An Act to consolidate and amend the law relating to income-tax and super-tax
BE it enacted by Parliament in the Twelfth Year of the Republic of India as follows :—
CHAPTER I
PRELIMINARY
11. 2(1) This Act may be called the Income-tax Act, 1961.
Definitions.
2. In this Act, unless the context otherwise requires,—
3[(1) “advance tax” means the advance tax payable in accordance with the provisions of Chapter XVII-C;]
3. Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. *Amendments made by the Finance Act, 2008 notwithstanding the dates from which they come into effect, have been printed in italics enclosed with bold square brackets. Amendments made by the Finance Act, 2007 coming into force from April 1, 2008 have also been printed in italics but enclosed within medium square brackets.
1.1
S. 2(1A) I.T. ACT, 1961
4[5(1A)] 6“agricultural income”7 means8— 9[(a) any rent10 or revenue derived from land10 which is situated in India and is used for agricultural purposes;]
(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause ;
(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on :
9[Provided that—
(A) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name)
or a cantonment board and which has a population of not less than ten thousand 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;]
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—
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 ;]
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.
25[(7A) “Assessing Officer” means the Assistant Commissioner 26[or Deputy Commissioner] 27[or Assistant Director]26[or Deputy Director] or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or subsection (2) of section 120 or any other provision of this Act, and the 28[Additional Commissioner or] 29[Additional Director or] 30[Joint Commissioner or Joint Director] who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;]
32[(9A) “Assistant Commissioner” means a person appointed to be an Assistant Commissioner of Income-tax 33[or a Deputy Commissioner of Income-tax] under sub-section (1) of section 117 ;]
34[(9B) “Assistant Director” means a person appointed to be an Assistant Director of Income-tax under sub-section (1) of section 117;]
(10) “average rate of income-tax” means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income ;
35[(11) “block of assets” means a group of assets falling within a class of assets comprising—
(a) tangible assets, being buildings, machinery, plant or furniture;
w.e.f. 1-4-1988, read as under :
‘(11) “block of assets” means a group of assets falling within a class of assets, being buildings, machinery, plant or furniture, in respect of which the same percentage of depreciation is prescribed ;’
Original clause was earlier omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
S. 2(14) I.T. ACT, 1961
(b) intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature,
in respect of which the same percentage of depreciation is prescribed ;]
(12) “Board” means the 36[Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963)] ;
37[(12A) “books or books of account” includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device;]
38(13) “business”39 includes any trade39, commerce or manufacture or any adventure39 or concern in the nature of trade39, commerce or manufacture ;
40(14) “capital asset” means property41 of any kind held by an assessee, whether or not connected with his business or profession, but does not include—
(i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession ;
42[(ii) personal effects43, that is to say, movable property (including wearing apparel and furniture) held for personal use 43 by the assessee or any member of his family dependent on him, but excludes—
“(ii) personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him. Explanation.—For the purposes of this sub-clause, “jewellery” includes—
43. For the meaning of the expressions “personal effects” and “personal use”, see Taxmann’s Direct Taxes Manual, Vol. 3.
Explanation.—For the purposes of this sub-clause, “jewellery” includes—
44[(iii) agricultural land45 in India, not being land situate—
47[(iv) 6½ per cent Gold Bonds, 1977,48[or 7 per cent Gold Bonds, 1980,] 49[or National Defence Gold Bonds, 1980,] issued by the Central Government ;]
50[(v) Special Bearer Bonds, 1991, issued by the Central Government ;]
S. 2(17) I.T. ACT, 1961
51[(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government ;]
52(15)53“charitable purpose”54 includes relief of the poor, education54, medical relief, and the advancement of any other 54object of general public utility 55[* * *] ;
(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—
(iii) any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the
w.e.f. 1-4-1984.
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—
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.
74[(19A) “Deputy Commissioner” means a person appointed to be a Deputy Commissioner of Income-tax 75[* * *] under sub-section (1) of section 117 ;
76[(19AA) “demerger”, in relation to companies, means the transfer, pursuant to a scheme of arrangement under sections 391 to 39477 of the Companies Act, 1956 (1 of 1956), by a demerged company of its one or more undertakings to any resulting company in such a manner that—
(iii) the property and the liabilities of the undertaking or undertakings being transferred by the demerged company are transferred at values appearing in its books of account immediately before the demerger;
otherwise than as a result of the acquisition of the property or assets of the demerged company or any undertaking thereof by the resulting company;
(vi) the transfer of the undertaking is on a going concern basis;
(vii) the demerger is in accordance with the conditions, if any, notified under sub-section (5) of section 72A by the Central Government in this behalf.
Explanation 1.—For the purposes of this clause, “undertaking” shall include any part of an undertaking, or a unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity.
w.e.f. 1-6-1994.
S. 2(20) I.T. ACT, 1961
Explanation 2.—For the purposes of this clause, the liabilities referred to in sub-clause (ii), shall include—
Explanation 3.—For determining the value of the property referred to in sub-clause (iii), any change in the value of assets consequent to their revaluation shall be ignored.
Explanation 4.—For the purposes of this clause, the splitting up or the reconstruction of any authority or a body constituted or established under a Central, State or Provincial Act, or a local authority or a public sector company, into separate authorities or bodies or local authorities or companies, as the case may be, shall be deemed to be a demerger if such split up or reconstruction fulfils 78[such conditions as may be notified in the Official Gazette79, by the Central Government];
(19AAA) “demerged company” means the company whose undertaking is transferred, pursuant to a demerger, to a resulting company;]
(19B) “Deputy Commissioner (Appeals)” means a person appointed to be a Deputy Commissioner of Income-tax (Appeals) 80[or an Additional Commissioner of Income-tax (Appeals)] under sub-section (1) of section 117 ;]
81[(19C) “Deputy Director” means a person appointed to be a Deputy Director of Income-tax 82[* * *] under sub-section (1) of section 117 ;]
(20) 83“director”, “manager” and “managing agent”, in relation to a company, have the meanings respectively assigned to them in the Companies Act, 1956 (1 of 1956) ;
w.e.f. 1-10-1998.
83. Clauses (13), (24) and (25) of section 2 of the Companies Act, 1956, define expressions “director”, “manager” and “managing agent”, respectively. For text of provisions, see
Appendix.
84[(21) “Director General or Director” means a person appointed to be a Director General of Income-tax or, as the case may be, a Director of Income-tax, under sub-section (1) of section 117, and includes a person appointed under that sub-section to be 85[an Additional Director of Income-tax or] a 86[Joint] Director of Income-tax or an Assistant Director 87[or Deputy Director] of Income-tax ;]
S. 2(22) I.T. ACT, 1961
in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits92 ;
but “dividend” does not include—
(i) a distribution made in accordance with sub-clause (c) or subclause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ;
93[(ia) a distribution made in accordance with sub-clause (c) or subclause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, 94[and before the 1st day of April, 1965] ;]
(ii) any advance or loan made to a shareholder 95[or the said concern] by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ;
(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off;
96[(iv) any payment made by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 77A 97 of the Companies Act, 1956 (1 of 1956);
(v) any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company).]
Explanation 1.—The expression “accumulated profits”, wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956.
Explanation 2.—The expression “accumulated profits” in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause (c) shall include all profits of the company up to the date
of liquidation, 98[but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place].
99[Explanation 3.—For the purposes of this clause,—
1[(22A) “domestic company” means an Indian company, or any other company which, in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference shares) payable out of such income ;]
2[(22AA) “document” includes an electronic record as defined in clause (t)3 of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);]
4[5[(22B)] “fair market value”, in relation to a capital asset, means—
“partnership” as follows :
‘ “Partnership” is the relation between persons who have agreed to share the profits of a
business carried on by all or any of them acting for all.
Persons who have entered into partnership with one another are called individually
“partners” and collectively “a firm”, and the name under which their business is carried on
is called the “firm name”.’
S. 2(24) I.T. ACT, 1961
7[(23A) “foreign company” means a company which is not a domestic company ;] 8[(23B) “fringe benefits” means any fringe benefits referred to in section 115WB;] 9(24) “income”10 includes10—
hospital or other institution referred to in sub-clause (iiiae) or subclause (via)] of clause (23C) of section 10].Explanation.—For the purposes of this sub-clause, “trust”
includes any other legal obligation ;]
(iii) the value of any perquisite or profit in lieu of salary taxable under clauses (2) and (3) of section 17 ;
14[(iiia) any special allowance or benefit, other than perquisite included under sub-clause (iii), specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the duties of an office or employment of profit ;
(iiib) any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living ;]
(d) of sub-section (1) of section 80F” by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, the said expression was substituted for “, not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution” by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date.
(iv) the value of any benefit or perquisite15, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid ;
16[(iva) the value of any benefit or perquisite15, whether convertible into money or not, obtained by any representative assessee mentioned in clause (iii) or clause (iv) of sub-section (1) of section 160 or by any person on whose behalf or for whose benefit any income is receivable by the representative assessee (such person being hereafter in this sub-clause referred to as the “beneficiary”) and any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been payable by the beneficiary ;]
(v) any sum chargeable to income-tax under clauses (ii) and (iii) of section 28 or section 41 or section 59 ; 17[(va) any sum chargeable to income-tax under clause (iiia) of section 28 ;] 18[(vb) any sum chargeable to income-tax under clause (iiib) of section 28 ;] 19[(vc) any sum chargeable to income-tax under clause (iiic) of section 28 ;] 20[(vd )] the value of any benefit or perquisite taxable under clause (iv) of section 28 ;
21[(ve) any sum chargeable to income-tax under clause (v) of section 28 ;]
(vi) any capital gains chargeable under section 45 ;
(vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule ;
S. 2(25) I.T. ACT, 1961
22[(viia) the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members;]
(viii)[Omitted by the Finance Act, 1988, w.e.f. 1-4-1988. Original subclause (viii) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964;]
23[(ix) any winnings from lotteries24, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever.]
25[Explanation.—For the purposes of this sub-clause,—
26[(x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees’ State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ;]
27[(xi) any sum received under a Keyman insurance policy including the
sum allocated by way of bonus on such policy. Explanation.—For the purposes of this clause*, the expression “Keyman insurance policy” shall have the meaning assigned to it in the Explanation to clause (10D) of section 10 ;]
28[(xii) any sum referred to in 29[clause (va)] of section 28;] 30[(xiii) any sum referred to in clause (v) of sub-section (2) of section 56;] 31[(xiv) any sum referred to in clause (vi) of sub-section (2) of section 56;]
(25) “Income-tax Officer” means a person appointed to be an Income-tax Officer under 32[* * *] section 117 ;
*Should be read as “sub-clause”.
33[(25A) “India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), and the air space above its territory and territorial waters;]
35[(ia) a corporation established by or under a Central, State or Provincial Act ; (ib) any institution, association or body which is declared by the Board to be a company under clause (17) ;]
(ii) in the case of the State of Jammu and Kashmir, a company formed and registered under any law for the time being in force in that State ;
36[(iii) in the case of any of the Union territories of Dadra and Nagar Haveli, Goa†, Daman and Diu, and Pondicherry, a company formed and registered under any law for the time being in force in that Union territory :]
Provided that the 37[registered or, as the case may be, principal office of the company, corporation, institution, association or body] in all cases is in India ;
38[(26A) “infrastructure capital company” means such company which makes investments by way of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the
33. Substituted by the Finance Act, 2007, w.r.e.f. 25-8-1976. Prior to its substitution, clause (25A), as inserted by the Taxation Laws (Extension to Union Territories) Regulation, 1963,
w.e.f. 1-4-1963, read as under :
‘(25A) “India” shall be deemed to include the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry,—
business referred to in sub-section (4) of section 80-IA or sub-section
(1) of section 80-IAB or an undertaking developing and building a housing project referred to in sub-section (10) of section 80-IB or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one hundred beds for patients;
(26B) “infrastructure capital fund” means such fund operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908) established to raise monies by the trustees for investment by way of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the business referred to in sub-section (4) of section 80-IA or sub-section (1) of section 80-IAB or an undertaking developing and building a housing project referred to in sub-section (10) of section 80-IB or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one hundred beds for patients;]
41[42(28A) “interest” means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised ;]
43[(28B) “interest on securities” means,—
44[(28BB) “insurer” means an insurer, being an Indian insurance company, as defined under clause (7A) of section 245 of the Insurance Act, 1938 (4 of 1938), which has been granted a certificate of registration under section 3 of that Act;]
46[(28C) “Joint Commissioner” means a person appointed to be a Joint Commissioner of Income-tax or an Additional Commissioner of Income-tax under sub-section (1) of section 117;
(28D) “Joint Director” means a person appointed to be a Joint Director of Income-tax or an Additional Director of Income-tax under subsection (1) of section 117;]
(29) “legal representative” has the meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure, 1908 (5 of 1908)47 ; 48[(29A) “long-term capital asset” means a capital asset which is not a short-term capital asset ; (29B) “long-term capital gain” means capital gain arising from the transfer of a long-term capital asset ;]
49[(29C) “maximum marginal rate” means the rate of income-tax (including surcharge on income-tax, if any) applicable in relation to the highest slab of income in the case of an individual 50[, association of persons or, as the case may be, body of individuals] as specified in the Finance Act of the relevant year ;]
51[(29D) “National Tax Tribunal” means the National Tax Tribunal established under section 3 of the National Tax Tribunal Act, 2005;]
(30) “non-resident” means a person who is not a “resident” 52[, and for the purposes of sections 92, 93 53[* * *] and 168, includes a person who is not ordinarily resident within the meaning of clause (6) of section 6] ;
54(31) “person” includes—
(iii) a company,
(vii) every artificial juridical person, not falling within any of the preceding sub-clauses.
S. 2(37A) I.T. ACT, 1961
57[Explanation.—For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains;]
company or any other public body or any association of persons or any body of individuals, means—
60(36) “profession” includes vocation61 ; 62[(36A) “public sector company” means any corporation established by or under any Central, State or Provincial Act or a Government company63 as defined in section 617 of the Companies Act, 1956 (1 of 1956) ;]
(37) 64“public servant” has the same meaning as in section 21 of the Indian Penal Code (45 of 1860) ;
65[(37A) “rate or rates in force” or “rates in force”, in relation to an assessment year or financial year, means—
S. 2(42) I.T. ACT, 1961
83[(iii) for the purposes of deduction of tax under section 195, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income-tax specified in 84[an agreement entered into by the Central Government under section 90, or an agreement notified by the Central Government under section 90A, whichever is applicable by virtue of the provisions of section 90, or section 90A, as the case may be];
85(38) “recognised provident fund” means a provident fund which has been and continues to be recognised by the 86[Chief Commissioner or Commissioner] in accordance with the rules contained in Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees’ Provident Funds Act, 1952 (19 of 1952) ;
89[(41A) “resulting company” means one or more companies (including a wholly owned subsidiary thereof) to which the undertaking of the demerged company is transferred in a demerger and, the resulting company in consideration of such transfer of undertaking, issues shares to the shareholders of the demerged company and includes any authority or body or local authority or public sector company or a company established, constituted or formed as a result of demerger;]
(42) “resident” means a person who is resident in India within the meaning of section 6 ;
83. Substituted by the Finance Act, 1992, w.e.f. 1-6-1992. Prior to its substitution, sub-clause
(iii) was inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
84. Substituted for “an agreement entered into by the Central Government under section 90, whichever is applicable by virtue of the provisions of section 90” by the Finance Act, 2006,
w.e.f. 1-6-2006.
90[91(42A)92[“short-term capital asset” means a capital asset held by an assessee for not more than 93[thirty-six] months immediately preceding the date of its transfer :]
94[Provided that in the case of a share held in a company 95[or any other security listed in a recognised stock exchange in India or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or a unit of a Mutual Fund specified under clause (23D) of section 10] 96[or a zero coupon bond], the provisions of this clause shall have effect as if for the words “thirty-six months”, the words “twelve months” had been substituted.]
97[Explanation 1].—(i) In determining the period for which any capital asset is held by the assessee—
99[(c) in the case of a capital asset being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, there shall be included the period for which the share or shares in the amalgamating company were held by the assessee ;]
1[(d) in the case of a capital asset, being a share or any other security (hereafter in this clause referred to as the financial asset) subscribed to by the assessee on the basis of his right to subscribe to such financial asset or subscribed to by the person in whose favour the assessee has renounced his right to subscribe to such financial asset, the period shall be reckoned from the date of allotment of such financial asset ;
(e) in the case of a capital asset, being the right to subscribe to any financial asset, which is renounced in favour of any other person, the period shall be reckoned from the date of the offer of such
1. Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
S. 2(42A) I.T. ACT, 1961
right by the company or institution, as the case may be, making such offer ;]
2[(f) in the case of a capital asset, being a financial asset, allotted without any payment and on the basis of holding of any other financial asset, the period shall be reckoned from the date of the allotment of such financial asset ;]
3[(g) in the case of a capital asset, being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a demerger, there shall be included the period for which the share or shares held in the demerged company were held by the assessee ;]
4[(h) in the case of a capital asset, being trading or clearing rights of a recognised stock exchange in India acquired by a person pursuant to demutualisation or corporatisation of the recognised stock exchange in India as referred to in clause (xiii) of section 47, there shall be included the period for which the person was a member of the recognised stock exchange in India immediately prior to such demutualisation or corporatisation;
(ha) in the case of a capital asset, being equity share or shares in a company allotted pursuant to demutualisation or corporatisation of a recognised stock exchange in India as referred to in clause
(xiii) of section 47, there shall be included the period for which the person was a member of the recognised stock exchange in India immediately prior to such demutualisation or corporatisation;]
5[(hb) in the case of a capital asset, being any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer free of cost or at concessional rate to his employees (including former employee or employees), the period shall be reckoned from the date of allotment or transfer of such specified security or sweat equity shares;]
(ii) In respect of capital assets other than those mentioned in clause (i), the period for which any capital asset is held by the assessee shall be determined subject to any rules which the Board may make in this behalf.]
6[Explanation 2.—For the purposes of this clause, the expression “security”7 shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).]
“securities” as follows :‘(h) “securities” include—
(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;
(Contd. on p. 1.27)
8[Explanation 3.—For the purposes of this clause, the expressions “specified security” and “sweat equity shares” shall have the meanings respectively assigned to them in the Explanation to clause (d) of subsection (1) of section 115WB;]
9[(42B) “short-term capital gain” means capital gain arising from the transfer of a short-term capital asset ;]
10[(42C) “slump sale” means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales.
Explanation 1.—For the purposes of this clause, “undertaking” shall
have the meaning assigned to it in Explanation 1 to clause (19AA). Explanation 2.—For the removal of doubts, it is hereby declared that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities ; ]
11[(43) “tax” in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date 12[and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA] ;]
13[(43A) “tax credit certificate” means a tax credit certificate granted to any person in accordance with the provisions of Chapter XXII-B14 and any scheme made thereunder ;]
(Contd. from p. 1.26) (ia) derivative; (ib) units or any other instrument issued by any collective investment scheme to
the investors in such schemes;
(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(id) units or any other such instrument issued to the investors under any mutual fund scheme;
(ii)Government securities;
(iia) such other instruments as may be declared by the Central Government to be securities; and
(iii) rights or interest in securities;’
S. 2(47) I.T. ACT, 1961
(43B) 15[* * *] 16[(44) “Tax Recovery Officer” means any Income-tax Officer who may be authorised by the Chief Commissioner or Commissioner, by general or special order in writing, to exercise the powers of a Tax Recovery Officer 17[and also to exercise or perform such powers and functions which are conferred on, or assigned to, an Assessing Officer under this Act and which may be prescribed];]
(iii) the compulsory acquisition thereof under any law ; or
(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ;] 22[or]
23[(iva) the maturity or redemption of a zero coupon bond; or] 24[(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A25 of the Transfer of Property Act, 1882 (4 of 1882) ; or
(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.
Explanation.—For the purposes of sub-clauses (v) and (vi), “immovable property” shall have the same meaning as in clause (d) of section 269UA;]
26[(48) “zero coupon bond” means a bond—
28[***]] 29[“Previous year” defined.
3. For the purposes of this Act, “previous year” means the financial year imme
diately preceding the assessment year : Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year.]
CHAPTER II
Charge of income-tax.
304. 31(1) Where any Central Act enacts that income-tax32 shall be charged for
any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and 33[subject to the
S. 5 I.T. ACT, 1961
provisions (including provisions for the levy of additional income-tax) of, this
Act]34 in respect of the total income34 of the previous year 35[* * *] of every person : Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly.
(2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act.
Scope of total income.
365. 37(1) Subject to38 the provisions of this Act, the total income38 of any previous
year of a person who is a resident includes all income from whatever source derived which—
it is derived from a business controlled in or a profession set up in India.
during such year. Explanation 1.—Income accruing or arising outside India shall not be deemed to be received39 in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India.
*Should be read as ‘clause (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.
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.]
426. For the purposes of this Act,—
44[Explanation.—In the case of an individual,—
I.T. ACT, 1961 1.32
49[(6) A person is said to be “not ordinarily resident” in India in any previous year if such person is—
Inserted by the Finance Act, 1990, w.e.f. 1-4-1990.Clause (18) of section 3 of the Merchant Shipping Act, 1958, defines “Indian ship” asfollows :
‘(18) “Indian ship” means a ship registered as such under this Act and includes any ship registered at any port in India at the commencement of this Act which is recognised as an Indian ship under the proviso to sub-section (2) of section 22;’
Substituted for “fifty” by the Finance Act, 1994, w.e.f. 1-4-1995.For the meaning of the terms/expressions “control and management”, “affairs” and“wholly”, see Taxmann’s Direct Taxes Manual, Vol. 3.Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Prior to its substitution, clause (6)read as under :
‘(6) A person is said to be “not ordinarily resident” in India in any previous year if such person is—
(Contd. on p. 1.33)
Income deemed to be received.
7. The following incomes shall be deemed to be received in the previous year :—
50[(iii) the contribution made, by the Central Government 51[or any other employer] in the previous year, to the account of an employee under a pension scheme referred to in section 80CCD.]
Dividend income.
8. 52[For the purposes of inclusion in the total income of an assessee,—
53[(b) any interim dividend shall be deemed to be the income of the previous year in which the amount of such dividend is unconditionally made available by the company to the member who is entitled to it.]
(Contd. from p. 1.32)
S. 9 I.T. ACT, 1961
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—
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—
no income shall be deemed to accrue or arise in India to such individual, firm or company through or from operations65 which are confined to the shooting of any cinematograph film in India.]
66[Explanation 2.—For the removal of doubts, it is hereby declared that “business connection” shall include any business activity carried out through a person who, acting on behalf of the non-resident,—
Provided that such business connection shall not include any business activity carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general commission agent or any other agent having an independent status is acting in the ordinary course of his business :
Provided further that where such broker, general commission agent or any other agent works mainly or wholly on behalf of a non-resident (hereafter in this proviso referred to as the principal non-resident) or on behalf of such non-resident and other non-residents which are controlled by the principal non-resident or have a controlling interest in the principal non-resident or are subject to the same common control as the principal non-resident, he shall not be deemed to be a broker, general commission agent or an agent of an independent status.
Explanation 3.—Where a business is carried on in India through a person referred to in clause (a) or clause (b) or clause (c) of Explanation 2, only so much of income as is attributable to the operations carried out in India shall be deemed to accrue or arise in India;]
(ii) income which falls under the head “Salaries”, if it is earned67 in India.
68[Explanation.—For the removal of doubts, it is hereby declared that the income of the nature referred to in this clause payable for—
For the meaning of the term “operations”, see Taxmann’s Direct Taxes Manual, Vol. 3.Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.For the meaning of the term “earned”, see Taxmann’s Direct Taxes Manual, Vol. 3.Substituted by the Finance Act, 1999, w.e.f. 1-4-2000. Prior to its substitution, Explanation,
as inserted by the Finance Act, 1983, w.r.e.f. 1-4-1979, read as under :“Explanation.—For the removal of doubts, it is hereby declared that income of the naturereferred to in this clause payable for service rendered in India shall be regarded as incomeearned in India ;”
S. 9 I.T. ACT, 1961
shall be regarded as income earned in India ;]
(iii) income chargeable under the head “Salaries” payable by the Government to a citizen of India for service outside India ;
Provided that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property, if such income is payable in pursuance of an agreement made before the 1st day of April, 1976, and the agreement is approved by the Central Government :
71[Provided further that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum payment made by a person, who is a resident, for the transfer of all or any rights (including the granting of a licence) in respect of computer software supplied by a non-resident manufacturer along with a computer or computer-based equipment under any scheme approved under the Policy on Computer Software Export, Software Development and Training, 1986 of the Government of India.]
Explanation 1.—For the purposes of the 72[first] proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date; so, however, that, where the recipient of the income by way of royalty is a foreign company, the agreement shall not be deemed to have been made before that date unless, before the expiry of the time allowed under sub-section (1) or sub-section (2) of section 139 (whether fixed originally or on extension) for furnishing the return of income for the assessment year commencing on the 1st day of April, 1977, or the assessment year in respect of which such income first becomes chargeable to tax under this Act, whichever assessment year is later, the company exercises an option by furnishing a declaration in writing to the 73[Assessing] Officer (such option being final for that assessment year and for every subsequent assessment year) that the agreement may be regarded as an agreement made before the 1st day of April, 1976.
Explanation 2.—For the purposes of this clause, “royalty” means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains”) for—
(iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property ;
(iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ;
S. 9 I.T. ACT, 1961
74[(iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB;]
referred to in sub-clauses (i) to 74[(iv), (iva) and] (v). 75[Explanation 3.—For the purposes of this clause, “computer software” means any computer programme recorded on any disc, tape, perforated media or other information storage device and includes any such programme or any customized electronic data;]
(vii) income by way of fees for technical services payable76 by—
77[Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government.]
77[Explanation 1.—For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date.]
Explanation 77[2].—For the purposes of this clause, “fees for technical services” means any consideration (including any lump sum consi
deration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction78, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”.]
(2) Notwithstanding anything contained in sub-section (1), any pension payable outside India to a person residing permanently outside India shall not be deemed to accrue or arise in India, if the pension is payable to a person referred to in article 314 of the Constitution or to a person who, having been appointed before the 15th day of August, 1947, to be a Judge of the Federal Court or of a High Court within the meaning of the Government of India Act, 1935, continues to serve on or after the commencement of the Constitution as a Judge in India.
79[Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this section, where income is deemed to accrue or arise in India under clauses (v), (vi) and (vii) of sub-section (1), such income shall be included in the total income of the non-resident, whether or not the non-resident has a residence or place of business or business connection in India.]
CHAPTER III
INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—
(1) agricultural income ; 80(2) 81[subject to the provisions of sub-section (2) of section 64,] any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family ;
82[(2A) in the case of a person being a partner of a firm which is separately assessed as such, his share in the total income of the firm. Explanation.—For the purposes of this clause, the share of a partner
in the total income of a firm separately assessed as such shall, notwithstanding anything contained in any other law, be an amount which bears to the total income of the firm the same proportion as the amount of his share in the profits of the firm in accordance with the partnership deed bears to such profits ;]
S. 10(4) I.T. ACT, 1961
(3) 83[***] 84[(4)(i) in the case of a non-resident, any income by way of interest on such securities or bonds as the Central Government may, by notification in the Official Gazette85, specify in this behalf,
including income by way of premium on the redemption of such bonds : 86[Provided that the Central Government shall not specify, for the
purposes of this sub-clause, such securities or bonds on or after the
1st day of June, 2002;]
87[88(ii) in the case of an individual, any income by way of intereston moneys standing to his credit in a Non-Resident (External)Account in any bank in India in accordance with the ForeignExchange Regulation Act, 1973 (46 of 1973), and the rules madethereunder :
Provided that such individual is a person resident outside India as defined in clause (q) of section 289 of the said Act or is a person who has been permitted by the Reserve Bank of India to maintain the aforesaid Account ;]]
83. Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its omission, clause (3), as substituted by the Finance Act, 1972, w.e.f. 1-4-1972, and amended by the Finance Act, 1986, w.e.f. 1-4-1987, Finance (No. 2) Act, 1991, w.e.f. 1-10-1991 and Finance Act, 1992, w.e.f. 1-4-1992, read as under :
‘(3) any receipts which are of a casual and non-recurring nature, to the extent such receipts do not exceed five thousand rupees in the aggregate : Provided that where such receipts relate to winnings from races including horse races, the provisions of this clause shall have effect as if for the words “five thousand rupees”, the words “two thousand five hundred rupees” had been substituted : Provided further that this clause shall not apply to—
(iii) receipts by way of addition to the remuneration of an employee ;’
84. Substituted for clauses (4) and (4A) by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Prior to their substitution, clause (4) was amended by the Finance Act, 1964,
w.e.f. 1-4-1964. Clause (4A) was inserted by the Finance Act, 1964, w.e.f. 1-4-1965, subsequently amended by the Finance Act, 1968, w.e.f. 1-4-1969 and substituted by the Finance Act, 1982, w.e.f. 1-4-1982.
‘(q) “person resident outside India” means a person who is not resident in India ;’ For definition of the above term in FEMA, 1999, see Appendix.
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,—
94[(5) in the case of an individual, the value of any travel concession or assistance received by, or due to, him,—
subject to such conditions as may be prescribed95 (including conditions as to number of journeys and the amount which shall be exempt
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)
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)
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—
(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 :
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
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—
(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.
(iii) to (v)[Sub-clause (ii) substituted for sub-clauses (ii) to (v) by the Finance Act, 1988, w.e.f. 1-4-1989;]
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;]
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 :—
(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)
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—
(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)
(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,—
(iii) any company which is a subsidiary of a company referred to in item (ii) ; or
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)
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 :—
S. 10(6BB) I.T. ACT, 1961
the 31st day of March, 1976 8[but before the 1st day of June, 2002] 9[and,—
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)],—
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
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 ;]
19[(8A) in the case of a consultant—
S. 10(9) I.T. ACT, 1961
Explanation.—In this clause, “consultant” means—
(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—
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
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.
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 ;
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
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 :
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—
(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
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 received62 63[or receivable] by an employee of—
(iii) an authority established under a Central, State or Provincial Act ; 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,]
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) 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.
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—
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;]
83[(13) any payment from an approved superannuation fund made—
w.e.f. 1-4-2006.
(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—
S. 10(14A) I.T. ACT, 1961
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[***]
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,—
(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—
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 :
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
of June, 2001 with any such financial institution] in a foreign country as may be approved14 in this behalf by the Central Government by general or special order ;
15(c) by an industrial undertaking in India on any moneys borrowed or debt incurred by it 16[before the 1st day of June, 2001] in a foreign country in respect of the purchase outside India of raw materials 17[or components] or capital plant and machinery, 18[to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf19, having regard to the terms of the loan or debt and its repayment.]
20[21[Explanation 1.]—For the purposes of this item, “purchase of capital plant and machinery” includes the purchase of such capital plant and machinery under a hire-purchase agreement or a lease agreement with an option to purchase such plant and machinery.]
22[Explanation 2.—For the removal of doubts, it is hereby declared that the usance interest payable outside India by an undertaking engaged in the business of ship-breaking in respect of purchase of a ship from outside India shall be deemed to be the interest payable on a debt incurred in a foreign country in respect of the purchase outside India;]
23[(d) by the Industrial Finance Corporation of India established by the Industrial Finance Corporation Act, 1948 (15 of 1948), or the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964), 24[or the Export-Import Bank of India established under the Export-Import Bank of India Act, 1981 (28 of 1981),] 25[or the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987),]
w.r.e.f. 1-4-1962.
S. 10(15) I.T. ACT, 1961
26[or the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989),] or the Industrial Credit and Investment Corporation of India [a company formed and registered under the Indian Companies Act, 1913 (7 of 1913)], on any moneys borrowed by it from sources outside India 27[before the 1st day of June, 2001],to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;]
28[(e) by any other financial institution established in India or a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act), on any moneys borrowed by it from sources outside India 29[before the 1st day of June, 2001] under a loan agreement approved by the Central Government where the moneys are borrowed either for the purpose of advancing loans to industrial undertakings in India for purchase outside India of raw materials or capital plant and machinery or for the purpose of importing any goods which the Central Government may consider necessary to import in the public interest, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;]
30[(f) by an industrial undertaking in India on any moneys borrowed by it in foreign currency from sources outside India under a loan agreement approved by the Central Government 31[before the 1st day of June, 2001] having regard to the need for industrial development in India, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;
32[(fa) by a scheduled bank 33[***] 34[to a non-resident or to a person who is not ordinarily resident within the meaning of sub
section (6)† of section 6] on deposits in foreign currency where the acceptance of such deposits by the bank is approved by the Reserve Bank of India.
35[Explanation.—For the purposes of this item, the expression “scheduled bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative bank;]
36[(g) by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes, 37[being a company eligible for deduction under clause (viii) of sub-section (1) of section 36] on any moneys borrowed by it in foreign currency from sources outside India under a loan agreement approved by the Central Government 38[before the 1st day of June, 2003], to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment.]
Explanation.—For the purposes of 39[items (f) 40[, (fa)] and (g)], the expression 41“foreign currency” shall have the meaning assigned to it in the Foreign Exchange Regulation Act, 1973 (46 of 1973);]
35. Substituted by the Finance Act, 2007, w.e.f. 1-4-2007. Prior to its substitution, the Explanation read as under : ‘Explanation.—For the purposes of this item, the expression “scheduled bank” shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section
(1) of section 36;’
currency” as follows:‘(g) “foreign currency” means any currency other than *Indian currency;’*“Indian currency” has been defined in clause (k), see footnote 42 on p. 1.432 post.For definitions of above terms under FEMA, 1999, see Appendix.
42[(h) by any public sector company in respect of such bonds or debentures and subject to such conditions, including the condition that the holder of such bonds or debentures registers his name and the holding with that company, as the Central Government may, by notification43 in the Official Gazette, specify in this behalf;]
44[(i) by Government on deposits made by an employee of the Central Government or a State Government 45[or a public sector company], in accordance with such scheme as the Central Government may, by notification46 in the Official Gazette, frame in this behalf, out of the moneys due to him on account of his retirement, whether on superannuation or otherwise.]
47[48[Explanation 1].—For the purposes of this sub-clause, the expression “industrial undertaking” means any undertaking which is engaged in—
(a) the manufacture or processing of goods; or
49[(aa) the manufacture of computer software or recording of programme on any disc, tape, perforated media or other information device; or]
(b) the business of generation or distribution of electricity or any
other form of power; or 50[(ba) the business of providing telecommunication services; or]
52[(e) the operation of ships or aircrafts or construction or operation of rail systems.]]
(e), as inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991, read as under : “(e) the operation of ships or aircrafts;”
53[Explanation 1A.—For the purposes of this sub-clause, the expression “interest” shall not include interest paid on delayed payment of loan or on default if it is in excess of two per cent per annum over the rate of interest payable in terms of such loan.]
54[Explanation 2.—For the purposes of this clause, the expression “interest” includes hedging transaction charges on account of currency fluctuation;]
55[(v) interest on—
Explanation.—For the purposes of this sub-clause, the expression “public sector bank” shall have the meaning assigned to it in the Explanation to clause (23D);]
57[(vi) interest on Gold Deposit Bonds issued under the Gold DepositScheme, 1999 notified by the Central Government;]58[(vii) interest on bonds—
Official Gazette. Explanation.—For the purposes of this sub-clause, the expression “State Pooled Finance Entity” shall mean such entity which is set up in
(vii), as inserted by the Finance Act, 2000, w.e.f. 1-4-2001, read as under :“(vii) interest on bonds—
59. For notified bonds issued by local authorities, see Taxmann’s Master Guide to Income-tax Act.
S. 10(16) I.T. ACT, 1961
accordance with the guidelines for the Pooled Finance Development Scheme notified by the Central Government in the Ministry of Urban Development;]
60[(viii) any income by way of interest received by a non-resident or a person who is not ordinarily resident, in India on a deposit made on or after the 1st day of April, 2005, in an Offshore Banking Unit61 referred to in clause (u) of section 2 of the Special Economic Zones Act, 2005;]
62[(15A) any payment made, by an Indian company engaged in the business of operation of aircraft, to acquire an aircraft or an aircraft engine (other than a payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease from the Government of a foreign State or a foreign enterprise under an agreement 63[64[, not being an agreement entered into between the 1st day of April, 1997 and the 31st day of March, 1999,] and] approved by the Central Government in this behalf :
65[Provided that nothing contained in this clause shall apply to any such agreement entered into on or after the 66[1st day of April, 67[2007]].]
Explanation.—For the purposes of this clause, the expression “foreign enterprise” means a person who is a non-resident;] 68(16) 69scholarships granted to meet the cost of education;
w.e.f. 1-4-2006. Earlier “1st day of October, 2005” was substituted for “1st day of April, 2005” by the Finance Act, 2005, w.e.f. 1-4-2006.
70[(17) any income by way of—
(i) daily allowance received by any person by reason of his membership of Parliament or of any State Legislature or of any Committee thereof; 71[* * *]
72[(ii) any allowance received by any person by reason of his membership of Parliament under the Members of Parliament (Constituency Allowance) Rules, 1986;
73[(iii) any constituency allowance received by any person by reason of his membership of any State Legislature under any Act or rules made by that State Legislature;]]]
74[(17A) any payment made, whether in cash or in kind,—
76[(18) any income by way of—
70. Substituted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986,
“(iii) all other allowances not exceeding two thousand rupees per month in the aggregate received by any person by reason of his membership of any State Legislature or of any Committee thereof, which the Central Government may, by notification* in the Official Gazette, specify in this behalf;”
*For notified allowances, see Taxmann’s Master Guide to Income-tax Act.
S. 10(20) I.T. ACT, 1961
Explanation.—For the purposes of this clause, the expression “family” shall have the meaning assigned to it in the Explanation to clause (5);]
(18A) 78[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;] 79[(19) family pension received by the widow or children or nominated heirs, as the case may be, of a member of the armed forces (including paramilitary forces) of the Union, where the death of such member has occurred in the course of operational duties, in such circumstances and subject to such conditions, as may be prescribed80;] 81[(19A) the annual value of any one palace in the occupation of a Ruler, being a palace, the annual value whereof was exempt from income-tax before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, by virtue of the provisions of the Merged States (Taxation Concessions) Order, 1949, or the Part B States (Taxation
Concessions) Order, 1950, or, as the case may be, the Jammu and Kashmir (Taxation Concessions) Order, 1958: Provided that for the assessment year commencing on the 1st day of
April, 1972, the annual value of every such palace in the occupation82 of such Ruler during the relevant previous year shall be exempt from income-tax;]
83(20) the income of a local authority which is chargeable under the head 84[* * *] “Income from house property”, “Capital gains” or “Income from other sources” or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service 85[(not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area].
86[Explanation.—For the purposes of this clause, the expression “local authority” means—
(i) Panchayat as referred to in clause (d) of article 243 of the Constitution87; or
(ii) Municipality as referred to in clause (e) of article 243P of the Constitution88; or
(iii) Municipal Committee and District Board,
legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or
(iv) Cantonment Board as defined in section 389 of the Cantonments Act, 1924 (2 of 1924);] (20A) 89[***] 90[91(21) 92any income of a scientific research association for the time being
approved for the purpose of clause (ii) of sub-section (1) of section 35: Provided that the scientific research association—
S. 10(21) I.T. ACT, 1961
93[(b) does not invest or deposit its funds, other than—
(iii) any accretion to the shares, forming part of the corpus of the fund mentioned in sub-clause (i), by way of bonus shares allotted to the scientific research association;
(iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify,
for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11:]
94[Provided further that the exemption under this clause shall not be denied in relation to voluntary contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred to in clause (b) of the first proviso to this clause, subject to the condition that such voluntary contribution is not held by the scientific research association, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later:
Provided also] that nothing contained in this clause shall apply in relation to any income of the scientific research association, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business:]
95[Provided also that where the scientific research association is approved by the Central Government and subsequently that Government is satisfied that—
(iii) the activities of the scientific research association are not genuine; or
(iv) the activities of the scientific research association are not being carried out in accordance with all or any of the conditions subject to which such association was approved,
it may, at any time after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association, by order, withdraw the approval and forward a copy of the order withdrawing the approval to such association and to the Assessing Officer;]
(22) 96[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;] (22A) 97[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;] 98[(22B) any income of such news agency set up in India solely for collection
and distribution of news as the Central Government may, by notification99 in the Official Gazette, specify in this behalf: Provided that the news agency applies its income or accumulates it
for application solely for collection and distribution of news and does
not distribute its income in any manner to its members: Provided further that any notification issued by the Central Government under this clause shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification:]
1[Provided also that where the news agency has been specified, by notification, by the Central Government and subsequently that Government is satisfied that such news agency has not applied or accumulated or distributed its income in accordance with the provisions contained in the first proviso, it may, at any time after giving a reasonable opportunity of showing cause, rescind the notification and forward a copy of the order rescinding the notification to such agency and to the Assessing Officer;]
1. Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
S. 10(23) I.T. ACT, 1961
(23) 2[Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]
2. Prior to its omission, clause (23), as amended by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, substituted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1990 and further amended by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1990, Finance Act, 1992, w.r.e.f. 1-4-1990/w.e.f. 1-4-1992 and Finance Act, 2000, w.e.f. 1-4-2001, read as under :
‘(23) any income of an association or institution established in India which may be notified by the Central Government in the Official Gazette having regard to the fact that the association or institution has as its object the control, supervision, regulation or encouragement in India of the games of cricket, hockey, football, tennis or such other games or sports as the Central Government may, by notification in the Official Gazette, specify in this behalf : Provided that the association or institution shall make an application in the prescribed form and manner to the prescribed authority for the purpose of grant of the exemption, or continuance thereof, under this clause: Provided further that the Central Government may, before notifying the association or institution under this clause, call for such documents (including audited annual accounts) or information from the association or institution as it thinks necessary in order to satisfy itself about the genuineness of the activities of the association or institution and that Government may also make such inquiries as it may deem necessary in this behalf : Provided also that the association or institution,—
(iii) any accretion to the shares, forming part of the corpus of the fund mentioned in sub-clause (i), by way of bonus shares allotted to the association or institution;
(iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify,
for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11; and
(Contd. on p. 1.75)
3[4(23A) any income (other than income chargeable under the head 5[* * *] “Income from house property” or any income received for rendering any specific services or income by way of interest or dividends derived from its investments) of an association or institution established in India having as its object the control, supervision, regulation or encouragement of the profession of law, medicine, accountancy, engineering or architecture or such other profession6 as the Central Government may specify in this behalf, from time to time, by notification in the Official Gazette:
(i) the association or institution applies its income, or accumulates it for application, solely to the objects for which it is established; and
(Contd. from p. 1.74)
Provided also that the exemption under this clause shall not be denied in relation to any funds invested or deposited before the 1st day of April, 1989 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 if such funds do not continue to remain so invested or deposited after the 30th day of March, 1993 :
Provided also that the exemption under this clause shall not be denied in relation to voluntary contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred to in clause (b) of the third proviso to this clause, subject to the condition that such voluntary contribution is not held by the association or institution, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later : Provided also that nothing contained in this clause shall apply in relation to any income of the association or institution, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business : Provided also that any notification issued by the Central Government under this clause in relation to any association or institution shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued), as may be specified in the notification*;’ *For approved sports associations/institutions, see Taxmann’s Direct Taxes Circulars.
S. 10(23AAA) I.T. ACT, 1961
(ii) the association or institution is for the time being approved7 for the purpose of this clause by the Central Government by general or special order:]
8[Provided further that where the association or institution has been approved by the Central Government and subsequently that Government is satisfied that—
it may, at any time after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association or institution, by order, withdraw the approval and forward a copy of the order withdrawing the approval to such association or institution and to the Assessing Officer;]
9[(23AA) any income received by any person on behalf of any Regimental Fund or Non-Public Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependants;]
10[(23AAA) any income received by any person on behalf of a fund established, for such purposes as may be notified11 by the Board in the Official Gazette, for the welfare of employees or their dependants and of which fund such employees are members if such fund fulfils the following conditions, namely :—