1.3 CH. I - PRELIMINARY S. 2(1B)

or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or

(B) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette¹¹.]

¹²[¹³[Explanation 1.]—For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section.]

¹⁴[Explanation 2.—For the removal of doubts, it is hereby declared that income derived from any building or land referred to in subclause (c) arising from the use of such building or land for any purpose (including letting for residential purpose or for the purpose of any business or profession) other than agriculture falling under subclause (a) or sub-clause (b) shall not be agricultural income;]

The following Explanation 3 shall be inserted after Explanation 2 in clause (1A) of section 2 by the Finance Act, 2008, w.e.f. 1-4-2009 :

Explanation 3.—For the purposes of this clause, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income;

¹⁵[¹⁶[(1B)] “amalgamation”, in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that—

(i)

all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation ;

(ii)

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 ;

1. For specified urban areas, refer Taxmann’s Direct Taxes Circulars.
2. Inserted by the Finance Act, 1989, w.r.e.f. 1-4-1970.
3. Explanation renumbered as Explanation 1 by the Finance Act, 2000, w.e.f. 1-4-2001.
4. Inserted, ibid.
5. Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
6. Renumbered as clause (1B) by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

S. 2(7) I.T. ACT, 1961

(iii) shareholders holding not less than ¹⁷[three-fourths] in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation,

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 ;]

¹⁸[(1C) “Additional Commissioner” means a person appointed to be an Additional Commissioner of Income-tax under sub-section (1) of section 117;

(1D) “Additional Director” means a person appointed to be an Additional Director of Income-tax under sub-section (1) of section 117 ;]

(2)

“annual value”, in relation to any property, means its annual value as determined under section 23 ;

(3)

¹⁹[* * *]

(4)

“Appellate Tribunal” means the Appellate Tribunal constituted under section 252 ;

(5)

“approved gratuity fund” means a gratuity fund which has been and continues to be approved by the ²⁰[Chief Commissioner or Commissioner] in accordance with the rules contained in Part C of the Fourth Schedule ;

(6)

“approved superannuation fund” means a superannuation fund or any part of a superannuation fund which has been and continues to be approved by the ²⁰[Chief Commissioner or Commissioner] in accordance with the rules contained in Part B of the Fourth Schedule ;

²¹(7) “assessee”²² means a person by whom ²³[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 for the assessment of his income²⁴[or assessment of fringe benefits] or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person ;

Substituted for “nine-tenths” by the Finance Act, 1999, w.e.f. 1-4-2000.Clauses (1C) and (1D) inserted by the Finance Act, 2007, w.r.e.f. 1-6-1994.Clause (3) omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.Substituted for “Commissioner”, ibid.For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.For meaning of the term “assessee”, see Taxmann’s Direct Taxes Manual, Vol. 3.Substituted for “income-tax or super-tax” by the Finance Act, 1965, w.e.f. 1-4-1965.Inserted by the Finance Act, 2005, w.e.f. 1-4-2006.

The following clause (15) shall be substituted for clause (15) of section 2 by the Finance Act, 2008, w.e.f. 1-4-2009 :

(15) “charitable purpose” includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility:

Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of 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;

⁵⁶[(15A) “Chief Commissioner” means a person appointed to be a Chief Commissioner of Income-tax under sub-section (1) of section 117 ;] ⁵⁷[⁵⁸[(15B)] “child”, in relation to an individual, includes a step-child and an adopted child of that individual ;] ⁵⁹[(16) “Commissioner” means a person appointed to be a Commissioner of Income-tax under sub-section (1) of section 117 ⁶⁰[* * *] ;] ⁶¹[(16A) “Commissioner (Appeals)” means a person appointed to be a Commissioner of Income-tax (Appeals) under sub-section (1) of section 117 ;] ⁶²[(17) “company” means—

(i)

any Indian company, or

(ii)

any body corporate incorporated by or under the laws of a country outside India, or

(iii) any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the

1. Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
2. See also Circular No. 395, dated 24-9-1984. For details, see Taxmann’s Master Guide to Income-tax Act.
3. For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.
4. For the meaning of terms/expression “charitable purpose”, “education” and “object of general public utility”, see Taxmann’s Direct Taxes Manual, Vol. 3.
5. “not involving the carrying on of any activity for profit” omitted by the Finance Act, 1983,

w.e.f. 1-4-1984.

1. Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
2. Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
3. Renumbered by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
4. Substituted by the Finance Act, 1970, w.e.f. 1-4-1970.
5. Words “, and includes a person appointed to be an Additional Commissioner of Income-tax under that sub-section” omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
6. Inserted by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978.
7. Substituted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971.

CH. I - PRELIMINARY S. 2(18)

Indian Income-tax Act, 1922 (11 of 1922), or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or

(iv) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company :

Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration ;]

(18) “company in which the public are substantially interested”—a company is said to be a company in which the public⁶³ are substantially interested—

⁶⁴[(a) if it is a company owned by the Government or the Reserve Bank of India or in which not less than forty per cent of the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a corporation owned by that bank ; or]

⁶⁵[(aa) if it is a company which is registered under section 25 of the Companies Act, 1956 (1 of 1956)⁶⁶ ; or

(ab) if it is a company having no share capital and if, having regard to its objects, the nature and composition of its membership and other relevant considerations, it is declared by order of the Board to be a company in which the public are substantially interested :

Provided that such company shall be deemed to be a company in which the public are substantially interested only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration ; or]

⁶⁷[(ac) if it is a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under section 620A⁶⁸ of the Companies Act, 1956 (1 of 1956), to be a Nidhi or Mutual Benefit Society ; or]

⁶⁹[(ad) if it is a company, wherein 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 fifty per cent of the voting power have been allotted unconditionally to, or

For the meaning of the term “public”, see Taxmann’s Direct Taxes Manual, Vol. 3.Substituted by the Finance Act, 1964, w.e.f. 1-4-1964.Inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971.For text of section 25 of the Companies Act, 1956, see Appendix.Inserted by the Finance Act, 1985, w.r.e.f. 1-4-1984.For text of section 620A of the Companies Act, 1956, and notified Nidhi(s) thereunder, see

Appendix.

Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

S. 2(19) I.T. ACT, 1961

acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies ;]

⁷⁰[(b) if it is a company which is not a ⁷¹private company as defined in the Companies Act, 1956 (1 of 1956), and the conditions specified either in item (A) or in item (B) are fulfilled, namely :—

(A) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder ;

⁷²[(B) shares in the company (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 fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by—

(a)

the Government, or

(b)

a corporation established by a Central, State or Provincial Act, or

(c)

any company to which this clause applies or any subsidiary company of such company ⁷³[if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year.]

Explanation.—In its application to an Indian company whose business consists 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, item (B) shall have effect as if for the words “not less than fifty per cent”, the words “not less than forty per cent” had been substituted ;]]

(19) “co-operative society” means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of cooperative societies ;

Substituted by the Finance Act, 1969, w.e.f. 1-4-1970. Earlier, clause (b) was amended firstby the Finance Act, 1965, w.e.f. 1-4-1965 and then by the Finance Act, 1966, w.e.f. 1-4-1966.Clause (iii) of section 3(1) of the Companies Act, 1956, defines “private company”. For textof section 3, see Appendix.Substituted by the Finance Act, 1983, w.e.f. 2-4-1983.Substituted for “where such subsidiary company fulfils the conditions laid down in clause

(b) of section 108” by the Finance Act, 1987, w.e.f. 1-4-1988.

1.31 CH. II - BASIS OF CHARGE S. 6

Explanation 2.—For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued⁴⁰ or arisen⁴⁰ or is deemed to have accrued⁴⁰ or arisen⁴⁰ to him shall not again be so included on the basis that it is received or deemed to be received by him in India.

⁴¹[Apportionment of income between spouses governed by Portuguese Civil Code.

5A. (1) Where the husband and wife are governed by the system of commu

nity of property (known under the Portuguese Civil Code of 1860 as “COMMUNIAO DOS BENS”) in force in the State of Goa and in the Union territories of Dadra and Nagar Haveli and Daman and Diu, the income of the husband and of the wife under any head of income shall not be assessed as that of such community of property (whether treated as an association of persons or a body of individuals), but such income of the husband and of the wife under each head of income (other than under the head “Salaries”) shall be apportioned equally between the husband and the wife and the income so apportioned shall be included separately in the total income of the husband and of the wife respectively, and the remaining provisions of this Act shall apply accordingly.

(2) Where the husband or, as the case may be, the wife governed by the aforesaid system of community of property has any income under the head “Salaries”, such income shall be included in the total income of the spouse who has actually earned it.]

Residence in India.

⁴²6. For the purposes of this Act,—

(1)

An individual is said to be resident in India in any previous year, if he—

(a)

is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or

(b)

⁴³[* * *]

(c)

having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.

⁴⁴[Explanation.—In the case of an individual,—

1. For the meaning of the terms/expressions “is received”, “deemed to be received”, “accrues or arises”, “accrued or arisen” and “deemed to have accrued or arisen”, see Taxmann’s Direct Taxes Manual, Vol. 3.
2. Inserted by the Finance Act, 1994, w.r.e.f. 1-4-1963.
3. For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.
4. Omitted by the Finance Act, 1982, w.e.f. 1-4-1983.
5. Substituted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990. Original Explanation was inserted by the Finance Act, 1978, w.e.f. 1-4-1979 and later amended by the Finance Act, 1982, w.e.f. 1-4-1983.

Income deemed to accrue or arise in India.

⁵⁴9. ⁵⁵(1) The following incomes shall be deemed⁵⁶ to accrue or arise in India :— ⁵⁷(i) all income accruing or arising, whether directly or indirectly, through or from any business connection⁵⁸ in India, or through or from any property⁵⁸ in India, or through or from any asset or source of income

in India, ⁵⁹[* * *] or through the transfer of a capital asset situate in
India.
⁶⁰[Explanation 1].—For the purposes of this clause—

(a)

in the case of a business of which all the operations⁶¹ are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations⁶¹ carried out in India ;

(b)

in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export ;

⁶²[* * *] ⁶³[(c) in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India ;] ⁶⁴[(d) in the case of a non-resident, being—

(1)

an individual who is not a citizen of India ; or

(2)

a firm which does not have any partner who is a citizen of India or who is resident in India ; or

(3)

a company which does not have any shareholder who is a citizen of India or who is resident in India,

1. See also Circular No. 23, dated 23-7-1969, Circular No. 163, dated 29-5-1975, Circular No. 35(XXXIII-7) of 1956, dated 3-9-1956, Circular No. 4, dated 20-2-1969, Circular No. 382, dated 4-5-1984, and Circular No. 5/2004, dated 28-9-2004. For details, see Taxmann’s Master Guide to Income-tax Act.
2. For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.
3. For the meaning of the term “deemed”, see Taxmann’s Direct Taxes Manual, Vol. 3.
4. See rule 10 for manner of computation of income of non-residents in certain cases.
5. For the meaning of the terms/expressions “business connection” and “property”, see Taxmann’s Direct Taxes Manual, Vol. 3.
6. Words “or through or from any money lent at interest and brought into India in cash or in kind” omitted by the Finance Act, 1976, w.e.f. 1-6-1976.
7. Explanation renumbered as Explanation 1 by the Finance Act, 2003, w.e.f. 1-4-2004.
8. For the meaning of the term “operations”, see Taxmann’s Direct Taxes Manual, Vol. 3.
9. Proviso omitted by the Finance Act, 1964, w.e.f. 1-4-1964.
10. Inserted by the Finance Act, 1983, w.r.e.f. 1-4-1962.
11. Inserted by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1982.

1.41 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(5)

⁹⁰[***]

⁹¹[(4B) in the case of an individual, being a citizen of India or a person of Indian origin, who is a non-resident, any income from interest on such savings certificates issued ⁹²[before the 1st day of June, 2002] by the

Central Government as that Government may, by notification in the Official Gazette⁹³, specify in this behalf : Provided that the individual has subscribed to such certificates

in convertible foreign exchange remitted from a country outside India in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder.

Explanation.—For the purposes of this clause,—

(a)

a person shall be deemed to be of Indian origin if he, or either of his parents or any of his grandparents, was born in undivided India ;

(b)

“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 Regulation Act, 1973 (46 of 1973), and any rules made thereunder ;]

⁹⁴[(5) in the case of an individual, the value of any travel concession or assistance received by, or due to, him,—

(a)

from his employer for himself and his family, in connection with his proceeding on leave to any place in India ;

(b)

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,

subject to such conditions as may be prescribed⁹⁵ (including conditions as to number of journeys and the amount which shall be exempt

1. Omitted by the Finance Act, 2005, w.e.f. 1-4-2006. Prior to its omission, second proviso, as inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2006, read as under : “Provided further that nothing contained in this sub-clause shall apply to any income by way of interest paid or credited on or after the 1st day of April, 2005 to the Non-Resident (External) Account of such individual;”
2. Inserted by the Finance Act, 1982, w.e.f. 1-4-1983.
3. Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
4. For specified savings certificates, see Notification No. SO 653(E), dated 8-9-1982. For details, see Taxmann’s Master Guide to Income-tax Act.
5. Substituted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier clause (5) was amended by the Finance Act, 1975, w.e.f. 1-4-1975, the Taxation Laws (Amendment) Act, 1970, w.r.e.f. 1-4-1962 and the Direct Tax Laws (Amendment) Act, 1987,

w.e.f. 1-4-1989.

95. Rule 2B prescribes the conditions as well as quantum of exemption, which are as follows :

Conditions to be satisfied - Conditions to be satisfied are as under : (Contd. on p. 1.42)

S. 10(5) I.T. ACT, 1961

per head) having regard to the travel concession or assistance granted to the employees of the Central Government :

(Contd. from p. 1.41)

• The exemption is admissible on the value of any travel concession or assistance received by or due to an assessee from his employer or former employer, as the case may be, for himself and his family, in connection with his proceeding (i) on leave to any place in India, or (ii) to any place in India after the retirement from service, or (iii) to any place in India after the termination of his service.
• The exemption is admissible in respect of actual expenditure incurred for journeys
• performed, not only by the assessee but also by his family. For this purpose, ‘family’ means (i) the spouse and children of the assessee, and (ii) the parents, brothers and sisters of the assessee provided that they are wholly or mainly dependent on the assessee. With effect from 1-10-1997, the Central Civil Service Leave Travel Concession Rules have been amended in this respect.
• The exemption can be availed only in respect of two journeys performed in a block of four calendar years. For this purpose, the first four-year block commenced with the calendar year 1986. Thus, the four-year blocks will be 1986-89, 1990-93, 1994-97, 19982001, 2002-05 and so on.
• If an assessee has not availed travel concession or assistance during any of the specified four-year block periods on one of the two permitted occasions, or on both occasions, exemption can be claimed provided he avails the concession or assistance in the calendar year immediately following that block. This is popularly known as the ‘carry-over’ concession. In such cases, the exemption so availed will not be counted for purposes of regulating the future exemptions allowable for the succeeding block of four years. Quantum of exemption.—The basic rule is that the quantum of exemption will be limited to the actual expenses incurred on the journey. This pre-supposes that, without performing any journey and incurring expenses thereon, no exemption can be claimed. In addition to the above general limitation, the quantum of exemption will also be subject to the following maximum limits, depending upon the mode of transport used or available:

Restricted concession for children.—Under sub-rule (4) of rule 2B, inserted with effect from 1-10-1997, exemption on travel concession will not be admissible to more than two

(Contd. on p. 1.43)

1.43 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(5B)

Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.

Explanation.—For the purposes of this clause, “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; ]

(5A) ⁹⁶[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;] (5B) ⁹⁷[Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]

(Contd. from p. 1.42)

surviving children of an individual born after 1-10-1998. This restriction will not however apply in respect of children born before 1-10-1998, and also in cases where an individual, after getting one child, begets multiple children (twins/triplets/quadruplets, etc.) on the second occasion. The implications of this restriction will be as follows :

• In respect of journeys performed on or before 1-10-1998 exemption will be admissible in respect of all the surviving children of the individual.
• In respect of journeys performed after 1-10-1998 -the exemption will be admissible to all surviving children born before 1-10-1998; -in addition, the exemption will be admissible to only two surviving children born on

or after 1-10-1998. In reckoning this limit of two children, children born out of

multiple birth after the first child will be treated as ‘one child’ only. It may be noted that section 2(15B) of the Act defines a ‘child’ as includes ‘a step-child and an adopted child of the individual’. Hence the aforesaid restrictions will operate in respect of step-children and adopted children also provided they are born on or after 1-10-1998.

96. Prior to its omission, clause (5A), as inserted by the Taxation Laws (Amendment) Act, 1984,

w.r.e.f. 1-4-1982, read as under :

“(5A) in the case of an individual who is not a citizen of India and is a non-resident, who comes to India solely in connection with the shooting of a cinematograph film in India by the individual, firm or company referred to in clause (d) of the Explanation to clause (i) of sub-section (1) of section 9, any remuneration received by him for rendering any service in connection with such shooting ;”

97. Prior to its omission, clause (5B), as inserted by the Finance Act, 1993, w.e.f. 1-4-1994, and later on amended by the Finance Act, 1999, w.e.f. 1-4-1999, read as under : ‘(5B) in the case of an individual who renders services as a technician in the employment

(commencing from a date after the 31st day of March, 1993) of the Government or of a local authority or of any corporation set up under any special law or of any such institution or body established in India for carrying on scientific research as is approved for the purposes of this clause by the prescribed authority or in any business carried on in India and the individual was not resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India and the tax on his income for such services chargeable under the head “Salaries” is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956)], the tax so paid by the employer for a period not exceeding forty-eight months commencing from the date of his arrival in India :

(Contd. on p. 1.44)

S. 10(6) I.T. ACT, 1961

(6)

in the case of an individual who is not a citizen of India,—

(i)

⁹⁸[***] ⁹⁹[(ii) the remuneration received by him as an official, by whatever name called, of an embassy, high commission, legation, commission, consulate or the trade representation of a foreign State, or

as a member of the staff of any of these officials, for service in such capacity : Providedthat the remuneration received by him as trade commis

sioner or other official representative in India of the Government of a foreign State (not holding office as such in an honorary capacity), or as a member of the staff of any of those officials, shall be exempt only if the remuneration of the corresponding officials or, as the case may be, members of the staff, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country :

Provided further that such 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 ;]

(Contd. from p. 1.43)

Provided that the Central Government may, if it considers it necessary or expedient in the public interest so to do, waive the condition relating to non-residence in India as specified in this clause in the case of any individual who is employed in India for designing, erection or commissioning of machinery or plant or supervising activities connected with such designing, erection or commissioning. Explanation.—For the purposes of this clause, “technician” means a person having specialised knowledge and experience in—

(i)

constructional or manufacturing operations, or in mining or in the generation of electricity or any other form of power, or

(ii)

agriculture, animal husbandry, dairy farming, deep sea fishing or ship building, or

(iii) such other field as the Central Government may, having regard to availability of Indians having specialised knowledge and experience therein, the needs of the country and other relevant circumstances, by notification in the Official Gazette, specify,

who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised ;’

98. Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its omission, sub-clause (i), as substituted by the Taxation Laws (Amendment) Act, 1970, w.r.e.f. 1-4-1962 and amended by the Finance (No. 2) Act, 1977, w.r.e.f. 1-4-1972 and the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999, read as under :

“(i) subject to such conditions as the Central Government may prescribe, passage moneys or the value of any free or concessional passage received by or due to such individual—

(a) from his employer, for himself, his spouse and children, in connection with

his proceeding on home leave out of India ;(aa) [* * *]

(b) from his employer or former employer for himself, his spouse and children, in connection with his proceeding to his home country out of India after retirement from service in India or after the termination of such service ;”

99. Substituted for sub-clauses (ii) to (v) by the Finance Act, 1988, w.e.f. 1-4-1989.

1.45 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(6)

(iii) to (v)[Sub-clause (ii) substituted for sub-clauses (ii) to (v) by the Finance Act, 1988, w.e.f. 1-4-1989;]

(vi)

the remuneration received by him as an employee of a foreign enterprise for services rendered by him during his stay in India, provided the following conditions are fulfilled—

(a)

the foreign enterprise is not engaged in any trade or business in India ;

(b)

his stay in India does not exceed in the aggregate a period of ninety days in such previous year ; and

(c)

such remuneration is not liable to be deducted from the

income of the employer chargeable under this Act ; (via) ¹[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]

(vii) ²[Omitted by the Finance Act, 1993, w.e.f. 1-4-1993;] (viia) ³[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]

1. Prior to its omission, sub-clause (via), as inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975, read as under : “(via) the remuneration received by him as an employee of, or a consultant to, an
2. institution or association or a body established or formed outside India solely for philanthropic purposes, for services rendered by him in India in connection with such purposes ; provided that such institution or association or body and the purposes for which his services are rendered in India are approved by the Central Government ;”
1. Prior to omission, sub-clause (vii) was amended by the Finance Act, 1964, w.e.f. 1-4-1964, Finance Act, 1965, w.e.f. 1-4-1965 and Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
2. Prior to its omission, sub-clause (viia), as inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971 and later on amended by the Direct Taxes (Amendment) Act, 1974,

w.r.e.f. 1-4-1973, Finance Act, 1979, w.e.f. 1-6-1979, Finance Act, 1988, w.e.f. 1-4-1988, Finance Act, 1992, w.e.f. 1-6-1992 and Finance Act, 1993, w.e.f. 1-4-1993, read as under : ‘(viia) where such individual renders services as a technician in the employment of the

Government or of a local authority or of any corporation set up under any special law or of any such institution or body established in India for carrying on scientific research as is approved for the purposes of this sub-clause by the prescribed authority or in any business carried on in India and the individual was not resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India, the remuneration for such services due to or received by him, which is chargeable under the head “Salaries”, to the extent mentioned below, namely :—

(I)

where such services commence from a date after the 31st day of March, 1971 but before the 1st day of April, 1988,—

(A)

such remuneration due to or received by him during the period of twenty-four months commencing from the date of his arrival in India, in so far as such remuneration does not exceed an amount calculated at the rate of four thousand rupees per month, and where the tax on the excess, if any, of such remuneration for the period aforesaid over the amount so calculated is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956)], also the tax so paid by the employer ; and

S.

10(6) I.T. ACT, 1961

(Contd. on p. 1.46)

(viii) any income chargeable under the head “Salaries” received by or due to any such individual being a non-resident as remuneration for services rendered in connection with his employment on a foreign ship where his total stay in India does not exceed in the aggregate a period of ninety days in the previous year ;

(ix) ⁴[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999; ]

(Contd. from p. 1.45)

(B)

where he continues, with the approval of the Central Government obtained before the 1st day of October of the relevant assessment year, to remain in employment in India after the expiry of the period of twenty-four months aforesaid and the tax on his income chargeable under the head “Salaries” is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956)], the tax so paid by the employer for a period not exceeding twenty-four months next following the expiry of the first-mentioned twenty-four months ;

(II)

where such services commence from a date after the 31st day of March, 1988 but before the 1st day of April, 1993, and tax on his income chargeable under the head “Salaries” is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956)], the tax so paid by the employer for a period not exceeding forty-eight months commencing from the date of his arrival in India :

Provided that the Central Government may, if it considers it necessary or expedient in the public interest so to do, waive the condition relating to non-residence in India as specified in this sub-clause in the case of any individual who is employed in India for designing, erection or commissioning of machinery or plant or supervising activities connected with such designing, erection or commissioning. Explanation.—For the purposes of this sub-clause, “technician” means a person having specialised knowledge and experience in—

(i)

constructional or manufacturing operations, or in mining or in the generation of electricity or any other form of power, or

(ii)

agriculture, animal husbandry, dairy farming, deep sea fishing or ship building, or

(iii) such other field as the Central Government may, having regard to the availability of Indians having specialised knowledge and experience therein, the needs of the country and other relevant circumstances, by notification in the Official Gazette, specify,

who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised ;’

4. Prior to its omission, sub-clause (ix), as inserted by the Finance Act, 1964, w.e.f. 1-4-1964, read as under :

‘(ix) any income chargeable under the head “Salaries” received by or due to him during the thirty-six months commencing from the date of his arrival in India for service rendered as a professor or other teacher in a University or other educational institution, and where any such individual continues to remain in employment in India after the expiry of the thirty-six months aforesaid and the tax on his income chargeable under the head “Salaries” is paid by the University or other educational institution concerned to the Central Government, the tax so paid for a period not exceeding twenty-four months following the expiry of the thirty-six months aforesaid, provided in either case the following conditions are fulfilled, namely :—

(Contd. on p. 1.47)

1.47 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(6A)

(x) ⁵[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999; ] ⁶[(xi) the remuneration received by him as an employee of the Government of a foreign State during his stay in India in

connection with his training in any establishment or office of, or in any undertaking owned by,—

(i)

the Government ; or

(ii)

any company in which the entire paid-up share capital is held by the Central Government, or any State Government or Governments, or partly by the Central Government and partly by one or more State Governments ; or

(iii) any company which is a subsidiary of a company referred to in item (ii) ; or

(iv)

any corporation established by or under a Central, State or Provincial Act ; or

(v)

any society registered under the Societies Registration Act, 1860 (14 of 1860), or under any other corresponding law for the time being in force 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 ;]

⁷[(6A) where in the case of a foreign company deriving income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after

(Contd. from p. 1.46)

(i)

such individual was not resident in any of the four financial years immediately preceding the financial year in which he arrived in India ; and

(ii)

his contract of service is approved by the Central Government—

(a)

on or before the 1st day of October, 1964, in the case of a professor or other teacher whose service commenced before the 1st day of April, 1964 ;

(b)

before the commencement of his service or within one year of such commencement, in any other case ;’

5. Prior to its omission, sub-clause (x), as inserted by the Finance Act, 1964, w.e.f. 1-4-1964, read as under :

“(x) any sum due to or received by him, during the twenty-four months commencing from the date of his arrival in India, for undertaking any research work in India, provided the following conditions are fulfilled, namely :—

(a)

the research work is undertaken in connection with a research scheme approved in this behalf by the Central Government on or before the 1st day of October of the relevant assessment year ; and

(b)

such sum is payable or paid directly or indirectly by the Government of a foreign State or any institution or association or other body established outside India ;”

1. Inserted by the Finance Act, 1976, w.e.f. 1-4-1976.
2. Inserted by the Finance Act, 1983, w.e.f. 1-4-1984.

S. 10(6BB) I.T. ACT, 1961

the 31st day of March, 1976 ⁸[but before the 1st day of June, 2002] ⁹[and,—

(a)

where the agreement relates to a matter included in the industrial policy, for the time being in force, of the Government of India, such agreement is in accordance with that policy ; and

(b)

in any other case, the agreement is approved by the Central

Government,

the tax on such income is payable, under the terms of the agreement,

by Government or the Indian concern to the Central Government, the

tax so paid].

Explanation.—For the purposes of this clause ¹⁰[and clause (6B)],—

(a)

“fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 ;

(b)

“foreign company” shall have the same meaning as in section 80B ;

(c)

“royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;]

¹⁰[(6B) where in the case of a non-resident (not being a company) or of a foreign company deriving income (not being salary, royalty or fees for technical services) from Government or an Indian concern in pursuance of an agreement entered into ¹¹[before the 1st day of June, 2002] by the Central Government with the Government of a foreign State or an international organisation, the tax on such income is payable by Government or the Indian concern to the Central Government under the terms of that agreement or any other related agreement approved ¹¹[before that date] by the Central Government, the tax so paid ;]

¹²[(6BB) where in the case of the Government of a foreign State or a foreign enterprise deriving income from an Indian company engaged in the business of operation of aircraft, as a consideration of acquiring an aircraft or an aircraft engine (other than payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease under ¹³[an agreement entered into after the 31st day of March, 1997 but before the 1st day of April, 1999, or entered

1. Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
2. Substituted for “and approved by the Central Government, the tax on such income is payable, under the terms of such agreement, by Government or the Indian concern to the Central Government, the tax so paid” by the Finance Act, 1992, w.e.f. 1-6-1992.
3. Inserted by the Finance Act, 1988, w.e.f. 1-4-1988.
4. Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
5. Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.
6. Substituted for “an agreement entered after the 31st day of March, 1997 (but before the 1st day of April, 1999) and approved by the Central Government in this behalf” by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2006. Words “30th day of September, 2005” substituted for “31st day of March, 2005” by the Finance Act, 2005, w.e.f. 1-4-2006. Earlier the bracketed words were amended by the Finance Act, 1999, w.e.f. 1-4-2000.

1.49 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(8A)

into after the ¹⁴[31st day of March, ¹⁵[2007]] and approved by the Central Government in this behalf] and the tax on such income is payable by such Indian company under the terms of that agreement to the Central Government, the tax so paid.

Explanation.—For the purposes of this clause, the expression “foreign enterprise” means a person who is a non-resident;]

¹⁶[(6C) any income arising to such foreign company, as the Central Government may, by notification¹⁷ in the Official Gazette, specify in this behalf, by way of ¹⁸[royalty or]fees for technical services received in pursuance of an agreement entered into with that Government for providing services in or outside India in projects connected with security of India ;]

(7)

any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering service outside India ;

(8)

in the case of an individual who is assigned to duties in India in connection with any co-operative technical assistance programmes and projects in accordance with an agreement entered into by the Central Government and the Government of a foreign State (the terms whereof provide for the exemption given by this clause)—

(a)

the remuneration received by him directly or indirectly from the Government of that foreign State for such duties, and

(b)

any other income of such individual which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such individual is required to pay any income or social security tax to the Government of that foreign State ;

¹⁹[(8A) in the case of a consultant—

(a)

any remuneration or fee received by him or it, directly or indirectly, out of the funds made available to an international organisation [hereafter referred to in this clause and clause (8B) as the agency] under a technical assistance grant agreement between the agency and the Government of a foreign State ; and

(b)

any other income which accrues or arises to him or it outside India, and is not deemed to accrue or arise in India, in respect of which such consultant is required to pay any income or social security tax to the Government of the country of his or its origin.

1. Substituted for “30th day of September, 2005” by the Taxation Laws (Amendment) Act, 2005, w.e.f. 1-4-2006.
2. Substituted for “2006” by the Finance Act, 2006, w.e.f. 1-4-2007.
3. Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
4. For notified companies, see Taxmann’s Master Guide to Income-tax Act.
5. Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
6. Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

S. 10(9) I.T. ACT, 1961

Explanation.—In this clause, “consultant” means—

(i)

any individual, who is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India ; or

(ii)

any other person, being a non-resident,
engaged by the agency for rendering technical services in India in

connection with any technical assistance programme or project, provided the following conditions are fulfilled, namely :—

(1)

the technical assistance is in accordance with an agreement entered into by the Central Government and the agency ; and

(2)

the agreement relating to the engagement of the consultant is approved by the prescribed authority²⁰ for the purposes of this clause ;

(8B) in the case of an individual who is assigned to duties in India in connection with any technical assistance programme and project in accordance with an agreement entered into by the Central Government and the agency—

(a)

the remuneration received by him, directly or indirectly, for such duties from any consultant referred to in clause (8A) ; and

(b)

any other income of such individual which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such individual is required to pay any income or social security tax to the country of his origin, provided the following conditions are fulfilled, namely :—

(i)

the individual is an employee of the consultant referred to in clause (8A) and is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India ; and

(ii)

the contract of service of such individual is approved by the prescribed authority²⁰ before the commencement of his service ;]

(9)

the income of any member of the family of any such individual as is referred to in clause (8) ²¹[or clause (8A) or, as the case may be, clause (8B)] accompanying him to India, which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such member is required to pay any income or social security tax to the Government of that foreign State ²¹[or, as the case may be, country of origin of such member];

1. The prescribed authority under rule 16B is Additional Secretary, Department of Economic Affairs in Ministry of Finance, Government of India in concurrence with Member (Income-tax), CBDT.
2. Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

1.51 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(10)

²²[²³(10)²⁴(i) any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, or under any similar scheme applicable 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 by the said Rules) or to the members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services ;

(ii) any gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972), to the extent it does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of section 4²⁵ of that Act ;

(iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month’s salary for each year of completed service²⁶, ²⁷[calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit²⁸ as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government] :

Provided that where any gratuities referred to in this clause²⁹ are received by an employee from more than one employer in the same

1. Substituted by the Finance Act, 1974, w.e.f. 1-4-1975. Original clause was amended first by the Finance Act, 1972, w.e.f. 1-4-1973 and then by the Finance Act, 1974, with retrospective effect from 1-6-1972/1-4-1962.
2. See also Letter F. No. 1(179)-62/TPL, dated 13-12-1962 and Letter F. No. 194/6/73-IT (A-I), dated 19-6-1973. For details, see Taxmann’s Master Guide to Income-tax Act.
3. For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.
4. For text of sub-sections (2) and (3) of section 4 of the Payment of Gratuity Act, 1972, see

Appendix.

The limit laid down under section 4(3) of the Payment of Gratuity Act, 1972 [as amended by the Payment of Gratuity (Amendment) Act, 1998, w.r.e.f. 24-9-1997] is Rs. 3,50,000.

1. For the meaning of the expression “each year of completed service”, see Taxmann’s Direct Taxes Manual, Vol. 3.
2. Substituted for “calculated on the basis of the average salary for the three years immediately preceding the year in which the gratuity is paid, subject to a maximum of *thirty-six thousand rupees or twenty months’ salary so calculated, whichever is less” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. *Substituted for “thirty thousand rupees” by the Finance Act, 1983, w.r.e.f. 1-4-1982.
3. Rs. 3,50,000 has been specified as the limit in case of retirement, etc., on or after 24-9-1997 vide Notification No. 10772 [F. No. 200/77/97-IT(A-I)], dated 20-1-1999. For details, see Taxmann’s Master Guide to Income-tax Act.
4. For meaning of the expression “this clause”, see Taxmann’s Direct Taxes Manual, Vol. 3.

S. 10(10A) I.T. ACT, 1961

previous year, the aggregate amount exempt from income-tax under

this clause ³⁰[shall not exceed the limit so specified] :Provided further that where any such gratuity or gratuities was orwere received in any one or more earlier previous years also and thewhole or any part of the amount of such gratuity or gratuities was notincluded in the total income of the assessee of such previous year oryears, the amount exempt from income-tax under this clause ³⁰[shall
not exceed the limit so specified] as reduced by the amount or, as the
case may be, the aggregate amount not included in the total income
of any such previous year or years.

³¹[* * *]Explanation.—³²[In this clause, and in clause (10AA)], “salary” shallhave the meaning assigned to it in clause (h) of rule 2 of Part A of theFourth Schedule ;]

³³[³⁴(10A)³⁵(i) any payment in commutation of pension received under the Civil Pensions (Commutation) Rules of the Central Government or under any similar scheme applicable ³⁶[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 by the said Rules) or to the members of the all-India services or to the members of the defence services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority] or a corporation established by a Central, State or Provincial Act ;

(ii)

any payment in commutation of pension received under any scheme of any other employer, to the extent it does not exceed—

(a)

in a case where the employee receives any gratuity, the commuted value of one-third of the pension which he is normally entitled to receive, and

(b)

in any other case, the commuted value of one-half of such pension,

1. Substituted for “shall not exceed *thirty-six thousand rupees” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. *Substituted for “thirty thousand rupees” by the Finance Act, 1983, w.r.e.f. 1-4-1982.
2. Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Original third and fourth provisos were inserted by the Finance Act, 1983, w.r.e.f. 1-4-1982.
3. Substituted for “In this clause” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
4. Inserted by the Finance (No. 2) Act, 1965, w.r.e.f. 1-4-1962.
5. See also Circular No. 286, dated 17-11-1980 and Circular No. 623, dated 6-1-1992. For details, see Taxmann’s Master Guide to Income-tax Act.
6. For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.
7. Substituted for “to the members of the Defence Services or to the employees of a State Government, a local authority” by the Finance Act, 1974, w.r.e.f. 1-4-1962.

1.53 CH. III -INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(10AA)

such commuted value being determined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality ;

³⁷[* * *]
³⁸[(iii) any payment in commutation of pension received from a fundunder clause (23AAB) ;]

³⁹[⁴⁰(10AA)(i) any payment received by an employee of the Central 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 ⁴¹retirement ⁴²[whether] on superannuation or otherwise ;

(ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement ⁴²[whether] on superannuation ⁴¹or otherwise as does not exceed ⁴³[ten] months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement ⁴²[whether] on superannuation or otherwise, ⁴⁴[subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit⁴⁵ applicable in this behalf to the employees of that Government] :

Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this sub-clause ⁴⁶[shall not exceed the limit so specified] :

Provided further that where any such payment or payments was or were received in any one or more earlier previous years also and the whole or any part of the amount of such payment or payments was

1. Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
2. Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
3. Inserted by the Finance Act, 1982, w.r.e.f. 1-4-1978.
4. For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.
5. For the meaning of the terms “retirement”, and “or otherwise” see Taxmann’s Direct Taxes Manual, Vol. 3.
6. Inserted by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1978.
7. Substituted for “eight” by the Finance Act, 1999, w.r.e.f. 1-4-1998. Earlier “eight” was substituted for “six” by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986.
8. Substituted for “or thirty thousand rupees, whichever is less” by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986.
9. Specified exemption limit applicable in relation to employees who retire, whether on superannuation or otherwise, after 1-4-1998 : Rs. 3,00,000 - Notification No. SO 588(E), dated 31-5-2002. For details, see Taxmann’s Master Guide to Income-tax Act.
10. Substituted for “shall not exceed thirty thousand rupees” by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986.

S. 10(10B) I.T. ACT, 1961

or were not included in the total income of the assessee of such
previous year or years, the amount exempt from income-tax under
this sub-clause ⁴⁷[shall not exceed the limit so specified], as reduced
by the amount or, as the case may be, the aggregate amount not
included in the total income of any such previous year or years.

⁴⁸[* * *]Explanation.—For the purposes of sub-clause (ii),—⁴⁹[* * *] the entitlement to earned leave of an employee shall not exceed

thirty days for every year of actual service rendered by him as an
employee of the employer from whose service he has retired ;
⁵⁰[* * *]

⁵¹[(10B) any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, ⁵²[at the time of his retrenchment :

Provided that the amount exempt under this clause shall not exceed—

(i) an amount calculated in accordance with the provisions of ⁵³clause (b) of section 25F of the Industrial Disputes Act, 1947 (14 of 1947) ; or

⁵⁴[(ii) such amount, not being less than fifty thousand rupees, as the Central Government may, by notification⁵⁵ in the Official Gazette, specify in this behalf,]

whichever is less :

1. Substituted for “shall not exceed thirty thousand rupees” by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986.
2. Third and fourth provisos omitted by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986. Prior to their omission, the third and fourth provisos were amended by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1978.
3. “(i)” omitted by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986.
4. Clause (ii) omitted, ibid.
5. Inserted by the Finance Act, 1975, w.e.f. 1-4-1976.
6. Substituted for the following by the Finance Act, 1985, w.e.f. 1-4-1986 : “at the time of his retrenchment, to the extent such compensation does not exceed—

(i)

an amount calculated in accordance with the provisions of clause (b) of section 25F of the Industrial Disputes Act, 1947 (14 of 1947) ; or

(ii)

twenty thousand rupees,
whichever is less.”

1. Clause (b) of section 25F of the Industrial Disputes Act, 1947, read as follows :
2. “(b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay for every completed year of continuous service or any part thereof in excess of six months ; and”
1. Substituted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
2. Maximum limit is Rs. 5,00,000 where retrenchment is on or after 1-1-1997 - Notification No. 10969 [F. No. 200/21/97-IT(A-I)], dated 25-6-1999.

1.55 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(10BC)

Provided further that the preceding proviso shall not apply in respect of any compensation received by a workman in accordance with any scheme which the Central Government may, having regard to the need for extending special protection to the workmen in the undertaking to which such scheme applies and other relevant circumstances, approve in this behalf.]

Explanation.—For the purposes of this clause—

(a)

compensation received by a workman at the time of the closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment ;

(b)

compensation received by a workman, at the time of the 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, shall be deemed to be compensation received at the time of his retrenchment if—

(i)

the service of the workman has been interrupted by such transfer ; or

(ii)

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

(iii) 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 ;

⁵⁶(c) the expressions “employer” and “workman” shall have the same meanings as in the Industrial Disputes Act, 1947 (14 of 1947);]

⁵⁷[(10BB) any payments made under the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 (21 of 1985), and any scheme framed thereunder except payment made to any assessee in connection with the Bhopal Gas Leak Disaster to the extent such assessee has been allowed a deduction under this Act on account of any loss or damage caused to him by such disaster ;]

⁵⁸[(10BC) any amount received or receivable from the Central Government or a State Government or a local authority by an individual or his legal heir by way of compensation on account of any disaster, except the amount received or receivable to the extent such individual or his

1. For text of clause (g) and clause (s) of section 2 of the Industrial Disputes Act, 1947, defining “employer” and “workman”, respectively, see Appendix.
2. Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.
3. Inserted by the Finance Act, 2007, w.r.e.f. 1-4-2005.

S. 10(10C) I.T. ACT, 1961

legal heir has been allowed a deduction under this Act on account of

any loss or damage caused by such disaster.Explanation.—For the purposes of this clause, the expression “disaster” shall have the meaning assigned to it under clause (d) of section 2⁵⁹ of the Disaster Management Act, 2005 (53 of 2005);]

⁶⁰[(10C) ⁶¹any amount received^{62 63}[or receivable] by an employee of—

(i)

a public sector company ; or

(ii)

any other company ; or

(iii) an authority established under a Central, State or Provincial Act ; or

(iv)

a local ⁶⁴[authority ; or]
⁶⁵[(v) a co-operative society ; or

(vi)

a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956) ; or

(vii) an Indian Institute of Technology within the meaning of clause

(g) of section 3⁶⁶ of the Institutes of Technology Act, 1961 (59 of 1961) ; or ⁶⁷[(viia) any State Government; or] ⁶⁸[(viib) the Central Government; or]

⁶⁹[(viic) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette⁷⁰, specify in this behalf; or]

(viii) such institute of management as the Central Government may, by notification⁷¹ in the Official Gazette, specify in this behalf,]

1. For the definition of term “disaster”, see Appendix.
2. Substituted by the Finance Act, 1993, w.e.f. 1-4-1993. Prior to substitution, clause (10C) was inserted by the Finance Act, 1987, w.e.f. 1-4-1987 and later substituted by the Finance Act, 1992, w.e.f. 1-4-1993.
3. See also Circular No. 640, dated 26-11-1992 and Circular F. No. 184/7/2003-ITAT, dated 4-3-2004. For details, see Taxmann’s Master Guide to Income-tax Act.
4. For the meaning of expression “amount received”, see Taxmann’s Direct Taxes Manual, Vol. 3.
5. Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
6. Substituted for “authority,” by the Finance Act, 1994, w.e.f. 1-4-1995.
7. Inserted, ibid.
1. Clause (g) of section 3 of the Institutes of Technology Act, 1961, defines “Institute” as follows : ‘(g) “Institute” means any of the Institutions mentioned in section 2 and includes the
2. Indian Institute of Technology, Kharagpur, incorporated under the Indian Institute of Technology (Kharagpur) Act, 1956 (5 of 1956);’
8. Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.
9. Inserted, ibid., w.e.f. 1-4-2002.
10. Inserted by the Finance Act, 2002, w.e.f. 1-4-2002.
11. For notified institutions, see Taxmann’s Master Guide to Income-tax Act.
12. For notified Institutes of Management, see Taxmann’s Master Guide to Income-tax Act.

1.57 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(10CC)

⁷²[on his] ⁷³[voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees] :

Provided that the schemes of the said companies or authorities ⁷⁴[or societies or Universities or the Institutes referred to in sub-clauses

(vii) and (viii)], as the case may be, governing the payment of such amount are framed in accordance with such guidelines (including inter alia criteria of economic viability) as may be ⁷⁵prescribed ⁷⁶[***] :

Provided further that where exemption has been allowed to an employee under this clause for any assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment year ;]

⁷⁷[(10CC) in the case of an employee, being an individual deriving income in the nature of a perquisite, not provided for by way of monetary payment, within the meaning of clause (2) of section 17, the tax on such income actually paid by his employer, at the option of the employer, on behalf of such employee, notwithstanding anything contained in section 200⁷⁸ of the Companies Act, 1956 (1 of 1956);]

1. Substituted for “at the time of his” by the Finance Act, 2003, w.e.f. 1-4-2004.
2. Substituted for “voluntary retirement, in accordance with any scheme or schemes of voluntary retirement, to the extent such amount does not exceed five lakh rupees” by the Finance Act, 2000, w.e.f. 1-4-2001.
3. Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
4. Rule 2BA prescribes requirements for a Scheme of Voluntary Retirement, which are as follows :

(1) It applies to an employee who has completed ten years of service or completed 40 years of age. This condition is not applicable in case of amount received by an employee of a public sector company under scheme of voluntary separation framed by the said company. (2) It applies to all employees (by whatever name called), including workers and executives of the company/authority/co-operative society excepting directors of the company/co-operative society. (3) The scheme of voluntary retirement/separation has been drawn to result in overall reduction in the existing strength of the employees. (4) The vacancy caused by voluntary retirement/separation is not to be filled up, nor, the retiring employee is to be employed in another company or concern belonging to the same management. (5) The amount receivable on account of voluntary retirement/separation of the employees, does not exceed the amount equivalent to three months’ salary for each completed year of service or salary at the time of retirement multiplied by the balance months of service left before the date of his retirement on superannuation.

76. Words “and such schemes in relation to companies referred to in sub-clause (ii) or cooperative societies referred to in sub-clause (v) are approved by the Chief Commissioner or, as the case may be, Director-General in this behalf” omitted by the Finance Act, 2000,

w.e.f. 1-4-2001. Earlier the quoted words were amended by the Finance Act, 1994, w.e.f. 1-4-1995.

1. Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
2. For text of section 200 of the Companies Act, 1956, see Appendix.

S. 10(13) I.T. ACT, 1961

⁷⁹[(10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than—

(a)

any sum received under sub-section (3) of section 80DD or subsection (3) of section 80DDA*; or

(b)

any sum received under a Keyman insurance policy; or

(c)

any sum received under an insurance policy issued on or after the 1st day of April, 2003 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured:

Provided that the provisions of this sub-clause shall not apply to

any sum received on the death of a person: Provided further that for the purpose of calculating the actual capital sum assured under this sub-clause, effect shall be given to the ⁸⁰[Explanation to sub-section (3) of section 80C or the Explanation to sub-section (2A) of section 88, as the case may be].

Explanation.—For the purposes of this clause, “Keyman insurance policy” means a life insurance policy taken by a person on the life of another person who is or was the employee of the first-mentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person;]

(11)

any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies ⁸¹[or from any other provident fund set up by the Central Government and notified⁸² by it in this behalf in the Official Gazette];

(12)

the accumulated balance due and becoming payable to an employee participating in a recognised provident fund, to the extent provided in rule 8 of Part A of the Fourth Schedule ;

⁸³[(13) any payment from an approved superannuation fund made—

1. Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Prior to its substitution, clause (10D), as inserted by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1962, and later on amended by the Finance Act, 1995, w.e.f. 1-4-1996 and Finance (No. 2) Act, 1996, w.e.f. 1-10-1996, read as under :
2. ‘(10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy other than any sum received under sub-section (3) of section 80DDA or under a Keyman insurance policy. Explanation.—For the purposes of this clause, “Keyman insurance policy” means a life insurance policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first mentioned person;’
1. Substituted for “Explanation to sub-section (2A) of section 88” by the Finance Act, 2005,

w.e.f. 1-4-2006.

1. Inserted by the Finance Act, 1968, w.e.f. 1-4-1969.
2. For notified public provident fund, see Notification No. SO 2430, dated 2-7-1968. For details, see Taxmann’s Master Guide to Income-tax Act.
3. Substituted by the Finance Act, 1965, w.r.e.f. 1-4-1962.
   *With effect from 1-4-2004, section 80DD has been substituted for sections 80DD & 80DDA.
   

1.59 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(13A)

(i)

on the death of a beneficiary ; or

(ii)

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

(iii) by way of refund of contributions on the death of a beneficiary ; or

(iv) 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;]

⁸⁴[⁸⁵(13A) any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent ⁸⁶[* * *] as may be prescribed⁸⁷ having regard to the area or place in which such accommodation is situate and other relevant considerations.]

⁸⁸[Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where—

1. Inserted by the Direct Taxes (Amendment) Act, 1964, w.e.f. 6-10-1964.
2. See also Circular No. 90, dated 26-6-1972, Letter F. No. 12/19/64-IT (A-I), dated 2-1-1967 and Circular No. 9/2003, dated 18-11-2003. For details, see Taxmann’s Master Guide to Income-tax Act.
3. “(not exceeding four hundred rupees per month)” omitted by the Finance Act, 1986, w.e.f. 1-4-1987. Earlier, in this omitted expression “four” was substituted for “three” by the Finance Act, 1975, w.e.f. 1-4-1975.
1. Rule 2A prescribes the quantum of exemption available, which will be the least of the following :
2. ‘Salary’ for this purpose includes basic salary as well as dearness allowance if the terms of employment so provide. It also includes commission based on a fixed percentage of turnover achieved by an employee as per terms of contract of employment but excludes all other allowances and perquisites. In view of Explanation (ii) to rule 2A, basic pay, dearness allowance and commission are determined on ‘due’ basis in respect of the period during which rental accommodation is occupied by the employee in the previous year. Thus, emoluments of a period other than previous year are not to be considered, even though such amount is received (as well as taxed) during the previous year. Again, emoluments of the period during which rental accommodation is not occupied in the previous year are left out of computation. It is important to note that where rent paid is 10 per cent or less than 10 per cent of salary, no exemption will be admissible. Again exemption is denied where an employee lives in his own house, or in a house for which he does not pay rent.
4. Inserted by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1976.

S. 10(14A) I.T. ACT, 1961

(a)

the residential accommodation occupied by the assessee is owned by him ; or

(b)

the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him ;]

⁸⁹[(14)(i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred⁹⁰ in the performance of the duties of an office or employment of profit⁹¹, ⁹²[as may be prescribed], to the extent to which such expenses are actually incurred for that purpose ;

(ii) any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit⁹¹ are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living, ⁹³[as may be prescribed and to the extent as may be prescribed] :]

⁹⁴[Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence ;]

(14A) ⁹⁵[***]

1. Substituted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Prior to its substitution, clause (14) was amended by the Finance Act, 1975, w.r.e.f. 1-4-1962.
2. For the meaning of the terms/expressions “incurred” and “office or employment of profit”, see Taxmann’s Direct Taxes Manual, Vol. 3.
3. For the meaning of the expression “office or employment of profit”, see Taxmann’s Direct Taxes Manual, Vol. 3.
4. Substituted for “as the Central Government may, by notification in the Official Gazette, specify” by the Finance Act, 1995, w.e.f. 1-7-1995. For prescribed allowances, see rule 2BB(1).
5. Substituted for “as the Central Government may, by notification in the Official Gazette, specify, to the extent specified in the notification” by the Finance Act, 1995, w.e.f. 1-7-1995. For prescribed allowances, see rule 2BB(2).
6. Inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989.
7. Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its omission, clause (14A), as inserted by the Finance Act, 1989, w.e.f. 1-4-1989, read as under : ‘(14A) any income received by a public financial institution as exchange risk premium

from any person borrowing foreign currency from such institution, provided theamount of such premium is credited by such institution to a fund specified underclause (23E).Explanation.—For the purposes of this clause,—

(i)

the expression “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956) ;

(ii)

the expression “exchange risk premium” means a premium paid by a person borrowing foreign currency from a public financial institution to cover the risk which may be borne by such institution on account of fluctuations in exchange rate of foreign currencies borrowed by such institution ;’

1.61 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(15)

(15) ⁹⁶[(i) income by way of interest, premium on redemption or other payment on such securities, bonds, annuity certificates, savings certificates, other certificates issued by the Central Government and deposits as the Central Government may, by notification⁹⁷ in the Official Gazette, specify in this behalf, subject to such conditions and limits as may be specified in the said notification ;]

⁹⁸[(iib) ⁹⁹[in the case of an individual or a Hindu undivided family,] interest on such Capital Investment Bonds as the Central Government may, by notification¹ in the Official Gazette, specify in this behalf :]

²[Provided that the Central Government shall not specify, for the purposes of this sub-clause, such Capital Investment Bonds on or after the 1st day of June, 2002;]

³[(iic) in the case of an individual or a Hindu undivided family, interest on such Relief Bonds⁴ as the Central Government may, by notification in the Official Gazette, specify in this behalf ;]

⁵[(iid) interest on such bonds, as the Central Government may, by notification⁶ in the Official Gazette, specify, arising to—

(a)

a non-resident Indian, being an individual owning the bonds ; or

(b)

any individual owning the bonds by virtue of being a nominee or survivor of the non-resident Indian ; or

(c)

any individual to whom the bonds have been gifted by the non

resident Indian :

Provided that the aforesaid bonds are purchased by a non-resident

Indian in foreign exchange and the interest and principal received in

respect of such bonds, whether on their maturity or otherwise, is not

allowable to be taken out of India :

Provided further that where an individual, who is a non-resident Indian in any previous year in which the bonds are acquired, becomes a resident in India in any subsequent year, the provisions of this subclause shall continue to apply in relation to such individual :

1. Substituted for sub-clauses (i), (ia), (ib), (ii) and (iia) by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Original sub-clauses (ia) and (ib) were inserted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1965, w.e.f. 4-12-1965 and Special Bearer Bonds (Immunities & Exemptions) Act, 1981, w.e.f. 12-1-1981, respectively ; subclause (ii) was amended by the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965, the Finance Act, 1979, w.e.f. 1-4-1980 and the Finance Act, 1987, w.r.e.f. 1-4-1983 ; and sub-clause (iia) was inserted by the Finance Act, 1968, w.e.f. 1-4-1969.
2. For notified securities, bonds, annuity certificates, savings certificates, etc., see Taxmann’s Master Guide to Income-tax Act.
3. Inserted by the Finance Act, 1982, w.e.f. 1-4-1983.
4. Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.

1. For notified capital investment bonds, see Taxmann’s Master Guide to Income-tax Act.
2. Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
3. Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
4. For details see Taxmann’s Master Guide to Income-tax Act.
5. Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
6. For specified NRI bonds, see Taxmann’s Master Guide to Income-tax Act.

S. 10(15) I.T. ACT, 1961

Provided also that in a case where the bonds are encashed in a previous year prior to their maturity by an individual who is so entitled, the provisions of this sub-clause shall not apply to such individual in relation to the assessment year relevant to such previous year :

⁷[Provided also that the Central Government shall not specify, for the purposes of this sub-clause, such bonds on or after the 1st day of June, 2002.]

Explanation.—For the purposes of this sub-clause, the expression “non-resident Indian” shall have the meaning assigned to it in clause

(e) of section 115C;]

(iii) interest on securities held by the Issue Department of the Central

Bank of Ceylon constituted under the Ceylon Monetary Law Act, 1949; ⁸[(iiia) interest payable to any bank incorporated in a country outside India and authorised to perform central banking functions in that country on any deposits made by it, with the approval of the Reserve Bank of India, with any scheduled bank.

Explanation.—For the purposes of this sub-clause, “scheduled bank” shall have the meaning assigned to it in ⁹[clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36];]

¹⁰[(iiib) interest payable to the Nordic Investment Bank, being a multilateral financial institution constituted by the Governments of Denmark, Finland, Iceland, Norway and Sweden, on a loan advanced by it to a project approved by the Central Government in terms of the Memorandum of Understanding entered into by the Central Government with that Bank on the 25th day of November, 1986;]

¹¹[(iiic) interest payable to the European Investment Bank, on a loan granted by it in pursuance of the framework-agreement for financial co-operation entered into on the 25th day of November, 1993 by the Central Government with that Bank;]

(iv) interest payable— ¹²[(a) by Government or a local authority on moneys borrowed by

it before the 1st day of June, 2001 from, or debts owed by it before the 1st day of June, 2001 to, sources outside India;]

(b) by an industrial undertaking in India on moneys borrowed by it under ¹³[a loan agreement entered into before the 1st day

1. Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
2. Inserted by the Finance Act, 1985, w.e.f. 1-4-1985.
3. Substituted for “the Explanation to clause (iii) of sub-section (5) of section 11” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
4. Inserted by the Taxation Laws (Amendment) Act, 2003, w.r.e.f. 1-4-2001.
5. Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.
1. Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to its substitution, item (a), as amended by the Finance Act, 1983, w.e.f. 1-4-1983, read as under :
2. “(a) by Government or a local authority on moneys borrowed by it from, or debts owed by it to, sources outside India ;”
6. Substituted for “a loan agreement entered into with any such financial institution” by the Finance Act, 2001, w.e.f. 1-4-2002.