall be granted to the assessee.
(2) Before making any adjustment under sub-section (1)(a),—
(a) an intimation is to be given to the assessee of such adjustments either
45 in writing or in electronic mode;
(b) the response received from the assessee in this regard, if any, shall
be considered; and in a case where no response is received within thirty days
of the issue of such intimation, such adjustments shall be made.
 306

(3) For the purposes of sub-section (1), an intimation shall also be sent to the
assessee in a case where the loss declared in the return by the assessee is adjusted
but no tax, interest or fee is payable by, or no refund is due to, him.
(4) No intimation under sub-section (1) shall be sent after the expiry of nine
months from the end of the financial year in which the return is made. 5

(5) For the purposes of sub-sections (1) to (4),—

(a) “an incorrect claim apparent from any information in the return” shall
mean a claim, on the basis of an entry, in the return,—
(i) of an item, which is inconsistent with another entry of the same
10
or some other item in such return;
(ii) in respect of which the information required to be furnished under
this Act to substantiate such entry has not been so furnished; or
(iii) in respect of a deduction, where such deduction exceeds
specified statutory limit which may have been expressed as monetary
amount or percentage or ratio or fraction; 15

(b) “the acknowledgement of the return” shall be deemed to be the

intimation in a case where no sum is payable by, or refundable to, the
assessee under sub-section(1)(c), and where no adjustment has been made
under sub-section(1)(a).
(6) For the purposes of processing of returns under sub-section (1), the Board 20
may make a scheme for centralised processing of returns with a view to
expeditiously determining the tax payable by, or the refund due to, the assessee as
required under the said sub-section.
(7) The scheme made under sub-section (6) shall, as soon as may be laid before
25
each House of Parliament.
(8) Where a return has been furnished under section 263 or in response to a
notice under section 268(1), the Assessing Officer or the prescribed income-tax
authority, if, considers it necessary or expedient to ensure that the assessee—
(a) has not understated the income;
30
(b) has not computed excessive loss;
(c) has not under-paid the tax in any manner,
shall serve on the assessee a notice requiring him, on a date to be specified therein,—
(i) either to attend the office of the Assessing Officer; or
(ii) to produce, or cause to be produced before the Assessing Officer any
35
evidence on which the assessee may rely in support of the return.
(9) No notice under sub-section (8) shall be served on the assessee after the expiry
of three months from the end of the financial year in which the return is furnished.
(10) On the day specified in the notice issued under sub-section (8), or as soon
afterwards as may be, after hearing such evidence as the assessee may produce and
such other evidence as the Assessing Officer may require on specified points, and 40
after taking into account all relevant material which he has gathered, the Assessing
Officer, subject to the provisions of sub-sections (11) and (13), shall—
(a) by an order in writing, make an assessment of the total income or
loss of the assessee; and
(b) determine the sum payable by him or refund of any amount due to 45
him on the basis of such assessment.
 307

(11) In the case of entities referred to in sub-section (12), which are required
to furnish the return of income under section 263(1)(a)(iv), no order under
sub-section (10) making an assessment of the total income or loss of any such entity
shall be made by the Assessing Officer, without giving effect to the provisions of
5 section 11, unless—
(i) the Assessing Officer has intimated the Central Government or the
prescribed authority the contravention of the provisions mentioned in Schedule III
(Table: Sl. No. 23, 24 or 25), by such entity, where in his view such contravention
has taken place; and
10 (ii) the approval granted to such entity has been withdrawn or
notification issued in respect of such entity has been rescinded.
(12) For the purposes of sub-section (11), the entities shall be—
(a) a research association referred to in Schedule III (Table: Sl. No. 23);
(b) an association or institution referred to in Schedule III (Table: Sl. No. 24);
15 (c) an institution referred to in Schedule III (Table: Sl. No. 25).
(13) In the case of a registered non-profit organisation, where the Assessing
Officer is satisfied that any such entity has committed any specified violation as
mentioned in section 351(1), he shall—
(a) send a reference to the Principal Commissioner or Commissioner to
20 withdraw the approval or registration; and
(b) no order making an assessment of the total income or loss of such
registered non-profit organisation shall be made by him without giving effect
to the order passed by the Principal Commissioner or Commissioner under
section 351(2)(ii)(A) or (B).
25
(14) For the purposes of sub-section (10), where the Assessing Officer is
satisfied that the activities of the university, college or other institution referred to
in section 45(3)(a) (hereinafter referred to as “entity”) are not being carried out in
accordance with all or any of the conditions subject to which such entity was
approved, then––
30
(a) he may, after giving a reasonable opportunity of showing cause
against the proposed withdrawal to the concerned entity, recommend to the
Central Government to withdraw the approval; and
(b) that Government may by order, withdraw the approval and forward
a copy of the order to the concerned entity and the Assessing Officer.
35 (15) Where a regular assessment under sub-section (10) or section 271 is
made,—
(a) any tax or interest paid by the assessee under sub-section (1) shall be
considered to have been paid towards such regular assessment;
(b) if no refund is due on regular assessment or the amount refunded
40 under sub-section (1) exceeds the amount refundable on regular
assessment, the whole or the excess amount so refunded shall be
considered to be tax payable by the assessee and the provisions of this Act
shall apply accordingly.
Best judgment
271.(1) If any person— assessment.
45 (a) fails to make the return required under sub-section 263(1) and has
not made a return or a revised return under section 263(4) or (5) or an updated
return under section 263(6);
(b) fails to comply with all the terms of a notice issued under
section 268(1) or fails to comply with a direction issued under
50 section 268(5);
 308

(c) having made a return, fails to comply with all the terms of a notice
issued under sub-section 270(8),
the Assessing Officer, after taking into account all relevant materials which he has
gathered, shall, after giving the assessee an opportunity of being heard, make the
assessment of the total income or loss to the best of his judgment and determine the 5
sum payable by the assessee on the basis of such assessment.
(2) The Assessing Officer before making an assessment under sub-section (1)
shall, subject to the provisions of sub-section (3), serve a notice on the assessee to
show cause, on a date and time to be specified in the notice, as to why assessment
10
should not be completed to the best of his judgment.
(3) It shall not be necessary to give the opportunity referred to in sub-section (2)
in a case where a notice under section 268(1) has been issued prior to the making of
an assessment under this section.
Power of Joint
Commissioner to
272. (1) A Joint Commissioner may, on his own motion or on a reference
issue directions being made to him by the Assessing Officer or on the application of an assessee, 15
in certain cases. call for and examine the record of any proceeding in which an assessment is
pending and, if he considers that, having regard to the nature of the case or the
amount involved or for any other reason, it is necessary or expedient so to do,
he may—
(a) issue such directions as he thinks fit for the guidance of the Assessing 20
Officer to enable him to complete the assessment; and
(b) such directions shall be binding on the Assessing Officer.
(2) No directions which are prejudicial to the assessee shall be issued under
sub-section (1) without giving an opportunity of being heard to the assessee.
(3) For the purposes of this section, no direction as to the lines on which an 25
investigation connected with the assessment should be made, shall be deemed to be
a direction prejudicial to the assessee.
Faceless
Assessment.
273.(1) Irrespective of anything to the contrary contained in any other
provision of this Act, the assessment, reassessment or recomputation under section
270(10) or 271 or 279, as the case may be, with respect to the cases referred to in 30
sub-section (2), shall be made in a faceless manner as per such procedure, as
prescribed in this behalf.
(2) The faceless assessment under sub-section (1) shall be made in respect of
such territorial area, or persons or class of persons, or incomes or class of incomes,
35
or cases or class of cases, as specified by the Board.
(3) The Board may, for the purposes of faceless assessment, set up the
following Centre and Units and specify their functions and jurisdiction:—
(a) a National Faceless Assessment Centre to facilitate the conduct of
faceless assessment proceedings in a centralised manner including assigning
the case selected for the purposes of faceless assessment under this section to 40
a specific assessment unit, intimating the assessee that assessment in his case
shall be completed in faceless manner, serving a notice to the assessee under
section 268(1) or 270(8), and forwarding any response of the assessee to the
assessment unit;
(b) such assessment units, as it may deem necessary to conduct the 45
faceless assessment, to perform the function of making assessment, which
includes analysis of the material furnished by the assessee or any other person,
identification of points or issues material for the determination of any liability
(including refund) under this Act, seeking information or clarification on
points or issues so identified, determination of any variation prejudicial to the 50
assessee, and such other functions as may be required for the purposes of
making faceless assessment;
 309

(c) such verification units, as it may deem necessary to facilitate the

conduct of faceless assessment, to perform the function of verification, which
includes enquiry, cross verification, examination of books of account,
examination of witnesses and recording of statements, and such other
5 functions as may be required for the purposes of verification;
(d) such technical units, as it may deem necessary to facilitate the
conduct of faceless assessment, to perform the function of providing technical
assistance which includes any assistance or advice on legal, accounting,
forensic, information technology, valuation, transfer pricing, data analytics,
10 management or any other technical matter under this Act or an agreement
entered into under section 159, which may be required in a particular case or
a class of cases, under this section;
(e) such review units, as it may deem necessary to facilitate the conduct
of faceless assessment, to perform the function of review of any variation
15 proposed by the assessment unit (wherever it is so considered necessary by
the National Faceless Assessment Centre), which includes checking whether
the relevant and material evidence has been brought on record, relevant points
of fact and law have been duly incorporated, the issues requiring addition or
disallowance have been incorporated and such other functions as may be
20 required for the purposes of review.
(4) In accordance with the procedure as prescribed under sub-section (1),––
(a) the verification unit, the technical unit and the review unit shall
facilitate the conduct of faceless assessment; and
(b) the assessment unit shall––
25 (i) make the assessment of the total income or loss, by an order in
writing after taking into account all relevant material which it has
gathered and after giving the assessee an opportunity of being heard; and
(ii)determine the sum payable by the assessee or refund of any
amount due to him on the basis of such assessment.
30 (5) For the purposes of this section, the terms “assessment unit”,
“verification unit”, “technical unit” and “review unit” shall refer to an
Assessing Officer having powers so assigned by the Board.
(6) The assessment unit, verification unit, technical unit and the review
unit shall have the following authorities:—
35 (a) Additional Commissioner or Additional Director or Joint
Commissioner or Joint Director, as the case may be;
(b) Deputy Commissioner or Deputy Director or Assistant
Commissioner or Assistant Director, or Income-tax Officer, as the case
may be;
40 (c) such other income-tax authority, ministerial staff, executive or
consultant, as may be considered necessary by the Board.
(7) All communications, save as otherwise provided in sub-section (8),—
(a) among the assessment unit, review unit, verification unit or
technical unit or with the assessee or any other person with respect to the
45 information or documents or evidence or any other details, as may be
necessary for the purposes of making a faceless assessment shall be
through the National Faceless Assessment Centre;
(b) between the National Faceless Assessment Centre and the
assessee, or his authorised representative, or any other person shall be
50 exchanged exclusively by electronic mode; and
(c) between the National Faceless Assessment Centre and various
units shall be exchanged exclusively by electronic mode.
 310

(8) The provisions of sub-section (7) shall not apply to the enquiry or
verification conducted by the verification unit in the circumstances as specified by
the Board in this behalf.
(9) The Principal Chief Commissioner or the Principal Director General, as the
case may be, in-charge of the National Faceless Assessment Centre shall, as per the 5
procedure laid down by the Board in this regard, if he considers appropriate that the
provisions of section 268(5) may be invoked in the case,—
(a) forward any reference received from an assessment unit in this regard to
the Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner having jurisdiction over such case, and inform 10
the assessment unit accordingly;
(b) transfer the case to the Assessing Officer having jurisdiction over such
case as per sub-section (12).
(10) Where a reference has been received by the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner under sub-section 15
(9)(a), he shall direct the Assessing Officer, having jurisdiction over the case, to invoke
the provisions of section 268(5).
(11) Where a reference has not been forwarded as per sub-section (9)(a) to the
Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or
Commissioner, having jurisdiction over the case, the assessment unit shall proceed to 20
complete the assessment as per the procedure laid down in this section.
(12) Irrespective of anything contained in sub-section (1) or (2), the Principal
Chief Commissioner or the Principal Director General, as the case may be, in-charge of
National Faceless Assessment Centre may, at any stage of the assessment, if considered
necessary, transfer the case to the Assessing Officer having jurisdiction over such case, 25
with the prior approval of the Board.
(13) In this section,––
(a) “designated portal” means the web portal designated as such by the
Principal Chief Commissioner or the Principal Director General, in charge of the 30
National Faceless Assessment Centre;
(b) “faceless assessment” means the assessment proceedings conducted
electronically in 'e-Proceeding' facility through registered account of the assessee
in designated portal; and.
(c) “registered account” of the assessee means the electronic filing account 35
registered by the assessee in designated portal.
Reference to 274. (1) The Assessing Officer may make a reference to the Principal
Principal
Commissioner
Commissioner or Commissioner at any stage of the assessment or reassessment
or proceedings before him, if, having regard to the material and evidence available
Commissioner in 40
with him, he considers that it is necessary to—
certain cases.
(a) declare an arrangement as an impermissible avoidance
arrangement; and
(b) determine the consequence of such an arrangement within the
meaning of Chapter XI.
(2) The Principal Commissioner or Commissioner shall, on receipt of a 45
reference under sub-section (1), if he is of the opinion that the provisions of
Chapter XI are required to be invoked,––
 311

(a) issue a notice to the assessee, setting out the reasons and basis of such
opinion, for submitting objections, if any; and
(b) provide an opportunity of being heard to the assessee within such
period, not exceeding sixty days, as specified in the said notice.
5 (3) If the assessee fails to furnish any objection to the notice within the time
specified in the notice issued under sub-section (2), the Principal Commissioner or
Commissioner shall issue such directions as he deems fit in respect of declaration
of the arrangement to be an impermissible avoidance arrangement.
(4) In case the assessee objects to the proposed action, and the Principal
10 Commissioner or Commissioner, after hearing the assessee in the matter, is not
satisfied by the explanation of the assessee, then, he shall make a reference in the
matter to the Approving Panel for the purpose of declaration of the arrangement as
an impermissible avoidance arrangement.
(5) If the Principal Commissioner or Commissioner is satisfied, after having
15 heard the assessee that the provisions of Chapter XI are not to be invoked, he shall
by an order in writing, communicate the same to the Assessing Officer with a copy
to the assessee.
(6) The Approving Panel, on receipt of a reference from the Principal
Commissioner or Commissioner under sub-section (4), shall––
20 (a) issue such directions, as it deems fit, in respect of the declaration of
the arrangement as an impermissible avoidance arrangement as per the
provisions of Chapter XI; and
(b) specify the tax year or years to which such declaration of an
arrangement as an impermissible avoidance arrangement shall apply.
25 (7) No direction under sub-section (6) shall be issued unless an opportunity of
being heard is given to the assessee and the Assessing Officer on such directions
which are prejudicial to the interest of the assessee or the interests of the revenue,
as the case may be.
(8) The Approving Panel may, before issuing any direction under sub-section (6),—
30 (a) if it is of the opinion that any further inquiry in the matter is
necessary, direct the Principal Commissioner or Commissioner to make such
inquiry or cause the inquiry to be made by any other income-tax authority and
furnish a report containing the result of such inquiry to it; or
(b) call for and examine such records relating to the matter as it deems fit; or
35
(c) require the assessee to furnish such documents and evidence as it
may direct.
(9) If the members of the Approving Panel differ in opinion on any point, such
point shall be decided according to the opinion of the majority of the members.
(10) The Assessing Officer, on receipt of directions of the Principal
40 Commissioner or Commissioner under sub-section (3) or of the Approving Panel
under sub-section (6), shall proceed to complete the proceedings referred to in
sub-section (1) as per such directions and the provisions of Chapter XI.
(11) If any direction issued under sub-section (6) specifies that declaration of the
arrangement as impermissible avoidance arrangement is applicable for any tax year other
45 than the tax year to which the proceedings referred to in sub-section (1) pertains, then,––
 312

(a) the Assessing Officer while completing any assessment or reassessment

proceedings relevant to such other tax year shall do so as per such directions and
the provisions of Chapter XI; and
(b) it shall not be necessary for him to seek fresh direction on the issue
5
for the relevant tax year.
(12) No order of assessment or reassessment shall be passed by the Assessing
Officer without the prior approval of the Principal Commissioner or Commissioner,
if any tax consequences have been determined in the order under the provisions of
Chapter XI.
(13) The Approving Panel shall, subject to sub-sections (14) and (15), issue 10
directions under sub-section (6) within six months from the end of the month in
which the reference under sub-section (4) was received.
(14) In computing the period referred to in sub-section (13), the following
shall be excluded:—
(a) the period commencing from the date on which the first direction is 15
issued by the Approving Panel to the Principal Commissioner or Commissioner
for getting the inquiries conducted through the authority competent under an
agreement referred to in section 159 and ending with the date on which the
information so requested is last received by the Approving Panel or one year,
whichever is less; 20

(b) the period commencing on the date on which the proceeding of the
Approving Panel is stayed by an order or injunction of any court and ending
on the date on which certified copy of the order vacating the stay was received
by the Approving Panel.
(15) If immediately after the exclusion of the period as per sub-section (14), 25
the remaining period available to the Approving Panel for issue of directions is less
than sixty days, such remaining period shall be extended to sixty days and the period
of six months mentioned in sub-section (13) shall be deemed to have been extended
accordingly.
(16) The directions issued by the Approving Panel under sub-section (6) shall 30
be binding on—
(a) the assessee; and
(b) the Principal Commissioner or Commissioner and the income-tax
authorities subordinate to him.
(17) No appeal under the Act shall lie against directions issued by the 35
Approving Panel under sub-section (6), irrespective of anything contained in any
other provision of the Act.
(18) The Central Government shall, for the purposes of this section, constitute
one or more Approving Panels as may be necessary and each panel shall consist of
40
three members including a Chairperson.
(19) The Chairperson of the Approving Panel shall be a person who is or has
been a judge of a High Court, and—
(a) one member shall be a member of Indian Revenue Service not below
the rank of Principal Chief Commissioner or Chief Commissioner of 45
Income-tax; and
 313

(b) one member shall be an academic or scholar having special

knowledge of matters, such as direct taxes, business accounts and international
trade practices.
(20) The term of the Approving Panel shall ordinarily be for one year and may
5 be extended from time to time up to three years.
(21) The Chairperson and members of the Approving Panel shall meet, as and
when required, to consider the references made to the panel and shall be paid such
remuneration as prescribed.
(22) In addition to the powers conferred on the Approving Panel under this
10 section, the powers which are vested in the Board for Advance Rulings under
section 387 shall apply mutatis mutandis to the Approving Panel.
(23) The Board shall provide to the Approving Panel such officials as may be
necessary for the efficient exercise of powers and discharge of functions of the
Approving Panel under this Act.
15 (24) The Board may make rules for the purposes of the constitution and
efficient functioning of the Approving Panel and expeditious disposal of the
references received under sub-section (4).
Reference to 275. (1) The Assessing Officer shall, irrespective of anything to the contrary
Dispute
Resolution contained in this Act, in the first instance, forward a draft of the proposed order of
Panel. 20 assessment (hereafter in this section referred to as the draft order) to the eligible
assessee, if he proposes to make any variation which is prejudicial to the interest of
such assessee.
(2) On receipt of the draft order, the eligible assessee shall, within thirty days
of its receipt,—
25 (a) file his acceptance of the variations to the Assessing Officer; or
(b) file his objections, if any, to such variation with,—
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(3) The Assessing Officer shall complete the assessment on the basis of the
30 draft order, if—
(a) the assessee intimates to the Assessing Officer the acceptance of the
variation; or
(b) no objection is received within the period specified in sub-section (2).
(4) The Assessing Officer shall, irrespective of anything contained in
35 section 286, pass the assessment order under sub-section (3) within one month from
the end of the month in which,—
(a) the acceptance is received; or
(b) the period of filing of objections under sub-section (2) expires.
(5) The Dispute Resolution Panel shall, in a case where any objection is
40 received under sub-section (2), issue such directions, as it thinks fit, for guidance of
the Assessing Officer to enable him to complete the assessment.
(6) The Dispute Resolution Panel shall issue the directions as referred to in
sub-section (5), in writing, stating the points of determination, the decision thereon
and the reason for such decision.
 314

(7) The Dispute Resolution Panel may, before issuing any directions referred
to in sub-section (5),—
(a) make such further enquiry, as it thinks fit; or
(b) cause any further enquiry to be made by any income-tax authority,
and report the result of the same to it. 5

(8) The Dispute Resolution Panel may, confirm, reduce or enhance the
variations proposed in the draft order, so however, that it shall not set aside any
proposed variation, or issue any direction under sub-section (5) for further enquiry
and passing of the assessment order.
(9) For the purposes of sub-section (8), the power of the Dispute Resolution 10
Panel to enhance the variation shall include the power to consider any matter arising
out of the assessment proceedings relating to the draft order, irrespective of the fact
that such matter was not raised by the eligible assessee.
(10) If the members of the Dispute Resolution Panel differ in opinion on any
point, the point shall be decided as per the opinion of the majority of the members. 15

(11) Every direction issued by the Dispute Resolution Panel shall be binding
on the Assessing Officer.
(12) No direction under sub-section (5) shall be issued unless an opportunity
of being heard is given to the assessee, and the Assessing Officer, on such directions
which are prejudicial to the interest of the assessee, or the interest of the revenue, 20
respectively.
(13) No direction under sub-section (5) shall be issued after nine months from
the end of the month in which the draft order is forwarded to the eligible assessee.
(14) Upon receipt of the directions issued under sub-section (5), the Assessing
Officer shall, in conformity with the directions, complete, irrespective of anything 25
to the contrary contained in section 286, the assessment without providing any
further opportunity of being heard to the assessee, within one month from the end
of the month in which such direction is received.
(15) The Board may make rules for the purposes of the efficient functioning
of the Dispute Resolution Panel and expeditious disposal of the objections filed 30
under sub-section (2) by the eligible assessee.
(16) The provisions of this section shall not apply to any assessment or
reassessment order passed by the Assessing Officer with the prior approval of the
Principal Commissioner or Commissioner as provided in section 274(12).
(17) In this section, subject to the provisions of sub-section (18),— 35

(a) “Dispute Resolution Panel” means a collegium comprising of three

Principal Commissioners or Commissioners of Income-tax constituted by the
Board for this purpose;
(b) “eligible assessee” means,—
(i) any person in whose case the variation referred to in 40
sub-section (1) arises as a consequence of the order of the Transfer
Pricing Officer passed under section 166(6);
(ii) any non-resident (not being a company), or any foreign
company.
(18) The eligible assessee referred to in sub-section (17) shall not include 45
person referred to in section 292(1) or other person referred to in section 295.
 315

(19) The provisions of this section shall not apply to any proceedings under
Chapter XVI-B.
276. (1) Income chargeable under the head “Profits and gains of business or Method of
accounting.
profession” or “Income from other sources” shall, subject to the provisions of
5 sub-section (2), be computed as per either cash or mercantile system of accounting
regularly employed by the assessee.
(2) The Central Government may notify income computation and disclosure
standards to be followed by any class of assessees or in respect of any class of
income.
10 (3) The Assessing Officer may make an assessment in the manner provided in
section 271, where––
(a) he is not satisfied about the correctness or completeness of the
accounts of the assessee;
(b) the method of accounting provided in sub-section (1) has not been
15 regularly followed by the assessee; or
(c) income has not been computed as per the standards notified under
sub-section (2).
277. (1) For the purposes of determining the income chargeable under the head Method of
“Profits and gains of business or profession”,— accounting in
certain cases.
20 (i) the valuation of inventory shall be made at lower of actual cost or net
realisable value computed as per the income computation and disclosure
standards notified under section 276(2);
(ii) the valuation of purchase and sale of goods or services and valuation
of inventory shall be adjusted to include any tax, duty, cess or fee (by whatever
25 name called) actually paid or incurred by the assessee to bring the goods or
services to the place of its location and condition as on the date of valuation;
(iii) the inventory being securities not listed on a recognised stock
exchange, or listed but not quoted on a recognised stock exchange with
regularity from time to time, shall be valued at actual cost initially recognised
30 as per the income computation and disclosure standards notified under
section 276(2);
(iv) the inventory being securities other than those referred to in clause (iii),
shall be valued at lower of actual cost or net realisable value as per the income
computation and disclosure standards notified under section 276(2).
35 (2) For the purposes of sub-section (1), the inventory being securities held by
a scheduled bank or public financial institution shall be valued as per the income
computation and disclosure standards notified under section 276(2) after taking into
account the extant guidelines issued by the Reserve Bank of India in this regard.
(3) For the purposes of sub-sections (1) and (2), the comparison of actual cost
40 and net realisable value of securities shall be made category-wise.
(4) For the purposes of this section, any tax, duty, cess or fee (by whatever
name called) under any law in force, shall include all such payment irrespective of
any right arising as a consequence to such payment.
(5) In this section, “public financial institution” shall have the same meaning
18 of 2013. 45 as assigned to it in section 2(72) of the Companies Act, 2013.
 316

Taxability of 278. (1) The interest received by an assessee on any compensation or on

certain income.
enhanced compensation, shall be deemed to be the income of the tax year in which
it is received, irrespective of anything to the contrary contained in section 276.
(2) Any claim for escalation of price in a contract or export incentives shall be
deemed to be the income of the tax year in which reasonable certainty of its 5
realisation is achieved.
(3) The income referred to in section 2(49)(w) shall be treated as the income
of the tax year in which it is received, if not charged to income-tax in any earlier tax
year.
Income escaping 279. (1) If, in the case of an assessee, any income chargeable to tax has escaped 10
assessment.
assessment for any tax year (hereinafter referred to as “the relevant tax year” in this
section and sections 280 to 286, the Assessing Officer may, subject to the provisions
of sections 280 to 286, for the relevant tax year,––
(a) assess or reassess income;
(b) recompute the loss or the depreciation allowance or any other 15
allowance or deduction.
(2) For the purposes of the assessment or reassessment or recomputation under
this section, Assessing Officer may assess or reassess––
(a) the income which has escaped assessment;
(b) income in respect of other issues which come to his notice 20
subsequently in the course of the proceedings under this section, irrespective
of the fact that the provisions of sections 280, 281 and 284 were not
complied with.

Issue of notice. 280. (1)(a) Before making the assessment, reassessment or recomputation
under section 279, the Assessing Officer shall, subject to the provisions of 25
section 281, issue a notice to the assessee, along with a copy of the order passed
under section 281(3).
(b) the notice referred to in clause (a) shall require the assessee to furnish,
within such period as may be specified therein, a return of his income or income of
any other person in respect of whom he is assessable under this Act during the 30
relevant tax year; and.
(c) the period specified in the notice referred to in clause (a) shall not exceed
three months from the end of the month in which such notice is issued.
(2) The return of income required under sub-section (1) shall be furnished in
such form, verified in such manner and setting forth such other particulars, as 35
prescribed, and the provisions of this Act shall apply accordingly, as if such return
were a return required to be furnished under section 263.
(3) Any return of income required under sub-section (1), furnished after the
expiry of the period specified in the notice under the said sub-section, shall not be
deemed to be a return under section 263. 40

(4) No notice under this section shall be issued unless there is information with
the Assessing Officer which suggests that the income chargeable to tax has escaped
assessment in the case of the assessee for the relevant tax year.
(5) No notice under this section shall be issued without prior approval of the
45
specified authority, where the Assessing Officer has received––
(a) information under the scheme notified under section 260; or
 317

(b) directions from the Approving Panel under section 274(6); or

(c) any finding or direction contained in an order passed by any
authority, Tribunal or court in any proceeding under this Act by way of appeal,
reference or revision or by a Court in any proceeding under any other law.
5 (6) For the purposes of this section and section 281, the information with the
Assessing Officer which suggests that the income chargeable to tax has escaped
assessment means—
(a) any information in the case of the assessee for the relevant tax year
as per the risk management strategy formulated by the Board from time to
10 time;
(b) any audit objection to the effect that the assessment in the case of the
assessee for the relevant tax year has not been made as per this Act;
(c) any information received under an agreement referred to in section 159
of this Act;
15 (d) any information made available to the Assessing Officer under the
scheme notified under section 260;
(e) any information which requires action in consequence of the order of
a Tribunal or a Court;
(f) any information in the case of the assessee emanating from the survey
20 conducted under section 253, other than under sub-section (4) of the said
section;
(g) any directions in the case of the assessee given by the Approving
Panel under section 274(6);
(h) any finding or direction contained in an order passed by any
25 authority, Tribunal or court in any proceeding under this Act by way of appeal,
reference or revision, or by a Court in any proceeding under any other law.
281. (1) Where the Assessing Officer has information which suggests that Procedure before
income chargeable to tax has escaped assessment in the case of an assessee for the issuance of
relevant tax year, he shall, before issuing any notice under section 280 provide an notice under
section 280.
30 opportunity of being heard to such assessee by serving upon him a show cause notice.
(2) The notice to show cause referred to in sub-section (1) shall be
accompanied by the information which suggests that income chargeable to tax has
escaped assessment in his case for the relevant tax year, and on receipt of such
notice, the assessee may furnish his reply within such period, as specified in therein.
35 (3) The Assessing Officer shall, on the basis of material available on record
and taking into account the reply of the assessee furnished under sub-section (2), if
any, pass an order with the prior approval of the specified authority determining
whether or not it is a fit case to issue notice under section 280.
(4) The provisions of this section shall not apply to income chargeable to tax
40 escaping assessment for any tax year in the case of an assessee, where the Assessing
Officer has received—
(a) information under the scheme notified under section 260;
(b) directions issued by the Approving Panel under section 274(6);
(c) any finding or direction contained in an order passed by any
45 authority, Tribunal or court in any proceeding under this Act by way of appeal,
reference or revision, or by a Court in any proceeding under any other law.
282. (1) No notice under section 280 shall be issued for the relevant tax year,— Time limit for
notices under
(a) if four years and three months have elapsed from the end of the sections 280 and
relevant tax year, unless the case falls under clause (b); 281.
 318

(b) if four years and three months, but not more than six years and three
months, have elapsed from the end of the relevant tax year, unless the
Assessing Officer has books of account or other documents or evidence related
to any asset or expenditure or transaction or entry which shows that the income
chargeable to tax, which has escaped assessment, amounts to or is likely to 5
amount to fifty lakh rupees or more.
(2) No notice to show cause under section 281 shall be issued for the relevant
tax year,—
(a) if four years have elapsed from the end of the relevant tax year, unless 10
the case falls under clause (b);
(b) if four years, but not more than six years, have elapsed from the end
of the relevant tax year, unless the income chargeable to tax which has escaped
assessment, as per the information with the Assessing Officer, amounts to or
is likely to amount to fifty lakh rupees or more.
(3) No notice under section 280 or 281 shall be issued within one year from 15
the end of any tax year.
Provision for 283. (1) Irrespective of anything contained in sections 280 and 282, the notice
cases where
assessment is in
under section 280 may be issued at any time for the purpose of making an assessment
pursuance of an or reassessment or recomputation in consequence of or to give effect to—
order on appeal,
etc. (a) any finding or direction contained in an order passed by any 20
authority, Tribunal or court in any proceeding under this Act by way of appeal,
reference or revision or by a Court in any proceeding under any other law; or
(b) the directions issued by the Approving Panel under section 274(6).
(2) The provisions of sub-section (1) shall not apply in any case where any
such assessment, reassessment or recomputation as is referred to in that sub-section 25
relates to a tax year in respect of which an assessment, reassessment or
recomputation could not have been made, by reason of any other provisions limiting
the time within which any action for assessment, reassessment or recomputation
may be taken, at the time when,—
(a) the order which was the subject-matter of the appeal, reference or 30
revision, as the case may be, was made; or
(b) the reference from the jurisdictional Principal Commissioner or
Commissioner is made to the Approving Panel under section 274(4).
Sanction for 284. The specified authority for the purposes of sections 280 and 281 shall be
issue of notice. the Additional Commissioner or the Additional Director or the Joint Commissioner 35
or the Joint Director.
Other 285. (1) In an assessment, reassessment or recomputation made under
provisions.
section 279, the tax shall be chargeable at the rate or rates at which it would have
been charged had the income not escaped assessment.
(2) The Assessing Officer may drop the proceedings initiated under 40
section 279 on a claim made by the assessee to the effect that—
(a) he had been assessed on an amount not lower than what he would be
rightly liable for, even if the income alleged to have escaped assessment had been
taken into account, or the assessment or computation had been properly made; and
(b) he has not impugned any part of the original assessment order for the 45
relevant year under section 356 or 357 or 378.
(3) Where a claim has been made by an assessee under sub-section (2), he
shall not be entitled to reopen matters concluded by an order under section 287 or
288 or 365(10) or 368 or 377.
 319

286. (1) No order in respect of proceedings mentioned in column B of the Time limit for
completion of
Table below shall be made after expiry of the period specified in column D of the assessment,
said Table and calculated from the date as mentioned in column C thereof. reassessment
and
Table recomputation.

5 Sl. No. Nature of Date from which time limit Time limit
Proceedings or for completion is to be for
orders calculated completion

A B C D

1. Assessment order End of the financial year One year.

10 under section 270(10) succeeding the relevant tax
or section 271. year.

2. Assessment order End of the financial year in One year.

under section 270(10) which such updated return
or 271, where an was furnished.
15 updated return of
income is furnished
under section 263(6).

3. Assessment order End of the financial year in One year.

under section 270(10) which such return was
20 or 271, where return furnished.
is furnished in
consequence of order
under section
239(3)(b).

25 4. Assessment, End of the financial year in One year.

reassessment or which notice under section
recomputation order 280 was served.
under section 279.

5. Fresh assessment End of the financial year in One year.

30 order or fresh order which order under section 359
under section 166 in or 363 is received, or order
pursuance to an order under section 377 or 378 is
under section 359, or passed, by the jurisdictional
363, or 377, or 378 Principal Commissioner or
35 setting aside or Commissioner.
canceling an
assessment order or
an order under
section 166.

40 6. Assessment or End of the month in which One year.

reassessment which such assessment or
stands revived, as per reassessment stands revived.
section 153A(2) of
Income-tax Act, 1961
45 (43 of 1961), or
section 292.
 320

A B C D
7. Assessment End of the month in which One year.
required to be made assessment order in the case
in the hands of of firm is passed.
partner, in 5
consequence of an
assessment made on
the firm under
section 279.
8. Assessment, End of the month in which One year. 10
reassessment or such order is received, or
recomputation passed, by the jurisdictional
required to be made Principal Commissioner or
on the assessee or Commissioner.
any person in 15
consequence of or to
give effect to any
finding or direction
contained in an
order–– 20

(i) under
section 359 or 363
or 365(10), or
368, or 377 or
25
378; or
(ii) of any Court
in a proceeding
otherwise than by
way of appeal or
reference under 30
this Act.
9. Order giving End of the month in which One year.
effect to an order order under section 359 or
under section 359 or 363 or 365(10) or 368 is
363 or 365(10) or received, or order under 35
368 or 377 or 378, section 377 or 378 is passed,
otherwise than by by the jurisdictional Principal
making a fresh Commissioner or
assessment or Commissioner.
reassessment or fresh 40
order under section
166, where––
(i) verification of
any issue by way of
submission of any 45
document by the
assessee or any other
person is to be
carried out; or
(ii) an opportunity 50
of being heard is to
be given to the
assessee.
 321

A B C D
10. Order giving effect to End of the month in Six months,
an order under section which order under extendable to
359 or 363 or 365(10) or section 359 or 363 or nine months
5 368 or 377 or 378 365(10) or 368 is with the
otherwise than by making received, or order under approval of
a fresh assessment or section 377 or 378 is authorities as
reassessment or fresh passed by the per section
order under section 166. jurisdictional Principal 2(62) and (64)
10 Commissioner or
Commissioner.
11. Modification of End of the month in Two
assessment, reassessment which such order under months.
or recomputation to give section 166 is received
15 effect to the order passed by the Assessing
under section 166 read Officer.
with section 377
(2) Time limit for completion of any assessment or reassessment as provided
in sub-section (1), in a case where reference is made to the Transfer Pricing
20 Officer for determining the arm’s length price under section 166(1), shall be
extended by an additional period of twelve months.
(3) For the purposes of this section, in computing the time limit for
completion, the following period shall be excluded,––
(a) the time taken in reopening the whole or any part of the proceeding
25 on request of the assessee or in giving an opportunity to the assessee to be
re-heard under section 244;
(b) the period commencing on the date on which stay on assessment
proceeding was granted by an order or injunction of any court and ending
on the date on which certified copy of the order vacating the stay was
30 received by jurisdictional Principal Commissioner or Commissioner;
(c) the period commencing from the date on which the Assessing
Officer intimates the Central Government or the prescribed authority, the
contravention of the provisions of Schedule III (Table: Sl. No. 23, 24, 25)
or section 270(11)(i), and ending with the date on which the copy of the
35 order withdrawing the approval or rescinding the notification, as the case
may be, under those provisions is received by the Assessing Officer;
(d) the period commencing from the date on which the Assessing
Officer directs the assessee to get his accounts audited or inventory valued
under section 268(5) and––

40 (i) ending with the last date on which the assessee is required
to furnish a report of such audit or inventory valuation under that
section; or
(ii) where such direction is challenged before a court, ending
with the date on which the order setting aside such direction is
45 received by the Principal Commissioner or Commissioner;
(e) the period commencing from the date on which the Assessing
Officer makes a reference to the Valuation Officer under section 269(1) and
ending with the date on which the report of the Valuation Officer is received
by him;
 322

(f) the period (not exceeding sixty days) commencing from the date on
which the Assessing Officer received the declaration under section 375(1)
and ending with the date on which the order under section 375(3) is made
by him;
(g) the period commencing from the date on which an application is 5
made before the Board for Advance Rulings under section 383(1) and
ending with the date on which the order either rejecting the application or
the advance ruling pronounced by it, is received by the jurisdictional
Principal Commissioner or Commissioner under section 384(5) or (8), as
the case may be; 10

(h) the period commencing from the date on which a reference or first
of the references for exchange of information is made by an authority
competent under an agreement referred to in section 159 and ending with
the date on which the information requested is last received by the
jurisdictional Principal Commissioner or Commissioner, or one year, 15
whichever is less;
(i) the period commencing from the date on which a reference for
declaration of an arrangement to be an impermissible avoidance
arrangement is received by the jurisdictional Principal Commissioner or
Commissioner under section 274(1) and ending on the date on which a 20
direction under sub-section (3) or (6) or an order under sub-section (5) of
the said section is received by the Assessing Officer;
(j) the period (not exceeding one hundred eighty days) commencing
from the date on which a search is initiated under section 247 or a requisition
is made under section 248 and ending on the date on which the seized items 25
or the requisitioned items, are handed over to the Assessing Officer having
jurisdiction over the assessee,—
(i) in whose case such search is initiated under section 247 or
such requisition is made under section 248; or
(ii) to whom any money, bullion, jewellery, virtual digital asset 30
or other valuable article or thing seized or requisitioned belongs to; or
(iii) to whom any books of account or documents seized or
requisitioned pertains or pertain to, or any information contained
therein, relates to;
(k) the period commencing from the date on which the Assessing 35
Officer makes a reference to the jurisdictional Principal Commissioner or
Commissioner under the section 270(13) and ending with the date on which
copy of the order under of section 351(2)(ii)(A) or (B), is received by the
Assessing Officer.
(4) Where immediately after exclusion of the period as mentioned in 40
sub-section (3), the remaining period for completion available to the Assessing
Officer, as specified in sub-section (1), for making an order of assessment,
reassessment or recomputation, is less than sixty days, such remaining period shall
be extended to sixty days and the aforesaid time limits for completion shall be
deemed to have been extended accordingly. 45

(5) Where the period available to the Transfer Pricing Officer is extended to
sixty days as per section 166(8) and the remaining period for completion available
to the Assessing Officer under this section, for making an order of assessment,
reassessment or re-computation, is less than sixty days, such remaining period
shall be extended to sixty days and the aforesaid time limit for completion shall 50
be deemed to have been extended accordingly.
 323

(6) Where a proceeding before the Interim Board for Settlement abates
43 of 1961. under section 245HA of the Income-tax Act, 1961 and the remaining period of
limitation available to the Assessing Officer under this section for making an
order of assessment, reassessment or re-computation, after the exclusion of the
5 period under section 245HA(4) of the Income-tax Act, 1961, is less than one year,
such remaining period shall be deemed to have been extended to one year; and for
the purposes of determining the period of limitation under sections 282, 287, 288
and 296 and for the purposes of payment of interest under section 437, this
sub-section shall also apply accordingly.
10 (7) In a case where the remaining time period for making an order of regular
or reassessment, after excluding the time period specified in sub-section (3)(k),
ends before the end of the month, the remaining period shall be extended to the
end of such month, and the specified time limit for completion shall be deemed to
have been extended accordingly.
15 (8) For the purposes of this section and section 283, where by an order
referred to in entry in sub-section (1) (Table: Sl. No. 8.A)––
(i) any income is excluded from the total income of the assessee for a
tax year, then, an assessment of such income for another tax year shall be
deemed as one made in consequence of or to give effect to any finding or
20 direction contained in the said order; or
(ii) any income is excluded from the total income of one person and
held to be the income of another person, then, an assessment of such income
on such other person shall be deemed as one made in consequence of or to
give effect to any finding or direction contained in the said order, if such
25 other person was given an opportunity of being heard before the said order
was passed.
287. (1) An income-tax authority referred to in section 236, for rectifying Rectification of
any mistake apparent from the record, may amend any— mistake.

(a) order passed by it under the provisions of this Act;

30 (b) intimation or deemed intimation under section 271(1);
(c) intimation under section 399.
(2) Irrespective of anything contained in any law in force, the authority
concerned may, amend any order under sub-section (1) in relation to any matter,
other than the matter considered and decided in any proceeding by way of appeal
35 or revision, relating to such order.
(3) Subject to the other provisions of this section, the authority concerned,––
(a) may make an amendment under sub-section (1) of its own
motion; and
(b) shall make such amendment for rectifying any such mistake which
40 has been brought to its notice by—
(i) the assessee or the deductor or the collector; or
(ii) the Assessing Officer, if the authority concerned is the Joint
Commissioner (Appeals) or the Commissioner (Appeals).
(4) No amendment that enhances an assessment, reduces a refund or
45 otherwise increases the liability of the assessee or the deductor or the collector,
shall be made under this section by the authority concerned without giving––
(a) a notice of its intention of making such amendment; and
 324

(b) a reasonable opportunity of being heard.

(5) The income-tax authority concerned shall pass an order in writing, if an
amendment is made under this section.
(6) The Assessing Officer shall make refund which may be due to the assessee
or the deductor or the collector, where an amendment reduces the assessment or 5
otherwise reduces the liability of such assessee or the deductor or the collector.
(7) The Assessing Officer shall serve on the assessee or the deductor or the
collector, a notice of demand in such form as prescribed specifying the sum
payable,—
(a) where an amendment enhances the assessment or reduces a refund 10
already made or otherwise increases the liability of such assessee or the
deductor or the collector; and
(b) such notice shall be deemed to be issued under section 289 and the
provisions of this Act shall apply accordingly.
(8) No amendment under this section, except as provided in section 288, 15
shall be made after four years from the end of the financial year in which the order
sought to be amended was passed.
(9) Subject to sub-section (8), an income-tax authority referred to in
sub-section (1), shall pass an order for making the amendment or refusing to allow
the claim within six months from the end of the month in which the application 20
for amendment under this section is received by it from the assessee or the
deductor or the collector.

Other
288. The Assessing Officer, may carry out such actions as are specified in
amendments. column B of the Table below for reasons mentioned therein, subject to the
conditions as specified in column C, within four years (except serial number 12) 25
referred to in section 287(8) which shall be reckoned from the time as specified
in column D, and the provisions of section 287 shall, so far as may be, apply to
such amendment:—
Table
Sl.No. Actions Conditions Time 30
A B C D
1. Amendment Where any remuneration From the end
of order of to any partner determined of the financial
assessment of the year in which the
partner of a firm in completed assessment of
the firm is subsequently subsequent order 35
so as to adjust the
income of the found not deductible under was passed in the
partner case of the firm.
section 35(f) in terms of—
corresponding to
the amount not (a) assessment or
deductible under reassessment of the firm; or 40
section 35(f) (b) any reduction or
enhancement made in the
income of the firm under
this section or section 287
or 356 or 363 or 365or 45
368 or 377 or 378; or
(c) any order passed
under section 245D (4) of
the Income-tax Act, 1961
on the application made 50
by the firm,
 325

A B C D
2. Amendment Where the share of the From the end
of order of member in the income of the of the financial
assessment of the association of persons or year in which the
5 member of an subsequent order
body of individuals
association of determined in completed was passed in the
persons or of a case of the
assessment is subsequently
body of association or
individuals; so as found not included in the body.
to include the assessment of the member
10
share of the or, if included, is not correct
member in the in terms of —
assessment or the
corrections (a) assessment or
15 thereof reassessment of the
association or body;

(b) any reduction or

enhancement made in the
income of the association
20 or body under this
section or section 287 or
359 or 363 or 365 or 368
or 377 or 378; or

(c) any order passed

25 under section 245D (4) of
the Income-tax Act, 1961
(43 of 1961) on the
application made by the
association or body.
30 3. Total income (a) Recomputation of From the end
of the assessee in loss or depreciation; and of the financial
respect of year in which the
succeeding year (b) in consequence to order under
or years referred such recomputation, section 279 was
35 to in column C, recompute the total income passed.
to be recomputed of the assessee for the
and necessary succeeding year or years to
amendment which the loss or
made consequent
depreciation allowance has
40 to proceedings
initiated under been carried forward and
section 279 for set off under the provisions
any tax year. of section 112(1) or 113(2)
or 111(1) and (2) or 115(1)
45 4. The total Where in the assessment From the end
income of the for any tax year,— of the year—
transferor
company for the (a) the capital gain (i) in which
tax year referred arising from the transfer the capital asset
50 to in column C, to of a capital asset is not was converted
be recomputed charged under section 67 or treated as
and necessary in terms of section stock-in trade;
amendment 70(1)(c) or (d); or
made.
 326

A B C D
(b) such gains (ii) in
are deemed under which the parent
section 71(1) as company or its
“Capital gains” of the nominees or, the 5
tax year in which the holding company
transfer took place at ceased to hold the
any time before the whole of the
expiry of the period share capital of
of eight years from the subsidiary 10
company.
the date of
such transfer by
reason of––
(i) such capital
asset being converted 15
by the transferee
company into, or
being treated by it, as
stock-in trade of its
business; or 20

(ii) the parent

company or its
nominees or, the
holding company
ceasing to hold the 25
whole of the share
capital of the
subsidiary company.
5. The order of Where in the assessment From the end
assessment to be for any tax year, a capital of the financial 30
amended; so as gain on transfer of original year in which the
to exclude the asset, referred to in section compensation
capital gain not 89 is charged to tax and was received by
chargeable to tax within the period extended the assessee.
under any of the under that section–– 35
sections referred
to in section 89. (a) the assessee
acquires the new asset
referred to in that
section; or
(b) deposits or invests 40
such capital gain.
6. The order of Where in the assessment From the end
assessment to be for any year, any deduction of the financial
amended - to under section 144 has not year in which
allow deduction - been allowed on the ground such income is so 45
in respect of such that–– received in, or
income or part brought into,
thereof as is so (a) such income has India.
received in, or not been received in
brought into, convertible foreign 50

India. exchange in India; or

 327

A B C D
(b) having been
received in convertible
foreign exchange
5 outside India, or having
been converted into
convertible foreign
exchange outside India,
has not been brought
10 into India, by or on
behalf of the assessee
with the approval of the
Reserve Bank of India or
such other authority as is
15 authorised under any
law for the time being in
force for regulating
payments and dealings
in foreign exchange,
20 and subsequently such
income or part thereof has
been or is received in, or
brought into, India in the
manner specified in (b)
25 above.
7. The order of Where in the assessment From the end
assessment or any for any tax year or in any of the financial
intimation or intimation or deemed year in which
deemed intimation under section such dispute is
30 intimation under 270(1) for any tax year,–– settled.
section 270(1), -to
be amended, - to (a) credit for income-
give credit for tax paid in any country
income-tax - for outside India or a
35 the year in which specified territory
such income is outside India referred to
offered to tax or in Chapter IX-B has not
assessed to tax in been given on the
India. ground that the payment
of such tax was under
40 dispute; and
(b) subsequently such
dispute is settled; and the
assessee, within six
months from the end of
45 the month in which the
dispute is settled,
furnishes to the
Assessing Officer—
(i) evidence of
50 settlement of dispute and
evidence of payment of
such tax; and
 328

A B C D
(ii) an undertaking that
no credit in respect of such
amount has directly or
indirectly been claimed or 5
shall be claimed for any
other tax year.
8. The order of Where, in the assessment From the end
assessment -to be for any year, a capital gain of the financial
amended -to arising from the transfer of a year in which the 10
compute the capital asset, being land or order revising the
capital gain by building or both, is value was passed
taking the full computed— in appeal or
value of the revision or
(a) by taking the full
consideration to reference. 15
value of the
be the value as so
consideration received or
revised in appeal
accruing as a result of the
or revision or
transfer to be the value
reference.
adopted or assessed by
any authority of a State 20
Government for the
purpose of payment of
stamp duty as per
section 78(1); and
(b) subsequently such 25
value is revised in any
appeal or revision or
reference referred to in
section 78(2)(b).
9. The order of (a) Where in the From the end 30
assessment -to assessment for any year, a of the financial
be amended - to capital gain arising from the year in which the
compute the transfer of a capital asset order reducing
capital gain by being a transfer referred to the compensation
taking the in clause (b) is computed–– was passed by the 35
compensation or (i) by taking the court, Tribunal or
consideration as compensation or other authority.
so reduced by the consideration as referred
court, Tribunal to in section 67(12)(a) or,
or any other as the case may be, the 40
authority to be compensation or
the full value of consideration enhanced
consideration. or further enhanced as
referred to in section
67(12)(b), to be the full 45
value of consideration
deemed to be received or
accruing as a result of the
transfer of the asset; and
(ii) subsequently such 50
compensation or
consideration is reduced
by any court, Tribunal or
other authority.
 329

A B C D
(b) The transfer and
consideration referred to in
clause (a) shall be
5 (i) Transfer by way of
compulsory acquisition
under any law;
(ii) consideration that
was determined or
10 approved by the Central
Government or the
Reserve Bank of India.
10. Amendment Where a deduction has From the end
to total income to been allowed to an assessee of the financial
15 disallow the in any tax year undersection year in which the
deduction 152 in respect of any patent, order of the
allowed under and subsequently by an order Controller under
section 152. of the Controller or the High section 2(1)(b), or
Court under the Patents Act, the High Court
20 1970 (39 of 1970),— under section
(a) the patent was 2(1)(i), of the
revoked, or Patents Act, 1970
(b) the name of the (39 of 1970), was
assessee was excluded passed.
25 from the patents register
as patentee in respect of
that patent,
the deduction from the
income by way of royalty
30 attributable to the period
during which the patent had
been revoked or the period
for which name of the
assessee was excluded as
35 patentee in respect of that
patent, shall be deemed to
have been wrongly allowed.
11. Amendment (a) Where any income From the end
of the order of has been included in the of the financial
40 assessment or return of income furnished year in which
any intimation - by an assessee under such tax has been
to allow credit of section 263 for any tax deducted.
such tax year, and tax on such
deducted at income has been deducted
45 source in the tax at source and paid to the
credit of the Central
year referred to
Government as per the
in column C, and
provisions of Chapter XIX-
the credit of such B in a subsequent tax year;
tax deducted at and
50 source not to be
allowed in any (b) an application is
other tax year. made by an assessee in such
form, as prescribed, within
two years from the end of
55 the tax year in which such
tax was deducted at source.
 330

A B C D
12. The order of Where the Transfer (i) Within three
assessment or Pricing Officer under months from the
any intimation or section 166(9) declares the end of the month
deemed option of the assessee, for in which the 5
intimation under determining the arm’s assessment is
section 271 to be length price of similar completed in the
amended for two international or specified case of the
consecutive tax domestic transaction for the assessee for the
years to give two consecutive tax years relevant tax year, 10
effect to the immediately following the and section 165(7)
order passed relevant tax year, as valid. and (8) is
under section applicable.
166(6) or (ii) If the order
directions issued of assessment or 15
under section any intimation or
275(5) deemed
intimation under
section 270(1), for
the two 20
consecutive tax
years is not made
within the said
three months,
such 25
recomputation
shall be made
within three
months from the
end of the month 30
in which such
order of
assessment or
intimation or
deemed 35
intimation, is
made.
Notice of 289. (1) When any tax, interest, penalty, fine or any other sum is payable in
demand. consequence of any order passed under this Act, the Assessing Officer shall serve
upon the assessee a notice of demand in such form, as prescribed, specifying the 40
sum so payable.
(2) Where any sum is determined to be payable by the assessee or the
deductor or the collector under section 270 or 399, the intimation under the said
sections shall be deemed to be a notice of demand for the purposes of this section.
(3) Where the income of the assessee of any tax year includes income of the 45
nature specified in section 17(1)(d) and such specified security or sweat equity
shares referred to in the said section are allotted or transferred directly or indirectly
by the current employer, being an eligible start-up referred to in section 140, the tax
or interest on such income included in the notice of demand referred to in
sub-section (1) shall be payable by the assessee within fourteen days— 50

(a) after the expiry of sixty months from the end of the relevant tax
year; or
(b) from the date of the sale of such specified security or sweat equity
share by the assessee; or
 331

(c) from the date of the assessee ceasing to be the employee of the
employer who allotted or transferred him such specified security or sweat
equity share,
whichever is the earliest.
5 290. (1) The Assesssing Officer shall serve on the assessee a modified notice Modification
of demand specifying the sum payable, if any, and such notice shall be treated as and revision of
notice in certain
a notice under section 289 and the provisions of this Act shall accordingly, apply cases.
in relation to such notice, where—
(a) any tax, interest, penalty, fine or any other sum in respect of which
10 a notice of demand has been issued earlier under section 289; and
(b) such tax, interest, penalty, fine or any other sum is reduced as a
result of an order of the Adjudicating Authority as defined in section 5(1) of
31 of 2016. the Insolvency and Bankruptcy Code, 2016.
(2) The modified notice of demand as referred to in sub- section (1) shall be
15 revised where the order referred to in sub-section (1)(b) is modified by the
National Company Law Appellate Tribunal or the Supreme Court.

291. The Assessing Officer shall notify to the assessee by an order in writing Intimation of
loss.
the amount of the loss as computed by him for the purposes of section 111(1) or
(2) or 112 or 113(2) or 115(1), where––
20 (a) in the course of the assessment of the total income of any assessee,
it is established that a loss has taken place; and
(b) the assessee is entitled to have carried forward and set off such loss
under the provisions of the said sections.
B.—Special procedure for assessment of search cases
25 292. (1) Irrespective of any other provision of this Act, where on or after the Assessment of
income
commencement of this Act, in the case of any person, search is initiated or pertaining to the
requisition is made, then, the Assessing Officer shall proceed to assess or reassess block period.
the total income of the block period as per this Chapter.
(2) The assessment or reassessment or recomputation proceedings under the
30 provisions of this Act (other than this Chapter), if any, pertaining to any tax year
falling in the block period, pending on the date of initiation of search, or the date
of making of requisition, shall abate and shall be deemed to have been abated on
such date.
(3) If any reference has been made under section 166(1) or order has been
35 passed under section 166(6), the assessment or reassessment or recomputation
proceedings, referred to in sub-section (2) together with such reference or order
shall abate on the date referred to in sub-section (2).
(4) If any assessment under the provisions of this Chapter is required to be
made in the case of an assessee, in whose case a search is initiated or a requisition
40 is made subsequently––
(a) such pending assessment shall be duly completed;
(b) assessment in respect of such subsequent search or requisition shall
be made thereafter under the provisions of this Chapter; and
(c) if the period available for assessment in clause (b) is less than three
45 months, such period shall be extended to three months from the end of the
month in which the assessment, as referred to in clause (a) was completed.
 332

(5) Irrespective of anything contained in any other provision of this Act, if

any proceeding initiated or completed under this Chapter has been annulled in an
appeal or any other legal proceeding, then––
(a) the assessment or reassessment or recomputation or reference or
order which has abated under sub-section (2) or (3), shall revive with effect 5
from the date of receipt of the order of such annulment by the Principal
Commissioner or Commissioner;
(b) the revival, as referred to in clause (a) shall cease to have effect, if
such order of annulment is set aside.
(6) The income (other than undisclosed income) of the tax year in which the 10
last of the authorisations for a search is executed or a requisition is made, shall be
assessed separately as per other provisions of this Act.
(7) The total income pertaining to the block period, as referred to in
section 293(5) shall be charged to tax at the rate specified in section 192,
irrespective of the tax year or years to which such income pertains. 15
Computation of 293. (1) The total income of the block period referred to in section 292(1)
total income of
block period. shall be the aggregate of the following:—
(a) undisclosed income declared in the return furnished under section 294;
(b) income assessed under section 270(10) or section 271 or 279 of
this Act, or section 153A or 153C of the Income-tax Act, 1961, prior to the 20 43 of 1961.
date of initiation of search or the date of making of requisition in respect of
tax years comprising the block period;
(c) income declared in the return of income furnished under
section 263 or in response to a notice under section 268(1) or 280 in respect
of tax years comprising the block period, which is not covered under 25
clause (a) or (b);
(d) income determined––
(i) in respect of a tax year, where such tax year has ended and the
due date for furnishing the return for such year has not expired prior to
the date of initiation of the search or the date of requisition, on the basis 30
of entries relating to such income or transactions as recorded in the books
of account and other documents maintained in the normal course before
the date of initiation of search or the date of requisition;
(ii) in respect of period commencing from 1st April of the tax year
in which the search is initiated or requisition is made and ending on the 35
day immediately preceding the date of initiation of search or requisition,
on the basis of entries relating to such income or transactions as recorded
in the books of account and other documents maintained in the normal
course for such period on or before the day immediately preceding the
date of initiation of search or the date of requisition; 40

(iii) in respect of period commencing from the date of initiation of the

search or the date of requisition and ending on the date of the execution of
the last of the authorisations for search or requisition, on the basis of entries
relating to such income or transactions as recorded in the books of account
and other documents maintained in the normal course for such period on or 45
before the date of the execution of the last of the authorisations;
(e) undisclosed income determined by the Assessing Officer under
sub-section (2).
(2) The undisclosed income forming part of the total income referred to in
section 292(1) shall be computed on the basis of following:–– 50

(a) evidence found as a result of search or survey or requisition; and

 333

(b) any other material or information as are either available with the
Assessing Officer or comes to his notice during the course of proceedings
under this Chapter.
(3) The relating to any international transaction or specified domestic
5 transaction referred to in section 166, shall not be considered for the purposes of
determining the total income of the block period, and shall be considered in the
assessment made under other provisions of this Act, if––
(a) such income pertains to the period beginning from the 1st April of
the tax year in which last of the authorisations was executed and ending with
10 the date of execution of the last of the authorisations; and
(b) such income is required to be determined––
(i) as a result of search or requisition of books of account or other
documents; or
(ii) based on any other material or information as are either
15 available with the Assessing Officer or comes to his notice during the
course of proceedings under this Chapter; or
(iii) based on entries relating to income or transactions as recorded
in books of account and other documents maintained in the normal course
on or before the date of the execution of the last of the authorisations.
20 (4) For the purposes of determination of undisclosed income,––
(a) of a firm, such income assessed for each of the tax years falling
within the block period shall be the income determined before allowing
deduction of salary, interest, commission, bonus or remuneration, by
whatever name called, to any partner not being a working partner;
25 (b) the provisions of sections 102, 103, 104 and 105 shall, so far as
may be, apply and reference to tax year in those sections shall be construed
as references to the relevant tax year falling in the block period;
(c) the provisions of section 166 shall, so far as may be, apply and
reference to tax year in that section shall be construed as reference to the
30 relevant tax year falling in the block period excluding the period referred to
in sub-section (3).
(5) The tax referred to in section 292(7) shall be charged on the total income
pertaining to the block period determined in the manner specified in
sub-section (1) as reduced by the total income referred to in clause (b), (c) and (d)
35 of the said sub-section.
(6) For the purposes of sub-sections (1) and (5), the following shall be
ignored:––
(a) the undisclosed income declared under sub-section (1)(a) is a
loss; or
40 (b) the income disclosed in respect of any tax year comprising the
block period is a loss; or
(c) the returned income or assessed income under sub-section (1)(b)
or (c) is a loss; or
(d) the income as determined under of sub-section (1)(d) is a loss.
45 (7) For the purposes of assessment, losses brought forward from the tax year
(prior to the first tax year comprising the block period) under Chapter VII or
unabsorbed depreciation under section 33(11) shall not be set off against the
undisclosed income determined in the block assessment under this Chapter.
(8) Losses or unabsorbed depreciation as referred to in sub-section (7) may
50 be carried forward for being set off in the tax year subsequent to the tax year in
which the block period ends, for the remaining period, taking into account the
block period and such tax year, and as per the provisions of this Act.
 334

Procedure for 294. (1) Where any search has been initiated or requisition is made in
block
assessment. the case of any person, then,––
(a) the Assessing Officer shall, in respect of such search or
requisition, issue a notice to such person, requiring him to furnish within
a period specified in the notice, not exceeding sixty days, a return in the 5
form and verified in the manner, as prescribed, setting forth his total
income, including the undisclosed income, for the block period, and––
(i) such return shall be considered as if it was a return
furnished under section 263 and thereafter notice under section
270(8) shall be issued; 10

(ii) any return furnished beyond the period allowed in the

notice shall not be deemed to be a return under section 259;
(iii) no notice under section 280 is required to be issued for
the purpose of proceeding under this Chapter;
(iv) a person who has furnished a return under this clause 15
shall not be entitled to furnish a revised return;
(b) the Assessing Officer shall proceed to determine the total
income including the undisclosed income of the block period in the
manner laid down in section 293 and the provisions of sections 268,
270(8), 270(10), 271, 276, 287 and 288 shall, so far as may be, apply; 20

(c) the Assessing Officer, on determination of the total income

of the block period as per this Chapter, shall pass an order of
assessment or reassessment and determine the tax payable by him on
the basis of such assessment or reassessment, so, however that—
(i) the provisions of section 275 shall not apply in respect 25
of such order;
(ii) where the order of assessment or reassessment is made
in pursuance of section 295, the block period for such
assessment or reassessment shall be the same as that determined
in respect of the person in whose case search was initiated or 30
requisition was made and proceedings under the said section
were initiated due to such search or requisition;
(d) the assets seized under section 247 or requisitioned under
section 248 shall be dealt with as per section 250.
(2) The provisions of section 270(1) shall not apply to the return furnished 35
under this section.
(3) The Assessing Officer, before issuance of notice under sub-section (1)(a),
shall take prior approval of the Additional Commissioner or the Additional Director
or the Joint Commissioner or the Joint Director.
Undisclosed 295. Where the Assessing Officer is satisfied that any undisclosed income 40
income of any belongs to or pertains to or relates to any person, other than the person with respect
other person.
to whom search was initiated or requisition was made, then––
(a) any money, bullion, jewellery, virtual digital asset or other
valuable article or thing, or assets, or books of account, other documents, or
any information contained therein, seized or requisitioned shall be handed 45
over to the Assessing Officer having jurisdiction over such other
person; and
(b) such other person referred to in clause (a) shall be assessed under
section 294 and the provisions of this Chapter shall apply accordingly.
 335

296. (1) Irrespective of the provisions of section 296, the order under Time-limit for
completion of
section 294 shall be passed within twelve months from the end of the month in block
which the last of the authorisations for search was executed, or requisition was assessment.
made.
5 (2) Where search was initiated or requisition was made, and during the
course of assessment or reassessment of the total income of the relevant block
period, any reference under section 166(1) is made, the period available for
completion of such assessment or reassessment proceeding shall be extended by
twelve months.
10 (3) In computing the period of limitation under sub-section (1), the period
(not exceeding one hundred eighty days) commencing from the date on which a
search is initiated or a requisition is made and ending on the date on which seized
or requisitioned items are handed over to the Assessing Officer having jurisdiction
over the assessee shall be excluded.
15 (4) If after exclusion of the period referred to in sub-section (3), the remaining
period of limitation for completion of assessment or reassessment, expires before
the end of a month, such period shall be extended to end of such month.
(5) The period of limitation for completion of assessment or reassessment for
the block period in the case of the other person referred to in section 295 shall be
20 twelve months from the end of the month in which the notice under section 294 in
pursuance of section 295, was issued to such other person.
(6) The period available for completion of assessment or reassessment
proceeding in respect of the block period in a case referred to in sub-section (5)
shall be extended by twelve months, where a reference under section 166(1) is
25 made in such case.
(7) In computing the period of limitation under this section, the following
period shall be excluded,—
(a) the period commencing on the date on which stay on assessment
proceeding was granted by an order or injunction of any court and ending
30 on the date on which certified copy of the order vacating the stay was
received by jurisdictional Principal Commissioner or Commissioner;
(b) the period commencing from the date on which a first of the
reference for exchange of information (made by an authority competent
under an agreement referred to in section 159) is made and ending with the
35 date on which such information requested is last received by the
jurisdictional Principal Commissioner or Commissioner or one year,
whichever is less;
(c) the time taken in reopening the whole or any part of the proceeding or
giving an opportunity to the assessee to be re-heard under section 244(2);
40 (d) the period commencing from the date on which the Assessing
Officer directs the assessee to get his accounts audited or inventory valued
under section 268(5) and—
(i) ending with the last date on which the assessee is required to
furnish a report of such audit or inventory valuation under that
45 sub-section; or
(ii) where such direction is challenged before a court, ending
with the date on which the certified copy of the order setting aside
such direction is received by the jurisdictional Principal
Commissioner or Commissioner;
 336

(e) the period commencing from the date on which the Assessing
Officer makes a reference to the Valuation Officer under section 269(1) and
ending with the date on which the report of the Valuation Officer is received
by the Assessing Officer;
(f) the period commencing from the date on which the Assessing 5
Officer intimates the Central Government or the prescribed authority, the
contravention of the provisions of Schedule III (Table: Sl. No. 23, 24 or 25)
as referred to in section 270(11)(i) and ending with the date on which the
copy of the order withdrawing the approval or rescinding the notification,
under those clauses is received by the Assessing Officer; 10

(g) the period commencing from the date on which the Assessing
Officer makes a reference to the Principal Commissioner or Commissioner
as per section 270(13) and ending with the date on which the copy of the
order under section 351(2)(ii)(A) or (B), is received by the Assessing
Officer; 15

(h) the period commencing from the date on which a reference for
declaration of an arrangement to be an impermissible avoidance
arrangement is received by the jurisdictional Principal Commissioner or
Commissioner under section 274(1) and ending on the date on which a
direction under sub-section (3) or (6) or an order under sub-section (5) of 20
the said section is received by the Assessing Officer;
(i) the period commencing from the date on which an application is
made before the Board for Advance Rulings under section 381(1) and
ending with the date on which the order rejecting the application is received
by the jurisdictional Principal Commissioner or Commissioner under 25
section 384(5);
(j) the period commencing from the date on which an application is
made before the Board for Advance Rulings under section 381(1) and
ending with the date on which the advance ruling pronounced by it is
received by the jurisdictional Principal Commissioner or Commissioner 30
under section 384(8).
(8) Where immediately after the exclusion of the period referred to in
sub-section (7), the remaining period of limitation referred to in sub-section (1)
or (5) available to the Assessing Officer for completion of assessment under
section 294 is less than sixty days, such remaining period shall be extended to 35
sixty days and the aforesaid period of limitation shall be deemed to be extended
accordingly.
(9) Where after extension of the period referred to in sub-section (8), the
period of limitation for making an order of assessment or reassessment, expires
before the end of a month, such period shall be extended to the end of such month. 40

Certain 297. Interest under section 423, 424 or 425 or penalty under section 439
interests and shall not be levied or imposed upon the assessee for the undisclosed income
penalties not assessed or reassessed for the block period.
to be levied or
imposed.
Levy of 298. (1) Where the return of total income as required under a notice under
interest and section 294(1)(a), is not furnished within the period specified in such notice, or is 45
penalty
incertain not furnished, then,—
cases.
(a) the assessee shall be liable to pay simple interest at the rate of 1.5%
of the tax on undisclosed income determined under clause (c) of said sub-
section;
 337

(b) the interest in clause (a) shall be paid for every month or part of a
month comprised in the period commencing on the day immediately
following the expiry of the time specified in said notice, and ending on the
date of completion of assessment under clause (c) of said sub-section.
5 (2) The Assessing Officer or the Commissioner (Appeals) in the course of
any proceedings under this Chapter, may direct that the person shall pay by way
of penalty a sum which shall be equal to 50% of tax so leviable in respect of the
undisclosed income determined by the Assessing Officer under section 294(1)(c).
(3) The order imposing penalty under this section or section 444(1) or 450
10 or 451 or 452 shall not be made for the block period in respect of a person, if—
(a) such person has furnished a return under section 294(1)(a);
(b) the tax payable on the basis of such return has been paid or, if the
assets seized consist of money, the assessee offers the money so seized to
be adjusted against the tax payable;
15 (c) evidence of tax paid is furnished along with the return; and
(d) an appeal is not filed against the assessment of that part of income
which is shown in the return.
(4) The provisions of the sub-section (3) shall not apply where the
undisclosed income determined by the Assessing Officer is in excess of the
20 income shown in the return and in such cases the penalty shall be imposed on that
portion of undisclosed income determined, which is in excess of income shown
in the return.
(5) The order imposing a penalty under sub-section (2) shall not be made—
(a) unless an assessee has been given a reasonable opportunity of
25 being heard;
(b) by the Deputy Commissioner or Assistant Commissioner or the
Deputy Director or Assistant Director, where penalty exceeds two lakh
rupees except with the previous approval of the Additional Commissioner
or the Additional Director or the Joint Commissioner or the Joint Director;
30 (c) in a case where the assessment is the subject-matter of an appeal
under section 357 or 362,—
(i) after the expiry of the financial year in which the proceedings,
in the course of which action for the imposition of penalty has been
initiated, are completed; or
35 (ii) six months from the end of the financial year in which the
order of the Commissioner (Appeals) or the Appellate Tribunal is
received by the jurisdictional Principal Commissioner or
Commissioner,
whichever period expires later;
40 (d) in a case where the assessment is the subject-matter of revision
under section 377, after the expiry of six months from the end of the
financial year in which such order of revision is passed;
(e) in any case other than those mentioned in clause (c) and clause (d),
after the expiry of the financial year in which the proceedings, in the course
45 of which notice for the imposition of penalty has been issued, are completed,
or six months from the end of the financial year in which notice for
imposition of penalty is issued, whichever period expires later.
 338

(6) In computing the period of limitation under this section, the following
period shall be excluded––
(a) the time taken in giving an opportunity to the assessee to be reheard
under section 244(2);
(b) the period commencing on the date on which stay on proceeding 5
under sub-section (2) was granted by an order or injunction of any court and
ending on the date on which certified copy of the order vacating the stay
was received by jurisdictional Principal Commissioner or Commissioner.
(7) Where immediately after the exclusion of the period referred to in
sub-section (6), the remaining period of limitation referred to in sub-section (5) 10
available to the Assessing Officer for making an order under sub-section (2) of
this section is less than sixty days, such remaining period shall be extended to
sixty days and the aforesaid period of limitation shall be deemed to be extended
accordingly.
(8) If after exclusion of the period referred to in sub-section (7), the 15
remaining period of limitation for making of an order for imposition of penalty
expires before the end of a month, such remaining period shall be extended to the
end of such month.
(9) An income-tax authority on making an order under sub-section (2)
imposing a penalty, unless he is himself an Assessing Officer, shall forthwith send 20
a copy of such order to the Assessing Officer.
Authority 299. (1) The order of assessment for the block period shall be passed by an
competent to Assessing Officer not below the rank of a Deputy Commissioner or an Assistant
make Commissioner or a Deputy Director or an Assistant Director.
assessment of
block period. (2) The order referred to in sub-section (1) shall be passed with the previous 25
approval of the Additional Commissioner or the Additional Director or the Joint
Commissioner or the Joint Director, in respect of search initiated or requisition
made on or after the commencement of this Act.
Application of 300. Save as otherwise provided in this Chapter, all other provisions of this
other Act shall apply to assessment made under this Chapter. 30
provisions of
Act.
Interpretation. 301. In this Chapter––
(a) “block period” means the aggregate of––
(i) the period comprising six tax years preceding the tax year in
which the search was initiated or any requisition was made; and
(ii) the period starting from the 1st April of the tax year in which 35
search was initiated or requisition was made and ending on the date of
the execution of the last of the authorisations for such search or such
requisition;
(b) “requisition” means requisition of books of account, other
documents or any assets under section 248; 40

(c) “requisitioned items” means the books of account, or other

documents or money or bullion or jewellery or other valuable article or thing
requisitioned under section 248;
(d) “search” means a search initiated under section 247;
(e) “seized items” means the books of account, or other documents or 45
money or bullion or jewellery or other valuable article or thing seized under
section 247;
(f) “the last of the authorisations” shall be deemed to have been
executed,—
 339

(i) in the case of search, on the conclusion of search as recorded

in the last panchnama drawn in relation to any person in whose case
the warrant of authorisation has been issued, irrespective of whether
or not any seizure is recorded in such panchnama;
5 (ii) in the case of requisition, on the actual receipt of the books
of account or other documents or assets by the Authorised Officer; and
(g) “undisclosed income” includes––
(i) any money, bullion, jewellery, virtual digital asset or other
valuable article or thing or any expenditure or any income based on any
10 entry in the books of account or other documents or transactions, where
such money, bullion, jewellery, virtual digital asset, valuable article,
thing, entry in the books of account or other document or transaction
represents wholly or partly income or property which has not been or
would not have been disclosed for the purposes of this Act, in respect of
15 the block period; or
(ii) any expense, exemption, deduction or allowance claimed under
this Act which is found to be incorrect, in respect of the block period.
CHAPTER XVII
SPECIAL PROVISIONS RELATING TO CERTAIN PERSONS
20 A.—Association of persons, firm, Hindu undivided family, etc.
1.—Legal representatives
302. (1) Where a person dies, his legal representative shall be liable to pay Legal
any sum which the deceased would have been liable to pay if he had not died, in representative.
the like manner and to the same extent as the deceased.
25 (2) For the purposes of making an assessment (including an assessment,
reassessment or recomputation under section 279) of the income of the deceased
and for the purpose of levying any sum in the hands of the legal representative as
per the provisions of sub-section (1), any proceeding––
(a) taken against the deceased before his death shall be deemed to have
30 been taken against the legal representative and may be continued against the
legal representative from the stage at which it stood on the date of the death
of the deceased;
(b) which could have been taken against the deceased if he had
survived, may be taken against the legal representative; and
35 (c) all the provisions of this Act shall apply accordingly.
(3) The legal representative of the deceased shall be deemed to be an
assessee for the purposes of this Act.
(4) Subject to the provisions of sub-sections (5), (6) and (7), the liability of
a legal representative referred to in sub-section (1) shall be limited to the extent
40 to which the estate of the deceased is capable of meeting the liability.
(5) Every legal representative shall be personally liable for any sum payable
by him in his capacity as legal representative if, while such liability remains
undischarged, he creates a charge on or disposes of or parts with any assets of the
estate of the deceased, which are in, or may come into, his possession.
45 (6) The liability of a legal representative referred to in sub-section (5) shall
be limited to the value of the asset so charged, disposed of or parted with.
 340

(7) The provisions of sections 304(2) and (5) and 305, so far as may be and
to the extent to which they are not inconsistent with the provisions of this section,
apply in relation to a legal representative.
2.—Representative assessees—General provisions
Representative 303. (1) For the purposes of this Act, “representative assessee” means— 5
assessee.
(a) in respect of the income of a non-resident specified in section 9,
the agent of the non-resident, including a person who is treated as an agent
under section 306;
(b) in respect of the income of a minor or a person who is mentally ill
or of unsound mind, the guardian or manager who is entitled to receive or is 10
in receipt of such income on behalf of such minor or a person who is
mentally ill or of unsound mind ;
(c) in respect of income which the Court of Wards, the
Administrator-General, the Official Trustee or any receiver or manager
(including any person, by whatever name called, who in fact manages 15
property on behalf of another) appointed by or under any order of a court,
receives or is entitled to receive, on behalf or for the benefit of any person,
such Court of Wards, Administrator-General, Official Trustee, receiver or
manager;
(d) in respect of income which a trustee appointed under a trust 20
declared by a duly executed instrument in writing whether testamentary or
otherwise (including any wakf deed which is valid under the Mussalman
Wakf Validating Act, 1913) receives or is entitled to receive on behalf or 6 of 1913.
for the benefit of any person, such trustee or trustees;
(e) in respect of income which a trustee appointed under an oral trust 25
receives or is entitled to receive on behalf or for the benefit of any person,
such trustee or trustees.
(2) For the purposes of sub-section (1)(d), a trust which is not declared by a
duly executed instrument in writing (including any wakf deed which is valid under
the Mussalman Wakf Validating Act, 1913) shall be deemed to be a trust declared 30 6 of 1913.
by a duly executed instrument in writing if a statement in writing, signed by the
trustee or trustees, setting out the purpose or purposes of the trust, particulars as
to the trustee or trustees, the beneficiary or beneficiaries and the trust property, is
forwarded to the Assessing Officer,—
(a) where the trust has been declared before the 1st June, 1981, within 35
three months from that day; and
(b) in any other case, within three months from the date of
declaration of the trust.
(3) For the purposes of sub-section (1)(e), “oral trust” means a trust which
is not declared by a duly executed instrument in writing (including any wakf deed 40
which is valid under the Mussalman Wakf Validating Act, 1913) and which is not 6 of 1913.
deemed under sub-section (2) to be a trust declared by a duly executed instrument
in writing.
(4) Every representative assessee shall be deemed to be an assessee for the
purposes of this Act. 45

Liability of 304. (1) Every representative assessee, as regards the income in respect of
representative which he is a representative assessee, shall be subject to the same duties,
assessee. responsibilities and liabilities as if the income were income received by or
accruing to or in favour of him beneficially and for this purpose,––
 341

(a) the representative assessee shall be liable to assessment and any

other proceedings under this Act, in his own name in respect of that income
and any such proceedings shall be deemed to be made upon him in his
representative capacity only; and

5 (b) the tax on such income shall, subject to the other provisions
contained in this Chapter, be levied upon and recovered from the
representative assessee in like manner and to the same extent as it would be
leviable upon and recoverable from the person represented by him.
(2) If any person, in respect of any income is assessable under this Chapter
10 in the capacity of a representative assessee, then he shall not, in respect of that
income, be assessed under any other provisions of this Act.
(3) Irrespective of the provisions of this Chapter, the Assessing Officer may
directly assess the person on whose behalf or for whose benefit income therein
referred to is receivable, or may recover from such person the tax payable in
15 respect of such income.
(4) If only part of the income of a trust is chargeable under this Act, then the
proportion of income receivable by a beneficiary from such trust derived from the
chargeable part shall be determined as follows:—
A x C,
20 B
Where,—
A = the chargeable part of the income of the trust;
B = the whole income of the trust; and
C = the income receivable by the beneficiary from the trust.
25 (5) The Assessing Officer shall have the same remedies in the same manner
against all property of any kind vested in or under the control or management of
any representative assessee as he would have against the property of any person
liable to pay any tax, whether the demand is raised against the representative
assessee or against the beneficiary direct.
30 305. (1) Every representative assessee who, as such, pays any sum under this Right of
Act, shall be entitled to recover the sum so paid from the person on whose behalf it representative
assessee to
is paid, or to retain out of any moneys that may be in his possession or may come recover tax
to him in his representative capacity, an amount equal to the sum so paid. paid.

(2) Any representative assessee, or any person who apprehends that he may
35 be assessed as a representative assessee, may retain out of any money payable by
him to the person on whose behalf he is liable to pay tax (herein referred to as the
principal), a sum equal to his estimated liability under this Chapter.
(3) In the event of any disagreement between such principal and such
representative assessee or person with regard to the amount to be so retained as
40 referred to in sub-section (2), such representative assessee or person may secure
from the Assessing Officer a certificate stating the amount to be so retained
pending final settlement of the liability, and the certificate so obtained shall be his
warrant for retaining that amount.
(4) The amount recoverable from such representative assessee or person
45 shall not exceed the amount specified in such certificate, except to the extent to
which such representative assessee or person may at such time have in his hands
additional assets of the principal.
 342

3.—Representative assesses—Special cases

Who may be 306. (1) For the purposes of this Act, “agent”, in relation to a non-resident,
regarded as includes––
agent.
(a) any person in India—
(i) who is employed by or on behalf of the non-resident; or 5

(ii) who has any business connection with the non-resident; or

(iii) from or through whom the non-resident is in receipt of any
income, whether directly or indirectly; or
(iv) who is the trustee of the non-resident;
(b) any other person who, whether a resident or non-resident, has 10
acquired by means of a transfer, a capital asset in India.
(2) A broker in India who, in respect of any transactions, does not deal
directly with or on behalf of a non-resident principal, but deals with or through a
non-resident broker shall not be deemed to be an agent under this section, in
respect of such transactions, if the following conditions are fulfilled:— 15

(a) the transactions are carried on in the ordinary course of business

through the first-mentioned broker; and
(b) the non-resident broker is carrying on such transactions in the
ordinary course of his business and not as a principal.
(3) A person shall not be treated as the agent of a non-resident unless he has 20
had an opportunity of being heard by the Assessing Officer as to his liability to be
treated as such.
(4) In this section, “business connection” shall have the meaning assigned
to it in section 9(8)(b).

Charge of tax 307. (1) Subject to the other provisions of this section, the income or any 25
where share of part thereof, in respect of the person mentioned in sections 303(1)(c) and (d) shall
beneficiaries be chargeable to tax at the maximum marginal rate, if––
unknown.
(a) such income or such part thereof is not specifically receivable on
behalf or for the benefit of any one person; or
(b) the individual shares of the persons on whose behalf or for whose 30
benefit such income or such part thereof is receivable are indeterminate or
unknown.
(2) The income or any part thereof as referred to in sub-section (1), shall be
chargeable to tax at the rate applicable to an association of persons, if,—
(a) none of the beneficiaries has any other income chargeable under 35
this Act exceeding the maximum amount not chargeable to tax in case of an
association of persons, or is a beneficiary under any other trust; or
(b) such income or part of such income is receivable under a trust declared
by any person by will and such trust is the only trust declared by him; or
(c) such income or part of such income is receivable under a trust 40
created before the 1st March, 1970, by a non-testamentary instrument and
the Assessing Officer is satisfied, having regard to all the circumstances
existing at the relevant time, that the trust was created bona fide––
(i) exclusively for the benefit of the relatives of the settlor; or
 343

(ii) exclusively for the benefit of the members of such family,

where the settlor is a Hindu undivided family,
in circumstances where such relatives or members were mainly dependent
on the settlor for their support and maintenance; or
5 (d) such income is receivable by the trustees on behalf of a provident
fund, superannuation fund, gratuity fund, pension fund or any other fund
created bona fide by a person carrying on a business or profession exclusively
for the benefit of persons employed in such business or profession.
(3) Subject to the provisions of sub-section (4), where the income in respect
10 of the person mentioned in section 303(1)(d) consists of, or includes, profits and
gains of business, tax shall be charged at the maximum marginal rate on the whole
of the income.
(4) Where the profits and gains referred to in sub-section (3) are receivable
under a trust declared by any person by will exclusively for the benefit of any
15 relative dependent on him for support and maintenance, and such trust is the only
trust so declared by him, tax shall be charged at the rate applicable to an
association of persons.
(5) For the purposes of this section,––
(a) such income or any part thereof shall be deemed as being not
20 specifically receivable on behalf or for the benefit of any one person unless
the person on whose behalf or for whose benefit such income or such part
thereof is receivable during the tax year is expressly stated in the order of
the court or the instrument of trust or wakf deed, as the case may be, and is
identifiable as such on the date of such order, instrument or deed;
25 (b) the individual shares of the persons on whose behalf or for whose
benefit such income or such part thereof is received shall be deemed to be
indeterminate or unknown unless the individual shares of the persons on whose
behalf or for whose benefit such income or such part thereof is receivable, are
expressly stated in the order of the court or the instrument of trust or wakf deed
30 and are ascertainable as such on the date of such order, instrument or deed.
308. (1) The income of the person appointed under an oral trust as mentioned Charge of tax
in section 303(1)(e) shall be chargeable to tax at the maximum marginal rate, in case of oral
trust.
irrespective of anything contained in any other provision of this Act.
(2) For the purposes of this section, “oral trust” shall have the meaning
35 assigned to it in section 303(3).
4.—Association of persons and body of individuals
309. (1) For the purposes of this section, sections 310 and 311, an association Method of
of persons or body of individuals shall not include a company or a co-operative computing a
member’s share
21 of 1860. society or a society registered under the Societies Registration Act, 1860, or under in income of
40 any law corresponding to that Act in force in any part of India. association of
persons or
(2) In computing the total income of an assessee who is a member of an body of
association of persons or a body of individuals wherein the shares of the members individuals.
are determinate and known, the share of a member in the income or loss of such
association or body shall be computed in the following manner,––
45 (a) any interest, salary, bonus, commission or remuneration, by
whatever name called, paid to any member in respect of the tax year shall
be deducted from the total income of the association or body and the balance
ascertained and apportioned among the members in the proportions in which
they are entitled to share in the income of the association or body;
 344

(b) the interest, salary, bonus, commission or remuneration referred to

in clause (a), shall be,—
(i) added to the apportioned amount referred to in clause (a), if
such apportioned amount is a profit; or
(ii) adjusted against the apportioned amount referred to in 5
clause (a), if such apportioned amount is a loss,
and the resultant amount shall be treated as the share of the member in the income
of such association or body.
(3) The share of a member in the income or loss of the association or body, as
computed under sub-section (2), shall, for the purposes of assessment, be apportioned 10
under the various heads of income in the same manner in which the income or loss of
the association or body has been determined under each head of income.
(4) Any interest paid by a member on capital borrowed by him for the
purposes of investment in the association or body shall, in computing his share
chargeable under the head “Profits and gains of business or profession” in respect 15
of his share in the income of the association or body, be deducted from his share.
(5) For the purposes of this section, “paid” means actually paid or incurred
according to the method of accounting upon the basis of which the profits or gains
are computed under the head “Profits and gains of business or profession”.
Share of 310. (1) Income-tax shall not be payable by an assessee (who is a member 20
member of of an association of persons or body of individuals) in respect of his share in the
association of
persons or income of the association of persons or body of individuals computed in the
body of manner provided in section 309, except in a case referred to in sub-section (2).
individuals in
income of (2) Where no income-tax is chargeable on the total income of the association
association or
body.
of persons or body of individuals, the share of a member computed as aforesaid 25
shall be chargeable to tax as part of his total income.
(3) Where no income-tax is payable by an assessee under sub-section (1),––
(a) if the association of persons or body of individuals is chargeable
to tax on its total income at the maximum marginal rate or any higher rate
under any of the provisions of this Act, the share of a member computed as 30
aforesaid shall not be included in his total income;
(b) in any other case, the share of a member computed as aforesaid
shall form part of his total income.
Charge of tax 311. (1) Where the individual shares of the members of an association of
where shares
of members in persons or body of individuals in the whole or any part of the income of such 35
association of association or body are indeterminate or unknown,—
persons or
body of (a) tax shall be charged on the total income of the association or body
individuals
unknown, etc.
at the maximum marginal rate; or
(b) where the total income of any member of such association or body
is chargeable to tax at a rate which is higher than the maximum marginal 40
rate, tax shall be charged on the total income of the association or body at
such higher rate.
(2) Where the individual shares of the members of an association of persons
or body of individuals in the whole or any part of the income of such association
or body are determinate or known,–– 45
 345

(a) the total income of any member thereof for the tax year (excluding
his share from such association or body) exceeds the maximum amount
which is not chargeable to tax in the case of that member under the Finance
Act of the relevant year, tax shall be charged on the total income of the
5 association or body at the maximum marginal rate;
(b) any member or members thereof is or are chargeable to tax at a rate
or rates which is or are higher than the maximum marginal rate,—
(i) tax shall be charged on that portion or portions of the total
income of the association or body which is or are relatable to the share
10 or shares of such member or members at such higher rate or rates, as the
case may be; and
(ii) the balance of the total income of the association or body
shall be taxed at the maximum marginal rate.
(3) For the purposes of this section, the individual shares of the members of
15 an association of persons or body of individuals in the whole or any part of the
income of such association or body shall be deemed to be indeterminate or
unknown if such shares (in relation to the whole or any part of such income) are
indeterminate or unknown on the date of formation of such association or body or
at any time thereafter.
20 5.—Executors
Executor. 312. (1) The income of the estate of a deceased person shall be chargeable
to tax in the hands of the executor as an individual, if there is only one executor,
or as an association of persons, if the executors are more than one.
(2) The executor shall be deemed to be resident or non-resident according
25 to the residential status of the deceased person for the tax year in which his death
took place.
(3) For the purposes of this section, “executor” includes an administrator or
other person administering the estate of the deceased person.
(4) The assessment of an executor under this section shall be made
30 separately from any assessment that may be made on him in respect of his own
income.
(5) Separate assessments shall be made under this section on the total
income of each completed tax year or part thereof as is included in the period from
the date of the death to the date of complete distribution to the beneficiaries of the
35 estate according to their several interests.
(6) In computing the total income of any tax year under this section, any
income of the estate of that tax year distributed to, or applied to the benefit of, any
specific legatee of the estate during that tax year shall be excluded; but the income
so excluded, shall be included in the total income of the tax year of such specific
40 legatee.
(7) The provisions of section 305 shall, so far as may be, apply in the case
of an executor in respect of tax paid or payable by him, as they apply in the case
of a representative assessee.
6.—Succession to business or profession

Succession to 45 313. (1) Where a person carrying on any business or profession (herein
business or referred to as the predecessor) has been succeeded therein by any other person
profession (herein referred to as the successor) who continues to carry on that business or
otherwise than
on death. profession,—
 346

(a) the predecessor shall be assessed in respect of the income of the

tax year in which the succession took place up to the date of succession;
(b) the successor shall be assessed in respect of the income of the tax
year after the date of succession.
(2) Irrespective of anything contained in sub-section (1), when the 5
predecessor cannot be found, the assessment of the income of the tax year in
which the succession took place up to the date of succession and of the tax year
preceding that year shall be made on the successor in like manner and to the same
extent as it would have been made on the predecessor, and all the provisions of
this Act shall, so far as may be, apply accordingly. 10

(3) Irrespective of anything contained in sub-sections (1) and (2), where

there is succession, the assessment or reassessment or any other proceedings,
made or initiated on the predecessor during the course of pendency of such
succession, shall be deemed to have been made or initiated on the successor and
all the provisions of this Act shall, so far as may be, apply accordingly. 15

(4) When any sum payable under this section in respect of the income of
such business or profession assessed on the predecessor,––
(a) for the tax year in which the succession took place up to the date
of succession; or
(b) for the tax year preceding the year in which the succession took place, 20

cannot be recovered from him, the Assessing Officer shall record a finding to that
effect and the sum payable by the predecessor shall thereafter be payable by and
recoverable from the successor, and the successor shall be entitled to recover from
the predecessor any sum so paid.
(5) Without prejudice to the provisions of this section, where any business or 25
profession carried on by a Hindu undivided family is succeeded to, and
simultaneously with the succession or after the succession there has been a partition
of the joint family property between the members or groups of members, the tax due
in respect of the income of the business or profession succeeded to, up to the date of
succession, shall be assessed and recovered in the manner provided in section 315. 30

(6) In this section,—

(a) “income” includes any gain accruing from the transfer, in any manner,
of the business or profession as a result of the succession; and
(b) “pendency” means the period commencing from the date of filing of
application for such succession of business before the High Court or tribunal or 35
the date of admission of an application for corporate insolvency resolution by
the Adjudicating Authority as defined in section 5(1) of the Insolvency and
Bankruptcy Code, 2016 and ending with the date on which the order of such 31 of 2016.
High Court or tribunal or such Adjudicating Authority, is received by the
Principal Commissioner or the Commissioner. 40

Effect of order 314. (1) Irrespective of anything to the contrary contained in section 263, if
of tribunal or prior to the date of order in respect of business reorganisation, any return of
court in respect
of business
income has been furnished under the provisions of the said section by an entity
reorganisation. for any tax year to which such order applies, the successor shall furnish, within
six months from the end of the month in which the order was issued, a modified 45
return in such form and manner, as prescribed, in accordance with and limited to
the said order.
 347

(2) Where the assessment or reassessment proceedings for a tax year to

which the order in respect of the business reorganisation applies,––
(a) have been completed on the date of furnishing of the modified
return as per the provisions of sub-section (1), the Assessing Officer
5 shall pass an order modifying the total income of the relevant tax year
determined in such assessment or reassessment, in accordance with such
order and taking into account the modified return so furnished;
(b) are pending on the date of furnishing of the modified return as
per sub-section (1), the Assessing Officer shall pass an order assessing
10 or reassessing the total income of the relevant tax year as per the order
of the business reorganisation and taking into account the modified
return so furnished.
(3) Subject to any other provisions of this section, in an assessment or
reassessment made in respect of a tax year under this section, all other
15 provisions of this Act shall apply and the tax shall be chargeable at the rate or
rates as applicable to such tax year.
(4) In this section,—
(a) “business reorganisation” means the reorganisation of business
involving the amalgamation or demerger or merger of business of one
20 or more persons;
(b) “order in respect of business reorganisation” means an order of
a High Court or tribunal or an Adjudicating Authority as defined in
31 of 2016. section 5(1) of the Insolvency and Bankruptcy Code, 2016; and
(c) “successor” means all resulting companies in a business
25 reorganisation, whether or not the company was in existence prior to
such business reorganisation.
7.—Partition
315. (1) A Hindu family, hitherto assessed as undivided, shall be deemed for Assessment after
partition of
the purposes of this Act to continue to be a Hindu undivided family, except where Hindu undivided
30 and in so far as a finding of partition has been given under this section in respect of family.
the Hindu undivided family.
(2) Where, at the time of making an assessment under section 270 or
section 271, it is claimed by or on behalf of any member of a Hindu family assessed
as undivided that a partition, whether total or partial, has taken place among the
35 members of such family, the Assessing Officer shall make an inquiry thereinto after
giving notice of the inquiry to all the members of the family.
(3) On the completion of the inquiry, the Assessing Officer shall record a
finding as to whether there has been a total or partial partition of the joint family
property, and, if there has been such a partition, the date on which it has taken place.
40 (4) Where a finding of total or partial partition has been recorded by the
Assessing Officer under this section, and the partition took place during the tax
year,—
(a) the total income of the joint family in respect of the period up to the
date of partition shall be assessed as if no partition had taken place; and
45 (b) each member or group of members shall, in addition to any tax for
which he or it may be separately liable and irrespective of anything contained
against Schedule III (Table: Sl. No. 2), be jointly and severally liable for the
tax on the income so assessed.
 348

(5) Where a finding of total or partial partition has been recorded by the
Assessing Officer under this section, and the partition took place after the expiry of
the tax year, the total income of the tax year of the joint family shall be assessed as
if no partition had taken place, and the provisions of sub-section (4)(b), so far as
may be, apply to the case. 5

(6) Irrespective of anything contained in this section, if the Assessing Officer

finds after completion of the assessment of a Hindu undivided family that the family
has already effected a partition, whether total or partial, the Assessing Officer shall
proceed to recover the tax from every person who was a member of the family before
the partition, and every such person shall be jointly and severally liable for the tax 10
on the income so assessed.
(7) The provisions of this section shall, so far as may be, apply in relation to
the levy and collection of any penalty, interest, fine or other sum in respect of any
period up to the date of the partition, whether total or partial, of a Hindu undivided
family as they apply in relation to the levy and collection of tax in respect of any 15
such period.
(8) Irrespective of anything contained in the foregoing provisions of this
section, where a partial partition has taken place after the 31st December, 1978,
among the members of a Hindu undivided family hitherto assessed as undivided,—
(a) a claim that such partial partition has taken place shall not be 20
inquired into under sub-section (2) and no finding shall be recorded under
sub-section (3) that such partial partition had taken place and any finding
recorded under sub-section (3) to that effect at any time, shall be
null and void;
(b) such family shall continue to be liable to be assessed under this Act 25
as if no such partial partition had taken place; and
(c) each member or group of members of such family immediately
before such partial partition and the family shall be jointly and severally liable
for any tax, penalty, interest, fine or other sum payable under this Act by the
family in respect of any period, whether before or after such partial partition. 30

(9) For the purposes of this section, the several liability of any member or
group of members thereunder shall be computed according to the portion of the joint
family property allotted to him or it at the partition, whether total or partial and the
provisions of this Act shall apply accordingly.
(10) In this section,— 35

(a) “partition” means,—

(i) where the property admits of a physical division, a physical
division of the property, but a physical division of the income without a
physical division of the property producing the income shall not be
deemed to be a partition; or 40

(ii) where the property does not admit of a physical division, then
such division as the property admits of, but a mere severance of status
shall not be deemed to be a partition;
(b) “partial partition” means a partition which is partial as regards the
persons constituting the Hindu undivided family, or the properties belonging 45
to the Hindu undivided family, or both.
 349

8.—Profits of non-residents from occasional shipping business

316. (1) Irrespective of anything in the other provisions of this Act, the Shipping
business of non-
provisions of this section shall apply for the purpose of levy and recovery of tax in residents.
the case of any ship, belonging to or chartered by a non-resident, which carries
5 passengers, livestock, mail or goods shipped at a port in India.
(2) Where such a ship carries passengers, livestock, mail or goods shipped at
a port in India,––
(a) 7.5 % of the amount paid or payable on account of such carriage shall
be deemed to be income accruing in India to the owner or charterer or to any
10 person on his behalf, on account of such carriage, whether that amount is paid
or payable in or out of India; and
(b) the amount referred to in clause (a) shall include the amount paid or
payable by way of demurrage charge or handling charge or any other amount
of similar nature.
15 (3) Before the departure from any port in India of any such ship, the master of
the ship shall prepare and furnish to the Assessing Officer a return of the full amount
paid or payable to the person as mentioned in sub-section (2) on account of such
carriage shipped at that port, since the last arrival of the ship thereat.
(4) The requirement of furnishing the return as per sub-section (3) shall be
20 deemed to have been complied with, if––
(a) the Assessing Officer is satisfied that––
(i) it is not possible for the master of the ship to furnish the return
before the departure of the ship from the port; and
(ii) the master of the ship has made satisfactory arrangements for
25 filing of the return and payment of tax by any other person on his behalf;
and
(b) the return is filed within thirty days of the departure of the ship by
any person so authorised by the master.
(5) On receipt of the return, the Assessing Officer shall—
30 (a) assess the income referred to in sub-section (2); and
(b) determine the sum payable as tax thereon at the rate or rates in force
applicable to the total income of a company which has not made the
arrangements referred to in section 393(1)(Table: Sl. No. 7) and such sum shall
be payable by the master of the ship.
35 (6) No order assessing the income and determining the sum of tax payable
thereon shall be made under sub-section (5) after the expiry of nine months from the
end of the tax year in which the return under sub-section (3) is furnished.
(7) For the purposes of determining the tax payable under sub-section (5), the
Assessing Officer may call for such accounts or documents as he may require.
40 (8) A port clearance shall not be granted to the ship until the Commissioner of
Customs, or other officer duly authorised to grant the same, is satisfied that the tax
assessable under this section has been duly paid or that satisfactory arrangements
have been made for the payment thereof.
(9) Nothing in this section shall prevent the owner or charterer of a ship from
45 claiming, before the end of the year following the tax year in which the date of
departure of the ship from Indian port falls, that an assessment be made of his total
income of the tax year as per other provisions of this Act, and tax payable be
determined on the basis of such assessment.
 350

(10) In a case falling under sub-section (9), any payment made under this
section during the tax year, if so claimed, shall be treated as––
(a) tax paid in advance with respect to that year and adjusted against tax
payable by such person; and
(b) the difference between the sum so paid and the amount of tax found 5
so payable by him on such assessment shall be paid by him or refunded to him.
9.—Persons leaving India
Assessment of
persons leaving
317. (1) Irrespective of anything contained in section 4, when it appears to the
India. Assessing Officer that any individual may leave India during the current tax year or
shortly after its expiry, with no present intention of returning to India, the total 10
income of such individual for the period beginning from the first day of that current
tax year up to the probable date of departure from India (referred to as specified
period in this section) shall be chargeable to tax in that current tax year.
(2) The total income of each completed tax year or part of any tax year
included in the specified period shall be chargeable to tax at the rate or rates in force 15
in that tax year, and separate assessments shall be made in respect of each such
completed tax year or part of any tax year.
(3) The Assessing Officer may estimate the income of such individual for such
specified period or any part thereof, where it cannot be readily determined in the
manner provided in this Act. 20

(4) For the purposes of making an assessment under sub-section (1), the
Assessing Officer may serve a notice upon such individual requiring him to furnish
within such time, not being less than seven days, as specified in the notice, a return
in the same form and verified in the same manner as a return under section 268(1),
setting forth his–– 25

(a) total income for each completed tax year comprised in such specified
period referred to therein; and
(b) estimated total income for any part of the tax year comprised in such
specified period,
and the provisions of this Act shall, so far as may be, and subject to the provisions 30
of this section, apply as if the notice were a notice issued under section 268(1).
(5) Irrespective of anything contained in section 268(1) or 280, where the
provisions of sub-section (1) are applicable, the Assessing Officer may issue any
notice under section 268(1) or 280, requiring the furnishing of the return by such
individual in respect of any tax chargeable under any other provisions of this Act, 35
within such period, not being less than seven days, as the Assessing Officer may
think proper.
(6) The tax chargeable under this section shall be in addition to the tax, if any,
chargeable under any other provisions of this Act.
10.—Association of persons or body of individuals or artificial juridical person 40
formed for a particular event or purpose
Assessment of 318. (1) Irrespective of anything contained in the section 4, where it appears
association of
persons or body to the Assessing Officer that any association of persons or a body of individuals or
of individuals or an artificial juridical person, formed or established or incorporated for a particular
artificial juridical event or purpose in a tax year is likely to be dissolved in the same year or 45
person formed for
a particular event
immediately after such year, the total income of such association or body or juridical
or purpose. person for the period beginning from the first day of that tax year up to the date of
its dissolution shall be chargeable to tax in that tax year.
 351

(2) For the purpose of sub-section (1), the provisions of section 317(2) to (6)
shall, so far as may be, apply to any proceedings in the case of any such person as
they apply in the case of persons leaving India.
11.—Persons trying to alienate their assets
5 319. (1) Irrespective of anything contained in section 4, where it appears to Assessment of
persons likely to
the Assessing Officer during any current tax year that any person is likely to charge, transfer property
sell, transfer, dispose of or otherwise part with any of his assets with a view to to avoid tax.
avoiding payment of any liability under the provisions of this Act, the total income
of such person for the period beginning from the first day of that current tax year up
10 to the date when the Assessing Officer commences proceedings under this section
shall be chargeable to tax in current tax year.
(2) For the purpose of sub-section (1), the provisions of section 317(2) to (6)
shall, so far as may be, apply to any proceedings in the case of any such person as
they apply in the case of persons leaving India.
15 12.—Discontinuance of business, or dissolution
320. (1) Irrespective of anything contained in section 4, where any business or Discontinued
profession is discontinued in any tax year, the income of the period beginning from business.
the first day of that tax year up to the date of such discontinuance may, at the
discretion of the Assessing Officer, be charged to tax in that tax year.
20 (2) The total income of each completed tax year or part of any tax year
included in such period shall be chargeable to tax at the rate or rates in force in that
tax year, and separate assessments shall be made in respect of each such completed
tax year or part of any tax year.
(3) Any person discontinuing any business or profession shall give to the
25 Assessing Officer notice of such discontinuance within fifteen days thereof.
(4) Where any business is discontinued in any year, any sum received after the
discontinuance shall be deemed to be the income of the recipient and charged to tax
accordingly in the year of receipt, if such sum would have been included in the total
income of the person who carried on the business had such sum been received before
30 such discontinuance.
(5) Where any profession is discontinued in any year on account of the
cessation of the profession by, or the retirement or death of, the person carrying on
the profession, any sum received after the discontinuance shall be deemed to be the
income of the recipient and charged to tax accordingly in the year of receipt, if such
35 sum would have been included in the total income of the said person, had it been
received before such discontinuance.
(6) Where an assessment is to be made under the provisions of this section,
the Assessing Officer may serve on the person whose income is to be assessed or,
in the case of a firm, on any person who was a partner of such firm at the time of its
40 discontinuance or, in the case of a company, on the principal officer thereof, a notice
containing all or any of the requirements which may be included in a notice under
section 268(1) and the provisions of this Act shall, so far as may be, apply
accordingly as if the notice were a notice issued under section 268.
(7) Irrespective of anything contained in section 268 or 280, where the
45 provisions of sub-section (1) are applicable, the Assessing Officer may issue any
notice under section 268 or 280, requiring the furnishing of the return by the person
whose income is to be assessed in respect of any tax chargeable under any other
provisions of this Act, within such period, not being less than seven days, as the
Assessing Officer may think proper.
 352

(8) The tax chargeable under this section shall be in addition to the tax, if any,
chargeable under any other provision of this Act.
Association 321. (1) Where any business or profession carried on by an association of
dissolved or
business persons has been discontinued or where an association of persons is dissolved, the
discontinued. Assessing Officer shall make an assessment of the total income of the association 5
of persons as if no such discontinuance or dissolution had taken place, and all the
provisions of this Act, including the provisions relating to the levy of a penalty or
any other sum chargeable under any provision of this Act shall apply, so far as may
be, to such assessment.
(2) Regardless of the generality of sub-section (1), if the Assessing Officer or 10
the Joint Commissioner (Appeals) or the Commissioner (Appeals) in the course of
any proceeding under this Act in respect of any such association of persons as is
referred to in that sub-section is satisfied that the association of persons was guilty
of any of the acts specified in Chapter XXI, he may impose or direct the imposition
of a penalty as per the provisions of that Chapter. 15

(3) Every person who was at the time of such discontinuance or dissolution a
member of the association of persons, and the legal representative of any such
person who is deceased, shall be jointly and severally liable for the amount of tax,
penalty or other sum payable, and all the provisions of this Act, so far as may be,
shall apply to any such assessment or imposition of penalty or other sum. 20

(4) Where such discontinuance or dissolution takes place after any

proceedings in respect of a tax year have commenced, the proceedings may be
continued against the persons referred to in sub-section (3) from the stage at which
the proceedings stood at the time of such discontinuance or dissolution, and all the
provisions of this Act shall, so far as may be, apply accordingly. 25

(5) Nothing in this section shall affect the provisions of section 302(4).
Company in
liquidation.
322. (1) Every person,—
(a) who is the liquidator of any company which is being wound up,
whether under the orders of a court or otherwise; or
(b) who has been appointed the receiver of any assets of a company, 30
(herein referred to as the liquidator),
shall, within thirty days after he has become such liquidator, give notice of his
appointment as such to the Assessing Officer who is entitled to assess the income
of the company.
(2) The Assessing Officer shall, after making such inquiries or calling for such 35
information as he may deem fit, notify to the liquidator within three months from
the date on which he receives notice of the appointment of the liquidator the amount
which, in the opinion of the Assessing Officer, would be sufficient to provide for
any tax which is then, or is likely thereafter to become, payable by the company.
(3) The liquidator— 40

(a) shall not, without the leave of the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner, part with
any of the assets of the company or the properties in his hands until he has
been notified by the Assessing Officer under sub-section (2); and
(b) on being so notified, shall set aside an amount, equal to the amount 45
notified and, until he so sets aside such amount, shall not part with any of the
assets of the company or the properties in his hands.
(4) The provisions of sub-section (3) shall not debar the liquidator from parting
with such assets or properties for the purpose of––
 353

(a) the payment of the tax payable by the company; or

(b) making any payment to secured creditors whose debts are entitled
under law to priority of payment over debts due to Government on the date of
liquidation; or
5 (c) meeting such costs and expenses of the winding up of the company,
as are in the opinion of the Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner or Commissioner, reasonable.
(5) If the liquidator fails to give the notice as per sub-section (1), or fails to set
aside the amount as required by sub-section (3), or parts with any of the assets of
10 the company or the properties in his hands in contravention of the provisions of that
sub-section, he shall be personally liable for the payment of the tax which the
company would be liable to pay.
(6) In relation to sub-section (5), if the amount of any tax payable by the
company is notified under sub-section (2), the personal liability of the liquidator
15 under that sub-section shall be to the extent of such amount.
(7) Where there are more liquidators than one, the obligations and liabilities
attached to the liquidator under this section shall attach to all the liquidators jointly
and severally.
(8) The provisions of this section shall have effect irrespective of anything to
20 the contrary contained in any other law in force, except the provisions of the
31 of 2016. Insolvency and Bankruptcy Code, 2016.
13.—Private companies
18 of 2013. 323. (1) Irrespective of anything contained in the Companies Act, 2013, where Liability of
directors of
any tax due from— private
company.
25 (a) a private company in respect of any income of any tax year; or
(b) any other company in respect of any income of any tax year during
which such other company was a private company,
cannot be recovered, then, every person, who was a director of the private company
at any time during the relevant tax year, shall be jointly and severally liable for the
30 payment of such tax unless he proves that the non-recovery cannot be attributed to
any gross neglect, misfeasance or breach of duty on his part in relation to the affairs
of the company.
(2) Where a private company is converted into a public company and the tax
assessed in respect of any income of any tax year during which such company was
35 a private company cannot be recovered, then, nothing contained in sub-section (1)
shall apply to any person who was a director of such private company in relation to
any tax due in respect of any income of such private company assessable for any tax
year commencing before the 1st April, 1961.
(3) In this section, “tax due” includes penalty, interest, fees or any other sum
40 payable under the Act.
14.—Assessment of firms
324. In the case of a firm which is assessable as a firm, tax shall be charged Charge of tax in
on its total income at the rate as specified in the Finance Act of the relevant year. case of a firm.

325. (1) A firm shall be assessed as a firm for the purposes of this Act, if— Assessment as a
Firm.
45 (a) the partnership is evidenced by an instrument; and
 354

(b) the individual shares of the partners are specified in that instrument.
(2) A certified copy of the instrument of partnership referred to in
sub-section (1) shall accompany the return of income of the firm of the tax year in
respect of which assessment as a firm is first sought.
(3) For the purposes of sub-section (2), the copy of the instrument of 5
partnership shall be certified in writing by all the partners (not being minors) or,
where the return is made after the dissolution of the firm, by all persons (not being
minors), who were partners in the firm immediately before its dissolution and by the
legal representative of any such partner who is deceased.
(4) Where a firm is assessed as such for any tax year, it shall be assessed in 10
the same capacity for every subsequent year, if there is no change in the constitution
of the firm or the shares of the partners as evidenced by the instrument of partnership
on the basis of which the assessment as a firm was first sought.
(5) Where any such change had taken place in the tax year, the firm shall
furnish a certified copy of the revised instrument of partnership along with the return 15
of income for such tax year, and all the provisions of this section shall apply
accordingly.
(6) Irrespective of anything contained in any other provision of this Act,
where, in respect of any tax year, there is on the part of a firm any such failure as is
mentioned in section 271,— 20

(a) the firm shall be so assessed that no deduction by way of any payment
of interest, salary, bonus, commission or remuneration, by whatever name
called, made by such firm to any partner of such firm shall be allowed in
computing the income chargeable under the head “Profits and gains of
25
business or profession”; and
(b) such payment shall not be chargeable to income-tax under
section 26(2)(f).
Assessment 326. Irrespective of anything contained in any other provision of this Act, where
when
section 325 not a firm does not comply with the provisions of section 325 for any tax year,—
complied with.
(a) no deduction by way of any payment of interest, salary, bonus, 30
commission or remuneration, by whatever name called, made by such firm to
any partner of such firm shall be allowed in computing its income chargeable
under the head “Profits and gains of business or profession”; and
(b) such interest, salary, bonus, commission or remuneration shall not be
chargeable to income-tax under section 26(2)(g) in the hands of partners of 35
such firm.
15.—Change in constitution, succession and dissolution
Change in 327. (1) Where at the time of making an assessment under section 270 or 271,
constitution of a it is found that a change has occurred in the constitution of a firm, the assessment
firm.
shall be made on the firm as constituted at the time of making the assessment. 40

(2) For the purposes of this section, there is a change in the constitution of the
firm—
(a) if one or more of the partners cease to be partners; or
 355

(b) one or more new partners are admitted, subject to the condition that
at least one person who was partner of the firm before the change continues as
partner after such change; or
(c) where all the partners continue with a change in their respective
5 shares or in the shares of some of them.
(3) The provisions of sub-section 2(a) shall not apply to a case where the firm
is dissolved on the death of any of its partners.
328. Where a firm carrying on a business or profession is succeeded by another Succession of
one firm by
firm, except in a case covered by section 327, separate assessments shall be made another firm.
10 on the predecessor firm and the successor firm as per the provisions of section 313.
329. Every person who was, during the tax year, a partner of a firm, and the Joint and several
legal representative of any such person who is deceased, shall be jointly and liability of
partners for tax
severally liable along with the firm for the amount of tax, penalty or other sum payable by firm.
payable by the firm for the tax year, and all the provisions of this Act, so far as may
15 be, shall apply to the assessment of such tax or imposition or levy of such penalty
or other sum.
330. (1) Where a firm is dissolved or any business or profession carried on by Firm dissolved
it has been discontinued, the Assessing Officer shall make an assessment of the total or business
discontinued.
income of the firm, as if no such dissolution or discontinuance had taken place, and
20 all the provisions of this Act, including the provisions relating to the levy of a
penalty or any other sum chargeable under any provision of this Act, shall apply, so
far as may be, to such assessment.
(2) Regardless of the generality of sub-section (1), if the Assessing Officer or
Joint Commissioner (Appeals) or Commissioner (Appeals), in the course of any
25 proceeding under this Act in respect of any such firm as referred to in that
sub-section, is satisfied that the firm was guilty of any of the acts specified in
Chapter XXI, he may impose or direct the imposition of a penalty as per the
provisions of that Chapter.
(3) Every person who was at the time of such dissolution or discontinuance a
30 partner of the firm, and the legal representative of any such person who is deceased,
shall be jointly and severally liable for the amount of tax, penalty or other sum
payable, and all the provisions of this Act, so far as may be, shall apply to any such
assessment or imposition of penalty or other sum.
(4) Where such dissolution or discontinuance takes place after any
35 proceedings in respect of a tax year have commenced, the proceedings may be
continued against the person referred to in sub-section (3) from the stage at which
the proceedings stood at the time of such dissolution or discontinuance, and all the
provisions of this Act shall, so far as may be, apply accordingly.
(5) The provisions of this section shall not affect the provisions of
40 section 302(4).
16.—Liability of partners of limited liability partnership in liquidation
331. Irrespective of anything contained in the Limited Liability Partnership Liability of
partners of
6 of 2009. Act, 2008, where any tax including penalty, interest, fees or any other sum payable limited liability
under the Act is due, and cannot be recovered, from–– partnership in
liquidation.
45 (a) the limited liability partnership in respect of any income of any tax
year; or
(b) any other person in respect of any income of any tax year during
which such other person was a limited liability partnership,
 356

then, in such case, every such person who was a partner of such partnership at any
time during the relevant tax year, shall be jointly and severally liable for the payment
of such due amount, unless he proves that the non-recovery cannot be attributed to
any gross neglect, misfeasance or breach of duty on his part in relation to the affairs
of the limited liability partnership. 5

B.—Special provisions for registered non-profit organisation

I.––Registration
Application for 332. (1) The following persons may, for claiming benefits under this Part
registration.
as a registered non-profit organisation, make an application for registration in
such form and manner, as prescribed, to the Principal Commissioner or 10
Commissioner:––
(a) a public trust;
(b) a society registered under the Societies Registration Act, 1860, or 21 of 1860.
under any law in force in India;
(c) a company registered under section 8 of the Companies Act, 2013 or 15 18 of 2013.
the companies registered under section 25 of the Companies Act, 1956 and 1 of 1956.
deemed to have been registered in pursuance of section 465 (2)(g) of the
Companies Act, 2013;

(d) a University established by law or any other educational institution

affiliated thereto or recognised by the Government; 20

(e) an institution financed wholly or in part by the Government or a local

authority;
(f) any person as referred to in Schedule III (Table: Sl. No. 27) to
(Table: Sl. No. 29) and (Table: Sl. No. 36) and in Schedule VII (Table: Sl. No. 10)
to (Table: Sl. No. 19) and (Table: Sl. No. 42); or 25

(g) any other person notified by the Board.

(2) A person referred to in sub-section (1) shall be eligible for

registration, if––
(a) such person is constituted or registered or incorporated in India for
carrying out one or more charitable purposes, as referred to in section 2(23) or 30
one or more public religious purposes, or both; and

(b) the properties of such person are held under an irrevocable trust for
the benefit of the general public,––
(i) wholly for charitable or religious purposes; or

(ii) partly for charitable or religious purposes in India, if such 35

person was constituted or registered or incorporated prior to the
commencement of the Income-tax Act, 1961. 43 of 1961.

(3) Every application in respect of the cases specified in column B

of the Table below shall be made to the Principal Commissioner or
Commissioner within the time provided in column C of the said Table, 40
who shall, on receipt of such application, follow the procedure provided
in sub-sections (6) and (7) and shall pass an order within the time
specified in column D of the said Table, and registration, if granted, shall
be valid for a period specified in column E thereof.
 357

Table
Sl. No. Case Time limit for Time limit for Validity of
furnishing passing order registration
application
5 A B C D E
1. Where At any Three Three tax
the activities time during the months from years
of the tax year the end of the commencing
applicant have beginning from month in from the tax
10 not which which year in which
commenced registration is application is such
and it has not sought. made. application is
been made.
registered
15 under any
specified
provision at
any time
before making
20 the
application.
2. Where At any Six Five tax
the activities time during the months from years
of the tax year, the end of the commencing
25 applicant have beginning from quarter in from the tax
commenced which which year in which
and it has not registration is application is such
been sought. made. application is
registered made.
30 under any
specified
provision at
any time
before making
35 the
application.
3. Where Within Six Five tax
the applicant six months of months from years
has been the the end of the commencing
40 granted commencement quarter in from the tax
provisional of activities. which year in which
registration application is such
and activities made. application is
have made.
45 commenced.
4. Where At least Six Five tax
the provisional six months months from years
registration of prior to the the end of the following the
the applicant is expiry of the quarter in tax year in
50 due to expire provisional which which such
and activities registration. application is application is
have not made. made.
commenced.
 358

A B C D E
5. Where At least Six Five tax
the registration six months months from years
of the applicant prior to the the end of the following the
is due to expire, expiry of the quarter in tax year in 5
other than cases registration. which which such
mentioned at application is application is
serial number made. made.
4.
6. Where At any Six Five tax 10
the registration time during the months from years
of the applicant tax year the end of the commencing
has become beginning from quarter in from the tax
inoperative which the which year in which
due to registration is application is such 15
switching over sought to be made. application is
of regime made operative. made.
under
section 333.
7. Where Within Six Five tax 20
the applicant, thirty days of months from years
being a the date of such the end of the commencing
registered adoption or quarter in from
non-profit modification. which commencement
organisation, application is of the tax year 25
has adopted or made. in which such
undertaken application is
modification made.
of its objects.
(4) In case the application under sub-section (3) is made beyond the time 30
allowed in column C of the Table specified in the said sub-section, the Principal
Commissioner or Commissioner may, if he considers that there is a reasonable cause
for delay in furnishing the application, condone such delay and such application
shall be deemed to have been made within time.
(5) In case the application is made under sub-section (3)(Table: Sl. Nos. 3 to 7), 35
and the total income of such applicant, without giving effect to the provisions of this
Part, does not exceed five crore rupees during each of the two tax years, preceding the
tax year in which such application is made, the provisions of (Table: Sl. Nos. 3.E to 7.E)
of the said sub-section, shall have effect as if for the words “five years”, the words
“ten years” had been substituted. 40

(6) If any application for registration is not made within the time specified in
sub-section (3)(Table: Sl. No. 3.C, 4.C, 5.C or 7.C) and the delay in filing such
application is not condoned under sub-section (4), such person shall be liable to pay
tax on accreted income under section 352.
(7) The Principal Commissioner or Commissioner shall, on an application made by 45
an applicant in any of the cases specified in sub-section (3)(Table: Sl. Nos. 2 to 7), call for
such documents or information or make such inquiries as he thinks necessary in order to
satisfy himself as to the compliance of such requirements of any other law as are material
for the purpose of achieving its objects, and the genuineness of activities and––
(a) if he is so satisfied about the objects and the genuineness of the 50
activities and compliance of the requirements of any other law in force, shall
pass an order granting registration; or
(b) if he is not so satisfied, after affording a reasonable opportunity of
being heard to the applicant shall,––
 359

(i) pass an order rejecting the application, where the application

was made in the any of the cases specified in sub-section (3)
(Table: Sl. No. 2 or 6); or
(ii) pass an order in writing rejecting the application and also
5 cancelling the registration in any other case specified in
sub-section (3)(Table: Sl. Nos. 3, 4, 5 or 7),
and send a copy of the said order to the applicant and the Assessing Officer.
(8) Where an application has been made in any of the cases specified in
sub-section (3)(Table: Sl. No. 1), the Principal Commissioner or Commissioner
10 shall grant provisional registration.
(9) Where the registration of a person, registered prior to the 1st April, 2021
43 of 1961. under the specified provision of the Income-tax Act, 1961 has expired and such
person makes an application for registration under this Part, the Principal
Commissioner or Commissioner may, if he considers that there is a reasonable cause
15 for delay in making such application, condone such delay and grant registration to
such person under this Part within three months from the end of the month in which
the application is made, which shall be valid for five years from the commencement
of the tax year 2021-2022.
(10) The order under sub-sections (7), (8) and (9) shall be passed in the form
20 and manner, as prescribed.
333. (1) Nothing contained in section 11, other than Schedule II Switching over
of regimes.
(Table: Sl. No. 1), Schedule III (Table: Sl. Nos. 27 to 29 and 36) and Schedule VII
(Table: Sl. Nos. 10 to 19 and 42 to 45), shall exclude any income of a registered
non-profit organisation from its total income for any tax year.
25 (2) The registration under section 332 shall cease to operate from the date on
which the registered non-profit organisation is notified as specified in Schedule III
(Table: Sl. No. 27, 28, 29 or 36) or Schedule VII (Table: Sl. No. 42), or from the 1st
day of April of the tax year for a registered non-profit organisation which claims
exemption under Schedule VII (Table: Sl. No. 43, 44 or 45).
30 (3) A person, whose registration ceases to operate under sub-section (2), may
apply for registration under section 332 subject to the condition that the notification
. granting exemption to such person under Schedule III (Table: Sl. No. 27, 28, 29 or 36)
or Schedule VII (Table: Sl. No. 42) ceases to have effect from the date on which the
said registration is granted and thereafter shall not be entitled to exemption under
35 the respective serial numbers of the said Schedules.
2.––Income of registered non-profit organisation
334. (1) The Income-tax payable by a registered non-profit organisation on its Tax on income
of registered
total income for any tax year shall be the aggregate of the amounts calculated–– non-profit
(a) at the rate of 30% on specified income for such tax year; and organisation.

40 (b) at the rate applicable on taxable regular income and any residual
income for such tax year under other provisions of this Act.
(2) The provisions of this Chapter shall apply irrespective of anything to the
contrary contained in any other provision of this Act other than section 96 to 98.
335. Regular income of any tax year of a registered non-profit organisation Regular income.
45 means––
(a) receipts from any charitable or religious activity, for which it is
registered, carried out by such registered non-profit organisation in such tax year;
(b) receipts, other than those specified in clause (d), whether capital or
revenue, derived from any property or investment held by such registered
50 non-profit organisation in such tax year;
 360

(c) voluntary contributions received by such registered non-profit

organisation in such tax year; and
(d) gains of any commercial activity, other than the commercial
activities restricted under sections 345 and 346, carried out by such registered
non-profit organisation in such tax year, computed in such manner, as 5
prescribed.
Taxable regular 336. The taxable regular income of a registered non-profit organisation for any
income.
tax year shall be––
(a) nil, where 85% or more of the regular income for such tax year has
been applied or accumulated under section 342 for charitable or religious 10
purposes, in such tax year as per the provisions of this Part; and
(b) in any other case, 85% of the regular income for such tax year as
reduced by its application for charitable or religious purposes or accumulation
thereof under section 342 in such tax year as per the provisions of this Part.
Specified 337. The specified income of a registered non-profit organisation shall mean 15
income.
the income as specified in column B of the Table below and shall be taxable in the
year provided in the column C thereof:––
Table
Sl. No. Specified income Tax year
A B C 20

1. Any anonymous donation received by Tax year in which

a registered non-profit organisation (other such anonymous donation
than a registered non-profit organisation is received.
created or established wholly for religious
purposes) excluding the anonymous 25
donations up to ₹1,00,000 or 5% of the such
donations received by it during the tax year,
whichever is higher.
2. Any portion of income applied by it, Tax year in which
directly or indirectly, for the benefit of any such application is made. 30
related person, computed in the manner, as
prescribed.
3. Any portion of income applied by it Tax year in which
outside India in contravention to the such application of income
provisions of section 338(a). is made. 35

4. Any investment made in Tax year in which

contravention to the provisions of such investment is made.
section 350 out of any income, accumulated
income, deemed accumulated income,
corpus, deemed corpus, or any other fund. 40
5. Any deemed corpus donation in Tax year in which
respect of which any of the conditions such violation is made.
specified in the section 340 is violated.
6. Any portion of accumulated income, Tax year in which
if it is applied to purposes other than it is so applied. 45
charitable or religious purposes for which it
is accumulated or set apart.
 361

A B C
7. Any portion of accumulated income, Tax year in which
if it ceases to be accumulated or set apart it ceases to be so
for application to such purposes as accumulated or set apart.
5 specified under section 342(1).
8. Any portion of accumulated income, Last of the tax
if it is not utilised for the purpose, for years for which income
which it is accumulated or set apart within was so accumulated or
the period for which it was accumulated or set apart.
10 set apart as specified in section 342(1).
9. Any portion of accumulated income, Tax year in which
if it is credited or paid to any other it is so credited or paid.
registered non-profit organisation.
10. Any income applied to purposes Tax year in which
15 other than charitable or religious purposes it is so applied.
for which it is registered.
11. Any income determined by the Tax year to which
Assessing Officer under section 344 in such income relates.
excess of income shown in the books of
20 account of such business undertaking.
338. While computing the regular income of a registered non-profit Income not to be
included in
organisation, the following income shall not be included:–– regular income.
(a) income applied outside India, where the Board, by general or special
order, directs that such income shall not be so included in its total income in
25 case of a registered non-profit organisation––
(i) created before the 1st April, 1952 for charitable or religious
purposes; or
(ii) created on or after the 1st April, 1952 for charitable purposes
where such application of income outside India tends to promote
30 international welfare in which India is interested;
(b) the corpus donation received by the registered non-profit
organisation under section 339.
339. Corpus donation means any donation made with a specific direction by Corpus donation.
the donor that it shall form part of the corpus of the registered non-profit
35 organisation where such donation is invested or deposited in any of the modes
permitted under section 350 maintained specifically for such corpus.
340. Where the property of a registered non-profit organisation includes any Deemed corpus
temple, mosque, gurdwara, church or other place notified under donation.
section 133(1)(b)(vii), any sum or sums received by such registered non-profit
40 organisation as donation for the purpose of renovation or repair of such temple,
mosque, gurdwara, church or other place, may, at its option, be deemed as forming
part of the corpus under section 339, if it—
(a) maintains such corpus as separate identifiable;
(b) applies such corpus only for the purpose for which the contribution
45 was made;
(c) invests or deposits such corpus in any of the modes permitted under
section 350; and
(d) does not apply such corpus for making donation to any person.
341. (1) The following sums shall be allowed as application of income to a Application of
income.
50 registered non-profit organisation:––
(a) any sum applied by it for charitable or religious purpose in India for
which it is registered where such sum is,––
 362

(i) paid during such tax year; and

(ii) such payment is allowable under sections 36(4), (5), (6) and
(7) and 35(b)(i);
(b) 85% of the sum paid by way of donation made to any other registered
non-profit organisation; and 5

(c) nil, with respect to any sum paid as a corpus donation to any other
registered non-profit organisation.
(2) The application of income under sub-section (1) shall include the
following:––
(a) the amount invested or deposited back during the tax year, in the 10
modes permitted under section 350 maintained specifically for such corpus,
if––
(i) such investment or depositing back is made within five years
from the end of the tax year in which such application of income was
made from the corpus; and 15

(ii) the application of income from the corpus is made after the
31st March, 2021 and there was no violation of any provision of this
Part, or any corresponding provision of the Income-tax Act, 1961 with 43 of 1961.
respect to such application;
(b) the amount repaid, during the tax year, towards any loan or 20
borrowing where,––
(i) such repayment is within five years from the end of the tax year
in which such application of income was made from the loan or
borrowing; and
(ii) the application of income from the loan or borrowing is made 25
after the 31st March, 2021 and there was no violation of any provision
of this Part, or any corresponding provision of the Income-tax Act, 1961 43 of 1961.
with respect to such application.
(3) The following claims shall not be allowed as application of income under
sub-sections (1) and (2):–– 30

(a) the deduction or allowance by way of depreciation or otherwise

claimed in respect of an asset acquisition of which has been claimed as an
application of income in the same or any other tax year under this Part or under
any corresponding provision of the Income-tax Act, 1961; or 43 of 1961.

(b) a claim of set off or deduction or allowance of any excess application 35

of any of the years preceding the tax year.
(4) An application from corpus, loan or borrowing, accumulated income,
specified income or deemed accumulated income shall not be considered as
application for the purpose of sub-sections (1) and (2).
Accumulated 342. (1) A registered non-profit organisation may accumulate or set apart any 40
income. part of its regular income during any tax year by furnishing a statement to the
Assessing Officer in such form and manner, as prescribed, on or before the due date
specified in section 263(1) for furnishing the return of income for such tax year
stating therein the purpose and period, not exceeding five years, for which the
income is being accumulated or set apart. 45
 363

(2) The amount credited or paid by a registered non-profit organisation to any

other registered non-profit organisation out of its income accumulated or set apart,
shall not be treated as application of income.
(3) The period during which the income is not be applied for the purpose for
5 which it is so accumulated or set apart pursuant to an order or injunction of any
court, shall be excluded from said period of five years.
(4) The income accumulated or set apart under sub-section (1) shall be
invested or deposited in any of the modes permitted under section 350, or applied
for the purposes as stated in the prescribed form referred to in sub-section (1).
10 (5) The registered non-profit organisation may, for the change of purpose for
which income has been accumulated or set apart, make an application to the
Assessing Officer, in such form and manner, as prescribed.
(6) The Assessing Officer may, on an application under sub-section (5) and
subject to sub-section (2), allow the registered non-profit organisation to apply its
15 income for such other charitable or religious purposes in India which are in
conformity with its objects.
(7) Where a registered non-profit organisation is dissolved, the Assessing
Officer may, on an application made by such registered non-profit organisation in
such form and manner, as prescribed, allow application of such income to be made
20 to any other registered non-profit organisation for the year in which it is dissolved.
343. (1) The regular income, as reduced by the application of income and Deemed
accumulated income under section 342, to the extent of 15% of regular income, shall accumulated
income.
be considered as deemed accumulated income and shall be invested or deposited in
any of the modes permitted under section 350.
25 (2) The deemed accumulated income under this section shall not be considered
as accumulated income for the purposes of section 342.
3.––Commercial activities by registered non-profit organisation
344. Where the property held by a registered non-profit organisation includes Business
undertaking
a business undertaking, and where a claim is made that the income of any such held as
30 undertaking is eligible for benefits under this Part, then the Assessing Officer shall property.
have the power to determine the income of such business undertaking as per the
provisions of this Act.
345. No registered non-profit organisation, other than a registered non-profit Restriction on
commercial
organisation, carrying out advancement of any other object of general public utility, activities by a
35 shall carry out any commercial activity unless— registered
non-profit
(a) such commercial activity is incidental to the attainment of the organisation.
objectives of the registered non-profit organisation; and
(b) separate books of account are maintained for such activities.
346. No registered non-profit organisation, carrying out advancement of any Restriction on
commercial
40 other object of general public utility, shall carry out any commercial activity activities by
unless,— registered
non-profit
(a) such commercial activity is undertaken in the course of actual organisation,
carrying out of advancement of any object of the general public utility; carrying out
advancement of
any other object
(b) the aggregate receipts from such commercial activity or activities do of general public
45 not exceed 20% of the total receipts of such registered non-profit organisation utility.
of the relevant tax year; and
 364

(c) separate books of account are maintained by such registered

non-profit organisation for such activities.
4.––Compliances
Books of 347. Where the total income of a registered non-profit organisation, without
account.
giving effect to the provisions of this Part, exceeds the maximum amount which is 5
not chargeable to income-tax in any tax year, such registered non-profit organisation
shall be required to keep and maintain the books of account and other documents in
such form and manner and at such place, as prescribed.
Audit. 348. Where the total income of a registered non-profit organisation, without
giving effect to the provisions of this Part, exceeds the maximum amount which is 10
not chargeable to income-tax in any tax year, the accounts of such registered
non-profit organisation for that tax year shall be audited by an accountant and the
person in receipt of the income shall be required to furnish a report of an audit of
such income by such date in the prescribed form, duly signed and verified by such
accountant and setting forth such particulars, as prescribed. 15
Return of 349. Where the total income of a registered non-profit organisation, without
income.
giving effect to the provisions of this Part, exceeds the maximum amount which is
not chargeable to income-tax in any tax year, it shall furnish the return of income
for such tax year as per the provisions of section 263(1)(a)(iii), within the time limit
allowed under sub-section (1)(b) of that section. 20

Permitted modes 350. (1) The modes of investing or depositing the money under this Part, shall
of investment. be such as specified in Schedule XVI.
(2) The modes of investing or depositing money under this Part, other than the
modes specified in Schedule XVI, shall be specified by the Central Government, by
notification. 25

5.––Violations
Specified 351. (1) The following shall constitute specified violation by a registered
violation.
non-profit organisation:––
(a) where any income of the registered non-profit organisation has been
applied, other than for its objects; or 30

(b) it carries out any commercial activity in contravention of the

provisions of section 345; or
(c) where it has applied any part of its total income for private religious
purposes, which does not enure for the benefit of the public; or
(d) where a registered non-profit organisation, created or established 35
after the commencement of this Act for charitable purpose, has applied any
part of its income for the benefit of any particular religious community or caste
other than the Scheduled Castes or the Scheduled Tribes or backward classes
or women and children; or
(e) where any activity being carried out by the registered non-profit 40
organisation is not genuine or is not being carried out in accordance with all
or any of the conditions subject to which it was registered; or
(f) the registered non-profit organisation has not complied with the
requirements under section 332(7) and the order, direction or decree, holding
that such non-compliance has occurred, has either not been disputed, or has 45
attained finality; or
(g) the application referred to in section 332(1) contains any false or
incorrect information.
 365

(2) Where during any tax year,––

(a) the Principal Commissioner or Commissioner has noticed occurrence
of one or more specified violations;
(b) the Principal Commissioner or Commissioner has received a reference
5 from the Assessing Officer under section 270(13) for any tax year; or
(c) a registered non-profit organisation has been selected as per the risk
management strategy formulated by the Board,
the Principal Commissioner or Commissioner shall—
(i) call for such documents or information from the registered non-profit
10 organisation, or make such inquiry as he thinks necessary in order to satisfy
himself about the occurrence of any specified violation;
(ii) pass an order,––
(A) either cancelling the registration of such registered non-profit
organisation, after affording a reasonable opportunity of being heard, for
15 such tax year during which such specified violation took place and all
subsequent tax years, if he is satisfied that one or more specified
violations have taken place; or
(B) not cancelling the registration of such registered non-profit
organisation, if he is not satisfied about the occurrence of any specified
20 violation; and
(iii) forward a copy of the order passed under clause (ii) to the Assessing
Officer and such registered non-profit organisation.
(3) The order under sub-section (2)(ii), shall be passed before the expiry of six
months, calculated from the end of the quarter in which the first notice is issued by
25 the Principal Commissioner or Commissioner, calling for any document or
information, or for making any inquiry, under clause (i) of the said sub-section.
352. (1) Every specified person shall, in addition to the income-tax chargeable Tax on accreted
income.
in respect of his total income, be liable to pay additional income-tax on accreted
income at the maximum marginal rate in any of the cases specified in column B of
30 the Table in sub-section (5).
(2) The Assessing Officer shall compute the accreted income on the date,
specified in column C of the Table in sub-section (5) and after affording a reasonable
opportunity of being heard to the assessee, pass on order that such income shall be
charged to tax under sub-section (1).
35 (3) The accreted income referred to in sub-section (1) shall be computed using
the following formula:––
A = B-C
where,––
A = Accreted income;
40 B = Aggregate fair market value of the total assets of the specified
person, as on the date specified, in column C of the Table in
sub-section (5), computed in accordance with such method of valuation,
as prescribed;
C = Total liability of such specified person, as on the date specified
45 in column C of the said Table, computed in accordance with such
method of valuation, as prescribed.
 366

(4) The accreted income, computed as per the provisions of sub-section (3)
shall be reduced by such amount of accreted income as is attributable to specified
assets, and liabilities, if any, related to such assets.
(5) The specified person and the principal officer or trustee of such
specified person shall be liable to pay the tax on accreted income to the credit 5
of the Central Government within fourteen days from the due date specified in
column D of the Table below, or the date of order passed under
sub-section (2).
Table
Sl. Case Specified date Due date for 10
No. the payment of
tax on accreted
income
A B C D
(i) (ii) 15

1. The registration The The date of Date of

granted to the specified the order receipt of the
specified person person has cancelling the order in any
under any specified preferred an registration. appeal,
provision has been appeal against confirming the 20
cancelled or the order of cancellation of
withdrawn. cancellation. the
registration, by
the specified
person. 25

2. The registration The The date of The date on

granted to the specified the order which the
specified person person has not cancelling the period for
under any specified preferred an registration. filing appeal
provision has been appeal against under 30
cancelled or such order of section 362
withdrawn. cancellation. against the
order
cancelling the
registration 35
expires.
3. (a) The The The date of The end of
specified person specified adoption or such tax year.
has adopted or person has not modification of
undertaken applied for any object. 40
modification of its fresh
objects during any registration
tax year; and under any
specified
(b) such provision in 45
modified objects such tax year.
do not conform to
the conditions of
registration.
 367

A B C D
(i) (ii)
4. (a) The The The date of The date of
specified person specified adoption or receipt of the
5 has adopted or person has modification of order in any
undertaken applied for any object. appeal,
modification of its fresh confirming the
objects during any registration cancellation of
tax year; and under any the registration
specified by the
10 (b) such provision in specified
modified objects such tax year person.
do not conform to and where
the conditions of such
registration. application has
15
been rejected
and appeal has
been preferred
against such
order of
20 rejection.
5. (a) The The The date of The date on
specified person specified adoption or which the
has adopted or person has modification of period for
undertaken applied for any object. filing appeal
25 modification of its fresh under section
objects during any registration 362 against the
tax year; and under any order
specified cancelling the
(b) such provision in registration
modified objects the said tax expires.
30 do not conform to year and where
the conditions of such
registration. application has
been rejected
and no appeal
35 has been
preferred
against such
order of
rejection.
40 6. The specified The period The last date The end of
person fails to make specified in the for making an such tax year.
an application as respective application for
per the provisions clause or registration.
of–– sub-clauses or
45 Table, as the
case may be,
expires in the
tax year in
which the said
50 application is
to be made.
 368

A B C D
(i) (ii)
(a) sub-clause (i)
or (ii) or (iii) of the
first proviso to 5

section 10 (23C) of
the Income-tax Act,
1961 (43 of 1961); or
(b) sub-clause (i)
10
or (ii) or (iii) of
section 12(1)(ac) of
the Income-tax Act,
1961 (43 of 1961);
or
(c) as specified in 15
section 332(3)
(Table: Sl. No. 3, 4,
5 or 7).
7. Where a The date of The end of
specified person such such tax year. 20
converts itself into conversion.
a form which is not
eligible for grant of
registration during
any tax year. 25

8. The specified The date of The date of

person has merged merger. merger.
with any other
entity other than a
registered non- 30
profit organisation
having the same or
similar objects and
the said merger
does not fulfil such [

35
conditions, as
prescribed.
9. The specified The date of The date on
person has failed to dissolution. which such
transfer upon period of 40
dissolution, all its twelve months
assets to any other expires.
registered non-profit
organisation within
twelve months from 45
the end of the month
in which the
dissolution takes
place.
 369

(6) The payment of tax on the accreted income by the specified person under
this section shall be deemed as the final payment of tax in respect of the said income
and no further credit therefor shall be claimed by, or any deduction be allowed to,
the specified person or any other person in respect of the amount of tax so paid under
5 any other provision of this Act.
(7) Where the specified person, or the principal officer or trustee of such
specified person, fails to pay the whole or any part of the tax on the accreted income
within the time allowed under sub-section (5), such specified person, principal
officer or trustee shall be liable to pay simple interest, computed as per the following
10 formula:––
I = 1% of (T*P)
where,––
I = interest;
T = tax on accreted income; and
15
P = number of months beginning on the date immediately
after the last date on which such tax was payable and ending with
the date on which the tax is actually paid including part thereof.
(8) All the provisions of this Act shall apply for the collection and recovery of
income-tax in respect of the amount of tax payable by the specified person, principal
20 officer or trustee and the following persons shall be deemed to be assessee in default:––
(a) the specified person and principal officer or the trustee of such
specified person;
(b) the person to whom any asset forming part of the computation of
accreted income under sub-section (3) has been transferred, where the tax on
25 accreted income is payable under the cases specified in sub-section (5)
(Table: Sl. No. 9).
(9) Subject to the provisions of sub-section (8), the liability of the person
referred to in clause (b) of the said sub-section shall be limited to the extent to which
the asset received by him is capable of meeting the liability. Other violations.
30 353. (1) Where any registered non-profit organisation––
(a) fails to maintain books of account under section 347; or
(b) fails to get books of account audited under section 348; or
(c) fails to furnish its return of income under section 349; or
(d) any registered non-profit organisation, carrying out advancement of
35 any other object of general public utility, carries out any commercial activity
in contravention of the provisions of section 346,
during any tax year, its regular income for such tax year as reduced by the expenditure
referred to in sub-section (3) shall be taxable regular income which shall be chargeable
to tax as per the provisions of section 334.
40 (2) In addition to the tax referred to in sub-section (1), the specified income
and residual income of the registered non-profit organisation shall also be
chargeable to tax under the provisions of section 334, to the extent not covered under
taxable regular income under the said sub-section, and the provisions of section 338
shall not apply.
45 (3) The expenditure referred in sub-section (1) shall be computed subject to
the following conditions:––
(a) capital expenditure shall not be allowed;
 370

(b) such expenditure shall be incurred in India;

(c) such expenditure shall be for the objects of the registered
non-profit organisation;
(d) such expenditure is not made from the corpus standing to the credit
of the registered non-profit organisation as on the end of the tax year 5
immediately preceding the tax year for which income is being computed;
(e) such expenditure is not out of any loan or borrowing;
(f) the claim of depreciation is not in respect of an asset, acquisition of
which has been claimed as application of income, in the same or any other tax
year; 10

(g) such expenditure is not in the form of any contribution or donation

to any person;
(h) such expenditure is not on account of a payment or aggregate of
payments made to a person in contravention to the provisions of
sections 36(4), (5), (6) and (7); 15

(i) such payment is allowable under section 35(b)(i); and

(j) set off or deduction or allowance of any application or
expenditure other than those referred to in clauses (a) to (i) shall not be
allowed.

Application for
6.––Approval for purpose of deduction under section 133(1)(b)(ii) 20
approval for
purpose of 354. (1) A registered non-profit organisation or a person referred to in
section Schedule III (Table: Sl. No. 1) may, for the purpose of section 133(1)(b)(ii), make
133(1)(b)(ii). an application for approval in such form and manner, as prescribed, to the Principal
Commissioner or Commissioner, subject to the following conditions:––
(a) it is not expressed to be for the benefit of any particular religious 25
community or caste;
(b) it is established in India for a charitable purpose and does not incur
any expenditure of an amount being 5% or more of its total income during a
tax year which is of a religious nature;
(c) the instrument under which it is constituted does not, or the rules 30
governing it do not, contain any provision for the transfer at any time of the
whole or any part of its assets for any purpose other than a charitable
purpose;
(d) it maintains regular accounts of its receipts and expenditure;
(e) it prepares such statement for such period, as prescribed, and deliver 35
or cause to be delivered to the prescribed income-tax authority or the person
authorised by such authority such statement in such form and verified in such
manner and setting forth such particulars and within such time, as prescribed;
(f) it delivers to the said prescribed authority, a correction statement for
rectification of any mistake or to add, delete or update the information 40
furnished in the statement delivered under clause (e) in such form and verified
in such manner, as prescribed; and
(g) it furnishes a certificate to the donor specifying the amount of
donation within such period from the date of receipt of the donation containing
the requisite particulars in the manner, as prescribed. 50
 371

(2) The application under sub-section (1) shall be made in respect of the cases
referred to in column B of the Table below within the time limit provided in column
C of the said Table and the Principal Commissioner or Commissioner, on receipt of
such application, shall follow the procedure provided in sub-sections (3) and (4),
5 and shall pass an order in writing within the time limit provided in column D and
approval, if granted, shall be valid for a period provided in column E of the said
Table.
Table
Sl. No. Case Time limit for Time limit Validity of
10 furnishing for passing approval
application the order
A B C D E
1. Where the At any time One Three tax
activities of the during the tax months from years
15 applicant have year from which the end of the commencing
not approval is month in from the tax
commenced. sought. which year in which
application is such
made. application is
20 made.
2. Where the At any time Six months Five tax
activities of the during the tax from the end years
applicant have year from which of the quarter commencing
commenced. approval is in which from the tax
25 sought. application is year in which
made. such application
is made.
3. Where the Within six Six months Five tax
30 applicant has months of the from the end years
provisional commencement of the quarter commencing
approval and of activities. in which from the tax
activities have application is year in which
commenced. made. such
35 application is
made.
4. Where the At least six Six months Five tax
provisional months prior to from the end years
approval of the the expiry of the of the quarter following the
40 applicant is due provisional in which tax year in
to expire and approval. application is which such
activities have made. application is
not made.
commenced.
45 5. Where the At least six Six months Five tax
period for months prior to from the end years
approval of a the expiry of the of the quarter following the
registered said approval. in which tax year in
non-profit application is which such
50 organisation is made. application is
due to expire. made.
 372

(3) Where an application has been made in any of the cases specified under
sub-section (2) (Table: Sl. No. 2) to (Table: Sl. No. 5), the Principal Commissioner
or Commissioner shall call for such documents or information or make such
inquiries as he thinks necessary in order to satisfy himself as to the compliance of
such requirements of any other law in force, as are material for the purpose of 5
achieving its objects, and the genuineness of activities and––
(a) if he is so satisfied about the objects and the genuineness of the
activities and compliance of the requirements of any other law in force, he
shall pass an order in writing approving it; or
(b) if he is not so satisfied, after affording a reasonable opportunity of 10
being heard,––
(i) shall pass an order in writing rejecting the application, where
the application was made in any of the cases specified in
sub-section (2) (Table: Sl. No. 2); and
(ii) in any other case, shall pass an order rejecting the application 15
and also cancelling the approval,
and send a copy of the order to the applicant and the Assessing Officer.
(4) Where an application has been made in any of the cases specified in
sub-section (2) (Table: Sl. No. 1), the Principal Commissioner or Commissioner
shall pass an order granting provisional approval. 20

7.—Interpretation
Interpretation. 355. In this Part,––
(a) “anonymous donation” means any voluntary contribution referred to
in section 2(49)(c), where a person receiving such contribution does not
maintain a record of the identity indicating the name and address of the person 25
making such contribution and such other particulars, as prescribed;
(b) “approval” means an approval under the second proviso to section
43 of 1961.
80G(5) of the Income-tax Act, 1961or section 354;
(c) “cancellation” includes withdrawal;
(d) “donation” means any voluntary contribution received by a 30
registered non-profit organisation from any person;
(e) “commercial activity” means any activity in the nature of trade, commerce
or business, or any activity of rendering any service in relation to any trade,
commerce or business, for a cess or fee or any other consideration, irrespective of
the nature of use or application, or retention, of the income from such activity; 35
(f) “registration” includes provisional registration, provisional
approval or approval, as referred to in the second proviso to sections 10(23C)
or 12AB(1) of the Income-tax Act, 1961 and under section 332, but shall not 43 of 1961.
include approval under the second proviso to section 80G(5) of the said Act
or section 354; 40

(g) “registered non-profit organisation” means any person having a

valid registration under any specified provision and such registration has not
been cancelled;
(h) “related person” means any of the following persons:—
(i) the author or the founder of the registered non-profit organisation; 45

(ii) any person whose total contribution to such registered

non-profit organisation, during the relevant tax year exceeds one lakh
rupees, or, in aggregate up to the end of the relevant tax year exceeds
ten lakh rupees, as the case may be;
 373

(iii) where such author, founder or person is a Hindu undivided

family, a member of the family;
(iv) any trustee or manager (by whatever name called) of the
registered non-profit organisation;
5 (v) any relative of any persons referred to in sub-clause (i), (iii) or (iv);
(vi) any concern in which any of the persons referred to in
sub-clauses (i), (iii) or (iv) has a substantial interest;
(i) “relative”, in relation to an individual, means—
(i) spouse of the individual;
10 (ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) any lineal ascendant or descendant of the individual;
(v) any lineal ascendant or descendant of the spouse of the individual;
(vi) spouse of a person referred to in sub-clause (ii), (iii), (iv) or (v);
15 (vii) any lineal descendant of a brother or sister of either the
individual or of the spouse of the individual;
(j) “residual income” means the total income, as reduced by regular
income and specified income;
(k) “specified asset” means any asset which is established to have been
20 directly acquired by the specified person––
(i) out of its income of the nature referred to in Schedule II
(Table: Sl. No. 1);
(ii) during the period beginning from the date of its creation or
establishment and ending on the date from which the registration under
25 specified provision became effective, if the specified person has not been
allowed any benefit under this Part or under sections 11 and 12 or
43 of 1961. section 10(23C)(iv) or (v) or (vi) or (via) of the Income-tax Act, 1961
during the said period, where provisions of the first proviso or the second
proviso to sub-section 12A(2) or the eighth proviso to clause 10(23C) of
30 the said Act, are not applicable;
(iii) during the period beginning from the date of its creation or
establishment and ending on the date from which the registration under
specified provision became effective due to the provisions of the first
proviso or the second proviso to section 12A(2) or the eighth proviso to
35 section 10(23C), where provisions of the first proviso or the second
proviso to section 12A(2) or the eighth proviso to section 10(23C), of
43 of 1961. the Income-tax Act, 1961, are applicable; and
(iv) which has been transferred to any other specified person within
twelve months from the end of the month in which the dissolution takes
40 place in respect of a case specified in section 352(5) (Table: Sl. No. 9);
(l) “specified person” means any person which is registered under any
specified provision at any time since its incorporation or creation;
(m) “specified provision” means section 12A, 12AA or 12AB or
43 of 1961. section 10(23C) of the Income-tax Act, 1961 or section 332;
45 (n) “substantial interest”, in relation to a person in a concern, means––
(i) where the concern is a company, its shares (not being shares
entitled to a fixed rate of dividend whether with or without a further right
to participate in profits) carrying not less than 20% of the voting power
are, at any time during the tax year, owned beneficially by such person
50 or partly by such person and partly by one or more of the other related
persons; or
 374

(ii) in the case of any other concern, if such person is entitled, or

such person and one or more of the other related persons are entitled in
the aggregate at any time during the tax year, to not less than 20% of the
profits of such concern; and
(o) “value” means the value of any benefit or facility granted or provided 5
free of cost or at concessional rate to any related person.
CHAPTER XVIII
APPEALS, REVISIONS AND ALTERNATE DISPUTE RESOLUTIONS
A.—Appeals
I.—Appeals to Joint Commissioner (Appeals) and Commissioner (Appeals) 10
Appealable 356. (1) Any assessee, aggrieved by any of the following orders of an
orders before Assessing Officer (below the rank of Joint Commissioner) may appeal to the Joint
Joint
Commissioner Commissioner (Appeals) against––
(Appeals).
(a) an order being an intimation under section 270(1) or 399(1), where
the assessee objects to the making of adjustments; or 15

(b) an order under section 270(10) or 271, where the assessee objects to
the amount of income assessed, or to the amount of tax determined, or to the
amount of loss computed, or to the status under which he is assessed; or
(c) an order of assessment, reassessment or recomputation under
20
section 279; or
(d) an order under section 398; or
(e) an order imposing penalty under Chapter XXI; or
(f) an order under section 287 or 288 amending any of the orders or
intimations in clauses (a) to (e).
(2) No appeal shall be filed before the Joint Commissioner (Appeals) if an 25
order referred to in sub-section (1) is passed by or with the prior approval of, an
income-tax authority above the rank of Deputy Commissioner.
(3) The Board or an income-tax authority so authorised by the Board in this
regard, may transfer—
(a) any appeal filed against an order referred to in sub-section (1) and 30
any matter arising out of or connected with such appeal, which is pending
before the Commissioner (Appeals), to the Joint Commissioner (Appeals); or
(b) any appeal which is pending before a Joint Commissioner (Appeals)
and any matter arising out of or connected with such appeal and which is so
pending, to the Commissioner (Appeals), regardless of anything contained in 35
sub-sections (1) and (3)(a),
who may proceed with such appeal or matter, from the stage at which it was before
it was so transferred.
(4) Where an appeal is transferred under sub-section (3), the appellant shall be
40
given an opportunity of being reheard.
(5) For the disposal of appeal under this section, the Central Government may
notify a scheme, so as to dispose of appeals in an expedient manner with transparency
and accountability, by eliminating the interface between the Joint Commissioner
(Appeals) and the appellant, to the extent technologically feasible and direct that any of
the provisions of this Act relating to jurisdiction and procedure for disposal of such 45
appeals, shall not apply or shall apply with exceptions, modifications and adaptations.
(6) The Board may specify that any provisions of this section shall not apply
to any case or class of cases.
(7) In this section, “status” means the category of person as defined in
section 2(77) under which the assessee is assessed. 50
 375

357. Any assessee or any deductor or any collector, aggrieved by any of the Appealable
following orders, may appeal to the Commissioner (Appeals) against— orders before
Commissioner
(Appeals).
(a) an order passed by a Joint Commissioner under section 231(4)(b);
(b) an order against the assessee where the assessee denies his liability
5 to be assessed under this Act; or
(c) an order being an intimation under section 270(1) or 399(1), where
the assessee or the deductor or the collector objects to the making of
adjustments; or
(d) any order of assessment under section 270(10), except an order
10 passed in pursuance of directions of the Dispute Resolution Panel or an order
referred to in section 274(12) or 271, where the assessee objects to the income
assessed, or to the amount of tax determined, or to the amount of loss
computed, or to the status under which he is assessed; or
(e) an order of assessment, reassessment or recomputation under
15 section 279 [except an order passed in pursuance of directions of the Dispute
Resolution Panel or an order referred to in section 274(12)] or 283; or
(f) an order made under section 169(3)(a); or
(g) an order made under section 287 or 288 having the effect of
enhancing the assessment or reducing a refund or an order refusing to allow
20 the claim made by the assessee under either of the said sections except an order
referred to in section 274(12); or
(h) an order made under section 306 treating the assessee as the agent of
a non-resident; or
(i) an order made under section 313(2) or (4); or
25 (j) an order made under section 315; or
(k) an order made under section 398; or
(l) an order made under section 431; or
(m) an order made under section 434; or
(n) an order imposing or enhancing a penalty under Chapter XXI; or
30 (o) an order imposing a penalty under section 412; or
(p) an order passed under section 294(1)(c); or
(q) an order imposing a penalty under section 298(2); or
(r) an order made by an Assessing Officer under the provisions of this
Act in the case of such person or class of persons, as the Board may, having
35 regard to the nature of the cases, the complexities involved and other relevant
considerations, direct.
358. (1) Every appeal under this Chapter shall be in such form and verified in Form of appeal
and limitation.
such manner, as prescribed.
(2) An appeal, referred in sub-section (1), made to the Commissioner
40 (Appeals) or to the Joint Commissioner (Appeals), shall be accompanied by a
fee of—
 376

(a) two hundred and fifty rupees, where the total income of the assessee
as computed by the Assessing Officer in the case to which the appeal relates
is one lakh rupees or less;
(b) five hundred, where the total income of the assessee, computed as
aforesaid, in the case to which the appeal relates is more than one lakh rupees 5
but not more than two lakh rupees;
(c) one thousand rupees, where the total income of the assessee,
computed as aforesaid, in the case to which the appeal relates is more than
two lakh rupees;
(d) two hundred and fifty rupees, where the subject matter of an appeal 10
is not covered under clauses (a), (b) and (c).
(3) The appeal shall be presented within thirty days,––
(a) from the date of service of the notice of demand where the appeal
relates to any assessment or penalty; or
(b) in any other case, from the date on which intimation of the order 15
sought to be appealed against is served.
(4) For the purposes of sub-section (3)(a), where an application has been made
under section 440(1), the period beginning from the date on which the application
is made, to the date on which the order rejecting the application is served on the 20
assessee, shall be excluded.
(5) The Joint Commissioner (Appeals) or the Commissioner (Appeals) may
admit an appeal after the expiration of the said period if he is satisfied that the
appellant had sufficient cause for not presenting it within that period.
(6) No appeal under this Chapter shall be admitted unless at the time of filing
25
of the appeal,—
(a) where a return has been filed by the assessee, the assessee has paid
the tax due on the income returned by him; or
(b) where no return has been filed by the assessee, the assessee has paid
an amount equal to the amount of advance tax which was payable by him.
(7) The Joint Commissioner (Appeals) or the Commissioner (Appeals) may, 30
for the purposes of sub-section (6)(b) and on an application made by the appellant
in this behalf, for reasons to be recorded in writing, exempt him from the operation
of the provisions of that sub-section.
Procedure in 359. (1) The Joint Commissioner (Appeals) or the Commissioner (Appeals) shall
appeal.
fix a day and place for the hearing of the appeal, and shall give notice of the same to the 35
appellant and to the Assessing Officer against whose order the appeal is preferred.
(2) The following shall have the right to be heard at the hearing of the appeal:—
(a) the appellant, either in person or by an authorised representative;
(b) the Assessing Officer, either in person or by a representative.
(3) The Joint Commissioner (Appeals) or the Commissioner (Appeals) may–– 40

(a) adjourn the hearing of the appeal; or

(b) make such further inquiry as he thinks fit, before disposing of any
appeal, or may direct the Assessing Officer to make further inquiry and report
the result of the same; or
(c) allow the appellant to go into any ground of appeal not specified in 45
the grounds of appeal, if he is satisfied that the omission of that ground from
the form of appeal was not wilful or unreasonable.
 377

(4) The order of the Joint Commissioner (Appeals) or the Commissioner

(Appeals) disposing of the appeal shall be in writing and shall state the points for
determination, the decision thereon and the reasons for the decision.
(5) The Joint Commissioner (Appeals) or the Commissioner (Appeals), where
5 it is possible, may hear and decide such appeal within one year from the end of the
financial year in which such appeal is filed or transferred to him under
section 356.
(6) On the disposal of the appeal, the Joint Commissioner (Appeals) or the
Commissioner (Appeals) shall communicate the order passed by him to the assessee
10 and to the Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner.
360. (1) In disposing of an appeal, the Commissioner (Appeals) or the Joint Powers of Joint
Commissioner
Commissioner (Appeals), shall have the following powers:— (Appeals) or
(a) in an appeal against an order of assessment, he may confirm, reduce, Commissioner
(Appeals).
15 enhance or annul the assessment;
(b) where such appeal is against an order of assessment made under
section 271, the Commissioner (Appeals) may set aside the assessment and
refer the case back to the Assessing Officer for making a fresh assessment;
(c) in an appeal against the order of assessment for which the proceeding
20 before the Settlement Commission abates under section 245HA of the
43 of 1961. Income-tax Act 1961, the Commissioner (Appeals) may, after taking into
consideration all the material and other information produced by the assessee
before, or the results of the inquiry held or evidence recorded by, the
Settlement Commission, in the course of the proceeding before it and such
25 other material as may be brought on his record, confirm, reduce, enhance or
annul the assessment;
(d) in an appeal against an order imposing a penalty, he may confirm or
cancel such order or vary it so as either to enhance or to reduce the penalty;
(e) in any other case, he may pass such orders in the appeal as he thinks
30 fit.
(2) The Joint Commissioner (Appeals) or the Commissioner (Appeals), shall
not enhance an assessment or a penalty or reduce the amount of refund, unless the
appellant has had a reasonable opportunity of showing cause against such
enhancement or reduction.
35 (3) The Joint Commissioner (Appeals) or the Commissioner (Appeals), may
consider and decide any matter arising out of the proceedings in which the order
appealed against was passed, irrespective of the fact that such matter was not raised
before him by the appellant.
2.—Appeals to Appellate Tribunal.
40 361. (1) The Central Government shall constitute an Appellate Tribunal Appellate
Tribunal.
consisting of as many Judicial and Accountant Members as it thinks fit, to exercise
the powers and discharge the functions conferred on the Appellate Tribunal by
this Act.
(2) Irrespective of anything contained in this Act, the qualifications,
45 appointment, term of office, salaries and allowances, resignation, removal and the
other terms and conditions of service of the President, Vice-President and other
Members of the Appellate Tribunal appointed,––
33 of 2021. (a) after the commencement of the Tribunals Reforms Act, 2021, shall
be governed by the provisions of Chapter II of the said Act;
 378

(b) before the commencement of Part XIV of Chapter VI of the Finance

Act, 2017, shall be governed by the provisions of the Income-tax Act, 1961 43 of 1961.
and the rules made thereunder, as if the provisions of section 184 of the
7 of 2017.
Finance Act, 2017 had not come into force.
5
(3) The Central Government shall appoint—
(a) a person who is a sitting or retired Judge of a High Court and who
has completed not less than seven years of service as a Judge in a High
Court; or
(b) one of the Vice-Presidents of the Appellate Tribunal,
to be the President thereof. 10

(4) The Central Government may appoint one or more members of the
Appellate Tribunal to be the Vice-President or, Vice-Presidents thereof.
(5) The Vice-President shall exercise such of the powers and perform such of
the functions of the President as may be delegated to him by the President by a
15
general or special order in writing.
Appeals to
Appellate
362. (1) Any assessee, aggrieved by any of the following orders, may appeal
Tribunal. to the Appellate Tribunal against such order—
(a) an order passed under this Act, by a Commissioner (Appeals) or a
Joint Commissioner (Appeals);
(b) an order passed by a Principal Commissioner or Commissioner 20
under—
(i) section 332(7) or (8) or (9), 351(2)(ii) or 354(3); or
(ii) section 377 or 439 or 465; or
(iii) section 287;
(c) an order passed by a Principal Chief Commissioner or Chief 25
Commissioner or a Principal Director General or Director General or a
Principal Director or Director under section 377 or 465 or an order passed
under section 287 amending any such order;
(d) an order passed by an Assessing Officer under section 270(10) or
279, in pursuance of the directions of the Dispute Resolution Panel or an order 30
passed under section 287 in respect of such order;
(e) an order passed by an Assessing Officer under section 270(10) or
279, with the approval of the Principal Commissioner or Commissioner as
referred to in section 274(12) or an order passed under section 287 or 288 in
35
respect of such order; or
(f) an order passed by an Assessing Officer under section 234(4).
(2) The Principal Commissioner or Commissioner may, if he objects to any
order passed by the Joint Commissioner (Appeals) or the Commissioner (Appeals)
under this Act, direct the Assessing Officer to appeal to the Appellate Tribunal
40
against the order.
(3) Every appeal under sub-section (1) or (2) shall be filed within two months
from the end of the month in which the order sought to be appealed against is
communicated to the assessee or to the Principal Commissioner or Commissioner.
 379

(4) The Assessing Officer or the assessee, on receipt of notice that an appeal
against an order, has been preferred under sub-section (1) or (2) by the other party,
may, irrespective of that he may not have appealed against such order or any part
thereof, within thirty days of the receipt of the notice, file a memorandum of
5 cross-objections, verified in the manner, as prescribed, against any part of such
order, and such memorandum shall be disposed of by the Appellate Tribunal as if
it were an appeal presented within the time specified in sub-section (3).
(5) The Appellate Tribunal may admit an appeal or permit the filing of a
memorandum of cross-objections after the expiry of the relevant period referred to
10 in sub-section (3) or (4), if it is satisfied that there was sufficient cause for not
presenting it within that period.
(6) An appeal to the Appellate Tribunal shall be in such form and verified in
such manner, as prescribed and shall, be accompanied by a fee of—
(a) five hundred rupees, where the total income of the assessee as
15 computed by the Assessing Officer, in the case to which the appeal relates, is
one lakh rupees or less;
(b) one thousand five hundred rupees, where the total income of the
assessee, computed as aforesaid, in the case to which the appeal relates is more
than one lakh rupees but not more than two lakh rupees;
20 (c) 1% of the assessed income, subject to a maximum of ten thousand
rupees, where the total income of the assessee, computed as aforesaid, in the
case to which the appeal relates is more than two lakh rupees;
(d) five hundred rupees, where the subject matter of an appeal relates to
any matter, other than those specified in clauses (a), (b) and (c).
25 (7) No fee shall be payable for an appeal referred to in sub-section (2), or a
memorandum of cross objections referred to in sub-section (4).
(8) An application for stay of demand shall be accompanied by a fee of five
hundred rupees.
363. (1) The Appellate Tribunal may, after giving both the parties to the appeal Orders of
Appellate
30 an opportunity of being heard, pass such orders thereon as it thinks fit. Tribunal.
(2) The Appellate Tribunal may amend any order passed by it under
sub-section (1) for the rectification of any mistake apparent from record, within six
months from the end of the month in which the order was passed, if the mistake is
brought to its notice by the assessee or the Assessing Officer.
35 (3) An amendment, as referred to in sub-section (2), which has the effect of
enhancing an assessment or reducing a refund or otherwise increasing the liability
of the assessee, shall not be made, unless the assessee has been allowed a reasonable
opportunity of being heard.
(4) Any application filed by the assessee under sub-section (2) shall be
40 accompanied by a fee of fifty rupees.
(5) In every appeal, the Appellate Tribunal, where it is possible, may hear and
decide such appeal within four years from the end of the financial year in which
such appeal is filed under section 362(1) or (2).
(6) The Appellate Tribunal may, after considering the merits of the application
45 made by the assessee, pass an order of stay in any proceedings relating to an appeal
filed under section 362(1), for a period not exceeding one hundred and eighty days
from the date of such order, subject to the condition that the assessee––
 380

(a) deposits not less than 20% of the amount of tax, interest, fee, penalty
or any other sum payable under this Act; or
(b) furnishes security of equal amount as referred to in clause (a),
and the Appellate Tribunal shall dispose of the appeal within the said period of stay
specified in that order. 5

(7) No extension of stay, as referred to in sub-section (6), shall be granted by

the Appellate Tribunal, where such appeal is not so disposed of within the said
period of stay as specified in the order of stay passed under the said sub-section,
unless––
(a) the assessee makes an application and has complied with the 10
condition referred to in sub-section (6); and
(b) the Appellate Tribunal is satisfied that the delay in disposing of the
appeal is not attributable to the assessee,
so, however, that the aggregate of the period of stay originally allowed and the
period of stay so extended shall not exceed three hundred and sixty-five days and 15
the Appellate Tribunal shall dispose of the appeal within the period or periods of
stay so extended or allowed.
(8) The order of stay shall stand vacated if the appeal is not disposed of within
the period allowed under sub-section (6) or (7), even if the delay in disposing of the 20
appeal is not attributable to the assessee.
(9) The cost of any appeal to the Appellate Tribunal shall be at the discretion
of that Tribunal.
(10) The Appellate Tribunal shall send a copy of any orders passed under this
section to the assessee and to the Principal Commissioner or Commissioner.
(11) Save as provided in section 365, orders passed by the Appellate Tribunal 25
on appeal shall be final.
Procedure of 364. (1) The powers and functions of the Appellate Tribunal may be exercised
Appellate and discharged by Benches constituted by the President of the Appellate Tribunal
Tribunal.
from among the members thereof.
(2) Subject to the provisions contained in sub-section (3), a Bench shall consist 30
of one Judicial Member and one accountant member.
(3) The President, or any other member of the Appellate Tribunal authorised
in this behalf by the Central Government, may sitting singly, dispose of any case
allotted to the Bench, pertaining to an assessee whose total income as computed by
the Assessing Officer in the case does not exceed fifty lakh rupees. 35

(4) The President of the Appellate Tribunal may, for the disposal of any
particular case, constitute a Special Bench consisting of three or more members, one
of whom shall necessarily be a judicial member and one an accountant member.
(5) If the members of a Bench differ in opinion on any point, the point shall
be decided according to the opinion of the majority, if there is a majority, but if the 40
members are equally divided, they shall state the point or points on which they
differ, and the case shall be referred by the President of the Appellate Tribunal for
hearing on such point or points by one or more of the other members of the Appellate
Tribunal, and such point or points shall be decided according to the opinion of the
majority of the members of the Appellate Tribunal who have heard the case, 45
including those who first heard it.
 381

(6) Subject to the provisions of this Act, the Appellate Tribunal shall have
power to regulate its own procedure and the procedure of Benches thereof in all
matters arising out of the exercise of its powers or of the discharge of its functions,
including the places at which the Benches shall hold their sittings.
5 (7) The Appellate Tribunal, for the purposes of discharging its functions,—
(a) shall have all the powers which are vested in the income-tax
authorities referred to in section 246;
(b) any proceeding before the Appellate Tribunal shall be deemed to be
a judicial proceeding within the meaning of sections 229 and 267 and for the
45 of 2023. 10 purposes of section 233 of the Bharatiya Nyaya Sanhita, 2023; and
(c) the Appellate Tribunal shall be deemed to be a Civil Court for all the
purposes of section 215 and Chapter XXXVIII of the Bharatiya Nagarik
46 of 2023. Suraksha Sanhita, 2023.
3.—Appeals to High Court
15 365. (1) An appeal shall lie to the High Court from every order passed in Appeal to High
Court.
appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves
a substantial question of law.
(2) The Principal Chief Commissioner or Chief Commissioner or the Principal
Commissioner or Commissioner or an assessee aggrieved by any order passed by
20 the Appellate Tribunal may file an appeal to the High Court and such appeal under
this sub-section shall be—
(a) filed within one hundred twenty days from the date on which the
order appealed against is received by the assessee or the Principal Chief
Commissioner or Chief Commissioner or Principal Commissioner or
25 Commissioner;
(b) in the form of a memorandum of appeal precisely stating therein the
substantial question of law involved.
(3) Where the High Court is satisfied that there was sufficient cause for not
filing the appeal within one hundred twenty days, it may admit an appeal after the
30 said period.
(4) Where the High Court is satisfied that a substantial question of law is
involved in any case, it shall formulate that question.
(5) The appeal shall be heard only on the question so formulated, and the
respondents shall, at the hearing of the appeal, be allowed to argue that the case does
35 not involve such question.
(6) The provisions of sub-section (5) shall not take away or abridge the power
of the court to hear, for reasons to be recorded, the appeal on any other substantial
question of law not formulated by it, if it is satisfied that the case involves such
question.
40 (7) The High Court shall decide the question of law so formulated and deliver
such judgment thereon containing the grounds on which such decision is founded
and may award such cost as it deems fit.
(8) The High Court may determine any issue which the Appellate Tribunal,––
(a) has not determined; or
45 (b) has wrongly determined, by reason of a decision on such question of
law as is referred to in sub-section (1).
 382

(9) Save as otherwise provided in this Act, the provisions of the Code of Civil
Procedure, 1908, relating to appeals to the High Court shall, as far as may be, apply 5 of 1908.
in the case of appeals under this section.
(10) Where the High Court delivers a judgment in an appeal filed before it
under this section, effect shall be given to such order by the Assessing Officer, on 5
the basis of a certified copy of the judgment.
Case before 366. (1) When an appeal has been filed before the High Court under
High Court to be section 365, it shall be heard by a bench of not less than two Judges of the High
heard by not less
than two Judges. Court, and shall be decided as per the opinion of such Judges or of the majority, if
10
any, of such Judges.
(2) Where there is no such majority, the Judges shall state the point of law
upon which they differ and the case shall then be heard upon that point only by one
or more of the other Judges of the High Court and such point shall be decided
according to the opinion of the majority of the Judges who have heard the case 15
including those who first heard it.
4.—Appeals to Supreme Court
Appeal to 367. An appeal shall lie to the Supreme Court from any judgment of the High
Supreme Court. Court delivered on an appeal made to High Court in respect of an order passed under
section 363 in any case which the High Court certifies to be fit for appeal to the
20
Supreme Court.
Hearing before 368. (1) The provisions of the Code of Civil Procedure, 1908, relating to
Supreme Court. appeals to the Supreme Court shall, so far as may be, apply in the case of appeals
under section 367 as they apply in the case of appeals from decrees of a High Court.
(2) The costs of the appeal shall be in the discretion of the Supreme Court.
(3) Where the judgment of the High Court is varied or reversed in the appeal, 25
effect shall be given to the order of the Supreme Court in the manner provided in
section 365(10) in the case of a judgment of the High Court.
5.—General
Tax to be paid 369. Irrespective of the fact that an appeal has been preferred to the High Court
irrespective of or the Supreme Court, tax shall be payable as per the assessment made in the case. 30
appeal, etc.

Execution for 370. The High Court may, on petition made for the execution of the order of
costs awarded by
Supreme Court.
the Supreme Court in respect of any costs awarded thereby, transmit the order for
execution to any court subordinate to the High Court.
Amendment of 371. If as a result of an appeal under section 356 or 357 or 362, any change is
assessment on made in the assessment of a body of individuals or an association of persons, or a 35
appeal.
new assessment is directed in such cases, the Joint Commissioner (Appeals) or the
Commissioner (Appeals) or the Appellate Tribunal, shall pass an order authorising
the Assessing Officer to either amend the assessment of any member of the body or
association or make a fresh assessment on such member.
Exclusion of 372. In computing the period of limitation prescribed for an appeal or an 40
time taken for
copy.
application under this Act, the day on which the order complained of was served
and, if the assessee was not provided with a copy of the order when the notice of the
order was served, the time required to obtain a copy of such order, shall be excluded.
Filing of appeal 373. (1) The Board may, from time to time, issue orders, instructions or
or by income-tax directions to other income-tax authorities, fixing such monetary limits as it may 45
authority.
deem fit, for the purpose of regulating filing of appeal by any income-tax authority
under the provisions of this Chapter.
(2) Where, in pursuance of the orders, instructions or directions issued under
sub-section (1), an income-tax authority has not filed any appeal on any issue in the
case of an assessee for any tax year, it shall not preclude such authority from filing 50
an appeal on the same issue in the case of—
 383

(a) the same assessee for any other tax year; or

(b) any other assessee for the same or any other tax year.
(3) Where even when no appeal has been filed by an income-tax authority
pursuant to the orders or instructions or directions issued under sub-section (1), it
5 shall not be lawful for an assessee, being a party in any appeal, to contend that the
income-tax authority has acquiesced in the decision on the disputed issue by not
filing an appeal in any case.
(4) The Appellate Tribunal or Court, hearing such appeal, shall have regard to
the orders, instructions or directions issued under sub-section (1) and the
10 circumstances under which such appeal was filed or not filed in respect of any case.
374. In this Chapter, “High Court” means,— Interpretation
of “High
(i) for any State, the High Court for that State; Court”.

(ii) for the Union territory of Jammu and Kashmir, the High Court of
Jammu and Kashmir and Ladakh;
15 (iii) for the Union territory of Ladakh, the High Court of Jammu and
Kashmir and Ladakh;
(iv) for the Union territory of the Andaman and Nicobar Islands, the
High Court at Calcutta;
(v) for the Union territory of Lakshadweep, the High Court of Kerala;
20 (vi) for the Union territory of Chandigarh, the High Court of Punjab and
Haryana;
(vii) for the Union territories of Dadra and Nagar Haveli and Daman and
Diu, the High Court at Bombay; and
(viii) for the Union territory of Puducherry, the High Court at Madras; and
25 (ix) for the National Capital Territory of Delhi, the High Court of Delhi.
B.—Special provisions for avoiding repetitive appeals
375. (1) Irrespective of anything contained in this Act, where an assessee Procedure
claims that— when assessee
claims
(a) any question of law arising in his case for a tax year pending before identical
question of law
30 the Assessing Officer or any appellate authority (such case being hereafter in is pending
this section referred to as the relevant case) is identical with a question of law before High
arising in his case for another tax year; Court or
Supreme
(b) such question of law is pending before— Court.

(i) the High Court on a reference under section 256 or on an appeal

43 of 1961. 35 under section 260A of the Income-tax Act, 1961; or
(ii) the Supreme Court on a reference under section 257 or on an
43 of 1961.
appeal under section 261 of the Income-tax Act, 1961; or
(iii) the High Court on an appeal made under section 365; or
(iv) the Supreme Court on appeal made under section 367; or
40 (v) in a Special Leave Petition under article 136 of the
Constitution, against the order of the Appellate Tribunal or the
jurisdictional High Court,
 384

such case being hereafter in this section referred to as the other case, he may furnish
a declaration to the Assessing Officer or the appellate authority, in such form and
manner, as prescribed, that if the Assessing Officer or the appellate authority, agrees
to apply in the relevant case, the final decision on the question of law in the other
case, he shall not raise such question of law in the relevant case before any appellate 5
authority or in a subsequent appeal before a higher forum.
(2) Where a declaration under sub-section (1) is furnished to any appellate
authority, the appellate authority shall––
(a) call for a report from the Assessing Officer on the correctness of the
10
claim made by the assessee; and
(b) allow the Assessing Officer an opportunity of being heard in the
matter, if such request is made by him.
(3) The Assessing Officer or the appellate authority, may, by an order in
writing,—
(a) admit the claim of the assessee if he or it is satisfied that the question 15
of law arising in the relevant case is identical with the question of law in the
other case; or
(b) reject the claim if not so satisfied.
(4) An order under sub-section (3) shall be final and shall not be called in
question in any proceeding by way of appeal or revision under this Act. 20

(5) Where a claim is admitted under sub-section (3),—

(a) the Assessing Officer or the appellate authority, may make an order
disposing of the relevant case without awaiting the final decision on the
question of law in the other case; and
(b) the assessee shall not be entitled to raise, in relation to the relevant 25
case, such question of law in appeal before any appellate authority or in any
subsequent appeal before a higher forum.
(6) When the decision on the question of law in the other case becomes final,
it shall be applied to the relevant case and the Assessing Officer or the appellate
authority, shall, if necessary, amend the order referred to in sub-section 5(a) in 30
conformity with such decision.
(7) In this section,—
(a) “appellate authority” means the Joint Commissioner (Appeals) or the
Commissioner (Appeals) or the Appellate Tribunal;
(b) “case”, in relation to an assessee, means any proceeding under this 35
Act for the assessment of the total income of the assessee or for the imposition
of any penalty or fine on him; and
(c) “subsequent appeal before a higher forum” means the appeal before
the High Court under section 365 or appeal before the Supreme Court under
section 367 or in a Special Leave Petition under article 136 of the Constitution, 40
against the order of the Appellate Tribunal or the jurisdictional High Court.
Procedure where 376. (1) Irrespective of anything contained in this Act, where the collegium is
an identical
question of law
of the opinion that—
is pending (a) any question of law arising in the case of an assessee for any tax year
before High
Courts or (such case being herein referred to as the relevant case) is identical with a 45
Supreme Court. question of law arising,—
(i) in his case for any other tax year; or
 385

(ii) in the case of any other assessee for any tax year; and
(b) such question of law is pending before the jurisdictional High Court
under section 365 or the Supreme Court in an appeal under section 367 or in
a Special Leave Petition under article 136 of the Constitution, against the order
5 of the Appellate Tribunal or the jurisdictional High Court, which is in favour
of such assessee (such case being herein referred to as the other case),
the collegium may, decide and inform the Principal Commissioner or Commissioner
not to file any appeal, at this stage, to the Appellate Tribunal under section 362(2)
or to the jurisdictional High Court under section 365(2) in the relevant case against
10 the order of the Joint Commissioner (Appeals) or the Commissioner (Appeals) or
the Appellate Tribunal.
(2) Irrespective of anything contained in section 362(3) or section 365(2)(a),
the Principal Commissioner or the Commissioner shall, on receipt of a
communication from the collegium under sub-section (1), direct the Assessing
15 Officer to make an application to the Appellate Tribunal or the jurisdictional High
Court, in such form as prescribed, stating that an appeal on the question of law
arising in the relevant case may be filed when the decision on such question of law
becomes final in the other case.
(3) The application referred to in sub-section (2) shall be filed within one
20 hundred and twenty days from the date of receipt of the order of the Joint
Commissioner (Appeals) or the Commissioner (Appeals) or of the Appellate Tribunal.
(4) The Principal Commissioner or Commissioner shall direct the Assessing
Officer—
(a) to make an application under sub-section (2), if an acceptance is
25 received from the assessee to the effect that the question of law in the other
case is identical to that arising in the relevant case; and
(b) to proceed as per section 362(2) or section 365(2)(b), if no such
acceptance is received irrespective of anything in section 362(3) or
section 365(2)(a).
30 (5) If the order of the Joint Commissioner (Appeals) or the Commissioner
(Appeals) or the order of the Appellate Tribunal referred to in sub-section(1), is not
in conformity with the final decision on the question of law in the other case, as and
when such order is received, the Principal Commissioner or Commissioner may
direct the Assessing Officer to appeal to the Appellate Tribunal or the jurisdictional
35 High Court, against such order, and save as otherwise provided in this section, all
other provisions of Parts A.2 and A.3 of this Chapter shall apply accordingly.
(6) Every appeal under sub-section (5) shall be filed within sixty days to the
Appellate Tribunal or one hundred and twenty days to the High Court, from the date
on which the order of the jurisdictional High Court or the Supreme Court in the other
40 case, is communicated to the Principal Commissioner or the Commissioner (having
jurisdiction over the relevant case), as per the procedure specified by the Board.
(7) In this section, “collegium” means a collegium comprising two or more
Chief Commissioners or Principal Commissioners or Commissioners, as specified
by the Board.
45 C.—Revision by the Principal Commissioner or Commissioner
377. (1) The Competent Authority may call for and examine the record of any Revision of
proceeding under this Act, and if he considers that any order passed therein by the orders
prejudicial to
Assessing Officer or the Transfer Pricing Officer, as the case may be, is erroneous revenue.
in so far as it is prejudicial to the interests of the revenue, he may, after giving the
50 assessee an opportunity of being heard and after making or causing to be made such
inquiry as he deems necessary, pass such order thereon as the circumstances of the
case justify, including—
 386

(a) an order enhancing or modifying the assessment or cancelling the

assessment and directing a fresh assessment; or
(b) an order modifying the order under section 166; or
(c) an order cancelling the order under section 166 and directing a fresh
order under the said section. 5

(2) For the purpose of sub-section (1),—

(a) an order passed by the Assessing Officer or the Transfer Pricing
Officer, shall include—
(i) an order of assessment made on the basis of the directions
issued by the Joint Commissioner under section 272; 10

(ii) an order made by the Joint Commissioner in exercise of the

powers or in the performance of the functions of an Assessing Officer or
the Transfer Pricing Officer, conferred on, or assigned to, him by the
Board or by the Principal Chief Commissioner or Chief Commissioner
or Principal Director General or Director General or Principal 15
Commissioner or Commissioner authorised by the Board under
section 241; and
(iii) an order under section 166;
(b) “record” shall include all records relating to any proceeding under
this Act available at the time of examination by the Competent Authority; 20

(c) where any order referred to in this section and passed by the
Assessing Officer or the Transfer Pricing Officer, had been the subject matter
of any appeal filed, the powers of the Competent Authority, shall extend to
such matters as had not been decided in such appeal.
(3) An order passed by the Assessing Officer or the Transfer Pricing Officer, 25
shall be deemed to be erroneous in so far as it is prejudicial to the interests of the
revenue, if, in the opinion of the Competent Authority, the order—
(a) is passed without making inquiries or verification which should have
been made;
(b) is passed allowing any relief without inquiring into the claim; 30

(c) has not been made in accordance with any order, direction or
instruction issued by the Board under section 239; or
(d) has not been passed in accordance with any decision which is
prejudicial to the assessee, rendered by the jurisdictional High Court or
Supreme Court in the case of the assessee or any other person. 35

(4) No order shall be made under sub-section (1) after the expiry of two years
from the end of the financial year in which the order sought to be revised was passed.
(5) Irrespective of anything contained in sub-section (4), an order in revision
under this section may be passed at any time to give effect to a finding or direction
contained in the order of the Appellate Tribunal, the High Court, or the Supreme 40
Court.
(6) In computing the period of limitation under sub-section (4), the following
period shall be excluded,––
(a) the time taken in giving an opportunity to the assessee to be reheard
under section 244(2); and 45
 387

(b) the period commencing on the date on which stay on any proceeding
under this section has been granted by an order or injunction of any court and
ending on the date on which certified copy of the order or injunction vacating
the stay is received by the jurisdictional Principal Commissioner or
5 Commissioner.
(7) If after the exclusion of the period provided in sub-section (6), the time
limit for completion, in that sub-section is less than sixty days, such remaining
period shall be extended to sixty days and such period of limitation shall be deemed
to have been extended accordingly.
10 (8) In this section,––
(a) “Competent Authority” means the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner; and
(b) “Transfer Pricing Officer” shall have the same meaning as in
section 166(18).
15 378. (1) For any order, other than an order to which section 377 applies, passed Revision of
other orders.
by an authority subordinate to him, the Competent Authority may, either of his own
motion or on an application by the assessee for revision,––
(a) call for the record of any proceeding under this Act in which any
such order has been passed;
20 (b) make such inquiry or cause such inquiry to be made; and
(c) subject to the provisions of this Act, pass such order thereon, not
being an order prejudicial to the assessee, as he thinks fit.
(2) The Competent Authority shall not of his own motion revise any order
under this section if the order has been made more than one year previously.
25 (3) In the case of an application for revision under this section by the assessee,
the application shall be made within one year from the date on which the order in
question was communicated to him or the date on which he otherwise came to know
of it, whichever is earlier.
(4) The Competent Authority may, if he is satisfied that the assessee was
30 prevented by sufficient cause from making the application within the period as
provided in sub-section (3), admit an application made after the expiry of the period
specified in that sub-section.
(5) The Competent Authority shall not revise any order under this section in
the following cases—
35 (a) where an appeal against the order lies to the Joint Commissioner
(Appeals) or the Commissioner (Appeals) or to the Appellate Tribunal, but
has not been made and the time within which such appeal may be made has
not expired; or
(b) where the appeal lies to the Joint Commissioner (Appeals) or the
40 Commissioner (Appeals) or to the Appellate Tribunal, the assessee has not
waived his right of appeal; or
(c) where the order has been made the subject of an appeal to the Joint
Commissioner (Appeals) or the Commissioner (Appeals) or to the Appellate
Tribunal.
45 (6) Every application by an assessee for revision under this section shall be
accompanied by a fee of five hundred rupees.
(7) On every application by an assessee for revision under this section, an
order shall be passed within one year from the end of the financial year in which
such application is made.
 388

(8) In computing the period of limitation under sub-section (7), the following
period shall be excluded:—
(a) the time taken in giving an opportunity to the assessee to be reheard
under section 244(2); and
(b) the period commencing on the date on which stay on any proceeding 5
under this section has been granted by an order or injunction of any court and
ending on the date on which certified copy of the order or injunction vacating
the stay is received by the jurisdictional Principal Commissioner or
Commissioner.
(9) If after the exclusion of the period provided in sub-section (8), the time 10
limit for completion as provided in sub-section (6) is less than sixty days, such
remaining period shall be extended to sixty days and such period of limitation shall
be deemed to have been extended accordingly.
(10) Irrespective of anything contained in sub-section (7), an order in revision
under that sub-section may be passed at any time in consequence of or to give effect 15
to any finding or direction contained in an order of the Appellate Tribunal, the High
Court or the Supreme Court.
(11) For the purposes of this section,––
(a) “Competent Authority” means the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner; 20

(b) an order by the Competent Authority declining to interfere shall, not

be deemed to be an order prejudicial to the assessee.
D.—Alternate Dispute Resolutions
1.—Dispute Resolution Committee in certain cases
Dispute
Resolution
379. (1) The Central Government shall constitute, one or more Dispute 25
Committee. Resolution Committees, as per the rules made under this Act, for dispute resolution
in the case of such persons or class of persons, as specified by the Board, who opt
for dispute resolution under this Chapter in respect of dispute arising from any
variation in the specified order in his case and who fulfils the specified conditions,
as prescribed. 30

(2) The Dispute Resolution Committee, subject to the conditions as

prescribed, may make modifications to the variations in specified order or reduce or
waive any penalty imposable under this Act, or grant immunity from prosecution
for any offence punishable under this Act, in case of a person whose dispute is
resolved under this Chapter. 35

(3) Irrespective of anything contained in section 275, upon receipt of the order of
the Dispute Resolution Committee under this section, the Assessing Officer shall,—
(a) in a case where the specified order is a draft of the proposed order of
assessment under section 275(1), pass an order of assessment, reassessment or
recomputation; or 40

(b) in any other case, modify the order of assessment, reassessment or

recomputation,
in conformity with the directions contained in the order of the Dispute Resolution
Committee within one month from the end of the month in which such order is
received. 45
 389

(4) “specified order” means such order, including draft order, as specified by
the Board, and—
(i) the aggregate sum of variations proposed or made in such order does
not exceed ten lakh rupees;
5 (ii) such order is not based on search initiated under section 247 or
requisition under section 248 in the case of assessee or any other person or
survey under section 253 or information received under an agreement referred
to in section 159(1) or (2); and
(iii) where the assessee has filed a return for the tax year relevant to such
10 order, total income as per such return does not exceed fifty lakh rupees.
2.—Advance rulings
380. In this Chapter,— Interpretation.

(a) “advance ruling” means—

(i) a determination by the Board for Advance Rulings in relation
15 to the tax liability arising out of a transaction which has been undertaken
or is proposed to be undertaken by a non-resident applicant; or
(ii) a determination by the Board for Advance Rulings in relation
to the tax liability of a non-resident arising out of a transaction which
has been undertaken or is proposed to be undertaken by a resident
20 applicant with such non-resident; or
(iii) a determination by the Board for Advance Rulings in relation
to the tax liability of a resident applicant, arising out of a transaction
which has been undertaken or is proposed to be undertaken by such
applicant; and such determination shall include the determination of any
25 question of law or of fact specified in the application;
(iv) a determination or decision by the Board for Advance Rulings
in respect of an issue relating to computation of total income which is
pending before any income-tax authority or the Appellate Tribunal and
such determination or decision shall include the determination or
30 decision of any question of law or of fact relating to such computation
of total income specified in the application;
(v) a determination or decision by the Board for Advance Rulings
whether an arrangement, which is proposed to be undertaken by any
person being a resident or a non-resident, is an impermissible avoidance
35 arrangement as referred to in Chapter XI or not;
(b) “applicant” means any person who—
(i) is a non-resident referred to in clause (a)(i); or
(ii) is a resident referred to in clause (a)(ii); or
(iii) is a resident referred to in clause (a)(iii) falling within any such
40 class or category of persons as the Central Government may, by
notification, specify; or
(iv) is a resident falling within any such class or category of persons
as the Central Government may, by notification, specify in this behalf; or
(v) is referred to in clause (a)(v),
45 and makes an application under section 383(1);
(c) “application” means an application made to the Board for Advance
Rulings under section 383(1);
(d) “Board for Advance Rulings” means the Board for Advance Rulings
constituted by the Central Government under section 381;
50 (e) “Member” means a Member of the Board for Advance Rulings.
 390

Board for 381. (1) The Central Government shall constitute one or more Boards for
Advance
Rulings.
Advance Rulings, as may be necessary, for giving advance rulings under this Chapter
on or after such date as the Central Government may, by notification, appoint.
(2) The Board for Advance Rulings shall consist of two members, each being an
officer not below the rank of Chief Commissioner, as may be nominated by the Board. 5

Vacancies, etc., 382. No proceeding before, or pronouncement of advance ruling by, the Board
not to invalidate for Advance Rulings, shall be questioned or shall be invalid on the ground merely
proceedings.
of the existence of any vacancy or defect in the constitution of the Board for
Advance Rulings.
Application for 383. (1) An applicant desirous of obtaining an advance ruling under this 10
advance ruling. Chapter, may make an application in such form and manner, as prescribed, stating
the question on which the advance ruling is sought.
(2) The application shall be made in quadruplicate and be accompanied by a
fee of ten thousand rupees or such fee, as prescribed.
(3) An applicant may withdraw an application within thirty days from the date 15
of the application.
Procedure on 384. (1) On receipt of an application, the Board for Advance Rulings shall
receipt of forward a copy thereof to the Principal Commissioner or Commissioner and, call
application.
upon him to furnish the relevant records, which shall be returned at the earliest
20
opportunity.
(2) The Board for Advance Rulings may, after examining the application and
the records called for either allow or reject the application by an order.
(3) For the purposes of sub-section (2), an application shall be rejected if the
question raised therein—
(a) is already pending before any income-tax authority or Appellate 25
Tribunal except in the case of a resident applicant falling in section 380(b)(iv)
or any court;
(b) involves determination of fair market value of any property;
(c) relates to a transaction or issue which is designed prima facie for the
avoidance of income-tax except in the case of a resident applicant falling in 30
section 380(b)(iv) or in the case of an applicant falling in section 380(b)(v).
(4) The application shall not be rejected under sub-section (2), unless an
opportunity has been given to the applicant of being heard and the reasons for such
rejection are given in the order.
(5) A copy of every order made under sub-section (2) shall be sent to the 35
applicant and to the Principal Commissioner or Commissioner.
(6) Where an application is allowed under sub-section (2), the Board for
Advance Rulings shall, after examining such further material as may be placed
before it by the applicant or obtained by the Board for Advance Rulings, pronounce
its advance ruling in writing, on the question specified in the application within six 40
months of the receipt of application.
(7) On a request from the applicant, the Board for Advance Rulings shall,
before pronouncing its advance ruling, provide an opportunity to the applicant of
being heard, either in person or through a duly authorised representative.
(8) A copy of the advance ruling pronounced by the Board for Advance 45
Rulings, duly signed by the Members and certified in the manner, as prescribed shall
be sent to the applicant and to the Principal Commissioner or Commissioner, as soon
as may be, after such pronouncement.
 391

(9) In this section, “authorised representative” shall have the meaning assigned
to it in section 515(3)(a), as if the applicant were an assessee.
385. No income-tax authority or the Appellate Tribunal shall proceed to decide Appellate
authority not to
any issue for which an application has been made by an applicant, being a resident, proceed in
5 under section 383(1). certain cases.
386. (1) Where on a representation made by the Principal Commissioner or Advance ruling
Commissioner or otherwise, the Board for Advance Rulings finds, that an advance to be void in
certain
ruling pronounced under section 384(6) has been obtained by the applicant by fraud circumstances.
or misrepresentation, then it may by order, declare such ruling to be void ab initio and
10 thereupon, all the provisions of this Act shall apply (after excluding the period
beginning with the date of such advance ruling and ending with the date of order under
this sub-section) to the applicant as if such advance ruling had never been made.
(2) A copy of the order made under sub-section (1) shall be sent to the
applicant and the Principal Commissioner or Commissioner.
15 387. (1) The Board for Advance Rulings shall, for the purpose of exercising Powers of the
its powers, have all the powers of a civil court under the Code of Civil Board for
Advance
5 of 1908. Procedure, 1908 as are referred to in section 246 of this Act. Rulings.
(2) The Board for Advance Rulings shall be considered to be a civil court for
the purposes of section 215 but not for the purposes of Chapter XXVIII of the
46 of 2023. 20 Bharatiya Nagarik Suraksha Sanhita, 2023 and every proceeding before the Board
for Advance Rulings shall be considered to be a judicial proceeding under sections
45 of 2023. 229 and 267 and for the purposes of section 233 of the Bharatiya Nyaya Sanhita,
2023.
388. The Board for Advance Rulings shall, subject to this Chapter, have power Procedure of
Board for
25 to regulate its own procedure in all matters arising out of the exercise of its powers Advance
under this Act. Rulings.

389. (1) The applicant, if aggrieved by any ruling pronounced or order passed Appeal.
by the Board for Advance Rulings or the Assessing Officer, on the directions of the
Principal Commissioner or Commissioner, may appeal to the High Court against such
30 ruling or order of the Board for Advance Rulings within sixty days from the date of
the communication of that ruling or order, in such form and manner, as prescribed.
(2) Where the High Court is satisfied, on an application made by the appellant
in this behalf, that the appellant was prevented by sufficient cause from presenting
the appeal within the period specified in sub-section (1), it may grant further period
35 of thirty days for filing such appeal.
CHAPTER XIX
COLLECTION AND RECOVERY OF TAX
A.—General
Deduction or
390. (1) The tax on income shall be payable as per this Chapter by way of–– collection at
(a) deduction or collection at source; or source and
40 advance
(b) advance payment; or payment.

(c) payment under section 392(2)(a).

(2) The tax referred to in sub-section (1) shall be payable as per the provisions of
this Chapter, irrespective of the assessment to be made later than the relevant tax year.
45 (3) Nothing contained in this section, shall affect the charge of tax on such
income under section 4(1).
(4) The payment of tax referred to in sub-section (1) shall be in addition to any
other mode of tax collection to discharge the liability in respect of income assessed
for a tax year.
 392

(5) The tax deducted or collected at source or sum referred to in

section 392(2)(a) under this Chapter and paid to the Central Government shall be
treated as payment of tax on behalf of the person––
(a) from or in respect of whose income or payment, such tax has been
deducted or paid; or 5
(b) from whom such tax has been collected.
(6) The Board may make rules for—
(a) giving credit of tax deducted or collected or paid to a person referred
to in sub-section (5) and also a person other than the person referred to in the
said sub-section; 10
(b) the tax year for which the credit shall be given.
Direct payment. 391. (1) The income-tax on any income shall be payable directly by the
assessee if—
(a) there is no provision under this Chapter to deduct income-tax on such
income at the time of payment; or 15
(b) income-tax has not been deducted as per the provisions of this Chapter.
(2) If an assessee has any income of the nature of specified security or sweat
equity shares as specified in section 17(1)(d) allotted or transferred directly or
indirectly by the current employer which is an eligible start-up referred to in
section 140, then direct payment of tax for the purposes of sub-section (1) shall be 20
made within the time specified in section 289(3).
(3) Where any person, including the principal officer of the company,––
(a) who is required to deduct any sum as per the provisions of this Act; or
(b) referred to in section 392(2)(a), being an employer,
does not deduct, or after so deducting fails to pay, or does not pay, the whole or any 25
part of the tax, as required under this Act, and where the assessee has also failed to
pay such tax directly, then, such person shall, apart from any other consequences
that he may incur, be deemed to be an assessee in default within the meaning of
section 398(1), in respect of such tax.
B.—Deduction and collection at source 30
Salary and 392. (1) Any person responsible for paying any income chargeable under the
accumulated
balance due to
head “Salaries” shall deduct income-tax on the amount payable and this deduction
an employee. shall be made at the time of such payment at the average rate of income-tax
computed on the basis of the rates in force for the tax year in which the payment is
made, on the estimated income of the assessee under this head for such year. 35
(2)(a) Without prejudice to the provisions of sub-section (1), the person
responsible for paying any income in the nature of a non-monetary perquisite
chargeable to tax under section 17(2), may pay, at his option, tax on the whole or
part of such income without making any deduction therefrom, at the time when such
tax was deductible under sub-section (1); 40

(b) the tax under clause (a) shall be determined at the average rate as per
sub-section (1), on the income chargeable under the head “Salaries” including the income
referred to in the said clause, and shall be construed as a tax deductible at source from the
income under the head “Salaries”, and be subject to the provisions of this Chapter.
(3) Any person, being an eligible start-up referred to in section 140, 45
responsible for paying any income of the nature specified in section 17(1)(d) in any
tax year, shall deduct or pay, tax on such income, on the basis of rates in force for
the tax year in which the specified security or sweat equity share is allotted or
transferred, within the time as specified for the payee in section 289(3).
 393

(4) (a) The person responsible for paying under sub-section (1), shall take
into account the following particulars furnished by the assessee, at his option, in
such form and manner as prescribed, for the purpose of making deduction under
the said sub-section and such particulars shall have an effect of increasing or
5 decreasing the tax to be deducted:—
(i) any income under the head “Salaries” due or received by the
assessee, from any other employer or employers during the tax year;
(ii) any relief allowable under section 157, where the assessee being a
Government servant, or an employee in a company, co-operative society, local
10 authority, university, institution, association or body is entitled for such relief;
(iii) any loss under the head “Income from house property”;
(iv) any income chargeable under any other head of income, [not being
a loss under any such head other than the loss specified in sub-clause (iii)];
(v) any tax deducted or collected at source under this Chapter;
15 (b) the tax deductible from income under the head “Salaries” shall not be
reduced in any case, except on account of––
(i) loss under the head “Income from house property”; and
(ii) the tax deducted and collected as per other provisions of this
Chapter.
20 (5) The person responsible for paying any income chargeable under the head
“Salaries” to the assessee—
(a) shall furnish a statement in such form and manner, as prescribed,
with correct and complete particulars of perquisites or profits in lieu of
salary paid, along with their value, to the assessee;
25 (b) shall, for the purposes of estimating income of the assessee or
computing tax deductible under sub-section (1), obtain from the assessee the
evidence or proof or particulars of prescribed claims (including claim for set
off of loss) under the provisions of this Act in such form and manner, as
prescribed; and;
30 (c) may, increase or reduce the amount to be deducted under this
section for adjusting any excess or deficiency arising out of any previous
deduction or failure to deduct during the tax year.
(6)(a) The trustees of a recognised provident fund, or any person authorised by
the regulations of the fund to make payment of the accumulated balances due to
35 employees shall, in cases where paragraph 9 of Part A of Schedule XI applies, at the
time an accumulated balance due to an employee is paid, make therefrom the deduction
provided in paragraph 10 of Part A of Schedule XI;
(b) Where any contribution made by an employer, including interest on such
contributions, if any, in an approved superannuation fund is paid to the employee,
40 tax on the amount so paid shall be deducted by the trustees of the fund to the extent
provided in paragraph 7 of Part B of Schedule XI.
(7)(a) The trustees of the Employees’ ‘Provident Funds Scheme, 1952,
made under section 5 of the Employees’ Provident Funds and Miscellaneous
19 of 1952. Provisions Act, 1952; or
45 (b) any person authorised under such scheme to make payment of
accumulated balance due to employees,
shall at the time of payment of accumulated balance due to the employee
participating in a recognised provident fund, deduct income-tax thereon at the rate
of 10%, where the aggregate amount of such payment is fifty thousand rupees or
50 more, and such accumulated balance is includible in his total income owing to the
provisions of paragraph 8 of Part A of Schedule XI not being applicable.
 394

Tax to be 393. (1) Where any income or sum of the nature specified in column B of
deducted at the Table below, is credited or paid or distributed by the person specified in
source.
column C during the tax year, to a resident, the person responsible for paying shall
deduct income-tax,—
(a) on the entire amount of such income or sum, where the amount or 5
aggregate of amounts exceeds the threshold limit specified in column D;
(b) at the rate specified in column D;
(c) at the time of credit of such income or sum to the account of the
payee or at the time of its payment in cash or by way of a cheque or a draft
or by any other mode, whichever is earlier; and 10

(d) subject to the provisions of sub-sections (4), (5), (6), (8) and (9).
Table
FOR PAYMENTS TO RESIDENT
Sl. No. Nature of Income or sum Payer Rate
Threshold limit 15

A B C D
1. Commission or brokerage
(i) Income by way of Any person. Rate: Rates in force.
remuneration or reward, ——
whether by way of 20
commission or otherwise, Threshold limit:
for soliciting or procuring ₹ 20,000
insurance business
(including business 25
relating to the continuance,
renewal or revival of
insurance policies).
(ii) Income by way of Specified Rate: 2%
30
commission [not being person. ——
insurance commission
referred to in serial number Threshold limit:
1(i)] or brokerage. ₹ 20,000
2. Rent
(i) Income by way of Person other Rate: 2% 35
rent. than specified ——
person.
Threshold limit:
₹50,000 for a month or
part of a month 40

(ii) Income by way of Specified Rate: (a) 2%, for the

rent. person. use of any machinery or ,
plant, or equipment; and
(b) 10%, for the use of
any land, or building 45
(including factory
building), or land
appurtenant to a building
(including factory
building), or furniture, or 50
fittings.
 395

A B C D
——
Threshold limit [for
(a) and (b)]:
5 ₹ 50,000 for a month
or part of a month.
Note 1.–– In serial number 2(i), the tax shall be deducted on such income
at the time of—
(a) credit of rent to the account of the payee; or
10 (b) payment thereof in cash or by way of a cheque or a draft or any
other mode,
whichever is earlier, for the last month of the tax year or the last month of
tenancy.
3. Payment on transfer of certain immovable property other than agricultural land
15 (i) Any consideration Person Rate:1% of such sum
for transfer of any (other than the or stamp duty value of
immovable property person who the property if more than
(other than agricultural are required to ₹50,00,000 , whichever
land). deduct tax is higher.
20 under serial ——
number
3(iii)). Threshold limit:
₹50,00,000.
(ii) Any Any person. Rate: 10%
25 consideration, not being ——
consideration in kind,
under the agreement Threshold limit: Nil.
referred to in
section 67(14).
30 (iii) Sum, being in the Any person. Rate: 10%
nature of— ——
(a) compensation or Threshold limit:
the enhanced ₹5,00,000
compensation; or
35 (b) consideration or
the enhanced
consideration,
on account of
compulsory acquisition,
40
under any law for the
time being in force, of
any immovable property
(other than agricultural
land).
45 Note 1.––Consideration for transfer of any immovable property under
serial number 3(i) shall be the aggregate of the amounts paid or payable by all the
transferees to the transferor or all the transferors for transfer of such immovable
property for the purposes of the threshold limit mentioned in column D.
Note 2.— In case of consideration on which provisions of both serial
50 numbers 3(i) and 3(ii) are applicable, tax shall be deducted under 3(ii) only.
 396

A B C D
4. Income from capital market
(i) Any income in Any person. Rate: 10%
respect of— ——
(a) units of a Mutual Threshold limit: 5
Fund specified under ₹ 10,000.
Schedule VII (Table:
Sl. No. 20 or 21); or
(b) units from the
Administrator of the 10
specified undertaking; or
(c) units from the
specified company.
(ii) Any distributed Any Rate: 10%
15
income referred to in Business ——
section 223, referred to Trust. Threshold limit: Nil.
in Schedule V (Table:
Sl. Nos. 3 and 4) or
(Table: Sl. No. 4),
payable to a unitholder
of a Business Trust. 20
(iii) Any income, other Any Rate: 10%
than that proportion of Investment ——
income which is exempt fund specified Threshold limit: Nil
under Schedule V (Table: in section 224. 25
Sl. No. 2), in respect of
units of an investment
fund specified in section
224, payable to its
unitholder. 30
(iv) Any income, in Any Rate: 10%
respect of an investment securitisation ——
in a securitisation trust trust specified Threshold limit: Nil.
specified in section 221 in section 221.
to an investor. 35
5. Interest income
(i) Any income by way Any person. Rate: Rates in force.
of Interest on securities ——
Threshold limit: ₹10,000
(ii) Any income by (a) A Rate: Rates in force. 40
way of interest other banking ——
than interest on company; or Threshold limit: (a)
securities. (b) a co- ₹1,00,000 in the case of
operative a senior citizen;
society (b) ₹50,000 in case of 45
carrying on the person other than senior
business of citizen.
banking; or
(c) a post
office for a 50
deposit made
under a
scheme
notified by the
Central 55
Government
 397

A B C D
(iii) Any income being Specified Rate: Rates in force.
interest other than person [other ——
interest on securities. than person in
5 Sl. No. 5(ii).C] Threshold limit:
₹10,000.
Note 1.— In serial number 5(ii) and (iii), where the interest income
credited or paid is in respect of—
(a) time deposits with a banking company;or
10 (b) time deposits with a co-operative society engaged in carrying
on the business of banking; or
(c) deposits with a public company formed and registered in India
with the main object of carrying on business of long-term finance for
construction or purchase of houses in India for residential purposes and
15 is eligible for deduction under section 32(e),
and the person mentioned in column C has not adopted core banking solutions,
the threshold limit in column D shall be computed with reference to the income
credited or paid by a branch of such person.
Note 2.—The person responsible for making the payment referred to in
20 serial numbers 5(ii) and (iii) of this Table, may at the time of making any
deduction, increase or reduce the amount to be deducted for the purpose of
adjusting any excess or deficiency arising out of any previous deduction or
failure to deduct during the tax year.
6. Payments to contractors, fees for professional and technical services, etc.
25 (i) Any sum for Any Rate: (a) 1%, if
carrying out any work designated contractor is individual
(including supply of person. or Hindu undivided
labour for carrying out family;
any work) in pursuance (b) 2%, if contractor is
30 of a contract between the a person other than the
contractor and a person mentioned in (a).
designated person.
——
Threshold limit: [for
35
(a) and (b)]
(a) ₹30,000; or
aggregate of amount; and
(b) ₹1,00,000 in case
of aggregate of amounts.
40 (ii) Any sum–– Any person, Rate: 2%. 1
(a) for carrying out being an —— %
any work (including individual or
Hindu Threshold limit:
supply of labour for ₹50,00,000.
carrying out any work) undivided
in pursuance of a family [other
45
contract; or than those
required to
(b) by way of fees for deduct
professional services; or income-tax as
50 per Sl. No. 6(i)
and (iii) or Sl.
No. 1(ii)]
 398

A B C D
(c) by way of
commission [not
being insurance
commission referred 5
to in serial number
1(i)] or brokerage.
(iii) Any sum by way Specified Rate: (a) 2% of such
of–– person. sum in case of—
(a) fees for (i) fees for technical 10
professional services; services (not being a
or professional services);
(b) fees for technical or
services; or (ii) royalty in the
(c) remuneration or nature of consideration 15
fees or commission by for sale, distribution or
whatever name called, exhibition of
other than those on cinematographic films;
which tax is or
deductible under (iii) payee, engaged 20
section 392, to a only in the business of
director of a company; operation of call centre;
or (b) 10% of such sum
(d) royalty; or in cases other than (a)
(e) any sum referred —— 25
to in section 26(2)(h). Threshold limit: [for
(a) and (b)]:
₹ 50,000.
Note.––In serial number 6 (i), if any sum is paid or credited for carrying 30
out any work specified in section 402(47)(e), tax shall be deducted at source—
(a) on the invoice value excluding the value of material, if such
value is specified separately in the invoice; or
(b) on the whole of the invoice value, if the value of material is not
35
specified separately in the invoice.
7. Dividend
Any dividends Any Rate: 10%.
(including on preference domestic ——
shares) declared. company.
Threshold limit: Nil. 40

Note.––The tax shall be deducted at source before making any

distribution or payment of dividend.
8. Other cases
(i) Any sum under a Any person. Rate: 2% on income
life insurance policy, comprised in such sum. 45
including the sum ——
allocated as bonus on
such policy, other than Threshold limit:
the amount not ₹1,00,000
includible in the total 50
income under Schedule
II (Table: Sl. No. 2).
 399

A B C D
(ii) Any sum for Any person, Rate: 0.1% of such
purchase of any goods. being a buyer. sum exceeding
₹50,00,000.
5
——
Threshold limit:
₹50,00,000.
(iii) Total income of a specified Rate: Rates in force.
specified senior citizen bank. ——
10 after allowing deduction
under Chapter VIII and Threshold limit: Nil.
rebate under
section 156.
(iv) Any benefit or Any Rate: 10% of value or
15 perquisite, whether specified aggregate of values of
convertible into money person. such benefit or
or not, arising from perquisite.
business or the exercise ——
of a profession of any
20 resident. Threshold limit:
₹ 20,000.
(v) Sale of goods or Any Rate: 0.1% of gross
provision of services by e-commerce amount of such sale or
an e-commerce operator. services or both.
25 participant, facilitated ——
by an e-commerce
operator through its Threshold limit: Nil.
digital or electronic
facility or platform.
30 (vi) Any sum by way Any person. Rate: 1%.
of consideration for ——
transfer of a virtual
digital asset. Threshold limit: Nil.
Note1.––The deduction of tax under serial number 8(ii) shall not apply to a
35 transaction on which tax is deductible or collectible under any of the provisions
of the Act.
Note 2.––The provisions of serial number 8(iv) shall apply to any benefit or
perquisite, whether in cash or in kind or partly in cash and partly in kind, provided
to a resident.
40 Note 3.––In respect of serial number 8(v)––
(a) for deduction of tax, the provisions thereof shall take precedence
over any other provisions of this Chapter;
(b) any payment made by a purchaser of goods or recipient of services
directly to an e-commerce participant for the sale of goods or provision of
45 services or both, facilitated by an e-commerce operator, shall be deemed to
be the amount credited or paid by the e-commerce operator to the
e-commerce participant and this amount shall be included in the gross
amount of such sale or services for the purposes of deduction of income-tax
under this serial number;
50 (c) e-commerce operator shall be deemed to be the person responsible
for paying to e-commerce participant;
 400

(d) irrespective of anything contained in this Chapter, if—

(i) tax has been deducted on a transaction under this serial
number; or
(ii) a transaction is not liable for tax deduction as provided in
section 393(4) (Table: Sl. No. 11), 5

then tax shall not be deducted on such transaction under any other
provision of this Chapter;
(e) clause (d) shall not apply to any amount or aggregate of amounts
received or receivable by an e-commerce operator for—
(i) hosting advertisements; or 10

(ii) providing any other services,

which are not in connection with the sale or services referred to in this
serial number.
Note 4.––In case of a transaction on which provisions of serial number 8(v)
are applicable along with the provisions of serial number 8(vi) for deduction of tax, 15
then tax on such transaction shall be deducted only under the provisions of
serial number 8(vi).
Note 5.—The provisions of serial number 8(iii) shall take precedence over
any other provisions of this Chapter and tax shall be deducted under this
provision. 20

Note 6.—For serial numbers 8(iv) and (vi),—

(a) where the consideration or benefit or perquisite is—
(i) in exchange of another virtual digital asset where there is no
part in cash, in respect of serial number 8(iv); or
25
(ii) is wholly in kind; or
(iii) is partly in kind and partly in cash, but such part in cash is
not sufficient to meet the liability of deduction of tax in respect of the
whole of such payment or benefit or perquisite,
the person responsible for paying or providing shall ensure that the tax required
to be deducted has been paid, before releasing such consideration or providing 30
such benefit or perquisite, as the case may be.
(b) “person responsible for providing” means the person providing
such benefit or perquisite, or in case of a company, the company itself
including the principal officer thereof.
(2) Where any income or sum of the nature specified in column B of the 35
Table below, is credited or paid by the person specified in column D during the
tax year, to a non-resident specified in column C, the person responsible for
paying shall deduct income-tax on the amount of such income or sum,—
(a) at the rate specified in column E;
(b) at the time of credit of income or sum to the account of the payee 40
or at the time of its payment in cash or by way of a cheque or a draft
or by any other mode, whichever is earlier; and
(c) subject to the provisions of sub-sections (4), (8) and (9).
 401

Table
FOR PAYMENTS TO NON-RESIDENT
Sl. Nature of Income or sum Payee Payer Rate
No.
5 A B C D E
1. Any income referred (a) A non- Any person. 20%.
to in section 211. resident
sportsman
(including
10 an athlete)
or an
entertainer,
who is not a
citizen of
15
India; or
(b) a non-
resident
sports
association
20 or
institution.
2. Any income by way of Any non- Any Indian 5%.
interest payable in respect resident (not company or a
of monies borrowed in being a business trust.
25 foreign currency from a company)
source outside India,— or a foreign
company.
(a) under a loan
agreement or issue of long-
term infrastructure bond on
30 or after the 1st July, 2012
but before the 1st July,
2023; or
(b) by way of issue of
any long-term bond on or
35 after the 1st October, 2014
but before the 1st July,
2023,
which is approved by the
Central Government in this
40 behalf.
3 Any income by way of Any non- Any Indian 5%.
interest payable in respect resident (not company or a
of monies borrowed from a being a business trust.
source outside India by way company)
45 of issue of rupee or a foreign
denominated bond before company.
the 1st July, 2023.
 402

A B C D E
4. Any income by way of Any non- Any Indian (a) 4%,
interest payable in respect resident company or a where issued
of monies borrowed from (not being a business trust. on or after the
a source outside India by company) 1st April, 2020 5
way of issue of any long- or a foreign but before the
term bond or rupee company. 1st July, 2023;
denominated bond, which or
is listed only on a (b) 9%,
recognised stock where issued 10
exchange located in any on or after the
International Financial 1st July, 2023.
Services Centre.
5. Any income by way of Any non- Any 5%.
interest. resident infrastructure 15
(not being a debt fund
company) referred to in
or a foreign Schedule VII
company. (Table: Sl. No.
46). 20

6. Any distributed income Any unit Any business (a) 5%, in

referred to in section 223, holder, trust. case of income
being of the nature referred being a of the nature
to in Schedule V (Table: Sl. non- referred to in
No. 3). resident Schedule V 25
(not being a [Table: Sl. No.
company) 3.B(a)]; and
or a foreign (b) 10%, in
company. case of income
of the nature 30
referred to in
Schedule V
[Table: Sl. No.
3.B(b)].
7 Any distributed income Any unit Any business Rates in force. 35
referred to in section 223, holder, trust.
being of the nature referred being a
to in Schedule V (Table: Sl. non-
No. 4). resident
(not being a 40
company)
or a foreign
company.
8 Any income, other than Any unit Any Rates in force.
that proportion of income holder, investment fund 45
which is exempt under being a specified in
Schedule V (Table: Sl. No. non- section 224.
2), in respect of units of an resident
investment fund specified in (not being a
section 224. company) 50
or a foreign
company.
 403

A B C D E
9. Any income in respect Any Any Rates in
of an investment in a investor, securitisation force.
securitisation trust being a non- trust specified
5 specified in section 221. resident (not in section 221.
being a
company) or
a foreign
company.
10 10. Any income— Any non- Any As per
(a) in respect of units of resident (not person. Note 2.
a Mutual Fund specified being a
under Schedule VII company) or
(Table: Sl. No. 20) or a foreign
15 (Table: Sl. No. 21); or company.
(b) from the specified
company.
11. Any income in respect Any Any person. 10%.
of units referred to in Offshore
20 section 208. fund.
12. Any income by way of Any Any person. 12.5%.
long-term capital gains offshore
arising from the transfer fund.
of units referred to in
25 section 208;
13. Any income by way of Any non- Any person. 10%.
interest or dividends in resident.
respect of bonds or Global
Depository Receipts
30 referred to in section 209.
14. Any income by way of Any non- Any person. 12.5%.
long-term capital gains resident.
arising from the transfer
of bonds or Global
35 Depository Receipts
referred to in section 209.
15. Any income in respect Any Any person. As per
of securities referred to in Foreign Note 2.
section 210(1)(Table: Sl. Institutional
40 No. 1). Investor.
16. Any income in respect a specified Any person. 10%.
of securities referred to in fund, referred
section 210(1)(Table: Sl. to in Schedule
No. 1). VI [ Note 1(g)].
45 17. Any interest (not being Any non- Any person. Rates in
interest referred to against resident (not force.
serial numbers 2, 3, 4 and 5) being a
or any other sum company) or
chargeable under the a foreign
50 provisions of this Act, not company.
being income chargeable
under the head “Salaries”.
 404

(3) Where any income or sum of the nature specified in column B of the
Table below, is credited or paid by the person specified in column D during the
tax year, to any person, the person responsible for paying the amount specified in
column C, shall deduct income-tax on such amount—
(a) at the rate specified in column E; 5
(b) at the time of payment thereof in cash or by way of a cheque or a
draft or by any other mode, or as specified therein; and
(c) subject to the provisions of sub-sections (4), (5), (6), (8) and (9).
Table
10
FOR PAYMENTS TO ANY PERSON
Sl. No. Nature of Income or sum Payer Rate
Threshold limit
A B C D
1. Any income by way of Any person. Rate: Rates in force.
15
winnings (other than ——
winnings from serial
number 2) from–– Threshold limit:
₹10,000 in case of a
(a) any lottery; or single transaction.
(b) crossword puzzle; or 20

(c) card game and other

game of any sort; or
(d) gambling or betting
of any form or nature
whatsoever 25
2. Any income by way of Any person. Rate: Rates in force.
winnings from online ——
game.
Threshold limit: Net
winnings as per 30
Note 1.
3. Any income by way of Any person, being a Rate: Rates in force.
winnings from any horse bookmaker or a ——
race. person to whom a
licence has been Threshold lilmit: 35

granted by the ₹10,000 in case of a

Government under single transaction.
any law for the time
being in force for
horse racing in any 40
race course or for
arranging for
wagering or betting in
any race course.
4. Any income, credited or Any person. Rate: 2%. 45
paid to a person, who is or ——
has been stocking,
distributing, purchasing or Threshold limit:
selling lottery tickets, by ₹20,000.
way of commission, 50
remuneration or prize (by
whatever name called) on
such tickets.
 405

A B C D
5. Any sum, paid in cash, Every person, Rate: 2%.
from one or more being,— ——
accounts maintained by (a) a banking
5 the deductee. Threshold limit:
company to which
the Banking ₹3,00,00,000 in case of
Regulation Act, deductee being, a co-
1949 applies operative society; or
(including any (b) ₹1,00,00,000
10 bank or banking
institution in case of deductee
referred to in being person other than a
section 51 of that co-operative society.
Act);
15 (b) a co-
operative society
engaged in
carrying on the
business of
20 banking; or
(c) a post office.
6. Any amount referred to Any person. Rate: 10%.
in section 80CCA(2)(a) of ——
the Income-tax Act, 1961
25 (43 of 1961). Threshold limit:
₹2,500.
7. Any sum in the nature Any person, Rate: 10%
of salary, remuneration, being a firm. ——
commission, bonus or
30 interest paid to a partner Threshold limit:
of the firm or credited to ₹20,000.
his account (including
capital account).
(4) The deduction of tax at source shall not be made under the provisions
35 referred to in column B of the Table below, in respect of the income or sum,
specified in column C:
Table
FOR NO DEDUCTION AT SOURCE
Sl. No. Provisions for tax Condition for no deduction
40 deduction at source
A B C
1. Commission or Commission or brokerage payable by Bharat
Brokerage referred to Sanchar Nigam Limited or Mahanagar
in section Telephone Nigam Limited to their public call
45
393(1)[Table: Sl. No. office franchisees.
1(ii)].
2. Rent referred to in Income by way of rent credited or paid to a
section 393(1)[Table: business trust, being a real estate investment trust,
Sl. No. 2(ii)]. in respect of any real estate asset, referred to in
50 Schedule V (Table: Sl. No. 4), owned directly by
such business trust.
 406

A B C
3. Compensation on Income by way of any award or agreement
acquisition of certain which has been exempted from levy of income-
immovable property tax under section 96 of the Right to Fair
referred to in section Compensation and Transparency in Land 5
393(1)[Table: Sl. No. Acquisition, Rehabilitation and Resettlement
3(iii)]. Act, 2013 (30 of 3013).
4. Income in respect of If income is of the nature of capital gain.
units referred to in
10
section 393(1)[Table:
Sl. No. 4(i)].
5. Income from units of Income of the nature referred to in Schedule V
a business trust referred [Table: Sl. No. 3.B(b)], if the special purpose
to in section vehicle referred to in the said clause has not
393(1)[Table: Sl. No. exercised the option under section 200. 15
4(ii)].
6. Interest on securities (a) Interest payable on––
referred to in section (i) National Development Bonds;
393(1)[Table: Sl. No.
5(i)]. (ii) such debentures, issued by such institution or
authority or person as the Central Government may, 20
by notification, specify in this behalf;
(iii) any security of the Central Government
or a State Government, other than––
(A) 8% Savings (Taxable) Bonds, 2003; or
(B) 7.75% Savings (Taxable) Bonds, 2018; or 25

(C) Floating Rate Savings Bonds, 2020

(Taxable); or
(D) any other security of the Central
Government or State Government as the Central
Government may, by notification, specify in this 30
behalf;
(b) interest payable to––
(i) the Life Insurance Corporation of India
established under the Life Insurance Corporation
Act, 1956, in respect of any securities owned by 35
it or in which it has full beneficial interest; or
(ii) the General Insurance Corporation of
India or to any of the four companies, formed by
virtue of the schemes made under section 16(1) of
the General Insurance Business (Nationalisation) 40
Act, 1972, in respect of any securities owned by
the Corporation or such company or in which the
Corporation or such company has full beneficial
interest; or
(iii) any other insurer in respect of any 45
securities owned by it or in which it has full
beneficial interest; or
(iv) a “business trust”, as defined in section
2(21), in respect of any securities, by a special
purpose vehicle referred to in Schedule V (Table: 50
Sl. No. 3 ).
 407

A B C
7. Interest other than (a) Interest income credited or paid to—
Interest on securities (i) any banking company; or
referred to in section
(ii) any financial corporation established
5 393(1)[Table: Sl. No.
by or under a Central Act or State Act or
5(ii) and 5(iii)].
Provincial Act; or
(iii) the Life Insurance Corporation of India
established under the Life Insurance
10 Corporation Act, 1956 (31 of 1956); or
(iv) the Unit Trust of India; or
(v) any company or co-operative society
carrying on the business of insurance; or
(vi) such other institution, association or
15 body or class of institutions, associations or
bodies which the Central Government may, for
reasons to be recorded in writing, notified in
this behalf before the 1st April, 2020;
(b) interest income credited or paid––
20 (i) by a co-operative society (other than a
co-operative bank) to a member thereof; or
(ii) by a co-operative society to any other
co-operative society; or
(iii) in respect of deposits with a primary
25 agricultural credit society or a primary credit
society or a co-operative land mortgage bank or
a co-operative land development bank; or
(iv) in respect of deposits (other than time
deposits made on or after the 1st July, 1995)
30 with a co-operative society, other than a
co-operative society or bank referred to in
sub-clause (iii), engaged in the business of
banking,
Where the total sales, gross receipts or
35 turnover of the co-operative society does not
exceed ₹50,00,00,000 during the tax year
immediately preceding the tax year in which
such interest is credited or paid;
(c) interest income credited or paid—
40 (i) by the Central Government under any
provision of this Act or the Income-tax Act,
1961 (43 of 1961), or the Estate Duty Act, 1953
(34 of 1953), or the Wealth-tax Act, 1957
(27 of 1957), or the Gift-tax Act, 1958 (18 of
45
1958), the Companies (Profits) Surtax Act,
1964 (7 of 1964), or the Interest-tax Act, 1974
(45 of 1974);
(ii) in respect of deposits under any scheme
framed by the Central Government and notified
50 by it in this behalf;
(iii) in respect of deposits (other than time
deposits made on or after the 1st July, 1995)
with a banking company;
 408

A B C
(iv) by way of interest on the compensation
amount awarded by the Motor Accidents
Claims Tribunal where the amount of such
income or, the aggregate of the amounts of such 5
income does not exceed ₹50,000 during the tax
year;
(v) or payable by an infrastructure capital
company; or infrastructure capital fund; or
infrastructure debt fund; or a public sector 10
company; or scheduled bank in relation to a
zero coupon bond issued on or after the 1st
June, 2005 by such company or fund or public
sector company or scheduled bank;
(vi) as referred to in Schedule V (Table: Sl. 15
No. 3);
(vii) by a firm to a partner of the firm.
8. Payments to (a) When––
contractors referred
to in section (i) any sum credited or paid or likely to be
393(1)[Table: Sl. No. credited or paid during the tax year to the 20

6(i)]. account of a contractor during the course of

business of plying, hiring or leasing goods
carriages; and
(ii) that contractor owns ten or less goods
carriages at any time during the tax year; and 25

(iii) furnishes a declaration to that effect

along with his Permanent Account Number to
the person paying the sum; and
(iv) the person responsible for paying to
the contractor furnishes to the prescribed 30
income-tax authority the particulars in such
form and within such time as prescribed;
(b) where such sum is credited or paid by
individual or Hindu undivided family
exclusively for personal purposes of such 35
individual or any member of Hindu undivided
family.
9. Fees for Where such sum is credited or paid by
professional or individual or Hindu undivided family exclusively
technical services for personal purposes of such individual or any 40
referred to in section member of Hindu undivided family.
393(1)[Table: Sl. No.
6(iii)].
10. Dividend referred to Dividend income credited or paid to—
in section 393(1)(Table:
Sl. No. 7). (a) the Life Insurance Corporation of India 45
established under the Life Insurance Corporation
Act, 1956, in respect of any shares owned by it or
in which it has full beneficial interest;
 409

A B C
(b) the General Insurance Corporation of
India or to any of the four companies, formed
by virtue of the schemes made under section
5 16(1) of the General Insurance Business
(Nationalisation) Act, 1972 (57 of 1972), in
respect of any shares owned by the Corporation
or such company or in which the Corporation
or such company has full beneficial interest;
10 (c) any other insurer in respect of any
shares owned by it or in which it has full
beneficial interest;
(d) a “business trust”, as defined in section
2(21), by a special purpose vehicle referred to
15 in Schedule V (Note 2);
(e) any other person as notified by the
Central Government in this behalf;
(f) a shareholder, being an individual, if—
(I) the dividend is paid by the company by
20 any mode other than cash; and
(II) amount or aggregate of amounts of
such dividend distributed or paid or likely to be
distributed or paid during the tax year does not
exceed ₹10,000.
25 11. Payment by If the amount is credited or paid or likely to be
e-commerce operator credited or paid during the tax year to the account
to e-commerce of an e- commerce participant, which is––
participant referred to (a) an individual or a Hindu undivided
in section family; and
30 393(1)[Table: Sl. No.
8(v)]. (b) the gross amount of the sales or services
or both during the tax year does not exceed
₹5,00,000; and
(c) the e-commerce participant has
35 furnished the Permanent Account Number or
Aadhaar number to the e-commerce operator.
12. Payment on Where value or aggregate value of such
transfer of virtual consideration during the tax year does not
digital asset referred exceed––
40 to in section (a) ₹50,000, when payable by an individual
393(1)[Table: Sl. No. or a Hindu undivided family,—
8(vi)]
(i) whose total sales, gross receipts or
turnover from the business carried on by him or
45 profession exercised by him does not exceed
₹1,00,00,000 in case of business or ₹50,00,000 in
case of profession, during the tax year
immediately preceding the tax year in which such
virtual digital asset is transferred;
50 (ii) not having any income under the head
“Profits and gains of business or profession”;
(b) ₹10,000, when payable by any person
other than the person referred to in clause (a).
 410

A B C
13. Income from units of a Income of the nature referred to in Schedule V
business trust referred to [Table: Sl. No. 3.B(b)], if the special purpose
in section 393(2)(Table: vehicle referred to in the said clause has not
Sl. No. 6). exercised the option under section 200. 5
14. Income in respect of Income that is not chargeable to tax under the
units of investment provisions of this Act.
fund referred to in
section 393(2)(Table:
10
Sl. No. 8).
15. Income in respect of Income payable in respect of units of the Unit
units of non-residents Trust of India to a non-resident Indian or a
referred to in section non-resident Hindu undivided family, subject to
393(2)(Table: Sl. No. prescribed conditions.
15
10).
16. Income of Foreign Income, by way of capital gains arising from
Institutional Investors the transfer of securities referred to in
from securities referred section 210, if payable to a Foreign Institutional
to in section Investor.
20
393(2)(Table: Sl. No.
15).
17. Income of Specified Income exempt at Schedule VI (Table: Sl. No. 1)
Fund from securities to (Table: Sl. No. 4).
25
referred to in section
393(2)(Table: Sl. No. 16).
18. Payment of certain Payment made to—
amounts in cash referred (a) the Government;
to in section
(b) any banking company or co-operative
393(3)(Table: Sl. No. 5). 30
society engaged in carrying on the business of
banking or a post office;
(c) any business correspondent of a banking
company or co-operative society engaged in
carrying on the business of banking, as per the
guidelines issued in this regard by the Reserve Bank 35
of India under the Reserve Bank of India
Act, 1934 (2 of 1934);
(d) any white label automated teller machine
operator of a banking company or co-operative
society engaged in carrying on the business of 40
banking, as per the authorisation issued by the
Reserve Bank of India under the Payment and
Settlement Systems Act, 2007 (51 of 2007).
19. Payment in respect of Payment made to—
deposits under National (a) an assessee being and individual; 45
Savings Scheme, etc.,
(b) heirs of an assessee.
referred to in section
393(3)(Table: Sl. No. 6).
(5) Irrespective of anything contained in this Chapter, the tax shall not be
deducted by any person from any amount payable to––
50
(a) the Government; or
(b) the Reserve Bank of India; or
(c) a corporation established by or under a Central Act which is, under
any law in force, exempt from income-tax on its income; or
 411

(d) a Mutual fund as specified at Schedule VII (Table: Sl. No. 20 or 21),
where such amount is payable to it by way of—
(A) interest; or
(B) dividend in respect of any securities or shares owned by it or in
5 which it has full beneficial interest; or
(C) any other income accruing or arising to it.
(6) The deduction of tax shall not be made under provisions referred to in
column C of the Table below, in the case of a person as specified in column B, if
such person furnishes to the person responsible for paying any income or sum of
10 the nature referred to in such provisions, a written declaration in duplicate in such
form and manner as prescribed that the tax on such person’s estimated total
income of the tax year in which such income or sum is to be included in computing
his total income shall be nil.
Table
15 DECLARATION FOR NO DEDUCTION AT SOURCE
Sl. No. Person Provisions for tax deduction at source
A B C
1. An individual, who Dividend referred to in section 393(1)(Table: Sl.
is a resident of India. No. 7).
20 2. (a) An individual, (a) Payment of accumulated balance due to an
resident of India, who employee referred to in section 392(7);
is of the age of sixty
years or more at any (b) Insurance Commission referred to in section
time during the tax 393(1)[Table: Sl. No. 1(i)];
25 year; (c) rent referred to in section 393(1)[Table: Sl.
(b) any person (not No. 2(ii)];
being a company or a (d) income in respect of units referred to in
firm). section 393(1)[Table: Sl. No. 4(i)];
(e) interest referred to in section 393(1)[Table:
30
Sl. No. 5(i)], [(ii)] and (iii)];
(f) payment in respect of Life Insurance Policy
referred to in section 393(1)[Table: Sl. No. 8(i)].
Note.––The provisions of this sub-section shall not apply where the
aggregate of amounts of any income or sum of the nature referred to in provision
35 mentioned in column C of this Table, is credited or paid or likely to be credited or
paid during the relevant tax year in which such income or sum is to be included,
exceeds the maximum amount not chargeable to tax.
(7) The person responsible for paying any income or sum of the nature
referred in sub-section (6) shall deliver or cause to be delivered, one copy of the
40 declaration referred therein, received from the person to the Principal Chief
Commissioner or Chief Commissioner or Principal Commissioner or
Commissioner, on or before the seventh day of the month following the month in
which the declaration is furnished to him.
(8) Irrespective of anything contained in sub-section (6), the deduction of
45 tax shall not be made from the interest paid by an Offshore Banking Unit on a
borrowing or deposit made on or after 1st April, 2005, by a non-resident or a
person not ordinarily resident in India.
 412

(9) Irrespective of anything contained in this Chapter, the deduction of tax

shall not be made from any payment to a person for, or on behalf of, the New
Pension System Trust referred to in Schedule VII (Table: Sl. No. 41).
(10 In a case other than that referred to in section 392(2)(a), where under an
agreement or an arrangement, if the tax chargeable on any income of the recipient 5
referred to in this Chapter is to be borne by the payer, then, for the purposes of
deduction of tax, the income shall be increased to an amount which after deduction
of tax as per provisions of this Chapter becomes equal to the net amount payable
under such agreement or arrangement.
(11) The credit of any income or sum to any account, whether called “suspense 10
account” or by any other name, in the books of account of the person liable to pay
such income or sum, shall be deemed to be the credit of such income or sum to the
account of the payee and the provisions of this section shall apply accordingly.
Collection of tax 394. (1) Every person, as specified in column C of the Table below shall
at source. 15
collect tax––
(a) on receipts specified in column B;
(b) at the rate as specified in column D; and
(c) at the time of debiting of the amount payable by the buyer or
licensee or lessee to the account of the buyer or licensee or lessee or at the
time of receipt of such amount from the said buyer or licensee or lessee in 20
cash or by way of a cheque of a draft or any other mode, whichever is earlier.
Table
TAX COLLECTION AT SOURCE
Sl. No. Nature of receipt Person Rate of Tax
Collected at 25
Source
A B C D
1. Sale of alcoholic liquor for human Seller. 1%.
consumption.
2. Sale of tendu leaves. Seller. 5%. 30

3. Sale of timber whether obtained Seller. 2%.

under a forest lease or otherwise; or
any other forest produce (not being
timber or tendu leaves) obtained under
a forest lease. 35

4. Sale of scrap. Seller. 1%.

5. Sale of minerals, being coal or lignite Seller. 1%.
or iron ore.
6. Sale consideration exceeding Seller. 1%.
₹10,00,000 in case of— 40

(a) motor vehicle; or

(b) any other goods, as notified by
the Central Government.
 413

A B C D
7. Remittance under the Liberalised Authorised (a) 5% for
Remittance Scheme of an amount or dealer. purposes of
aggregate of the amounts exceeding education or
5 ₹10,00,000— medical
treatment;
(b) 20% for
purposes other
than education
10 or medical
treatment.
8. Sale of “overseas tour programme Seller. (a) 5% of
package” including expenses for travel amount of
or hotel stay or boarding or lodging or aggregate of
15 any such similar or related expenditure. amounts up to
₹10,00,000;
(b) 20% of
amount or
aggregate of
20 amounts
exceeding ₹
10,00,000.
9. Use of parking lot or toll plaza or Licensor 2%.
mine or quarry for the purpose of or Lessor.
25 business, excluding mining and
quarrying of mineral oil (including
petroleum and natural gas).

(2) The collection of tax shall not to be made in respect of receipts specified
in sub-section (1) (Table: Sl. No. 1 to 5) in respect of the buyer, who is a resident
30 in India, if he furnishes a written declaration in duplicate in such form and manner,
as prescribed, to the person responsible for collecting tax, mentioning that such
goods are to be utilised––
(a) for the purposes of manufacturing, processing or producing articles
or things or for generating power; and
35 (b) not for trading purposes.
(3) Where no collection of tax is to be made under sub-section (2), the person
responsible for collecting tax shall deliver, one copy of the declaration referred to
in that sub-section, to the Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner or Commissioner, on or before the seventh day of the
40 month following the month of receipt of that declaration.
(4) The collection of tax shall not be made by the authorised dealer in respect
of receipt specified in serial number 7 of the Table in sub-section (1) on such
amount on which tax has been collected by the seller referred to in serial number
8 of the Table in sub-section (1).
45 (5) The collection of tax shall not be made by the authorised dealer or seller,
in respect of receipt specified in sub-section (1) (Table: Sl. No. 7 and 8), if the
buyer is liable to deduct tax at source under any other provisions of this Act and
he has deducted such tax.
 414

(6) For the purposes of this sub-section, “forest produce” shall have the same
meaning as defined in any State Act for the time being in force, or in the Indian
Forest Act, 1927. 16 of 1927.

Certificates. 395. (1) Where tax is required to be deducted on any income or sum under
5
this Chapter, then subject to the rules made under this Act,—

(a) the payee may make an application before the Assessing Officer
for deduction of tax at a lower rate; and

(b) the Assessing Officer on being satisfied that the total income of the
payee justifies a lower deduction, shall issue a certificate as appropriate; and

(c) when a certificate is issued under clause (b), the person responsible 10
for paying the income or amount shall deduct the tax at the rate specified in
such certificate till its validity.

(2) (a The person responsible for paying to a non-resident any sum

chargeable under this Act (other than salary), may make an application to the
Assessing Officer in such form and manner as prescribed, where he considers that 15
the whole of such sum would not be chargeable in the case of the recipient;

(b) the application under clause (a) shall be for determination of the
appropriate proportion of the sum chargeable to tax, by the Assessing Officer in
the manner as prescribed; and

(c) when the determination is made by the Assessing Officer as per clause (b), 20
the tax shall be deducted under section 393(2)(Table: Sl. No. 17) only on that
proportion of sum which is chargeable to tax under the Act.

(3) Where tax is required to be collected on any amount under this Chapter,
then subject to the rules made under this Act,––

(a) the buyer or licensee or lessee may make an application before the 25
Assessing Officer for collection of tax at a lower rate; and;

(b) the Assessing Officer on being satisfied that the total income of the
buyer or licensee or lessee justifies a lower collection, shall issue a
certificate as may be appropriate; and

(c) when a certificate is issued under clause (b), the person responsible for 30
collecting tax shall collect it at the rates specified in such certificate till its validity.

(4) (a) Every person deducting or collecting tax shall issue a certificate to
the deductee or collectee, as the case may be, specifying––

(i) the amount of tax that has been deducted or collected;

(ii) the rate at which tax has been deducted or collected; and 35

(iii) any other particulars, as prescribed,

within such period as prescribed.

(b) An employer referred to in section 392(2)(a) shall issue a certificate to

the employee, in respect of whose income payment of tax has been made by the
employer, that the tax has been paid to the Central Government, and specify–– 40

(i) the amount of tax so paid;

 415

(ii) the rate at which tax has been paid; and

(iii) any other particulars, as prescribed,

within such period, as prescribed.
(5) The assessing officer may cancel the certificate granted under sub-
5 section (1) or (3) after giving reasonable opportunity to the applicant.
396. The following sums shall be deemed as income received for the Tax deducted is
purposes of computing the income of an assessee— income
received.
(a) amount deducted under this Chapter; and

(b) income-tax paid outside India by way of deduction in respect of

10 which an assessee is allowed a credit against the tax payable under this Act,
except tax paid under section 392(2)(a) and tax deducted as per section 393(3)
(Table: Sl. No. 5).
397. (1) (a) Every person deducting or collecting tax shall apply to the Assessing Compliance and
Officer for allotment of a tax deduction and collection account number within such reporting.
15 time as prescribed, if that person has not already been allotted such number;
(b) where a tax deduction and collection account number has been allotted
to a person, such person shall quote such number in all challans, statements,
certificates, and in all documents pertaining to such transactions as prescribed in
the interests of revenue;
20 (c) the provisions of clause (a) shall not apply––
(i) to a person required to deduct tax under provisions of section 393(1)
[Table: Sl. No. 2(i), 3(i) and 5(ii)];
(ii) to a person referred to in section 393(4) [Table: Sl. No. 12.C(a)]; and
(iii) a person notified in this regard by the Central Government.
25 (2) (a) Irrespective of anything contained in any other provision of this Act,
every person, entitled to receive any amount on which tax is deductible or, paying
any amount on which tax is collectible, shall furnish his valid Permanent Account
Number to the person responsible for deducting or collecting tax;
(b) in case of failure to comply with provisions of clause (a)—
30 (i) tax be deducted at the higher of the following rates—
(A) at the rate specified in the relevant provision of this Act; or

(B) at the rate or rates in force; or

(C) at the rate of 5% where tax is required to be deducted under
section 393(1) [Table: Sl. No. 8(ii) or 8(v)]; or 20% in any other case;
35 (ii) tax shall be collected at the higher of the following rates, not
exceeding 20%––
(A) at twice the rate specified in the relevant provision of this Act; or

(B) at the rate of 5%;

 416

(c) the provisions of clause (b)(i) shall not apply to a non-resident, not being
a company or a foreign company in respect of—
(i) payment of interest on long-term bonds as specified in section
393(2) (Table: Sl. No. 2, 3 and 4); and
(ii) any other payment subject to such conditions, as prescribed; 5

(d) the provisions of clause (b)(ii) shall not apply to a non-resident who
does not have permanent establishment in India (which includes a fixed place
of business through which the business of the enterprise is wholly or partly
carried on);
(e) in respect of rent specified in section 393(1) [Table: Sl. No. 2(i)], if the 10
tax is required to be deducted as per clause (b)(i), then such deduction shall not
exceed the amount of rent payable for the last month of the tax year or the last
month of the tenancy, as the case may be;
(f) if a person does not furnish his Permanent Account Number in—
(i) any declaration under section 393(6) or 394(2), then such 15
declaration becomes invalid;
(ii) any application made under provisions as per section 395(1) or (3),
then no certificate under such provisions shall be granted;
(g) if any declaration becomes invalid under clause (f)(i), then the deductor
or collector shall deduct or collect tax as per the provisions of clause (b)(i) or (ii) 20
as the case may be;
(h) the deductee or collectee shall furnish his Permanent Account Number
to the deductor or collector, as the case may be, and the same shall be indicated
in all bills, vouchers, correspondence and other documents which are sent to
25
each other.
(3) (a) Every person responsible for deduction or collection of tax or
employer referred to in section 392(2)(a) shall pay the amount so deducted or
collected or determined as per section 392(2)(b) to the credit of the Central
Government, in such time as prescribed;
(b) every person responsible for deduction or collection of tax or employer 30
referred to in section 392(2)(a), after paying the tax to the credit of the Central
Government as per clause (a), shall deliver or cause to be delivered to the
prescribed authority or the person authorised by such authority, a statement in
such form, verified in such manner, giving such particulars and within such time,
35
as prescribed;
(c) every prescribed authority as per clause (b), shall deliver a statement in
such form and manner as prescribed, to the buyer or licensor or lessee referred to
in section 394(1) (Table: Sl. Nos. 1 to 4 or 9);
(d) every person responsible for paying to a non-resident, not being a
company or a foreign company, any sum, whether or not chargeable under this 40
Act, shall furnish the information relating to payment of such sum, in such form
and manner as prescribed;
(e) in case of an office of the Government,—
(i) where the sum deducted under this Chapter or tax referred to in
section 392(2)(a); or 45
 417

(ii) where the amount collected under section 394(1) (Table: Sl. Nos.
1to 5 or 9),
has been paid to the credit of the Central Government without the production of a
challan, the Pay and Accounts Officer or the Treasury Officer or the Cheque
5 Drawing and Disbursing Officer or any other person, who is responsible for
crediting such sum or tax to the credit of the Central Government, shall deliver or
cause to be delivered to the prescribed authority or the person authorised by such
authority, a statement in such form, verified in such manner, giving such
particulars and within such time, as prescribed;
10
(f) every person referred to in clause (b) or (e) may correct any discrepancy
or update the information furnished, in the statement delivered under such clauses,
by filing a correction statement in such form and verified in such manner as
prescribed, within of six years from the end of the tax year in which such statement
is required to be delivered;
15
(g) (i) any banking company or co-operative society or public company
referred to in note 1 to section 393(1) (Table: Sl. No. 5) responsible for paying
to a resident any income by way of interest, less than the amount mentioned in
section 393(1) [Table: Sl. No. 5(ii) and (iii)], shall deliver or cause to be
delivered to the prescribed authority or the person authorised by such authority,
20 a statement in such form, verified in such manner, giving such particulars and
within such time, as prescribed;
(ii) the Board may require any person, other than the person mentioned
in sub-clause (i), responsible for paying to a resident any income which is
liable for deduction of tax at source under this Chapter to deliver or cause to
25 be delivered to the prescribed authority or the person authorised by such
authority, a statement in such form, verified in such manner, giving such
particulars and within such time, as prescribed;
(iii) the person referred to in sub-clause (i) or sub-clause (ii) may deliver a
correction statement to correct any discrepancy or update the information
30 furnished, in the statement delivered under sub-clause (i) or sub-clause (ii) in such
form and manner of verification, as prescribed;
(h) Any person responsible for collecting the tax who fails to collect the tax as
per the provisions of section 394, shall, irrespective of such failure, be liable to pay
the tax to the credit of the Central Government as per the provisions of clause (a).
35 Consequences
398. (1) If a person, including the principal officer of a company,––
of failure to
deduct or pay
(a) who is required to deduct or collect any amount under this Act; or or, collect or
pay.
(b) referred to in section 392(2)(a), being an employer,—
(i) does not deduct or pay; or
(ii) does not collect or pay; or
40 (iii) after deducting or collecting fails to pay,
the whole or any part of the tax, as required by or under this Act, he shall be
deemed to be an assessee in default in respect of such tax in addition to any other
consequences which that person may incur under this Act.
(2) Any person,—
45 (a) including the principal officer of a company, who fails to deduct; or
(b) responsible for collecting tax as per section 394(1) (Table: Sl. Nos.
1 to 5 and 9), who fails to collect,
 418

the whole or any part of the tax, as required under this Chapter, shall not be deemed
to be an assessee in default if the payee or buyer or licensee or lessee has —
(i) furnished his return of income under section 263;
(ii) taken into account the amount for computing income in that return 5
of income; and
(iii) paid the tax due on the income declared by him in such return of
income,
and the person furnishes a certificate to this effect from an accountant in the
prescribed form.
(3) (a) Without prejudice to sub-section (1), if any person, as referred to in 10
that sub-section does not deduct or collect the whole or any part of the tax or
after deducting or collecting fails to pay the tax as required under this Act, he shall
be liable to pay simple interest—
(i) at 1% for every month or part of a month on the amount of such tax
from the date on which such tax was deductible or collectible to the date on 15
which such tax is deducted or collected; and
(ii) at 1.5% for every month or part of a month on the amount of such
tax from the date on which such tax was deducted or collected to the date on
which such tax is actually paid;
(b) the interest referred to in clause (a) shall be paid before furnishing the 20
statement as per the provisions of section 397(3)(b).
(c) if the person referred to in sub-section (1) is not deemed to be an assessee
in default under sub-section (2), then the interest as per clause (a)(i) is payable
from the date on which that tax was deductible or collectible to the date of
furnishing of return of income by the concerned payee or buyer or licensee or 25
lessee, as the case may be;
(d) when an order is made by the Assessing Officer for the default under
sub-section (1), the interest shall be paid by the person as per such order.
(4) Where the tax has not been paid after it is deducted or collected, the
amount of the tax together with the amount of simple interest on it as referred to 30
in sub-section (3)(a) shall be a charge upon all the assets of the person referred to
in sub-section (1).
(5) The order shall not be made under sub-section (1) deeming a person to
be an assessee in default for failure to deduct or collect the whole or any part of
35
the tax from any person––
(a) after six years from the end of the tax year in which tax was
deductible or collectible; or
(b) after two years from the end of the tax year in which the correction
statement is delivered under section 393(3)(f),
whichever is later. 40

(6) The provisions of sections 286(1) and 286(3) shall apply to the time limit
prescribed in sub-section (5).
(7) No penalty shall be charged under section 412 from the person
mentioned in sub-section (1), unless the Assessing Officer is satisfied that such
person, without good and sufficient reasons, has failed to deduct and pay such tax. 45

Processing. 399. (1) All statements of tax deducted at source or tax collected at source
including a correction statement shall be processed in the following manner:––
 419

(a) the amounts deductible or collectible under this Chapter shall be

computed after making the following adjustments—
(i) any arithmetical error in the statement; or
(ii) an incorrect claim apparent from any information in the
5
statement;
(b) the interest, if any, shall be computed on the basis of the
amounts deductible or collectible as reflected in the statement;
(c) the fee, if any, shall be computed as per the provisions of
section 427;
10
(d) (i) the amount payable by; or
(ii) the amount of refund due to,
the deductor or collector shall be determined after adjustment of the amount
computed under clause (b) and (c) against any amount paid under section 397(3)
or 398 or 427 and any amount paid otherwise by way of tax or interest or fee;
15 (e) an intimation shall be prepared or generated and sent to the
deductor or collector specifying the amount determined to be payable by,
or the amount of refund due to, him under clause (d);
(f) the amount of refund due to a deductor or collector in pursuance of the
determination under clause (d) shall be granted to the deductor or collector.
20
(2) The intimation under this section shall be sent within of one year
from end of the tax year in which the statement is filed.

(3) The Board may make a scheme for centralised processing of

statements, as required under sub-section (1).
400. (1) The Central Government may, by notification provide that deduction Power of
Central
25 or collection of tax shall not be made or is to be made at such lower rate, from such Government to
payment or receipt and in respect of such person or class of persons. relax provisions
of this Chapter.
(2) The Board may issue guidelines with the previous approval of the Central
Government, to remove any difficulty arising in giving effect to the provisions of this
Chapter and these guidelines shall be laid before each House of Parliament.
30
(3) The Board may notify, a class of person, or cases, where the person
responsible for paying to a non-resident, not being a company, or to a foreign
company, any sum, to make an application in such form and manner as
prescribed to the Assessing Officer, to determine the appropriate proportion
of sum chargeable in the manner as prescribed, and accordingly tax shall be
35 deducted under section 393(2) (Table: Sl. No. 17) on that proportion of the
sum which is so chargeable.
(4) The Board may by notification, make rules specifying the cases in
which, and the circumstances under which, an application may be made for
grant of a certificate under section 395(1) to (3), and the conditions subject to
40 which such certificate may be granted and providing for all other matters
connected therewith.
401. Where tax is deductible at the source under this Chapter, the Bar against
assessee shall not be called upon to pay the tax himself to the extent to which direct demand
on assessee.
tax has been deducted from that income.
 420

Interpretation. 402. In this chapter,––

(1) “Administrator” shall have the same meaning as assigned to it in section
2(a) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002; 58 of 2002.

(2) “agricultural land” means agricultural land in India,––

(a) not being a land situate in any area referred to in section 2(22)(iii), 5
for the purposes of section 393(1) [Table: Sl. No. 3(i)];
(b) including a land situated in any area referred to in section
2(22)(iii), for the purposes of section 393(1) [Table: Sl. No. 3(iii)];
(3) “an incorrect claim apparent from any information in the statement”
shall mean a claim, on the basis of an entry, in the statement— 10

(a) of an item, which is inconsistent with another entry of the same

or some other item in such statement;
(b) in respect of rate of deduction of tax at source, where such rate
is not as per the provisions of the Act;
(4) “authorised dealer” means a person authorised by the Reserve Bank 15
of India under section 10(1) of the Foreign Exchange Management Act, 1999 42 of 1999
to deal in foreign exchange or foreign security;
(5) “banking company” means a banking company to which the Banking
10 of 1949.
Regulation Act, 1949 applies;
(6) “buyer” for the purposes of provisions in column B of the Table 20
below means any person as specified in column C but does not include any
person as specified in column D:—
Table

Sl. No Provisions Person Person not to be included

A B C D 25

1. Purchase of Person whose Any person, as the Central

goods referrred total sales, gross Government may notify for
to in section receipts or turnover this purpose, subject to
393(1) [Table: from the business specified conditions therein.
Sl. No. 8(ii)] carried on by him 30
exceed
₹10,00,00,000
during the tax year
immediately
preceding the tax 35
year in which the
purchase of goods
is carried out
2. Sale of goods Person who (a) A public sector
referred to in obtains in any sale, company; or 40
section 394(1) by way of auction, (b) the Central or a State
(Table: Sl. No. 1 tender or any other Government, and an embassy,
to 5) mode, goods of the a High Commission, legation,
nature specified in commission, consulate and the
section 394(1) trade representation, of a 45
(Table: Sl. No. 1 to foreign State; or
5), or the right to
receive any such (c) a club; or
goods
 421

(1) (2) (3) (4)

(d) a buyer in the retail sale
of such goods purchased by
him for personal consumption.
5 3. Sale of Person who (a) A person as per Sl. No.
motor vehicle obtains in any sale, 2.D(b); or
or any other goods of the nature
(b) a local authority as
goods referred specified in section
defined at Schedule III (Table:
to in section 394(1) (Table: Sl.
Sl. No. 22); or
10 394(1) (Table: No. 6).
Sl. No. 6). (c) a public sector company
which is engaged in the
business of carrying
passengers.

15 4. Remittance A person (a) A person as per Sl. No.

under remitting amount 3.D(a) or (b);
Liberallised under the Liberalised
(b) a person, as per Sl. No.
Remittance Remittance Scheme
1.D.
Scheme of Reserve Bank of
20 referred to in India.
section 394(1)
(Table: Sl. No. 7).
5. Sale of A person who A person as per Sl. No. 4.D.
overseas tour purchases overseas
25 programme tour programme
package referred package.
to in section
394(1) (Table:
Sl. No. 8).

30 (7) “commission or brokerage” includes any payment received or receivable,

directly or indirectly, by a person acting on behalf of another person,––
(a) for services rendered (not being professional services); or
(b) for any services in the course of buying or selling of goods; or
(c) in relation to any transaction relating to any asset, valuable article or
35 thing, not being securities;
(8) “computer resource”, “internet” and “online game” shall have the
meanings respectively assigned to them in section 194(2);
(9) “consideration for transfer of any immovable property” shall include all
charges of the nature of,—
40 (a) club membership fee; or
(b) car parking fee; or
(c) electricity or water facility fee; or
(d) maintenance fee; or
(e) advance fee;
 422

(f) or any other charges of similar nature, which are incidental to transfer
of the immovable property;
(10) “contract” shall include sub-contract;
(11) “designated person”, for the purposes of section 393(1) (Table: Sl.
No. 6), means— 5

(a) the Central Government or any State Government; or

(b) any local authority; or
(c) any corporation established by or under a Central Act or State Act or
Provincial Act; or
(d) any company; or 10

(e) any co-operative society; or

(f) any authority, constituted in India by or under any law, engaged either
for the purpose of dealing with and satisfying the need for housing
accommodation or for the purpose of planning, development or improvement
of cities, towns and villages, or for both; or 15

(g) any society registered under the Societies Registration Act, 1860 or 21 of 1860.
under any law corresponding to that Act in force in any part of India; or
(h) any trust; or
'
(i) any University established or incorporated by or under a Central Act
or State Act or Provincial Act and an institution declared to be a university 20
under section 3 of the University Grants Commission Act, 1956; or 3 of 1956.

(j) any Government of a foreign State or a foreign enterprise or any

association or body established outside India; or
(k) any firm; or
(l) any person, being an individual or a Hindu undivided family or an 25
association of persons or a body of individuals, if such person,—
(i) does not fall under any of the preceding sub-clauses; and
(ii) has total sales, gross receipts or turnover from business or
profession carried on by him exceeding one crore rupees in case of
business or fifty lakh rupees rupees in case of profession during the tax 30
year immediately preceding the tax year in which such sum is credited
or paid to the account of the contractor;
(12) “electronic commerce” means the supply of goods or services, or both,
including digital products, over digital or electronic network;
(13) “e-commerce operator” means a person who owns, operates or manages 35
digital or electronic facility or platform for electronic commerce;
(14) “e-commerce participant” means a person resident in India selling goods
or providing services, or both, including digital products, through digital or
electronic facility or platform for electronic commerce;
(15) “fees for technical services” shall have the meaning as assigned to it in 40
section 9(7)(b);
(16) “foreign exchange asset” means any specified asset which the assessee
has acquired or purchased with, or subscribed to in, convertible foreign exchange;
 423

(17) “Foreign Institutional Investor” shall have the meaning as assigned to it

in section 210(6)(a);
(18) “goods carriage” shall have the meaning as assigned to it in
section 58(10)(d);
5 (19) “immovable property” means any land (other than agricultural land) or
any building or part of a building;
(20) “investor” shall have the meaning assigned to it in section 221(6)(a),
for the purposes of section 393(1) [Table: Sl. No. 4(iv)] and section 393(2)
(Table: Sl. No. 9);
10 (21) “licensee or lessee” means any person, other than a public sector
company, who has been granted a lease or a license or entered into a contract or
otherwise received any right or interest either in whole or in part in any parking lot
or toll plaza or mine or quarry, from the licensor or lessor for the use of parking lot
or toll plaza or mine or quarry for the purposes of business;
15 (22) “licensor or lessor” means any person who grants a lease or a license or
enters into a contract or otherwise transfers any right or interest either in whole or
in part in any parking lot or toll plaza or mine or quarry, to another person, other
than a public sector company for the use of such parking lot or toll plaza or mine or
quarry for the purposes of business;

20 (23) “non-resident Indian” shall have the meaning assigned to it in

section 212(d);

(24) “Offshore Banking Unit” shall have the same meaning as assigned to it
28 of 2005. in section 2(u) of the Special Economic Zones Act, 2005;
(25) “online gaming intermediary” means an intermediary who offers one or
25 more online games;
(26) “overseas tour programme package” means any tour package which
offers visit to any country or territory outside India and includes expenses for travel
or hotel stay or boarding or lodging or any other expenditure of similar nature or in
relation thereto;
30 (27) “person responsible for paying” means—
(a) in the case of payments of income chargeable under the head “Salaries”,
other than payments by the Central Government or the State Government––
(i) the employer himself; or
(ii) if the employer is a company, the company itself, including the
35 principal officer thereof;
(b) in the case of payments of income chargeable under the head
“Interest on securities”, other than payments made by or on behalf of the
Central Government or State Government, or local authority, or corporation
or company, including the principal officer thereof;

40 (c) in the case of any sum payable to a non-resident Indian, being any
sum representing consideration for the transfer by him of any foreign
exchange asset, which is not a short-term capital asset, the authorised person
responsible––
 424

(i) for remitting such sum to the non-resident Indian; or

(ii) for crediting such sum to his Non-resident (External) Account

maintained as per the provisions of the Foreign Exchange Management
Act, 1999, and any rules made thereunder; 42 of 1999.

(d) in the case of furnishing of information relating to payment to a 5

non-resident, not being a company, or to a foreign company, of any sum,
whether or not chargeable under the provisions of this Act––

(i) the payer himself; or

(ii) if the payer is a company, the company itself including the

principal officer thereof; 10

(e) in the case of credit, or, as the case may be, payment of any other
sum chargeable under the provisions of this Act––

(i) the payer himself; or

(ii) if the payer is a company, the company itself including the

principal officer thereof; 15

(f) in the case of credit, or as the case may be, payment of any sum
chargeable under the provisions of this Act made by or on behalf of the Central
Government or the State Government––

(i) the drawing and disbursing officer; or

(ii) any other person, by whatever name called, 20

responsible for crediting, or paying such sum;

(g) in the case of a person not resident in India––

(i) the person himself; or

(ii) any person authorised by such person; or

(iii) the agent of such person in India including any person treated 25
as an agent under section 306, where the expression “authorised person”
shall have the same meaning as assigned to it in section 2(c) of the
Foreign Exchange Management Act, 1999; 42 of 1999.

(28) “professional services” means services rendered by a person in the course

of carrying on legal, medical, engineering or architectural profession or the 30
profession of accountancy or technical consultancy or interior decoration or
advertising or such other profession as notified by the Board for the purposes of this
section, or of section 62;

(29) “rent” means any payment, by whatever name called, under any lease,
sub-lease, tenancy or any other agreement or arrangement for the use of (either 35
separately or together) any—

(a) land; or

(b) building (including factory building); or

(c) land appurtenant to a building (including factory building); or

 425

(d) machinery; or

(e) plant; or
(f) equipment; or

(g) furniture; or
5 (h) fittings,
whether or not any or all of the above are owned by the payee, and for the purposes
of section 393(1) [Table: Sl. No. 2(i)], only the payment with reference to assets
mentioned in sub-clauses (a), (b) and (c) shall be treated as rent;

(30) “royalty” shall have the meaning assigned to it in section 9(6)(b);

10 (31) “scrap” means waste and scrap from the manufacture or mechanical
working of materials which is definitely not usable as such because of breakage,
cutting up, wear and other reasons;
(32) “securities” shall have the same meaning as assigned to it in section 2(h)
42 of 1956. of the Securities Contracts (Regulation) Act, 1956;
15 (33) “seller” means––
(a) for the purposes of section 394(1) (Table: Sl. No. 1 to 6),—

(i) the Central Government; or

(ii) a State Government; or

(iii) any local authority or corporation or authority established by

20 or under a Central Act or State Act or Provincial Act; or
(iv) any company or firm or co-operative society; or

(v) an individual or a Hindu undivided family, whose total sales,

gross receipts or turnover from the business or profession carried on by
him exceed one crore rupees in case of business or fifty lakh rupees in
25 case of profession during the tax year immediately preceding the tax
year in which the goods of the nature specified in such serial numbers
are sold;
(b) for the purposes of section 394(1) (Table: Sl. No. 8), a person who
sells overseas tour program package;
30 (34) “services” for the purposes of section 393(1) [Table: Sl. No. 8(v)],
includes “fees for technical services” and fees for “professional services”, as defined
in this section;
(35) “specified bank” means a banking company as the Central Government
may, by notification, specify;
35 (36) “specified company” means for the purposes of section 393(1) [Table: Sl.
No. 4(i)] and 393(2) (Table: Sl. No. 10), a company as referred to in section 2(h) of
the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002;
58 of 2002.
(37) “specified person” means––
(a) any person, not being an individual or Hindu undivided family; or
 426

(b) an individual or a Hindu undivided family, whose total sales, gross

receipts or turnover from the business or profession carried on by him exceed
one crore rupees in case of business or fifty lakh rupees in case of profession
during the tax year immediately preceding the tax year in which such income
is credited or paid; 5

(38) “special purpose vehicle” shall have the meaning in Schedule V (Note 2);
(39) “specified senior citizen” means an individual, being a resident in India—
(a) who is of the age of seventy-five years or more at any time during
the tax year;
(b) who is having pension income and no other income except the interest 10
received or receivable from any account maintained by such individual in the
same specified bank in which he is receiving his pension income; and
(c) has furnished a declaration to the specified bank containing
particulars, in such form and verified in such manner as prescribed;
(40) “specified undertaking” shall have the same meaning as assigned to it in 15
section 2(i) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002; 58 of 2002.

(41) “time deposits” means deposits (including recurring deposits) repayable

on the expiry of fixed periods;
(42) “unit” for the purposes of section 393(1) [Table: Sl. No. 4(iii)] and section
393(2) (Table: Sl. No. 8) shall have the meaning assigned to it in section 224(10)(c); 20
(43) “Unit Trust of India” means the Unit Trust of India as referred to in the
Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002; 58 of 2002.

(44) "University", referred in section 392(4), means a University established

or incorporated by or under a Central, State or Provincial Act, and includes an
institution declared under section 3 of the University Grants Commission Act, 1956, 25 3 of 1956.
to be a University for the purposes of that Act;
(45) “user” means any person who accesses or avails any computer resource
of an online gaming intermediary;
(46) “user account” means account of a user registered with an online gaming
intermediary; 30

(47) “work” shall include—

(a) advertising;
(b) broadcasting and telecasting including production of programmes for
such broadcasting or telecasting;
(c) carriage of goods or passengers by any mode of transport other than 35
by railways;
(d) catering;
(e) manufacturing or supplying a product according to the requirement
or specification of a customer by using material purchased from––
(i) such customer; or 40

(ii) its associate, being a person placed similarly in relation to such

customer as is the person placed in relation to the assessee under the
provisions contained in section 36(3),
but does not include—
(A) manufacturing or supplying a product according to the requirement 45
or specification of a customer by using material purchased from a person,
other than such customer or associate of such customer; or
 427

(B) any sum referred to in section 393(1) [Table: Sl. No. 6(iii)].

C.––Advance payment of tax

403. (1) Advance tax shall be payable during any tax year in respect of the Liability for
payment of
current income of the assesse, as per the provisions of this Part. advance tax.
5 (2) For the purposes of this Part, “current income” means the total income of
the assessee which would be chargeable to tax for that tax year.
(3) The provisions of sub-section (1) shall not apply to an individual resident
in India, who––

(a) does not have any income chargeable under the head “Profits and
10 gains of business or profession”; and
(b) is of the age of sixty years or more at any time during the tax year.
404. Advance tax shall be payable by the assessee during a tax year, where Conditions of
liability to pay
the amount of such tax during that year, as computed under this Part, is advance tax.
ten thousand rupees or more.
15 405. (1) The amount of advance tax payable by an assessee under section 404, Computation of
advance tax.
on his own accord under section 406, or in pursuance of an order of an Assessing
Officer under section 407, in the tax year shall, subject to the provisions of
sub-section (2), be computed as under––

A = B-C
20 where,––
A = the amount of advance tax payable in a tax year;

B = income-tax on the specified sum calculated at the rates in force

in the tax year, where “specified sum” shall have the meaning assigned
to it in section 406 or 407;
25 C = amount of income-tax which would be deductible or
collectible at source during the said tax year under any provision of this
Act from any income subject to the following:––
(a) such income is computed before allowing any deduction
admissible under this Act and has been taken into account in
30 computing the specified sum; and
(b) the person responsible for deducting tax has paid or
credited such income after deduction of tax; or
(c) the person responsible for collecting tax has received or
debited such income after collection of tax.
35 (2) In the case of any class of assessees, where the Finance Act of the relevant
year provides that, net agricultural income shall be taken into account for the
purposes of computing advance tax, then,––
(a) for the purposes of order as mentioned in section 407(1) and (4), the
net agricultural income shall be the amount that has been taken into account
40 for the purposes of charging income-tax on the specified sum as mentioned in
sub-sections (3) and (6) of the said section; or
 428

(b) in any other situation, the net agricultural income as estimated by the
assessee for the tax year.

Payment of 406. (1) Every person, who is liable to pay advance tax under section 404
advance tax by (whether or not he has been previously assessed by way of regular assessment) shall,
assessee on his on his own accord, pay advance tax on the specified sum, calculated in the manner 5
own accord.
laid down in section 405, at the appropriate percentage, and on or before the due
date of each instalment, as specified in section 408.
(2) A person who pays any instalment or instalments of advance tax under
sub-section (1), may increase or reduce the amount of advance tax to accord with
specified sum and the advance tax payable thereon, and make payment of the said 10
tax in the remaining instalment or instalments, accordingly.
(3) In this section, the expression “specified sum” means current income as
estimated by the assessee.
Payment of 407. (1) Where a person has already been assessed for the total income of any
advance tax by tax year by way of regular assessment and the Assessing Officer is of the opinion 15
assessee in
pursuance of
that such person is liable to pay advance tax, he may require such person to pay
order of advance tax on the specified sum, calculated in the manner laid down in
Assessing section 405, by an order in writing, and specifying the instalment or instalments in
Officer. which such tax is to be paid, on or before the due date of each instalment specified
in section 408. 20

(2) The order referred to in sub-section (1) may be passed at any time during
the tax year but not later than the last day of February of such tax year and it shall
be followed by a notice of demand under section 289.
(3) In sub-section (1), “specified sum” means a sum, being higher of,––
(a) the total income of the latest tax year in respect of which the assessee 25
has been assessed by way of regular assessment; or
(b) total income returned by the assessee in any return of income
furnished by him for any subsequent tax year.
(4) The Assessing Officer may amend the order referred to in sub-section (1),
and may require such person to pay advance tax on the specified sum, calculated in 30
the manner laid down in section 405, if after passing an order under sub-section (1),—
(a) a return of income is furnished by the assessee, under section 263 or
in response to a notice under section 268; or
(b) a regular assessment of the income is made in respect of a tax year
later than the assessment referred to in sub-section (1), on or before the due 35
date of each instalment specified in section 408.
(5) The order referred to in sub-section (4) may be passed at any time before
the 1st March of that tax year and it shall be followed by issuance of a demand notice
under section 289.
(6) In sub-section (4), “specified sum” means the total income declared in the 40
return of income or computed in regular assessment mentioned in sub-section (4)
(a) and (b), respectively.
(7) If the notice of demand issued under section 289, as referred in
sub-sections (2) and (5), is served after any of the due dates specified in
section 408, the appropriate part or, the whole of the amount of the advance tax 45
specified in such notice, shall be payable on or before each of the due date falling
after the date of service of the notice of demand.
 429

(8) Where a person, who is served with an order referred to in sub-sections (1)
and (4), estimates the advance tax payable on his current income to be lower than
the amount of advance tax specified in the said order, then, he may send an
intimation in the prescribed form to the Assessing Officer to that effect, and pay
5 such advance tax on the current income, calculated in the manner laid down in
section 401 as accords with his estimate, at an appropriate percentage thereof on or
before the due date of each instalment specified in section 408 falling after the date
of such intimation.
(9) Where a person, who is served with an order referred in sub-sections (1)
10 and (4), estimates that advance tax payable on his current income would exceed the
amount of advance tax specified in such order or intimated by him under
sub-section (8), he shall pay such advance tax on the current income, calculated in
the manner laid down in section 405 at the appropriate part or whole of such higher
amount of advance tax as accords with his estimate, on or before the due date of the
15 last instalment specified in section 408.
408. (1) All the assessees who are liable to pay advance tax, other than the Instalments of
advance tax and
assessee referred to in sub-section (2), shall pay the same on the current income due dates.
calculated in the manner laid down in section 405 in four instalments during each
tax year and the due date of each instalment and the amount of such instalment shall
20 be as specified in the Table below.
Table
Sl. No. Due date of Amount payable
instalment
A B C
25 1. On or before Not less than 15% of such advance tax.
the 15th June.
2. On or Not less than 45% of such advance tax, as
before the 15th reduced by the amount, if any, paid in the earlier
September. instalment.
30 3. On or Not less than 75% of such advance tax, as
before the 15th reduced by the amount or amounts, if any, paid in
December. the earlier instalment or instalments.
4. On or before The whole amount of such advance tax, as
the 15th March. reduced by the amount or amounts, if any, paid in
35 the earlier instalment or instalments.
(2) An assessee, who declares profits and gains as per the provisions of section
58(2) (Table: Sl. No. 1 or 3), shall pay the whole amount of advance tax on the
current income, calculated in the manner laid down in section 405 during each tax
year, on or before the 15th March.
40 (3) Any amount paid by way of advance tax on or before the 31st March, shall
be treated as advance tax paid during the tax year ending on that day for all the
purposes of this Act.
409. A person shall be deemed to be an assessee in default, if such person— When assesse is
considered to be
(a) does not pay on the date specified in section 408, any instalment of in default.
45 the advance tax that he is required to pay by an order of the Assessing Officer
under section 407(1) and (4); or
 430

(b) does not send to the Assessing Officer an intimation under

section 407(8) on or before the date on which any such instalment as is not
paid becomes due; or
(c) does not pay on the basis of his estimate of his current income, the
advance tax payable by him under section 407(9), 5

in respect of such instalments.

Credit for 410. Any sum, other than a penalty or interest, paid by or recovered from an
advance tax. assessee as advance tax in pursuance of this Part shall be treated as a payment of tax
in respect of the income of the tax year in which it was payable, and credit therefor
shall be given to the assessee in the regular assessment. 10

D.—Collection and Recovery

When tax 411. (1) Any amount, otherwise than by way of advance tax, specified as
payable and payable in a notice of demand under section 289 at the place and to the person
when assessee
deemed in mentioned in the notice shall be paid within—
default.
(a) thirty days of the service of the notice; or 15

(b) such lesser period, as specified in the notice with the previous
approval of the Joint Commissioner, where the Assessing Officer has any
reason to believe that it shall be detrimental to revenue if the full period of
thirty days is allowed.

(2) Where any notice of demand has been served upon an assessee and any 20
appeal or other proceeding, as the case may be, is filed or initiated in respect of the
amount specified in the said notice of demand, then––

(a) such demand shall be deemed to be valid till the disposal of the
appeal by the last appellate authority or disposal of the proceedings; and

(b) any such notice of demand shall have the effect as specified in 25
section 3 of the Taxation Laws (Continuation and Validation of Recovery
11 of 1964.
Proceedings) Act, 1964.
(3) If the amount specified in any notice of demand under section 289 is not
paid within the period limited under sub-section (1),––

(a) the assessee shall be liable to pay simple interest at 1% for every 30
month or part of a month; and
(b) such period shall commence from the day immediately following the
end of the period mentioned in sub-section (1) and end with the day on which
the amount is paid.
(4) No interest shall be charged under sub-section (3) on any amount for any 35
period, where interest is charged on the same amount for the same period under
section 398(3) on the amount of tax specified in the intimation issued under
section 399.

(5) Nothing contained in sub-section (3) shall prevent the Assessing Officer,
where an application is made by the assessee before the expiry of the due date under 40
sub-section (1), to extend the time for payment or allow payment by instalments,
subject to such conditions as he may think fit to impose in the circumstances of
the case.
 431

(6) Where as a result of an order under section 287 or 288 or 359 or 363 or 365(10)
or 368 or 378 or an order of the Settlement Commission under section 245D (4) of the
43 of 1961. Income-tax Act, 1961,––
(a) the amount on which interest was payable under sub-section (3) had
5 been reduced, the interest shall be reduced accordingly and the excess interest
paid, if any, shall be refunded; and
(b) if subsequent to such reduction, as a result of an order under said
sections or section 377, the amount on which interest was payable is increased,
the assessee shall be liable to pay interest under sub-section (3),—
10 (i) from the day immediately following the end of the period
mentioned in the first notice of demand, referred to in sub-section (1); and
(ii) ending with the day on which the amount is paid.
(7) In respect of any period commencing on or before the 31st March, 1989
and ending after that date, interest under sub-section (3) shall, in respect of so much
15 of such period as falls after that date, be calculated at the rate of 1.5% for every
month or part of a month.
(8) Irrespective of the provisions contained in sub-section (3), the Principal Chief
Commissioner or Chief Commissioner or Principal Commissioner or Commissioner
may, on an application by the assessee, reduce or waive the amount of interest paid or
20 payable by an assessee under sub-section (3) if he is satisfied that—
(a) payment of such amount has caused or would cause genuine hardship
to the assessee;
(b) default in the payment of the amount on which interest has been paid
or was payable under the said sub-section was due to circumstances beyond
25 the control of the assessee; and
(c) the assessee has co-operated in any inquiry relating to the assessment
or any proceeding for the recovery of any amount due from him.
(9) The order under sub-section (8) accepting or rejecting the application of
the assessee, either in full or in part, shall be passed within twelve months from the
30 end of the month in which the application is received.
(10) No order under sub-section (8) rejecting the application, either in full or in
part, shall be passed unless the assessee has been given an opportunity of being heard.
(11) If the amount is not paid within the specified time under sub-section (1)
or extended under sub-section (5), at the place and to the person mentioned in the
35 said notice, the assessee shall be deemed to be in default.
(12) If, in a case where payment by instalments is allowed under sub-section (5),
the assessee commits defaults in paying any one of the instalments within the time
fixed under that sub-section,––
(a) the assessee shall be deemed to be in default as to the whole of the
40 amount then outstanding; and
(b) the other instalment or instalments shall be deemed to have been due
on the same date as the instalment actually in default.
(13) Where an assessee has presented an appeal under section 356 or 357 the
Assessing Officer may, in his discretion and subject to such conditions as he may think fit
45 to impose in the circumstances of the case, treat the assessee as not being in default in
respect of the amount in dispute in the appeal, even though the time for payment has
expired, till the time such appeal remains undisposed of.
 432

(14) Where an assessee has been assessed in respect of income arising outside
India in a country the laws of which prohibit or restrict the remittance of money to
India, the Assessing Officer shall—
(a) not treat the assessee as in default in respect of that part of the tax
which is due in respect of that amount of his income which, by reason of such 5
prohibition or restriction, cannot be brought into India; and
(b) continue to treat the assessee as not in default in respect of such part
of the tax until the prohibition or restriction is removed.
(15) For the purposes of sub-section (14), income shall be deemed to have
been brought into India, if— 10

(a) it has been utilised or could have been utilised for the purposes of
any expenditure actually incurred by the assessee outside India; or
(b) the income, whether capitalised or not, has been brought into India
in any form.
Penalty payable 412. (1) When an assessee is in default or is deemed to be in default in making a 15
when tax in payment of tax, he shall, in addition to the amount of the arrears and the amount of
default. interest payable under section 411(3), be liable, by way of penalty, to pay—
(a) such amount as the Assessing Officer may direct; and
(b) in the case of a continuing default, such further amount or amounts
as the Assessing Officer may, from time to time, direct. 20

(2) The total amount of penalty under sub-section (1) shall not exceed the
amount of tax in arrears.
(3) No penalty under sub-section (1) shall be levied—
(a) unless the assessee has been given a reasonable opportunity of being
heard; and 25

(b) where the assessee proves to the satisfaction of the Assessing Officer
that the default was for good and sufficient reasons.
(4) The assessee shall not cease to be liable to any penalty under sub-section (1)
merely by reason of the fact that before the levy of such penalty he has paid the tax.
(5) Where as a result of any final order the amount of tax, with respect to the 30
default in the payment of which the penalty was levied, has been wholly reduced, the
penalty levied shall be cancelled and the amount of penalty paid shall be refunded.
Certificate by 413. (1) When an assessee is in default or is deemed to be in default in making
Tax Recovery a payment of tax, the Tax Recovery Officer may draw up under his signature a
Officer and statement in such form as prescribed specifying the amount of arrears due from the 35
Validity thereof.
assessee (such statement being hereafter referred to as “certificate”) and shall proceed
to recover from such assessee the amount specified in the certificate by one or more
of the modes mentioned below, as per the rules prescribed in this regard,—
(a) attachment and sale of movable property of the assessee;
(b) attachment and sale of immovable property of the assessee; 40

(c) arrest of the assessee and his detention in prison;

(d) appointing a receiver for the management of movable and
immovable properties of the assessee.
(2) The Tax Recovery Officer may take action under sub-section (1), whether
or not proceedings for recovery of the arrears by any other mode have been taken. 50
 433

(3) The assessee shall not be entitled to dispute the correctness of any
certificate drawn up by the Tax Recovery Officer on any ground.
(4) The Tax Recovery Officer may cancel the certificate if, for any reason,
he considers it necessary so to do, or may correct any clerical or arithmetical
5 mistake therein.
(5) In this section, the movable or immovable property of the assessee shall
include any property—
(a) which has been transferred, directly or indirectly on or after the
1st June, 1973, by the assessee to his spouse or minor child or son’s wife or
10 son’s minor child, otherwise than for adequate consideration, and which is
held by, or stands in the name of, any of the said persons; and
(b) so far as the movable or immovable property so transferred to his
minor child or his son’s minor child is concerned, it shall, even after the date
of attainment of majority by such minor child or son’s minor child, as the case
15 may be, continue to be included in the movable or immovable property of the
assessee for recovering any arrears due from the assessee in respect of any
period prior to such date.
414. (1) For the purposes of section 413, the Tax Recovery Officer shall be— Tax Recovery
Officer by whom
(a) the Tax Recovery Officer within whose jurisdiction the recovery is to be
effected.
20 assessee carries on his business or profession or has the principal place
of his business or profession; or
(b) the Tax Recovery Officer within whose jurisdiction the
assessee resides or any of his movable or immovable property is situated,
the jurisdiction for this purpose being the jurisdiction assigned to the Tax Recovery
25 Officer under the orders or directions issued by the Board, or by any income-tax
authority not below the rank of Commissioner who is authorised in this behalf by
the Board in pursuance of section 241.
(2) Where an assessee has property within the jurisdiction of more than one Tax
Recovery Officer and the Tax Recovery Officer by whom the certificate is drawn up—
30 (a) is not able to recover the entire amount by sale of the property,
movable or immovable, within his jurisdiction; or
(b) is of the opinion that, for the purpose of expediting or securing the
recovery of the whole or any part of the amount under this Part, it is necessary
so to do,
35 he may send—
(i) the certificate; or
(ii) a copy of the certificate certified in the manner as prescribed and
specifying the amount to be recovered, where only a part of the amount is to
be recovered,
40 to a Tax Recovery Officer referred to in sub-section (1)(b) and, thereupon, such
officer shall also proceed to recover the amount under this Part as if the certificate
or copy thereof had been drawn up by him.
415. (1) The Tax Recovery Officer may grant time for the payment of any tax Stay of
proceedings in
and, till the expiry of such time, shall stay the recovery proceedings for such tax. pursuance of
certificate and
45 (2) Where a certificate has been drawn up and subsequently, the amount of the amendment or
outstanding demand is reduced as a result of an appeal or other proceeding under cancellation
this Act, the Tax Recovery Officer shall— thereof.
 434

(a) if the order is the subject-matter of further proceeding under this Act,
stay the recovery of such part of the amount specified in the certificate as
pertains to the said reduction for the period for which the appeal or other
proceeding remains pending; or
(b) if the order which was the subject-matter of such appeal or other 5
proceeding has become final and conclusive, amend the certificate, or cancel it.
Other modes of 416.(1) Where no certificate has been drawn up under section 413, the Assessing
recovery. Officer may recover the tax by any one or more of the modes provided in this section.
(2) Where a certificate has been drawn up under section 413, the Tax Recovery
Officer may, without prejudice to the modes of recovery specified in that section, 10
recover the tax by any one or more of the modes provided in this section.
(3) If any assessee is in receipt of any income chargeable under the head
“Salaries”, the Assessing Officer or Tax Recovery Officer may require any person
paying the same to deduct from any payment subsequent to the date of such
requisition any arrears of tax due from such assessee and such person shall comply 15
with the said requisition and shall pay the sum so deducted to the credit of the
Central Government or as the Board directs.
(4) Nothing contained in sub-section (3) shall apply to any part of the salary
exempted from attachment in execution of a decree of a civil court under section 60
of the Code of Civil Procedure, 1908. 20 5 of 1908.

5. (a) The Assessing Officer or Tax Recovery Officer may, at any time or from
time to time, by notice in writing require any person—
(i) from whom money is due or may become due to the assessee; or
(ii) who holds or may subsequently hold money for or on account of the
assessee, 25

to pay to the Assessing Officer or Tax Recovery Officer—

(I) either forthwith upon the money becoming due or being held; or
(II) at or within the time specified in the notice (not being before the
money becomes due or is held),
so much of the money as is sufficient to pay the amount due by the assessee in respect 30
of arrears or the whole of the money when it is equal to or less than that amount;
(b) A notice under this sub-section may be issued to any person who holds or
may subsequently hold any money for or on account of the assessee jointly with any
other person;
(c) For the purposes of this sub-section, the shares of the joint holders in the 35
account, as referred in clause (b), shall be presumed, until the contrary is proved, to
be equal;
(d) A copy of the notice under this sub-section shall be forwarded to—
(i) the assessee; and
(ii) in the case of a joint account to all the joint holders, at his or their 40
last addresses known to the Assessing Officer or Tax Recovery Officer;
(e) Save as otherwise provided in this sub-section, every person to whom a
notice is issued under that sub-section shall be bound to comply with such notice,
and, in particular, where any such notice is issued to a post office, banking company
or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or 45
any other document to be produced for the purpose of any entry, endorsement or the
like being made before payment is made, irrespective of any rule, practice or
requirement to the contrary;
 435

(f) Any claim respecting any property in relation to which a notice under this
sub-section has been issued arising after the date of the notice shall be void as
against any demand contained in the notice;
(g) Where a person, to whom a notice under this sub-section is issued, objects
5 to it by a statement on oath that—
(a) the sum demanded or any part thereof is not due to the assessee; or
(b) he does not hold any money for or on account of the assessee,
then nothing contained in that sub-section shall be deemed to require such person to
pay any such sum or part thereof;
10 (h) Where it is discovered that the statement under was false in any material
particular, such person shall be personally liable to the Assessing Officer or Tax
Recovery Officer to the extent of his own liability to the assessee on the date of the
notice, or to the extent of the assessee’s liability for any sum due under this Act,
whichever is less;
15 (i) The Assessing Officer or Tax Recovery Officer may, at any time or from
time to time, amend or revoke any notice issued under this sub-section or extend the
time for making any payment in pursuance of a notice issued under the said
sub-section;
(j) The Assessing Officer or Tax Recovery Officer shall grant a receipt for any
20 amount paid in compliance with a notice issued under this sub-section, and the
person so paying shall be fully discharged from his liability to the assessee to the
extent of the amount so paid;
(k) Any person discharging any liability to the assessee after receipt of a notice
under this sub-section shall be personally liable to the Assessing Officer or the Tax
25 Recovery Officer—
(i) to the extent of his own liability to the assessee so discharged; or
(ii) to the extent of the assessee’s liability for any sum due under this Act,
whichever is less.
(l) If the person to whom a notice under this sub-section is issued fails to make
30 payment in pursuance thereof to the Assessing Officer or Tax Recovery Officer,—
(i) he shall be deemed to be an assessee in default in respect of the
amount specified in the notice and further proceedings may be taken against
him for the realisation of the amount as if it were an arrear of tax due from
him, in the manner provided in sections 413 to 415; and
35 (ii) the notice shall have the same effect as an attachment of a debt by
the Tax Recovery Officer in exercise of his powers under section 413.
(6) The Assessing Officer or Tax Recovery Officer may apply to the court in
whose custody there is money belonging to the assessee—
(a) for payment to him of the entire amount of such money; or
40 (b) if it is more than the tax due, an amount sufficient to discharge the tax.
(7) The Assessing Officer or Tax Recovery Officer may, if so authorised by
an income-tax authority not below the rank of commissioner by general or special
order, recover any arrears of tax due from an assessee by distraint and sale of his
movable property in the manner as prescribed.
45 417. If the recovery of tax in any area has been entrusted to a State Recovery
through State
Government under article 258(1) of the Constitution, the State Government may Government.
direct, with respect to that area or any part thereof that tax shall be recovered therein
with, and as an addition to, any municipal tax or local rate, by the same person and
in the same manner as the municipal tax or local rate is recovered.
 436

Recovery of tax 418. (1) Where an agreement is entered into by the Central Government with
in pursuance of
agreements with
the Government of any country outside India for recovery of income-tax under this
foreign countries. Act and the corresponding law in force in that country and the Government of that
country or any authority under that Government which is specified in this behalf in
such agreement sends to the Board a certificate for the recovery of any tax due under 5
such corresponding law from—
(a) a resident; or
(b) a person having any property in India,
the Board may forward such certificate to any Tax Recovery Officer having 10
jurisdiction over the resident, or within whose jurisdiction such property is situated
and thereupon such Tax Recovery Officer shall—
(i) proceed to recover the amount specified in the certificate in the
manner in which he would proceed to recover the amount specified in a
certificate drawn up by him under section 413; and 15

(ii) remit any sum so recovered by him to the Board after deducting his
expenses in connection with the recovery proceedings.
(2) Where an assessee is in default or is deemed to be in default in making a
payment of tax, the Tax Recovery Officer may,—
(a) if the assessee is a resident of a country being a country with which the 20
Central Government has entered into an agreement for the recovery of
income-tax under this Act and the corresponding law in force in that country; or
(b) has any property in that country,
forward to the Board a certificate drawn up by him under section 413 and the Board
may take such action thereon as it may deem appropriate having regard to the terms 25
of the agreement with such country.
Recovery of 419. Any sum imposed by way of interest, fine, penalty, or any other sum
penalties, fine, payable under the provisions of this Act, shall be recoverable in the manner provided
interest and other
sums. in this Part for the recovery of arrears of tax.
Tax clearance 420.(1) Subject to such exceptions as the Central Government may, by 30
certificate.
notification, specify in this behalf, no person,—
(a) who is not domiciled in India;
(b) who has come to India in connection with business, profession or
employment; and
(c) who has income derived from any source in India, 35

shall leave the territory of India by land, sea or air unless he furnishes to such
authority as prescribed—
(i) an undertaking in the prescribed form from his employer; or
(ii) through whom such person is in receipt of the income, 40

to the effect that tax payable by such person who is not domiciled in India shall be
paid by the employer referred to in clause (i) or the person referred to in clause (ii),
and the prescribed authority shall, on receipt of the undertaking, immediately give
to such person a no objection certificate, for leaving India.
(2) Nothing contained in sub-section (1) shall apply to a person who is not 45
domiciled in India but visits India as a foreign tourist or for any other purpose not
connected with business, profession or employment.
 437

(3) Subject to such exceptions as the Central Government may, by notification,

specify in this behalf, every person, who is domiciled in India at the time of his
departure from India, shall furnish, in the prescribed form to the income-tax
authority or such other authority as prescribed—
5 (a) the Permanent Account Number allotted to him under section 262;
(b) the purpose of his visit outside India; and
(c) the estimated period of his stay outside India.
(4) Where no such Permanent Account Number has been allotted to him, or
10 his total income is not chargeable to income-tax, or he is not required to obtain a
Permanent Account Number under this Act, such person shall furnish a certificate
in such form, as prescribed.
(5) No person—
(a) who is domiciled in India at the time of his departure; and
15 (b) in respect of whom circumstances exist which, in the opinion of an
income-tax authority render it necessary for such person to obtain a certificate
under this section,
shall leave the territory of India by land, sea or air unless he obtains a certificate
from the income-tax authority stating that he has no liability under this Act, or the
27 of 1957. 20 Wealth-tax Act, 1957 or the Gift-tax Act, 1958 or the Expenditure-tax Act, 1987 or
18 of 1958. the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax
35 of 1987.
22 of 2015. Act, 2015, or that satisfactory arrangements have been made for the payment of all
or any of such taxes which are or may become payable by that person.
(6) No income-tax authority shall make it necessary for any person who is
25 domiciled in India to obtain a certificate under this section unless—
(a) he records the reasons therefor; and
(b) obtains the prior approval of Principal Chief Commissioner or Chief
Commissioner.
(7) If the owner or charterer of any ship or aircraft carrying persons from any
30 place in the territory of India to any place outside India allows any person to whom
sub-section (1) or (5) applies to travel by such ship or aircraft without first satisfying
himself that such person is in possession of a certificate as required by those sub-
sections, he shall be personally liable to pay the whole or any part of the amount of
tax, if any, payable by such person as the Assessing Officer may, having regard to
35 the circumstances of the case, determine.
(8) In respect of any sum payable by the owner or charterer of any ship or
aircraft under sub-section (7),—
(a) the owner or charterer, shall be deemed to be an assessee in default
40 for such sum; and
(b) such sum shall be recoverable from him in the manner provided in
this Part as if it were an arrear of tax.
(9) The Board may make rules for regulating any matter necessary for, or
45 incidental to, the purpose of carrying out the provisions of this section.
(10) In this section, “owner” and “charterer” include any representative, agent
or employee empowered by the owner or charterer to allow persons to travel by the
ship or aircraft.
 438

Recovery by suit 421. The several modes of recovery specified in this Part shall not affect in
or under other
law not affected. any way;—
(a) any other law for the time being in force relating to the recovery of
debts due to Government; or
(b) the right of the Government to institute a suit for the recovery of the 5
arrears due from the assessee; and
(c) it shall be lawful for the Assessing Officer or the Government, as the
case may be, to have recourse to any such law or suit, irrespective of the fact
that the tax due is being recovered from the assessee by any mode specified in
this Part. 10

Recovery of tax 422. Irrespective of the provisions of sections 304(1) or (5), where the person
arrear in respect entitled to the income referred to in section 9(2) is a non-resident, the tax chargeable
of non-resident
from his assets. thereon, whether in his name or in the name of his agent who is liable as a
representative assessee—
(a) may be recovered by deduction under the provisions of 15
Chapter XIX-B; and
(b) any arrears of tax may also be recovered as per the provisions of this
Act from any assets of the non-resident which are, or may at any time come,
within India.
E.—Interest chargeable in certain cases 20

Interest for 423. (1) Where the return of income for any tax year is furnished after the due
defaults in date or is not furnished, the assessee shall be liable to pay simple interest as per the
furnishing return
of income. following formula:—
I = 1% x A x T
where,— 25

I = the interest payable;

A = the amount of tax on which interest is payable, as specified in
sub-section (2);
T = number of months comprised in the period commencing on the
date immediately following the starting date and ending on the end date, 30
both specified in sub-section (2).
(2) For sub-section (1), in respect of the circumstances specified in column B
of the Table below, the starting date shall be the date specified in column C, the
ending date shall be the date as specified in column D and the amount of tax on
which interest is payable is specified in column E. 35
Table
Sl. No. Circumstances Starting Ending date The amount of tax on
date which interest is
payable
A B C D E 40

1. Where the return is Due Date of (a) Where a

furnished–– date for furnishing of regular assessment
furnishing the return. is not made, tax on
(a) under
the return the total income as
section 263(1), (4)
of income determined under 45
or (6); or
under section 270(1) as
section reduced by tax paid;
263(1).
 439

A B C D E
(b) in (b) Where a
response to a regular assessment
notice under is made, tax on the
section 268(1) total income
5 after the due determined under
date. regular assessment
as reduced by tax
paid.
2. (i) Where no Due Date of Tax on the total
10 return has been date for completion income determined
furnished under furnishing of the under regular
section 263(1), (4) or the return assessment assessment as
(6) or in response to a of income under reduced by tax
notice under section under section 271. paid.
15 268(1). section
263(1).
3. (a) Where return Date Date of Amount by
of income is required immediately furnishing which the tax on the
by a notice under following the return. total income
20 section issued after the last date determined on the
the determination of of time basis of such
income under section allowed reassessment or
270(1) or after the under such recomputation
completion of an notice. exceeds the tax on
25 assessment under the total income
section 270(10) or determined under
271 or 279; and section 270(1) or on
the basis of the
(b) such return is earlier assessment
furnished after the under the section
30 expiry of the time referred to against
allowed under such serial number 3(a).
notice.
4. (a) Where return Date Date of Amount by
of income is required immediately completion of which the tax on the
35 by a notice under following the total income
section 280 issued the last reassessment determined on the
after the date of or basis of such
determination of time recomputation reassessment or
income under allowed under section recomputation
40 section 270(1) or under such 279. exceeds the tax on
after the completion notice. the total income
of an assessment
determined under
under section 270(10)
section 270(1) or on
or 271 or 279; and
the basis of the
45 (b) no return is earlier assessment
furnished. under the section
referred to against
serial number 4(a).
 440

(3) Where as a result of an order under section 287 or 288 or 359 or 363 or
365(10) or 368 or 377 or 378, the amount of tax on which interest was payable under
sub-sections (1) and (2) has been increased or reduced, the interest shall be increased
or reduced accordingly, and in a case —
(a) where the interest is increased, the Assessing Officer shall serve on 5
the assessee a notice of demand in the form as prescribed specifying the sum
payable, and such notice of demand shall be deemed to be a notice under
section 289 and the provisions of this Act shall apply accordingly;
(b) where the interest is reduced, the excess interest paid, if any, shall be
refunded. 10

(4) For the purposes of this section,—

(a) tax on total income as determined under section 270(1) shall not
include the additional income-tax, if any, payable under section 267;
(b) tax on the total income determined under regular assessment shall
not include the additional income-tax payable under section 267; 15

(c) interest payable under sub-section (1) shall be reduced by the interest,
if any, paid under section 266 towards the interest chargeable;
(d) “tax paid” means––
(i) advance tax, if any, paid;
(ii) any tax deducted or collected at source; 20

(iii) any relief of tax allowed under section 157;

(iv) any relief of tax allowed under section 159(1) on account of
tax paid in a country outside India;
(v) any relief of tax allowed under section 159(2) on account of tax
paid in a specified territory outside India referred to in that section; 25

(vi) any deduction, from the Indian income-tax payable, allowed

under section 160, on account of tax paid in a country outside India; and
(vii) any tax credit allowed to be set off as per section 206(13).
(5) Where for any tax year, an assessment is made for the first time under
section 279, the assessment so made shall be regarded as a regular assessment for 30
the purposes of this section.
Interest for 424. (1) Subject to the other provisions of this section, where, in any tax year,
defaults in an assessee who is liable to pay advance tax under section 404,––
payment of
advance tax.
(a) has failed to pay such tax; or
(b) the advance tax paid by such assessee under the provisions of 35
section 406 or 407 is less than 90% of the assessed tax,
the assessee shall be liable to pay simple interest at the rate of 1% for every month
or part of a month, for the period, beginning from the 1st April following such
tax year––
(i) upto the date of determination of total income under section 270(1); or 40

(ii) upto the date of completion of regular assessment,

 441

on an amount equal to the assessed tax in case where clause (a) is applicable or, on
the amount by which the advance tax paid as aforesaid falls short of the assessed tax
in case where clause (b) is applicable.
(2) In sub-section (1), “assessed tax” means the tax on the total income
5 determined under section 270(1) and where a regular assessment is made, the tax on
the total income determined under such regular assessment as reduced by the
amount of,—
(a) any tax deducted or collected at source as per Chapter XIX-B on any
income which is subject to such deduction or collection and which is taken
10 into account in computing such total income;
(b) any relief of tax allowed under section 157;
(c) any relief of tax allowed under section 159(1) on account of tax paid
in a country outside India;
(d) any relief of tax allowed under section 159(2) on account of tax paid
15 in a specified territory outside India referred to in that section;
(e) any deduction, from the Indian income-tax payable, allowed under
section 160, on account of tax paid in a country outside India; and
(f) any tax credit allowed to be set off as per section 206(13).
(3) For the purposes of this section,—
20 (a) where in relation to a tax year, an assessment is made for the first
time under section 279, the assessment so made shall be regarded as a regular
assessment;
(b) tax on total income as determined under section 270(1) shall not include
the additional income-tax, if any, payable under section 267;
25 (c) tax on the total income determined under such regular assessment
shall not include the additional income-tax payable under section 267.
(4) Where, before the date of determination of total income under
section 270(1) or completion of a regular assessment, tax is paid by the assessee
under section 266 or otherwise,—
30 (a) interest shall be calculated as per the foregoing provisions of this
section up to the date on which the tax is so paid, and reduced by the interest,
if any, paid under section 266 towards the interest chargeable under this
section;
(b) thereafter, interest shall be calculated at the rate aforesaid on the
35 amount by which the tax so paid together with the advance tax paid falls short
of the assessed tax.
(5) Where, the amount on which interest was payable in respect of shortfall in
payment of advance tax for any tax year under sub-section (1) is increased, as a
result of an order of reassessment or recomputation under section 279, the assessee
40 shall be liable to pay simple interest at the rate of 1% for every month or part of a
month comprised in the period commencing on the 1st April immediately following
such tax year and ending on the date of the reassessment or recomputation on such
amount determined as per formula below:––
A = B-C
45 where,—
 442

A = the increased amount on which interest was payable in respect of

shortfall in payment of advance tax for any tax year as a result of reassessment or
recomputation—
B = tax on total income determined on the basis of reassessment or
recomputation; 5

C = tax on total income determined under section 270(1) or regular

assessment as referred to in sub-section (1).
(6) Where, as a result of an order under section 287 or 288 or 359 or 363 or
365(10) or 368 or 377 or 378, the amount on which interest was payable under
sub-section (1) or (3) has been increased or reduced, the interest shall be increased 10
or reduced accordingly, and—
(a) in a case where the interest is increased, the Assessing Officer shall serve
on the assessee a notice of demand in the form as prescribed specifying the sum
payable and such notice of demand shall be deemed to be a notice under
section 289 and the provisions of this Act shall apply accordingly; 15

(b) in a case where the interest is reduced, the excess interest paid, if any,
shall be refunded.

Interest for 425. (1) If an assessee, liable to pay advance tax under section 404, other than
deferment of the assessee mentioned in sub-section (3), has failed to pay such tax, or the advance
advance tax. tax paid by the assessee on its current income on or before the date specified in 20
column B of the Table below, is less than advance tax due on returned income, as
specified in column C, then the assessee shall be liable to pay interest on the amount
of shortfall of advance tax as specified in column D , at the rate of interest specified
in column E:
Table 25

Sl. No. Due date of Advance tax Amount of shortfall of Interest

Instalment due on advance tax being payable on
returned percentage of advance tax shortfall as
income due as per column C, as specified in
reduced by advance tax column D 30
already paid on or before the
date specified in column B
A B C D E
1. 15th day 15% of 15%. 3% on
of June the tax due the shortfall. 35
on returned
income.
2. 15th 45% of 45%. 3% on
day of the tax due the shortfall.
September. on returned 40
income.
3. 15th 75% of 75%. 3% on
day of the tax due the shortfall.
December. on returned
income. 45

4. 15th day 100% of 100%. 1% on

of March. the tax due the shortfall.
on returned
income.
 443

(2) The assessee shall not be liable to pay any interest under sub-section (1),
if the advance tax paid by the assessee on the current income,––
(a) on or before the 15th day of June is 12% or more of the tax due on
the returned income; or
5 (b) on or before the 15th day of September is 36% or more of the tax due
on the returned income.
(3) An assessee who declares profits and gains as per section 58(2)
(Table: Sl. No. 1 or 3) or, who is liable to pay advance tax under section 404, has
failed to pay such tax, or the advance tax paid by the assessee on its current income
10 on or before the 15th day of March is less than the tax due on returned income, shall
be liable to pay simple interest at the rate of 1% on the amount of shortfall from
the tax due on returned income..
(4) No interest shall be payable under sub-section (1) or (3) in respect of
shortfall in the payment of tax due on returned income, where,––
15 (a) the shortfall is on account of underestimation or failure to estimate
the following incomes:––
(i) capital gains;
(ii) income as per section 2(49)(n);
(iii) income under the head profits and gains of business or
20 profession accruing or arising for the first time;
(iv) dividend income; and
(b) the assessee has paid in full, the tax payable on the incomes referred
to in clause (a), in any of the remaining instalments of advance tax, if any, or
by the 31st day of March of the tax year.
25 (5) For the purposes of this section “tax due on the returned income” means
the tax chargeable on the total income declared in the return of income furnished by
the assessee for the tax year in which the advance tax is paid or payable, as reduced
by the amount of—
(a) any tax deducted or collected at source as per the provisions of
30 Chapter XIX-B on any income which is subject to such deduction or collection
and which is taken into account in computing such total income;
(b) any relief of tax allowed under section 157;
(c) any relief of tax allowed under section 159(1) on account of tax paid
in a country outside India;
35 (d) any relief of tax allowed under section 159(2) on account of tax paid
in a specified territory outside India referred to in that section;
(e) any deduction, from the Indian income-tax payable, allowed under
section 160, on account of tax paid in a country outside India; and
(f) any tax credit allowed to be set off as per section 206(13).
40 426. (1) Subject to the other provisions of this Act, where any refund is granted Interest on
to the assessee under section 270(1), and— excess refund.

(a) no refund is due on regular assessment; or

(b) the amount refunded under section 270(1) exceeds the amount
refundable on regular assessment,
 444

the assessee shall be liable to pay simple interest at the rate of 0.5% on the whole or the
excess amount so refunded, for every month or part of a month comprised in the period
from the date of grant of refund to the date of such regular assessment.
(2) Where, as a result of an order under section 287 or 288 or 359 or 363 or
365(10) or 368 or 377 or 378, the amount of refund granted under section 270(1) is 5
held to be correctly allowed, either in whole or in part, then, the interest chargeable,
if any, under sub-section (1) shall be reduced accordingly.
(3) Where in relation to a tax year, an assessment is made for the first time
under section 279, the assessment so made shall be regarded as a regular assessment
for the purposes of this section. 10

F.—LEVY OF FEE IN CERTAIN CASES

Fee for default 427. (1) Without prejudice to the provisions of this Act, where a person fails
in furnishing to deliver or cause to be delivered a statement within the time prescribed in
statements.
section 393(3)(b), he shall be liable to pay, by way of fee, a sum of two hundred
rupees for every day during which the failure continues. 15

(2) The amount of fee referred to in sub-section (1) shall,––

(a) not exceed the amount of tax deductible or collectible; and
(b) be paid before delivering or causing to be delivered the statement, as
per sub-section (1).
Fee for default 428. Without prejudice to the provisions of this Act, where, a person required 20
in furnishing
return of
to furnish a return of income under section 263 fails to do so within the time as
income. prescribed in section 263(1) he shall pay, by way of a fee,––
(a) a sum of five thousand rupees, if the total income of such person
exceeds five lakh rupees;
(b) a sum not exceeding one thousand rupees in any other case. 25

Fee for default 429. (1) Without prejudice to the provisions of this Act, where,—
relating to
statement or (a) the research association, University, college or other institution
certificate.
referred to in section 45(3)(a) or the company referred to in section 45(3)(b)
fails to deliver or cause to be delivered the documents as prescribed in section
45(4)(a) within the time as prescribed therein or furnish a certificate as 30
prescribed under section 45(4)(a); or
(b) the institution or fund fails to deliver or cause to be delivered a
statement within the time as prescribed under section 354(1)(e), or furnish a
certificate as prescribed under section 354(1)(f),
it shall be liable to pay, by way of fee, a sum of two hundred rupees for every day 35
during which the failure continues.
(2) The amount of fee referred to in sub-section (1) shall,—
(a) not exceed the amount in respect of which the failure referred to
therein has occurred;
(b) be paid before delivering or causing to be delivered the statement or 40
before furnishing the certificate referred to in sub-section (1).
Fee for default 430. Without prejudice to the provisions of this Act, where a person is required
relating to
intimation of
to intimate his Aadhaar number under section 262(6) and such person fails to do so
aadhaar on or before such date as prescribed, he shall be liable to pay such fee, as prescribed,
number. not exceeding one thousand rupees, at the time of making intimation under that 45
sub-section after the said date.
 445

CHAPTER XX
REFUNDS
431. If any person satisfies the Assessing Officer that the amount of tax paid Refunds.
by him or on his behalf or treated as paid by him or on his behalf for any tax year
5 exceeds the amount with which he is properly chargeable under this Act for that
year, he shall be entitled to a refund of the excess.
432. (1) Where the income of one person is included in total income of any Person entitled
another person under any provision of this Act, the latter shall be eligible for a to claim refund
in certain
refund under this Part in respect of such income. special cases.
10 (2) Where a person is unable to claim or receive a refund due to him on account
of death, incapacity, insolvency, liquidation or other cause, his legal representative
or the trustee or guardian or receiver, shall be entitled to claim or receive such refund
for the benefit of such person or his estate.
433. Every claim for refund under this Part shall be made by furnishing return Form of claim
for refund and
15 as per section 263. limitation.
434. (1) Where,–– Refund for
denying
(a) under an agreement or other arrangement, in writing, the tax deductible liability to
on any income, other than interest in section 393(2) (Table: Sl. No. 17), is to be deduct tax in
certain cases.
borne by the person by whom the income is payable; and
20 (b) such person having paid such tax to the credit of the Central
Government claims that no tax was required to be deducted on such income,
he may, within thirty days from the date of payment of such tax, file an application
before the Assessing Officer for refund of such tax in such form and such manner,
as prescribed.
25 (2) The Assessing Officer shall, by an order in writing, allow or reject the
application.
(3) No application under sub-section (1) shall be rejected unless an
opportunity of being heard has been given to the applicant.
(4) The Assessing Officer may, before passing an order under sub-section (2),
30 make such inquiry as he considers necessary.
(5) The order under sub-section (2) shall be passed within six months from the
end of the month in which application under sub-section (1) is received.
435. (1) Where, as a result of any order passed in appeal or other proceeding Refund on
under this Act, refund of any amount becomes due to the assessee, the Assessing appeal, etc.
35 Officer shall, except as otherwise provided in this Act, refund the amount to the
assessee without his having to make any claim in that behalf.
(2) Where, by the order as referred to in sub-section (1),—
(a) an assessment is set aside or cancelled and an order of fresh
assessment is directed to be made, the refund, if any, shall become due only
40 on the making of such fresh assessment;
(b) the assessment is annulled, the refund shall become due only of the
amount, if any, of the tax paid in excess of the tax chargeable on the total
income returned by the assessee.
436. In a claim under this part, it shall not be open to the assessee to question Correctness of
45 the correctness of any assessment, or other matter decided which has become final assessment not
to be
and conclusive, or ask for a review of the aforesaid assessment or matter; and the questioned.
assessee shall not be entitled to any relief on such claim except refund of tax wrongly
paid or paid in excess.
 446

Interest on 437. (1) Where a refund is due to the assessee under this Act, he shall, subject
refunds.
to the provisions of this section, be entitled to receive, in addition to the refund,
simple interest thereon calculated at the rate of 0.5% for each month (or part of a
month), in the circumstances specified in column B of the Table below, for the
period specified in column C of the said Table. 5

TABLE
Sl. No. Circumstances Period
A B C
1. Such refund is out of— (a) From the first day of April
following the tax year to the date the 10
(a) tax collected at refund is granted, where the income-tax
source under return has been furnished on or before
section 394; or the due date as specified in section
(b) paid by way of 263(1);
advance tax; or (b) from the date of furnishing the 15

(c) treated as paid income-tax return to the date on which

under section 390(5), the refund is granted; in any other case.
during the year.

2. Where the refund is out of from the date of furnishing of return

any tax paid under of income or payment of tax, whichever 20
section 266. is later, to the date on which the refund
is granted.
3. Any other case. from the date or, as the case may be,
dates on which the amount of tax or
penalty specified in the notice of 25
demand issued under section 289 is paid
in excess of such demand to the date on
which the refund is granted.
(2) No interest shall be payable under sub-section (1) (Table: Sl. No. 1 or 2),
if the amount of refund is less than 10% of the tax as determined under section 30
270(1) or on regular assessment.
(3) Where refund, mentioned in sub-section (1) (Table: Sl. No. 1), arises as a
result of an order passed by the Assessing Officer in consequence of an application
made by the assessee under section 288 (Table: Sl. No. 11), such interest shall be
calculated at the rate of 0.5% for every month or part of a month comprised in the 35
period from the date of such application to the date on which the refund is granted
(4) In a case where a refund arises as a result of giving effect to an order under
section 359 or 363 or 365(10) or 368 or 377 or 378, wholly or partly, otherwise than
by making a fresh assessment or reassessment, the assessee shall be entitled to
receive an additional interest which shall be–– 40

(a) over and above the interest payable under sub-section (1) or (3); and
(b) computed on such amount of refund calculated at the rate of 3% per
annum, for the period beginning from the date following the date of expiry of
the time allowed under section 286(1) (Table: Sl. No. 10) to the date on which
the refund is granted. 50
 447

(5) For the purposes of sub-section (4)(b), in a case where proceedings for
assessment or reassessment is pending, in computing the period for determining the
additional interest payable, the period beginning from the date on which such refund
is withheld by the Assessing Officer as per and subject to provisions of
5 section 438(3) and ending with the date on which such assessment or reassessment
is made, shall be excluded.
(6) Where refund of any amount becomes due to the deductor in respect of any
amount paid to the credit of the Central Government under Chapter XIX-B, such
deductor shall be entitled to receive, in addition to the said amount, simple interest
10 thereon calculated at the rate of 0.5% for every month or part of a month comprised
in the period, from the date on which—
(a) claim for refund is made in the form as prescribed; or
(b) tax is paid, where refund arises on account of giving effect to an order
under section 359 or 363 or 365(10) or 368,
15 to the date on which the refund is granted.
(7) If the proceedings resulting in the refund are delayed for reasons
attributable to the assessee or the deductor, whether wholly or in part, the period of
the delay so attributable to him shall be excluded from the period for which interest
is payable under this section.
20 (8) Where any question arises as to the period to be excluded under
sub-section (7), it shall be decided by the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner whose decision thereon
shall be final.
(9) Where, as a result of an order under section 270(10) or 271 or 279 or 287
25 or 288 or 359 or 363 or 365(10) or 368 or 377 or 378, the amount on which interest
was payable under sub-section (1) has been increased or reduced, the interest shall
be increased or reduced accordingly.
(10) In a case where the interest is reduced under sub-section (9), the
Assessing Officer shall serve on the assessee a notice of demand in the form as
30 prescribed specifying the amount of the excess interest paid and requiring him to
pay such amount.
(11) The notice of demand under sub-section (10) shall be deemed to be
a notice under section 289 and the provisions of this Act shall apply
accordingly.
35 438. (1) Where a refund becomes due or is found to be due to any person under Set off and
this Act, the Assessing Officer or Commissioner or Principal Commissioner or withholding of
refunds in
Chief Commissioner or Principal Chief Commissioner, may instead of payment of certain cases.
the refund, set off the amount to be refunded or any part of that amount, against the
sum, if any, remaining payable under this Act by such person.
40 (2) Any action under sub-section (1) shall only be taken after giving intimation
in writing to such person of the action proposed to be taken.
(3) Where,––
(a) a part of the refund is set off under sub-section (1); or
(b) no such amount is set off,
 448

and refund becomes due to a person, and the Assessing Officer, having regard to the
fact that proceedings for assessment or reassessment are pending in the case of the
person, may, for reasons to be recorded in writing and with the previous approval
of the Principal Commissioner or the Commissioner, withhold the refund up to sixty
days from the date on which such assessment or reassessment is made. 5

CHAPTER XXI
PENALTIES
Penalty for 439. (1) The Competent Authority may, during the course of any proceedings
under-
reporting and
under this Act, impose penalty on any person who has under-reported his income
misreporting and such penalty shall be payable in addition to tax, if any. 10
of income.
(2) A person shall be deemed to have under-reported his income, if—
(a) the income assessed is greater than the income determined in the
return processed under section 270(1)(a);
(b) the income assessed is greater than the maximum amount not
chargeable to tax, where no return of income has been furnished or where 15
return has been furnished for the first time under section 280;
(c) the income reassessed is greater than the income assessed or
reassessed immediately before such reassessment;
(d) the amount of deemed total income assessed or reassessed as per
section 206, is greater than the deemed total income determined in the return 20
processed under section 270(1)(a);
(e) the amount of deemed total income assessed as per section 206, is
greater than the maximum amount not chargeable to tax, where no return of
income has been furnished or where return has been furnished for the first time
under section 280; 25

(f) the amount of deemed total income reassessed as per section 206, is
greater than the total income assessed or reassessed under the said sections
immediately before such reassessment;
(g) the income assessed or reassessed has the effect of reducing the loss
or converting such loss into income. 30
(3) The amount of under-reported income shall be,—
(a) if income has been assessed for the first time,—
(i) Where return has been furnished, the difference between the
amount of income assessed and the amount of income determined under
section 270(1)(a); 35

(ii) Where no return of income has been furnished or if return has

been furnished for the first time under section 280,—
(A) the amount of income assessed, in the case of a company,
firm or local authority; and
(B) the difference between the amount of income assessed 40
and the maximum amount not chargeable to tax, in a case not
covered in item (A);
 449

(b) in any other case, the difference between the amount of income
reassessed or recomputed and the amount of income assessed, reassessed or
recomputed in a preceding order.
(4) If under-reported income arises out of determination of deemed total
5 income as per section 206, the amount of total under-reported income shall be
determined as under—
(A-B) + (C-D)
where,—
A = the total income assessed as per the provisions other than the
10 provisions contained in section 206 (herein referred to as “general
provisions”);
B = the total income that would have been chargeable had the total
income assessed as per the general provisions been reduced by the amount of
under-reported income;
15 C = the total income assessed as per section 206;
D = the total income that would have been chargeable had the total
income assessed as per section 206 been reduced by the amount of
under-reported income.
(5) (a) If the amount of under-reported income on any issue is considered both
20 under section 206 and under general provisions, such amount shall not be reduced
from total income assessed while determining the amount under D referred to in
sub-section (4);
(b) in a case where an assessment or reassessment has the effect of reducing
the loss declared in the return or converting that loss into income, the amount of
25 under-reported income shall be the difference between the loss claimed and the
income or loss, assessed or reassessed.
(6) Subject to sub-section (8), where the source of any receipt, deposit or
investment in any tax year is claimed to be an amount added to income or deducted
while computing loss, in the assessment of such person in any year prior to the tax
30 year in which such receipt, deposit or investment appears (herein referred to as “the
preceding year”) and no penalty was levied for such preceding year, then, the
under-reported income shall include such amount as is sufficient to cover such
receipt, deposit or investment.
(7) The amount referred to in sub-section (6) shall be deemed to be income
35 under-reported for the preceding year in the following order—
(a) the preceding year immediately before the year in which the receipt,
deposit or investment appears, being the first preceding year; and
(b) where the amount added or deducted in the first preceding year is not
sufficient to cover the receipt, deposit or investment, the year immediately
40 preceding the first preceding year and so on.
(8) The under-reported income, for the purposes of this section, shall not
include the following:—
(a) the amount of income in respect of which the assessee offers an
explanation and the Competent Authority, is satisfied that the explanation is
45 bona fide and the assessee has disclosed all the material facts to substantiate
the explanation offered;
(b) the amount of under-reported income determined on the basis of an
estimate, if the accounts are correct and complete to the satisfaction of the
Competent Authority, but the method employed is such that the income cannot
50 properly be deduced therefrom;
 450

(c) the amount of under-reported income determined on the basis of

an estimate, if the assessee has, on his own, estimated a lower amount of
addition or disallowance on the same issue, has included such amount in
the computation of his income and has disclosed all the facts material to the
addition or disallowance; and 5

(d) the amount of under-reported income represented by any addition

made in conformity with the arm’s length price determined by the Transfer
Pricing Officer, where the assessee had maintained information and
documents as prescribed under section 171, declared the international
transaction under Chapter X, and, disclosed all the material facts relating to 10
the transaction.
(9) The penalty referred to in sub-section (1) shall be 50% of the tax payable
on under-reported income.
(10) Irrespective of anything contained in sub-section (8) or (9), where under-
reported income is in consequence of any misreporting thereof by any person, the 15
penalty referred to in sub-section (1) shall be 200% of the tax payable on under-
reported income.
(11) The cases of misreporting of income referred to in sub-section (10) shall
be the following:—
(a) misrepresentation or suppression of facts; 20

(b) failure to record investments in the books of account;

(c) claim of expenditure not substantiated by any evidence;
(d) recording of any false entry in the books of account;
(e) failure to record any receipt in books of account having a bearing on
total income; and 25

(f) failure to report any international transaction or any transaction

considered to be an international transaction or any specified domestic
transaction, to which the provisions of Chapter X apply.
(12) The tax payable in respect of the under-reported income shall be—
(a) where no return of income has been furnished or where return has 30
been furnished for the first time under section 280 and the income has been
assessed for the first time, the amount of tax calculated on the under-reported
income as increased by the maximum amount not chargeable to tax as if it
were the total income;
(b) if the total income determined under section 270(1)(a) or assessed, 35
reassessed or recomputed in a preceding order is a loss, the amount of tax
calculated on the under-reported income as if it were the total income;
(c) in any other case, determined as follows—
(X-Y)
where,— 40

X = the amount of tax calculated on the under-reported income as

increased by the total income determined under section 270(1)(a) or total
income assessed, reassessed or recomputed in a preceding order as if it
were the total income; and
Y = the amount of tax calculated on the total income determined 4
5
under section 270(1)(a) or total income assessed, reassessed or
recomputed in a preceding order.
 451

(13) No addition or disallowance of an amount shall form the basis for

imposition of penalty, if such addition or disallowance has already formed the basis
for penalty in the case of the person for the same or any other tax year.
(14) The penalty referred to in sub-section (1) shall be imposed, by an order
5 in writing by the Competent Authority.
(15) In this section,—
(a) “Competent Authority” means the Assessing Officer or the Joint
Commissioner (Appeals) or the Commissioner (Appeals) or the
Commissioner or the Principal Commissioner; and
10 (b) “preceding order” means an order immediately preceding the order
during the course of which the penalty under sub-section (1) has been initiated.
440. (1) An assessee may make an application to the Assessing Officer for Immunity from
imposition of
granting immunity from penalty under section 439 and initiation of proceedings penalty, etc.
under section 478 or section 479, if––
15 (a) the tax and interest payable as per the order of assessment or
reassessment under section 270(10) or section 279, has been paid within the
period specified in the notice of demand; and
(b) no appeal against the order referred to in clause (a) has been filed.
(2) An application referred to in sub-section (1) shall be made within one
20 month from the end of the month in which the order referred to in clause (a) of the
said sub-section has been received in such form and such manner as prescribed.
(3) The Assessing Officer, on fulfilment of the conditions as specified in sub-
section (1), and after the expiry of the period of filing appeal as specified in section
358(3)(a), shall grant immunity from penalty under section 439 and initiation of
25 proceedings under section 478 or 479.
(4) No immunity under sub-section (3) shall be granted if penalty has been
initiated under circumstances referred to in sub-section 439(11).
(5) The Assessing Officer, shall pass an order accepting or rejecting the
application as referred to in sub-section (1) within three months from the end of the
30 month of its receipt.
(6) No order of rejection under sub-section (5) shall be made without giving
the assessee an opportunity of being heard.
(7) The order made under sub-section (5) shall be final.
(8) No appeal under section 356 or 357 or an application for revision under
35 section 378 shall be admissible against the order referred to in sub-section (1)(a), if
an order under sub-section (5) has been made accepting the application.
441. A penalty of twenty-five thousand rupees shall be imposed on a person Failure to
keep, maintain
by the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner or retain books
(Appeals), if he fails to— of account,
documents,
40 (a) keep and maintain the books of account and other documents as per etc.
section 62 or the relevant rules, in respect of any tax year; or
(b) retain such books of account and other documents for the period
specified in the said rules.
 452

Penalty for 442. (1) The Assessing Officer or Commissioner (Appeals) may impose a
failure to keep
and maintain
penalty of 2% of the value of each international transaction or specified domestic
information transaction entered into by a person, if in respect of such transaction he,—
and document,
etc., in respect (a) fails to keep and maintain any such information and document as
of certain required by section 171(1); 5
transactions.
(b) fails to report such transaction as he is required to do so; or
(c) maintains or furnishes an incorrect information or document.
(2) The prescribed income-tax authority referred to in section 171(4)
may impose a penalty of five lakh rupees on a person, if he fails to furnish the
information and document required under the said section. 10

Penalty in 443. (1) The Assessing Officer or the Joint Commissioner (Appeals) or
respect of Commissioner (Appeals) may impose a penalty of 10% of the tax payable under
certain
income.
section 195(1)(i), on an assessee if the income determined in his case for any tax
year includes any income referred to in section 102, 103, 104, 105 or 106.
(2) The penalty under sub-section (1) shall be payable in addition to the tax 15
payable under section 195.
(3) No penalty shall be levied on income referred to in section 102, 103, 104,
105 or 106 to the extent such income has been included by the assessee in the return
of income furnished under section 263 and the tax as per section 195(1)(i) has been
paid on or before the end of the relevant tax year. 20

(4) No penalty under section 439 shall be imposed upon the assessee in respect
of income referred to in sub-section (1).
(5) The provisions of sections 471 and 472 shall as far as may be, apply in
relation to the penalty referred to in this section.

Penalty for 444. The Assessing Officer or the Joint Commissioner (Appeals) or the 25
false entry, Commissioner (Appeals), may impose a penalty equal to the aggregate amount of
etc., in books
of account.
false or omitted entry, where during any proceeding under this Act, it is found that
in the books of account maintained by any person there is—
(a) a false entry; or
(b) an omission of any entry which is relevant for computation of total 30
income of such person, to evade tax liability.
(2) Without prejudice to sub-section (1), the Assessing Officer or the Joint
Commissioner (Appeals) or the Commissioner (Appeals) may impose a penalty
equal to the aggregated amount of false or omitted entry, on any other person, who
causes the person referred to in the said sub-section in any manner to make a false 35
entry or omits or causes to omit any entry referred to in that sub-section.
(3) In this section, “false entry” includes use or intention to use—
(a) forged or falsified documents such as a false invoice or, in general, a
false piece of documentary evidence; or
(b) invoice in respect of supply or receipt of goods or services or both 40
issued by the person or any other person without actual supply or receipt of
such goods or services or both; or
(c) invoice in respect of supply or receipt of goods or services or both to
or from a person who does not exist.
 453

445. (1) If during any proceedings under this Act, it is found that a registered Benefits to
related
non-profit organisation has any specified income which is chargeable to tax as per persons.
section 337 (Table: Sl. No. 2), the Assessing Officer may impose on such person, a
penalty of—

5 (a) a sum equal to the aggregate amount of income applied, directly or

indirectly, by such person, for the benefit of any related person referred to
in section 355(i), if the violation is noticed for the first time during any tax
year; and

(b) a sum equal to 200% of the aggregate amount of income of such

10 person applied, directly or indirectly, by that person for the benefit of any
person referred to in section 355(i), if the violation is noticed again in any
subsequent tax year.

446. If any person fails to get his accounts audited for any tax year or years or Failure to get
accounts
furnish the audit report as required under section 63, the Assessing Officer may audited.
15 impose a penalty on such person, which shall be the lesser of––

(a) 0.5% of the total sales, turnover, or gross receipts in business, or the
gross receipts in profession for such tax year or years; or

(b) one lakh fifty thousand rupees.

Penalty for
447. If any person fails to furnish a report from an accountant as required failure to
20 by section 172, the Assessing Officer may impose a penalty of one lakh rupees furnish report
on such person. under section
172.
448. (1) If any person fails to— Penalty for
failure to
deduct tax at
(a) deduct the whole or in part, the tax as required under source.
Chapter XIX-B; or

25 (b) pay or ensure the payment of, the whole or any part of the tax as
required by or under—

(i) Note 3 in Table in section 393(3); or

(ii) Note 6 to section 393(1) (Table: Sl. No. 8),

then, the Assessing Officer may impose on him, a penalty equal to the tax which
30 such person failed to deduct or pay or ensure payment of, as aforesaid.

449. (1) If any person fails to collect the whole or in part, the tax as required Penalty for
failure to
under Chapter XIX-B, the Assessing Officer may impose on him, a penalty equal to collect tax at
the tax which such person failed to collect. source.

450. If a person takes or accepts any loan or deposit or specified sum in Penalty for
35 contravention of the provisions of section 185, the Assessing Officer may impose failure to
comply with
on him, a penalty equal to the amount of the loan or deposit or specified sum so provisions of
taken or accepted. section 185.

451. The Assessing Officer may impose on a person, a penalty equal to the Penalty for
failure to
sum received by him in contravention of the provisions of section 186 except comply with
40 where he proves that there were good and sufficient reasons for the said provisions of
contravention. section 186.
 454

Penalty for 452. The Assessing Officer may impose on a person, a penalty of five
failure to thousand rupees for every day of the duration of failure where he fails to provide a
comply with
provisions of facility for accepting payments through the prescribed electronic modes of payment,
section 187. as referred to in section 187 except when he proves that there were good and
sufficient reason for such failure. 5

Penalty for 453. If a person repays any loan or deposit or specified advance referred to in
failure to section 188 otherwise than in accordance with the provisions of that section, the
comply with
provisions of
Assessing Officer may impose on him, a penalty equal to the loan or deposit or
section 188. specified advance so repaid.

Penalty for 454. (1) If a person who is required to furnish a statement of financial 10
failure to transaction or reportable account under section 508(1), fails to furnish such
furnish statement within the time prescribed under sub-section (2) thereof, the income-
statement of
financial tax authority prescribed under the said sub-section (1) may impose on him, a
transaction or penalty of five hundred rupees for every day during which such failure
reportable continues. 15
account.
(2) If the person referred to in sub-section (1), fails to furnish the statement
within the period specified in the notice issued under section 508(7), he shall pay
penalty of one thousand rupees for every day during which the failure continues,
beginning from the day immediately after the time specified in the such notice for
furnishing the statement expires. 20

Penalty for 455. (1) The prescribed income-tax authority referred to in section 508 may
furnishing direct that a person required to furnish a statement under sub-section (1) of the said
inaccurate
statement of
section shall pay penalty of fifty thousand rupees, if such person—
financial
transaction or (a) provides inaccurate information in the statement or fails to furnish
reportable correct information within the period specified under section 508(8); or 25
account.
(b) fails to comply with the due diligence requirement under
section 508(9).
(2) The prescribed income-tax authority referred to in section 508, may
direct that a reporting financial institution referred to in sub-section (1)(k) of the
said section, shall, in addition to the penalty under sub-section (1) of this section, 30
if any, pay a sum of five thousand rupees for every inaccurate reportable
account, if––
(a) the said institution provides inaccurate information in the statement
required to be furnished under section 508(1); and
(b) the inaccuracy in the said statement is due to false or inaccurate 35
information furnished by the holder or holders of the relevant reportable
account or accounts.
(3) The reporting financial institution shall be entitled to––
(a) recover the amount paid under sub-section (2) on behalf of the
reportable account holder; or 40

(b) retain an amount equal to the sum so paid out of any moneys that
may be in its possession, or may come to it from every such account holder.
Penalty for 456. If any eligible investment fund required to furnish a statement or
failure to furnish any information or document under section 9(12)(e) [section 9A (5)], fails to
statement or
information or do so within the time prescribed under that section, the income-tax authority 45
document by an prescribed under the said section may direct that such fund shall pay, by way
eligible of penalty, a sum of five lakh rupees.
investment fund.
 455

457. If any person who has entered into an international transaction or Penalty for
failure to
specified domestic transaction fails to furnish any such information or document as furnish
required by section 171(2), a penalty equal to 2 % of the value of such transaction information or
may be imposed upon him for each such failure by the Assessing Officer or the document
under section
5 Transfer Pricing Officer as referred to in section 166 or the Commissioner 171.
(Appeals).
458. If any Indian concern which is required to furnish any information or Penalty for
failure to
document under section 506, fails to do so, the prescribed income-tax authority furnish
under the said section, may direct that such Indian concern shall pay by way of information or
penalty, a sum of— document
10
under section
(a) 2% of the value of the transaction in respect of which such failure 506.
has taken place, if such transaction had the effect of directly or indirectly
transferring the right of management or control in relation to the Indian
concern;
15 (b) five lakh rupees, in any other case.
459. (1) If any reporting entity referred to in section 511, required to furnish Penalty for
failure to furnish
the report referred to in sub-section (2) of the said section, for a reporting accounting report or for
year, fails to do so, the prescribed authority under that section may impose on such furnishing
entity, a penalty of— inaccurate
report under
20 (a) five thousand rupees for every day for which the failure continues, if section 511.
the period of failure does not exceed one month; or
(b) fifteen thousand rupees for every day for which the failure continues
beyond the period of one month.
(2) If a reporting entity referred to in section 511 fails to produce the
25 information and documents within the period allowed under sub-section (7) of the
said section, the prescribed authority under that section may impose on such entity,
a penalty of five thousand rupees for every day during which the failure continues,
beginning from the day immediately following the day on which the period for
furnishing the information and document expires.
30 (3) If the failure referred to in sub-section (1) or (2) continues after an order
imposing a penalty under the said sub-sections, has been served on the entity, then,
irrespective of the provisions of the said sub-sections, the prescribed authority may
impose penalty of fifty thousand rupees for every day for which such failure
continues starting from the date of service of such order.
35 (4) If a reporting entity referred to in section 511 provides inaccurate
information in the report furnished under sub-section (2) of the said section, the
prescribed authority under that section may impose on such entity, a penalty of
five lakh rupees, if—
(a) the entity has knowledge of the inaccuracy at the time of furnishing
40 the report but fails to inform the prescribed authority; or
(b) the entity discovers the inaccuracy after the report is furnished and
fails to inform the prescribed authority and furnish correct report within fifteen
days of such discovery; or
(c) the entity furnishes inaccurate information or document in
45 response to the notice issued under section 511(7).
4 Penalty for
460. If a person required to furnish statement under section 505, fails to do so failure to submit
within the period prescribed under that section, the Assessing Officer may impose statement under
on him, a penalty of— section 505.
 456

(a) one thousand rupees for every day for which the failure continues, if
the period of failure does not exceed three months; or
(b) one lakh rupees in any other case.
Penalty for 461. (1) Where a person, who is required to deliver or causes to be delivered
failure to
furnish a statement prescribed in section 397(3)(b), fails to do so within the time prescribed 5
statements, etc. in the said section, or furnishes incorrect information in the said statement, the
Assessing Officer may impose on such person, a penalty of a sum which shall not
be less than ten thousand rupees but which may extend to one lakh rupees.
(2) No penalty shall be levied under sub-section (1) for delay in filing or
non-filing of statement referred therein, if the person proves that— 10

(a) tax deducted or collected along with the fee and interest, if any, was
paid to the credit of the Central Government; and
(b) the said statement was also delivered before the expiry of one month
from the time prescribed in section 397(3)(b).
Penalty for 462. If a person, who is required to furnish information under 15
failure to furnish
information or section 397 (3)(d), fails to furnish such information, or furnishes inaccurate
furnishing information, the Assessing Officer may impose a penalty of one lakh rupees.
inaccurate
information
under section
397 (3)(d).

Penalty for
furnishing
463. (1) Any accountant or merchant banker or registered valuer, shall be
incorrect liable to pay a penalty of ten thousand rupees for any incorrect information in any
information in report or certificate furnished under any provision of this Act or the rules made 20
reports or
certificates.
thereunder.
(2) The penalty under sub-section (1) shall be payable in respect of each
incorrect report or certificate.
(3) The penalty under sub-section (1) shall be payable on directions of the
Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner 25
(Appeals) where the inaccuracy mentioned in sub-section (1) is found by such
authority in the course of any proceedings under this Act.
(4) In this section,—
(a) “merchant banker” means Category I merchant banker registered
with the Securities and Exchange Board of India established under section 3 30
of the Securities and Exchange Board of India Act, 1992; and 15 of 1992.

(b) “registered valuer” means a person registered as a valuer under

section 514.

Penalty for 464. The Assessing Officer may impose a penalty which shall not be less than
failure to ten thousand rupees but which may extend up to one lakh rupees on— 35
furnish
statements, etc. (a) the research association, University, college or other institution
referred to in section 45, if it fails to deliver or furnish the documents as
prescribed under section 45(4)(a); or
(b) the institution or fund, if it fails to deliver or cause to be delivered a
statement within the time prescribed under section 354(1)(e) or (f), or furnish 40
a certificate prescribed under section 354(1)(g).
 457

465. (1) A person shall be liable to pay a penalty of ten thousand rupees for Penalty for failure
to answer
each default or failure as mentioned below, if that person,— questions, sign
statements,
(a) being legally bound to state the truth of any matter touching the furnish
subject of his assessment, refuses to answer any question put to him by an information,
5 income-tax authority in the exercise of its powers under this Act; or returns or
statements, allow
inspections, etc.
(b) refuses to sign any statement made by him in the course of any
proceedings under this Act, which an income-tax authority may legally require
him to sign; or
(c) to whom a summons is issued under section 246(1), either to attend
10 to give evidence or to produce books of account or other documents at a certain
place and time omits to attend or produce books of account or documents at
the place or time; or
(d) fails to comply with a notice under section 268(1) or (2) or 270(8) or
fails to comply with a direction issued under section 268(5).
15 (2) A person shall be liable to pay a penalty of five hundred rupees for every
day during which the following failures continue, if that person fails to—
(a) comply with a notice under section 175(7); or
(b) give the notice of discontinuance of his business or profession as
required by section 320(3); or
20 (c) furnish in due time any of the returns, statements or particulars
mentioned in section 252 or section 397(3) or 507; or
(d) allow inspection of any register referred to in section 255 or of any
entry in such register or to allow copies of such register or of any entry therein
to be taken; or
25 (e) furnish the return of income as required under section263(1)(a)(iii)
or (iv) or to furnish it within the time allowed and in the manner required under
sections 263(1) and (2); or
(f) deliver or cause to be delivered in due time a copy of the declaration
mentioned in section 393(6); or

30 (g) furnish a certificate under section 395(4); or

(h) deduct and pay tax under section 416(3); or
(i) furnish a statement under section 389(5)(a); or
(j) deliver or cause to be delivered in due time a copy of the declaration
referred to in section 394(2); or
35 (k) deliver or cause to be delivered the statement within the time
specified in section 397(3)(g); or
(l) deliver or cause to be delivered a statement within the time as
prescribed under section 397(3)(e).
(3) The amount of penalty shall not exceed the amount of tax deductible or
40 collectible for failures in relation to the following:––
(a) a declaration mentioned in section 393(6);
(b) a certificate as required by section 395(4); and
(c) statements under section 397(3)(b) or (e).
 458

(4) Any penalty imposable under sub-section (1) or (2) shall be imposed—
(a) if the contravention, failure or default for which such penalty is
imposable occurs in the course of any proceeding before an income-tax
authority not below the rank of Joint Director or a Joint Commissioner, by
such income-tax authority; 5

(b) in a case falling under sub-section (1)(d), by the income-tax authority

who had issued the notice or direction referred to therein;
(c) in a case falling under of sub-section (2)(f), by the Principal Chief
Commissioner or Chief Commissioner or Principal Commissioner or
Commissioner; and 10

(d) in any other case, by the Joint Director or the Joint Commissioner.
(5) In this section, “income-tax authority” includes a Principal Director
General or Director General, Principal Director or Director, Joint Director and an
Assistant Director or Deputy Director while exercising the powers vested in a court
under the Code of Civil Procedure, 1908, when trying a suit in respect of the matters 15 5 of 1908.
specified in section 246(1).
Penalty for 466. If a person fails to comply with the provisions of section 254, the Joint
failure to
comply with
Commissioner, Deputy Director or Assistant Director or the Assessing Officer, may
the provisions impose a penalty which may extend up to one thousand rupees on him.
of section 254.

Penalty for 467. (1) If a person fails to comply with the provisions of section 262, the 20
failure to Assessing Officer may impose a penalty of ten thousand rupees on him.
comply with
the provisions
of section 262.
(2) If a person, required to quote or intimate his permanent account number or
Aadhaar number in any document as referred to in section 262(9)(a), provides or
quotes or intimates a number which is false, knowing or believing it to be false, the
Assessing Officer may impose a penalty of ten thousand rupees on him for each 25
such default.
(3) If a person fails to quote or authenticate his permanent account number
or Aadhaar number in any document referred to in section 262(9)(a), the
Assessing Officer may impose a penalty of ten thousand rupees on him for each
such default. 30

(4) If a person referred to in 262(9)(b) responsible for ensuring the correct

quoting or authentication of permanent account number or Aadhaar number, in
documents relating to transactions prescribed under section 262(9)(a) fails to do so,
the Assessing Officer may impose a penalty of ten thousand rupees on him for each
such default. 35

Penalty for
468. (1) If a person fails to comply with the provisions of section 397, the
failure to comply Assessing Officer may impose a penalty of ten thousand rupees on him.
with the
provisions of (2) If a person, required to quote his Tax Deduction and Collection
section 397(1). Account Number in documents (such as challans, certificates, or statements)
referred to in section 397(1)(b), quotes a number which is false, knowing or 40
believing it to be false, the Assessing Officer may impose a penalty of ten
thousand rupees on him.
469. (1) Irrespective of anything contained in this Act, the Principal
Power to reduce
or waive penalty, Commissioner or Commissioner may, whether on his own motion or otherwise,
etc., in certain at his discretion reduce or waive the penalty imposed or imposable under section 45
cases. 439 if he is satisfied that such person,––
 459

(a) before the Assessing Officer detected any concealment of particulars

of income or of the inaccuracy of particulars furnished in respect of such
income, has made a full and true disclosure of such particulars voluntarily and
in good faith; and
5 (b) has cooperated in any enquiry relating to the assessment of his
income and has paid or made satisfactory arrangements to pay any tax or
interest payable in consequence of an order passed under this Act in respect of
the relevant tax year.
(2) For the purposes of sub-section (1), a person shall be deemed to have made
10 full and true disclosure of his income or of the particulars relating thereto if the
difference between the assessed and returned income does not attract penalties under
section 439.
(3) If the penalty under section 439 relates to income or disclosure in respect
of income relates to more than one tax year and aggregate amount of such income
15 or disclosure thereof for such years exceeds five lakh rupees, the Principal
Commissioner or Commissioner shall obtain prior approval from the Principal Chief
Commissioner or Chief Commissioner or Principal Director General or Director
General, as the case may be, before waiving or reducing the penalty by order
referred to in sub-section (1).
20 (4) Where an order has been made under sub-section (1) in favour of any
person, whether such order relates to one or more tax years, he shall not be entitled
to any relief under this section in relation to any other tax year at any time after the
making of such order.
(5) The Principal Commissioner or Commissioner may, upon an application from
25 the assessee, and after recording his reasons for doing so, reduce or waive the amount of
penalty or penalties (whether they relate to one or more tax years) payable by the assessee
or stay or compound any proceeding for the recovery of any such amount, if––
(a) doing otherwise would cause genuine hardship to the assessee,
30 having regard to the circumstances of the case; and
(b) the assessee has cooperated in any inquiry relating to the assessment
or any proceeding for the recovery of any amount due from him.
(6) The Principal Commissioner or Commissioner shall take prior approval
from the Principal Chief Commissioner or Chief Commissioner or Principal
35 Director General or Director General, as the case may be, if the aggregate amount
of penalties reduced or waived or compounded, as the case may be, under
sub-section (5), exceeds one lakh rupees.
(7) An order under sub-section (5), accepting or rejecting the application under
the said sub-section, shall be passed within twelve months from the end of the month
40 in which such application was received by the Principal Commissioner or
Commissioner.
(8) No rejection of application under sub-section (5) shall be made without
giving the assessee an opportunity of being heard.
(9) Every order made under this section shall be final and shall not be called
45 into question by any court or any other authority.
470. Irrespective of anything contained in the provisions of section 441 or 442 Penalty not to be
imposed in certain
or 446 or 447 or 448 or 449 or 450 or 451 or 454 or 455 or 456 or 457 or 458 or 459 cases.
or 460 or 461 or 462 or 463 or 465(1)(c) or 465(1)(d) or 465(2)(c) or 465(2)(d) or
466 or 467 or 468(1) or 468(2), no penalty shall be imposed on a person or assessee
50 for any failure referred to in the said provisions, if he proves that there was
reasonable cause for the said failure.
 460

Procedure. 471. (1) No order imposing a penalty under this Chapter shall be made unless
the assessee has been heard, or has been given a reasonable opportunity of being
heard.
(2) No order imposing a penalty under this Chapter shall be made without the
prior approval of the Joint Commissioner— 5

(a) where the penalty exceeds ten thousand rupees, by the Income-tax
Officer;
(b) where the penalty exceeds twenty thousand rupees, by the Assistant
Commissioner or Deputy Commissioner.
(3) An income-tax authority on making an order under this Chapter imposing 10
a penalty, unless he himself is the Assessing Officer, shall send a copy of the order
to the Assessing Officer.
Bar of 472. (1) No order imposing a penalty under this Chapter shall be passed after
limitation for
imposing the expiry of six months from the end of the quarter in which—
penalties.
(a) the proceedings, in the course of which action for the imposition of 15
penalty has been initiated, are completed, if the relevant assessment or other
order is not the subject-matter of an appeal under section 356 or 357 or 362;
(b) the order of revision is passed, if the relevant assessment or other
order is the subject-matter of revision under section 377 or 378;
(c) the order of appeal is received by the jurisdictional Principal 20
Commissioner or Commissioner, if the relevant assessment or other order is
the subject-matter of an appeal under section 356 or 357 or 362;
(d) notice for imposition of penalty is issued, in any other case.
(2) The order imposing or enhancing or reducing or cancelling penalty or
dropping the proceedings for the imposition of penalty may be revised on the basis 25
of assessment as revised by giving effect to the order under section 356 or
357 or 362 or 365 or 367 or revision under section 377 or 378, where the relevant
assessment or other order is the subject-matter of an appeal or revision under the
said sections.
(3) No order imposing or enhancing or reducing or cancelling penalty or 30
dropping the proceedings for the imposition of penalty under sub-section (2) shall
be passed—
(a) unless the assessee has been heard, or has been given a reasonable
opportunity of being heard;
(b) after the expiry of six months from the end of the quarter in which 35
the order under section 356 or 357 or 362 or 365 or 367 is received by the
jurisdictional Principal Commissioner or Commissioner or the order of
revision under section 377 or 378 is passed.
(4) The provisions of section 471(2) shall apply to the order imposing or
enhancing or reducing penalty under this section. 40

(5) In computing the period of limitation for the purposes of this section,
following period shall be excluded—
(a) the time taken in giving an opportunity to the assessee to be reheard
under the section 244 (2);
(b) the period commencing on the date on which stay on proceeding for 45
levy of penalty was granted by an order or injunction of any court and ending
on the date on which certified copy of the order vacating the stay was received
by jurisdictional Principal Commissioner or Commissioner.
 461

CHAPTER XXII
OFFENCES AND PROSECUTION
473. Whoever contravenes any order referred to in section 247(1)(viii) or (4) Contravention of
shall be punishable with rigorous imprisonment which may extend to two years and order made under
section 247.
5 shall also be liable to fine.
474. If a person, who is required to afford the authorised officer with the Failure to
necessary facility to inspect the books of account or other documents under section comply with
247(1)(b)(ii) fails to do so, he shall be punishable with rigorous imprisonment for a section
247(1)(b)(ii).
term which may extend to two years and shall also be liable to fine.
Removal,
10 475. Whoever, fraudulently removes, conceals, transfers or delivers to any concealment,
person, any property or any interest therein, with the intent to prevent such transfer or
property or interest from being taken in execution of a certificate as prescribed, delivery of
shall be punishable with rigorous imprisonment for a term which may extend to property to
prevent tax
two years and shall also be liable to fine. recovery.
15 476. (1) If a person fails to—
(a) pay to the credit of the Central Government, the tax deducted at Failure to pay tax
source by him as required by or under the provisions of Chapter XIX-B; or to credit of
Central
(b) pay tax or ensure payment of tax to the credit of the Central Government
Government, as required under— under Chapter
XIX-B.
20 (i) Note 3 in Table in section 393(3); or
(ii) Note 6 to section 393(1) (Table: Sl. No. 8),
he shall be punishable with rigorous imprisonment for a term which shall not be less than
three months but which may extend to seven years, and shall also be liable to fine.
(2) The provisions of this section shall not apply if the payment referred to in
25 sub-section (1)(a) has been credited to the Central Government on or before the time
prescribed for filing the statement for such payment under section 397(3)(b).
477. (1) Where a person fails to pay to the credit of the Central Government Failure to pay tax
collected at
the tax collected by him as required under section 394, he shall be punishable source.
with rigorous imprisonment for a term which shall not be less than three months
30 but which may extend to seven years and shall also be liable to fine.
(2) The provisions of this section shall not apply if the payment of the tax
collected at source has been made to the credit of the Central Government at any
time on or before the time prescribed for filing the statement under
section 397(3)(b) in respect of such payment.
35 478. (1) If a person wilfully attempts in any manner to evade payment of any Wilful attempt to
tax, penalty or interest chargeable or imposable, or under-reports his income, under evade tax, etc.
this Act, he shall be punishable,—
(a) in a case, where the amount sought to be evaded or tax on
under-reported income exceeds twenty-five lakh rupees, with rigorous
40 imprisonment for a term which shall not be less than six months but which
may extend to seven years and shall also be liable to fine;
(b) in any other case, with rigorous imprisonment for a term which shall
not be less than three months but which may extend to two years and shall also
be liable to fine,
45 and shall also be liable for penalty that may be imposable on him under any other
provision of this Act.
(2) If a person wilfully attempts in any manner to evade the payment of any
tax, penalty or interest under this Act, he shall be punishable with rigorous
imprisonment for a term which shall not be less than three months but which
50 may extend to two years and shall, in the discretion of the court, also be liable
4 to fine.
 462

(3) In addition to the punishment referred to in sub-section (2), the person

referred to in the said sub-section shall also be liable for penalty that may be
imposable on him under any other provision of this Act.
(4) For the purposes of this section, a wilful attempt to evade any tax, penalty
or interest chargeable or imposable under this Act, or the payment thereof, shall 5
include a case where any person—
(a) has in his possession or control any books of account or other
documents (being books of account or other documents relevant to any
proceeding under this Act) containing a false entry or statement; or
(b) makes or causes to be made any false entry or statement in such 10
books of account or other documents; or
(c) wilfully omits or causes to be omitted any relevant entry or statement
in such books of account or other documents; or
(d) causes any other circumstance to exist which may have the effect of
enabling such person to evade any tax, penalty or interest chargeable or 15
imposable under this Act or the payment thereof.
Failure to furnish 479. (1) If a person wilfully fails to furnish in due time the return of income,
returns of income. which is required to be furnished under section 263(1), or by notice given under
sections 268(1) or 280, he shall be punishable,—
(a) in a case, where the amount of tax, which would have been evaded 20
if the failure had not been discovered, exceeds twenty- five lakh rupees, with
rigorous imprisonment for a term which shall not be less than six months but
which may extend to seven years and shall also be liable to fine;
(b) in any other case, with imprisonment for a term which shall not be
less than three months but which may extend to two years and shall also be 25
liable to fine.
.
(2) A person shall not be proceeded against under sub-section (1) for failure
to furnish in due time the return of income under section 263(1) for any tax
year, if––
(a) the return is furnished by him before the expiry of one year from the 30
end of the tax year or a return is furnished by him under section 263(6) within
the time provided in that section; or
(b) the tax payable by such person, not being a company, on the total
income determined on regular assessment, as reduced by the advance tax or
self-assessment tax, if any, paid before the expiry of one year from the end of 35
the tax year, and any tax deducted or collected at source, does not
exceed ten thousand rupees.

Failure to furnish
480. If a person wilfully fails to furnish in due time the return of total income
return of income in which is required to be furnished by notice given under section 294 (1)(a), he shall
search cases. be punishable with imprisonment for a term which shall not be less than three 40
months but which may extend to three years and shall also be liable to fine.
Failure to produce 481. If a person wilfully fails to produce, or cause to be produced, the accounts
accounts and and documents as are referred to in the notice served on him under section 268(1)
documents.
on or before the date specified in such notice, or wilfully fails to comply with a
direction issued to him under section 268(5) of, he shall be punishable with rigorous 45
imprisonment for a term which may extend to one year and shall also be liable to 0
fine.
 463

482. If a person makes a statement in any verification under this Act or under False statement
in verification,
any rule made thereunder, or delivers an account or statement which is false, and etc.
which he either knows or believes to be false, or does not believe to be true, he shall
be punishable,—

5 (a) in a case, where the amount of tax, which would have been evaded
if the statement or account had been accepted as true, exceeds twenty-five lakh
rupees, with rigorous imprisonment for a term which shall not be less than six
months but which may extend to seven years and shall also be liable to fine;

(b) in any other case, with rigorous imprisonment for a term which shall
10 not be less than three months but which may extend to two years and shall also
be liable to fine.
483. (1) If any person (herein referred to as the first person) wilfully and with Falsification of
intent to enable any other person (herein referred to as the second person) to evade books of
account or
any tax or interest or penalty chargeable and imposable under this Act in the document, etc.
15 circumstances referred to in sub-section (2), the first person shall be punishable with
rigorous imprisonment for a term which shall not be less than three months but
which may extend to two years and with fine.
(2) The circumstances referred to in sub-section (1) shall be, where the first
person makes or causes to be made any entry or statement which is false and which
20 the first person either knows to be false or does not believe to be true, in any books
of account or other document relevant to or useful in any proceedings against the
first person or the second person, under this Act.
(3) For the purposes of establishing the charge under this section, it shall not
be necessary to prove that the second person has actually evaded any tax, penalty or
25 interest chargeable or imposable under this Act.
484. If a person abets or induces in any manner another person–– Abetment of
false return, etc.
(a) to make and deliver an account or a statement or declaration relating
to any income chargeable to tax which is false and which he either knows to
be false or does not believe to be true; or
30 (b) to commit an offence under section 478(1),
he shall be punishable,—

(i) in a case, where the amount of tax, penalty or interest which

would have been evaded, if the declaration, account or statement had
been accepted as true, or which is wilfully attempted to be evaded,
35 exceeds twenty-five lakh rupees, with rigorous imprisonment for a term
which shall not be less than six months but which may extend to seven
years and shall also be liable to fine;
(ii) in any other case, with rigorous imprisonment for a term which shall not
be less than three months but which may extend to two years and shall also be
40 liable to fine.
Punishment for
485. If any person convicted of an offence under sections 476, 477, 478(1), second and
479, 480, 482 or 484 is again convicted of an offence under any of the said sections, subsequent
he shall be punishable for the second and for every subsequent offence with rigorous offences.
imprisonment for a term which shall not be less than six months but which may
45 extend to seven years and shall also be liable to fine.
 464

Punishment not to 4 486. No person shall be punishable for any failure referred to in section 476
be imposed in
certain cases.
or 477, irrespective of anything contained in that section, if he proves that there was
reasonable cause for such failure.
Offences by 487. (1) If an offence under this Act has been committed by a company, every
companies. person who, at the time the offence was committed, was in charge of, and was 5
responsible to, the company for the conduct of the business of the company as well
as the company shall be deemed to be guilty of the offence and shall be liable to be
proceeded against and punished accordingly.
(2) The provisions of sub-section (1) shall not apply if the person referred in
the said sub-section proves that the offence was committed without his knowledge 10
or that he had exercised all due diligence to prevent the commission of such
offence.
(3) If it is proved that an offence under this Act has been committed by a
company with the consent or connivance of, or is attributable to any neglect on the
part of, any director, manager, secretary or other officer of the company, then 15
irrespective of the provisions of sub-section (1), such director, manager, secretary
or other officer shall also be deemed to be guilty of that offence and shall be liable
to be proceeded against and punished accordingly.
(4) Where an offence committed by a company under this Act is punishable
with imprisonment and fine, then, without prejudice to the provisions contained in 20
sub-section (1) or (3), such company shall be punished with fine and every person
referred to in sub-section (1), or the director, manager, secretary or other officer of
the company referred to in sub-section (3), shall be liable to be proceeded against
and punished as per the provisions of this Act.
(5) In this section,— 25

(a) “company” means a body corporate and includes—

(i) a firm; and
(ii) an association of persons or a body of individuals, whether
incorporated or not; and
(b) “director”, in relation to— 30

(i) a firm, means a partner in the firm;

(ii) any association of persons or a body of individuals, means any
member controlling the affairs thereof.
Offences by
Hindu 488. (1) Where an offence under this Act has been committed by a Hindu
undivided undivided family, the karta thereof shall be deemed to be guilty of the offence and 35
family. shall be liable to be proceeded against and punished accordingly.
(2) Nothing contained in sub-section (1) shall render the karta liable to any
punishment, if he proves that the offence was committed without his knowledge or
that he had exercised all due diligence to prevent the commission of such offence.
(3) Irrespective of anything contained in sub-section (1), where an offence 40
under this Act has been committed by a Hindu undivided family, a member of such
Hindu undivided family shall also be deemed to be guilty of that offence and shall
be liable to be proceeded against and punished accordingly, if it is proved that—
(a) the offence has been committed with the consent or connivance of
such member; or 45
4
(b) the offence is attributable to any neglect on the part of such member.
 465

489. (1) Where during the course of any search made under section 247, Presumption as
to assets,
any money, bullion, jewellery, virtual digit asset or other valuable article or books of
thing (herein referred to as the assets) or any books of account or other account, etc.,
documents, has or have been found in the possession or control of any person in certain
cases.
5 and such assets or books of account or other documents are tendered by the
prosecution in evidence against such person, or against such person and the
person referred to in section 484, for an offence under this Act, the provisions
of section 247(7) shall, so far as may be, apply in relation to such assets or books
of account or other documents.
10 (2) Where any assets or books of account or other documents taken into
custody from the possession or control of any person, by the officer or authority
referred to in section 248(1)(a) or (b) or (c) are delivered to the requisitioning officer
under sub-section (2) of that section and such assets, books of account or other
documents are tendered by the prosecution in evidence against such person, or
15 against such person and the person referred to in section 484, for an offence under
this Act, the provisions of section 247(7) shall, so far as may be, apply in relation to
such assets or books of account or other documents.
490. (1) In any prosecution for any offence under this Act, which requires a Presumption as
culpable mental state on the part of the accused, the court shall presume the to culpable
mental state.
20 existence of such mental state but it shall be a defence for the accused to prove the
fact that he had no such mental state with respect to the act charged as an offence in
that prosecution.
(2) In this section, “culpable mental state” includes intention, motive or
knowledge of a fact or belief in, or reason to believe, a fact.
25 (3) For the purposes of this section, a fact is said to be proved only when the
court believes it to exist beyond reasonable doubt and not merely when its existence
is established by a preponderance of probability.
491. (1) A person shall not be proceeded against for an offence under Prosecution to
be at instance
section 473, 474, 475, 476, 477, 478, 479, 480, 481, 482, 483, or 484 except with of Principal
30 the previous sanction of the Principal Commissioner or Commissioner or Joint Chief
Commissioner (Appeals) or Commissioner (Appeals). Commissioner
or Chief
(2) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner
or Principal
Director General or Director General may issue such instructions or directions to Commissioner
the income-tax authorities mentioned in sub-section (1) as he considers fit for or
35 institution of proceedings under that sub-section. Commissioner.

(3) A person shall not be proceeded against for an offence under

section 478 or 482 in relation to the assessment for a tax year for which the
penalty imposed or imposable on him under section 439 has been reduced or
waived by an order under section 469.

40 (4) Any offence under this Chapter may be compounded, either before or after
the institution of proceedings, by the Principal Chief Commissioner or Chief
Commissioner or a Principal Director General or Director General.
(5) Where any proceeding has been taken against any person under
sub-section (1), any statement made or account or other document produced by such
45 person before any income-tax authority specified in section 236(a) to (k) shall not
be inadmissible as evidence for the purpose of such proceedings merely on the
ground that—
(a) such statement was made or such account or document was produced
in the belief that the penalty imposable would be reduced or waived, under
50 section 469; or
 466

(b) the offence for which such proceeding was taken would be
compounded.
(6) The power of the Board to issue orders, instructions or directions
under this Act shall include the power to issue instructions or directions
(including instructions or directions to obtain the previous approval of the 5
Board) to other income-tax authorities for the proper composition of offences
under this section.
Certain offences 492. Irrespective of anything contained in the Bharatiya Nagarik Suraksha
to be non- Sanhita, 2023, an offence punishable under section 476, 478, 479, 480, 482 or 484 46 of 2023.
cognizable.
shall be deemed to be non-cognizable within the meaning of that Sanhita. 10

Proof of entries 493. Entries in the records or other documents in the custody of an
in records or income-tax authority shall be admitted in evidence in any proceedings for the
documents.
prosecution of any person for an offence under this Chapter, and all such entries
may be proved by—
(a) production of the records or other documents in the custody of the 15
income-tax authority containing such entries; or
(b) production of a copy of the entries certified by the income-tax
authority having custody of the records or other documents under its signature
and stating that it is a true copy of the original entries and that such original
entries are contained in the records or other documents in its custody. 20

Disclosure of 494. (1) A public servant, who furnishes any information or produces any
particulars by document in contravention of the provisions of section 258(3), shall be punishable
public servants.
with imprisonment which may extend to six months and shall also be liable
to fine.
(2) No prosecution shall be instituted under this section except with the 25
previous sanction of the Central Government.
Special Courts. 495. (1) The Central Government, in consultation with the Chief Justice of the
High Court, may, for trial of offences punishable under this Chapter, by notification,
designate one or more courts of Judicial Magistrate of the first class as Special Court
for such area or areas, or for such cases or class or group of cases, as specified in 30
the notification.
(2) In this section, “High Court” means the High Court of the State in which
a Judicial Magistrate of first class designated as Special Court was functioning
immediately before such designation.
(3) While trying an offence under this Act, a Special Court shall also try an 35
offence, other than an offence referred to in sub-section (1), with which the accused
may, under the Bharatiya Nagarik Suraksha Sanhita, 2023, be charged at the 46 of 2023.
same trial.
Offences triable 496. (1) Irrespective of anything contained in the Bharatiya Nagarik Suraksha
by Special Sanhita, 2023,— 40 46 of 2023.
Court.
(a) the offences punishable under this Chapter shall be triable only by
the Special Court, if so designated, for the area or areas or for cases or class
or group of cases, as the case may be, in which the offence has been
committed;
(b) a Special Court may, upon a complaint made by an authority 45
authorised in this behalf under this Act, take cognizance of the offence for
which the accused is committed for trial.
 467

(2) For the purposes of sub-section (1)(a), the court competent to try offences
under section 520,—
(a) which has been designated as a Special Court under this section, shall
continue to try the offences before it or offences arising under this Act after
5 such designation;
(b) which has not been designated as a Special Court, shall continue to
try such offence pending before it till its disposal.
497. The Special Court, irrespective of anything contained in the Bharatiya Trial of offences
as summons
46 of 2023. Nagarik Suraksha Sanhita, 2023, shall try an offence under this Chapter case.
10 punishable with imprisonment not exceeding two years or with fine, or with
both, as a summons case, and the provisions of the Bharatiya Nagarik Suraksha
Sanhita, 2023 as applicable in the case of trial of summons case, shall apply
accordingly.
498. (1) Save as otherwise provided in this Act, the provisions of Bharatiya Application of
Bharatiya
46 of 2023. 15 Nagarik Suraksha Sanhita, 2023 (including the provisions as to bails or bonds), Nagarik
shall apply to the proceedings before a Special Court and the person conducting Suraksha
the prosecution before the Special Court, shall be deemed to be a Public Sanhita, 2023
Prosecutor. to proceedings
before Special
(2) The Central Government may also appoint a Special Public Prosecutor for Court.
20 any case or class or group of cases.
(3) A person shall not be qualified to be appointed as a Public Prosecutor
or a Special Public Prosecutor under this section unless he has been in practice
as an advocate for not less than seven years, requiring special knowledge
of law.
25 (4) Every person appointed as a Public Prosecutor or a Special Public
Prosecutor under this section shall be deemed to be a Public Prosecutor within the
46 of 2023. meaning of section 2(v) of the Bharatiya Nagarik Suraksha Sanhita, 2023, and the
provisions of that Sanhita shall have effect accordingly.
CHAPTER XXIII
30 MISCELLANEOUS
499. (1) Where, during the pendency of any proceeding under this Act or after Certain
the completion thereof, but before the service of notice by the Tax Recovery Officer transfers to be
void.
as per the procedure specified under section 413, any assessee creates a charge on,
or parts with the possession of, any of his assets in favour of any other person, such
35 charge or transfer shall be void as against any claim in respect of any tax or any
other sum payable by the assessee as a result of the completion of the said
proceeding or otherwise.
(2) The charge or transfer as referred to in sub-section (1) shall not be void if
it is made—
40 (a) for adequate consideration and without notice of the pendency of
such proceeding or, as the case may be, without notice of such tax or other
sum payable by the assessee; or
(b) with the previous permission of the Assessing Officer.
(3) This section applies to cases where the amount of tax or other sum payable
45 or likely to be payable exceeds five thousand rupees and the assets charged or
transferred exceed ten thousand rupees in value.
 468

(4) In this section,––

(a) “assets” means land, building, machinery, plant, shares, securities
and fixed deposits in banks, virtual digital asset, to the extent to which any of
the said assets does not form part of the stock-in-trade of the business of the
assessee; and 5

(b) the modes of creating a charge on or parting with the possession of such
assets shall include sale, mortgage, gift, exchange or any other mode of transfer.
Provisional 500. (1) Where, during the pendency of any proceeding for—
attachment to
protect revenue (a) the assessment of any income or for the assessment or reassessment
in certain cases.
of any income, which has escaped assessment; or 10

(b) imposition of penalty under section 444, where the amount or

aggregate of amounts of penalty likely to be imposed under the said section
exceeds two crore rupees,
the Assessing Officer is of the opinion that for protecting the interests of the revenue
it is necessary so to do, he may, with the previous approval of the Competent 15
Authority by order in writing, attach provisionally any property belonging to the
assessee in the manner prescribed in section 413.
(2) Every provisional attachment under sub-section (1) shall cease to have
effect after the expiry of six months from the date of the order made under the said
sub-section. 20

(3) The Competent Authority may, for reasons to be recorded in writing,

extend the period referred to in sub-section (2) and the total period of such extension
shall not exceed two years or sixty days after the date of order of assessment or
reassessment, whichever is later.
(4) Where the assessee furnishes a guarantee from a scheduled bank for an 25
amount not less than the fair market value of the property provisionally attached
under sub-section (1), the Assessing Officer shall, by an order in writing, revoke
such attachment.
(5) For the purposes of sub-section (4), where the Assessing Officer is satisfied
that a guarantee from a scheduled bank for an amount lower than the fair market 30
value of the property is sufficient to protect the interests of the revenue, he may
accept such guarantee and revoke the attachment.
(6) The Assessing Officer may, for determining the value of the property
provisionally attached under sub-section (1), make a reference to the Valuation
Officer, who shall estimate the fair market value of the property in the manner 35
provided under section 269(3) to (8), and submit a report of such estimate to the
Assessing Officer within thirty days from the date of receipt of the reference.
(7) An order revoking the provisional attachment under sub-section (4) or (5)
shall be made—
(a) within forty-five days from the date of receipt of the guarantee, where 40
a reference to the Valuation Officer has been made under sub-section (6); or
(b) within fifteen days from the date of receipt of guarantee, in any
other case.
(8) Where a notice of demand specifying a sum payable is served upon the
assessee and the assessee fails to pay that sum within the time specified, the 45
Assessing Officer may invoke the guarantee furnished under sub-section (4) or (5),
wholly or in part, to recover the amount.
 469

(9) The Assessing Officer shall, in the interests of revenue, invoke the bank
guarantee, if the assessee fails to renew the guarantee referred to in sub-section (4)
or (5), or fails to furnish a new guarantee from a scheduled bank for an equal
amount, before fifteen days of its expiry.
5 (10) The amount realised by invoking the guarantee referred to in
sub-section (4) or (5) shall be adjusted against––
(a) the existing demand which is payable by the assesse; and
(b) the balance amount, if any, shall be deposited in the Personal Deposit
Account of the Principal Commissioner or Commissioner in the branch of the
10 Reserve Bank of India or the State Bank of India or any bank as may be
appointed by the Reserve Bank of India as its agent under section 45(1) of the
2 of 1934. Reserve Bank of India Act, 1934 at the place where the office of the Principal
Commissioner or Commissioner is situated.
(11) Where the Assessing Officer is satisfied that the guarantee referred to in
15 sub-section (4) or (5) is not required any more to protect the interests of the revenue,
he shall release that guarantee forthwith.
(12) In this section, “Competent Authority” means the Principal Chief
Commissioner or Chief Commissioner, Principal Commissioner or Commissioner,
Principal Director General or Director General or Principal Director or Director.
20 501. (1) The service of a notice, or summon, or requisition, or order, or any Service of
notice,
other communication, under this Act may be made by delivering or transmitting a generally.
copy thereof, to the person therein named—
(a) by post or by such courier services as may be approved by the
Board; or
5 of 1908. 25 (b) as provided under the Code of Civil Procedure, 1908 for the purposes
of service of summons; or
(c) in the form of any electronic record as provided in Chapter IV of the
21 of 2000. Information Technology Act, 2000; or
(d) by any other means of transmission of documents, as prescribed.
30 (2) The Board may make rules providing for the addresses (including the
address for electronic mail or electronic mail message) to which the communication
referred to in sub-section (1) may be delivered or transmitted to the person therein
named.
(3) In this section, “electronic mail” and “electronic mail message” means a
35 message or information created or transmitted or received on a computer, computer
system, computer resource or communication device including attachments in text,
image, audio, video and any other electronic record, which may be transmitted with
the message.
502. (1) Where this Act requires a notice or other document to be issued by Authentication
of notices and
40 any income-tax authority, such notice or other document shall be signed and issued other
in paper form or communicated in electronic form by that authority as per such documents.
procedure, as prescribed.
(2) Every notice or other document to be issued, served or given under this
Act by any income-tax authority, shall be deemed to be authenticated, if the name
45 and office of a designated income-tax authority is printed, stamped or otherwise
written thereon.
(3) In this section, “designated income-tax authority” means any income-tax
authority authorised by the Board to issue, serve or give such notice or other
document after authentication in the manner as provided in sub-section (2).
 470

Service of notice 503. (1) After a finding of total partition has been recorded by the Assessing
when family is
disrupted or firm
Officer under section 315 for any Hindu family, notices under this Act in respect of
etc., is dissolved. the income of the Hindu family shall be served on the person, who was its last
manager, or, if such person is dead, then on all adults who were members of the
Hindu family immediately before the partition. 5

(2) Where a firm or other association of persons is dissolved, notices under

this Act for the income of such firm or association may be served on any person,
who was a partner (not being a minor) or member of the association, immediately
before its dissolution.
Service of notice 504. Where an assessment is to be made under section 320, the Assessing 10
in case of
discontinued Officer may serve on the—
business.
(a) person whose income is to be assessed; or
(b) person who was a member of a firm or association of persons at
the time of its discontinuance, in the case of a firm or an association of
persons; or 15

(c) principal officer, in case of a company,

a notice containing all or any of the requirements which may be included in a notice
under section 268(1) and the provisions of this Act shall, so far as may be, apply
accordingly as if the notice were a notice issued under that sub-section.
Submission of 505. Every person, being a non-resident, having a liaison office in India set up 20
statement by a
non-resident
as per the guidelines issued by the Reserve Bank of India under the Foreign
having liaison Exchange Management Act, 1999, shall, in respect of its activities in a tax year, 42 of 1999.
office. prepare and deliver to the Assessing Officer having jurisdiction, within sixty days
from the end of such tax year, a statement, in such form and containing such
25
particulars, as prescribed.
Furnishing of 506. Where,––
information or
documents by an (a) any share of, or interest in, a company or an entity registered or
Indian concern
in certain cases. incorporated outside India, derives, directly or indirectly, its value
substantially from the assets located in India, as referred to in
section 9(9)(a); and 30

(b) such company or, entity, holds, directly or indirectly, such assets in
India through, or in, an Indian concern,
then, such Indian concern shall, for the determination of any income accruing or
arising in India under the said clause, furnish within such period, the information
or documents in such manner, as prescribed, to the prescribed income-tax 35
authority.
Submission of 507. (1) Any person carrying on the production of a cinematograph film or
statements by
producers of
engaged in any specified activity, or both, during the whole or any part of any tax
cinematograph year shall, furnish within such period, a statement in such form and in such manner,
films or persons as prescribed, to the prescribed income-tax authority. 40
engaged in
specified (2) The statement referred in sub-section (1) shall contain particulars of all
activity.
payments of over fifty thousand rupees in the aggregate made by him or due from
him to each such person as is engaged by him in such production or
specified activity.
(3) In this section, “specified activity” means any event management, 45
documentary production, production of programmes for telecasting on television or
over the top platforms or any other similar platform, sports event management, other
performing arts or any other activity as the Central Government may, by
notification, specify.
 471

508. (1) Any person, being— Obligation to

furnish
(a) an assessee; or statement of
financial
transaction or
(b) the prescribed person, in the case of an office of Government; or reportable
account.
(c) a local authority or other public body or association; or
5 (d) the Registrar or Sub-Registrar appointed under section 6 of the
16 of 1908. Registration Act, 1908; or
(e) the registering authority empowered to register motor vehicles under
59 of 1988. Chapter IV of the Motor Vehicles Act, 1988; or
(f) the Director General as referred to in section 2(a) of the Post Office
43 of 2023. 10 Act, 2023; or
(g) the Collector referred to in section 3(g) of the Right to Fair
Compensation and Transparency in Land Acquisition, Rehabilitation and
30 of 2013. Resettlement Act, 2013; or
(h) the recognised stock exchange referred to in section 2(f) of the
42 of 1956. 15 Securities Contracts (Regulation) Act, 1956; or
(i) an officer of the Reserve Bank of India, constituted under section 3
2 of 1934. of the Reserve Bank of India Act, 1934; or
(j) a depository referred to in section 2(1)(e) of the Depositories
22 of 1996. Act, 1996; or
20 (k) a prescribed reporting financial institution; or
(l) any other person, as prescribed,
who is responsible for registering, or, maintaining books of account or other
document containing a record of any specified financial transaction or any
reportable account, as prescribed, under any law in force, shall furnish a statement
25 regarding such specified financial transaction or such reportable account, which is
registered or recorded or maintained by him and information relating to which is
relevant and required for this Act, to the income-tax authority or such other
authority or agency, as prescribed.
(2) The statement referred to in sub-section (1) shall be furnished for such
30 period, within such time and in the form and manner, as prescribed.
(3) In sub-section (1), “specified financial transaction” means any
transaction—
(a) of purchase, sale or exchange of goods or property or right or interest
in a property; or
35 (b) for rendering any service; or
(c) under a works contract; or
(d) by way of an investment made or an expenditure incurred; or
(e) for taking or accepting any loan or deposit,
as prescribed.
40 (4) The Board may prescribe different values for different transactions
specified in sub-section (3) for different persons having regard to the nature of such
transaction.
 472

(5) If the prescribed income-tax authority finds a defect in the statement

furnished under sub-section (1), he may intimate the defect to the person furnishing
such statement, to rectify the defect within thirty days from the date of such
intimation, and at his discretion, extend the said period upon an application made
for this purpose. 5

(6) If the defect mentioned in sub-section (5) remains unrectified within the
initial period of thirty days or extended period as applicable, then, the provisions of
this Act shall apply as if such person had furnished inaccurate information in the
statement, irrespective of anything contained in any other provision of this Act.
(7) If a person required to furnish a statement under sub-section (1) fails to do 10
so within the specified time, the prescribed income-tax authority may serve upon
such person a notice requiring him to furnish such statement, within a period not
exceeding thirty days from the date of service of notice, and he shall furnish the
statement within the time specified therein.
(8) If a person, having furnished a statement under sub-section (1), or in 15
pursuance of a notice issued under sub-section (7), becomes aware of any
inaccuracy in the information provided, he shall within ten days, inform the
prescribed income-tax authority or other authority or agency referred to in
sub-section (1), of the inaccuracy and furnish the correct information in such
manner, as prescribed. 20

(9) The Central Government may, specify by rules,—

(a) the persons referred to in sub-section (1) to be registered with the
prescribed income-tax authority;
(b) the nature of information and the manner in which such information
shall be maintained by the persons referred to in clause (a); and 25

(c) the due diligence to be carried out by the persons for the identification
of any reportable account referred to in sub-section (1).
Obligation to 509. (1) Any person, being a reporting entity, as prescribed, in respect of a
furnish
information on
crypto-asset, shall furnish information in respect of a transaction of such
transaction of crypto-asset in a statement, for such period, within such time, in such form and 30
crypto-asset. manner and to such income-tax authority, as prescribed.
(2) Where the prescribed income-tax authority considers that the statement
furnished under sub-section (1) is defective, he may intimate the defect to the person
who has furnished such statement and give him an opportunity of rectifying the
defect within thirty days from the date of such intimation or such further period as 35
may be allowed, and if the defect is not rectified within such period, the provisions
of this Act shall apply as if such person had furnished inaccurate information in the
statement.
(3) Where a person who is required to furnish a statement under
sub-section (1) has not furnished the same within the specified time, the prescribed
income-tax authority may serve upon such person a notice requiring him to furnish 40
such statement within a period not exceeding thirty days from the date of service of
such notice and he shall furnish the statement within the time specified in the notice.
(4) If any person, having furnished a statement under sub-section (1), or in
pursuance of a notice issued under sub-section (3), comes to know or discovers any
inaccuracy in the information provided in the statement, he shall within ten days 45
inform the prescribed income-tax authority, the inaccuracy in such statement and
furnish the correct information in such manner as prescribed.
(5) The Central Government may, by rules prescribe—
 473

(a) the persons referred to in sub-section (1) to be registered with the

prescribed income-tax authority;
(b) the nature of information and the manner in which such information
shall be maintained by the persons referred to in clause (a); and
5 (c) the due diligence to be carried out by the persons referred to in
sub-section (1) for the purpose of identification of any crypto-asset user or owner.
(6) In this section, “crypto-asset” shall have the meaning assigned to it in
section 2(111)(d).
510. (1) The prescribed income-tax authority or the person authorised by such Annual
10 authority, shall upload in the registered account of the assessee an annual information
statement.
information statement in such form and manner, within such time and along with
such information, which is in the possession of an income-tax authority, as
prescribed.
(2) In sub-section (1), “registered account” means the electronic filing account
15 registered by the assessee in the web portal, as may be designated by the prescribed
income-tax authority or the person authorised by such authority.
511. (1) Every constituent entity resident in India, shall, if it is constituent of Furnishing of
report in respect
an international group, the parent entity of which is not resident in India, notify the of international
prescribed income-tax authority in the form and manner, on or before such date, as group.
20 prescribed,—
(a) whether it is the alternate reporting entity of the international
group; or
(b) the details of the parent entity or the alternate reporting entity, if any,
of the international group, and the country or territory of which the said entities
25 are resident.
(2) Every parent entity or the alternate reporting entity, resident in India, shall,
for every reporting accounting year, in respect of the international group of which
it is a constituent, furnish a report, to the prescribed income-tax authority within
twelve months from the end of the said reporting accounting year, in such form and
30 manner, as prescribed.
(3) In sub-sections (2) and (4), the report in respect of an international group
shall include—
(a) the aggregate information in respect of the amount of revenue, profit
or loss before income-tax, amount of income-tax paid, amount of income-tax
35 accrued, stated capital, accumulated earnings, number of employees and
tangible assets not being cash or cash equivalents, with regard to each country
or territory in which the group operates;
(b) the details of each constituent entity of the group including the
country or territory in which such constituent entity is incorporated or
40 organised or established and the country or territory where it is resident;
(c) the nature and details of the main business activity or activities of
each constituent entity; and
(d) any other information, as prescribed.
(4) A constituent entity of an international group, resident in India, other than
45 the entity referred to in sub-section (2), shall furnish the report referred to in the said
sub-section, in respect of the international group for a reporting accounting year
within the period, as prescribed, if the parent entity is resident of a country or
territory,—
 474

(a) where the parent entity is not obligated to file the report of the nature
referred to in the said sub-section;
(b) with which India does not have an agreement providing for exchange
of the report of the nature referred to in the said sub-section;
(c) where there has been a systemic failure and such failure has been 5
intimated by the prescribed income-tax authority to such constituent entity.
(5) If there are more than one such constituent entities of the group, resident
in India, the report as mentioned in sub-section (4) shall be furnished by any one
constituent entity, if—
(a) the international group has designated such entity to furnish the 10
report as per sub-section (2) on behalf of all the constituent entities resident in
India; and
(b) the information has been conveyed in writing on behalf of the group
to the prescribed income-tax authority.
(6) The provisions of sub-sections (4) and (5) shall not apply, if— 15

(a) an alternate reporting entity of the international group has furnished

a report of the nature referred to in sub-section (2), with the tax authority of
the country or territory in which such entity is resident, on or before the date
specified by that country or territory; and
(b) the following conditions are satisfied:— 20

(i) the said report is required to be furnished under any law in force
in the said country or territory;
(ii) the said country or territory has entered into an agreement with
India providing for exchange of the said report;
(iii) the prescribed income-tax authority has not conveyed any 25
systemic failure in respect of the said country or territory to any
constituent entity of the group that is resident in India;
(iv) the said country or territory has been informed in writing by
the constituent entity that it is the alternate reporting entity on behalf of
the international group; and 30

(v) the prescribed income-tax authority has been informed by

the entity referred to in sub-sections (4) and (5) as per
sub-section (1).
(7) The prescribed income-tax authority may, for determining the accuracy of
the report furnished by any reporting entity, issue notice in writing, requiring the 35
entity to produce such information and document as specified in the notice within
thirty days of the date of receipt of the notice and such period may be extended by
up to an additional thirty days upon application by the entity.
(8) The provisions of this section shall not apply to an international group for
an accounting year, if the total consolidated group revenue, as per the consolidated 40
financial statement for the accounting year preceding such accounting year, does
not exceed the prescribed amount.
(9) The provisions of this section shall be applied as per such guidelines and
subject to such conditions, as prescribed.
(10) In this section,— 45

(a) “accounting year” means,—

 475

(i) a tax year, in a case where the parent entity is resident in India; or
(ii) an annual accounting period, with respect to which the parent
entity of the international group prepares its financial statements under
any law in force or the applicable accounting standards of the country or
territory of which such entity is resident, in any other case; 5

(b) “agreement” means a combination of all of the following

agreements:—
(i) an agreement entered into under section 159(1) or (2); and
(ii) an agreement for exchange of the report referred to in
sub-section (2) and notified by the Central Government; 10

(c) “alternate reporting entity” means any constituent entity of the

international group that has been designated by such group, in the place of the
parent entity, to furnish the report of the nature referred to in sub-section (2)
in the country or territory in which the said constituent entity is resident on
behalf of such group; 15

(d) “constituent entity” means—

(i) any separate entity of an international group that is included in
the consolidated financial statement of the said group for financial
reporting purposes, or may be so included for the said purpose, if the
equity share of any entity of the international group were to be listed on 20
a stock exchange;
(ii) any such entity that is excluded from the consolidated financial
statement of the international group solely on the basis of size or
materiality; or
(iii) any permanent establishment of any separate business entity 25
of the international group included in sub-clause (i) or (ii), if such
business unit prepares a separate financial statement for such permanent
establishment for financial reporting, regulatory, tax reporting or
internal management control purposes;
(e) “group” includes a parent entity and all the entities in respect of 30
which, for the reason of ownership or control, a consolidated financial
statement for financial reporting purposes—
(i) is required to be prepared under any law in force or the
accounting standards of the country or territory of which the parent
entity is resident; or 35

(ii) would have been required to be prepared, had the equity shares
of any of the enterprises were listed on a stock exchange in the country
or territory of which the parent entity is resident;
(f) “consolidated financial statement” means the financial statement of
an international group in which the assets, liabilities, income, expenses and 40
cash flows of the parent entity and the constituent entities are presented as
those of a single economic entity;
(g) “international group” means any group that includes—
(i) two or more enterprises which are resident of different countries
or territories; or 45

(ii) an enterprise, being a resident of one country or territory, which

carries on any business through a permanent establishment in other
countries or territories;
 476

(h) “parent entity” means a constituent entity, of an international group

holding, directly or indirectly, an interest in one or more of the other
constituent entities of the international group, such that—
(i) it is required to prepare a consolidated financial statement under
any law in force or the accounting standards of the country or territory 5
of which the entity is resident; or
(ii) it would have been required to prepare a consolidated financial
statement had the equity shares of any of the enterprises were listed on
a stock exchange,
and, there is no other constituent entity of such group which, due to ownership of 10
any interest, directly or indirectly, in the first mentioned constituent entity, is
required to prepare a consolidated financial statement, under the circumstances
referred to in sub-clause (i) or (ii), that includes the separate financial statement of
the first mentioned constituent entity;
(i) “permanent establishment” shall have the meaning assigned to it in 15
section 173(c);
(j) “reporting accounting year” means the accounting year in respect of
which the financial and operational results are required to be reflected in the
report referred to in sub-sections (2), (4) and (5);
(k) “reporting entity” means the constituent entity including the parent 20
entity or the alternate reporting entity, that is required to furnish a report of the
nature referred to in sub-section (2);
(l) “systemic failure” with respect to a country or territory means that
the country or territory has an agreement with India providing for exchange of
report of the nature referred to in sub-section (2), but— 25

(i) in violation of the said agreement, it has suspended automatic

exchange; or
(ii) has persistently failed to automatically provide to India the
report in its possession in respect of any international group having a
constituent entity resident in India. 30
Publication of 512. (1) If the Central Government is of the opinion that it is necessary or
information
respecting
expedient in the public interest to publish the names of any assessees and any other
assessees in particulars relating to any proceedings or prosecutions under this Act in respect of
certain cases. such assessees, it may publish such names and particulars in such manner as it
thinks fit. 35

(2) No publication under this section shall be made for any penalty imposed
under this Act, until the time for filing an appeal under section 356 or 357 has
expired and no appeal has been filed, or if an appeal is filed, it has been
disposed of.
(3) The names of the partners of the firm, directors, managing agents, 40
secretaries and treasurers, or managers of the company, or the members of the
association, as the case may be, may also be published under sub-section (1), if, in
the opinion of the Central Government, the circumstances of the case justify it.
Appearance by
registered valuer
513. (1) Any assessee, entitled or required to attend before any income-tax
in certain authority or the Appellate Tribunal in matters relating to the valuation of any asset, 45
matters. may attend through a registered valuer.
(2) The provisions of sub-section (1) shall not apply, where the assessee is
required to attend personally for examination on oath or affirmation under
section 246.
(3) In this section, “registered valuer” means a person registered as a valuer 50
under section 514.
 477

514. (1) The Principal Chief Commissioner or Chief Commissioner, or the Registration of
valuers.
Principal Director General or Director General, shall maintain a register of valuers
in which the names and addresses of persons registered under sub-section (2) shall
be entered.
5 (2) Any person, possessing such qualification for valuing such class of assets,
may apply to the Principal Chief Commissioner or Chief Commissioner, or the
Principal Director General or Director General, for getting registered as a valuer, in
such form, verified in such manner and accompanied by such fee, as prescribed,
along with a declaration stating that the applicant will––
10 (a) conduct an impartial and true valuation of any asset required to be
valued;
(b) furnish a valuation report in the prescribed form;
(c) charge fees not exceeding the prescribed rate or rates; and
(d) refrain from undertaking the valuation of any asset in which such
15 person has a direct or indirect interest.
(3) The valuation report prepared by a registered valuer for any asset shall be
in such form and verified in such manner, as prescribed.
515. (1) An assessee, entitled or required to attend before any income-tax Appearance by
authorised
authority or the Appellate Tribunal for any proceeding under this Act, may attend representative.
20 through an authorised representative.
(2) The provisions of sub-section (1) shall not apply where an assessee is
required to attend personally for examination on oath or affirmation under
section 246.
(3) In this section,––
25 (a) “authorised representative” means a person authorised by the
assessee, in writing, to appear on his behalf, being—
(i) a person related to or regularly employed by the assessee in any
manner; or
(ii) any officer of a scheduled bank with which the assessee
30 maintains a current account or has other regular dealings; or
(iii) any legal practitioner, who is entitled to practise in any civil
court in India; or
(iv) an accountant; or
(v) any person, who has passed any accountancy examination
35 recognised by the Board; or
(vi) any person, who has acquired such educational qualifications,
as prescribed; or
(vii) any person who, before the coming into force of the
43 of 1961. Income-tax Act, 1961 in the Union territory of Dadra and Nagar Haveli,
40 Goa, Daman and Diu, or Pondicherry, attended before an income-tax
authority in the said territory on behalf of any assessee otherwise than as
an employee or relative of that assessee; or
(viii) any other person who, immediately before the coming into
force of the said Act, was an income-tax practitioner as per
11 of 1922. 45 section 61(2)(iv) of the Indian Income-tax Act, 1922, and was actually
practising as such;
(ix) any other person as prescribed;
 478

(b) “accountant” means a chartered accountant as defined in

section 2(1)(b) of the Chartered Accountants Act, 1949, who holds a valid 38 of 1949
certificate of practice under section 6(1) of that Act, but does not include
[except for representing the assessee under sub-section (1)],—
(i) in case of an assessee, being a company, a person who is not 5
eligible for appointment as an auditor of the said company under
section 141(3) of the Companies Act, 2013; or 18 of 2013.

(ii) in any other case,—

(A) the assessee himself, or in the case of being a firm or
association of persons or a Hindu undivided family, any partner of 10
such firm or a member of such association or such Hindu
undivided family;
(B) for an assessee, being a trust or institution, any person
referred to in section 355(h)(i) or (ii) or (iii) or (iv);
(C) for any person other than the persons referred to in 15
sub-clauses (A) and (B), the person who is competent to verify the
return under section 263 as per section 265;
(D) any relative of any of the persons referred to in
sub-clauses (A), (B) and (C);
(E) an officer or employee of the assessee; 20

(F) an individual, who, is a partner, or who is in the

employment, of an officer or employee of the assessee;
(G) an individual, who or his relative or partner—
(I) is holding any security of, or interest in, the assessee
and the face value of such security or interest held by his 25
relative does not exceed one lakh rupees;
(II) is indebted to the assessee, and such debt in case of
his relative does not exceed one lakh rupees;
(III) has given a guarantee or provided security in
connection with the indebtedness of a third person to the 30
assessee and such relative gives a guarantee or provides
security for an amount not exceeding one lakh rupees;
(H) a person who, whether directly or indirectly, has business
relationship with the assessee of such nature, as prescribed;
(I) a person convicted by a court of an offence involving 35
fraud and ten years has not elapsed from the date of such
conviction.
(4) No person,—
(a) who has been dismissed or removed from Government service; or
(b) who has been convicted of an offence connected with any 40
income-tax proceeding or on whom a penalty has been imposed under this
Act, except a penalty imposed under section 275(1)(ii) of the Income-tax
Act, 1961 or section 465(1)(d); or 43 of 1961.

(c) who has become an insolvent; or

(d) who has been convicted by a court for an offence involving fraud, 45
 479

shall be qualified to represent an assessee under sub-section (1), for––

(i) all times, in case of a person referred to in clause (a);
(ii) for such time as the Principal Chief Commissioner or Chief
5 Commissioner or Principal Commissioner or Commissioner may by order
determine, in case of a person referred to in clause (b);
(iii) for the period during which the insolvency continues, in case of a
person referred to in clause (c); and
(iv) for ten years from the date of conviction, in case of a person referred
10 to in clause (d).
(5) If a person,—
(a) who is a legal practitioner or an accountant, is found guilty of
misconduct in his professional capacity by any authority authorised to institute
disciplinary proceedings against him, the order passed by that authority shall
15 affect his right to attend before an income-tax authority in the same manner as
it affects his right to practise as a legal practitioner or accountant, as the case
may be;
(b) who is not a legal practitioner or an accountant, and is found guilty
of misconduct in any income-tax proceedings by the prescribed income-tax
20 authority, may be directed by such authority that he shall henceforth be
disqualified from representing an assessee under sub-section (1).
(6) Every order or direction under sub-section (4)(b) or (5)(b) shall be subject
to the following conditions:—
(a) no such order or direction shall be made against any person unless
25 he has been given a reasonable opportunity of being heard;
(b) any person against whom such an order or direction is made may,
within one month of the said order or direction, appeal to the Board to have
the order or direction cancelled; and
(c) no such order or direction shall take effect until one month has passed
30 from the making thereof, or, if an appeal has been filed, until the disposal of
the appeal.
(7) A person disqualified to represent an assessee by virtue of section 61(3) of
11 of 1922. the Indian Income-tax Act, 1922 or section 288(5) of the Income-tax Act, 1961 shall
43 of 1961. be disqualified to represent an assessee under sub-section (1).
35 (8) In this section, “relative”, in relation to an individual, means—
(a) spouse of the individual;
(b) brother or sister of the individual;
(c) brother or sister of the spouse of the individual;
(d) any lineal ascendant or descendant of the individual;
40 (e) any lineal ascendant or descendant of the spouse of the individual;
(f) spouse of a person referred to in clauses (b), (c), (d) or (e);
(g) any lineal descendant of a brother or sister of either the individual or
the spouse of the individual.
516. The amount of total income computed or any amount payable or Rounding off of
amount of total
45 refundable under this Act, shall be rounded off to the nearest multiple of ten rupees income, or tax
ignoring any part of a rupee consisting of paise and thereafter if such amount is not payable or
a multiple of ten, then— refundable.
 480

(a) such amount shall be increased to the next higher amount which is a
multiple of ten, if the last figure in that amount is five or more; or
(b) such amount shall be reduced to the next lower amount which is a
multiple of ten, if the last figure is less than five,
and the amount so rounded off shall be deemed to be the total income of the assessee 5
or the amount payable and refund due, under this Act.
Receipt to be 517. A receipt shall be given for any money paid or recovered under this Act.
given.
Indemnity. 518. Every person deducting, retaining, or paying any tax in pursuance of this
Act in respect of an income belonging to another person shall be indemnified for the
deduction, retention, or payment thereof. 10

Power to tender 519. (1) The Central Government may, if it is of the opinion that with a view
immunity from to obtaining the evidence of any person appearing to have been directly or indirectly
prosecution.
concerned in or privy to the concealment of income or to the evasion of payment of
tax on income it is necessary or expedient so to do, for reasons to be recorded in
writing, tender to such person,— 15

(a) immunity from prosecution for any offence under this Act or under
the Bharatiya Nyaya Sanhita, 2023, or under any other Central Act in 45 of 2023.
force; and
(b) from imposition of any penalty under this Act on condition of his
making a full and true disclosure of the whole circumstances relating to the 20
concealment of income or evasion of payment of tax on income.
(2) A tender of immunity made to, and accepted by, the person concerned,
shall, to the extent to which the immunity extends, render him immune from
prosecution for any offence in respect of which the tender was made, or from the
imposition of any penalty under this Act. 25

(3) If it appears to the Central Government that any person to whom immunity
has been tendered under this section––
(a) has not complied with the conditions on which the tender was made; or
(b) is wilfully concealing anything; or
(c) is giving false evidence, 30

the Central Government may record a finding to that effect, and thereupon the
immunity shall be deemed to have been withdrawn.
(4) The person whose immunity has been withdrawn under sub-section (3)
may be tried for the offence in respect of which the tender of immunity was made
or for any other offence of which he appears to have been guilty in connection with 35
the same matter and shall also become liable to imposition of any penalty under this
Act to which he would otherwise have been liable.
Cognizance of 520. No court inferior to that of a Judicial Magistrate of the first class shall try
offences. any offence under this Act.
Probation of 521. The provisions of section 401 of the Bharatiya Nagarik Suraksha 40
Offenders Act, Sanhita, 2023 and the Probation of Offenders Act, 1958 shall not apply to a person 20 of 1958.
1958 and section 46 of 2023.
401 of Bharatiya convicted of an offence under this Act unless that person is under eighteen years of
Nagarik age.
Suraksha
Sanhita, 2023,
not to apply.
 481

522. No return of income, assessment, notice, summons or other proceeding, Return of

income, etc., not
furnished or made or issued or taken, or purported to have been furnished or made to be invalid on
or issued or taken, in pursuance of any of the provisions of this Act, shall be invalid certain grounds.
or shall be considered to be invalid merely by reason of any mistake, defect or
5 omission in such return of income, assessment, notice, summons or other
proceeding, if such return of income, assessment, notice, summons or other
proceeding is in substance and effect in conformity with or according to the intent
and purposes of this Act.
523. (1) Where an assessee has appeared in any proceeding or co-operated Notice deemed
to be valid in
10 in any inquiry relating to an assessment or reassessment, it shall be deemed that certain
any notice under this Act, which is required to be served upon him, has been circumstances.
duly served upon him in time as per the provisions of this Act and such assessee
shall be precluded from taking any objection in any proceeding or inquiry under
this Act that the notice was—
15 (a) not served upon him; or
(b) not served upon him in time; or
(c) served upon him in an improper manner.
(2) The provisions of sub-section (1) shall not apply where the assessee
20 has raised such objection before the completion of such assessment or
reassessment.
524. (1) Where any books of account, other documents money, bullion, Presumption as
jewellery, virtual digital asset or other valuable article or thing, is found in the to assets, books
of account, etc.
possession or control of any person in the course of a search under section 247 or
25 survey under section 253, it may, in any proceeding under this Act, be presumed—
(a) that such books of account, other document, money, bullion,
jewellery, virtual digital asset or other valuable article or thing belong or
belongs to such person;
(b) that the contents of such books of account and other document
30 are true;
(c) that the signature and every other part of such books of account and
other document, which purports to be in the handwriting of any particular
person, or which may reasonably be assumed to have been signed by, or to be
in the handwriting of, any particular person, are in the handwriting of that
35 person; and
(d) in the case of a document stamped, executed or attested, that it was
duly stamped and executed or attested by the person by whom it purports to
have been so executed or attested article or thing belong or belongs to such
person;
40 (2) Where any books of account, other documents or assets have been
delivered to the requisitioning officer as per section 248, then, the provisions of
sub-section (1) shall apply as if such books of account, other documents or assets,
which had been taken into custody from the person referred to in sub-section (1)(a)
or (b) or (c) of the said section, had been found in the possession or control of that
45 person in the course of a search under section 247.
525. (1) Irrespective of anything contained in this Act,— Authorisation
and assessment
(a) it shall not be necessary to issue an authorisation under in case of search
or requisition.
section 247 or make a requisition under section 248 separately in the
name of each person;
 482

(b) where an authorisation under section 247 has been issued or

requisition under section 248 has been made mentioning therein the name of
more than one person, the mention of such names of more than one person on
such authorisation or requisition shall not be considered to construe that it was
issued in the name of an association of persons or body of individuals 5
consisting of such persons.
(2) Irrespective of an authorisation issued under section 247 or a requisition
made under section 248 mentioning therein the name of more than one person, the
assessment or reassessment shall be made separately in the name of each of the
persons mentioned in such authorisation or requisition. 10

Bar of suits in 526. No suit shall be brought in any civil court to set aside or modify any
civil courts.
proceeding taken or order made under this Act, and no prosecution, suit or other
proceeding shall lie against the Government or any officer of the Government
for anything in good faith done or intended to be done under this Act.
Power to make 527. (1) If the Central Government is satisfied that it is necessary or expedient 15
exemption, etc.,
in relation to
in the public interest, it may, by notification, make an exemption, reduction in rate,
participation in or other modification of income-tax for any class of persons specified in
business of sub-section (2) or in regard to the whole or any part of the income of such class of
prospecting for, persons or the status in which such class of persons or the members thereof are to
extraction, etc.,
of mineral oils. be assessed on their income from the business referred to in sub-section (2)(a), 20
effective from tax year beginning on or after 1st April, 1992.
(2) The persons referred to in sub-section (1) shall be the following:—
(a) persons with whom the Central Government has entered into
agreements for the association or participation of that Government, or any
person authorised by that Government in any business of prospecting for or 25
extraction or production of mineral oils;
(b) persons providing any services or facilities or supplying any ship,
aircraft, machinery or plant (whether by sale or hire) for any business
consisting of the prospecting for or extraction or production of mineral oils
carried on by that Government, or any person specified by that Government 30
by notification; and
(c) employees of the persons referred to in clause (a) or (b).
(3) Every notification issued under this section shall be laid before each House
of Parliament.
(4) In this section,— 35

(a) “mineral oil” includes petroleum and natural gas;

(b) “status” means the category of person as defined in section 2(77)
under which the assessee is assessed.
Power of Central 528. Where, the approval of the Central Government or the Board is required
Government or
to be obtained before a specified date under this Act, it shall be open to the Central 40
Board to condone
delays in Government or the Board to condone, for sufficient cause, any delay in obtaining
obtaining approval. such approval.
Power to 529. Where the Central Government or the Board or an income-tax authority,
withdraw
approval. has the power to grant any approval under any provision of this Act to any assessee,
the Central Government or the Board or such income-tax authority may, withdraw 45
such approval at any time after recording the reasons therefor, even if such provision
does not specifically allow for its withdrawal, after giving such assessee a
reasonable opportunity of being heard.
 483

530. If on the 1st April in any tax year, provision has not yet been made by a Act to have
effect pending
Central Act for the charging of income-tax for that tax year, this Act shall legislative
nevertheless have effect until such provision is so made, as if the provision in force provision for
in the preceding tax year or the provision proposed in the Bill then before charge of tax.
5 Parliament, whichever is more favourable to the assessee, were actually in force.
531. Where the Central Government considers it necessary or expedient so to Power to rescind
do may, by general or special order, rescind an exemption, reduction in rate or other exemption in
relation to certain
modification in respect of income-tax or super-tax in favour of any assessee or class Union territories
of assessees or in regard to the whole or any part of the income of any assessee or already granted
10 class of assesses, made as per the provisions of section 294A of the Income-tax under section
294A of the
43 of 1961. Act, 1961. Income-tax Act,
1961.

532. (1) The Central Government may, by notification, make a scheme for Power to frame
schemes.
any of the purposes of this Act, so as to impart greater efficiency, transparency
and accountability by—
15 (a) eliminating the interface with the assessee or any other person to
the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale
and functional specialisation.
(2) The Central Government may, for the purposes of giving effect to the
20 scheme made under sub-section (1), by notification, direct that any of the
provisions of this Act shall not apply or shall apply with such exceptions,
modifications and adaptations as specified in the notification.
(3) Where a scheme has been notified under the provisions of the
43 of 1961. Income-tax Act, 1961 with a view to eliminating the interface with the assessee
25 or any other person, the Central Government may by notification amend or
modify the said scheme as per the provisions of sub-section (1), and the
provisions of sub-section (2) shall apply accordingly.
(4) Every notification issued under sub-sections (1), (2) and (3) shall, as
soon as may be after the notification is issued, be laid before each House of
30 Parliament.
533. (1) The Board may, subject to the control of the Central Government, by Power to make
notification, make rules for carrying out the purposes of this Act. rules.

(2) In particular, and without prejudice to the generality of the foregoing

power, such rules may provide for all or any of the following matters:—
35 (a) the ascertainment and determination of any class of income;
(b) the manner in which and the procedure by which the income shall be
arrived at in the case of—
(i) income derived in part from agriculture and in part from
business;
40 (ii) persons residing outside India;
(iii) operations carried out in India by a non-resident;
(iv) transactions or activities of a non-resident;
(v) an individual who is liable to be assessed under
section 99(3) and (4);
45 (c) the determination of the value of any perquisite chargeable to tax
under this Act in such manner and on such basis as appears to the Board to be
proper and reasonable;
 484

(d) the percentage on the written down value which may be allowed as
depreciation for buildings, machinery, plant or furniture;
(e) the matters specified in section 62;
(f) the conditions or limitations subject to which any payment of rent
made by an assessee shall be deducted under section 134; 5

(g) the matters specified in Chapter XI;

(h) the time within which any person may apply for the allotment of a
Permanent Account Number, the form and the manner in which such
application may be made and the particulars which such application shall
contain and the transactions with respect to which Permanent Account 10
Number shall be quoted on documents relating to such transactions under
section 262;
(i) the documents, statements, receipts, certificates or audited reports
which may not be furnished along with the return but shall be produced before
the Assessing Officer on demand under section 263(2)(a); 15

(j) the class or classes of persons who shall be required to furnish the
return of income in electronic form; the form and the manner of furnishing the
said return in electronic form; documents, statements, receipts, certificates or
reports which shall not be furnished with the return in electronic form and the
computer resource or electronic record to which such return may be 20
transmitted under section 263(2)(a);
(k) the cases, the nature and value of assets, the limits and heads of
expenditure and the outgoings, which are required to be prescribed under
section 263(2)(b);
(l) the form of the report of audit or inventory valuation and the 25
particulars which such report shall contain under section 268(5);
(m) remuneration of Chairperson and members of the Approving Panel
under section 274(21) and procedure and manner for constitution of,
functioning and disposal of references by, the Approving Panel under
section 274(24); 30

(n) the form and manner in which the information relating to payment of
any sum may be furnished under section 397(3)(d);
(o) the authority to be prescribed for any of the purposes of this Act;
(p) the procedure for giving effect to any agreement for the granting of
relief in respect of double taxation or for the avoidance of double taxation 35
entered into by the Central Government under this Act;
(q) the procedure for granting of relief or deduction, of any income-tax
paid in any country or specified territory outside India, under section 159 or
160, against the income-tax payable under this Act;
(r) the form and manner in which any application, claim, return or 40
information may be made or furnished and the fees that may be levied in
respect of any application or claim;
(s) the manner in which any document required to be filed under this Act
may be verified;
(t) the procedure to be followed on applications for refunds; 45
 485

(u) the procedure for calculating interest payable by assessees or by the

Government to assessees under this Act, including the rounding off of periods
when a fraction of a month is involved, and specifying the circumstances
under which and the extent to which petty amounts of interest payable by
5 assessees may be ignored;
(v) the regulation of any matter for which provision is made in
section 420;
(w) the form and manner in which any appeal or cross-objection may be
filed under this Act, the fee payable in respect thereof and the manner in which
10 intimation referred to in section 358(3)(b) may be served;
(x) the circumstances, conditions and the manner in which, the Joint
Commissioner (Appeals) or the Commissioner (Appeals) may permit an
appellant to produce evidence which he did not produce or which he was not
allowed to produce before the Assessing Officer;
15 (y) the form in which the statement under section 507 shall be delivered
to the Assessing Officer;
(z) the maintenance of a register of persons other than legal practitioners
or accountants practising before income-tax authorities and for the
constitution of and the procedure to be followed by the authority referred to in
20 section 515(5);
(za) the issue of certificate verifying the payment of tax by assessees;
(zb) any other matter which by this Act is to be, or may be, prescribed.
(3) In cases, where the income liable to tax cannot be definitely ascertained,
or can be ascertained only with an amount of trouble and expense to the assessee,
25 which is unreasonable, the rules made under this section may—
(a) prescribe methods by which an estimate of such income may be
made; and
(b) in cases of income derived in part from agriculture and in part from
business, specify the proportion of the income which shall be considered to be
30 income liable to tax,
and an assessment based on such estimate or proportion shall be considered to be
duly made as per this Act.
(4) The power to make rules conferred by this section shall include the power
to give retrospective effect, from a date not earlier than the date of commencement
35 of this Act, to the rules or any of them and, unless the contrary is permitted (whether
expressly or by necessary implication), no retrospective effect shall be given to any
rule so as to prejudicially affect the interests of assessees.
534. The Central Government shall cause–– Laying before
Parliament.
(a) every rule made under this Act;
40 (b) rules of procedure framed by the Appellate Tribunal under
section 364; or
(c) every notification issued under sections 263(3) and 264 and
Chapter XIII-G,
 486

to be laid, as soon as may be after it is made or issued, 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 sessions
aforesaid, both Houses agree in making any modification in such rule, or notification 5
or both Houses agree that the rule, should not be made or the notification should not
be issued, the rule or notification 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 rule or notification. 10

Removal of 535. (1) If any difficulty arises in giving effect to the provisions of this Act,
difficulties. the Central Government may, by general or special order, do anything not
inconsistent with the provisions which appears to it to be necessary or expedient for
the purpose of removing the difficulty.
(2) In particular, and without prejudice to the generality of the foregoing power, 15
any order referred to in sub-section (1) may provide for the adaptations or modifications
subject to which the Income-tax Act, 1961 shall apply in relation to the assessments for 43 of 1961.
the tax year ending on the 31st March, 2026, or any earlier tax year.
(3) No order under sub-section (1) shall be made after the expiration of three
years from the 1st April, 2026. 20

(4) Every order made under this section shall be laid, as soon as may be, after
it is made, before each House of Parliament.
Repeal and 536. (1) The Income-tax Act, 1961 is hereby repealed. 43 of 1961.
savings.
(2) Irrespective of the repeal of the Income-tax Act, 1961 (hereinafter referred 43 of 1961.
to as the repealed Income-tax Act), and subject to sub-section (3)— 25

(a) affect the previous operation of the repealed Act and orders or
anything duly done or suffered thereunder; or
(b) affect any right, privilege, obligation or liability acquired, accrued or
incurred under the repealed Act or orders under such repealed Act;
(c) the provisions of the repealed Income-tax Act shall continue to apply 30
to any proceedings (including notices, assessment, re-assessment,
rectification, penalty, reference, revision and appeals) in respect of any tax
year beginning before the 1st April, 2026 and such proceedings shall be
carried out as per the procedure specified in the repealed Income-tax Act;
(d) any proceeding for the imposition of a penalty in respect of any tax 35
year beginning before the 1st April, 2026, may be initiated and any such
penalty may be imposed under the repealed Income-tax Act, as if this Act had
not been enacted;
(e) any proceeding pending on the commencement of this Act before any
income-tax authority or any other authority constituted under the repealed 40
Income-tax Act, Appellate Tribunal, or any court, by way of application,
appeal, reference or revision or by any other means, shall be continued and
disposed of as if this Act had not been enacted;
(f) any election or declaration made, or option exercised, by an assessee
under any provision of the repealed Income-tax Act and in force immediately 45
before the commencement of this Act shall be deemed to have been an election
or declaration made, or option exercised, under the corresponding provision
of this Act;
 487

(g) where in respect of any proceeding relating to any tax year beginning
before the 1st April, 2026,—
(i) a refund falls due after commencement of this Act; or
(ii) default is made after such commencement in the payment of
5 any sum due under such proceeding,
the provisions of this Act, relating to interest payable by the Central Government on
refunds and interest payable by the assessee for default, shall apply for the period
after the commencement of this Act;
(h) where any deduction has been allowed or any amount has not been
10 included in the total income of any person, subject to fulfilment of certain
conditions for any tax year beginning before the 1st April, 2026, and in case
of violation of such conditions in any tax year beginning on or after
1st April, 2026, any sum (on account of deduction earlier allowed or amount
not included) was required to be included in the total income of such
15 subsequent tax year under the repealed Income-tax Act if it had not been so
repealed, then such sum shall be—
(i) deemed to be the income of the tax year in which the violation
takes place; and
(ii) included in the total income of the said person under the same
20 head of income as it would have been included under the repealed
Income-tax Act;
(i) any sum payable under the repealed Income-tax Act may be
recovered under this Act without prejudice to any action already taken for the
recovery of such sum under repealed Income-tax Act;
25 (j) any agreement entered into, appointment made, approval given,
recognition granted, direction, instruction, notification, order or rule issued
under any provision of the repealed Income-tax Act shall, so far as it is not
inconsistent with the corresponding provisions of this Act, be deemed to have
been entered into, made, granted, given or issued under the corresponding
30 provision of this Act and shall continue in force accordingly;
(k) where the period provided for any application, appeal, reference or
revision under the repealed Income-tax Act had expired on or before the
commencement of this Act, nothing in this Act shall be construed as enabling
any such application, appeal, reference or revision to be made under this Act
35 by reason only of the fact that a longer period therefor is prescribed or
provision is made for extension of time in suitable cases by the appropriate
authority;
(l) any amount of credit, in respect of tax paid, allowable to be carried
forward in the case of an assessee, under the provisions of section 115 JAA or
40 115JD of the repealed Income-tax Act for the tax year beginning before the
43 of 1961. 1st April 2026, had the Income-tax Act, 1961 not been repealed,—
(i) shall be deemed to be the amount eligible for credit under
corresponding provision of this Act in the case of said assessee; and
(ii) credit for the tax paid under the repealed Income-tax Act shall
45 be allowed under this Act for the period for which it would have been
allowed under the repealed Income–tax Act if the assessee otherwise
continues to satisfy the conditions as specified in the corresponding
provisions of this Act in such tax years;
 488

(m) any amount of loss under the source or head of income specified in
column B of the Table given below and referred to in the section of the
repealed Income-tax Act specified in column C of the said Table, brought
forward for the tax year beginning before the 1st April, 2026 had the
Income-tax Act not been repealed, shall be set off and carried forward against 5
the income computed under this Act , in the manner provided in the respective
section of the repealed Income-tax Act specified in column C of the said table,
for the tax years beginning on or after the 1st April, 2026:
Table
Sl. Source or head of income under the repealed Section of the repealed 10
No. Income-tax Act Income-tax Act
A B C
1. Income from house property. 71B.
2. Profits and gains of business or profession. 72.
3. Speculation business. 73. 15

4. Specified Business. 73A.

5. Activity of owning and maintaining race horses. 74A.

(n) any amount of loss under the head capital gains, whether related to a
long-term capital asset or a short term capital asset, referred to in section 74 20
of the repealed Income-tax Act, brought forward from the tax year beginning
before the 1st April, 2026 had the Income-tax Act, 1961 not been repealed, 43 of 1961.
shall be set off and carried forward against the income under the head “Capital
gains” computed under this Act for any tax year beginning on or after the
1st April, 2026 upto eight financial years immediately succeeding the financial
year in which such loss was first computed under the repealed Income-tax Act; 25

(o) any set off of loss or allowance for depreciation made in any tax year
beginning before the 1st April, 2026 in the hands of the amalgamated
company, successor company or the successor limited liability partnership, in
accordance with the provisions of section 72A of the repealed Income-tax Act,
shall be deemed to be the income of the amalgamated company, successor 30
company or the successor limited liability partnership, as the case may be,
chargeable to tax under this Act for the year in which any of the conditions
specified in that section are not complied with;
(p) any set off of accumulated loss or unabsorbed depreciation allowed
in any tax year beginning before the 1st April, 2026 to the successor 35
co-operative bank, in accordance with the provisions of section 72AB of the
repealed Income-tax Act, shall be deemed to be the income of the successor
co-operative bank chargeable to tax under this Act for the year in which any
of the conditions specified in that section are not complied with;
(q) any amount of profits or gains arising out of transfer of capital asset 40
not charged under the head capital gains by virtue of the provisions contained
in section 47(iv), (v), (xiii), (xiiib) or (xiv) of the repealed Income-tax Act in
any tax year beginning before the 1st April, 2026 shall be deemed to be the
income chargeable under the head “Capital gains” under this Act , if any of
the conditions laid down in section 47A(1)(i) or (ii) of the repealed 45
Income-tax Act are satisfied or conditions laid down in section 47(xiii), (xiiib)
or (xiv), as the case may be, of the repealed Income-tax Act are not complied
with, for the tax year in which such conditions are satisfied or not complied
with, as the case may be;
 489

(r) where any allowance or part thereof, under section 32(2) or 35(4) of
the repealed Income-tax Act, is to be carried forward to tax year beginning on
the 1st April, 2026, had the Income-tax Act not been repealed, then, the
allowance or part thereof shall be added to the amount of capital allowances
5 referred to corresponding provisions of this Act for the tax year beginning on
the 1st April, 2026 and deemed to be part of that allowance, or if there is no
such allowance for that tax year, be deemed to be allowance for that tax year;
(s) the deduction referred to in section 35ABB, 35D, 35DD, 35DDA,
35E or the first proviso to section 36(1)(ix) of the repealed Income-tax Act,
10 shall, on fulfilment of the conditions mentioned in the said provisions,
continue to be allowed under this Act for tax year beginning on or after the
1st April, 2026 had the Income-tax Act not been repealed and such deduction
shall be added to the amount of deferred revenue expenditure allowance
referred to corresponding provisions of this Act for the tax year beginning on
15 or after the 1st April, 2026 and deemed to be part of that allowance, or if there
is no such allowance for a tax year, be deemed to be that allowance for that
tax year;
(t) credit balance in the provision for bad and doubtful debts account
made under section 36(1)(viia) of the repealed Income-tax Act standing on the
20 last day of the tax year beginning on 1st April, 2025 shall be added to the
amount credited to the provision for bad and doubtful debts accounts referred
to in the corresponding provisions of this Act for the tax year beginning on the
1st April, 2026 and deemed to be part of amount credited to the provision for
bad and doubtful debts accounts, or if there is no such amount credited for that
25 tax year, be deemed to be amount credited for that tax year;
(u) any scheme which has been notified under the provisions of the
repealed Income-tax Act with a view to eliminating the interface with the
assessee or any other person, the said scheme shall be deemed to have
been made—
30 (i) under the corresponding provisions of this Act; or
(ii) under section 294B where there is no such corresponding
provision,
and shall continue in force accordingly; and
(v) where a search has been initiated under section 132 or requisition is
35 made under section 132A prior to the 1st April, 2026, the provisions of
repealed Income-tax Act, shall continue to apply to any proceedings connected
in respect of such search or requisition, as the case may be, as if this Act has
not been enacted.
(3) Without prejudice to the provisions of sub-section (2), the provisions of
10 of 1897. 40 section 6 of the General Clauses Act, 1897 shall apply with regard to the effect
of repeal.
 490

SCHEDULE I
[See section 9(12)]
CONDITIONS FOR CERTAIN ACTIVITIES NOT TO CONSTITUTE BUSINESS CONNECTION IN INDIA.
1. (1) The eligible investment fund referred to in section 9(12), means a fund
established or incorporated or registered outside India, which collects funds from its
members for investing it for their benefit and fulfils the following conditions:––
(a) the fund is not a person resident in India;
(b) the fund is––
(i) a resident of a country or a specified territory with which an
agreement referred to in section 159(1) or (2) has been entered into; or
(ii) established or incorporated or registered in a country or a
specified territory as notified in this behalf;
(c) the aggregate participation or investment in the fund, directly or
indirectly, by persons resident in India does not exceed 5% of the corpus of
the fund as on the 1st April and the 1st October of the tax year, subject to the
conditions that—
(i) for the purposes of calculation of such aggregate participation
or investment in the fund, any contribution made by the eligible fund
manager during the first three years of operation of the fund, not
exceeding twenty-five crore rupees, shall not be taken into account;
(ii) where the aforesaid aggregate participation or investment in
the fund exceeds 5% on the 1st April or the 1st October of the tax year,
the condition mentioned in this clause shall be deemed to be satisfied, if
it is satisfied, within four months of the 1st April or the 1st October of
such tax year;
(d) the fund and its activities are subject to applicable investor protection
regulations in the country or specified territory where it is established or
incorporated or is a resident;
(e) the fund has a minimum of twenty-five members who are, directly or
indirectly, not connected persons;
(f) any member of the fund along with connected persons shall not have
any participation interest, directly or indirectly, in the fund exceeding 10%;
(g) the aggregate participation interest, directly or indirectly, of ten or
less members along with their connected persons in the fund, shall be less
than 50%;
(h) the fund shall not invest more than 25% of its corpus in any entity;
(i) the fund shall not make any investment in its associate entity;
(j) the monthly average of the corpus of the fund shall not be less than
one hundred crore rupees subject to the following:––
(i) if the fund has been established or incorporated in the tax year,
then corpus of fund shall not be less than one hundred crore rupees at
the end of twelve months from the last day of the month of its
establishment or incorporation; and

490
 491

(ii) this clause shall not apply to a fund which has been wound up
in the tax year;
(k) the fund shall not carry on or control and manage, directly or
indirectly, any business in India;
(l) the fund is neither engaged in any activity which constitutes a
business connection in India nor has any person acting on its behalf whose
activities constitute a business connection in India other than the activities
undertaken by the eligible fund manager on its behalf;
(m) the remuneration paid by the fund to an eligible fund manager in
respect of fund management activity undertaken by him on its behalf is not
less than the amount calculated in such manner, as prescribed.
(2) The conditions specified in paragraph (1)(e), (f) and (g) shall not apply, in
case of––
(a) an investment fund set up by the Government or the Central Bank of
a foreign State or a sovereign fund; or
(b) such other fund as the Central Government may, by notification,
specify in this behalf, subject to conditions, if any.
(3) The eligible fund manager, referred to in section 9(12), in respect of an
eligible investment fund, means any person who is engaged in the activity of fund
management and fulfils the following conditions:––
(a) the person is not an employee of the eligible investment fund or a
connected person of the fund;
(b) the person is registered as a fund manager or an investment advisor
in accordance with the regulations as specified;
(c) the person is acting in the ordinary course of his business as a fund
manager;
(d) the person along with his connected persons shall not be entitled,
directly or indirectly, to more than 20% of the profits accruing or arising to
the eligible investment fund from the transactions carried out by the fund
through the fund manager.
(4) Every eligible investment fund shall, in respect of its activities in a tax
year, furnish within ninety days from the end of the tax year, a statement in the
prescribed form to the prescribed income-tax authority, containing information
relating to the fulfilment of the conditions specified in this Schedule, and also
provide such other relevant information or documents, as prescribed.
(5) The provisions of this Schedule shall apply as per such guidelines and in
such manner as the Board may prescribe in this behalf.
(6) The Central Government may, by notification, specify that any one or more
of the conditions specified in sub-paragraph (1) (other than at paragraph (1)(c)) or
(3) shall not apply or shall apply with such modifications, as specified in case of an
eligible investment fund and its eligible fund 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.
 492

2. In this Schedule,—
(a) “associate” means an entity in which a director or a trustee or a
partner or a member or a fund manager of the investment fund, or a director
or a trustee or a partner or a member of the fund manager of such fund, holds,
either individually or collectively, share or interest, being more than 15% of
its share capital or interest, as the case may be;
(b) “connected person” shall have the meaning assigned to it in
section 184(5);
(c) “corpus” means the total amount of funds raised for the purpose of
investment by the eligible investment fund as on a particular date;
(d) “entity” means any entity in which an eligible investment fund makes
an investment; and
(e) “specified regulations” means the Securities and Exchange Board of
India (Portfolio Managers) Regulations, 1993 or the Securities and Exchange
Board of India (Investment Advisers) Regulations, 2013, or such other
regulations made under the Securities and Exchange Board of India Act, 1992
(15 of 1992), which may be notified in this regard.
 493

SCHEDULE II

(See section 11)

INCOME NOT TO BE INCLUDED IN TOTAL INCOME
In computing the total income of a person for a tax year, the income mentioned in
column B of the Table below shall not be included, subject to fulfilment of the conditions
mentioned in column C of the said Table, and the expressions used in columns B and C of the said
Table, shall have the meaning respectively assigned to them in the Notes below the said Table.
Table

Sl. Income not to be included in Conditions

No. total income

A B C

1. Agricultural income. Nil.

2. Any sum received under a (a) The insurance policies, issued during the
life insurance policy, period mentioned in column B of the table below, except
including the sum allocated where such sum is received on the death of a person, or
by way of bonus on such under a life insurance policy issued by the International
policy. Financial Services Centre insurance intermediary office,
including the sum allocated by way of bonus on such
policy, shall fulfil the conditions mentioned in
Column C thereof:

Sl. Period of Conditions of issuance policy

No. issue of
insurance
policy

A B C

1. 1st Premium to sum assured ratio

April, 2003 is <=20%
to 31st
March,
2012.
2. 1st Premium to sum assured ratio
April, 2012 is <=10%
to 31st
March,
2013.

3. 1st Premium to sum assured ratio is

April, 2013 <=15% for special policies; and
to 31st 10% for other policies.
January,
2021.

4. 1st Unit linked insurance policy:—

February,
2021 to (A) premium to sum assured
31st March, ratio is <=15% for special policies;
2023. and 10% for other policies; and

493
 494

A B C

A B C

(B) aggregate of premium for

all such policies (in all of the tax
years during the term of all of
such policies) is <=₹ 2,50,000.

Other than unit linked

insurance policy:—

Premium to sum assured ratio

is <=15% for special policies; and
10% for other policies.

5. On or Unit linked insurance

after the 1st policy:—
April,
2023. (a) premium to sum assured
ratio is <=15% for special
policies; and 10% for other
policies; and

(b) aggregate of premium for

all such policies (in all of the tax
years during the term of all of
such policies) <=₹ 2,50,000.

Other than Unit linked

insurance policy:—

(i) premium to sum assured

ratio is <=15% for special
policies; and 10% for other
policies; and

(ii) aggregate of premium for

all such policies (in all of the tax
years during the term of all of
such policies) is <=₹ 5,00,000;

(b) the following sums shall not be eligible for

exclusion from total income:––

(i) any sum received under section 127; and

(ii) any sum received under a Keyman insurance

policy.
Note:— For removal of difficulties, the Board may issue
guidelines with the previous approval of the Central
Government, which shall be binding on the income-tax
authorities and the assessee and every guideline issued
by the Board under this clause shall be laid before each
House of Parliament.
 495

A B C

3. Any payment from a (a) The income by way of interest accrued during the
provident fund to which the tax year shall not be eligible for exclusion from total
Provident Funds Act, 1925 income where,––
(19 of 1925) applies, or from
any other provident fund set up (i) it is attributable to the contribution (including
by the Central Government and aggregate thereof) made on or after the 1st April,
notified by it in this behalf. 2021; and

(ii) such contribution exceeds––

(A) ₹5,00,000 in a tax year in such fund where

no contribution is made by the employer of such
person;

(B) ₹2,50,000 in other cases; and

(b) the amount of income to be excluded from total

income as referred to in clause (a) shall be computed in
such manner, as prescribed.

4. The accumulated balance (a) The income by way of interest accrued during the
due and becoming payable to an tax year shall not be eligible for exclusion from total
employee participating in a income where,––
recognised provident fund to
the extent provided in (i) it is attributable to contribution (including
paragraph 8 of Part A of the aggregate thereof) made on or after the 1st
Schedule XI April, 2021; and

(ii) such contribution exceeds––

(A) ₹ 5,00,000 in a financial year in such fund

where no contribution is made by the employer of such
person; or

(B) ₹ 2,50,000 in other cases; and

(b) the amount of income to be excluded from total

income as referred to in clause (a) shall be computed in
such manner as prescribed.

5. Any payment from any Nil.

account opened as per the
Sukanya Samriddhi Account
Scheme, 2019 made under the
Government Savings
Promotion Act, 1873
(5 of 1873).

6. Any payment from the (a) Such payment is on closure of account of the
National Pension System Trust. assessee or on his opting out of the pension scheme
referred to in section 124; and

(b) income shall be excluded to the extent it does not

exceed 60% of the total amount payable at the time of
such closure or his opting out of the scheme.
 496

A B C

7. Any payment from the Nil.

Agniveer Corpus Fund to a
person enrolled under the
Agnipath Scheme or to his
nominee.

8. Any payment from an Such payment is made—

approved superannuation fund.
(a) on the death of a beneficiary; or

(b) to an employee in lieu of or in commutation of

an annuity on his retirement at or after a specified age
or on his becoming incapacitated prior to such
retirement; or

(c) by way of refund of contributions on the death

of a beneficiary; or

(d) by way of refund of contributions to an

employee on his leaving the service in connection
with which the fund is established otherwise than by
retirement at or after a specified age or on his
becoming incapacitated prior to such retirement, to
the extent to which such payment does not exceed the
contributions made prior to the commencement of this
Act and any interest thereon; or

(e) by way of transfer to the account of the

employee under a pension scheme referred to in
section 124 and notified by the Central Government
in this behalf.

9. Scholarships. Such scholarship is granted to meet the cost of

education.

10. Any payment made, Such payment is made––

whether in cash or in kind for
any award or reward. (a) in pursuance of any award instituted in the
public interest by the Central Government or any State
Government or instituted by any other body and
approved by the Central Government in this behalf; or

(b) as a reward by the Central Government or any

State Government for such purposes as may be
approved by the Central Government in this behalf in
public interest.

11. Income by way of interest, (a) It is notified by the Central Government; and
premium on redemption or other
payment on such securities, (b) exclusion from total income shall be allowed
bonds, annuity certificates, subject to such conditions and limits as specified in the
savings certificates, other said notification.
certificates issued by the Central
Government and deposits.
 497

A B C
12. Interest on Gold Deposit Nil.
Bonds issued under the Gold
Deposit Scheme, 1999 or
deposit certificates issued under
the Gold Monetisation Scheme,
2015 notified by the Central
Government.
13. Interest on bonds issued by a As specified by the Central Government, by
local authority or by a State notification.
Pooled Finance Entity.
14. Any income arising from the The transfer of such asset takes place on or after the
transfer of a capital asset, being 1st April, 2002.
a unit of the Unit Scheme, 1964
referred to in Schedule I to the
Unit Trust of India (Transfer of
Undertaking and Repeal) Act,
2002 (58 of 2002).
15. Any income arising from any Such income shall not include any income which
specified service provided on or is chargeable to tax as royalty or fees for technical
after the date on which the services in India under this Act read with the agreement
provisions of Chapter VIII of the notified by the Central Government under section 159.
Finance Act, 2016 (28 of 2016)
comes into force and chargeable
to equalisation levy under that
Chapter
16. Any income covered under
section 10(15)(iii) or (15)(iv)(c),
(15)(iv)(d), (15)(iv)(e), (15)(iv)
(f), (15)(iv) (g) or (15)(iv) (h) or
(36) of the Income-tax Act, 1961,
subject to the conditions as
provided therein.
Note 1: For the purposes of Sl. No. 2,––
(a) “Keyman insurance policy” means a life insurance policy––
(i) taken by a person on the life of another person; and
(ii) such person is or was the employee of the first-mentioned person or is or
was connected in any manner with the business of the first-mentioned person; and
(iii) includes such policy which has been assigned to a person at any time during
the term of the policy, with or without any consideration;
(b) “actual capital sum assured” shall have the meaning assigned to it in paragraph 2(2)
of Schedule XV;
(c) “United Linked Insurance Policy” means a unit linked life insurance policy,––
(i) which has components of both investment and insurance; and
(ii) is linked to a unit as defined in clause (ee) of regulation 3 of the Insurance
Regulatory and Development Authority of India (Unit Linked Insurance Products)
Regulations, 2019 made under the Insurance Regulatory and Development Authority
Act, 1999(41 of 1999);
(d) “premium to sum assured ratio” shall mean the highest percentage of annual
premium payable to the actual capital sum assured, during the term of the policy;
(e) “special policy” means any policy issued on life of any person, who is—
 498

(i) a person with disability or a person with severe disability as referred to in

section 154; or
(ii) suffering from disease or ailment as specified in the rules made under .
Note 2: For the purposes of Sl. No. 7,––
“Agniveer Corpus Fund” and “Agnipath Scheme” shall have the meanings
respectively assigned to them in section 125.
Note 3: For the purposes of Sl. No. 11,––
“interest” includes hedging transaction charges on account of currency fluctuation.
Note 4: For the purposes of Sl. No. 13,––
“State Pooled Finance Entity” means such entity which is set up as per the guidelines
for the Pooled Finance Development Scheme notified by the Central Government in the
Ministry of Housing and Urban Affairs.
Note 5: For the purposes of Sl. No. 15,––
“specified service” shall have the same meaning as assigned to it in clause (i) of section 164
of the Finance Act, 2016 (28 of 2016).
 499

SCHEDULE III
(See section 11)
INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF ELIGIBLE PERSONS
In computing the total income of a tax year of any eligible person mentioned in column C of
the Table below, the income mentioned in column B of the said Table shall not be included, subject
to the conditions mentioned in column D of the said Table, and the expressions used in columns B
to D therein shall have the meanings respectively assigned to them in the Notes below the said
Table.
Table
Sl. Income not to be Eligible persons Conditions
No. included in total income

A B C D
1. Any sum received by a An individual (a) Such sum is not covered under the
member from Hindu who is a member provisions of section 99(3) and (4); and
undivided family. of a Hindu (b) such sum has been paid out of––
undivided family.
(i) the income of the family; or
(ii) the income of the estate
belonging to the family, in the case of
any impartible estate.
2. Any sum received by a A person who is The sum received is as per the profit-
partner towards his share a partner of a firm sharing ratio provided in the partnership
in the total income of the separately assessed deed.
firm. as such—
3. Any amount received or Any individual No deduction of this amount was
receivable from the Central or his legal heir. allowed earlier under this Act on
Government or a State account of any loss or damage caused
Government or a local by such disaster to such individual or
authority by way of his legal heir.
compensation on account
of any disaster.
4. Any payment from the Any employee, (a) Such payment is on partial
National Pension System or an assessee, withdrawal made out of his account or
Trust under the pension being the guardian the account of the minor, as per the
scheme referred to in or parent of a terms and conditions specified under the
section 121. minor. Pension Fund Regulatory and
Development Authority Act, 2013 (23
of 2013) and the regulations made
thereunder; and
(b) exclusion shall not exceed 25% of
the amount of contributions made by
him.
5. Daily allowance Any person by Nil.
received reason of his
membership of
Parliament or of
any State
Legislature or of
any Committee
thereof.

499
 500

A B C D
6. Any allowance Any person by Nil.
received. reason of his
membership of
Parliament under the
Members of
Parliament
(Constituency
Allowance) Rules,
1986 made under the
Salary, Allowances
and Pension of
Members of
Parliament Act,
1954 (30 of 1954).
7. Any constituency Any person by Nil.
allowance received. reason of his
membership of any
State Legislature
under any State Act
or rules made
thereunder.
8. The value of any travel An individual. (a) Such sum is received by, or due
concession or assistance. to, such individual—
(i) from his employer for himself
and his family, in connection with his
proceeding on leave to any place in
India;
(ii) from his employer or former
employer for himself and his family,
in connection with his proceeding to
any place in India after retirement
from service or after the termination
of his service;
(b) Such sum is subject to such
conditions as prescribed (including
conditions as to number of journeys and
the amount which shall be exempt per
head);
(c) The conditions in clause (b) shall
have regard to the travel concession or
assistance granted to the employees of
the Central Government; and
(d) Sum not included in the total
income shall in no case exceed the
amount of expenses actually incurred
for the purpose of such travel.
9. Any allowances or A citizen of India. Such sum is paid or allowed for
perquisites paid or rendering service outside India.
allowed as such outside
India by the Government.
 501

A B C D
10. Income in the nature of An employee, (a) Such perquisite is not provided
a perquisite. being an individual. for by way of monetary payment, within
the meaning of section 17(1);
(b) the tax on such income actually
paid by his employer, at the option of
the employer, on behalf of such
employee; and
(c) such perquisite is paid
irrespective of section 200 of the
Companies Act, 1956 (1 of 1956).
11. Any special allowance An assessee. (a) Such allowance is specifically
from employer. granted to meet expenditure actually
incurred on payment of rent (by
whatever name called) in respect of
residential accommodation occupied by
the assessee;
(b) such allowance is to such extent
as prescribed having regard to the area
or place in which such accommodation
is situate and other relevant
considerations;
(c) the residential accommodation
occupied by the assessee is not owned
by him; and
(d) the assessee has actually incurred
expenditure on payment of rent (by
whatever name called) in respect of the
residential accommodation occupied by
him.
12. Any special allowance An assessee. (a) Such allowance or benefit is not
or benefit to the extent to in the nature of a perquisite within the
which such expenses are meaning of section 17(1);
actually incurred for that
(b) Such allowance or benefit is
purpose.
specifically granted to meet expenses
wholly, necessarily and exclusively
incurred in the performance of the
duties of an office or employment of
profit, as prescribed.
13. Any allowance. An assessee. (a) Such allowance is granted to the
assessee to meet his personal
expenses:—
(i) at the place where the duties of
his office; or
(ii) at the place employment of
profit are ordinarily performed by
him; or
 502

A B C D
(iii) at the place where he
ordinarily resides; or
(iv) to compensate him for the
increased cost of living,
to the extent as prescribed; and
(b) personal allowance to remunerate
or compensate for performing duties of a
special nature relating to office or
employment shall not be excluded from
total income unless such allowance is
related to the place of his posting or
residence.
14. Pension received An individual Nil.
who has been in the
service of the Central
Government or State
Government and has
been awarded
"Param Vir
Chakra" or "Maha
Vir Chakra" or "Vir
Chakra" or such
other gallantry
award as the Central
Government may, by
notification, specify
in this behalf.
15. Family pension Any member of Nil.
received. the family of an
individual referred
against serial
number 14.
16. Family pension Widow or The death of such member has
received. children or occurred in the course of operational
nominated heirs of a duties in such circumstances and
member of the subject to such conditions, as
armed forces prescribed.
(including
paramilitary forces)
of the Union.
17. Any income includible In case of an Exclusion of such income from the
in the total income under assessee referred to total income is to the extent such
section 99 (1)(d). in that sub-section income does not exceed ₹ 1,500 in
respect of each minor child whose
income is so includible.
18. Any income An individual or (a) Such land is situated in any area
chargeable under the a Hindu undivided referred to in section 2(22)(iii);
head “Capital gains” family. (b) such land, during the period of
arising from the transfer two years immediately preceding the
of agricultural land. date of transfer, was being used for
agricultural purposes by such Hindu
undivided family or individual or a
parent of his;
 503

A B C D
(c) such transfer is by way of
compulsory acquisition under any law, or a
transfer, the consideration for which is
determined or approved by the Central
Government or the Reserve Bank of
India; and
(d) such income has arisen from the
compensation or consideration for such
transfer received by such assessee on or
after the 1st April, 2004.
19. Any income which A member of a Nil.
accrues or arises— Scheduled Tribe,—
(a) from any source (a) as defined in
in the areas or States article 366(25) of the
mentioned in column C; Constitution; and
or (b) residing in any
area specified in Part
(b) by way of
I or II of the Table
dividend or interest on
appended to
securities.
paragraph 20 of the
Sixth Schedule to the
Constitution or in the
States of Arunachal
Pradesh, Manipur,
Mizoram, Nagaland
and Tripura or in the
areas covered by
notification No.
TAD/R/35/50/109,
dated the 23rd
February, 1951,
issued by the
Governor of Assam
under the proviso to
the said paragraph
20(3) [as it stood
immediately before
the commencement
of the North-Eastern
Areas
(Reorganisation)
Act, 1971 (18 of
1971) or in the Union
territory of Ladakh].
20. Any income which An individual, Nil.
accrues or arises— being a Sikkimese.
(a) from any
source in the State of
Sikkim; or
(b) by way of
dividend or interest
on securities
 504

A B C D
21. The amount of any An assessee who (a) Such scheme is for replantation or
subsidy received from carries on the replacement of tea bushes, rubber plants,
or through the business of growing coffee plants, cardamom plants or plants
concerned Board and manufacturing for the growing of such other commodity
tea, rubber, coffee,
under a scheme. cardamom or such or for rejuvenation or consolidation of
other commodity in areas used for cultivation of tea, rubber,
India as notified by coffee, cardamom or such other
the Central commodity;
Government.
(b) such scheme is notified by the
Central Government; and
(c) the assessee furnishes to the
Assessing Officer, along with his return
of income for the tax year concerned or
within such further time as the Assessing
Officer may allow, a certificate from the
concerned Board, as to the amount of
such subsidy paid to the assessee during
the tax year.
22. The income which is Any local Income from trade or business is
chargeable under the authority. eligible for exclusion from total income
head “Income from if such income accrues or arises from the
house property”, supply of––
“Capital gains” or
(a) a commodity or service (not being
“Income from other
water or electricity) within its own
sources” or from a trade
jurisdictional area; or
or business.
(b) water or electricity within or
outside its own jurisdictional area.
23. Any income of a A research (a) Applies its income or accumulates
research association. association for the it for application, wholly and
time being approved exclusively to the objects for which it is
for the purpose of established;
section 45(3)(a).
(b) invests its funds received in the
forms or modes specified in section 350;
(c) satisfies such conditions as
prescribed; and.
(d) the procedure for withdrawal of
approval granted shall be in such manner
as prescribed.
24. Any income (other An association or (a) the association or institution
than income institution applies its income, or accumulates it for
chargeable under the established in India application, solely to the objects for
head “Income from having as its object
the control, which it is established;
house property” or any supervision,
income received for (b) the association or institution is for
regulation or the time being approved by the Central
rendering any specific encouragement of
services or income by the profession of, Government by general or special order;
way of interest or law, medicine, and
dividends derived accountancy, (c) the procedure for withdrawal of
from its investments) engineering or approval granted shall be in such
manner, as prescribed.
 505

A B C D
architecture or such
other profession as
the Central
Government may,
by notification
specify in this
behalf
25. Any income An institution (a) Such institution exists solely for
attributable to the constituted as a the development of khadi or village
business of production, public charitable industries or both, and not for profit;
sale, or marketing, of trust or registered
(b) such institution applies its income,
khadi or products of under the Societies
or accumulates it for application, solely
village industries. Registration Act,
for the development of khadi or village
1860 (21 of 1860),
industries, or both;
or under any other
law corresponding (c) such institution is approved for
to that Act in force such purpose by the Khadi and Village
in any part of India. Industries Commission for a period not
exceeding 3 tax years at any one time;
and
(d) the procedure for withdrawal of
approval granted shall be in such manner
as prescribed.
26. Any income from A securitisation
the activity of trust.
securitisation.
27. Any income, by Any Investor (a) Such fund is notified by the
way of contributions Protection Fund Central Government; and
received from set up by
recognised stock recognised stock (b) where any amount standing to
exchanges and the exchanges in the credit of the Fund and not charged
members thereof. India, either to income-tax during any tax year is
jointly or shared, either wholly or in part, with a
separately. recognised stock exchange, the whole
of the amount so shared shall be
deemed to be the income of the tax year
in which such amount is so shared and
shall accordingly be chargeable to
income-tax.
28. Any income, by Any Investor (a) Such fund is notified by the Central
way of contributions Protection Fund set Government; and
received from up by commodity (b) where any amount standing to the
commodity exchanges in India, credit of the said Fund and not charged
exchanges and the either jointly or to income-tax during any tax year is
members thereof. separately. shared, either wholly or in part, with a
commodity exchange, the whole of the
amount so shared shall be deemed to be
the income of the tax year in which such
amount is so shared and shall
accordingly be chargeable to income-tax.
 506

A B C D
29. Any income, by way Any Investor (a) Such fund is notified by the
of contributions Protection Fund set Central Government; and
received from a up as per the (b) where any amount standing to
depository. regulations by a the credit of the Fund and not charged to
depository.
income-tax during any tax year is
shared, either wholly or in part with a
depository, the whole of the amount so
shared shall be deemed to be the income
of the tax year in which such amount is
so shared and shall, accordingly, be
chargeable to income-tax.
30. (a) Any income by Any Core (a) Such fund is notified by the
way of contribution Settlement Central Government; and
received from specified
persons; Guarantee Fund, (b) where any amount standing to the
set up by a credit of the Fund and not charged to
(b) any income by
recognised clearing income-tax during any tax year is
way of penalties
corporation. shared, either wholly or in part with the
imposed by the
specified person, the whole of the
recognised clearing
amount so shared shall be deemed to be
corporation and credited
the income of the tax year in which such
to the Core Settlement
amount is so shared and shall,
Guarantee Fund.
accordingly, be chargeable to income-
(c) any income from tax.
investment made by the
Fund.
31. Any income (a) A registered
chargeable under the union within the
heads “Income from
house property” and meaning of the
“Income from other Trade Unions
sources”. Act, 1926 (16 of
1926), formed
primarily for the
purpose of
regulating the
relations between
workmen and
employers or
between workmen
and workmen; or
(b) an association
of registered unions
referred to in clause
(a).
32. Any interest on Provident Fund Such securities are held by, or are the
securities, and any to which the property of such Provident Fund.
capital gains of the fund
arising from the sale, Provident Funds
exchange or transfer of Act, 1925
such securities. (19 of 1925) applies.
33. Any income of the Any person (a) Such international sporting event—
nature and to the extent, notified by the (i) is approved by the
arising from the
international sporting Central international body regulating the
event held in India. Government. international sport relating to such
event;
 507

A B C D
(ii) has participation by more than
two countries; and
(iii) is notified by the Central
Government for the purposes of this
clause; and
(b) nature and extent of such income
is notified by the Central Government.
34. Any income, of the A body or Such body or authority—
nature and to the extent, authority which has
which the Central been established or (a) is established or constituted or
Government may notify constituted or appointed not for the purposes of
in this behalf. appointed under a profit; and
treaty or an (b) is notified by the Central
agreement entered
into by the Central Government.
Government with
two or more
countries or a
convention signed by
the Central
Government.
35. Any amount received Any individual. Nil.
as a loan, either in lump
sum or in instalment, in
a transaction of reverse
mortgage referred to in
section 70(1)(zh)
36. Any income of the A body or Such body or authority or Board or
nature and to the extent authority or Board or Trust or Commission—
which the Central Trust or Commission (a) has been established or
Government may, by (by whatever name constituted by or under a Central Act,
notification, specify in called), or a class State or Provincial Act, or
this behalf. thereof, other than constituted by the Central
those covered under Government or a State Government,
Schedule VII (Table: with the object of regulating or
Sl. No. 42) administering any activity for the
benefit of the general public;
(b) is not engaged in any
commercial activity; and
(c) is notified by the Central
Government.
37. Any income accruing Indian Strategic It shall not apply to an arrangement,
or arising as a result of Petroleum Reserves if the crude oil is not replenished in the
arrangement for Limited, being a storage facility within three years from
replenishment of crude wholly owned the end of the tax year in which the
oil stored in its storage subsidiary of the Oil crude oil was removed from the storage
facility in pursuance of Industry facility for the first time.
the directions of the Development Board
Central Government in under the Ministry of
this behalf. Petroleum and
Natural Gas.
 508

A B C D
38. Any gratuity Any widow,
computed as per the children or
provisions of section dependants on death
19(1)(Table: Sl. No. of an employee.
3.C) to (Table: Sl. No.
6.C)
39. Any income falling
under section 10(15)(iic)
or (15)(iv)(i) or (19A) or
(40) of the Income-tax
Act, 1961(43 of 1961),
shall be subject to the
conditions as provided
therein.
Note 1: For the purposes of Sl. No. 3,––
“disaster” shall have the same meaning as assigned to it in section 2(d)
of the Disaster Management Act, 2005.
Note 2: For the purposes of Sl. No. 8 and 15,––
“family” in relation to an individual, means—
(i) the spouse and children of the individual; and
(ii) the parents, brothers and sisters of the individual or any of
them, wholly or mainly dependent on the individual.
Note 3: For the purposes of Sl. No. 18,––
“compensation or consideration” includes the compensation or
consideration enhanced or further enhanced by any court, Tribunal or other
authority.
Note 4: For the purposes of Sl. No. 20,––
“Sikkimese” means—
(i) an individual, whose name is recorded in the register
maintained under the Sikkim Subjects Regulation, 1961 read with the
Sikkim Subject Rules, 1961 (hereinafter referred to as the “Register of
Sikkim Subjects”), immediately before the 26th April, 1975; or
(ii) an individual, whose name is included in the Register of
Sikkim Subjects by virtue of the Government of India Order No.
26030/36/90-I.C.I., dated the 7th August, 1990 and Order of even number
dated the 8th April, 1991; or
(iii) any other individual, whose name does not appear in the Register
of Sikkim Subjects, but it is established beyond doubt that the name of the
father or husband or paternal grand-father or brother from the same father
of such individual has been recorded in that register; or
(iv) any other individual, whose name does not appear in the Register
of Sikkim Subjects but it is established that such individual was domiciled
in Sikkim on or before the 26th April, 1975; or
(v) any other individual, who was not domiciled in Sikkim on or
before the 26th April, 1975, but it is established beyond doubt that the
father or husband or paternal grand-father or brother from the same father
of such individual was domiciled in Sikkim on or before the 26th April,
1975.
 509

Note 5: For the purposes of Sl. No. 21,––

“concerned Board” means—
(i) in relation to tea, the Tea Board shall mean the Tea Board
established under section 4 of the Tea Act, 1953 (29 of 1953);
(ii) in relation to rubber, the Rubber Board constituted under
section 4 of the Rubber Act, 1947 (24 of 1947);
(iii) in relation to coffee, the Coffee Board constituted under
section 4 of the Coffee Act, 1942 (7 of 1942);
(iv) in relation to cardamom, the Spices Board constituted under
section 3 of the Spices Board Act, 1986 (10 of 1986);
(v) in relation to any other commodity, any Board or other
authority established under any law for the time being in force which
the Central Government may, by notification, specify in this behalf.
Note 6: For the purposes of Sl. No. 22,––
“local authority” means—
(i) Panchayat as referred to in article 243(d) of the Constitution; or
(ii) Municipality as referred to in article 243P(e) of the
Constitution; or
(iii) Municipal Committee and District Board,
legally entitled to, or entrusted by the Government with, the control or
management of a Municipal or local fund; or
(iv) Cantonment Board constituted under section 12 of the
Cantonments Act, 2006 (4 of 2006).
Note 7: For the purposes of Sl. No. 25,––
(a) “Khadi and Village Industries Commission” means the Khadi and
Village Industries Commission established under the Khadi and Village
Industries Commission Act, 1956 (91 of 1956); and
(b) “khadi” and “village industries” shall have the same meanings as
respectively assigned to them in that Act.
Note 8: For the purposes of Sl. No. 26,––
(a) “securitisation” shall have the same meaning as assigned to it,—
(i) in regulation 2(1)(r) of the Securities and Exchange Board of
India (Public Offer and Listing of Securitised Debt Instruments)
Regulations, 2008 made under the Securities and Exchange Board of
India Act, 1992 (15 of 1992) and the Securities Contracts (Regulation)
Act, 1956 (42 of 1956); or
(ii) in section 2(1)(z) of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (54 of
2002; or
(iii) under the guidelines on securitisation of standard assets
issued by the Reserve Bank of India;
(b) “securitisation trust” shall have the meaning assigned to it in section
221 (6)(d).
Note 9: For the purposes of Sl. No. 28,––
“commodity exchange” shall mean a registered association as defined
in section 2(jj) of the Forward Contracts (Regulation) Act, 1952 (74 of 1952).
 510

Note10: For the purposes of Sl. No. 29,––

(a)“depository” shall have the same meaning as assigned to it in section
2(1)(e) of the Depositories Act, 1996 (22 of 1996);
(b)“regulations” shall mean the regulations made under the Securities
and Exchange Board of India Act, 1992 (15 of 1992) and the Depositories
Act, 1996.
Note11: For the purposes of Sl. No. 30––
(a) “recognised clearing corporation" shall have the same meaning as
assigned to it in––
(i) regulation 2(1)(o) of the Securities Contracts (Regulation) (Stock
Exchanges and Clearing Corporations) Regulations, 2012 made under the
Securities Contracts (Regulation) Act, 1956 (42 of 1956); or
(ii) regulation 2(1)(n) of the International Financial Services Centres
Authority (Market Infrastructure Institutions) Regulations, 2021 made under
the International Financial Services Centres Authority Act, 2019 (50 of 2019);
(b) “regulations” means––
(i) the Securities Contracts (Regulation) (Stock Exchanges and
Clearing Corporations) Regulations, 2012 made under the Securities
Contracts (Regulation) Act, 1956 (42 of 1956); or
(ii) the International Financial Services Centres Authority (Market
Infrastructure Institutions) Regulations, 2021 made under the International
Financial Services Centres Authority Act, 2019 (50 of 2019);
(c) “specified person” means—
(i) any recognised clearing corporation which establishes and
maintains the Core Settlement Guarantee Fund;
(ii) any recognised stock exchange, being a shareholder in such
recognised clearing corporation, or a contributor to the Core Settlement
Guarantee Fund; and
(iii) any clearing member contributing to the Core Settlement
Guarantee Fund.
 511

SCHEDULE IV
(See section 11)
INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF ELIGIBLE NON-RESIDENTS, FOREIGN COMPANIES AND
OTHER SUCH PERSONS

In computing the total income of a tax year of any eligible person mentioned in column C of
the Table below, the income mentioned in column B of the said Table shall not be included, subject
to the conditions mentioned in column D of the said Table, and the expressions used in columns B
to D shall have the meanings respectively assigned to them in the Notes below the said Table.
Table
Sl. Income not to be Eligible persons Conditions
No. included in total income

A B C D
1. Any income by way of (a) A person being Such interest is on moneys standing
interest. an individual, who is a to the credit of such person in a Non-
resident outside India Resident (External) Account in any
as defined in section bank in India as per the said Act and
2(w) of the Foreign the rules made thereunder.
Exchange
Management Act,
1999 (42 of 1999); or
(b) a person being
an individual who has
been permitted by the
Reserve Bank of India
to maintain the said
account.
2. Any remuneration An official, by (a) The remuneration received as a
received for service in the whatever name called, trade commissioner or other official
capacity as an official of an embassy, high representative in India of the
mentioned in column C, commission, legation, government of a foreign State (not
holding office as such in an honorary
not being a citizen of commission, capacity), or as members of the staff,
India. consulate or the trade if any, of the government, resident for
representation of a similar purposes in the country
foreign State, or as a concerned enjoy a similar exemption
member of the staff of in that country; and
any of these officials. (b) the members of the staff are
subjects of the country represented and
are not engaged in any business or
profession or employment in India
otherwise than as members of such
staff.
3. Any remuneration A person who is an (a) The foreign enterprise is not
received as an employee employee of a foreign engaged in any trade or business in
for services rendered by enterprise, not being a India;
him during his stay in citizen of India.
India (b) his stay in India does not exceed
in the aggregate a period of ninety
days in such tax year; and
(c) such remuneration is not liable
to be deducted from the income of the
employer chargeable under this Act.

511
 512

A B C D
4. Any income Any individual The total stay of such individual in
chargeable under the being a non-resident, India does not exceed in the aggregate
head “Salaries”, received not being a citizen of a period of ninety days in the tax year.
or due as remuneration India.
for services rendered in
connection with his
employment on a foreign
ship.
5. Any remuneration An employee of the Such remuneration is received
received as an employee Government of a during his stay in India in connection
of the Government of a foreign State, not with his training in any establishment
foreign State. being a citizen of or office of, or in any undertaking
India. owned by—

(a) the Government; or

(b) any company in which the

entire paid-up share capital is held
by the Central Government or any
State Government or State
Governments, or partly by the
Central Government and partly by
one or more State Governments; or

(c) any company which is a

subsidiary of a company referred to
in clause (b); or

(d) any corporation established

by or under a Central Act or State
Act or Provincial Act; or

(e) any society registered under

the Societies Registration Act, 1860
(21 of 1860), or under any other law
and wholly financed by the Central
Government, or any State
Government or State Governments,
or partly by the Central
Government and partly by one or
more State Governments.

6. Any income arising by Any foreign (a) Such company is notified by the
way of royalty or fees for company. Central Government; and
technical services. (b) such income is received in
pursuance of an agreement entered
into with the Central Government for
providing services in or outside India
in projects connected with security of
India.
 513

A B C D
7. Any income arising by A non-resident, not (a) Such royalty is received from
way of royalty from, or being a company, or a the National Technical Research
fees for technical foreign company. Organisation; or.
services rendered in or
outside India. (b) such fees is for technical
services rendered to the National
Technical Research Organisation.
8. Interest received. Non-resident or a Such interest is on a deposit made
person who is not on or after the 1st April, 2005 in an
ordinarily resident in Offshore Banking Unit referred to in
India. section 2(u) of the Special Economic
Zones Act, 2005 (28 of 2005).
9. Income from lease Foreign company. (a) Such income is received from a
rentals, by whatever specified company which operates
name called, of a cruise such ship or ships in India;
ship. (b) such foreign company and the
specified company are subsidiaries of
the same holding company; and
(c) such income is received or
accrues or arises in India for any
relevant tax year beginning on or
before the 1st April, 2029.
10. Any income derived in The European Such investments made out of its
India by way of interest, Economic Community. funds under such scheme as the
dividends or Capital gains Central Government may, by
from investments made. notification specify.
11. Any income received in A foreign company. (a) Such income is on account of sale
India in Indian currency. of crude oil or any other goods or
rendering of services, as notified by the
Central Government in this behalf, to
any person in India;
(b) receipt of such income in India
by the foreign company is pursuant to
an agreement or an arrangement
entered into by the Central
Government or approved by the
Central Government;
(c) such agreement is entered with
the foreign company, having regard to
the national interest, and the
agreement or arrangement is notified
by the Central Government; and
(d) such foreign company is not
engaged in any activity in India, other
than activity resulting in such income.
12. Any income accruing A foreign company. (a) Such storage and sale by the
or arising on account of foreign company is pursuant to an
storage of crude oil in a agreement or an arrangement entered
facility in India and sale into by the Central Government or
of such crude oil to any approved by the Central Government;
person resident in India. and
 514

A B C D
(b) such agreement is entered with
the foreign company, having regard to
the national interest, and the
agreement or arrangement is notified
by the Central Government.
13. Any income accruing A foreign company. Such sale shall be as per the terms
or arising to on account mentioned in the said agreement,
of sale of leftover stock subject to such conditions as notified
of crude oil, if any, from by the Central Government in this
the facility in India after behalf.
the expiry of the
agreement or
arrangement referred to
against serial number 12
or on termination of the
said agreement or
arrangement.
14. Any income falling
under section 10(6A),
(6B), (6BB), (15A),
(15)(iiia),
(15)(iiib),(15)(iiic) or
(15)(iv)(a), (15)(iv)(b)
or(15)(iv)(fa) of the
Income-tax Act, 1961(43
of 1961) subject to the
conditions as specified
therein.
Note 1: For the purposes of Sl. No. 9,––
(a) “specified company” means any company, other than a domestic
company which operates cruise ships in India and opts to pay tax as per the
provisions of section 61(2)(Table: Sl. No. 2);
(b) “holding company”, in relation to a foreign company or a specified
company, means a company of which such companies are subsidiary
companies; and
(c) “subsidiary company” or “subsidiary”, in relation to a holding
company, means a company in which the holding company exercises or
controls more than one-half of the total share capital either at its own or
together with one or more of its subsidiary companies.
Note 2: For the purposes of Sl. No. 10,––
“European Economic Community” means the European Economic
Community established by the Treaty of Rome of 25th March, 1957.
 515

SCHEDULE V
(See section 11)
INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF CERTAIN ELIGIBLE PERSONS INCLUDING
INVESTMENT FUNDS, BUSINESS TRUSTS AND THEIR UNIT HOLDERS

In computing the total income of a tax year of any eligible person mentioned in column C
of the Table below, the income mentioned in column B of the said Table shall not be included,
subject to the conditions mentioned in column D of the said Table, and the expressions used in
columns B to D of the said Table shall have the meanings respectively assigned to them in Notes
below the said table.
Table
Sl. Income not to be Eligible Conditions
No. included in total income persons

A B C D
1. Any income other than An
the income chargeable investment fund.
under the head “Profits and
gains of business or
profession”.
2. Any income referred to A unit holder Nil.
in section 224, accruing or of an investment
arising to, or received fund.
being that proportion of
income which is of the
same nature as income
chargeable under the head
“Profits and gains of
business or profession”.
3. Any income by way A business
of— trust.
(a) interest received or
receivable from a special
purpose vehicle; or
(b) dividend received or
receivable from a special
purpose vehicle.
4. Any income by way A business
of renting or leasing or trust, being a
letting out any real estate real estate
asset owned directly by investment trust.
such business trust.

5 Any distributed Any unit Exemption shall not be allowed on that

income referred to in holder of a proportion of the income which is of the
section 223 business trust. same nature as––
(a) interest received or receivable
from a special purpose vehicle by the
business trust; or

515
 516

A B C D
(b) dividend received or receivable
from a special purpose vehicle by the
business trust (in a case where the special
purpose vehicle has exercised the option
under section 200; or
(c) income of a business trust by way
of renting or leasing or letting out any real
estate asset owned directly by such
business trust.
6. Any income from Venture
investment in a venture capital company
capital undertaking. or venture
capital fund
other than being
an investment
fund specified in
section
224(10)(a).
7. Any income of the Any (a) Such investment—
nature of–– specified (i) is made on or after the
(a) dividend; person. 1st April, 2020 but on or before the
(b) interest; 31st March, 2030;
(c) any sum referred (ii) is held for at least three years; and
to in section 92(2)(k); or (iii) is in,—
(d) long-term capital (A) a business trust;
gains (whether or not (B) an eligible infrastructure
such capital gains are entity;
deemed as short term
(C) an eligible Alternate Investment
capital gains under
Fund;
section 76),
(D) an eligible domestic
arising from an
company; or
investment made by a
specified person in (E) an eligible Non-banking
India, whether in the Financial Company;
form of debt or share
(b) The provisions of this clause shall be
capital or unit.
governed by guidelines issued by the Board,
if any difficulty arises in interpreting or
implementing the provisions of this clause;
(c) such Guidelines shall be––
(i) issued with the previous approval of
the Central Government;
(ii) every Guideline issued by the
Board under this clause shall be laid
before each House of Parliament; and
(iii) shall be binding on the Income-tax
Authority and the specified person;
 517

A B C D
(d) where any income has not been
included in the total income of the
specified person, and subsequently
during any tax year the specified person
fails to satisfy any of these conditions so
that the said income would not have been
eligible for such non-inclusion, such
income shall be chargeable to income-tax
as the income of the specified person of
that tax year;
(e) where an eligible Alternate
Investment Fund has investment of less
than 100% in one or more of eligible
infrastructure entity or eligible domestic
company or eligible Non-Banking
Financial Company or in an eligible
InvIT, income accrued or arisen or
received or attributable to such
investment, directly or indirectly, which
is exempt shall be calculated
proportionately to that investment made
in one or more of the eligible
infrastructure entity or eligible domestic
company or eligible Non-Banking
Financial Company or in an eligible
InvIT, in such manner as prescribed;
(f) where an eligible domestic
company has investment of less than
100% in one or more of the eligible
infrastructure entity, income accrued or
arisen or received or attributable to such
investments, directly or indirectly, which
is exempt herein shall be calculated
proportionately to the investment made in
one or more of the eligible infrastructure
entity, in such manner, as prescribed;
(g) where an eligible Non-Banking
Financial Company has lending of less
than 100% in one or more of the eligible
infrastructure entity, income accrued or
arisen or received or attributable to such
lending, directly or indirectly, which is
exempt herein shall be calculated
proportionately to the lending made in
eligible infrastructure entity, in such
manner, as prescribed;
(h) in case a sovereign wealth fund or
pension fund has loans or borrowings,
directly or indirectly, for the purposes of
making investment in India, such fund
shall be deemed to be not eligible for
exclusion from total income.
 518

A B C D
8. Any income falling
under section 10(23F) and
(23FA) of the Income-tax
Act, 1961 (43 of 1961),
subject to the conditions as
specified therein.
Note 1: For the purposes of Sl. Nos. 1 and 2,––
“investment fund” shall have the meaning assigned to it in section 224(10)(a).
Note 2: For the purposes of Sl. No. 3,––
“special purpose vehicle” means an Indian company in which the business
trust holds controlling interest and any specific percentage of shareholding or
interest, as may be required by the law under which such trust is granted
registration.
Note 3: For the purposes of Sl. No. 4,––
“real estate asset” shall have the same meaning as assigned to it in regulation
2(1)(zj) of the Securities and Exchange Board of India (Real Estate Investment
Trusts) Regulations, 2014 made under the Securities and Exchange Board of India
Act, 1992 (15 of 1992).
Note 4: For the purposes of Sl. No. 6,––
(a) “venture capital company” means a company which—
(i) has been granted a certificate of registration, before the 21st
May, 2012, as a Venture Capital Fund and is regulated under the Securities
and Exchange Board of India (Venture Capital Funds) Regulations, 1996
(hereinafter referred to as the Venture Capital Funds Regulations) made
under the Securities and Exchange Board of India Act, 1992 (15 of 1992); or
(ii) has been granted a certificate of registration as Venture Capital
Fund as a sub-category of Category I Alternative Investment Fund and is
regulated under the Securities and Exchange Board of India (Alternative
Investment Funds) Regulations, 2012 (hereinafter referred to as the
Alternative Investment Funds Regulations) made under the Securities and
Exchange Board of India Act, 1992 (15 of 1992), and which fulfils the
following conditions:—
(A) it is not listed on a recognised stock exchange;
(B) it has invested not less than two-thirds of its investible funds
in unlisted equity shares or equity linked instruments of venture capital
undertaking; and
(C) it has not invested in any venture capital undertaking in which
its director or a substantial shareholder (being a beneficial owner of
equity shares exceeding 10% of its equity share capital) holds, either
individually or collectively, equity shares in excess of 15% of the
paid-up equity share capital of such venture capital undertaking;
(b) “venture capital fund” means a fund—
(i) operating under a trust deed registered under the provisions of the
Registration Act, 1908 (16 of 1908), which—
 519

(A) has been granted a certificate of registration, before the 21st

May, 2012, as a Venture Capital Fund and is regulated under the
Venture Capital Funds Regulations; or
(B) has been granted a certificate of registration as Venture
Capital Fund as a sub-category of Category I Alternative Investment
Fund under the Alternative Investment Funds Regulations or as referred
to regulation 18(2) of the International Financial Services Centres
Authority (Fund Management) Regulations, 2022 made under the
International Financial Services Centres Authority Act, 2019 (50 of
2019), and which fulfils the following conditions:—
(I) it has invested not less than two-thirds of its investible
funds in unlisted equity shares or equity linked instruments of
venture capital undertaking;
(II) it has not invested in any venture capital undertaking in
which its trustee or the settler holds, either individually or
collectively, equity shares in excess of 15% of the paid-up equity
share capital of such venture capital undertaking; and
(III) the units, if any, issued by it are not listed in any
recognised stock exchange; or
(IV) any other condition as prescribed; or
(ii) operating as a venture capital scheme made by the Unit Trust of
India ;
(c) "venture capital undertaking" means—
(i) a venture capital undertaking as defined in clause (n) of
regulation 2 of the Venture Capital Funds Regulations; or
(ii) a venture capital undertaking as defined in clause (aa) of
regulation 2(1) of the Alternative Investment Funds Regulations.
Note 5: For the purposes of Sl. No. 7,––
(a) “specified person” means—
(i) a wholly owned subsidiary of the Abu Dhabi Investment Authority,
which—
(A) is a resident of the United Arab Emirates; and
(B) makes investment, directly or indirectly, out of the fund
owned by the Government of Abu Dhabi;
(ii) a sovereign wealth fund, which satisfies the following conditions,
namely:—
(A) it is wholly owned and controlled, directly or indirectly, by
the government of a foreign country;
(B) it is set up and regulated under the law of such foreign
country;
(C) the earnings of the said fund are credited either to the account
of the government of that foreign country or to any other account
designated by that government so that, no portion of the earnings inures
any benefit to any private person;
(D) the asset of the said fund vests in the government of such
foreign country upon dissolution;
 520

(E) the provisions of items (C) and (D) shall not apply to any
payment made to creditors or depositors for loan taken or borrowing for
the purposes other than for making investment in India;
(F) it does not participate in the day-to-day operations of investee
but the monitoring mechanism to protect the investment with the
investee including the right to appoint directors or executive director
shall not be considered as participation in the day to day operations of
the investee; and
(G) it is specified by the Central Government, by notification for
this purpose and fulfils the conditions specified in such notification;
(iii) a pension fund, which—
(A) is created or established under the law of a foreign country
including the laws made by any of its political constituents, being a
province, State or local body, by whatever name called;
(B) is not liable to tax in such foreign country or if liable to tax,
exemption from taxation for all its income has been provided by such
foreign country;
(C) it does not participate in the day-to-day operations of investee
but the monitoring mechanism to protect the investment with the
investee including the right to appoint directors or executive director
shall not be considered as participation in day-to-day operations of the
investee;
(D) is specified by the Central Government, by notification for
this purpose and fulfils conditions specified in such notification; and
(E) satisfies such other conditions as prescribed;
(b) “investee” means a business trust or eligible infrastructure entity or
eligible Alternate Investment Fund or eligible domestic company or eligible
Non-Banking Financial Company, in which the sovereign wealth fund or the
pension fund has made the investment directly or indirectly as provided herein;
(c) “loan and borrowing” means—
(i) any loan taken, or borrowing by a sovereign wealth fund from, or
any deposit or investment made in a sovereign wealth fund by any person
other than the Government of the country in which the sovereign wealth fund
is set up;
(ii) any loan taken, or borrowing by a pension fund from, or any deposit
or investment made in a pension fund by any person, but shall not include––
(A) the deposit or investment which represents statutory
obligations and defined contributions of one or more funds or plans
established for providing retirement, social security, employment,
disability or death benefits; or
(B) any similar compensation to the participants or beneficiaries
of such funds or plans, as the case may be;
(d) “eligible infrastructure entity” means a company or enterprise or an entity
carrying on the business of––
(i) developing;
(ii) operating and maintaining; or
 521

(iii) developing, operating and maintaining an infrastructure facility as

defined in section 138(11) or such other business as the Central Government
may, by notification, specify in this behalf;
(e) “eligible Alternate Investment Fund” means Category-I or Category-II
Alternative Investment Fund––
(i) regulated under the Securities and Exchange Board of India
(Alternative Investment Funds) Regulations, 2012 made under the Securities
and Exchange Board of India Act, 1992 (15 of 1992);
(ii) having not less than 50% investment in one or more of the eligible
infrastructure entity or eligible domestic company or eligible Non-Banking
Financial Company or in an eligible InvIT, computed in such manner as
prescribed;
(f) “eligible domestic company” means a domestic company––
(i) set up and registered on or after the 1st April, 2021; and
(ii) having minimum 75% investments in one or more of the eligible
infrastructure entities, computed in such manner, as prescribed;
(g) “eligible Non-Banking Financial Company” means––
(i) a non-banking financial company registered as an Infrastructure
Finance Company as referred to in notification number RBI/2009-10/316
issued by the Reserve Bank of India or in an Infrastructure Debt Fund or a
non-banking finance company as referred to in the Infrastructure Debt Fund
- Non-Banking Financial Companies (Reserve Bank) Directions, 2011,
issued by the Reserve Bank of India; and
(ii) having minimum 90% lending to one or more of eligible
infrastructure entities, computed in such manner, as prescribed; and
(h) “eligible InvIT” means an Infrastructure Investment Trust referred to in
section 2(21)(a).
 522

SCHEDULE VI
(See section 11)
INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF CERTAIN ELIGIBLE PERSONS IN INTERNATIONAL
FINANCIAL SERVICES CENTRE OR HAVING INCOME THEREFROM

In computing the total income of a tax year of any eligible person, as mentioned in
column C of the Table below, the income mentioned in column B of the said Table and the income
as mentioned in savings clause shall not be included, subject to the conditions mentioned in
column D of the said Table, and the expressions used in columns B to D of the said Table, shall
have the meanings respectively assigned to them in the Notes below the said Table.
Table
Sl. Income not to be Eligible Conditions
No. included in total income persons
A B C D
1. Any income accrued Any specified (a) Consideration is paid or payable in
or arisen to, or received, fund. convertible foreign exchange;
as a result of transfer of
(b) Income shall not be included in the
capital asset referred to in
total income to the extent such income is
section 70(1)(r) where
attributable to––
such transfer takes place
on a recognised stock (i) units held by non-resident (not
exchange located in any being the permanent establishment of a
International Financial non-resident in India); or
Services Centre.
(ii) the investment division of
offshore banking unit; and
(c) The income exempt shall be
computed in such manner as prescribed.

2. Any income accrued Any specified As specified in clauses (b) and (c) of
or arisen to, or received, fund. Column D against Sl. No. 1.
as a result of transfer of
securities (other than
shares in a company
resident in India).
3. Any income from Any specified (a) Such income otherwise does not
securities issued by a non- fund. accrue or arise in India;
resident where such
(b) As specified in clauses (b) and (c) of
securities are not issued
Column D against Sl. No. 1.
by a permanent
establishment of a non-
resident in India.

4. Any income from a Any specified As specified in clauses (b) and (c) of
securitisation trust, which fund. Column D against Sl. No. 1.
is chargeable under the
head “Profits and gains
of business or
profession”.

522
 523

A B C D
5. Any income accrued Non-resident. (a) Such contract, instrument or
or arisen to, or received as derivative is entered into with an offshore
a result of— banking unit of an International Financial
Services Centre or any Foreign Portfolio
(a) transfer of non- Investor being a unit of an International
deliverable forward Financial Services Centre; and
contracts or offshore
derivative instruments (b) it fulfils such conditions, as prescribed.
or over-the-counter
derivatives; or
(b) distribution of
income on offshore
derivative instruments.
6. Any income by way of Non-resident. (a) Such royalty or interest is paid by a
royalty or interest on unit of an International Financial Services
account of lease of an Centre; and
aircraft or a ship in a tax (b) such unit has commenced its
year. operations on or before the 31st March,
2030.
7. Any income received Non-resident. (a) Such income is received in an
from–– account maintained with an Offshore
Banking Unit in any International
(a) portfolio of
Financial Services Centre; and
securities or financial
products or funds, (b) the income not to be included in the
managed or total income shall be to the extent such
administered by any income accrues or arises outside India and
portfolio manager on is not deemed to accrue or arise in India.
behalf of the non-
resident; or
(b) such activity
carried out by such
person, as notified by
the Central
Government.
8 Any income by way A non- (a) The domestic company—
of Capital gains arising resident, or a
(i) it is engaged primarily in the
from the transfer of Unit of an
business of leasing of aircraft or ship;
equity shares of International
domestic company Financial (ii) has commenced operations on or
where such domestic Services Centre, before the 31st March, 2030; and
company is a Unit of an engaged
(b) exclusion from total income shall
International Financial primarily in the
be available for capital gains arising from
Services Centre. business of
the transfer of equity shares of such
leasing of
domestic company in a tax year falling
aircraft or ship.
within—
(i) ten tax years beginning with
the tax year in which the domestic
company has commenced operations;
or
 524

A B C D
(ii) ten tax years beginning with the
tax year commencing on the 1st April,
2023, where the period referred to in
sub-clause (i) ends before the 1st April,
2033.
9. Any income accruing A unit holder
or arising to, or received of a specified
from a specified fund or fund.
on transfer of units in a
specified fund.
10. Any income of the Any non- (a) The Capital gain is on account of
nature of Capital gains, resident or a transfer of shares by the resultant fund or
arising or received on specified fund. a specified fund; and
account of transfer of
share of a company (b) such shares were transferred from
resident in India. the original fund, or from its wholly
owned special purpose vehicle, to the
resultant fund in relocation, and the
Capital gains on such shares were not
chargeable to tax if that relocation had not
taken place; and
(c) income not to be included in the
total income shall be to the extent
attributable to units held by the non-
resident (not being a permanent
establishment of a non-resident in India)
in such manner, as prescribed.
11. Any income by way A Unit of any Such Unit is primarily engaged in
of dividends from a International the business of leasing of aircraft or ship.
company being a Unit of Financial
an International Services Centre.
Financial Services
Centre primarily
engaged in the business
of leasing of an aircraft
or ship.
12. Any income by way of Non- Such interest is payable by a Unit of
interest payable. resident. an International Financial Services Centre
in respect of monies borrowed by it on or
after the 1st September, 2019.

Note 1: For the purposes of Sl. Nos. 1 to 4,––

(a) “convertible foreign exchange” means foreign exchange which is for the
time being treated by the Reserve Bank of India as convertible foreign exchange
for the purposes of the Foreign Exchange Management Act, 1999 and the rules
made thereunder;
(b) “investment division of offshore banking unit” means an investment
division of a banking unit of a non-resident located in an International Financial
Services Centre and which has commenced its operations on or before the 31st
March, 2030;
 525

(c) “manager” shall have the same meaning as assigned to it in regulation

2(1)(q) of the Securities and Exchange Board of India (Alternative Investment
Funds) Regulations, 2012 made under the Securities and Exchange Board of India
Act, 1992 (15 of 1992);
(d) “permanent establishment” shall have the meaning assigned to it in
section 173 (c);
(e) “securities” shall have the same meaning as assigned to it in section 2(h)
of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and shall also
include such other securities or instruments as notified by the Central Government
in this behalf;
(f) “securitisation trust” shall have the meaning assigned to it in section 221
(6)(d);
(g) “specified fund” means—
(i) a fund established or incorporated in India in the form of a trust or a
company or a limited liability partnership or a body corporate,—
(A) which has been granted a certificate of registration as a
Category III Alternative Investment Fund and is regulated––
(I) under the Securities and Exchange Board of India
(Alternative Investment Funds) Regulations, 2012 made under
the Securities and Exchange Board of India Act, 1992; or
(II) regulated under the International Financial Services
Centres Authority (Fund Management) Regulations, 2022 made
under the International Financial Services Centres Authority Act,
2019 (50 of 2019);
(B) which has been granted a certificate as a retail scheme or an
Exchange Traded Fund, and is regulated under the International
Financial Services Centres Authority (Fund Management) Regulations,
2022 made under the International Financial Services Centres
Authority Act, 2019 (50 of 2019), and satisfies such conditions, as
prescribed;
(C) which is located in any International Financial Services
Centre; and
(D) of which all the units are held by non-residents except––
(I) the unit held by a sponsor or manager;
(II) where any unit holder or holders, being non-resident
during the tax year when such unit or units were issued, becomes
resident under section 6(2) or (3) or (4) or (5) or (6) or (7) in any
tax year subsequent to that year;
(III) in case of sub-item (II), aggregate value and the number
of units held by such resident unit holder or holders do not exceed
5% of the total units issued and shall fulfil such other conditions
as prescribed; or
(ii) investment division of an offshore banking unit, which has been—
(A) granted a certificate of registration as a Category-I foreign
portfolio investor under the Securities and Exchange Board of India
(Foreign Portfolio Investors) Regulations, 2019 made under the
Securities Exchange Board of India Act, 1992 (15 of 1992) and which
has commenced its operations on or before the 31st March, 2025; and
 526

(B) fulfils such conditions including maintenance of separate

accounts for its investment division, as prescribed;
(h) “sponsor” shall have the same meaning as assigned to it in regulation
2(1)(w) of the Securities and Exchange Board of India (Alternative Investment
Funds) Regulations, 2012 made under the Securities and Exchange Board of India
Act, 1992;
(i) “trust” means a trust established under the Indian Trusts Act, 1882 or
under any other law;
(j) “unit” means beneficial interest of an investor in the fund and shall include
shares or partnership interests.
Note 2: For the purposes of Sl. No. 5,––
“Foreign Portfolio Investor” shall mean a person registered as per the
provisions of the Securities and Exchange Board of India (Foreign Portfolio
Investors) Regulations, 2019 made under the Securities and Exchange Board of
India Act, 1992.
Note 3: For the purposes of Sl. Nos. 6, 8 and 11,––
(a) “aircraft” means an aircraft or a helicopter, or an engine of an aircraft or
a helicopter, or any part thereof;
(b) “ship” means a ship or an ocean vessel, engine of a ship or ocean vessel,
or any part thereof.
Note 4: For the purposes of Sl. No. 7,––
“portfolio manager” shall have the same meaning as assigned to it in
regulation 2(1)(z) of the International Financial Services Centres Authority
(Capital Market Intermediaries) Regulations, 2021 made under the International
Financial Services Centres Authority Act, 2019.
Note 5: For the purposes of Sl. No. 9,––
(a) “specified fund” shall have the same meaning as assigned to it in Note
1(g);
(b) “unit” means beneficial interest of an investor in the fund and shall include
shares or partnership interests.
Note 6: For the purposes of Sl. No. 10,––
(a) “original fund”, “relocation” and “resultant fund” shall have the meanings
respectively assigned to them in section 70(2);
(b) “specified fund” shall have the meaning assigned to it in Note 1(g).
Note 7: For the purposes of Sl. No. 12,––
“Unit” shall have the same meaning as assigned to it in section 2(zc) of the
Special Economic Zones Act, 2005.
 527

SCHEDULE VII
(See section 11)
PERSONS EXEMPT FROM TAX
Persons not liable to pay tax on total income.––Any eligible person, mentioned in
column B of the Table below, shall not be liable to pay income-tax on the total income for any tax
year, subject to the conditions mentioned in column C of the said Table, and the expression used
in columns B and C of the said Table, shall have the meanings respectively assigned to them in
the Notes below the said Table.

Table
Sl. Eligible persons Conditions
No.
A B C
1. Any regimental Fund or Non- Such Fund is for the welfare of the past and
public Fund established by the armed present members of the armed forces or their
forces of the Union. dependants.

2. Any fund established for such (a) Such fund—

purposes as may be notified by the
Board for the welfare of employees or (i) applies its income or accumulates it for
their dependants and such employees application, wholly and exclusively to the
are members of such fund. objects for which it is established; and
(ii) invests its funds and contributions and
other sums received by it in the forms or
modes specified in section 350;
(b) such fund is approved by the Principal
Commissioner or Commissioner in such manner
as prescribed; and such approval shall at any one
time have effect for such tax year or years not
exceeding three tax years as specified in the
order of approval.
3. Any fund, by whatever name (a) The contribution is made to such pension
called, set up by the Life Insurance scheme by any person for the purpose of
Corporation of India on or after the 1st receiving pension from such fund; and
August, 1996 or any other insurer
under a pension scheme. (b) such scheme is approved by the Controller
of Insurance or the Insurance Regulatory and
Development Authority established under
section 3(1) of the Insurance Regulatory and
Development Authority Act, 1999 (41 of 1999).

4. An authority (whether known as Such authority is established in a State by or

the Khadi and Village Industries under a State Act or Provincial Act for the
Board or by any other name). development of khadi or village industries in the
State.

527
 528

A B C
5. Any body or authority (whether or not a (a) Such body or authority provides for
body corporate or corporation sole) the administration of any one or more of
established, constituted or appointed by or public religious or charitable trusts or
under any Central Act or State Act or endowments (including mosques,
Provincial Act. temples, gurudwaras, wakfs, churches,
synagogues, agiaries or other places of
public religious worship) or societies for
religious or charitable purposes,
registered under the Societies Registration
Act, 1860 (21 of 1860), or any other law;
and
(b) exclusion from total income as
provided herein shall not be available to
any trust, endowment or society referred
to therein.
6. SAARC Fund for Regional Projects set up
by Colombo Declaration issued on the 21st
December, 1991 by the Heads of State or
Government of the Member Countries of South
Asian Association for Regional Cooperation
established on the 8th December, 1985 by the
Charter of the South Asian Association for
Regional Cooperation.
7. Insurance Regulatory and Development
Authority established under section 3(1) of
the Insurance Regulatory and Development
Authority Act, 1999 (41 of 1999).
8. Central Electricity Regulatory
Commission constituted under section 76(1)
of the Electricity Act, 2003 (36 of 2003).
9. Prasar Bharati (Broadcasting Corporation
of India) established section 3(1) of the Prasar
Bharati (Broadcasting Corporation of India)
Act, 1990 (25 of 1990).
10. The Prime Minister’s National Relief Fund
or the Prime Minister’s Citizen Assistance
and Relief in Emergency Situations Fund
(PM CARES FUND).
11. The Prime Minister’s Fund (Promotion of
Folk Art).
12. The Prime Minister’s Aid to Students
Fund.
13. The National Foundation for Communal
Harmony.
14. The Swachh Bharat Kosh, set up by the
Central Government.
15. The Clean Ganga Fund set up by the
Central Government.
 529

A B C
16. The Chief Minister’s Relief Fund or the
Lieutenant Governor’s Relief Fund in respect
of any State or Union territory as referred to
in section 133(1)(a)(xv).
17. Any University or other educational (a) It exists solely for educational
institution wholly or substantially financed purposes and not for purposes of profit;
by the Government. and
(b) if the Government grant to such
University or other educational institution
exceeds such percentage of the total
receipts including any donations, as
prescribed, of such University or other
educational institution, it shall be
considered as being substantially financed
by the Government during the relevant tax
year.
18. Any hospital or other institution wholly or (a) It is for the reception and treatment
substantially financed by the Government. of persons suffering from illness or mental
defectiveness, or for the reception and
treatment of persons during
convalescence or of persons requiring
medical attention or rehabilitation;
(b) it exists solely for philanthropic
purposes and not for profit; and
(c) if the Government grant to such
hospital or other institution exceeds such
percentage of the total receipts including
any donations, as prescribed, of such
hospital or other institution, it shall be
considered as being substantially financed
by the Government during the relevant tax
year.
19. (a) Any University or other educational (a) Such University or other
institution; educational institution exists solely for
educational purposes and not for profit;
(b) any hospital or other institution.
(b) such hospital or other institution is
for the reception and treatment of persons
suffering from illness or mental
defectiveness, or for the reception and
treatment of persons during
convalescence or of persons requiring
medical attention or rehabilitation;
(c) such hospital or other institution
exists solely for philanthropic purposes
and not for profit; and
(d) the aggregate of annual receipts of
the person from such University or
Universities or educational institution or
institutions, as well as, from such hospital
or hospitals or institution or institutions,
does not exceed ₹ 5,00,00,000.
 530

A B C
20. A Mutual Fund registered under the
Securities and Exchange Board of India Act,
1992 (15 of 1992) or regulations made
thereunder.
21. Any Mutual Fund set up by a public sector Such conditions as the Central
bank or a public financial institution or Government may, by notification,
authorised by the Reserve Bank of India. specify.
22. A recognised provident fund.
23. An approved superannuation fund.
24. An approved gratuity fund.
25. Deposit-linked Insurance Fund established
under section 3G of the Coal Mines Provident
Funds and Miscellaneous Provisions Act,
1948 (46 of 1948).
26. Deposit-linked Insurance Fund established
under section 6C of the Employees’ Provident
Funds and Miscellaneous Provisions Act,
1952 (19 of 1952).
27. Employees' State Insurance Fund set up
under the provisions of the Employees’ State
Insurance Act, 1948 (34 of 1948).
28. An agricultural produce market committee Such committee or board is constituted
or board constituted under any law. for the purpose of regulating the
marketing of agricultural produce.
29. A corporation established by a Central Act Such corporation or other body or
or State Act or Provincial Act or of any other institution or association has been
body, institution or association (being a body, established or formed for promoting the
institution or association wholly financed by interests of the members of the Scheduled
the Government). Castes or the Scheduled Tribes or
backward classes, or of any two, or all of
them.

30. A corporation established by the Central

Government or any State Government for
promoting the interests of the members of a
minority community.
31. Any corporation established by a Central
Act or State Act or Provincial Act for the
welfare and economic upliftment of
ex-servicemen being the citizens of India.
32. Any co-operative society formed for Membership of such co-operative
promoting the interests of the members of society shall consist of only other co-
either the Scheduled Castes or Scheduled operative societies formed for similar
Tribes, or both. purposes and the finances of the society
are provided by the Government and such
other societies.
33. Coffee Board constituted under
section 4 of the Coffee Act, 1942 (7 of 1942).
 531

A B C
34. Rubber Board constituted under section 4(1) of
the Rubber Board Act, 1947 (24 of 1947).
35. Tea Board established under section 4 of the
Tea Act, 1953 (29 of 1953).
36. Tobacco Board constituted under the Tobacco
Board Act, 1975 (4 of 1975).
37. Marine Products Export Development Authority
established under section 4 of the Marine Products
Export Development Authority Act, 1972
(13 of 1972).
38. Agricultural and Processed Food Products Export
Development Authority established under section 4
of the Agricultural and Processed Food Products
Export Development Act, 1985 (2 of 1986).
39. Spices Board constituted under section 3(1) of the
Spices Board Act, 1986 (10 of 1986).
40. Coir Board established under section 4 of the
Coir Industry Act, 1953 (45 of 1953).
41. New Pension System Trust established on the
27th February, 2008 under the provisions of the
Indian Trusts Act, 1882 (2 of 1882).
42. Any body or authority or Board or Trust or Such body or authority or Board or
Commission, not being a company, which has been Trust or Commission is notified by the
established or constituted by or under a Central Act Central Government.
or State Act with one or more of the following
purposes,—
(a) dealing with and satisfying the need for
housing accommodation;
(b) planning, development or improvement of
cities, towns and villages;
(c) regulating, or regulating and developing,
any activity for the benefit of the general public;
or
(d) regulating any matter, for the benefit of the
general public, arising out of the object for which
it has been created.
43. National Credit Guarantee Trustee Company
Limited, being a company established and wholly
financed by the Central Government for the
purposes of operating credit guarantee funds
established and wholly financed by the Central
Government.
44. A credit guarantee fund established and wholly
financed by the Central Government and managed
by the National Credit Guarantee Trustee Company
Limited.
 532

A B C
45. Credit Guarantee Fund Trust for Micro and Small
Enterprises, being a trust created by the Central
Government and the Small Industries Development
Bank of India established under section 3(1) of the
Small Industries Development Bank of India Act, 1989
(39 of 1989).
46. An infrastructure debt fund. Such fund is set up as per the
guidelines issued by the Central
Government, by notification.
47. An institution established for financing the Such exclusion from total income is
infrastructure and development set up under an Act ten consecutive tax years, beginning
of Parliament. from the tax year in which such
institution is set up and such institution
is notified by the Central Government.
48. A developmental financing institution, licensed (a) Such institution is notified by
by the Reserve Bank of India under an Act of the Central Government;
Parliament referred to against serial number 47.
(b) exclusion of such income from
the total income is for five consecutive
tax years beginning from the tax year
in which the developmental financing
institution is set up; and
(c) the Central Government may,
by notification extend the period of
exclusion for a further period, not
exceeding five more consecutive tax
years, subject to fulfilment of such
conditions as specified in the said
notification.

Note 1: For the purposes of Sl. No 3,––

“Controller of Insurance” shall have the same meaning as assigned to it
in section 2(5B) of the Insurance Act, 1938 (4 of 1938).
Note 2: For the purposes of Sl. No 4,––
“khadi” and “village industries” shall have the meanings respectively
assigned to them in the Khadi and Village Industries Commission Act, 1956
(61 of 1956).
Note 3: For the purposes of Sl. No 21,––
“public financial institution” shall have the same meaning as assigned
to it in section 2(72) of the Companies Act, 2013 (18 of 2013).
Note 4: For the purposes of Sl. No 29,––
(a) Scheduled Castes” and “Scheduled Tribes” shall have the meanings
respectively assigned to them in article 366(24) or (25) of the Constitution;
(b) “backward classes” means such classes of citizens, other than the
Scheduled Castes and the Scheduled Tribes, as notified by the Central
Government or any State Government.
Note 5: For the purposes of Sl. No 30,––
“minority community” means a community notified as such by the Central
Government.
 533

Note 6: For the purposes of Sl. No 31,––

“ex-servicemen” means persons––
(i) who have served in any rank, whether as combatant or non-
combatant;
(ii) in the armed forces of the Union or armed forces of the Indian States
before the commencement of the Constitution (but excluding the Assam
Rifles, Defence Security Corps, General Reserve Engineering Force, Lok
Sahayak Sena, Jammu and Kashmir Militia and Territorial Army);
(iii) for a continuous period of not less than six months after attestation;
(iv) have been released, otherwise than by way of dismissal or discharge
on account of misconduct or inefficiency; and
(v) includes their wife, children, father, mother, minor brother, widowed
daughter and widowed sister, wholly dependant upon such ex-servicemen,
immediately before their death or incapacitation, in case of deceased or
incapacitated ex-servicemen.
 534

SCHEDULE VIII
[See section 12]
INCOME NOT TO BE INCLUDED IN THE TOTAL INCOME OF POLITICAL PARTIES AND ELECTORAL
TRUSTS
In computing the total income of a tax year of any eligible person, being a political party
or an electoral trust, as mentioned in column C of the Table below, the income mentioned in
column B of the said Table shall not be included, subject to the conditions mentioned in
column D of the said Table, and the expressions used in columns B to D of the said Table, shall
have the meanings respectively assigned to them in the Note below the said Table:
Table
Sl. Income not to Eligible Conditions
No. be included in persons
total income
A B C D
1. Any income A (a) Such political party keeps and maintains such
which is political party books of account and other documents as would
chargeable under registered enable the Assessing Officer to properly deduce its
the head under section income therefrom;
“Income from 29(a) of the (b) in respect of each such voluntary contribution
house property” Representation other than contribution by way of electoral bond in
or “Income from of the People excess of ₹ 20,000, such political party keeps and
other sources” or Act, 1951 maintains a record of such contribution and the
“Capital gains” (43 of 1951) name and address of the person who has made such
or any income by contribution;
way of voluntary (c) the accounts of such political party are audited
contributions by an accountant;
received from (d) no donation exceeding ₹ 2,000 is received by
any person. such political party otherwise than by an account
payee cheque drawn on a bank or an account payee
bank draft or use of electronic clearing system
through a bank account or through such other
electronic mode as prescribed or through electoral
bond;
(e) the treasurer of such political party or any
other person authorised by that political party in
this behalf submits a report under section
29C (3) of the Representation of the People Act,
1951 (43 of 1951) for such tax year; and
(f) such political party furnishes a return of
income for the tax year as per the provisions of
section 263(1)(a)(iii) on or before the due date under
that section.
2. Any An electoral (a) Such electoral trust distributes to any
voluntary trust. political party, registered under section 29A of the
contributions Representation of the People Act, 1951 (43 of
received. 1951), during the said tax year, 95% of the
aggregate donations received by it during the said
tax year along with the surplus, if any, brought
forward from any earlier tax year; and
(b) such electoral trust functions as per the
rules made by the Central Government.
Note: For the purposes of this Schedule, “electoral bond" means a bond referred to in the
Explanation to sub-section (3) of section 31 of the Reserve Bank of India Act, 1934 (2 of 1934).

534
 535

SCHEDULE IX
. (See section 48)
DEDUCTION FOR TEA DEVELOPMENT ACCOUNT, COFFEE DEVELOPMENT ACCOUNT AND
RUBBER DEVELOPMENT ACCOUNT FOR COMPUTING INCOME UNDER THE HEAD “PROFITS
AND GAINS OF BUSINESS OR PROFESSION”

1. Quantum of deduction.—(1) An assessee shall be allowed deduction of,––

(a) the amount or aggregate of the amounts deposited by the assessee in
the account as specified in paragraph 2; or
(b) 40 % of the profits of such business computed under the head “Profits
and gains of business or profession” before making any deduction under this
paragraph,
whichever is less.
(2) The deduction shall be allowed before allowing set off of loss, if any,
brought forward from earlier tax years as per section 110.
2. Conditions for claiming deduction.—(1) The deduction under paragraph 1
shall be allowed if the assessee––
(a) is carrying on the business of growing and manufacturing tea or
coffee or rubber in India during the tax year; and
(b) has deposited any amount in the specified account being,—
(i) a special account maintained with the National Bank in
accordance with, and for the purposes specified in the special
scheme; or
(ii) a deposit account in accordance with, and for the purposes
specified in the deposit scheme;
(c) gets the accounts of such business for the relevant tax year audited
by an accountant before the specified date referred to in section 63 and
furnishes the audit report, in such form and manner as prescribed and
verified by such accountant, by that date.
(2) Where the assessee is required, by or under any other law, to get his
accounts audited, then it shall be sufficient compliance of sub-paragraph (1)(c), if
such person—
(a) gets the accounts of such business audited under such law before the
specified date referred to in section 63; and
(b) furnishes by that date the report of such audit along with report by an
accountant in the form referred to in sub-paragraph (1)(c).
(3) If any deduction has been allowed under paragraph 1 in any tax year, no
deduction shall be allowed in respect of such amount in any other tax year.
(4) Where the assessee referred to in paragraph 1 is a firm or an association of
persons or body of individuals, deduction under paragraph 1 shall not be allowed in
computing the income of any of the partners or members of such assessee.
3. Withdrawal from special account or deposit account.—(1) Any amount
standing to the credit of the assessee in the specified account shall not be allowed
to be withdrawn except for the purpose specified in the special scheme or, in the
deposit scheme, or in the circumstances specified below:—

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(a) closure of business; or

(b) death of an assessee; or
(c) partition of a Hindu undivided family; or
(d) dissolution of a firm; or
(e) liquidation of a company.
(2) If any amount standing to the credit of the assessee in the specified account,
is withdrawn during any tax year by the assessee in the circumstance referred to in
sub-paragraph (1)(a) and (1)(d), the whole of such amount shall be deemed to be
the profits and gains of business or profession of that tax year and shall accordingly
be charged to income-tax for that tax year, as if the business had not been closed or,
the firm had not been dissolved respectively.
(3) Irrespective of anything contained in sub-paragraph (1), if ––
(a) any amount standing to the credit of the assessee in the specified
account is released by the National Bank or withdrawn by the assessee from
the Deposit account, during any tax year; and
(b) such amount is utilised for the purchase of specified articles or thing,
then whole of such amount so utilised shall be deemed to be the profits and gains of
business of that tax year and shall accordingly be charged to income-tax for that
tax year.
(4) If any amount standing to the credit of the assessee in the specified account
which is––
(a) released by the National Bank; or
(b) withdrawn by the assessee from the deposit account,
during any tax year for utilisation for the purposes of such business as per the special
scheme or deposit scheme and the same is not so utilised, either wholly or partly,
within that tax year, such amount not so utilised shall be deemed to be the profits
and gains of business of that tax year and shall accordingly be charged to
income-tax for that tax year.
(5) The provisions of sub-paragraph (4) shall not apply in cases where amount
is released during any tax year on closure of the account in circumstances referred
to in sub-paragraph (1)(b), (1)(c) and (1)(e).
(6) In sub-paragraph (3), “specified article or thing” means—
(a) any machinery or plant to be installed in any office premises or
residential accommodation, including any accommodation in the nature of a
guest-house;
(b) any office appliances (not being computers);
(c) any machinery or plant, the whole of the actual cost of which is
allowed as a deduction (whether by way of depreciation or otherwise) in
computing the income chargeable under the head “Profits and gains of
business or profession” of any one tax year;
(d) any new machinery or plant to be installed in an industrial
undertaking for the purposes of business of construction, manufacture or
production of any article or thing specified in the list in Schedule XIII.
4. No deduction of expenditure met through the amount withdrawn from
specified account.—If the amount standing to the credit of the assessee in specified
account is utilised to incur any expenditure for the purpose of such business as per
the special scheme or deposit scheme, no deduction against such expenditure shall
be allowed in computing the income chargeable under the head “Profits and gains
of business or profession”.
 537

5. Sale or transfer of asset acquired as per special scheme or deposit scheme.—

(1) Any asset,––
(a) which is acquired in accordance with the special scheme or the
deposit scheme; and
(b) is sold or transferred to any person in the tax year at any time before
expiry of eight years from the end of tax year in which such asset was acquired,
then, the part of cost of asset which is relatable to the deduction allowed under
paragraph 1 shall be deemed to be the profits and gains of business of the tax year
in which such asset is sold or transferred and shall accordingly be charged to
income-tax for that tax year.
(2) The provisions of sub-paragraph (1) shall not apply, if the asset is sold or
transferred—
(a) by the assessee to the specified person; or
(b) by a firm to a company in view of succession of business or profession
of the firm by such company subject to the following conditions:––
(i) the provisions of specified scheme or deposit scheme is
applicable to the company in the same manner as it applied to the firm;
(ii) all the properties of the firm relating to the business or
profession immediately before the succession become the properties of
the company;
(iii) all the liabilities of the firm relating to the business or
profession immediately before the succession become the liabilities of
the company; and
(iv) all the shareholders of the company were partners of the firm
immediately before the succession.
(3) In this paragraph, “specified person” means,––
(a) Government; or
(b) a local authority; or
(c) a corporation established by or under a Central, State or Provincial
Act; or
(d) a Government company as defined in section 2(45) of the Companies
Act, 2013 (18 of 2013).
6. Interpretation.—In this Schedule,—
(a) “Coffee Board” means the Coffee Board constituted under section 4
of the Coffee Act, 1942 (7 of 1942);
(b) “deposit account” means an account opened by the assessee for
making deposits by the assessee in accordance with and for the purposes
specified in the deposit scheme;
(c) “deposit scheme” means the scheme made by the Tea Board or the
Coffee Board or the Rubber Board, with the prior approval of the Central
Government;
(d) “National Bank” means the National Bank for Agriculture and Rural
Development established under section 3 of the National Bank for Agriculture
and Rural Development Act, 1981 (61 of 1981);
(e) “Rubber Board” means the Rubber Board constituted under
section 4(1) of the Rubber Act, 1947 (34 of 1947);
 538

(f) “Special account” means an account maintained by the assessee with

the National Bank for making deposits in accordance with and for the purposes
specified in the special scheme;
(g) “specified account” means a special account or a deposit account;
(h) “Tea Board” means the Tea Board established under section 4 of the
Tea Act, 1953 (29 of 1953).
 539

SCHEDULE-X
(See section 49)
DEDUCTION FOR SITE RESTORATION FUND FOR COMPUTING INCOME UNDER THE HEAD
“PROFITS AND GAINS OF BUSINESS OR PROFESSION

1. Quantum of deduction.—(1) An assessee shall be allowed deduction of,––

(a) the amount or aggregate of the amount deposited by the assessee in
the account maintained with the State Bank of India as specified in
paragraph 2; or
(b) 20% of the profits of such business computed under the head “Profits
and gains of business or profession” before making any deduction under this
paragraph,
whichever is less.
(2) The deduction shall be allowed before allowing set off of loss, if any,
brought forward from earlier tax years as per section 112.
(3) Any interest credited in the specified account shall be deemed to be a
deposit.
2. Conditions for claiming deduction.—(1) Deduction under paragraph 1 shall
be allowed if the assessee––
(a) is, during the tax year, carrying on the business consisting of the
prospecting for, or extraction or production of, petroleum or natural gas, or
both in India, and has entered into an agreement with the Central Government
for such business;
(b) has, before the end of the tax year, deposited any amount in the
specified account, being,––
(i) a special account in accordance with, and for the purposes
specified in the special scheme; or
(ii) a site restoration account in accordance with, and for the
purposes specified in the deposit scheme; and
(c) gets the accounts of such business for the relevant tax year audited
by an accountant before the specified date referred to in section 63 and
furnishes the audit report, in such form and manner, as prescribed and
verified by such accountant, by that date.
(2) Where the assessee is required, by or under any other law, to get his
accounts audited, then it shall be sufficient compliance of sub -paragraph
(1)(c), if such person—
(a) gets the accounts of such business audited under such law before the
specified date referred to in section 63; and
(b) furnishes by that date the report of such audit along with report by an
accountant in such form referred to in sub-paragraph (1)(c).
(3) If any deduction has been allowed under paragraph 1 in any tax year, no
deduction shall be allowed in respect of such amount in any other tax year.
(4) Where the asseessee referred to in paragraph 1 is a firm or an association
of persons or body of individuals, deduction under paragraph 1 shall not be allowed
in computing the income of any of the partners or members of such assessee.
3. Withdrawal from specified account.—(1) Any amount standing to the credit
of the assessee in the specified account shall not be allowed to be withdrawn except
for the purposes specified in the special scheme or in the deposit scheme.

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(2)(a) Irrespective of anything contained in sub-paragraph (1), if––

(i) any amount standing to the credit of the assessee in the specified
account is released or withdrawn from the special account or the site
restoration account, during any tax year; and
(ii) the amount is utilised for the purchase of specified articles or things,
then, whole of such amount so utilised shall be deemed to be the profits and gains of
business of that tax year and shall accordingly be charged to income-tax for that tax year;
(b) for the purposes of this paragraph, “specified article or thing” means—
(i) any machinery or plant to be installed in any office premises or
residential accommodation, including any accommodation in the nature of a
guest-house;
(ii) any office appliances (except computers);
(iii) any machinery or plant, the whole of the actual cost of which is
allowed as a deduction (whether by way of depreciation or otherwise) in
computing the income chargeable under the head “Profits and gains of
business or profession” of any one tax year;
(iv) any new machinery or plant for constructing or manufacturing or
producing any items listed in the Schedule XIII.
(3) Where any amount standing to the credit of the assessee in specified
account is withdrawn on closure of such account in any tax year, then the amount
computed as under shall be deemed to be the profits and gains of business or
profession for the tax year and accordingly the following sum shall be charged to
income-tax for that tax year:
A = B-C
where,—
A = deemed profits and gains of business or profession of that tax year;
B = amount withdrawn from the specified account on its closure; and
C = amount, if any, payable to the Central Government by way of profit or
production share as provided in agreement referred to in section 54.
(4) Where any amount is withdrawn on closure of specified account in a tax
year in which the business of the assessee is no longer in existence, sub-paragraph
(3) shall apply as if the business is in existence in that tax year.
(5) If any amount standing to the credited of the assessee in the specified
account which is—
(a) released by the State Bank of India; or
(b) withdrawn by the assessee from the site restoration account,
during any tax year for utilisation for the purposes of such business as per the special
scheme or deposit scheme and the same is not so utilised, either wholly or in part,
shall be deemed to be the profits and gains of business of that tax year and
accordingly be charged to income-tax for that tax year.
4. No deduction of expenditure met through amount withdrawn from specified
account.—(1) If the amount standing credit to the assessee in the specified account
is utilised to incur any expenditure for the purpose of business as per the special
scheme or deposit scheme, no deduction against such expenditure shall be allowed
in computing the income chargeable under the head “Profits and gains of business
or profession”.
(2) In this paragraph, “amount standing credit to the assessee in the specified
account” includes interest to such accounts.
 541

5. Sale or transfer of asset acquired as per special scheme or deposit scheme.—

(1) Any asset,––
(a) which is acquired as per the special scheme or the deposit scheme;
and
(b) sold or transferred to any person in the tax year at any time before
the expiry of eight years from the end of tax year in which it was acquired,
then, the part of cost of asset as is relatable to the deduction allowed under paragraph 1
shall be deemed to be the profits and gains of business of the tax year in which such asset
is sold or transferred and shall accordingly be charged to income-tax for that tax year.
(2) Sub-paragraph (1) shall not apply, if the asset is sold or transferred by—
(a) the assessee to the specified person; or
(b) a firm to a company in view of succession of business or profession
of the firm by such company subject to the following conditions:––
(i) the provisions of special scheme or deposit scheme is applicable
to the company in the same manner as it applied to the firm;
(ii) all the properties of the firm relating to the business or
profession immediately before the succession becomes the properties of
the company;
(iii) all the liabilities of the firm relating to the business or
profession immediately before the succession becomes the liabilities of
the company; and
(iv) all the shareholders of the company were partners of the firm
immediately before the succession.
(3) In this paragraph, “specified person” means—
(a) Government; or
(b) a local authority; or
(c) a corporation established by or under a Central, State or Provincial Act; or
(d) a Government company as defined in section 2(45) of the Companies
Act, 2013 (18 of 2013).
6. Interpretation.—For the purposes of this Schedule,—
(a) “amount standing to the credit of the assessee” pertaining to the
specified account includes interest accrued to such accounts;
(b) “deposit scheme” means a scheme made in this behalf by the
Ministry of Petroleum and Natural Gas;
(c) “specified account” means a special account or site restoration account;
(d) “special account” means an account maintained with the State Bank
of India for making deposits in accordance with, and for the purposes specified
in the special scheme;
(e) “special scheme” means a scheme approved in this behalf by the
Government of India in the Ministry of Petroleum and Natural Gas;
(f) “site restoration account” means an account opened by the assessee
for making deposits in accordance with, and for the purposes specified in the
deposit scheme;
(g) “State Bank of India” means the State Bank of India constituted
under the State Bank of India Act, 1955 (23 of 1955).
 542

SCHEDULE XI
[See section 2(91)]
PART A
RECOGNISED PROVIDENT FUNDS
1. Application of Part.— This Part shall not apply to any provident fund to
which the Provident Funds Act, 1925(19 of 1925), applies.
2. Definitions.—In this Part, unless the context otherwise requires,—
(a) “approving authority” means the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner;
(b) “employer” means any person who maintains a provident fund for
the benefit of his or its employees, being—
(i) a Hindu undivided family, company, firm or other association
of persons, or
(ii) an individual engaged in a business or profession, the profits
and gains whereof are assessable to income-tax under the head “Profits
and gains of business or profession”;
(c) “employee” means an employee participating in a provident fund,
excluding personal or domestic servant;
(d) “contribution” means any sum credited by or on behalf of any
employee from his salary, or by an employer from his own funds, to the
individual account of an employee, excluding any sum credited as interest;
(e) “balance to the credit of an employee” means the total amount to the
credit of his individual account in a provident fund at any time;
(f) “annual accretion”, in relation to the balance to the credit of an
employee means the yearly increase to such balance, from contributions
and interest;
(g) “accumulated balance due to an employee” means the balance to his
credit, or portion thereof claimable by the employee under the regulations of the
fund, on the day he ceases to be an employee of the employer maintaining the
fund;
(h) “regulations of a fund” means the specific regulations governing the
constitution and administration of a particular provident fund; and
(i) “salary” includes dearness allowance, if provided for in the terms of
employment, but excludes all other allowances and perquisites.
3. Recognition to provident fund and its withdrawal.—(1) The approving
authority may grant recognition to a provident fund, which in his opinion, satisfies
the conditions prescribed in paragraph 4 and the rules made by the Board in this
regard and may, at any time, withdraw such recognition if, in his opinion, the
provident fund violates any of those conditions
(2) An order granting recognition shall take effect on such date specified by
the approving authority as per any rules made by Board in this behalf, such date not
being later than the last day of the tax year in which the order is made.
(3) An order withdrawing recognition shall take effect from the date on which it is made.
(4) An order according recognition to a provident fund shall not, unless the
approving authority otherwise directs, be affected by the fact that—

542
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(a) the fund is subsequently amalgamated with another provident fund

on the occurrence of an amalgamation of the undertakings in connection with
which the two funds are maintained; or
(b) the fund subsequently absorbs the whole or a part of another
provident fund belonging to an undertaking which is wholly or in part
transferred to or merged in the undertaking of the employer maintaining the
first-mentioned fund.
4. Conditions to be satisfied by recognised provident funds.—In order to
receive and retain recognition, a provident fund, shall, subject to the provisions of
paragraph 5, satisfy the following conditions and any other conditions as
prescribed —
(a) all employees shall be employed in India, or employed by an
employer whose principal place of business is in India;
(b) the contributions of an employee in any year shall be a fixed
proportion of his salary for that year, deducted by the employer from each
periodical payment of salary in that proportion and credited to the employee’s
individual account in the fund;
(c) the employer’s contributions to the employee’s account in any year
shall not exceed the employee’s contribution in year, and shall be credited to
the employee’s account at intervals not exceeding one year;
(d) the fund shall be vested in two or more trustees or the Official Trustee
under a trust which shall not be revocable, except with the consent of all the
beneficiaries;
(e) the fund shall consist only of––
(i) contributions as specified above, received by the trustees;
(ii) accumulations thereof;
(iii) interest credited in respect of such contributions and
accumulations;
(iv) securities purchased there with; and
(v) any capital gains arising from the transfer of capital assets of
the fund;
(f) the fund shall be the fund of an establishment—
(i) to which the provisions of section 1(3) of the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952
(19 of 1952) apply; or
(ii) notified by the Central Provident Fund Commissioner under
section 1(4) of the said Act,
and such establishment shall be exempted from the operation of all or any of the
provisions of any scheme mentioned in section 17 of the said Act;
(g) the employer, subject to clause (h), shall not be entitled to recover
any sum from the fund, except when the employee—
(i) is dismissed for misconduct; or
(ii) voluntarily leaves his employment otherwise than due to
ill-health or other unavoidable cause before the end of the term of service
specified in the regulations of the fund;
(h) for the purposes of clause (g), the recovery made by the employer
shall be limited to––
 544

(i) the contributions made by him to the individual account of the

employee;
(ii) interest credited in respect of such contributions as per the
regulations of the fund; and
(iii) the accumulations thereof;
(i) the accumulated balance due to an employee shall be payable on the day he
ceases to be an employee of the employer maintaining the fund;
(j) except as provided in clause (i) or as per conditions and restrictions
prescribed, no portion of the balance to the credit of an employee shall be payable
to him.
5. Relaxation of conditions.—(1) Irrespective of anything contained in
paragraph 4(a), the approving authority may, if he thinks fit and subject to such
conditions that he thinks proper to attach to such recognition, record recognition to
a fund which is—
(a) maintained by an employer whose principal place of business is
outside India; and
(b) the proportion of employees employed outside India does not exceed 10 %.
(2) Irrespective of anything contained in paragraph 4(b), an employee who
retains his employment––
(a) while serving in the armed forces of the Union; or
(b) when taken into or employed in the national service under any law
for the time being in force,
may, contribute to the fund during such service in the armed forces or employment
in the national service, a sum not exceeding the amount he would have contributed
had he continued to serve the employer, whether he received any salary or not from
the employer.
(3) Irrespective of anything contained in paragraph 4(e) or paragraph 4(i),—
(a) at the request made in writing by the employee who ceases to be an
employee of the employer maintaining the fund, the trustees of the fund may
agree to retain the whole or any part of the accumulated balance to be drawn
by him at any time on demand;
(b) when the accumulated balance due to such employee is retained in
the fund as per clause (a), the fund may also include interest in respect of such
accumulated balance; and
(c) the fund may also consist of any amount and interest thereof
transferred from the employee’s individual account in any recognised
provident fund maintained by his former employer.
(4) Subject to any rules made by the Board, the approving authority may relax
the provisions of paragraph 4(c) for any particular fund,—
(a) to permit the payment of larger contributions by an employer to the
employee’s individual account whose salary does not exceed five hundred rupees
per month; and
(b) to permit the employers to credit the employees’ individual accounts
with periodical bonuses or contributions of a contingent nature, when the
calculation and payment of such bonuses or contributions is provided for on
definite principles by the regulations of the fund.
 545

(5) Irrespective of anything contained in paragraph 4(j), in order to allow an

employee to pay the amount of tax assessed on his total income under
paragraph 11(4), such employee shall be allowed to withdraw from the balance
amount to his credit in the recognised provident fund, a sum not exceeding the
difference between such amount and the amount to which he would have been
assessed if the transferred balance referred to in paragraph 11(2) had not been
included in the total income.
6. Employer’s annual contributions, when deemed to be income received by
employee.—The portion of the annual accretion in the tax year to the employee’s
balance in a recognised provident fund consisting of—
(a) contributions made by the employer exceeding 12% of the
employee’s salary; and
(b) interest credited on the balance to the credit of an employee in so far
as it is allowed at a rate exceeding such rate as fixed by the Central
Government by notification,
shall be deemed to have been received by the employee and included in his total
income for that tax year and shall be liable to income tax.
7. Exemption for employee’s contributions.—An employee participating in a
recognised provident fund shall, in respect of his own contributions to his individual
account in the fund in the tax year, be entitled to a deduction in the computation of
his total income of an amount determined as per section 123.
8. Exclusion from total income of accumulated balance.—(1) Subject to the
provisions of sub-paragraph (2), the accumulated balance due and payable to an
employee shall be excluded from the computation of his total income—
(a) if the employee has rendered continuous service with his employer
for five years or more;
(b) even if, the employee has not served continuously, the service was
terminated due to––
(i) the employee’s ill-health; or
(ii) by the contraction or closure of the employer’s business; or
(iii) other cause beyond the control of the employee;
(c) if, on the cessation of his employment, the employee obtains
employment with any other employer, to the extent the accumulated balance
due and becoming payable to him is transferred to his individual account in
any recognised provident fund maintained by such other employer; or
(d) the entire balance standing to the employee’s credit is transferred to
his account under a pension scheme referred to in section 124 and notified by
the Central Government;
(2) Where the accumulated balance due and payable to an employee includes
any amount transferred from another recognised provident fund or funds of a
previous employer or employers, the continuous service period for the purposes of
sub-paragraph (1)(a) or (g) shall include the period or periods served under the
aforesaid previous employer or employers.
9. Tax on accumulated balance.—Where the accumulated balance due to an
employee is included in his total income owing to the provisions of paragraph 8 not
being applicable, then—
(a) the Assessing Officer shall calculate the total of the various sums of
tax which would have been payable by the employee in respect of his total
income for each of the years concerned if the fund had not been a recognised
provident fund; and
 546

(b) the amount by which such total exceeds the total of all sums paid by
or on behalf of such employee by way of tax for such years shall be payable
by the employee in addition to any other tax for which he may be liable for
the tax year in which the accumulated balance due to him becomes payable.
10. Deduction at source of tax payable on accumulated balance.—In cases
where paragraph 9 applies––
(a) the trustees of a recognised provident fund; or
(b) any person authorised by the regulations of the fund to make payment
of accumulated balances due to employees,
shall deduct from the accumulated balance at the time of payment, the amount payable
under the rule and the provisions of Chapter XIX-B shall apply as if the accumulated
balance were income chargeable under the head “Salaries”.
11. Treatment of balance in newly recognised provident fund.—(1) Where
recognition is accorded to a provident fund with existing balances, an account shall
be made of the fund up to the day immediately preceding the day on which the
recognition takes effect,—
(a) showing the balance to the credit of each employee on such day; and
(b) containing such further particulars as prescribed.
(2) The account shall also show in respect of balance to the credit of each employee—
(a) the amount thereof to be transferred to the employee’s account in the
recognised provident fund (hereinafter called his transferred balance); and
(b) such “transferred balance” shall be shown as balance to his credit in
the recognised provident fund on the date on which the recognition takes
effect, and sub-paragraph (4) and paragraph 5(5) shall apply accordingly.
(3) Any part of the balance to the credit of each employee in the existing fund not
transferred to the recognised fund shall be excluded from the recognised fund’s account
and shall be liable to income-tax as per the provisions of this Act, other than this Part.
(4) Subject to rules made by the Board in this behalf,—
(a) the Assessing Officer shall calculate the aggregate of all amounts in
the transferred balance that would have been liable to income-tax if this Part
had been in force since the fund’s institution, without regard to any tax which
may have been paid on any amount;
(b) the aggregate of amounts in a transferred balance, if any, shall be
deemed to be income received by the employee in the tax year in which the
recognition of the fund takes effect and shall be included in the employee’s
total income for that tax year;
(c) for the purposes of assessment, the remainder of the transferred
balance shall be disregarded, but no other exemption or relief, by way of
refund or otherwise, shall be granted in respect of any sum comprised in such
transferred balance.
(5) In cases of serious accounting difficulty, the approving authority may, subject
to rules, make a summary calculation of the aggregate as provided in sub-paragraph (4).
(6) Nothing in this paragraph shall affect the rights of the persons administering
an unrecognised provident fund or dealing with it, or with the balance to the credit of
any individual employee prior to recognition, in any manner permitted by law.
12. Accounts of recognised provident funds.—(1) The accounts of a
recognised provident fund shall be maintained by the trustees of the fund in such
form, for such period, and contain such particulars, as prescribed.
 547

(2) The accounts shall be available to inspection by the income-tax authorities

at all reasonable times, and the trustees shall provide the Assessing Officer with the
abstracts of such accounts as prescribed.
13. Appeals.—(1) An employer objecting to an order of the approving
authority not granting recognition or withdrawing recognition from a provident fund
may appeal to the Board, within sixty days of such order
(2) The appeal shall be in such form and verified in such manner, and subject
to the payment of such fee as prescribed.
14. Treatment of fund transferred by employer to trustee.—(1) When an
employer who maintains a provident fund, whether recognised or not, for the
benefit of his employees and has not transferred the fund or portion of it, transfers
such fund or portion to trustees in trust for the participating employees, the
transferred amount shall be deemed to be of the nature of capital expenditure.
(2) When an employee receives the accumulated balance due to him from the
fund, any portion of such balance representing the employee’s share of the amount
transferred to the trustees (without addition of interest and exclusive of employee’s
contributions and interest thereon) shall be deemed to be,—
(a) employer’s expenditure under 34;
(b) incurred in the tax year in which the accumulated balance due to the
employee is paid,
provided an arrangement for deduction of tax at source has been made from the
amount of such share by the employer.
PART B
APPROVED SUPERANNUATION FUNDS AND GRATUITY FUNDS
[See sections 2(9) and (10)]
1. Interpretation.—In this Part, unless the context otherwise requires,
“approving authority”, “employer”, “employee”, “contribution” and “salary”, in
relation to superannuation funds and gratuity funds shall have, the meanings as
assigned to those expressions in paragraph 2(a), (b), (c), (d) and (i) of Part A in
relation to provident funds.
2. According approval to superannuation fund and its withdrawal.—(1) The
approving authority may grant approval to any superannuation fund or its part, or
any gratuity fund, as the case may be, which in his opinion satisfies the conditions
prescribed in paragraph 3, and may withdraw such approval at any time, if, in his
opinion, the circumstances cease to warrant such approval.
(2) The approving authority shall inform the trustees of the fund, in writing,
the grant of approval with the date on which the approval is to take effect and the
conditions subject to which such approval is granted, if any.
(3) The approving authority shall inform the trustees of the fund, in writing,
any withdrawal of approval along with the reasons and the date on which the
withdrawal is to take effect.
(4) The approving authority shall not refuse or withdraw any approval without
giving the trustees a reasonable opportunity of being heard.
3. Conditions for approval.—In order to receive and retain approval, a
superannuation fund or a gratuity fund, as the case may be, shall satisfy the
following conditions, and any other conditions as prescribed:—
(a) the fund shall be established under an irrevocable trust in connection
with a trade or an undertaking carried on in India, with at least 90% employees
employed in India;
 548

(b) the sole purpose of the fund shall be to the provision of annuities or
gratuity, as the case may be, for employees in the trade or undertaking––
(i) upon their retirement at or after a specified age;
(ii) upon incapacitation before retirement;
(iii) on termination of employment after a minimum period of
service specified in the rules of the gratuity fund; or
(iv) for the widows, children or dependants of such employees on
their death;
(c) the employer in the trade or undertaking shall contribute to the
fund; and
(d) all annuities, pensions and other benefits, granted from the fund shall
be payable only in India.
4. Application for approval.—(1) An application for approval of a superannuation
fund or part of it, or any gratuity fund, as the case may be, shall be made in writing by
the trustees to the Assessing Officer by whom the employer is assessable, and shall be
accompanied by—
(a) a copy of the instrument establishing the fund and two copies of the
rules thereof; and
(b) two copies of the accounts of the fund relating to such earlier year or
years (not more than three years immediately preceding the year in which the
said application is made) for which the accounts have been made up, if the
fund has been in existence before the financial year in which the application
for approval is made.
(2) In addition to the documents referred to in sub-paragraph (1), the approving
authority may require such further information to be furnished as he thinks proper.
(3) If any alteration is made to the rules, constitution, objects or conditions of the
fund after the date of the application for approval,––
(a) the trustees shall immediately inform such alterations to the Assessing
Officer mentioned in sub-paragraph (1); and
(b) failure to inform such alterations may result in the approval given, if any,
be deemed to be withdrawn from the date on which the alteration took effect,
unless the approving authority orders otherwise.
5. Contributions by employer when deemed to be income of employer.—If a
gratuity is paid to an employee during his lifetime, the gratuity shall be treated as salary
paid to the employee for the purposes of this Act.
6. Amount deemed to be income of employer.—When contributions by an
employer (including the interest, if any) are repaid to the employer, the amount so repaid
shall be deemed for the purposes of income-tax to be the income of the employer of the
tax year in which they are so repaid.
7. Deduction of tax on contributions paid to an employee.—(1) When any
contributions made by an employer to an approved superannuation fund, including
interest are paid to an employee during his lifetime under conditions other than those
specified in Schedule II (Table: Sl. No. 8), tax on the amounts so paid shall be deducted
at the average rate of tax applicable to the employee—
(a) during the previous three years; or
(b) during the period for which the employee was a member of the fund, if
the period is less than three years.
 549

(2) The trustees shall pay the tax so deducted to the Central Government within
the time and manner, as prescribed.
8. Deduction from pay of an contributions on behalf of employee to be included
in return.—When an employer deducts contributions from the emoluments of the
employee or pays on his behalf any contributions to an approved superannuation fund,
all such deductions or payments shall be included in the statement which is required
under section 397(3)(b).
9. Appeal.—(1) An employer objecting to an order of the approving authority
refusing to grant approval to a superannuation fund, or a gratuity fund, as the case may
be, or withdrawing such approval may appeal to the Board within sixty days of such
order.
(2) The appeal shall be in such form and verified in such manner and subject to
the payment of such fee, as prescribed.
10. Liability of trustees on cessation of approval.—If a fund or a part of a fund
for any reason ceases to be an approved superannuation fund, the trustees of the fund
shall nevertheless remain liable to tax on any sum paid on account of returned
contributions (including interest on contributions, if any), in so far as the sum so paid
is in respect of contributions made before the fund or part of the fund ceased to be an
approved superannuation fund under the provisions of this Part.
11. Liabilities of trustees.—If a gratuity fund for any reason ceases to be an
approved gratuity fund, the trustees shall nevertheless remain liable to tax on any
gratuity paid to any employee.
12. Particulars to be furnished in respect of superannuation funds.—The trustees
of an approved superannuation fund or an approved gratuity fund and any employer
who contributes to such a fund shall furnish such returns, statement, particulars or
information, as required by notice from the Assessing Officer within the specified
period, not being less than twenty-one days from the date of the notice.
PART C
POWER TO MAKE RULES FOR PROVIDENT FUNDS, SUPERANNUATION FUNDS AND
GRATUITY FUNDS

1. Power of Board to make rules for fund.—In addition to powers granted by

Part A and Part B of this Schedule, the Board may make rules for a fund (provident
fund or superannuation fund or gratuity fund) in respect of the following:—
(a) to provide for the statements and information to be submitted along
with an application for approval or recognition for a fund;
(b) to provide for the returns, statements, particulars, or information which
the Assessing Officer may require from the trustees of an approved
superannuation fund or from the employer;
(c) to limit the ordinary annual and other contributions of an employer to
the gratuity fund or an approved superannuation fund;
(d) to limit the contributions to a recognised provident fund by employees
who are shareholders in the company;
(e) to regulate investment or deposit of the moneys of a recognised or an
approved fund, subject to the condition that no rule shall require more than 50%
of the fund’s money to be invested in Government securities as defined in
section 2 of the Public Debt Act, 1944;
 550

(f) to provide for the assessment by way of penalty of any consideration

received by an employee for an assignment of, or creation of a charge upon, his
beneficial interest in a recognised or an approved fund;
(g) to determine the extent and manner of exemption from payment of tax
on contributions and interest credited to the individual account of the employee
in a provident fund from which recognition has been withdrawn;
(h) to determine the extent and manner of exemption from payment of tax
on any payment made from a superannuation fund from which approval has
been withdrawn;
(i) to provide for the withdrawal of the approval of a superannuation
fund or gratuity fund, which ceases to satisfy the requirements of this Part or
the rules made thereunder; and
(j) to carry out any other the purpose of this Part and to secure such
further control over the recognition or approval of the funds and the
administration of such funds as it may deem requisite.
2. Rules to be subject section 534.—All rules made under this Part shall
be subject to section 534.
 551

SCHEDULE XII
(See section 51)
PART A
MINERALS
1. Aluminium ores.
2. Apatite and phosphatic ores.
3. Beryl.
4. Chrome ore.
5. Coal and lignite.
6. Columbite, Samarskite and other minerals of the “rare earths” group.
7. Copper.
8. Gold.
9. Gypsum.
10. Iron ore.
11. Lead.
12. Manganese ore.
13. Molybdenum.
14. Nickel ores.
15. Platinum and other precious metals and their ores.
16. Pitchblende and other uranium ores.
17. Precious stones.
18. Rutile.
19. Silver.
20. Sulphur and its ores.
21. Tin.
22. Tungsten ores.
23. Uraniferous allanite, monazite and other thorium minerals.
24. Uranium bearing tailings left over from ores after extraction of copper and
gold, ilmenite and other titanium ores.
25. Vanadium ores.
26. Zinc.
27. Zircon.
PART B
GROUPS OF ASSOCIATED MINERALS
1. Apatite, Beryl, Cassiterite, Columbite, Emerald, Felspar, Lepidolite, Mica,
Pitchblende, Quartz, Samarskite, Scheelite, Topaz, Tantalite, Tourmaline.
2. Iron, Manganese, Titanium, Vanadium and Nickel minerals.

551
 552

3. Lead, Zinc, Copper, Cadmium, Arsenic, Antimony, Bismuth, Cobalt,

Nickel, Molybdenum, and Uranium minerals, and Gold and Silver, Arsenopyrite,
Chalcopyrite, Pyrite, Pyrrhotite and Pentlandite.
4. Chromium, Osmiridium, Platinum and Nickel minerals.
5. Kyanite, Sillimanite, Corundum, Dumortierite and Topaz.
6. Gold, Silver, Tellurium, Selenium and Pyrite.
7. Barytes, Fluorite, Chalcocite, Selenium, and minerals of Zinc, Lead and
Silver.
8. Tin and Tungsten minerals.
9. Limestone, Dolomite and Magnesite.
10. Ilmenite, Monazite, Zircon, Rutile, Garnet and Sillimanite.
11. Sulphides of Copper and Iron.
12. Coal, Fire clay and Shale.
13. Magnetite and Apatite.
14. Magnesite and Chromite.
15. Talc (Soapstone and Steatite) and Dolomite.
16. Bauxite, Laterite, Aluminous Clays, Lithomarge, Titanium, Vanadium,
Gallium and Columbium minerals.
 553

SCHEDULE XIII
[See sections 45(2)(c) and (d)]
LIST OF ARTICLES OR THINGS
1. Beer, wine and other alcoholic spirits.
2. Tobacco and tobacco preparations, such as, cigars and cheroots, cigarettes,
biris, smoking mixtures for pipes and cigarettes, chewing tobacco and snuff.
3. Cosmetics and toilet preparations.
4. Tooth paste, dental cream, tooth powder and soap.
5. Aerated waters in the manufacture of which blended flavouring
concentrates (including synthetic essence) in any form are used.
6. Confectionery and chocolates.
7. Gramophones, including record players, and gramophone records.
8. Projectors.
9. Photographic apparatus and goods.
10. Office machines and apparatus such as typewriters, calculating machines,
cash registering machines, cheque writing machines, intercom machines and
teleprinters including all machines and apparatus used in offices, shops, factories,
workshops, educational institutions, railway stations, hotels and restaurants for
doing office work and for data processing including calculating machines and
calculating devices not being computers.
11. Steel furniture, whether made partly or wholly of steel.
12. Safes, strong boxes, cash and deed boxes and strong room doors.
13. Latex foam sponge and polyurethane foam.
14. Crown corks, or other fittings of cork, rubber, polyethylene or any other
material.
15. Pilfer-proof caps for packaging or other fittings of cork, rubber,
polyethylene or any other material.

553
 554

SCHEDULE XIV
(See section 55)
INSURANCE BUSINESS
A.—Life insurance business
1. Profits of life insurance business to be computed separately.—If a person is
engaged in life insurance business during the tax year, the profits and gains of such
business shall be computed separately from profits and gains of any other business.

2. Computation of profits of life insurance business.—(1) The profits and gains

from life insurance business shall be the annual average of the surplus after adjusting
the surplus or deficit disclosed by the actuarial valuation made as per the Insurance
Act, 1938 (4 of 1938) for the last inter-valuation period ending before the
commencement of tax year, so as to exclude from it any surplus or deficit from any
earlier inter-valuation period.
(2) Any expenditure which is inadmissible under section 34 in computing the
profits and gains of a business, shall be added to such profits and gains of life
insurance business.
3. Adjustment of tax paid by deduction at source.—When an assessment of
the life insurance business profits is made based on the annual average of a surplus
disclosed by a valuation for an inter-valuation period exceeding twelve months,
then, in computing the income-tax, payable for that year credit shall––
(a) not be given as per section 386 for the income-tax paid in the
preceding tax year;
(b) be given for the annual average of the income-tax paid by deduction
at source from interest on securities or otherwise during such period.
B.—Other insurance business
4. Computation of profits and gains of other insurance business.—(1)The
profits and gains of any insurance business other than life insurance shall be the
profit before tax and appropriations as disclosed in the profit and loss account
prepared as per the Insurance Act, 1938 (4 of 1938) or the rules made thereunder or
the Insurance Regulatory and Development Authority Act, 1999 (4 of 1999) or the
regulations made subject to the following adjustments:––
(a) any expenditure or allowance including any amount debited to profit
and loss account either by way of a provision for any tax, dividend, reserve, or
any other provision as prescribed, which is inadmissible under sections 28 to 54
shall be added back;
(b) gain or loss from realisation of investments shall be added or
deducted, if not already credited or debited to the profit and loss account;
(c) provision for diminution in investment value debited to the profit and
loss account, shall be added back; and
(d) such amount carried over to a reserve for unexpired risks as
prescribed shall be allowed as a deduction.
(2) The amount payable under section 37, added under paragraph (1)(a) shall
be allowed as deduction in the tax year in which it is actually paid.
C.—Other provisions
5. Profits and gains of non-resident person.—(1) The profits and gains of a
non-resident person who is engaged in the insurance business through its branches
in India may, in the absence of reliable data, be deemed to be that proportion of
his global income which corresponds to the proportion the premium income
derived from India bears to his total premium income.

554
 555

(2) In this paragraph, the global income in relation to life insurance business
of a person not resident in India shall be computed as per this Act for computing
the profits and gains of life Insurance business carried on in India.
. 6. Interpretation.—(1) In this schedule,––
(a) “investments” includes securities, stocks and shares; and
(b) “life insurance business” means life insurance business as defined
in section 2(11) of the Insurance Act, 1938 (4 of 1938).
(2) References of the Insurance Act, 1938 (4 of 1938) in this Schedule
regarding the Life Insurance Corporation of India shall be treated as references to
that Act or section 43 of the Life Insurance Corporation Act, 1956 (31 of 1956).
 556

SCHEDULE XV
(See section 123)
DEDUCTION IN RESPECT OF LIFE INSURANCE PREMIA, CONTRIBUTION TO PROVIDENT
FUND, SUBSCRIPTION TO CERTAIN EQUITY SHARES, ETC.

1. Sums qualifying as deduction.—The amounts paid or deposited in the tax year

by the assessee, which qualify as deduction for the purpose of section 123 are––
(a) premium paid for a life insurance policy––
(i) in the case of an individual, on life of such individual, spouse
of the individual and any child of the individual;
(ii) in the case of a Hindu undivided family, on life of any
member of the Hindu undivided family,
subject to paragraph 2;
(b) sum paid under a deferred annuity contract other than the annuity
plan referred to in clause (1) on life of the individual, spouse of the
individual and any child of the individual, and such contract does not contain
an option to receive cash payment in lieu of the annuity;
(c) sum deducted from salary payable by or on behalf of the
Government to any individual for securing deferred annuity or making
provision for his spouse or children, to the extent of 20% of salary;
(d) contribution by an individual to any provident fund to which the
Provident Funds Act, 1925 (19 of 1925) applies;
(e) contribution to an account with any provident fund, set up and
notified by the Central Government, in the name of,––
(i) in the case of an individual, such individual, spouse of the
individual and any child of the individual;
(ii) in the case of a Hindu undivided family, any member thereof;
(f) contribution by an employee to a recognised provident fund;
(g) contribution by an employee to an approved superannuation fund;
(h) subscription to any security or deposit scheme notified by the
Central Government in the name of an individual or any girl child of that
individual, or any girl child for whom such person is the legal guardian, if
the scheme so specifies;
(i) subscription to savings certificate as mentioned in section 3(k) of
the Government Savings Banks Act, 1873, (5 of 1873), as notified by the
Central Government;
(j) contribution for participation in Unit-linked Insurance Plan, 1971
specified in Schedule II of the Unit Trust of India (Transfer of Undertaking
and Repeal) Act, 2002 (58 of 2002),––
(i) in the case of an individual, in the name of such individual,
spouse of the individual and any child of the individual;
(ii) in the case of a Hindu undivided family, in the name of any
member thereof;
(k) contribution for participation in unit-linked insurance plan of Life
Insurance Corporation Mutual Fund, referred to in Schedule VII
(Table: Sl. No. 20 or 21), as notified by the Central Government,—
(i) in the case of an individual, in the name of such individual,
spouse of the individual and any child of the individual;

556
 557

(ii) in the case of a Hindu undivided family, in the name of any

member thereof;
(l) sum paid towards contract for annuity plan of the Life Insurance
Corporation or any other insurer notified by the Central Government;
(m) subscription to any units of––
(i) any Mutual Fund referred to in serial number 20 or 21 of the
Table in Schedule VII; or
(ii) the Administrator; or
(iii) the specified company,
under any plan formulated as per such scheme notified by the Central
Government;
(n) contribution by an individual to any pension fund set up by––
(i) any Mutual Fund referred to in Schedule VII (Table: Sl.
No. 20 or 21); or
(ii) the Administrator; or
(iii) the specified company,
as notified by the Central Government;
(o) subscription to a deposit scheme or contribution to a pension fund,
set up by the National Housing Bank established under section 3 of the
National Housing Bank Act, 1987 (53 of 1987), as notified by the Central
Government;
(p) subscription to any deposit schemes of––
(i) a public sector company engaged in providing long-term
finance for construction or purchase of houses in India for residential
purposes; or
(ii) an authority constituted in India by any law, for the purpose
of dealing with and satisfying the need for housing accommodation or
for the purpose of planning, development or improvement of cities,
towns and villages, or for both,
as notified by the Central Government;
(q) tuition fees (excluding any development fees or donation or payment
of similar nature) paid by an individual to any University, college, school or
other educational institution situated in India (at the time of admission or
thereafter), for full time education of any two children of such individual;
(r) payment made for purchase or construction of a residential house
property the income from which is chargeable to tax under the head “Income
from house property” (or which would, if it had not been used for the own
residence of the assessee, have been chargeable to tax under that head),
subject to satisfaction of conditions laid down in paragraph 3;
(s) term deposit for a fixed period of not less than five years with a
scheduled bank, and which is as per such scheme framed and notified by the
Central Government;
(t) subscription to bonds issued by the National Bank for Agriculture
and Rural Development, as notified by the Central Government;
(u) deposit in an account under the Senior Citizen Savings Scheme
Rules, 2004;
 558

(v) five years term deposit in an account under the Post Office Time
Deposit Rules, 1981;
(w) contribution by an employee of the Central Government to an
additional account referred to in section 20(3) of the Pension Fund
Regulatory and Development Authority Act, 2013 (23 of 2013) of the
pension scheme notified by the Central Government,––
(a) for a fixed period of not less than three years; and
(b) which is as per the scheme as notified by the Central
Government for the purposes of this clause;
(x) contribution made from income chargeable to tax to effect or keep
in force a contract for any annuity plan of Life Insurance Corporation of
India or any other insurer for receiving pension from the fund referred to in
Schedule VII (Table: Sl. No. 3);
(y) contribution made by an individual to a pension scheme notified by
the Central Government, to the extent of––
(i) 10% of salary, including dearness allowance, if the terms of
employment so provide, but excluding all other allowances and
perquisites, during the tax year in the case of an employee of the
Central Government or any other employer; or
(ii) 20% of gross total income during the tax year in the case of
any other individual;
(z) subscription to––
(i) equity shares or debentures forming part of any eligible issue
of capital approved by the Board on an application made by a public
company or as subscription to any eligible issue of capital by any
public financial institution in the prescribed form;
(ii) any units of any mutual fund referred to in Schedule VII
(Table: Sl. No. 20 or 21) and approved by the Board on an application
made by such mutual fund in the prescribed form and if the amount of
subscription to such units is subscribed only in the eligible issue of
capital of any company.
2. Payment on insurance policy.—(1) The deductions shall apply only to so
much of any premium or other payment made on an insurance policy, other than
a contract for a deferred annuity,––
(a) as is up to 20% of the actual capital sum assured, in respect of a
policy issued on or before the 31st March, 2012;
(b) as is up to 10% of the actual capital sum assured, in respect of a
policy issued on or after the 1st April, 2012;
(c) as is up to 15% of the actual capital sum assured, if the policy is
issued on or after the 1st April, 2013 and where such policy covers the
life of,––
(i) a person with a disability or severe disability as referred to in
section 154; or
(ii) a person suffering from a disease or ailment specified in the
rules made under section 128.
(2) In this paragraph, “actual capital sum assured” shall mean the minimum
amount assured under the policy on happening of the insured event at any time
during the term of the policy, not taking into account—
 559

(a) the value of any premiums agreed to be returned; or

(b) any benefit by way of bonus or otherwise over and above the sum
actually assured, which is to be or may be received under the policy by any person.
3. Payments made for purchase or construction of residential house property.—
The deduction in respect of amount spent for purchase or construction of a residential
house property as provided in paragraph 1(r) shall––
(a) include payments that are made towards or by way of—
(i) any instalment or part payment of the amount due under any
self-financing or other scheme of any development authority, housing
board or other authority engaged in the construction and sale of house
property on ownership basis; or
(ii) any instalment or part payment of the amount due to any
company or co-operative society of which the assessee is a shareholder
or member towards the cost of the house property allotted to him; or
(iii) repayment of the amount borrowed by the assessee from—
(A) the Central Government or any State Government; or
(B) any bank, including a co-operative bank; or
(C) the Life Insurance Corporation; or
(D) the National Housing Bank; or
(E) any public company formed and registered in India with
the main object of carrying on the business of providing
long-term finance for construction or purchase of houses in India
for residential purposes which is eligible for deduction under
section 32(e); or
(F) any company in which the public are substantially
interested or any co-operative society, where such company or
co-operative society is engaged in the business of financing the
construction of houses; or
(G) the employer where such employer is an authority or a
board or a corporation or any other body established or
constituted under a Central Act or State Act; or
(H) the employer of the assessee where such employer is a
public company or a public sector company or a University
established by law or a college affiliated to such University or a
local authority or a co-operative society; or
(iv) stamp duty, registration fee and other expenses for the
purpose of transfer of such house property to the assessee;
(b) not include any payment towards or by way of—
(i) the admission fee, cost of share and initial deposit which a
shareholder of a company or a member of a co-operative society has to
pay for becoming such shareholder or member; or
(ii) the cost of any addition or alteration to, or renovation or
repair of, the house property, which is carried out after the issue of the
completion certificate in respect of the house property by the authority
competent to issue it, or after the house property or any part thereof
has either been occupied by the assessee or any other person on his
behalf, or been let out; or.
(iii) any expenditure in respect of which deduction is allowable
under section 22.
 560

4. Withdrawal of deduction and taxation of deduction already allowed.—

The deductions in the nature of payments specified in column B of the Table below
shall not be allowable in the tax year in which the conditions specified in column
C of the said Table are fulfilled, and the aggregate amount of the deductions
allowed thus far in the preceding tax year or tax years shall be deemed to be the
income of the assessee and liable to tax in such tax year..
Table
Sl. Nature of payment Conditions for disallowance of the deduction in
No. respect of payment provided in column B
A B C
1. Premium paid Where the assessee terminates his contract of,
for a life insurance by notice to that effect or where the contract
policy. ceases to be in force by reason of failure to pay
any premium, by not reviving contract of
insurance,—
(a) in case of any single premium policy,
within two years after the date of
commencement of insurance; or
(b) in any other case, before premiums have
been paid for two years.
2. (a) Contribution Where the assessee terminates his participation
for participation in in such plan, by notice to that effect or where he
the Unit-Linked ceases to participate by reason of failure to pay
Insurance Plan, any contribution, by not reviving his participation,
1971; before contributions in respect of such
(b) contribution participation have been paid for five years.
for participation in
the unit-linked
insurance plan of
Life Insurance
Corporation
Mutual Fund.
3. Certain Where the assessee––
payments made for (a) transfers the house property before the
purchase or expiry of five years from the end of the tax year
construction of in which possession of such property is
residential house obtained by him; or
property.
(b) receives back, whether by way of refund
or otherwise, any sum specified in that clause.
4. Certain (a) Where the assessee sells or otherwise transfers
payments for to any person at any time within a period of three years
subscription to any from the date of their acquisition; and
equity shares or
debentures forming (b) such shares or debentures shall be treated as
part of any eligible having acquired by the person on the date on
issue of capital by a which his name is entered in relation to those
public company or shares or debentures in the register of members or
by any public of debenture-holders, as the case may be, of the
financial institution public company.
and approved by
Board.
 561

5. Taxation of receipts where deduction already allowed.—Where

deductions in the nature of payments specified in column B of the Table below
have been allowed, and the conditions specified in column C of the said Table are
fulfilled in any tax year, the amounts received shall be taxed in such tax year in
the manner as provided in column D of the said Table.
Table
Sl Nature of Condition for Manner and amount of taxation in
No. payment taxation the tax year in which condition in
column C is fulfilled.
A B C D
1. (a) Deposit in If any amount, (a) The amount so withdrawn
an account under including interest shall be deemed to be the
the Senior accrued, in income of the assessee of the tax
Citizen Savings respect of the year in which the amount is
Scheme Rules, account provided withdrawn and shall be liable to
2004 in column B, is tax in the said year;
withdrawn by the (b) the amount liable to tax, as
(b) five year referred in clause (a), shall not
assessee, before
term deposit in an include the following amounts:—
the expiry of the
account under the
period of five (i) any amount of interest,
Post Office Time
years from the which has been included in the
Deposit Rules, total income of the assessee of
date of its
1981. the tax year or years preceding
deposit.
such tax year; and
(ii) any amount received by
the nominee or legal heir of
the assessee, on the death of
such assessee, other than
interest, if any, accrued
thereon, which was not
included in the total income of
the assessee for the tax year or
years preceding such tax year.
2. Contribution Where any An amount equal to the whole
to effect or keep amount standing to of the amount referred to in
in force a the credit of the column C (a) or (b) shall be
contract for any assessee in the deemed to be the income of the
annuity plan of pension fund, in assessee or his nominee, in the
Life Insurance respect of which a tax year in which such
Corporation of deduction has been withdrawal is made or, pension
India or any other allowed, together is received, and shall be liable to
insurer for with the interest or tax in the said year.
receiving pension bonus accrued or
from the fund credited to the of
referred to in the assessee
Schedule VII account, if any, is
(Table: Sl. No. 3). received by the
assessee or his
nominee,—
(a) on account
of the surrender of
the annuity plan
whether in whole
or in part, in any tax
year; or
 562

A B C D
(b) as pension
received from
the annuity plan.
3. Contribution by Where any The whole of the amount
an individual to a amount referred to in column C (a) or
pension scheme standing to the (b) shall be deemed to be the
notified by the credit of the income of the assessee or his
Central assessee in the nominee, in the tax year in
Government. pension which such amount is
scheme, in received, and shall be liable to
respect of tax in the said year.
which a
deduction has
been allowed,
together with
the amount
accrued
thereon, if any,
is received by
the assessee or
his nominee, in
whole or in
part, in any tax
year, and if
such amount is
not used for
purchasing an
annuity plan in
the same year—
(a) on
account of
closure or his
opting out of the
pension scheme
(except when
received by the
nominee on the
death of the
assessee); or
(b) as pension
received from
the annuity plan
purchased or
taken on such
closure or opting
out.
6. Interpretation.—In this Schedule,––
(a) “Administrator” means the Administrator as referred to in section 2(a) of
the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(b) “contribution” to any fund shall not include any sums in
repayment of loan;
(c) “insurance” shall include,—
 563

(i) a policy of insurance on the life of an individual or the spouse

or the child of such individual or a member of a Hindu undivided
family securing the payment of specified sum on the stipulated date of
maturity, if such person is alive on such date irrespective that the policy
of insurance provides only for the return of premiums paid (with or
without any interest thereon) in the event of such person dying before
the said stipulated date;
(ii) a policy of insurance effected by an individual or a member
of a Hindu undivided family for the benefit of a minor with the object
of enabling the minor, after he has attained majority to secure
insurance on his own life by adopting the policy and on his being alive
on a date (after such adoption) specified in the policy in this behalf;
(d) “Life Insurance Corporation” means the Life Insurance
Corporation of India established under the Life Insurance Corporation
Act, 1956 (31 of 1956);
(e) “public company” shall have the same meaning as assigned to it in
section 2(71) of the Companies Act, 2013 (18 of 2013);
(f) “security” means a Government security as defined in section 2(2)
of the Public Debt Act, 1944 (18 of 1994);
(g) “specified company” means a company as referred to in
section 2(h) of the Unit Trust of India (Transfer of Undertaking and Repeal)
Act, 2002 (58 of 2002);
(h) “transfer” shall be deemed to include also the transactions referred
to in section 269UA(f) of the Income-tax Act, 1961 (43 of 1961);
(i) “eligible issue of capital” means an issue made by a public company
formed and registered in India or a public financial institution and the entire
proceeds of the issue are utilised wholly and exclusively for the purposes of
any business referred to in section 135(9);
(j) “public financial institution” shall have the same meaning as
assigned to it in section 2(72) of the Companies Act, 2013 (18 of 2013).
 564

SCHEDULE XVI
(See section 350)
PERMITTED MODES OF INVESTMENT OR DEPOSITS
FORMS OR MODES OF INVESTMENT OR DEPOSITS BY A CHARITABLE OR RELIGIOUS
TRUST OR INSTITUTION

The modes of investing or depositing the money referred to in section 350

shall be the following:—
(1) investment in savings certificates as defined in section 2(c) of the
Government Savings Certificates Act, 1959 (46 of 1959), and any other
securities or certificates issued by the Central Government under the Small
Savings Schemes of that Government;
(2) deposit in any account with the Post Office Savings Bank;
(3) deposit in any account with a scheduled bank or a co-operative
society engaged in carrying on the business of banking (including a
co-operative land mortgage bank or a co-operative land development bank);
(4) investment in units of the Unit Trust of India;
(5) investment in any security for money created and issued by the
Central Government or a State Government;
(6) investment in debentures issued by, or on behalf of, any company or
corporation both the principal whereof and the interest whereon are fully and
unconditionally guaranteed by the Central Government or by a State Government;
(7) investment or deposit in any public sector company subject to the
condition that where an investment or deposit in any public sector company
has been made and such public sector company ceases to be a public sector
company,—
(a) such investment made in the shares of such company shall be
deemed to be an investment made under this clause for three years from
the date on which such public sector company ceases to be a public
sector company;
(b) such other investment or deposit shall be deemed to be an
investment or deposit made under this clause for the period up to the date
on which such investment or deposit becomes repayable by such company;
(8) deposits with or investment in any bonds issued by a financial corporation
which is engaged in providing long-term finance for industrial development in India
and which is eligible for deduction under section 32(1)(e);
(9) deposits with or investment in any bonds issued by a public company
formed and registered in India with the main object of carrying on the business of
providing long-term finance for construction or purchase of houses in India for
residential purposes and which is eligible for deduction under section 32(1)(e);
(10) deposits with or investment in any bonds issued by a public
company formed and registered in India with the main object of carrying on
the business of providing long-term finance for urban infrastructure in India;
(11) investment in immovable property;
(12) deposits with the Industrial Development Bank of India established
under the Industrial Development Bank of India Act, 1964 (18 of 1964);

564
 565

(13) investment in the units issued under any scheme of the mutual fund
referred to in Schedule VII (Table: Sl. No.20) or (Table: Sl. No.21);
(14) any transfer of deposits to the Public Account of India;
(15) deposits made with an authority constituted in India by or under any
law enacted either for the purpose of dealing with and satisfying the need for
housing accommodation or for the purpose of planning, development or
improvement of cities, towns and villages, or for both;
(16) investment by way of acquiring equity shares of a depository as
defined in section 2(1)(e) of the Depositories Act, 1996 (22 of 1996);
(17) investment made by a recognised stock exchange referred to in
section 2(f) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956)
(hereafter referred to as investor) in the equity share capital of a company
(hereafter referred to as investee)—
(a) which is engaged in dealing with securities or mainly
associated with the securities market;
(b) whose main object is to acquire the membership of another
recognised stock exchange for the sole purpose of facilitating the members
of the investor to trade on the said stock exchange through the investee as
per the directions or guidelines issued under the Securities and Exchange
Board of India Act, 1992 (15 of 1992) by the Securities and Exchange Board
of India established under section 3 of that Act; and
(c) in which at least 51% of equity shares are held by the investor
and the balance equity shares are held by members of such investor;
(18) investment made by a person, authorised under section 4 of the
Payment and Settlement Systems Act, 2007 (51 of 2007), in the equity share
capital or bonds or debentures of a company—
(a) which is engaged in operations of retail payments system or
digital payments settlement or similar activities in India and abroad and
is approved by the Reserve Bank of India for this purpose; and
(b) in which at least 51% of equity shares are held by National
Payments Corporation of India;
(19) investment made by a person, authorised under section 4 of the
Payment and Settlement Systems Act, 2007 (51 of 2007), in the equity share
capital or bonds or debentures of Open Network for Digital Commerce Ltd,
being a company incorporated under section 7(2) read with section 8(1) of the
Companies Act, 2013 (18 of 2013), for participating in network based open
protocol models which enable digital commerce and interoperable digital
payments in India;
(20) investment by way of acquiring equity shares of an incubatee by an
incubator;
(21) investment by way of acquiring shares of National Skill
Development Corporation;
(22) investment in debt instruments issued by any infrastructure Finance
Company registered with the Reserve Bank of India;
(23) investment in “Stock Certificate” as defined in clause (c) of
paragraph 2 of the Sovereign Gold Bonds Scheme, 2015, published in the
Official Gazette vide notification number G.S.R. 827(E), dated the 30th
October, 2015;
 566

(24) investment by way of Acquiring Units of Powergrid Infrastructure

Investment Trust;
(25) shares in a public sector company;
(26) any assets held by the trust or institution where such assets form
part of the corpus of the trust or institution as on the 1st June, 1973;
(27) any asset, being equity shares of a public company, held by any
university or other educational institution or any hospital or other medical
institution where such assets form part of the corpus of any university or other
educational institution or any hospital or other medical institution as on the
1st June, 1998, where it was approved at that time under the provisions of
section 10(23C) of the Income-tax Act, 1961 (43 of1961);
(28) any accretion to the shares, forming part of the corpus mentioned in
clause (1) or (2), by way of bonus shares allotted to the trust or institution;
(29) any assets (being debentures issued by, or on behalf of, any
company or corporation) acquired by the trust or institution before the
1st March, 1983;
(30) any asset, not being an investment or deposit in any of the forms or
modes specified in clause (1), where such asset is not so held after the expiry of
one year from the end of the tax year in which such asset is acquired;
(31) any funds representing the profits and gains of business, being
profits and gains of any tax year relevant to the tax year commencing on the
1st April, 1984 or any subsequent tax year so, however, where it has any other
income in addition to profits and gains of business, these provisions shall not
apply unless it maintains separate books of account in respect of such business;
(32) voluntary contributions received and maintained in the form of
jewellery, furniture or any other article as the Board may, by notification
specify;
(33) In this schedule,—
(a) “long-term finance” means any loan or advance where the terms
under which moneys are loaned or advanced provide for repayment along
with interest thereof during a period of not less than five years;
(b) “public company” shall have the same meaning as assigned to
it in section 2(71) of the Companies Act, 2013 (18 of 2013);
(c) “urban infrastructure” means a project for providing potable
water supply, sanitation and sewerage, drainage, solid waste
management, roads, bridges and flyovers or urban transport;
(d) “Immovable property” does not include any machinery or plant
(other than machinery or plant installed in a building for the convenient
occupation of the building) even though attached to, or permanently
fastened to, anything attached to the earth;
(e) “incubatee” shall mean such incubatee as may be notified by
the Government of India in the Ministry of Science and Technology;
(f) “incubator” shall mean such Technology Business Incubator or
Science and Technology Entrepreneurship Park as notified by the
Government of India in the Ministry of Science and Technology.
 567

STATEMENT OF OBJECTS AND REASONS

The Income-tax Act passed in 1961 has been subjected to numerous
amendments since its passage sixty years ago. As a result of these amendments
the basic structure of the Income-tax Act has been overburdened and language has
become complex, increasing cost of compliance for taxpayers and hampering
efficiency of direct-tax administration. Tax administrators, practitioners and
taxpayers have also raised concerns about the complicated provisions and
structure of the Income-tax Act.
Therefore, the Government in the budget in July 2024 announced that a time
bound comprehensive review of the Income-tax Act, 1961 would be undertaken
to make the Act concise, lucid, easy to read and understand. Accordingly, the
Income-tax Bill, 2025 has been prepared which proposes to repeal and replace the
Income-tax Act, 1961.
The Notes on clauses explain in detail the various provisions contained in
the Bill.

NEW DELHI; NIRMALA SITHARAMAN.

The 8th February, 2025.

_____

PRESIDENT’S RECOMMENDATION UNDER ARTICLE 117 OF THE

CONSTITUTION OF INDIA
_____

[Copy of letter No. 370134/18/2025 - TPL dated 10 February 2025 from

Smt. Nirmala Sitharaman, Minister of Finance and Corporate Affairs to the
Secretary General, Lok Sabha]

The President, having been informed of the subject matter of the Income-tax Bill,
2025, recommends the introduction and consideration of the Bill in Lok
Sabha under article 117(1) and (3), read with clause (1) of article 274
of the Constitution.

______

567
 568

Notes on Clauses

Clause 1 of the Bill provides for the short title, extent and commencement
of the proposed legislation.
Clause 2 of the Bill provides for definition of various terms and expressions
used in the proposed legislation.
Clause 3 of the Bill provides for definition of “tax year”.
Clause 4 of the Bill provides for charge of income-tax.
Clause 5 of the Bill defines the scope of total income for a person who is a
resident or a non-resident in India.
Clause 6 of the Bill seeks to provide for the conditions for determining the
residential status of a person in India.
Clause 7 of the Bill seeks to deal with income deemed to be received.
Clause 8 of the Bill provides for income on receipt of capital asset or stock
in trade by specified person from specified entity.
Clause 9 of the Bill provides for income deemed to accrue or arise in India,
including those from a business connection and provides the source rule for
income from Interest, dividend, royalty, fee for technical services, transfer of a
capital asset situated in India, etc.
Clause 10 of the Bill deals with apportionment of income between spouses
governed by Portuguese Civil Code.
Clause 11 of the Bill seeks to provide for incomes not included in total
income and, inter alia, provides for details of certain income enumerated in
Schedules II, III, IV, V and VI which are not to be included in computing the total
income of any person for a tax year. It also deals with certain persons enumerated
in Schedule VII who are not chargeable to tax under the proposed legislation for
a tax year.
Clause 12 of the Bill provides for income not to be included in total income
of political parties and electoral trust enumerated in Schedule VIII which are not
to be included in computing their total income for a tax year.
Clause 13 of the Bill provides for classification under various heads of
income for the purposes of charge of income-tax and computation of total income.
Clause 14 of the Bill provides for disallowance of certain expenditure
incurred in relation to income which does not form part of the total income and
expenditure in relation to such income.
Clause 15 of the Bill provides for under the head salaries.
Clause 16 of the Bill provides for different payments made by an employer
to an employee which may be taxed under this head of income which include
wages, annuity or pension, gratuity, commission, perquisites, profits in lieu of
salary, leave encashment, etc.
Clause 17 of the Bill provides for exclusion of certain benefits from the
definition of perquisites.

568
 569

Clause 18 of the Bill seeks to define different payments in the nature of

“profits in lieu of salary” and also seeks to specify the payments that are not to be
regarded as “profits in lieu of salary”.
Clause 19 of the Bill provides for deductions available against salary
income. It also seeks to provide for calculation of the eligible amount of deduction
with the help of formula.
Clause 20 of the Bill provides for the charge of income-tax under the head
“Income from house property” on the annual value of property consisting of any
buildings or lands appurtenant thereto.
Clause 21 of the Bill provides for determination of annual value and also
seeks to define the annual value of property.
Clause 22 of the Bill provides for deductions from income from house
property.
Clause 23 of the Bill provides for taxability of arrears or unrealised rent
received subsequently irrespective of ownership of the property in tax year.
Clause 24 of the Bill provides for taxability of co-owners of the property
with definite and ascertainable shares.
Clause 25 of the Bill provides for interpretation relating to Chapter IV-C
and definition of an “owner” in relation to a property.
Clause 26 of the Bill seeks to provide charging of income-tax on income
under the head “Profits and gains of business or profession”. It further seeks to
provide inclusive definition of income under the head “Profits and gains of
business or profession”.
Clause 27 of the Bill provides for the manner of computing income under
the head “Profits and gains of business or profession”.
Clause 28 of the Bill provides for deduction for expenses on account of rent,
repairs, insurance premium, local taxes, etc.
Clause 29 of the Bill seeks to provide the deduction related to employee
welfare including contribution to various funds, etc., that need to be allowed while
computing the income under the head “Profits and gains of business or
profession”.
Clauses 30 to 32 of the Bill provides for deduction on expenditure incurred
towards insurance premium relating to destruction of stock, provision for bad
debts, written off, bonus, commission paid to employees, interest paid on
borrowed capital.
Clause 33 of the Bill provides for deduction in respect of tangible and
intangible assets owned and used for the purposes of business.
Clause 34 of the Bill provides for general conditions for allowing
expenditure (other than capital and personal expenditure) incurred wholly and
exclusively for the purposes of business or profession being carried on by
assessee.
Clauses 35 and 36 of the Bill provides for amounts not to be allowed while
computing the income under the head “Profit and gains of business or profession”.
 570

Clause 37 of the Bill provides for certain deductions allowed on certain

expenditures which is to be made only on actual payment basis.
Clause 38 of the Bill provides for certain sums that are liable to be deemed
as profit and gains of business or profession where the sums have been earlier
allowed as expenditure or deduction for the purpose of computation of income.
Clause 39 of the Bill provides for certain definitions such as actual cost,
written down value, speculative transactions, etc.
Clause 40 of the Bill provides for special provision for computation of cost
of acquisition of certain assets.
Clause 41 of the Bill provides for written down value of depreciable asset
and, inter alia, provides certain definitions such as actual cost, written down value,
speculative transactions, etc.
Clauses 42 and 43 of the Bill provide for capitalising the impact of foreign
exchange fluctuation and taxation of foreign exchange fluctuation at the time of
acquisition of assets and payments therefor in foreign currency by appropriately
adding or reducing the quantum of variation in such liability. The said clauses
further provide for treating profits or loss on account of fluctuation in exchange rate.
Clause 44 of the Bill provides for amortisation of certain preliminary
expenses insured by specified businesses before commencement of such businesses.
Clause 45 of the Bill provides for deduction of certain capital expenditure
(other than cost of land) or revenue expenditure incurred for scientific research.
Clause 46 of the Bill provides for deduction of certain capital expenditure of
specified business incurred subject to fulfilment of certain conditions.
Clause 47 of the Bill provides for deduction of expenses incurred for
agricultural extension projects and skill development projects.
Clauses 48 and 49 of the Bill provide for tea development account, coffee
development account and rubber development account and Site Restoration Fund
which, inter alia, seek to deal with deduction of deposits in tea, coffee or rubber
development accounts by the assessee or site restoration account engaged in
prospecting or extracting or producing petroleum or natural gas or both.
Clause 50 of the Bill provides for deduction in the case of specified
associations for the interest and welfare of members of such association when there
is a shortfall in expenditure for the welfare of its members with reference to
contributions by its members.
Clause 51 of the Bill provides for amortisation of expenditure for prospecting
certain minerals.
Clause 52 of the Bill provides for amortisation of expenditure for
telecommunications services, amalgamation, demerger, scheme of voluntary
retirement, etc., and deductions for spectrum or license fee paid in the
telecommunication business.
Clause 53 of the Bill provides for full value of consideration for transfer of
assets other than capital assets in certain cases and for adoption of stamp duty value
as full value of consideration at the time of transfer of assets (other than capital
assets) in specific cases.
 571

Clause 54 of the Bill provides for deduction of certain capital expenditure

expenses incurred in business of prospecting for mineral oils
Clause 55 of the Bill provides for the manner of computation of profits or
gains in cases of insurance business.
Clause 56 of the Bill provides for computation of interest income of
specified financial institutions.
Clause 57 of the Bill provides for revenue recognition for construction and
service contracts.
Clause 58 of the Bill provides for special provision for computing profits
and gains of business of profession on presumptive basis in case of certain
residents.
Clause 59 of the Bill provides for chargeability of royalty and fee for
technical services in hands of non-residents.
Clause 60 of the Bill seeks to provide the manner for computation for
allowing the deduction of head office expenditure in case of non-residents.
Clause 61 of the Bill provides for special provision for computation of
income on presumptive basis in respect of certain business activities of certain
non-residents
Clause 62 of the Bill provides for maintenance of books of accounts and
seeks to deal with maintenance of books of account.
Clause 63 of the Bill provides for tax audit and also provides for auditing of
books account by specified accountant under certain conditions.
Clause 64 of the Bill provides for facilitating payments in electronic modes.
Clause 65 of the Bill provides for special provision for computing
deductions in case of business reorganisation of co-operative banks.
Clause 66 of the Bill provides for interpretation of Chapter IV-D which
deals with various definitions related to income under the head “Profit and gains
of business or profession”.
Clause 67 of the Bill provides for capital gains and also seeks to provide the
chargeability of Income-tax under the head “Capital gains” for various kinds of
transfer of capital assets.
Clause 68 of the Bill provides for capital gains on distribution of assets by
companies in liquidation.
Clause 69 of the Bill provides for capital gains arising to shareholders or
holders of specified securities, when a company purchases its own shares or
specified securities.
Clause 70 of the Bill provides for delineation all the transactions which will
not be regarded as transfer of capital asset for taxation as capital gains.
Clause 71 of the Bill provides for conditions wherein exemption from
taxation as capital gains are withdrawn.
Clause 72 of the Bill provides for mode of computation of capital gains.
Clause 73 of the Bill provides for the cost of acquisition of the asset with
reference to certain modes of acquisition.
 572

Clause 74 of the Bill provides for special provision for computation of

capital gains in case of depreciable assets. The said clause seeks to tabulate the
methodology for arriving at the cost of acquisition for different capital assets.
Clause 75 of the Bill provides for computation of capital gains with respect
to assets that are depreciable, as well as the provision for their cost of acquisition.
Clause 76 of the Bill provides for special provision for computation of
capital gains in case of Market Linked Debenture.
Clause 77 of the Bill provides for the computation of capital gains in the
scenario of a slump sale of a capital asset.
Clauses 78 and 79 of the Bill provide for special provision for full value of
consideration in certain cases and special provision for full value of consideration
for transfer of share other than quoted share, respectively.
Clause 80 of the Bill provides for the fair market value shall be deemed to
the full value of consideration as a result of transfer of a capital asset by an
assessee where the consideration is not ascertainable or cannot be determined.
Clause 81 of the Bill provides for advance money received regarding the
transfer of a capital asset.
Clause 82 of the Bill provides for the capital gains arising from profits on
sale of residential properties.
Clause 83 of the Bill provides for capital gains on transfer of land used for
agricultural purposes not to be charged in certain cases.
Clause 84 of the Bill provides for capital gains on compulsory acquisition of
lands and buildings not to be charged in certain cases.
Clause 85 of the Bill provides for capital gains not to be charged on
investment in certain specific bonds.
Clause 86 of the Bill provides for non-chargeability of capital gains in
specific scenarios of investment in residential house.
Clauses 87 and 88 of the Bill provide for exemption of capital gains on
transfer of assets in cases of shifting of industrial undertaking from urban area and
exemption of capital gains on transfer of assets in cases of shifting of industrial
undertaking from urban area to any Special Economic Zone.
Clause 89 of the Bill provides for scenarios for extension of time for
acquiring new assets or depositing or investing amounts, with respect to capital
gains.
Clause 90 of the Bill provides for meaning of “adjusted”, “cost of
improvement” and “cost of acquisition” and also seeks to delineate the meaning
of terms and expressions with respect to capital gains.
Clause 91 of the Bill provides for reference to Valuation Officer for
ascertaining the fair market value of a capital asset.
Clause 92 of the Bill provides for a non-exhaustive list of the incomes which
are chargeable to tax under the head “Income from other sources”.
Clause 93 of the Bill provides for deductions for eligible expenses for
computing the taxable income under the head “Income from other sources”.
 573

Clause 94 of the Bill seeks to enumerate the deductions that are allowable
to be set off against incomes referred to in clause 92.
Clause 95 of the Bill seeks to propose that any benefit in cash or otherwise
obtained on account of remission or cessation of any liability, for which a
deduction has been allowed in an earlier year, shall be taxable in the year in which
the benefit has been obtained.
Clause 96 of the Bill seeks to provide that the income which is transferred
to any other person without the transfer of the assets from which such income
arises shall be clubbed in the income of the transferor but not the transferee
(person to whom such income has been transferred).
Clause 97 of the Bill seeks to propose that the provisions relating to the clubbing
of income in the hands of transferor and transferee in case where transfer of assets is
revocable and the transfer of assets is irrevocable for a specified period.
Clause 98 of the Bill provides for definitions of the expressions “Transfer”
and “revocable transfer”.
Clause 99 of the Bill provides for clubbing of income which means adding
or including the income of another person (mostly family members) to one’s own
income.
Clause 100 of the Bill provides for the tax liability of the person in respect
of the income which is included in the income of any other person.
Clause 101 of the Bill provides that in computing the total income of an
assessee, there shall be included all income on which no income-tax is payable
under sub-part 4 of part A of Chapter XVII.
Clause 102 of the Bill provides for the circumstances or conditions in which
any sum found credited in the books of account maintained by the assessee shall be
considered as unexplained credits and be included in the total income of the assessee.
Clause 103 of the Bill provides for unexplained investment. It also seeks to
provide the circumstances or conditions in which any investment made by the
assessee shall be deemed as unexplained investment and be included in the total
income of the assessee.
Clause 104 of the Bill provides for the circumstances or conditions in which
any asset owned by or belonging to the assessee shall be deemed as unexplained
asset and be included in the total income of the assessee.
Clause 105 of the Bill provides for the circumstances or conditions in which
any expenditure incurred by the assessee shall be deemed to be unexplained
expenditure and be included in the total income of the assessee.
Clause 106 of the Bill seeks to provide that where any amount is borrowed
on a hundi and other instruments like hundi from, or any amount due thereon is
repaid to, any person otherwise than through an account payee cheque drawn on
a bank, the amount so borrowed or repaid shall be deemed to be the income of the
person borrowing or repaying the amount.
Clause 107 of the Bill seeks to provide that income referred to in clauses 102,
103, 104, 105 and 106 shall be charged to tax as per the provisions of clause 195.
Clause 108 of the Bill provides for set off of losses under the same head of
income in the manner specified therein.
 574

Clause 109 of the Bill provides for set off of losses under any other head of
income in the manner provided therein.
Clause 110 of the Bill provides for carry forward and set off of loss against
income from house property.
Clause 111 of the Bill provides for carry forward and set off of loss from
capital gains and seeks to provide for carry forward and set off of loss from capital
gains. The said clause further defines “unabsorbed capital loss” for this purpose.
Clause 112 of the Bill provides for carry forward and set off of business
loss. It further defines the expression “unabsorbed business loss”.
Clause 113 of the Bill provides for set off and carry forward of losses from
speculation business and provides for set off and carry forward of losses from
speculation business. It also defines the expressions “speculation business” and
“unabsorbed speculation business loss”.
Clause 114 of the Bill provides for set off and carry forward of losses from
specified business. The said clause also defines the expressions “specified
business” and “unabsorbed loss from the specified business”.
Clause 115 of the Bill seeks to provide for set off and carry forward of losses
from specified activity.
Clause 116 of the Bill seeks to provide for carry forward and set off of losses
and unabsorbed depreciation in case of specified business amalgamation.
Clause 117 of the Bill provides that in a case of amalgamation the
accumulated loss and depreciation of amalgamating entity shall be deemed to be
loss and depreciation of amalgamated entity specified therein.
Clause 118 of the Bill seeks to provide for carry forward and set off of losses
and unabsorbed depreciation in business reorganisation of co-operative banks.
Clause 119 of the Bill provides for carry forward and set off of losses not
permissible in certain cases and also provides that subject to certain conditions
specified therein, carry forward and set off of losses shall not be permissible in
cases including constitution of firm and on succession of a business or profession
by another person in such capacity or shall be permissible in case of change in
shareholding of a company.
Clause 120 of the Bill seeks to provide that no set off of loss or unabsorbed
depreciation shall be allowed against undisclosed income, consequent to search,
requisition and survey.
Clause 121 of the Bill provides for submission of return for losses and also
that no loss shall be carried forward and set off which has not been determined in
pursuance of a return filed.
Clause 122 of the Bill provides for the statutory compliance requirements,
time limits and overall limits for claiming the deductions enumerated in Chapter
VIII to eligible.
Clause 123 of the Bill provides for deduction for insurance premia, deferred
annuity, contributions to provident fund, etc. and to provide deduction to an
assessee being an individual or Hindu undivided family in respect of payments
made on account of insurance premia, deferred annuity, contribution to provident
fund etc. specified in the relevant proposed Schedule.
 575

Clause 124 of the Bill seeks to provide for deduction in respect of employer
contribution to pension scheme of Central Government.
Clause 125 of the Bill seeks to provide for deduction in respect of
contribution to Agnipath Scheme.
Clause 126 of the Bill seeks to provide for deduction in respect of health
insurance premia.
Clause 127 of the Bill seeks to provide for deduction in respect of
maintenance including medical treatment of a dependant who is a person with
disability.
Clause 128 of the Bill seeks to provide for deduction in respect of medical
treatment, etc.
Clause 129 of the Bill seeks to provide for deduction in respect of interest
on loan taken for higher education.
Clause 130 of the Bill seeks to provide for deduction in respect of interest
on loan taken for certain house property.
Clause 131 of the Bill provides for deduction in respect of interest on loan
taken for certain house property and to provide for deduction in respect of interest
on loan taken for certain house property in case of an individual to whom clause
130 is not applicable.
Clause 132 of the Bill seeks to provide for deduction in respect of purchase
of electric vehicle.
Clause 133 of the Bill seeks to provide for deduction in respect of donations
to certain funds, charitable institutions, etc.
Clause 134 of the Bill seeks to provide that deduction to an assessee being
an individual in respect of any expenditure incurred by him towards payment of
rent for any accommodation occupied by him for the purpose of his own
residence.
Clause 135 of the Bill seeks to provide for deduction in respect of certain
donations for scientific research or rural development.
Clause 136 of the Bill seeks to provide for deduction in respect of
contributions given by companies to political parties.
Clause 137 of the Bill seeks to provide for deduction in respect of
contributions given by any person to political parties.
Clause 138 of the Bill seeks to provide for deductions in respect of profits
and gains from industrial undertakings or enterprises engaged in infrastructure
development, etc.
Clause 139 of the Bill seeks to provide for deductions in respect of profits
and gains by an undertaking or enterprise engaged in development of Special
Economic Zone.
Clause 140 of the Bill seeks to provide deduction to eligible start up in
respect of profits and gains of eligible businesses, which have high potential of
employment generation, subject to certain conditions specified therein.
 576

Clause 141 of the Bill provides for deduction in respect of profits and gains
from certain industrial undertakings and provides for deduction for industrial
undertakings in North-eastern region and also in respect of undertakings
promoting housing projects.
Clause 142 of the Bill provides for deductions in respect of profits and gains
of business of developing and building housing projects.
Clause 143 of the Bill provides for special provisions in respect of profits
and gains of certain undertakings with respect to production of eligible article or
things in North-Eastern States.
Clause 144 of the Bill provides for deduction in respect of profits and gains
of newly established units in Special Economic Zones.
Clause 145 of the Bill seeks to provide for deduction for businesses engaged
in collecting and processing of bio-degradable waste.
Clause 146 of the Bill provides for deduction in respect of additional
employee cost and deduction in respect of additional employee cost in certain
cases for specified period and shall be subject to conditions specified therein.
Clause 147 of the Bill provides for deductions for income of Offshore
Banking Units and Units of International Financial Services Centre. The said
clause also seeks to provide for deductions for income of Offshore Banking Units
and Units of International Financial Services Centre.
Clause 148 of the Bill seeks to provide for deduction in respect of certain
inter-corporate dividends.
Clause 149 of the Bill seeks to provide for deduction in respect of income
of co-operative societies.
Clause 150 of the Bill seeks to provide for deduction in respect of certain
income of Producer Companies.
Clause 151 of the Bill provides for deduction in respect of royalty income,
etc., of authors of certain books other than text-books.
Clause 152 of the Bill provides for deduction in respect of royalty on patents.
Clause 153 of the Bill provides for certain deduction for interest on savings
account deposits (excluding time deposits) for individuals and Hindu undivided
families.
Clause 154 of the Bill provides for deduction in case of a person with
disability and to provide for deduction for an individual resident who is certified
by a medical authority as a person with disability or severe disability.
Clause 155 of the Bill seeks to provide for rebate to be allowed in computing
income-tax.
Clause 156 of the Bill seeks to provide for rebate of income-tax in case of
certain individuals.
Clause 157 of the Bill seeks to provide for relief when salary, etc, is paid in
arrears or in advance.
Clause 158 of the Bill seeks to provide for relief from taxation in income
from retirement benefit account maintained in a notified country.
 577

Clause 159 of the Bill provides for agreement with foreign countries or
specified territories and adoption by the Central Government of agreement
between specified associations for double taxation relief. It also seeks to provide
for double taxation relief where the Central Government has entered into an
agreement with other countries. The said clause further provides for exchange of
information for the prevention of evasion, avoidance and recovery of income-tax.
Clause 160 of the Bill seeks to provide for deduction from the Indian
income-tax payable by a person who has paid tax outside India in a country with
which no agreement exists in respect of his income which accrued or arose during
that tax year outside India.
Clause 161 of the Bill provides for computation of income from
international transaction and specified domestic transaction having regard to
arm’s length price.
Clause 162 of the Bill seeks to define the expression “associated enterprise”.
Clause 163 of the Bill seeks to define the expression “international transaction”.
Clause 164 of the Bill seeks to define the expression “specified domestic
transaction”.
Clause 165 of the Bill provides for determination of arm’s length price and
the methods for determining the arm’s length price.
Clause 166 of the Bill provides for referral of cases by the Assessing Officer
to the Transfer Pricing Officer for determining the arm’s length price.
Clause 167 of the Bill provides for power of Board to make safe harbour
rules to simplify compliance and reduce litigation.
Clause 168 of the Bill provides for advance pricing agreement between the
taxpayer and the tax authorities to pre-determine the arm’s length price for
specified transactions.
Clause 169 of the Bill, inter alia, seeks to provide for giving effect to
advance pricing agreement entered into by an assessee and consequential
procedures.
Clause 170 of the Bill provides for secondary adjustment in certain cases to
ensure that the actual allocation of profits between the associated enterprises
aligns with the arm’s length price.
Clause 171 of the Bill provides for maintenance, keeping and furnishing of
information and document by certain persons and documents by entities involved
in international or specified domestic transactions.
Clause 172 of the Bill provides for report from an accountant to be furnished
by persons entering into international transaction or specified domestic transaction.
Clause 173 of the Bill provides for definitions of certain terms relevant to
determination of arm’s length price, etc.
Clause 174 of the Bill provides for avoidance of income-tax by transactions
resulting in transfer of income to non-residents also that the income arising of
such transaction be deemed to be income.
 578

Clause 175 of the Bill provides for avoidance of tax by certain transactions
in securities arising from such securities for such year shall be deemed to be the
income of persons specified therein.
Clause 176 of the Bill seeks to provide for special measures in respect of
transactions with persons located in notified jurisdictional area.
Clause 177 of the Bill seeks to provide for limitation on interest deduction
in certain cases.
Clause 178 of the Bill provides for the framework for the applicability of
General Anti-Avoidance Rule.
Clause 179 of the Bill seeks to define impermissible avoidance
arrangements under the General Anti-Avoidance Rule.
Clause 180 of the Bill seeks to outline the conditions under which an
arrangement shall be deemed to lack commercial substance.
Clause 181 of the Bill provides for consequences of impermissible
avoidance arrangement under the General Anti-Avoidance Rule.
Clause 182 of the Bill provides for treatment of connected person and
accommodating party under the General Anti-Avoidance Rule.
Clause 183 of the Bill seeks to provide for the applicability of General
Anti-Avoidance Rule.
Clause 184 of the Bill seeks to provide for definition of General
Anti-Avoidance Rule.
Clause 185 of the Bill seeks to provide, inter alia, for restrictions on taking
or accepting loan, deposit and specified sum in cash with certain exceptions.
Clause 186 of the Bill provides, inter alia, for restriction on receiving an amount
of rupees two lakh and above in the modes other than the modes specified therein.
Clause 187 of the Bill seeks to provide for accepting payment through
prescribed electronic modes.
Clause 188 of the Bill provides, inter alia, for restrictions on repayment of
certain loans, deposit or specified advance in cash with certain exceptions.
Clause 189 of the Bill seeks to provide for definitions of certain expressions
which, inter alia, includes banking company, specified sum, etc.
Clause 190 of the Bill provides for the mode of computation of total income
if it includes any income on which no income tax is payable.
Clause 191 of the Bill seeks to provide for tax on accumulated balance of
recognised provident fund.
Clause 192 of the Bill provides for the tax liability on the total income in
search cases.
Clause 193 of the Bill provides for, inter alia, for special rates of tax on
resident individuals employed by an entity engaged in a specified
knowledge-based industry or services on income from Global Depository
Receipts.
 579

Clause 194 of the Bill provides for taxation of earnings from lotteries, cross
word puzzles, horse race, card games, online games, income from transfer of
virtual digital assets. The said clause further provides for a concessional tax rate
on royalty income on patents earned by a resident, income on transfer of carbon
credits and profits and gains from insurance business.
Clause 195 of the Bill provides for tax on certain income referred to in
clauses 102 to 106.
Clause 196 of the Bill provides for taxation of short-term capital gains in
case of a transfer of short-term capital asset, being an equity share in a company
or a unit of an equity-oriented fund or a unit of a business trust subject to certain
conditions.
Clause 197 of the Bill provides for taxation of long-term capital gains where
the capital gains arise from the transfer of a long-term capital asset (other than an
equity share in a company or a unit of an equity-oriented fund or a unit of a
business trust).
Clause 198 of the Bill provides for taxation of long-term capital gains where
the capital gains arise from the transfer of a long-term capital asset being an equity
share in a company or a unit of an equity-oriented fund or a unit of a business trust.
Clause 199 of the Bill provides for beneficial rate of tax on manufacturing
companies subject to satisfaction of certain conditions.
Clause 200 of the Bill provides for the (optional) concessional tax rate
applicable to companies other than those covered under clauses 199 and 201, if
they do not claim specific deductions. The said clause further provides for the
manner of opting, method of computing the income and also implications for Unit
in the International Financial Services Centre.
Clause 201 of the Bill provides for an incentivized tax rate on income of new
manufacturing domestic companies subject to satisfaction of certain conditions.
Clause 202 of the Bill provides for a simplified tax regime for individuals,
Hindu undivided families and other specified persons.
Clause 203 of the Bill provides for the (optional) concessional tax rate
applicable to co-operative societies other than those covered under clause 204, if
they do not claim specific deductions.
Clause 204 of the Bill provides for an incentivized tax rate of 15% on the
manufacturing income of new manufacturing co-operative societies subject to
satisfaction of certain conditions.
Clause 205 of the Bill provides for the conditions for the concessional rate
of taxes applicable under clauses 199, 200, 201, 203 and 204.
Clause 206 of the Bill provides for provisions relating to taxation on book
profits and deals with minimum alternate tax and alternate minimum tax.
Clause 207 of the Bill provides special rates of taxes for non-residents on
certain types of income (like dividends, interest, distributed income, income in
respect of units, royalties and fees for technical services).
Clause 208 of the Bill provides for special rates of taxes for offshore funds
on investments made in foreign currency.
 580

Clause 209 of the Bill provides for special rates of taxes for non-residents
on Global Depository Receipts including income by way of interest, dividend and
income on transfer of such Global Depository Receipts.
Clause 210 of the Bill provides for special rates of tax on income earned by
Foreign Institutions Investors including dividend and interest on securities and
capital gains on transfer of their securities.
Clause 211 of the Bill provides for special rates of tax on non-residents
sportsmen or sports associations with respect to certain incomes earned in India.
Clause 212 of the Bill provides for Interpretation relating to Chapter XIII-E.
The said clause seeks to provide the definitions of certain terms for the purposes
of clauses 213 to 218.
Clause 213 of the Bill provides for the method of computing the taxable
income for non-resident Indians.
Clause 214 of the Bill provides for the special rates of taxes on investment
income and long terms capital gains earned by non-resident Indians.
Clause 215 of the Bill provides for the non-taxation of long term capital
gains earned by non-resident Indians, if they make specific investment(s).
Clause 216 of the Bill provides for the exemption from filing of the return
of income of non-resident Indians, if certain conditions are satisfied.
Clause 217 of the Bill provides for the optional grandfathering of the
taxation of income from investments made by a non-resident Indian if he becomes
a resident at a later year.
Clause 218 of the Bill provides for the method for opting out of the
provisions of the clauses 212 to 217.
Clause 219 of the Bill provides for relaxation from capital gains tax and
entitlement to carry forward losses, etc., when an Indian branch of a foreign bank
is converted into an Indian company.
Clause 220 of the Bill provides for the implications where a foreign
company is said to be a resident in India.
Clause 221 of the Bill provides for special taxation regime for income from
a securitization trust earned by its investors.
Clause 222 of the Bill seeks to provide for tax on income in case of venture
capital undertakings.
Clause 223 of the Bill provides for special taxation regime for Infrastructure
Investment Trust under the Securities and Exchange Board of India (Infrastructure
Investment Trusts) Regulations, 2014 and Real Estate Investment Trust under the
Securities and Exchange Board of India (Real Estate Investment Trusts)
Regulations, 2014 and their unit holders.
 581

Clause 224 of the Bill provides for special taxation regime for income of
investment fund and its unit holders.
Clause 225 of the Bill seeks to provide for income from the business of
operating qualifying ships and the option to tax payers to opt for the scheme of
tonnage tax.
Clause 226 of the Bill seeks to provide for tonnage tax scheme and defines
that a company operating ships and giving the manner of computation of income
under tonnage tax scheme for a tonnage tax company for its tonnage income.
Clause 227 of the Bill seeks to provide for computation of tonnage income.
Clause 228 of the Bill seeks to provide for relevant shipping income and
exclusion from book profit.
Clause 229 of the Bill provides for manner of calculation of depreciation
along with treatment of capital gains in case of the transfer of capital asset forming
part of qualifying assets as well as treatment given to the written down value of
the qualifying assets and other assets whenever they are moved between the
qualifying and non- qualifying businesses.
Clause 230 of the Bill seeks to provide for general exclusion of losses,
deductions and set off including the accrued losses incurred or claimed prior to
opting of tonnage tax scheme by the company.
Clause 231 of the Bill seeks to provide for the method of opting of tonnage
tax scheme and validity.
Clause 232 of the Bill seeks to provide for certain conditions for
applicability of tonnage tax scheme.
Clause 233 of the Bill seeks to provide for continuance of and validity of
the scheme in the case of amalgamation and demerger.
Clause 234 of the Bill seeks to provide for avoidance of tax and exclusion
from tonnage tax scheme in case of abuse of the provisions by way of any
arrangement made to avail tax advantage.
Clause 235 of the Bill provides for definition of certain terms relating to
tonnage tax scheme.
Clause 236 of the Bill provides for various classes of income-tax authorities
beginning from, the Central Board of Direct Taxes and up to Inspectors of
Income-tax.
Clause 237 of the Bill seeks to provide for the appointment of income-tax
authorities by the Central Government by framing rules and orders for regulating
conditions of service and to authorise the Board or subordinate authorities, to
appoint income-tax authorities below the rank of a Deputy or Assistant
Commissioner and also other executive or ministerial staff.
Clause 238 of the Bill provides for the income-tax authorities to be subordinate
to another income-tax authorities as per the notification issued by the Board.
 582

Clause 239 of the Bill provides for the power of the Board to issue orders,
instructions and directions to other income-tax authorities.
Clause 240 of the Bill empowers the Board towards administration of
Charter for Taxpayers.
Clause 241 of the Bill provides for the power and performance of the
income-tax authorities in accordance with such directions as the Board may issue
or by other income-tax authorities as specified by the Board.
Clause 242 of the Bill provides for jurisdiction of Assessing Officers over
an area.
Clause 243 of the Bill provides for the power of the specified income-tax
authority to transfer any case from one Assessing Officer to another Assessing
Officer.
Clause 244 of the Bill provides for the jurisdiction of the succeeding
income-tax authority to continue with any proceeding from the stage at which his
predecessor has left.
Clause 245 of the Bill seeks to provide for the faceless jurisdiction of the
income-tax authorities who will exercise all powers and performance assigned
leading to greater efficiency, transparency and accountability among other things.
Clause 246 of the Bill seeks to provide for powers of income tax authorities
regarding discovery or production of evidence etc. as are vested in court under
Code of Civil Procedure, 1908 in respect of specified matters.
Clause 247 of the Bill provides for dealing with powers and procedures
relating to search and seizure under the proposed legislation.
Clause 248 of the Bill provides for powers to requisition books of account,
etc., which have been taken into custody by any officer or authority under any
other law.
Clause 249 of the Bill provides for reasons for search and seizure not to be
disclosed.
Clause 250 of the Bill seeks to provide for application of seized or
requisitioned assets under the provisions of the proposed legislation.
Clause 251 of the Bill seeks to provide for authority and procedures to deal
with books of accounts and documents seized or requisitioned under clauses 247
and 248 of the proposed legislation and provides time limitations for their retention
by the authorities concerned.
Clause 252 of the Bill provides for power to call for information of the
income-tax authorities to call for information.
Clause 253 of the Bill provides for powers of survey, i.e., entry into business
premises of an assessee, restrictions imposed in exercises of this power and duties
of the assesses during survey action.
Clause 254 of the Bill seeks to provide for powers of authorities to collect
certain information which may be useful, or relevant to the purposes of the
proposed legislation.
Clause 255 of the Bill seeks to provide for power to inspect registers of
companies by income-tax authorities.
 583

Clause 256 of the Bill seeks to provide for the powers of Assessing Officer
under the proposed legislation in relation to making enquiries to competent
authority, i.e., higher authorities.
Clause 257 of the Bill provides to treat proceedings before the income-tax
authorities at par with the judicial proceedings.
Clause 258 of the Bill provides for restrictions on disclosure of information
in respect of assessees by income-tax authorities.
Clause 259 of the Bill provides the power of income-tax authority to call for
information by prescribed income-tax authority.
Clause 260 of the Bill empowers the Board to make any scheme by
notification for faceless collection of information under certain clauses.
Clause 261 of the Bill provides for definitions of various expressions used
in this Chapter XIV.
Clause 262 of the Bill seeks to provide for obtaining and quoting of
Permanent Account Number and linking of Aadhar Number to Permanent
Account Number.
Clause 263 of the Bill provides for obligation of persons to file return of
income and timelines for filing of return of income.
Clause 264 of the Bill seeks to provide for scheme for submission of return
through Tax Return Preparer.
Clause 265 of the Bill seeks to provide for verification of returns of income
by assessee and the persons competent to verify the returns of income.
Clause 266 of the Bill provides for payment of tax together with interest and fee
while filing return of income.
Clause 267 of the Bill provides for payment of self-assessment tax on
updated return along with the interest and fee payable.
Clause 268 of the Bill seeks to provide for inquiry before assessment, to call
for statement of all assets and liabilities and making a reference for special audit.
Clause 269 of the Bill seeks to provide for making a reference by Assessing
Officer to a Valuation Officer to estimate the fair market value of any asset,
property or investment.
Clause 270 of the Bill seeks to provide for processing of returns filed and the
powers to make prima facie adjustments and also selecting returns for the assessment.
Clause 271 of the Bill seeks to provide for completion of assessment to the
best of judgment of the assessing officer.
Clause 272 of the Bill empowers the Joint Commissioner to issue directions
to the assessing officer during assessment proceedings.
Clause 273 of the Bill seeks to provide for faceless assessment of eligible
cases assigned by National Faceless Assessment Centre to a specific Assessment
Unit through an automated allocation system.
 584

Clause 274 of the Bill seeks to provide for making a reference by Assessing
Officer to the Principal Commissioner or Commissioner during the course of pending
assessments or reassessments to declare an arrangement as an impermissible tax
avoidance arrangement and determining the consequences of such an alignment.
Clause 275 of the Bill provides for scheme for reference to the Dispute
Resolution Panel.
Clause 276 of the Bill seeks to provide for method of accounting to be
followed for computation of income under the heads “Profits and gains of
business or profession” and “Income from Other sources”.
Clause 277 of the Bill seeks to provide for valuation of inventory and
securities as per income computation and disclosure standards.
Clause 278 of the Bill seeks to provide for taxability of interest,
compensation or enhanced compensation and escalation claims in respect of
contract or export incentives.
Clause 279 of the Bill seeks to provide for assessment of any income
chargeable to tax which has escaped assessment.
Clause 280 of the Bill seeks to provide for issue of notice where income has
escaped assessment.
Clause 281 of the Bill seeks to provide for procedure to be followed before
issuance of notice under clause 280.
Clause 282 of the Bill provides for time limit for notices in the cases of
income escaping assessment.
Clause 283 of the Bill seeks to provide provision for cases where assessment
is in pursuance of an order on appeal, directions from approving panel.
Clause 284 of the Bill provides for sanction for issue of notice in cases of
income escaping assessment.
Clause 285 of the Bill provides for other provisions pertaining to assessment
or re-assessment or re-computation made.
Clause 286 of the Bill provides for time limits for completion of assessment,
re-assessment and re-computation in various situations.
Clause 287 of the Bill provides for rectifying any mistake apparent on the
face of the record by amending orders passed by an income-tax Authority under
the provisions of the proposed legislation.
Clause 288 of the Bill provides for time limits for passing of rectification
orders in certain cases.
Clause 289 of the Bill provides for notice of demand payable (tax, interest,
penalty, fine or any other sum).
Clause 290 of the Bill provides for modification and revision of demand
notice issued in certain cases.
Clause 291 of the Bill seeks to provide for intimation of loss the purposes
of carrying forward and set-off of such losses.
Clause 292 of the Bill provides for scheme of block assessment in a search case.
Clause 293 of the Bill provides for computation of total income of block
period in search cases.
 585

Clause 294 of the Bill seeks to provide procedure for block assessment.
Clause 295 of the Bill seeks to provide for procedure for block assessment
of any other person in search cases.
Clause 296 of the Bill seeks to provide time limit for completion of block
assessment.
Clause 297 of the Bill seeks to provide that certain interests and penalties
not to be imposed in case of assessment of search cases.
Clause 298 of the Bill seeks to provide for levy of interest and penalty in
search cases.
Clause 299 of the Bill seeks to provide authorities competent to make
assessments of block period.
Clause 300 of the Bill provides for saving clause with respect to application
of other provisions of the Act.
Clause 301 of the Bill provides for interpretation of various expressions
related to assessment of search cases.
Clause 302 of the Bill provides for tax liability of the legal representative in
the event of the demise of the assessee.
Clause 303 of the Bill explains the concept of representative assessee for
the income of a non-resident or trust or minor, lunatic or idiot, etc.
Clause 304 of the Bill provides for the responsibility of the representative
assessee and taxation of income received in the capacity of representative assessee.
Clause 305 of the Bill deals with the rights of the representative assessee to
recover the taxes paid by him in his capacity as representative assessee.
Clause 306 of the Bill seeks to deal with persons to act as an agent in relation
to a non-resident.
Clause 307 of the Bill seeks to provide for the charge of tax of certain
representative assesses in a situation where the share of the beneficiaries is
unknown or indeterminate.
Clause 308 of the Bill provides for charge of tax in case of oral trust.
Clause 309 of the Bill seeks to provide for the method of computing a
member’s share in income of association of persons or body of individuals.
Clause 310 of the Bill deals with share of member of an association of
persons or body of individuals in income of association or body.
Clause 311 of the Bill seeks to provide for charge of tax in the hands of the
association of persons or body of individuals where shares of members in such
association or body is either known or unknown, represented in the form of a table.
Clause 312 of the Bill seeks to provide for the chargeability of tax on the income
of the estate of the deceased in the hands of the Executor and the right of the executor
to recover the tax paid.
Clause 313 of the Bill seeks to deal with the assessment of the income and the
taxability of the same pertaining to a business in which there is a succession otherwise
than a death.
 586

Clause 314 of the Bill seeks to deal with effect of order of tribunal or court in
respect of business reorganisation in cases where either proceeding is pending or an
assessment is completed.
Clause 315 of the Bill seeks to deal with assessment of the income of a Hindu
undivided family where a partition has taken place and the joint and several liability
of the members of such family.
Clause 316 of the Bill provides for levy and recovery of tax in the case of any
ship, belonging to or chartered by a non-resident, which carries passengers, livestock,
mail or goods shipped at a port in India.
Clause 317 of the Bill provides for taxability of income of any individual who
may leave India.
Clause 318 of the Bill seeks to provide for the taxation of the income of
association of persons or body of individuals or artificial juridical person formed for
a particular event or purpose and likely to be dissolved soon after that event.
Clause 319 of the Bill provides for assessment of the income of persons who
are likely to transfer any property with a view to avoiding payment of any liability
under the proposed legislation.
Clause 320 of the Bill seeks to provide for accelerated assessment in cases of
discontinuance of business or profession in any year.
Clause 321 of the Bill seeks to provide for chargeability of any liability under
the proposed legislation in cases of discontinuance of business or profession or
dissolution of an association of persons.
Clause 322 of the Bill provides for the procedures to be followed by companies
in liquidation and the responsibilities of the liquidator
Clause 323 of the Bill seeks to provide for the liability of the directors of a
private company on tax and other dues as per the provisions of this Bill.
Clause 324 of the Bill seeks to provide for the charge of tax in case of a firm.
Clause 325 of the Bill deals with the provisions of assessment of a partnership
firm including compliances to certain conditions.
Clause 326 of the Bill deals with consequences in the assessment of a
partnership firm in case of non-compliance to the conditions made by rules.
Clause 327 of the Bill seeks to provide for assessment of a partnership firm in
cases where there is a change in constitution of the firm.
Clause 328 of the Bill provides for taxation in the hands of the predecessor and
successor in the case of succession of one firm by another firm.
Clause 329 of the Bill seeks to provide for joint and several liability of
partners for tax payable by firm.
Clause 330 of the Bill seeks to provide for assessment and liability in the
hands of the firm even after its dissolution or discontinuance of the business.
Clause 331 of the Bill provides for joint and several liability of partners of
a limited liability partnership in liquidation.
Clause 332 of the Bill provides for provisions related to registration of
non-profit organisation.
 587

Clause 333 of the Bill seeks to provide provision related to switching over
of regimes by a registered non-profit organisation .
Clause 334 of the Bill seeks to provide taxability of income of a registered
non-profit organisation.
Clause 335 of the Bill provides the meaning of regular income of a
registered non-profit organisation .
Clause 336 of the Bill seeks to deal with the taxable regular income of a
registered non-profit organisation.
Clause 337 of the Bill provides for the provisions related to specified
income of a registered non-profit organisation.
Clause 338 of the Bill seeks to provide for the provisions related to income
not to be included in regular income of a registered non-profit organisation.
Clause 339 of the Bill provides for the meaning of corpus donation of a
registered non-profit organisation.
Clause 340 of the Bill provides for the provision related to deemed corpus
donation of a registered non-profit organisation.
Clause 341 of the Bill provides for the provision related to application of
income of a registered non-profit organisation.
Clause 342 of the Bill seeks to provide the provision related to accumulated
income of a registered non-profit organisation.
Clause 343 of the Bill provides for the provisions related to deemed
accumulated income of a registered non-profit organisation.
Clause 344 of the Bill seeks to provide for the provisions related to business
undertaking held as property of a registered non-profit organisation.
Clause 345 of the Bill seeks to provide the provision related to restriction
on commercial activities of a registered non-profit organisation.
Clause 346 of the Bill seeks to provide for the provisions relating to
restriction on commercial activities of a registered non-profit organisation which
has advancement of any other object of general public utility as any of its objects.
Clause 347 of the Bill provides for provision related to books of account of a
registered non-profit organisation.
Clause 348 of the Bill seeks to provide the provision related to audit of a
registered non-profit organisation.
Clause 349 of the Bill seeks to provide the provision related to return of
income of a registered non-profit organisation.
Clause 350 of the Bill seeks to provide provision related to permitted modes
of investment.
Clause 351 of the Bill seeks to provide provisions related to specified
violation of a registered non-profit organisation.
Clause 352 of the Bill seeks to provide provision related to tax on accreted
income of a registered non-profit organisation.
 588

Clause 353 of the Bill seeks to provide provision related to other violations
of a registered non-profit organisation.
Clause 354 of the Bill seeks to provide provisions related to approval for
purpose of exemption on donation.
Clause 355 of the Bill seeks to provide the meaning of different terms used
in this Chapter.
Clause 356 of the Bill seeks to provide for appeals to Joint Commissioner
(Appeals) against certain orders.
Clause 357 of the Bill seeks to provide for appeals to Commissioner
(Appeals) against certain orders.
Clause 358 of the Bill seeks to provide for form of appeal and limitation.
Clause 359 of the Bill seeks to provide for procedure in appeal.
Clause 360 of the Bill deal with the powers of Joint Commissioner
(Appeals) and the Commissioner (Appeals).
Clause 361 of the Bill provides for constitution of Income tax Appellate Tribunal.
Clause 362 of the Bill seeks to provide for appeals to the Income tax
Appellate Tribunal.
Clause 363 of the Bill seeks to provide for the orders passed by the Income
tax Appellate Tribunal.
Clause 364 of the Bill seeks to provide for the powers and functions of the
Income tax Appellate Tribunal.
Clause 365 of the Bill seeks to provide for appeals to the High Court.
Clause 366 of the Bill provide for appeals to the High Court to be heard by
not less than two Judges.
Clause 367 of the Bill seeks to provide for appeals to Supreme Court.
Clause 368 of the Bill seeks to provide for hearing before the Supreme Court.
Clause 369 of the Bill seeks to provide that tax to be paid irrespective of
filing of appeal before High Court or Supreme Court.
Clause 370 of the Bill seeks to provide for execution for costs awarded by
Supreme Court.
Clause 371 of the Bill provides for amendment of assessment on account of
appeal in certain cases.
Clause 372 of the Bill seeks to provide for exclusion of time taken to obtain
copy of the order.
Clause 373 of the Bill seeks to provide for filing of appeals by income tax
authority and empowers Board to issue instructions from time to time.
Clause 374 of the Bill provides for the definition of “High Court” for the
purpose of filing of appeal under this Chapter.
Clause 375 of the Bill provides for procedure when assessee claims identical
question of law is pending before High Court or Supreme Court.
 589

Clause 376 of the Bill seeks to prescribe procedure where an identical

question of law is pending before High Courts or Supreme Court.
Clause 377 of the Bill provides for revision of orders prejudicial to Revenue
by Principal Commissioner or Commissioner.
Clause 378 of the Bill seeks to provide for revision of orders in certain cases
which are not prejudicial to revenue.
Clause 379 of the Bill provides for constitution of Dispute Resolution
Committee to resolve disputes in certain cases.
Clause 380 of the Bill seeks to define certain expressions used in the context
of Advance Rulings.
Clause 381 of the Bill provides for constitution of Board for Advance Rulings.
Clause 382 of the Bill seeks to deal with proceedings in case of vacancies
in the Board for Advance Rulings.
Clause 383 of the Bill provides for filing of application before the Board for
Advance Rulings.
Clause 384 of the Bill seeks to provide for procedure to process the
application made for advance rulings.
Clause 385 of the Bill seeks to provide that certain authorities not to proceed
to decide in certain cases where application for advance ruling has been made.
Clause 386 of the Bill seeks to provide that advance ruling to be void in
certain circumstances.
Clause 387 of the Bill seeks to provide for powers of the Board for Advance
Rulings.
Clause 388 of the Bill seeks to empower the Board for Advance Rulings to
regulate its own procedure.
Clause 389 of the Bill provides for appeal to High Court on the rulings
pronounced by the Board for Advance Rulings.
Clause 390 of the Bill provides for the provisions relating to tax deduction at
source, tax collection at source, advance payment, etc., as modes of tax payment.
Clause 391 of the Bill provides for provisions relating to direct payment of
tax by assessee in certain conditions.
Clause 392 of the Bill provides for provisions relating to tax deduction at
source on salary and accumulated balance to an employee.
Clause 393 of the Bill provides for provisions relating to tax deduction at
source on various payments.
Clause 394 of the Bill provides for provisions relating to tax collection at
source on various transactions.
Clause 395 of the Bill provides for provisions relating to issuance of
certificate for lower deduction of tax.
Clause 396 of the Bill seeks to provide the certain sums which shall be
deemed as income received for the purposes of computing the income of the
assessee.
 590

Clause 397 of the Bill seeks to provide for compliance and reporting
requirements for tax deduction at source and tax collection at source.
Clause 398 of the Bill seeks to provide for consequence for failure to deduct
or collect or pay tax.
Clause 399 of the Bill seeks to provide for processing of statements of tax
deduction at source and tax collection at source filed.
Clause 400 of the Bill empowers the Central Government to relax the
provisions of tax deduction at source and tax collection at source.
Clause 401 of the Bill seeks to provide for provisions relating to bar against
the demand on assessee to the extent tax has been deducted.
Clause 402 of the Bill seeks to provides for definition of certain expressions
used in the chapter of collection and recovery of tax.
Clause 403 of the Bill seeks to provide for liability for payment of advance
tax during the tax year in respect of total income of an assessee.
Clause 404 of the Bill seeks to provide for conditions where assessee shall
be required to pay advance tax.
Clause 405 of the Bill seeks to provides for the provisions relating to the
method for computation of advance tax payable in a tax year.
Clause 406 of the Bill seeks to provide for payment of advance tax by
assessee on his own accord.
Clause 407 of the Bill provides for payment of advance tax by an assessee
in pursuance of an order of the Assessing Officer.
Clause 408 of the Bill provides for payment of advance tax in four
instalments and by the due dates as made by the rules.
Clause 409 of the Bill seeks to provide for deeming an assessee to be in
default for failure to pay advance tax as per the order of the Assessing Officer.
Clause 410 of the Bill seeks to provide for giving credit for advance tax paid
by or recovered from an assessee as a payment of tax in respect of the income of
the tax year.
Clause 411 of the Bill seeks to provide for the provisions relating to notice
of demand, tax payable and when assessee is deemed to be in default.
Clause 412 of the Bill seeks to provide for penalty which shall be payable
when assessee is in tax default.
Clause 413 of the Bill seeks to provide for drawing up of a certificate in
respect of an assessee in default by the Tax Recovery Officer, specifying the
amount of arrears due from the assessee and the recovery thereof.
Clause 414 of the Bill seeks to specify the Tax Recovery Officer by whom
recovery is to be effected.
Clause 415 of the Bill empowers the Tax Recovery Officer to stay the
recovery proceedings of his own accord or in pursuance of reduction in demand
because of an appeal or other proceedings under the proposed legislation.
 591

Clause 416 of the Bill empowers the Assessing Officer with modes of
recovery where no certificate is drawn up by the Tax Recovery Officer.
Clause 417 of the Bill provides for recovery of tax through State
Government in any area where recovery of tax has been entrusted to a State
Government under article 258(1) of the Constitution.
Clause 418 of the Bill provides for recovery of tax on behalf of the
Government of any foreign country under an agreement between the two
Governments from a resident of India or a person having any property in India
through a Tax Recovery Officer.
Clause 419 of the Bill provides for the provisions relating to recovery of penalties,
fine, interest and other sums in the same manner as provided for recovery of tax.
Clause 420 of the Bill seeks to provide for the requirement of a no objection
certificate to be issued by the prescribed authority to a person who is not domiciled
in India and has come to India in connection with business, profession or
employment and who has income derived from any source in India for leaving India.
Clause 421 of the Bill seeks to provide that recovery by suit or under other
law will not be affected notwithstanding tax due being recovered under any mode
prescribed in the proposed legislation.
Clause 422 of the Bill seeks to provide for recovery of tax arrears from a
non-resident from his assets.
Clause 423 of the Bill seeks to provide that the assessee shall be liable to
pay interest for default in furnishing return of income.
Clause 424 of the Bill seeks to provide that the assessee shall be liable to
pay interest for failure to pay advance tax or where the advance tax paid by the
assessee falls short of 90% of the assessed tax.
Clause 425 of the Bill seeks to provide that the assessee shall be liable to
pay interest for failure to pay full amount of any instalment of advance tax by the
due date for that instalment.
Clause 426 of the Bill seeks to provide that the assessee shall be liable to
pay interest on any amount refunded to him in excess of the refund actually due.
Clause 427 of the Bill seeks to provide that the assessee shall be liable to
pay fee of for delay in furnishing of statement regarding taxes deducted or
collected at source.
Clause 428 of the Bill seeks to provide that the assessee shall be liable to
pay a fee for failure to furnish a return of income by the prescribed due date.
Clause 429 of the Bill seeks to provide that the assessee shall be liable to
pay a fee of for delay in furnishing of prescribed statement or certificate relating
to expenditure on scientific research and by an institution or fund established in
India for charitable purposes.
Clause 430 of the Bill seeks to provide that the assessee shall be liable to
pay a fee for failure to intimate his Aadhaar number by the prescribed date.
Clause 431 of the Bill provides for refund of excess amount paid by an
assessee where the tax paid is more than the tax actually chargeable.
 592

Clause 432 of the Bill provides that the legal representative or the trustee or
guardian or receiver, to claim or receive refund for the benefit of a person who is
unable to claim or receive the refund due to him on account of death, incapacity,
insolvency, liquidation or other cause or his estate.
Clause 433 of the Bill seeks to provide that every claim of refund shall be
made by furnishing a return of income.
Clause 434 of the Bill seeks to provide for refund of tax deducted and paid
to the Central Government by a person by whom the income is payable and who
was required by an agreement to bear such tax deductible on the income on a
claim made by him that no tax was required to be deducted on such income.
Clause 435 of the Bill seeks to provide that the Assessing Officer shall
refund any amount becoming due to the assessee as a result of any appellate order
without the assessee being required to make any claim in this regard.
Clause 436 of the Bill seeks to provide that the assessee shall not be entitled
to question the correctness of any assessment or other matter which has become
final or to claim any other relief except refund of tax wrongly paid or paid in
excess.
Clause 437 of the Bill seeks to provide that the assessee shall be entitled to
receive interest in addition to the refund due to him.
Clause 438 of the Bill seeks to provide for setting off the amount to be
refunded or any part of that amount, against any sum remaining payable under
this Bill by such person after giving prior intimation to such person.
Clause 439 of the Bill seeks to impose penalty for under-reporting and mis-
reporting of income.
Clause 440 of the Bill deals with the conditions and circumstances under
which immunity from imposition of penalty and initiation of prosecution
proceedings.
Clause 441 of the Bill seeks to impose penalty for failure to keep, maintain
or retain books of account, documents, etc.
Clause 442 of the Bill seeks to impose penalty for failure to keep and
maintain information and document, etc., in respect of certain transactions.
Clause 443 of the Bill seeks to provide for imposition of penalty, if the
income which includes any cash credits, unexplained investment, unexplained
money, unexplained expenditure, amount of investment, etc., not fully disclosed
in books of account and amount borrowed or repaid on hundi.
Clause 444 of the Bill seeks to impose penalty for false entry or omitted
entry in the books of account.
Clause 445 of the Bill seeks to impose penalty for violation of certain
provisions by specified persons.
Clause 446 of the Bill seeks to provide for imposition of penalty for failure
to get accounts audited.
 593

Clause 447 of the Bill seeks to provide for imposition of penalty for failure
to furnish a report from an accountant as required by clause 172.
Clause 448 of the Bill seeks to provide for imposition of penalty for failure
to deduct tax at source.
Clause 449 of the Bill seeks to provide for imposition of penalty for failure
to collect tax at source.
Clause 450 of the Bill provides for imposition of penalty if a person takes
or accepts any loan or deposit or specified sum in contravention of the provisions
of clause 185.
Clause 451 of the Bill provides for imposition of penalty for failure to
comply with the provisions of clause 186.
Clause 452 of the Bill provides for imposition of penalty for failure to
comply with the provisions of clause 187.
Clause 453 of the Bill provides for imposition of penalty for failure to
comply with the provision of clause 188.
Clause 454 of the Bill seeks to provide for imposition of penalty for failure
to furnish statement of financial transaction or reportable account.
Clause 455 of the Bill seeks to provide for imposition of penalty for
furnishing inaccurate statement of financial transaction or reportable account.
Clause 456 of the Bill seeks to provide for imposition of penalty for failure
to furnish statement or information or document by an eligible investment fund.
Clause 457 of the Bill seeks to provide for imposition of penalty for failure
to furnish statement or information or document under clause 171.
Clause 458 of the Bill seeks to provide for imposition of penalty for failure
to furnish information or document under clause 506.
Clause 459 of the Bill seeks to provide for imposition of penalty for failure
to furnish report or for furnishing inaccurate report under clause 511.
Clause 460 of the Bill seeks to provide for imposition of penalty for failure
to submit statement under clause 505.
Clause 461 of the Bill seeks to provide for imposition of penalty for failure
to submit statement as required under clause 397(3)(b).
Clause 462 of the Bill seeks to provide for imposition of penalty for failure
to furnish information or furnishing inaccurate information as required under
clause 397(3)(d).
Clause 463 of the Bill seeks to provide for imposition of penalty for
furnishing incorrect information in reports or certificates by any accountant or
merchant banker or registered valuer.
Clause 464 of the Bill seeks to provide for imposition of penalty for failure
to furnish statements by certain institutions or funds.
Clause 465 of the Bill seeks to provide for imposition of penalty for failure
to answer questions, sign statements, furnish information, returns or statements,
allow inspections, etc.
 594

Clause 466 of the Bill seeks to provide for imposition of penalty for failure
to comply with the provisions of clause 254.
Clause 467 of the Bill seeks to provide for imposition of penalty for failure
to comply with the provisions of clause 262.
Clause 468 of the Bill seeks to provide for imposition of penalty for failure
to comply with the provisions of clause 397(1).
Clause 469 of the Bill seeks to provide for power to reduce or waive penalty,
etc., in certain cases.
Clause 470 of the Bill seeks to provide that penalty in certain cases shall not
be imposed for reasonable cause.
Clause 471 of the Bill seeks to provide for the procedure for levy of penalty.
Clause 472 of the Bill provides for bar of limitation for imposing penalty.
Clause 473 of the Bill seeks to provide for punishment for contravention of
order passed under clause 247 (1)(viii) or (4).
Clause 474 of the Bill seeks to provide for punishment for failure to comply
with clause 247 (1)(b)(ii).
Clause 475 of the Bill seeks to provide for punishment for the removal,
concealment, transfer or delivery of property to evade tax recovery.
Clause 476 of the Bill seeks to provide for punishment for failure to pay tax
to the credit of Central Government as required under Chapter XIX-B.
Clause 477 of the Bill seeks to provide for punishment for failure to pay
collected tax to the credit of Central Government.
Clause 478 of the Bill seeks to provide for punishment for wilful attempt to
evade tax, penalty, etc.
Clause 479 of the Bill seeks to provide for punishment for failure to furnish
return of income.
Clause 480 of the Bill seeks to provide for punishment for failure to furnish
return of income in search cases.
Clause 481 of the Bill seeks to provide for punishment for failure to produce
accounts and documents.
Clause 482 of the Bill seeks to provide for punishment for making of false
statement in verification, etc.
Clause 483 of the Bill seeks to provide for punishment for falsification of
books of account or document, etc., to evade tax.
Clause 484 of the Bill seeks to provide for punishment for abetment of false
return, etc.
Clause 485 of the Bill seeks to provide for punishment for second and
subsequent offences.
Clause 486 of the Bill seeks to provide for that punishment shall not be
imposed in certain cases for reasonable cause.
Clause 487 of the Bill seeks to provide for punishment for offences by
companies.
 595

Clause 488 of the Bill seeks to provide for punishment for Hindu undivided
family.
Clause 489 of the Bill seeks to provide for presumption as to assets, book
of accounts, etc., in certain cases.
Clause 490 of the Bill seeks to provide for presumption as to culpable
mental state.
Clause 491 of the Bill seeks to provide for previous sanction of the Commissioner
or Principal Commissioner or Joint Commissioner (Appeals) or Commissioner
(Appeals) or Principal Chief Commissioner to launch prosecution of certain offences.
Clause 492 of the Bill seeks to provide for certain offences to be non-
cognizable irrespective of the provisions contained in the Bharatiya Nagarik
Suraksha Sanhita, 2023.
Clause 493 of the Bill seeks to provide that entries in the records or other
documents in the custody of an income-tax authority shall be admitted in evidence
in any proceedings for the prosecution of any person for an offence.
Clause 494 of the Bill provides for punishment for contravention of
clause 258(3) relating to disclosure of information by public servants.
Clause 495 of the Bill seeks to provide for trial of offences under the Bill
by special Court.
Clause 496 of the Bill seeks to provide for trial of offences under the Bill
by special Court irrespective of the provisions of the Bharatiya Nagarik Suraksha
Sanhita, 2023.
Clause 497 of the Bill seeks to provide for trial of offences as summons case.
Clause 498 of the Bill seeks to provide for application of the Bharatiya
Nagarik Suraksha Sanhita, 2023 to proceedings before Special Court.
Clause 499 of the Bill seeks to provide that transfers of assets shall be void
as against any claim in respect of any tax payable by the assessee as a result of
the completion of the pending proceeding or otherwise.
Clause 500 of the Bill empowers the Assessing Officer to provisionally attach
any property belonging to the assessee during the pendency of an assessment,
reassessment or penalty proceeding, to protect the interests of the revenue.
Clause 501 of the Bill seeks to provide mode of service of a notice, summon,
requisition, order or any other communication.

Clause 502 of the Bill provides for manner of authentication of a notice or

other document shall be issued by any income-tax authority.

Clause 503 of the Bill seeks to provide for service of notice on partition of
a Hindu undivided family or on dissolution of a firm.
Clause 504 of the Bill seeks to provide for service of notice to be made in
the case of a discontinued business or profession.
Clause 505 of the Bill provides for submission of statement a non-resident,
having a liaison office in India set up as per the guidelines issued by the Reserve
Bank of India under the Foreign Exchange Management Act, 1999.
 596

Clause 506 of the Bill seeks to provide for furnishing information or documents
by an Indian concern in certain cases to the prescribed income-tax authority.
Clause 507 of the Bill seeks to provide for submission of statements by
persons carrying on the production of a cinematograph film or engaged in any
specified activity.
Clause 508 of the Bill seeks to provide for furnishing of statement by a
prescribed reporting financial institution in respect of a specified financial
transaction or reportable account to the prescribed income-tax authority.
Clause 509 of the Bill seeks to provide for furnishing of information in
respect of a transaction of a crypto-asset.
Clause 510 of the Bill seeks to provide that the prescribed income-tax
authority or the person authorised by such authority shall provide an annual
information statement in the prescribed manner.
Clause 511 of the Bill seeks to provide for furnishing of reports in respect
of international group.
Clause 512 of the Bill seeks to provide for publication of information in
respect of proceedings or prosecution in certain cases.
Clause 513 of the Bill seeks to provide that any assessee who is entitled or
required to attend before any income-tax authority or the Appellate Tribunal in
connection with any proceeding relating to valuation of any asset may be
represented by a registered valuer.
Clause 514 of the Bill seeks to provide for the procedure for registration of
valuers.
Clause 515 of the Bill seeks to provide that an assessee, entitled or required
to attend before an income-tax authority or Appellate Tribunal for any proceeding
under this Bill, may attend through an authorised representative.
Clause 516 of the Bill seeks to provide for rounding off of amount of total
income, or tax payable or payable or refundable.
Clause 517 of the Bill seeks to provide that a receipt shall be given for any
money paid or recovered under this Bill.
Clause 518 of the Bill seeks to provide that every person deducting, retaining,
or paying any tax in pursuance of this clause in respect of an income belonging to
another person shall be indemnified for the deduction, retention, or payment thereof.
Clause 519 of the Bill seeks to provide for the power to tender immunity
from prosecution to the Central Government.
Clause 520 of the Bill provides that no court inferior to that of a Judicial
Magistrate of First Class shall try any offence under this Bill.
Clause 521 of the Bill seeks to provide for the barring of the application of
the Probation of Offenders Act, 1958 and section 401 of the Bharatiya Nagarik
Suraksha Sanhita, 2023 to persons convicted under the Bill who are not under the
age of 18 years.
 597

Clause 522 of the Bill seeks to that no return of income, assessment, notice,
summons or other proceeding shall be invalid merely by reason of any mistake,
defect or omission.
Clause 523 of the Bill seeks to provide that where an assessee has appeared
in any proceeding or cooperated in any inquiry related to an assessment or
reassessment, it shall be deemed that any notice has been duly served upon him.
Clause 524 of the Bill provides for a rebuttable presumption with respect to
books of account, other documents, money, bullion, jewellery or other valuable
article or thing found in the possession or control of any person in the course of a
search or survey.
Clause 525 of the Bill seeks to provide for authorisation and assessment in
case of search or requisition.
Clause 526 of the Bill seeks to provide for bar of suits in civil courts in
relation to proceedings under the Bill.
Clause 527 of the Bill seeks to empower the Central Government to make
exemption, etc., in relation to participation in business of prospecting for,
extraction, etc., of mineral oils.
Clause 528 of the Bill seeks to empower the Central Government or Board
to condone delays in obtaining approval.
Clause 529 of the Bill seeks to specify for withdrawal of approval where
Central Government or Board have the power to grant any such approval.
Clause 530 of the Bill seeks to provide for effectivity for charge of tax in
case of pending legislative provision.
Clause 531 of the Bill seeks to provide for rescinding exemption in relation
to certain Union territories already granted.
Clause 532 of the Bill seeks to empower the Board, subject to the control of
the Central Government, to make Schemes.
Clause 533 of the Bill seeks to empower the Board, subject to the control of
the Central Government, to make rules.
Clause 534 of the Bill seeks to provide for laying of rules and certain
notifications before Parliament.
Clause 535 of the Bill seeks to empower the Central Government to remove
difficulties.
Clause 536 of the Bill seeks to provide for repeal of the Income-tax
Act, 1961 and saving of certain actions taken thereunder.
 598

FINANCIAL MEMORANDUM
This Bill seeks to repeal the Income-tax Act, 1961 and re-enact the proposed
legislation so that no additional expenditure of significance, apart from what is
being spent on the administration of the said Act, is contemplated by reason
merely of passing of this Bill.

598
 599

MEMORANDUM REGARDING DELEGATED LEGISLATION

The provisions of the Bill, inter alia, empower the Central Government to
issue notifications and the Board to make rules and issue guidelines for various
purposes as specified therein.
2. Sub-clause (4) of clause 8 of the Bill empowers the Board to issue
guidelines with the prior approval of the Central Government for removing any
difficulty arising in giving effect to the provisions of the said clause and
clause 67(10).
3. Sub-clause (15) of clause 166 of the Bill empowers the Board to issue
guidelines with the prior approval of the Central Government for removing any
difficulty arising in giving effect to the provisions of the sub-clauses (9) and (12) of
the said clause.
4. Sub-clause (2) of clause 205 of the Bill empowers the Board to issue
guidelines with the prior approval of the Central Government for removing any
difficulty arising in giving effect to the provisions of the item (b) or (c) or (d) of the
said sub-clause.
5. Sub-clause (8) of clause 267 of the Bill empowers the Board to issue
guidelines with the prior approval of the Central Government for removing any
difficulty arising in giving effect to the provisions of the said clause.
6. The Bill seeks to make provisions to lay the guidelines referred to in
paragraphs 2 to 5 above shall be laid, as soon as may be, after it is made, before each
House of Parliament.
7. Clause 533 of the Bill empowers the Board to make rules for carrying
out the purposes of the proposed legislation, subject to the control of the Central
Government. It, inter alia, seeks to empower the Board to make rules for (a) the
ascertainment and determination of any class of income; (b) the manner in which
and the procedure by which the income shall be arrived at in the case of (i) income
derived in part from agriculture and in part from business; (ii) persons residing
outside India; (iii) operations carried out in India by a non-resident; (iv) transactions
or activities of a non-resident; (v) an individual who is liable to be assessed under
clause 99(3) and (4); (c) the determination of the value of any perquisite chargeable
to tax under the proposed legislation in such manner and on such basis as appears
to the Board to be proper and reasonable; (d) the percentage on the written down
value which may be allowed as depreciation for buildings, machinery, plant or
furniture; (e) the matters specified in clause 62; (f) the conditions or limitations
subject to which any payment of rent made by an assessee shall be deducted under
clause 134; (g) the matters specified in Chapter XI; (h) the time within which any
person may apply for the allotment of a Permanent Account Number, the form and
the manner in which such application may be made and the particulars which such
application shall contain and the transactions with respect to which Permanent
Account Number shall be quoted on documents relating to such transactions under
clause 262; (i) the documents, statements, receipts, certificates or audited reports
which may not be furnished along with the return but shall be produced before the
Assessing Officer on demand under clause 263 (2)(a); (j) the class or classes of
persons who shall be required to furnish the return of income in electronic form; the
form and the manner of furnishing the said return in electronic form; documents,
statements, receipts, certificates or reports which shall not be furnished with the
return in electronic form and the computer resource or electronic record to which
such return may be transmitted under clause 263 (2)(a); (k) the cases, the nature and
value of assets, the limits and heads of expenditure and the outgoings, which are
required to be prescribed under clause 263(2)(b); (l) the form of the report of audit
or inventory valuation and the particulars which such report shall contain under
clause 268(5); (m) remuneration of Chairperson and members of the Approving
Panel under clause 274(21) and procedure and manner for constitution of, functioning

599
 600

and disposal of references by, the Approving Panel under clause 274(24); (n) the
form and manner in which the information relating to payment of any sum may be
furnished under clause 397(3)(d); (o) the authority to be prescribed for any of the
purposes of the proposed legislation; (p) the procedure for giving effect to any
agreement for the granting of relief in respect of double taxation or for the avoidance
of double taxation entered into by the Central Government under the proposed
legislation; (q) the procedure for granting of relief or deduction, of any income-tax
paid in any country or specified territory outside India, under clause 159 or 160,
against the income-tax payable under the proposed legislation; (r) the form and
manner in which any application, claim, return or information may be made or
furnished and the fees that may be levied in respect of any application or claim; (s)
the manner in which any document required to be filed under the proposed
legislation may be verified; (t) the procedure to be followed on applications for
refunds; (u) the procedure for calculating interest payable by assessees or by the
Government to assessees under the proposed legislation, including the rounding off
of periods when a fraction of a month is involved, and specifying the circumstances
under which and the extent to which petty amounts of interest payable by assessees
may be ignored; (v) the regulation of any matter for which provision is made in
clause 420; (w) the form and manner in which any appeal or cross-objection may be
filed under the proposed legislation, the fee payable in respect thereof and the
manner in which intimation referred to in clause 358 (3)(b) may be served; (x) the
circumstances, conditions and the manner in which, the Joint Commissioner
(Appeals) or the Commissioner (Appeals) may permit an appellant to produce
evidence which he did not produce or which he was not allowed to produce before
the Assessing Officer; (y) the form in which the statement under clause 507 shall be
delivered to the Assessing Officer; (z) the maintenance of a register of persons other
than legal practitioners or accountants practising before income-tax authorities and
for the constitution of and the procedure to be followed by the authority referred to
in clause 515(5); (za) the issue of certificate verifying the payment of tax by
assessees; and (zb) any other matter which is to be provided by rules under the
proposed legislation.
8. Sub-clause (3) of clause 535 of the Bill seeks to provide that every removal
of difficulty order made under the said clause shall be laid, as soon as may be, after
it is made, before each House of Parliament.
9. The conditions specified in the Note to Table:2.C of Schedule II, inter alia,
empowers the Board to issue guidelines with the prior approval of the Central
Government for removing any difficulty arising in giving effect to the provisions of
the said clause. The said clause further provides that the guidelines so issued shall
be laid, as soon as may be, after it is made, before each House of Parliament.
10. The matters in respect of which rules may be made are matters of
procedure and details and it is not practicable to provide for them in the Bill itself.
The delegation of legislative powers is, therefore, of a normal character.
 LOK SABHA

————

A
BILL
to consolidate and amend the law relating to income-tax.

————

(Smt. Nirmala Sitharaman, Minister of Finance and Corporate Affairs)