F Sec 201 - Assessee in default: If payer not deducted TDS or after deduction not paid to Govt.

then such person is treated as assessee in default and required to pay penalty u/s 221 and that
can be maximum 100% of TDS amount. AO shall pass order to treat assessee in default within 6
years [7 years upto 31/3/25] from end of FY in which payment/credit is made if payment made to
resident without TDS. If “*payment is made to NR without TDS” or TDS deducted but not paid to
Govt. then there is no time limit in law to treat assessee in default. [ * words in red colour removed
w.e.f. 1/4/2025]
Exception: Payer shall not be treated as assessee in default if payments made / credited to Payee
without TDS, if such Payee fulfils all the following 4 conditions:
ü He has furnished his ROI u/s 139;
ü Such sum has been taken into account by him, in such ROI;
ü He has paid the tax due on income declared by him in his ROI; and
ü Payer has furnished a Certificate in this regard from a CA in Form 26A.

F Sec 201(1A): Interest on Late deduction or Late payment of TDS

ü Late Deduction: Interest @ 1 % per month or part of the month on amount of TDS from
the date on which TDS was deductible till the date on which TDS actually deducted.
ü Late Payment: Interest @1.5% per month or part of the month on amount of TDS from the
date on which TDS actually deducted till the date on which such tax actually paid.

v Case Laws
ü Sun Outsourcing Solutions Private Limited [2018](T&AP): Interest u/s 201(1A) is automatically
attracted for failure to deduct TDS and does not require a proof of wilful default unlike Penalty u/s
221. Hence, if no deduction was made even on a bonafide belief that no TDS is applicable,
nevertheless the company is liable to pay interest u/s 201(1A).
ü Pioneer Overseas Corporation USA (India Branch) (2022) (SC): Merely raising the dispute before
any authority cannot be a ground not to levy the interest and/or waiver of interest u/s 220.
Otherwise, each and every assessee may raise a dispute and thereafter, may contend that since the
litigation was bona fide, no interest is leviable. It is required to be noted that u/s 220, the levy of
simple interest on non-payment of the tax at 1% p.m. is mandatory. (if assessee not paid demand
notice u/s 156 within 30 days then interest u/s 220 apply from 31st day)
 Tax Collection at Sources (TCS)
Section Nature of Transaction Rate Collector (Seller) Collectee (Buyer)
206C(1) Sale of Goods Any Person other than Any person other than:
Ø Tendu Leaves 5% Individual and HUF 1. Buyer who buys such
Ø Timber & other 2.5% [Ind/HUF required to goods for his
personal
forest products collect TCS, if last
consumption;
Ø Alcoholic liquor for 1% year T/O > ` 1 Cr in
2. Public sector Co;
human consumption case of business or G/R 3. CG, SG, Embassy,
Ø Scrap 1% > ` 50 Lakhs in case of High comm., legation,
Ø Minerals being Coal, 1% profession] consulate, trade
Lignite, Iron ore representation and
clubs.

Additional Points
1. No TCS if resident buyer furnishes a declaration to the seller that "goods" are to be utilized in
manufacturing/production of any article or for the purpose of generation of power. If buyer T/o
of last year more than ` 10 crores then Buyer required to deduct TDS u/s 194Q.
2. Scrap means waste from the manufacture or mechanical working of materials & which is definitely
not usable as such because of breakage, cutting up, wear and other reasons.
3. Priya Blue Industries (P) Ltd (2016) (Guj): In case of an assessee engaged in ship breaking activity,
certain items/products are finished products obtained from such activity which are usable as such
and hence, are not ‘waste and scrap’ though commercially known as scrap. Hence no TCS u/s 206C.

Section Nature of Transaction Rate Collector (Licensor) Collectee (Licensee)

206C(1C) Leasing or licensing or Same as section Any person other than
transferring any right or 2% 206C(1) public sector company
interest in any-
ü Parking lot or
ü Toll plaza or
ü Mine or quarry
for the purpose of business
Note: For the purpose of this section “mining and quarrying” shall not include mining and quarrying
of “mineral oil” includes petroleum and natural gas.
 Notes:
1. Loss can be set-off even if return filed after due date.
2. House property losses & unabsorbed depreciation can be Carry Forward even if return late filed.
3. The condition stipulated/ enumerated in sec. 80 applies only for the year in which the loss was
sustained/incurred. It does not apply to the ROI of the year in which carry forward is claimed.
4. Govind Nagar Sugar Ltd. (2011) (Delhi): Unabsorbed depreciation will be allowed to be c/f to
subsequent year even though the ROI of the current AY was not filed within the due date u/s 139(1).
5. As per CBDT Circular, Loss can be c/f even if ROI filed after due date and delay in filing of loss
return in case of genuine hardship can be condoned by:
v Monetary limits w.e.f. 1.6.2023 vide Circular No. 7/2023: New Circular 11/2024 w.e.f. 1/10/24
Authority Return Losses Return Losses
CIT/ PCIT upto ` 50 lakhs upto ` 1 Crore
CCIT > ` 50 lakhs upto ` 2 Crores > ` 1 Crores upto ` 3 Crores
PCCIT > ` 2 Crores upto ` 3 Crores > ` 3 Crores
CBDT > ` 3 Crores -
6. Condonation appl’n can be made within 6 years from end of AY [5 years for appln made on or after
1/10/24]. IT Authority will dispose appl’n within 6 month from end of the month in which appl’n is
received.
Sec 139(4): Belated Return
If Assessee fails to File return within due date then he can file belated return with in following
time limit:
ü Before the three months prior to end the of the relevant AY ( 31st Dec. 25 for AY 25-26)
OR
ü Before completion of Assessment
Whichever is earlier
v Consequences of belated return
Ä No carry forward of specified loss as per sec 80.
Ä No deduction of certain Income u/c VI-A (80-IA to 80RRB) and u/s 10AA as per 80AC.
Ä Interest u/s 234A i.e. 1% pm or part of the month.
Ä Late filing fees u/s 234F i.e. ` 5,000/1000.
Ä Interest on refund u/s 244A calculated from the date of filing of ROI and not from 1st April of
AY.

Sec 139(5): Revised Return

Any person filed return u/s 139(1) or 139(3) or 139(4), if discover any omission or wrong statement
in such ROI Filed earlier, then such person can file revised return within following time limit ;-
ü Before the three months prior to end the of the relevant AY ( 31st Dec. 25 for AY 25-26)
 Sec 268A: Special provision for appeal by Dept
1. This section empowers CBDT to fix monetary limit to regulate appeal by Dept. in order to avoid
litigation in small cases.
2. As per notification, the dept can file appeal only in the Tax effect is more than following amount:
S.No. Appeals in IT matters Monetary Limit Revised limit w.e.f. 17/09/24
1. Before ITAT ` 50,00,000 ` 60,00,000
2. Before HC ` 1,00,00,000 ` 2,00,00,000
3. Before SC ` 2,00,00,000 ` 5,00,00,000

3. If Dept. has not filed appeal on a particular issue in case of a particular assessee in a particular
year, then it shall not stop the dept from filing appeal on the same issue.
(a) in case of same Assessee in another year.
(b) in case of another assessee in any year.
4. The assessee cannot contend that the dept has agreed on a particular issue by not filing appeal
on such issue.

Case Laws
Ø Genpact India Pvt. Ltd. [2019](SC): Assessee company bought back shares but not paid taxes u/s
115QA. AO passed order u/s 143(3) and charged tax @20% u/s 115QA. Assessee directly filed
writ to HC. SC held that any dispute on the determination of Buy back tax u/s 115QA would fall
within the ambit of “an order against which, the assessee denies his liability to be assessed under
this Act”. Hence, an appeal u/s 246A to CIT(A) against such order passed would also be
maintainable. The company cannot directly file writ.

Ø Pruthvi Brokers & Shareholders (2012) (Bom.): Assessee can make an additional/new claim before
an appellate authority, which was not claimed by the assessee in the return of income, otherwise
than by way of filing a revised return of income.

Ø Ritha Sabapathy [2019] (Mad): The ITAT cannot dismiss an appeal, without deciding the case on
its merits, solely on the ground that the assessee had not appeared on the appointed date of
hearing. ITAT should not shirk its responsibility to decide a case on its merits. Cryptic orders,
not touching the merits of the case, would not give rise to any substantial question of law for
consideration by the High Court u/s 260A.

Ø Earnest Exports Ltd. (2010) (Bom.)/Lachman Dass Bhatia Hingwala (P) Ltd. (2011) (Delhi): ITAT
does not have the power to review or re-appreciate the correctness of its earlier decision u/s
254(2). It only has the power to rectify an apparent mistake. While exercising the power of
2. “Investment division of offshore banking unit (OBU)" means an investment division of a banking
unit of a NR located in an IFSC, as referred in sec 80LA(1A) and which has commenced its
operations on or before the 31st March, 2025.
10(4E) Any income accrued as a result of— Non Resident
(i) transfer of non-deliverable forward contracts or offshore derivative
instruments or over-the-counter derivatives; or
(ii) distribution of income on offshore derivative instruments,
entered into with OBU of IFSC.
(i) "A non-deliverable forward contract" shall mean a contract for the difference between an exchange rate agreed
before and the actual spot rate at maturity, with the spot rate being taken as the domestic rate or a market
determined rate and such contract being settled with a single payment in a foreign currency.
(ii) Offshore derivative instrument shall have same meaning as assigned to it in SEBI Foreign Portfolio Investor Reg.
(iii) over-the-counter derivatives" shall mean a derivative contract that is not traded on an exchange but instead is
privately negotiated between a purchaser and a seller.
10(4F) Royalty or interest, on account of lease of an aircraft or ship in a PY, paid by Non-
a unit of an IFSC, if the unit has commenced its operations on or before the Resident
31st March, 2025.
"aircraft" means an aircraft or a helicopter, or an engine of an aircraft or a helicopter,
or any part there of ship" means a ship or an ocean vessel, engine of a ship or ocean
vessel, or any part thereof
10(4G) Any income received from,— Non-
(i) Portfolio of securities or financial products or funds, managed or Resident
administered by any portfolio manager on behalf of such NR; or
(ii) Such activity carried out by such person, as may be notified by CG, in
an account maintained with OBU in IFSC, to the extent such income
accrues or arises outside India and not deemed to accrue or arise in India.
10(4H) Capital gains arising from transfer of equity shares of domestic company Non-
(Unit of an IFSC), engaged primarily in the business of lease of an aircraft Resident or
which has commenced operations upto 31/03/26. Unit of IFSC
Provided that this clause shall apply for CG from transfer of equity shares Engaged in
of such domestic company in a PY relevant to AY falling within the— the business
(a) period of 10 AY’s beginning with AY relevant to the PY in which the of leasing of
domestic company has commenced operations; or an Aircraft
(b) period of 10 AY’s beginning with AY commencing on 01/04/24, where
the period referred to in clause (a) ends before 01/04/34.
E.g. - If dom. company commences operation on 06/06/22, the first 10 AY’s will
be 23-24 to 32-33 (in other words, this period ends before 01/04/34).
Therefore, CG exemption will be available if CG arises during 10 AY’s beginning
with the AY 24-25. Conversely, if the aforesaid dom. Co. commences operations
on 01/01/25, 10 AY’s [for exemption u/s 10(4H)] will be 25-26 to 34-35.
10(34B) Dividend from a company being unit of IFSC primarily engaged in the Unit of IFSC
business of leasing of Aircraft. Engaged in the
business of
leasing of an
Aircraft
 10(15)(ix) Interest payable by a unit located in an IFSC in respect of monies borrowed Non-Resident
by it on or after the 01/09/ 2019
10(15B) Any income from lease rentals of cruise ships received from a foreign Foreign
company which operates cruise ship in India [pay tax as per section 44BBC] Company
10(6)(ii) Remuneration received by Foreign Diplomats/ Consulate and their staff Individual
Conditions: (a) The remuneration received by our corresponding Govt. (not being a
official's resident in such foreign countries should be exempt. citizen of
(b) The above-mentioned officers should be the subjects of the respective India)
countries and should not be engaged in any other business or profession or
employment in India.
10(6)(vi) Remuneration received as employee of a foreign enterprise for services Individual –
rendered by him during his stay in India, if: Salaried
a) Foreign enterprise is not engaged in any trade or business in India; Employee
b) His stay in India does not exceed period of 90 days in such PY; and (not being a
c) Such remuneration is not liable to deducted from the income of employer citizen of
chargeable under this Act India)
10(6)(viii) Salary received by or due for services rendered in connection with his Individual (NR
employment on a foreign ship if his total stay in India does not exceed 90 who is not a
days in the PY. citizen of
India)

10(48) Income received in India in Indian currency on account of sale Foreign company on account of
of Crude oil. Foreign company and agreement should be sale of crude oil.
notified by the CG in national interest. It should not be engaged in
any other activity in India.
10(48A) Income accruing or arsing on account of storage of crude oil Foreign company on account of
in a facility in India and sale of crude oil therefrom to any storage of crude oil in a facility
person resident in India. Foreign company and agreement in India and sale of
should be notified by the CG in national interest. crude oil there from.
10(48B) Income from sale of leftover stock of crude oil from facility Foreign company from sale of
in India after the expiry or termination of agreement leftover stock of crude oil
referred u/s 10(48A). from the facility in India.
10(48C) Income from arrangement for replenishment of crude oil Indian Strategic Petroleum
stored in its storage facility in pursuance of directions of the Reserves Limited, being a
CG in this behalf. Provided that this clause shall not apply to wholly owned subsidiary of the
an arrangement, if the crude oil is not replenished in the Oil Industry Development
storage facility within 3 years from the end of the FY in which Board under the Ministry of
the crude oil was removed from storage facility for the first Petroleum and Natural Gas.
time.

Ø Sec 10(23FE): Exemption of Income of specified person from Investment in India

F Incomes: dividend, interest, any sum referred u/s 56(2)(xii) or LTCG from an investment made in
India, in the form of debt/share capital/unit, if the investment—
(i) is made between 1st April, 2020 to 31st March, 2025 &
(ii) is held for at least three years.
 Ø Sec 115ACA: Tax on income/CG from GDRs purchased in foreign currency
Income received by resident employees of an Indian company or its subsidiary engaged in specified
industry & GDR issued as per ESOP'S
LTCG : 10% Tax [Tax on LTCG @ 12.5% if asset transfer on or after 23/07/24]
Dividend : 10% Tax
Notes:
1. Specified industry means IT software/service, entertainment service, pharmaceutical industry,
biotechnology industry & any other may be notified.
2. "GDR" means any instrument in the form of a depository receipt or certificate created by the
Overseas Depository Bank outside India or in an IFSC and issued to investors against the issue of,—
(i) Ordinary shares of company listed on a RSE 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 listed and traded on any IFSC.
3. This section is applicable to Resident person. We have included in this topic is only to maintain
sequencing of sections.

Ø Sec 115AD: Capital Gain & Interest/dividend on Security of FII /Specified fund
Income received by Foreign Institutional Investors (FII) or specified fund on securities (other than
units of UTI/MF).

LTCG STCG Interest/Dividend STCG 111A

10% Tax 30% Tax FII – 20% Specified Fund – 10% 15% Tax
[@12.5% if asset [@20% if asset
transfer on or after transfer on or
23/07/24 & 112A apply] after 23/07/24]

Notes:
1. In case of LTCG u/s 112A, tax @10%/12.5% on income > ₹ 1.25 lakh. Other LTCG always 10%.
2. Higher Surcharge @ 25% and 37% not applicable in case of above dividend & Capital Gain (STCG &
LTCG). It means maximum surcharge rate on dividend & above capital gain is 15% in case of AOP/BOI.
3. In case of specified fund, the provision of this section shall apply only to the extent of income that
is attributable to units held by NR (not being a PE of a NR in India).
4. Specified Fund means same as assign in sec. 10(4D).
5. In case of specified fund is investment division of an OBU, the provisions of this section shall apply
only to the extent of income that is attributable to the investment division of such OBU.
 Chapter 1: Basics, Tax Rates AY 25-26 & Alternate Taxation Regime
Answer
Mr. Devam PY 24-25 AY 25-26
Computation of Total Income & Tax Liability
Particular Normal Provisions Section 115BAC
` ` ` `
Basic Salary 40,00,000 40,00,000
HRA 90,000 90,000
Less: Exempt u/s 10(13A) 60,000 30,000 N/A 90,000
LTC 1,95,000 1,95,000
Less: Exempt u/s 10(5) 1,80,000 15,000 N/A 1,95,000
NPS contribution by BB Pvt. Ltd. 4,80,000 4,80,000
Gross Salary 45,25,000 47,65,000
Deduction u/s 16
(i) Professional Tax (2,000) N/A
(ii) Standard Deduction (50,000) (75,000)
Net Salary 44,73,000 46,90,000
Income from House Property
Self-Occupied Property – A (1,05,000) N/A
Let-out Property- B 60,000
Let-out Property- C (80,000) (20,000) (20,000) Set-off &
carry
forward not
allowed
43,48,000 46,90,000
Income from other sources
SB Interest of Minor Son 800 800
Less: Exempt u/s 10(32) 800 - N/A 800
SB Interest of Minor Daughter 2000 2,000
Less: Exempt u/s 10(32) 1500 500 N/A 2,000
SB Interest of Devam 28,000 28,000
Interest on PPF 55,000 55,000
Less: Exempt u/s 10(11) 55,000 - 55,000 -
Gross Total Income 43,76,500 47,20,800
Less: Deductions u/c VI-A
Sec. 80C: PPF 20,000 N/A
Sec. 80CCD(1) EE cont. to NPS 3,50,000 N/A
3,70,000

CA Bhanwar Borana
3
Chapter 31: Non-Resident & NRI Taxation
(iv) Business Income of ` 8,00,000 from a unit established at Mumbai.
(v) Income by way of royalty (other than referred to in section 44DA) amounting to ` 10,00,000,
received from Z Ltd., an Indian company, in pursuance of an agreement approved by
Central Government. As per DTTA between the two countries, such royalty is taxable
@22%.
With brief reasons for the treatment of the above incomes, you are required to compute the tax
liability of Cherry Ltd. for the Assessment Year 2025-26.
Answer
Computation of total income and tax liability of Cherry Ltd., a non-resident German company, for the
A.Y. 2025-26
Particulars `
Business Income from a unit established at Mumbai 8,00,000
Income from other sources
- Dividend income from XY Ltd. an Indian company 12,50,000
- Fees for technical services [would be equivalent to the amount of debentures of ` 20,00,000
20,00,000 received from an Indian company, issued in consideration of providing
technical knowhow
- Interest on Debentures [` 20,00,000 x 8% x 6/12] 80,000
- Dividend on Global Depository Receipts (GDRs) of Y Ltd. an Indian company, issued 6,13,839
under a scheme of Central Government against the initial issue of Y Ltd. and purchased
in foreign currency by Cherry Ltd. [` 5,50,000 x 100/89.6, since tax would have been
deducted at source @ 10.4%]
- Royalty income received from Z Ltd. an Indian company in pursuance of an agreement
approved by Central Government [`10,00,000 x 100/79.2, since tax would have been
deducted at source @ 20.8%] 12,62,626
Gross Total Income/Total income 60,06,465
Computation of tax liability
Dividend income of ` 12,50,000, taxable @20% u/s 115A 2,50,000
Dividend on GDRs of ` 6,13,839, taxable @10% u/s 115AC 61,384
Royalty income of ` 12,62,626, taxable @20% u/s 115A, since it is in pursuance of an 2,52,525
agreement approved by the Central Government
FTS of ` 20,00,000, taxable @35%, since it is not in pursuance of an agreement approved 7,00,000
by the Central Government
Interest on debentures of ` 80,000, taxable @35%, since debt is incurred in Indian currency, 28,000
it is not eligible for concessional rate of 20% u/s 115A
Business income of `8,00,000 [taxable @35%] 2,80,000
15,71,909
Add: Health and education cess@4% 62,876
Tax liability2 16,34,785
Tax liability (rounded off) 16,34,790

2 TDS on dividend has to be deducted to arrive at the net tax payable. The question, however, asks only for tax liability.
CA Bhanwar Borana
472
Chapter 31: Non-Resident & NRI Taxation
Particulars `
Tax@20% on Investment income of `25,00,000 5,00,000
Tax@10% on long-term capital gains = 10% of `24,00,000 2,40,000
Tax@20% on STT paid short-term capital gains on sale of listed equity shares of 1,60,000
Company A = 20% of `8,00,000
Tax@30% on short-term capital gains on sale of listed equity shares of Company B on 1,32,000
which STT is not paid = 30% of `4,40,000
10,32,000
Add: HEC @ 4% 41,280
Tax Liability 10,73,280
Note-The computation of total income and tax liability of an FII, whose in- come comprises solely of
investment income and capital gains on sale of securities is governed by the provisions of section 115AD, as
per which
• No deduction is allowable in respect of expenditure to earn investment income and
• Benefit of indexation is not allowable in respect of long-term capital gains.
The rates at which tax is to be calculated in respect of investment income and capital gains are also provided
in section 115AD.
Question 34
[Special Tax Rate - FII – RTP NOV 2019]
Neptune Inc, a notified Foreign Institutional Investor (FII), derived the following incomes for the
financial year 2024-25:-
(1) Interest received on investment in Rupee Denominated Bonds of ABC Ltd., an Indian
company (investment was made in the F.Y.2019-20) - `8,50,000
(2) Interest on securities – `17,32,000 (Expenses of `26,000 has been incurred to earn such
income)
(3) Income from sale of securities and shares:
(i) Bonds of Jupiter Ltd.
[Date of purchase 5 May 2021; Date of sale 7 March 2025]
Sale proceeds: `47,00,000
Cost of purchase: `32,00,000
(ii) Listed Shares of Earth Ltd.
[Date of purchase – 2 May, 2024; Date of sale – 9 February, 2025]
Sale Consideration `12,40,000
Purchase cost `7,80,000
[STT paid both at the time of purchase and sale]
(iii) Unlisted equity shares of Mars Ltd.
[Date of purchase – 1 July, 2024; Date of sale – 7 March, 2025]
Sale Consideration `8,40,000
Purchase cost `3,72,000
Answer
Compute the total income and tax liability of the FII, Neptune Inc., for the A.Y. 2025-26, assuming that no
other income is derived by Neptune Inc. during the F.Y.2024-25.
Computation of total income of Neptune Inc., a notified FII, for A.Y.2025-26
Particulars ` `

CA Bhanwar Borana
476
 Chapter 31: Non-Resident & NRI Taxation
Particulars ` `
Interest on Rupee Denominated Bonds 8,50,000
Interest on securities [No deduction is allowable in respect of expenses 17,32,000 25,82,000
incurred in respect thereof]

Long-term capital gains on sale of bonds of Jupiter Ltd.

Sale consideration
Less: Cost of acquisition 47,00,000
[Benefit of indexation is not allowable] 32,00,000 15,00,000
Short-term capital gains on sale of STT paid equity shares of Earth Ltd.
Sale consideration 12,40,000
Less: Cost of acquisition 7,80,000 4,60,000
Short-term capital gains on sale on unlisted equity shares of Mars Ltd.
Sale consideration 8,40,000
Less: Cost of acquisition 3,72,000 4,68,000
Total Income 50,10,000
Computation of tax liability of Neptune Inc. for A.Y.2025-26
Particulars `
Tax@20% on interest on securities of `25,82,000 =20% x `25,82,000 5,16,400
Tax@10% on LTCG on sale of bonds of Jupiter Ltd. = 10% x `15,00,000 1,50,000
Tax@20% on STCG on sale of listed equity shares of Earth Ltd., in respect of which STT
has been paid = 20% of `4,60,000 92,000
Tax@30% on short-term capital gains on sale of unlisted equity shares of Mars Ltd. = 30%
of `4,68,000 1,40,400
8,98,800
Add: HEC@4% 35,952
Tax Liability 9,34,752
Tax Liability (rounded off) 9,34,750

Question 35
[Sec 115BBA – SM Q.]
Smith, a foreign national and a cricketer came to India as a member of Australian cricket team in
the year ended 31st March, 2025. He received `5 lakhs for participation in matches in India. He
also received `1 lakh for an advertisement of a product on TV. He contributed articles in a
newspaper for which he received `10,000. When he stayed in India, he also won a prize of `10,000
from horse racing in Mumbai. He has no other income in India during the year. Assume assessee
opt out from section 115BAC.
(i) Compute tax liability of Smith for Assessment Year 2025-26.
(ii) Are the income specified above subject to deduction of tax at source?
(iii) Is he liable to file his return of income for Assessment Year 2025-26?
(iv) What would have been his tax liability, had he been a match referee instead of a cricketer?

CA Bhanwar Borana
477