LegalWalaKart CA Firm
Login
LegalWalaKart CA Firm

ITA Chapter 13

Determination of tax where total income includes income on which no tax is payable

  1. Where there is included in the total income of an assessee any income on which no income-tax is payable under the provisions of this Act, the assessee shall be entitled to a deduction, from income-tax with which he is chargeable on his total income, of an amount equal to the income-tax calculated at the average rate of income-tax on the amount on which no income-tax is payable.

Tax on accumulated balance of recognised provident fund

  1. Where the accumulated balance due to an employee participating in a recognised provident fund is included in his total income, owing to the provisions of paragraph 8 of Part A of Schedule XI not being applicable, the Assessing Officer shall calculate the total of the various sums of tax as per the provisions of paragraph 9 thereof.

Tax in case of block assessment of search cases

  1. Irrespective of anything contained in any other provisions of this Act, the total undisclosed income of the block period, determined under section 294 shall be chargeable to tax at the rate of 60%.
  2. The tax chargeable under sub-section (1) shall be increased by a surcharge, if any, levied by any Central Act.

Tax on income from Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer

  1. Where the total income of an assessee, being an individual, who is a resident and an employee of an Indian company engaged in specified knowledge based industry or service or an employee of its subsidiary engaged in specified knowledge based industry or service (hereafter in this section referred to as the resident employee), includes income specified in column B of the Table below, the income-tax payable shall be the aggregate of income-tax computed at the rate specified in the column C applied on the corresponding income specified in column B.
  2. Where the gross total income of the resident employee—
    1. consists only of income by way of dividends in respect of Global Depository Receipts referred to in sub-section (1) (Table: Sl. No. 1), no deduction shall be allowed to him under any other provision of this Act;
    2. includes any income referred to in sub-section (1) (Table: Sl. No. 1 or 2),—
      1. the gross total income shall be reduced by such income; and
      2. the deduction under any provision of this Act shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.
  3. The section 72(6) shall not apply for computation of long-term capital gains arising out of the transfer of long-term capital asset, being Global Depository Receipts referred to in sub-section (1) (Table: Sl. No. 2).
  4. For the purposes of this section,—
    1. “Global Depository Receipts” means any instrument in the form of a depository receipt or certificate (by whatever name called) created by the Overseas Depository Bank outside India or in an International Financial Services Centre and issued to investors against the issue of—
      1. ordinary shares of issuing company, being a company listed on a recognised stock exchange in India; or
      2. foreign currency convertible bonds of issuing company; or
      3. ordinary shares of issuing company, being a company incorporated outside India, if such depository receipt or certificate is listed and traded on any International Financial Services Centre.
    2. “information technology service” means any service which results from the use of any information technology software over a system of information technology products for realising value addition;
    3. “information technology software” means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form and capable of being manipulated or providing inter-activity to a user, by means of an automatic data processing machine falling under heading information technology products but does not include non-information technology products;
    4. “Overseas Depository Bank” means a bank authorised by the issuing company to issue Global Depository Receipts against issue of Foreign Currency Convertible Bonds or ordinary shares of the issuing company;
    5. “specified knowledge based industry or service” means—
      1. information technology software; or
      2. information technology service; or
      3. entertainment service; or
      4. pharmaceutical industry; or
      5. bio-technology industry; or
      6. any other industry or service, as specified by the Central Government, by notification;
    6. “subsidiary” shall have the same meaning as assigned to it in section 2(87) of the Companies Act, 2013 (18 of 2013) and includes subsidiary incorporated outside India.

Tax on certain incomes

  1. Irrespective of anything contained in any other provision of this Act, where the total income of an assessee as mentioned in column B of the Table below, includes income of the nature specified in column C of the said Table, the income-tax payable by such assessee, for a tax year, shall be the aggregate of—
    1. income-tax calculated on income mentioned in column C, at the rate mentioned in column D, subject to the conditions specified in column E; and
    2. income-tax with which the assessee would have been chargeable had his total income been reduced by income mentioned in column C thereof.
  2. For the purposes of this section,—
    1. “carbon credit”, in respect of one unit, means reduction of one tonne of carbon dioxide emissions or emissions of its equivalent gases which is validated by the United Nations Framework on Climate Change and which can be traded in market at its prevailing market price;
    2. “computer resource” shall have the same meaning as assigned to it in section 2(1)(k) of the Information Technology Act, 2000 (21 of 2000);
    3. “developed” means at least 75% of the expenditure incurred in India by the eligible assessee for any invention in respect of which patent is granted under the Patents Act, 1970 (39 of 1970) (herein referred to as the Patents Act);
    4. “horse race” shall have the meaning assigned to it in section 94(6);
    5. “internet” means the combination of computer facilities and electro-magnetic transmission media including related equipment and software, comprising the interconnected worldwide network of computer networks that transmits information based on a protocol for controlling such transmission;
    6. “invention” shall have the same meaning as assigned to it in section 2(1)(j) of the Patents Act;
    7. “lump sum” includes an advance payment on account of such royalties which is not returnable;
    8. “online game” means a game that is offered on the internet and is accessible by a user through a computer resource including any telecommunication device;
    9. “patent” shall have the same meaning as assigned to it in section 2(1)(m) of the Patents Act;
    10. “patented article” and “patented process” shall have the same meanings as respectively assigned to them in section 2(1)(o) of the Patents Act;
    11. “patentee” means the person, being the true and first inventor of the invention, whose name is entered in the patent register as the patentee, as per the Patents Act, and includes every such person, being the true and first inventor of the invention, where more than one person is registered as patentee under that Act in respect of that patent;
    12. “royalty”, in respect of a patent, means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains” or consideration for sale of product manufactured with the use of patented process or the patented article for commercial use) for the—
      1. transfer of all or any rights (including the granting of a licence) in respect of a patent; or
      2. imparting of any information concerning the working of, or the use of, a patent; or
      3. use of any patent; or
      4. rendering of any services in connection with the activities referred to in sub-clauses (i) to (iii).
    13. “true and first inventor” shall have the same meaning as assigned to it in section 2(1)(y) of the Patents Act; and
    14. For the purposes of sub-section (1) (Table: Sl. No. 4), the term “transfer” as defined in section 2(109), shall apply to any virtual digital asset, whether capital asset or not.

Tax on income referred to in sections 102 to 106

  1. Where the total income of an assessee—
    1. includes any income referred to in section 102 or 103 or 104 or 105 or 106 and reflected in the return of income furnished under section 263; or
    2. determined by the Assessing Officer includes any income referred to in any of the said section 102 or 103 or 104 or 105 or 106, if such income is not covered under clause (a),
    the income-tax payable shall be the aggregate of—
    1. income-tax calculated on the income referred to in clauses (a) and (b), at the rate of 30%; and
    2. income-tax with which the assessee would have been chargeable had his total income been reduced by income referred to in clause (i).
  2. Irrespective of anything contained in this Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income referred to in sub-section (1)(a) and (b).

Tax on short-term capital gains in certain cases

  1. Where the total income of an assessee includes any income chargeable under the head “Capital gains”, arising from the transfer of a short-term capital asset—
    1. being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust; and
    2. the transaction of sale of such equity share or unit is chargeable to securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004),
    then, the tax payable by the assessee on the total income, subject to the provisions of sub-section (2), shall be the aggregate of—
    1. income-tax calculated on such short-term capital gains at the rate of 20%;
    2. income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee.
  2. In the case of an individual or a Hindu undivided family, being a resident, where the total income, as reduced by short-term capital gains computed under sub-section (1), is below the maximum amount which is not chargeable to income-tax, then—
    1. such short-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax; and
    2. the tax on the balance of such short-term capital gains shall be computed at the rate as applicable in sub-section (1)(i).
  3. The provisions of sub-section (1)(b) shall not apply to a transaction undertaken on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency.
  4. Where the gross total income of an assessee includes any short-term capital gains referred to in sub-section (1), the deduction under Chapter VIII shall be allowed from the gross total income as reduced by such capital gains.
  5. For the purposes of this section, the expression “equity oriented fund” shall have the meaning assigned to it in section 198.

Tax on long-term capital gains

  1. Where the total income of an assessee includes any income arising from the transfer of a long-term capital asset which is chargeable under the head “Capital gains”, the tax payable by the assessee on the total income, subject to sub-sections (2), (3) and (4), shall be the aggregate of—
    1. income-tax payable on the total income as reduced by such long-term capital gains, had the total income, as so reduced, been his total income; and
    2. income-tax calculated on such long-term capital gains at the rate of 12.5%.
  2. In the case of an individual or a Hindu undivided family, being a resident, where the total income as reduced by long-term capital gains computed under sub-section (1) is below the maximum amount which is not chargeable to income-tax, then—
    1. such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax; and
    2. the tax on the balance of such long-term capital gains shall be computed at the rate as referred in sub-section (1).
  3. In the case of an individual or a Hindu undivided family, being a resident, in the case of transfer of a long-term capital asset, being land or building, or both, which was acquired before the 23rd July, 2024, the excess income-tax computed as per the following formula shall be ignored:—

    E = A – B

    where—
    1. E = excess income-tax to be ignored;
    2. A = income-tax computed under sub-section (1)(b);
    3. B = income-tax computed under sub-section (1)(b) taking the rate as 20% and the capital gains is computed by taking the cost of acquisition as “indexed cost of acquisition” and the cost of improvement as “indexed cost of improvement”.
  4. In the case of an assessee being a non-resident (not being a company) or a foreign company, the long-term capital gains arising from the transfer of a capital asset, being unlisted securities or shares of a company not being a company in which the public are substantially interested, shall be computed without giving effect to the provisions under section 72(6).
  5. Where the gross total income of an assessee includes any income arising from the transfer of a long-term capital asset, the gross total income shall be reduced by such income and the deduction under Chapter VIII shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.
  6. For the purposes of this section,—
    1. “securities” shall have the same meaning as assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
    2. “listed securities” means the securities which are listed on any recognised stock exchange in India;
    3. “unlisted securities” means securities other than listed securities;
    4. “indexed cost of acquisition” and “indexed cost of improvement” shall have the meanings respectively assigned to them in section 72.

Tax on long-term capital gains in certain cases

  1. Irrespective of anything contained in section 197, the tax payable by an assessee on his total income shall be determined as per the provisions of sub-section (2), if—
    1. the total income includes any income chargeable under the head “Capital gains”;
    2. the capital gains arise from the transfer of a long-term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust;
    3. securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004) has—
      1. in a case where the long-term capital asset is in the nature of an equity share in a company, been paid on acquisition and transfer of such capital asset; or
      2. in a case where the long-term capital asset is in the nature of a unit of an equity oriented fund or a unit of a business trust, been paid on transfer of such capital asset.
  2. The tax payable by the assessee on the total income referred to in sub-section (1) shall be the aggregate of—
    1. income-tax calculated on such long-term capital gains exceeding ₹125000 at the rate of 12.5%; and
    2. income-tax payable on the total income as reduced by long-term capital gains referred to in sub-section (1) as if the total income so reduced were the total income of the assessee.
  3. In the case of an individual or a Hindu undivided family, being a resident, where the total income as reduced by long-term capital gains computed under sub-section (1) is below the maximum amount which is not chargeable to income-tax, then—
    1. such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax; and
    2. the tax on the balance of such long-term capital gains shall be computed at the rate as referred to in sub-section (2).
  4. The condition specified in sub-section (1)(c) shall not apply to a transfer undertaken on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transfer is received or receivable in foreign currency.
  5. The Central Government may, by notification, specify the nature of acquisition in respect of which the provisions of sub-section (1)(c)(i) shall not apply.
  6. Where the gross total income of an assessee includes any long-term capital gains referred to in sub-section (1), the deduction under Chapter VIII shall be allowed from the gross total income as reduced by such capital gains.
  7. Where the total income of an assessee includes any long-term capital gains referred to in sub-section (1), the rebate under section 156 shall be allowed from the income-tax on the total income as reduced by tax payable on such capital gains.
  8. For the purposes of this section, the expression “equity oriented fund” means a fund set up under a scheme of a mutual fund specified in Schedule VII (Table: Sl. No. 20 or 21) or under a scheme of an insurance company comprising unit linked insurance policies to which exemption in Schedule II (Table: Sl. No. 2) does not apply and—
    1. in a case where the fund invests in the units of another fund which is traded on a recognised stock exchange,—
      1. a minimum of 90% of the total proceeds of such fund is invested in the units of such other fund; and
      2. such other fund also invests a minimum of 90% of its total proceeds in the equity shares of domestic companies listed on a recognised stock exchange; and
    2. in any other case, a minimum of 65% of the total proceeds of such fund is invested in the equity shares of domestic companies listed on a recognised stock exchange,
    and, for the purposes of this clause—
    1. the percentage of equity shareholding or unit held in respect of the fund, shall be computed with reference to the annual average of the monthly averages of the opening and closing figures;
    2. in case of a scheme of an insurance company comprising unit linked insurance policies to which exemption in Schedule II (Table: Sl. No. 2) does not apply, the minimum requirement of 90% or 65%, as the case may be, is required to be satisfied throughout the term of such insurance policy.

Tax on income of certain manufacturing domestic companies

  1. Irrespective of anything contained in this Act, but subject to the provisions of Parts A, B, E and this Part (other than sections 200 and 201) of this Chapter, the income-tax payable in respect of the total income of a person, being a domestic company, for any tax year, shall, at the option of such person, be computed at the rate of 25% subject to the following conditions:—
    1. the company has been set-up and registered on or after the 1st March, 2016;
    2. the company is not engaged in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it; and
    3. the total income of the company has been computed—
      1. without any deduction under—
        1. section 45(2) or 47(1)(b);
        2. Chapter VIII-C, other than the provisions of section 146; or
        3. sections specified in section 205(1)(a) to (g);
      2. without set off of any loss carried forward from any earlier tax year, if such loss is attributable to any of the deductions referred to in sub-clause (i).
  2. The loss referred to in sub-section (1)(c)(ii) shall be deemed to have been given full effect to and no further deduction for such loss shall be allowed for any subsequent year.
  3. The provisions of this section shall not apply unless an option is exercised by the person in the manner as may be prescribed on or before the due date specified under section 263(1) for furnishing the first of the returns of income which such person is required to furnish and such option once exercised, shall apply to subsequent tax years.
  4. Once the option under sub-section (3) has been exercised for any tax year, it cannot be subsequently withdrawn for the same or any other tax year, except where the person exercises option under section 200.

Tax on income of certain domestic companies

  1. Irrespective of anything contained in this Act but subject to the provisions of Parts A, B, E and this Part (other than sections 199 and 201) of this Chapter, the income-tax payable for a tax year shall be at the rate of 22%, at the option of a person being a domestic company, in respect of the total income of such person computed in the following manner:—
    1. without any deduction under—
      1. section 45(2) or 47(1)(b); or
      2. Chapter VIII other than provisions of section 146 or 148; or
      3. sections specified in section 205(1)(a) to (g);
    2. without set off of any loss carried forward or depreciation from any earlier tax year, if such loss or depreciation is attributable to any of the deductions referred to in clause (a);
    3. without set off of any loss or allowance for unabsorbed depreciation deemed so under section 116, if such loss or depreciation is attributable to any of the deductions referred to in clause (a).
  2. Where the person fails to satisfy the requirements contained in sub-section (1) in any tax year, the option shall become invalid in respect of the said tax year and subsequent years and other provisions of the Act shall apply, as if the option had not been exercised for such tax year and for subsequent years.
  3. The loss and depreciation referred to in sub-section (1)(b) and (c) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year.
  4. In case of a person, having a Unit in the International Financial Services Centre, which has exercised option under sub-section (5), the requirements contained in sub-section (1) shall be modified to the extent that the deduction as referred to in section 147 shall be available to such Unit subject to fulfilment of the conditions contained in that section.
  5. The provisions of this section shall not apply unless the option is exercised by the person in such manner as may be prescribed on or before the due date specified under section 263(1) for furnishing the return of income and such option once exercised, shall apply to subsequent tax years.
  6. Once the option under this section has been exercised for any tax year, it shall not be subsequently withdrawn for the same or any other tax year.
  7. In case of a person, being a domestic company, where the option exercised by it under section 201, has been rendered invalid due to violation of the conditions contained in section 205(2)(b) or (c) or (d), such person may exercise the option under this section.

Tax on income of new manufacturing domestic companies

  1. Irrespective of anything contained in this Act, but subject to the provisions of Parts A, B, E and this Part (other than sections 199 and 200) of this Chapter, the income-tax payable in respect of the total income of an assessee, being a domestic company, specified in column B of the Table below, shall, at the option of such assessee, be computed at the rates specified in column C, if the conditions contained in column D thereof are fulfilled.
  2. The option under this section shall be exercised by the assessee in the manner prescribed subject to the following conditions:—
    1. it shall be exercised on or before the due date specified under section 263(1) for furnishing first of the returns of income for any tax year;
    2. such option, once exercised, shall apply to subsequent tax years;
    3. once the option has been exercised for any tax year, it shall not be subsequently withdrawn for the same or any other tax year; and
    4. where the assessee fails to fulfil the conditions contained in sub-section (1) (Table: Sl. No. 1.D) in any tax year,—
      1. the option shall become invalid in respect of such tax year and subsequent tax years; and
      2. the other provisions of this Act shall apply, as if the option had not been exercised for that tax year and subsequent tax years.
  3. For the purposes of sub-section (1), the total income of the assessee shall be computed,—
    1. without any deduction under—
      1. section 45(2) or 47(1)(b); or
      2. Chapter VIII other than section 146 or 148; or
      3. sections specified in section 205(1)(a) to (g);
    2. without set off of any loss or allowance for unabsorbed depreciation deemed so under section 116, if such loss or depreciation is attributable to any of the deductions referred to in clause (a).
  4. While computing the income of the assessee, the loss and depreciation, or both, as specified in sub-section (3)(b) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation, or both, shall be allowed for any subsequent year.
  5. In case of an amalgamation, option under this section shall remain valid in case of the amalgamated company only and if the conditions contained in sub-section (1) (Table: Sl. No. 1.D) are continued to be fulfilled by such company.

New tax regime for individuals, Hindu undivided family and others

  1. Irrespective of anything contained in this Act other than Chapter XVII-B but subject to Parts A, B, E and this Part of this Chapter, the income-tax payable by a person, being—
    1. an individual; or
    2. a Hindu undivided family; or
    3. an association of persons (other than a co-operative society); or
    4. a body of individuals, whether incorporated or not; or
    5. an artificial juridical person referred to in section 2(77)(g),
    in respect of the total income for a tax year, shall, unless the person exercises the option in the manner provided under sub-section (4), be computed at the rate of tax given in the following Table:—
  1. For the purposes of sub-section (1), the total income of the assessee shall be computed—
    1. without any exemption or deduction under—
      1. Schedule III (Table: Sl. No. 5 or 6 or 7 or 8 or 11 or 17);
      2. Schedule III (Table: Sl. No. 12 or 13) (other than those as may be prescribed for this purpose);
      3. 25[***]
      4. section 19(1) (Table: Sl. No. 1);
      5. section 22(1)(b), in respect of properties referred to in section 21(6);
      6. section 33(8);
      7. section 48;
      8. section 49;
      9. section 45(3)(a) or (b) or (c);
      10. section 46;
      11. section 47(1)(a); and
      12. Chapter VIII other than the provisions of section 124(1) and 124(2), or 125(2) or 146;
    2. without set off of—
      1. any loss carried forward or depreciation from any earlier tax year, if such loss or depreciation is attributable to any of the deductions referred to in clause (a); or
      2. any loss under the head “Income from house property” with any other head of income; and
    3. without any exemption or deduction for allowances or perquisite, called by any name, provided under any other law in force.
  2. The loss and depreciation referred to in sub-section (2)(b) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year.
  3. Nothing contained in sub-section (1) shall apply to a person, where an option is exercised by such person under this section, in such manner as may be prescribed, for any tax year, and such option is exercised,—
    1. in case of a person having income from business or profession,—
      1. on or before the due date specified under section 263(1) for furnishing the returns of income for such tax year;
      2. such option, once exercised, shall apply to subsequent tax years;
      3. such option, once exercised, may be withdrawn only once for a tax year other than the tax year for which it was exercised; and
      4. after such withdrawal, the person shall never be eligible to exercise the option under this sub-section, except where such person ceases to have any income from business or profession, and in such a case the option under clause (b) shall be available;
    2. in case of a person not having income from business or profession, along with the return of income to be furnished under section 263(1) for the tax year.
  4. In case of a person, having a Unit in the International Financial Services Centre, the provisions of sub-section (2) shall be modified to the extent that deduction under section 147 shall be available to such Unit subject to fulfilment of the conditions contained in that section.

Tax on income of certain resident co-operative societies

  1. Irrespective of anything contained in this Act but subject to the provisions of Part A, B, E and this Part (other than section 204) of this Chapter, the income-tax payable for a tax year shall be at the rate of 22%, at the option of a person being a co-operative society resident in India, in respect of the total income of such person computed in the following manner:—
    1. without any deduction under—
      1. Chapter VIII other than the provisions of section 146 or 150; or
      2. sections specified in section 205(1)(a) to (g);
    2. without set off of any loss carried forward or depreciation from any earlier tax year, if such loss or depreciation is attributable to any of the deductions referred to in clause (a).
  2. Where a person fails to satisfy the requirements contained in sub-section (1) in any tax year, the option shall become invalid in respect of the said tax year and subsequent tax years and other provisions of the Act shall apply, as if the option had not been exercised for such tax year and for subsequent tax years.
  3. The loss and depreciation referred to in clause (b) of sub-section (1) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent tax year.
  4. In case of a person, having a Unit in the International Financial Services Centre, which has exercised option under sub-section (5), the requirements contained in sub-section (1) shall be modified to the extent that the deduction under section 147 shall be available to such Unit subject to fulfilment of the conditions contained in the said section.
  5. The provisions of this section shall not apply unless the option is exercised by the person in the prescribed manner on or before the due date specified under section 263(1) for furnishing the return of income and such option once exercised shall apply to subsequent tax years.
  6. Once the option under this section has been exercised for any tax year, it shall not be subsequently withdrawn for the same or any other tax year.
  7. In case of an assessee, being a co-operative society, which has exercised option under sub-section (5), the requirements contained in sub-section (1) shall be modified to the extent that the deduction under section 149(2)(d)(ii) shall be available to such assessee as does not exceed the amount of dividend distributed by it to its members at least one month before the due date for filing the return of income under section 263(1).

Tax on income of certain new manufacturing co-operative societies

  1. Irrespective of anything contained in this Act but subject to the provisions of Part A, B, E and this Part (other than section 203) of this Chapter, the income-tax payable in respect of the total income of an assessee, being a co-operative society, resident in India, engaged in the business of manufacture or production of any article or thing, shall at the option of such assessee, be computed at the rates specified in column A of the said Table, if the conditions contained in column B thereof are fulfilled.
  2. The option under this section shall be exercised by the assessee in the manner as may be prescribed subject to the following conditions:—
    1. it shall be exercised on or before the due date specified under section 263(1) for furnishing the first of the returns of income for any tax year; and
    2. such option, once exercised, shall apply to subsequent tax years;
    3. once the option has been exercised for any tax year, it shall not be subsequently withdrawn for the same or any other tax year; and
    4. where the assessee fails to fulfil the conditions contained in sub-section (1) (Table: Sl. No. 1.B) in any tax year,—
      1. the option shall become invalid in respect of such tax year and subsequent tax years; and
      2. the other provisions of this Act shall apply, as if the option had not been exercised for that tax year and subsequent tax years.
  3. For the purposes of sub-section (1), the total income of the assessee shall be computed,—
    1. without any deduction under—
      1. Chapter VIII other than the provisions of section 146 or 150; or
      2. sections specified in section 205(1)(a) to (g);
    2. without set off of any loss carried forward or depreciation from earlier tax year, if such loss or depreciation is attributable to any of the deductions referred to in clause (a).
  4. While computing the income of the assessee, the loss and depreciation, or both, as specified in sub-section (3)(b) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation, or both, shall be allowed for any subsequent year.
  5. In case of an assessee, being a co-operative society, which has exercised option under sub-section (2), the requirements contained in sub-section (3) shall be modified to the extent that the deduction under section 149(2)(d)(ii) shall be available to such assessee as does not exceed the amount of dividend distributed by it to its members at least one month before the due date for filing the return of income under section 263(1).

Conditions for tax on income of certain companies and co-operative societies

  1. For the purposes of sections 199(1)(c)(i)(C), 200(1)(a)(iii), 201(3)(a)(iii), 203(1)(a)(ii) and 204(3)(a)(ii), the total income shall be computed without any deduction or exemption, under the following provisions:—
    1. section 33(8);
    2. section 45(3)(a) or (b) or (c);
    3. section 46;
    4. section 47(1)(a);
    5. section 48;
    6. section 49; and
    7. section 144.
  2. For the purposes of section 201 or 204, the following conditions shall apply to the assessee:—
    1. its business is not formed by splitting up, or the reconstruction, of a business already in existence, unless it is formed as a result of the re-establishment, reconstruction or revival of the business of any such undertaking as is referred to in section 140(4) in the circumstances and within the period specified in the said section;
    2. it does not use any machinery or plant, previously used for any purpose, other than—
      1. permitted machinery or plant used outside India;
      2. machinery or plant or any part thereof previously used for any purpose and the total value of such machinery or plant or any part thereof put to use by the assessee does not exceed 20% of the total value of the machinery or plant used by such assessee;
    3. in case of a domestic company, it does not use any building previously used as a hotel or a convention centre, in respect of which deduction under section 80-ID of the Income-tax Act, 1961 (43 of 1961) has been claimed and allowed;
    4. it is not engaged in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it,
    and, if any difficulty arises in fulfilling any of the conditions contained in clause (b) or (c) or (d), the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty and to promote manufacturing or production of article or thing using new plant and machinery.
  3. Every guideline issued by the Board under sub-section (2) shall be laid before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in such guideline or both Houses agree that the guideline, should not be issued, the guideline shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that guideline.
  4. For the purposes of sections 201 and 204,—
    1. where it appears to the Assessing Officer that, owing to the close connection between the person to which the said section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such business, then the Assessing Officer shall, in computing the profits and gains of such business for the purposes of this section, take profits as may be reasonably deemed to have been derived therefrom, and where the said arrangement involves a specified domestic transaction referred to in section 164, profits from such transaction shall be determined having regard to the arm’s length price as defined in section 173(a); and
    2. the amount, being profits in excess of the profits determined by the Assessing Officer under clause (a), shall be deemed to be the income of the person and shall be chargeable at the rates specified in section 201(1) [Table: Sl. No. 1.C(d)] or 204(1) [Table: Sl. No. 1.A(d)], as the case may be.
  5. For the purposes of this Part,—
    1. the business of manufacture or production of any article or thing shall include the business of generation of electricity but shall not include business of—
      1. development of computer software in any form or in any media; or
      2. mining; or
      3. conversion of marble blocks or similar items into slabs; or
      4. bottling of gas into cylinder; or
      5. printing of books or production of cinematograph film; or
      6. any other business as may be notified by the Central Government in this behalf;
    2. the expressions,—
      1. “hotel” and “convention centre” shall have the meanings respectively assigned to them in clause (b) and clause (a) of section 80-ID(6) of the Income-tax Act, 1961 (43 of 1961);
      2. “permitted machinery and plant used outside India” means the machinery or plant, which was previously used outside India by any other person, if the following conditions are fulfilled:—
        1. such machinery or plant was not, at any time previous to the date of the installation, used in India;
        2. such machinery or plant is imported into India from any country outside India; and
        3. no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period before the date of installation of machinery or plant by the person;
      3. “unabsorbed depreciation” shall have the meaning assigned to it in section 116(13)(e); and
      4. “Unit” shall have the same meaning as assigned to it in section 2(zc) of the Special Economic Zones Act, 2005 (28 of 2005).

Special provision for minimum alternate tax and alternate minimum tax

  1. Irrespective of anything contained in any other provision of this Act, where in the case of an assessee being a company, the income-tax payable on the total income as computed under this Act for a tax year is less than the minimum alternate tax payable for such tax year, then—
    1. the book profit shall be deemed to be the total income of that assessee for such tax year; and
    2. the assessee shall be liable to pay income-tax equal to the minimum alternate tax.
  2. For the purposes of clause (a), the expression “minimum alternate tax” means the amount of tax computed on the book profit—
    1. in case of a company being a unit located in an International Financial Services Centre and deriving its income solely in convertible foreign exchange, at the rate of 9%;
    2. in case of any other company, at a rate of 14%.
  3. For the purposes of this section, “book profit” means the profit as shown in the statement of profit and loss for the relevant tax year prepared as per clause (f), as increased by—
    1. income-tax paid or payable and the provision therefor, if any such amount is debited to the statement of profit and loss, where income-tax shall include—
      1. any interest charged under this Act;
      2. surcharge, if any, as levied under the Central Acts;
      3. Education Cess on income-tax, if any, as levied under the Central Acts; and
      4. Secondary and Higher Education Cess on income-tax, if any, as levied under the Central Acts;
    2. the amounts carried to any reserves, called by any name, if any such amount is debited to the statement of profit and loss;
    3. the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities, if any such amount is debited to the statement of profit and loss;
    4. the amount by way of provision for losses of subsidiary companies, if any such amount is debited to the statement of profit and loss;
    5. dividends paid or proposed, if any such amount is debited to the statement of profit and loss;
    6. expenditure relatable to any income to which provisions of section 11 apply or any expenditure out of regular income of a registered non-profit organisation referred in section 335, if any such amount is debited to the statement of profit and loss;
    7. depreciation, if any such amount is debited to the statement of profit and loss;
    8. deferred tax and the provision therefor, if any such amount is debited to the statement of profit and loss;
    9. the amount or amounts set aside as provision for diminution in the value of any asset, if any such amount is debited to the statement of profit and loss;
    10. the amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such asset, if any such amount is not credited to the statement of profit and loss;
    and as reduced by—
    1. the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st April, 1997 otherwise than by way of a debit to the statement of profit and loss), where—
      1. any such amount is credited to the statement of profit and loss; and
      2. the book profit of such year has been increased by those reserves or provisions out of which the said amount was withdrawn;
    2. income to which any of the provisions of section 11 apply or any regular income of a registered non-profit organisation referred in section 335, if any such amount is credited to the statement of profit and loss;
    3. depreciation debited to the statement of profit and loss excluding the depreciation on account of revaluation of assets;
    4. the amount withdrawn from revaluation reserve and credited to the statement of profit and loss, to the extent it does not exceed depreciation on account of revaluation of assets referred to in sub-clause (xiii);
    5. deferred tax, if any such amount is credited to the statement of profit and loss;
    6. loss brought forward (excluding depreciation) or unabsorbed depreciation, whichever is less, as per books of account, except, where either of such amount is nil, in case of a company other than the company referred to in clause (d)(vi) and (vii),
    and as further adjusted by the amounts referred to in clause (d).
  4. While computing the book profit under this section, the following amounts shall be further adjusted:—
    1. in case of a company being a member of association of persons or body of individuals having income being share of the assessee in the income of an association of persons or body of individuals, on which no income-tax is payable as per the provisions of section 310, then—
      1. the amount or amounts of expenditure relatable to such income if debited to the statement of profit and loss, is to be added; and
      2. the amount being income if credited to the statement of profit and loss, is to be reduced;
    2. in case of a foreign company having income accruing or arising from—
      1. capital gains arising on transactions in securities; or
      2. the interest, dividend, royalty or fees for technical services chargeable to tax at the rate or rates specified in Chapter XIII,
      and the income-tax payable thereon as per the provisions of this Act, other than the provisions of this Part, is at a rate less than the rate specified in clause (b), then—
      1. the amount or amounts of expenditure relatable to such income if debited to the statement of profit and loss, is to be added; and
      2. the amount being income if credited to the statement of profit and loss, is to be reduced;
    3. in case of a company, which has transferred any capital asset, being share of a special purpose vehicle to a business trust,—
      1. the following amounts, if debited to the statement of profit and loss, are to be added:—
        1. the amount representing the notional loss on transfer of such capital asset, to a business trust in exchange of units allotted by the trust referred to in section 70(1)(zi); or
        2. the amount representing the notional loss resulting from any change in carrying amount of the said units; or
        3. the loss on transfer of units referred to in section 70(1)(zi);
      2. the following amounts, if credited to the statement of profit and loss, are to be reduced:—
        1. the amount representing the notional gain on transfer of such capital asset, to a business trust in exchange of units allotted by the trust referred to in section 70(1)(zi); or
        2. the amount representing the notional gain resulting from any change in carrying amount of the said units; or
        3. the gain on transfer of units referred to in section 70(1)(zi);
    4. in case of a company that has transferred units referred to in section 70(1)(zi) and, where the gain or loss on such transfer has been computed by taking into account—
      1. the cost of the shares exchanged with units referred to in section 70(1)(zi); or
      2. the carrying amount of the shares at the time of exchange, if such shares are carried at a value other than the cost through statement of profit and loss,
      then, the gain on transfer of such units is to be added, and the loss on transfer of such units is to be reduced;
    5. in case of a company whose total income includes income by way of royalty in respect of a patent which is chargeable to tax under section 194(1)—
      1. the amount or amounts of expenditure relatable to such royalty income, if any such amount is debited to the statement of profit and loss, is to be added; and
      2. the income by way of such royalty, is to be reduced;
    6. in case of a company, where the Tribunal, on an application moved by the Central Government under section 241 of the Companies Act, 2013 (18 of 2013) has after suspension of the Board of Directors of such company has nominated new directors under section 242 of the said Act, the aggregate amount of unabsorbed depreciation and loss (excluding depreciation) brought forward of such company and its subsidiary and the subsidiary of such subsidiary, is to be reduced;
    7. in case of a company against whom corporate insolvency resolution process has been admitted by the Adjudicating Authority under section 7 or 9 or 10 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the aggregate amount of unabsorbed depreciation and loss (excluding depreciation) brought forward, is to be reduced;
    8. in case of a company being a sick industrial company under section 17(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), as it stood immediately before its repeal by the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (1 of 2004), the profits for the period commencing from the tax year in which such company has become a sick industrial company and ending with the tax year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses, is to be reduced;
    9. in case of a company, whose financial statements are drawn up in compliance with the Indian Accounting Standards specified in Annexure to the Companies (Indian Accounting Standards) Rules, 2015 made under the Companies Act, 2013 (18 of 2013), the amounts mentioned in column A of the Table below shall be added and the amounts mentioned in column B of the said Table below are to be reduced:—
  5. For the purposes of the Table in clause (d)(ix),—
    1. the amount referred to in columns A and B of serial number 1 of the said Table shall be the other comprehensive income in the statement of profit and loss under the head “Items that will not be re-classified to profit or loss”, excluding—
      1. revaluation surplus for assets as per the Indian Accounting Standards 16 and Indian Accounting Standards 38; or
      2. gains or losses from investments in equity instruments designated at fair value through other comprehensive income as per the Indian Accounting Standards 109,
      and the amount or the aggregate of the amounts referred to in sub-clause (i)(A) and (B) for the tax year or any of the preceding tax years, and relatable to such investment or asset, in the tax year in which the said investment or asset is retired, disposed, realised or otherwise transferred;
    2. the distribution referred to in columns A and B of serial number 2 of the said Table shall be the distribution of non-cash assets to shareholders in a demerger as per Appendix A of the Indian Accounting Standards 10;
    3. the amount referred to in columns A and B of serial number 4 of the said Table shall be the amount which is relatable to the asset or investment referred to in clause (t)(vi)(B) to (E) for the tax year in which such asset or investment is retired, disposed, realised or otherwise transferred;
    4. the amount referred to in columns A and B of serial number 5 of the said Table shall be the transition amount which is relatable to the foreign operations referred to in clause (t)(vi)(F) for the tax year in which such foreign operation is disposed or otherwise transferred.
  6. For the purposes of book profit under clause (c), every company shall prepare its statement of profit and loss for the relevant tax year in the following manner:—
    1. in case of an insurance or banking company, or a company engaged in the generation or supply of electricity, or any other class of company for which a form of financial statement has been specified under the enactment governing such class of company, as per the provisions of such enactment;
    2. in all other cases, as per the provisions of Schedule III to the Companies Act, 2013 (18 of 2013).
  7. While preparing the annual accounts including statement of profit and loss by the company, the—
    1. accounting policies;
    2. accounting standards adopted for preparing such accounts including statement of profit and loss; and
    3. method and rates adopted for calculating the depreciation,
    shall be the same as have been adopted for the purpose of preparing such accounts including statement of profit and loss and laid before the company at its annual general meeting as per the provisions of section 129 of the Companies Act, 2013 (18 of 2013), or correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including statement of profit and loss for, such financial year or part of such financial year falling within the relevant tax year, where the company has adopted or adopts the financial year which is different from the tax year under this Act.
  8. In the case of a resulting company, where the property and the liabilities of the undertaking or undertakings being received by it are recorded at values different from the values appearing in the books of account of the demerged company immediately before the demerger, any change in such value shall be ignored for the purpose of computation of book profit of the resulting company under this sub-section.
  9. In the case of an assessee being a company, where—
    1. there is an increase in book profit of the tax year due to income of past year or years included in the book profit on account of—
      1. an advance pricing agreement entered into by the assessee under section 168; or
      2. a secondary adjustment required to be made under section 170;
    2. the assessee has not utilised the credit of tax paid under section 115JAA of the Income-tax Act, 1961 (43 of 1961), in any subsequent tax year ending on or before the 31st March, 2026,
    the Assessing Officer shall, on an application made to him in this behalf by the assessee,—
    1. recompute the book profit of the past year or years and tax payable under this sub-section, if any, by the assessee during the tax year, in such manner as may be prescribed; and
    2. the provisions of section 287 shall, so far as may be, apply and the period of four years specified in sub-sections (7) and (8) of that section shall be reckoned from the end of the tax year in which the said application is received by the Assessing Officer.
  10. Irrespective of anything contained in any other provisions of this Act, no interest shall be payable to an assessee on the refund arising on account of clause (i).
  11. Nothing contained in clause (a) shall affect the determination of the amounts, in relation to the relevant tax year, to be carried forward to the subsequent year or years under the provisions of section 33(11) or 111 or 112(1) or 113 or 115.
  12. The provisions of this sub-section shall not be applicable to any assessee, being a foreign company, where—
    1. the assessee is a resident of a country or a specified territory with which India has an agreement referred to in section 159(1) or the Central Government has adopted any agreement under section 159(2) and the assessee does not have a permanent establishment in India as per the provisions of such agreement; or
    2. the assessee is a resident of a country with which India does not have an agreement of the nature referred to in sub-clause (i) and the assessee is not required to seek registration under any law for the time being in force relating to companies; or
    3. the total income of the assessee comprises solely of profits and gains from business referred to in section 61(2), and such income has been offered to tax at the rates specified in the respective sections.
  13. Where any tax is paid under clause (a) by an assessee, then, credit shall be allowed to him of an amount in excess of such minimum alternate tax over the tax payable by such assessee on his total income computed as per the other provisions of this Act for that tax year.
  14. While allowing credit under clause (m),—
    1. no interest shall be payable on the tax credit so allowed; and
    2. where tax credit in respect of any income-tax paid in any country or specified territory outside India, under section 159(1) or (2), allowed against the minimum alternate tax exceeds such tax credit admissible against the tax payable by the assessee on its income as per the other provisions of this Act, then, while computing the credit under clause (m), such excess amount shall be ignored.
  15. The tax credit determined under clause (m) shall be carried forward, and—
    1. set off in a year, when tax payable on the total income computed as per the provisions of this Act exceeds the minimum alternate tax; and
    2. such set off in respect of brought forward tax credit shall be allowed for any tax year to the extent of the difference between the tax on his total income and the minimum alternate tax for that tax year;
    3. such carry forward of tax credit shall not be allowed beyond the fifteenth tax year immediately succeeding the tax year in which the tax credit becomes allowable under clause (m).
  16. Where as a result of any order passed under this Act, tax payable under this Act is decreased or increased, as the case may be, tax credit allowed under clause (m) shall also be decreased or increased accordingly.
  17. The provisions of this section shall not apply to a person,—
    1. being a company having income accruing or arising from life insurance business referred to in section 194(1) (Table: Sl. No. 6); or
    2. who has exercised the option under section 200(5) or section 201(2).
  18. In case of conversion of a private company or unlisted public company into a limited liability partnership under the Limited Liability Partnership Act, 2008 (6 of 2009), the provisions of clauses (m) to (p) shall not apply to the successor limited liability partnership.
  19. Every company to which this section applies, shall furnish a report in the prescribed form from an accountant, certifying that the book profit in its case has been computed as per the provisions of this section—
    1. before the specified date referred to in section 63; or
    2. along with the return of income furnished in response to a notice under section 268(1).
  20. For the purposes of this sub-section,—
    1. “Adjudicating Authority” shall have the same meaning as assigned to it in section 5(1) of the Insolvency and Bankruptcy Code, 2016 (31 of 2016);
    2. “convergence date” means the first day of the first Indian Accounting Standards reporting period as defined in the Indian Accounting Standards 101;
    3. “net worth” shall have the meaning assigned to it in section 3(1)(ga) of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), as it stood immediately before its repeal by the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (1 of 2004);
    4. “private company” and “unlisted public company” shall have the meanings respectively assigned to them in the Limited Liability Partnership Act, 2008 (6 of 2009);
    5. “securities” shall have the same meaning as assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
    6. “transition amount” means the amount or the aggregate of the amounts adjusted in the other equity (excluding capital reserve and securities premium reserve) on the convergence date, but not including the following:—
      1. amount or aggregate of the amounts adjusted in the other comprehensive income on the convergence date which shall be subsequently re-classified to the profit or loss;
      2. revaluation surplus for assets as per the Indian Accounting Standards 16 and Indian Accounting Standards 38 adjusted on the convergence date;
      3. gains or losses from investments in equity instruments designated at fair value through other comprehensive income as per the Indian Accounting Standards 109 adjusted on the convergence date;
      4. adjustments relating to items of property, plant and equipment and intangible assets recorded at fair value as deemed cost as per paragraphs D5 and D7 of the Indian Accounting Standards 101 on the convergence date;
      5. adjustments relating to investments in subsidiaries, joint ventures and associates recorded at fair value as deemed cost as per paragraph D15 of the Indian Accounting Standards 101 on the convergence date; and
      6. adjustments relating to cumulative translation differences of a foreign operation as per paragraph D13 of the Indian Accounting Standards 101 on the convergence date.
    7. “Tribunal” shall have the same meaning as assigned to it in section 2(90) of the Companies Act, 2013 (18 of 2013);
    8. “Unit” means a unit established in an International Financial Services Centre;
    9. “year of convergence” means the tax year within which the convergence date falls; and
    10. a company shall be a subsidiary of another company, if such other company holds more than half in the nominal value of equity share capital of the company.
    1. Irrespective of anything contained in this Act, where the regular income-tax payable for a tax year by a person, other than a company, is less than the alternate minimum tax payable for such tax year, then,—
      1. the adjusted total income shall be deemed to be the total income of that person for such tax year; and
      2. he shall be liable to pay income-tax equal to the alternate minimum tax.
    2. For the purposes of this sub-section,—
      1. “adjusted total income” shall be the total income before giving effect to clause (a), as increased by deductions claimed, if any, under—
        1. any section (other than section 149) included in Chapter VIII-C;
        2. section 46 as reduced by depreciation allowable as per the provisions of section 33, as if no deduction was allowed in respect of the assets on which the deduction under that section is claimed;
      2. “alternate minimum tax” means the amount of tax computed on adjusted total income,—
        1. in case of an assessee being a unit located in an International Financial Services Centre and deriving its income solely in convertible foreign exchange, at the rate of 9%;
        2. in case of an assessee being a co-operative society, at the rate of 15%;
        3. in any other case, at a rate of 18.5%.
      3. “regular income-tax” means the income-tax payable for a tax year by a person on his total income in accordance with the provisions of this Act other than the provisions of this sub-section;
      4. “Unit” means a unit established in an International Financial Services Centre.
    3. The provisions of this sub-section shall apply to a person who has claimed any deduction under any section (other than section 149) included in Chapter VIII-C or section 46.
    4. The provisions of this sub-section shall not apply to—
      1. a person, who has exercised the option under section 203(5) or section 204(2);
      2. a person, whose income-tax payable in respect of the total income of such person is computed under section 202(1);
      3. an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person referred to in section 2(77)(g), if the adjusted total income of such person does not exceed twenty lakh rupees; or
      4. any specified fund referred to in Schedule VI (Note 1).
    5. Where any tax is paid under clause (a) by an assessee, then, credit shall be allowed to him of an amount which shall be the excess of alternate minimum tax over the regular income-tax payable of that year.
    6. While allowing credit under clause (e),—
      1. no interest shall be payable on the tax credit so allowed; and
      2. where tax credit in respect of any income-tax paid in any country or specified territory outside India, under section 159(1) or (2), allowed against the alternate minimum tax payable exceeds such tax credit admissible against the regular income-tax payable by the assessee, then, while computing the credit under clause (e), such excess amount shall be ignored.
    7. Tax credit determined under clause (e) shall be carried forward and—
      1. set off in a year, when the regular income-tax exceeds the alternate minimum tax; and
      2. such set off in respect of brought forward tax credit shall be allowed for any tax year to the extent of the excess of regular income-tax over the alternate minimum tax for that tax year,
      and such carry forward shall not be allowed beyond the fifteenth tax year immediately succeeding the tax year in which the tax credit becomes allowable under clause (e).
    8. Where as a result of any order passed under this Act, tax payable under this Act is reduced or increased, tax credit allowed under clause (e) shall also be reduced or increased accordingly.
    9. Irrespective of anything contained in clause (c) or clause (d), the credit for tax paid under clause (a) shall be allowed in accordance with the provisions of clauses (e), (f), (g) and (h).
    10. Every person to which this sub-section applies, shall furnish a report in the prescribed form from an accountant, certifying that the adjusted total income and alternate minimum tax in its case have been computed as per the provisions of this sub-section before the specified date referred to in section 63.

    3. Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee mentioned in this section

    E.—Special provisions relating to non-residents and foreign companies

Tax on dividends, royalty and fees for technical service in case of foreign companies

  1. The income-tax payable on the total income of a non-resident (not being a company) or of a foreign company, which includes any income specified in the column B of the Table below, shall be the aggregate of income-tax computed at the rate specified in the column C applied on the corresponding income specified in column B.
  2. Where the total income of a non-resident (not being a company) or of a foreign company, includes any income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made with Government or an Indian concern after the 31st March, 1976, other than income referred to in section 59(1), and—
    1. the agreement is approved by the Central Government where such agreement is with an Indian concern; or
    2. where the agreement relates to a matter included in the industrial policy, for the time being in force, of the Government of India, it is as per that policy,
    then, subject to the provisions of sub-section (3), the income-tax payable shall be the aggregate of income-tax computed at the rate specified in the column C applied on the corresponding income specified in column B of the Table below:—
  3. Where the royalty referred to in sub-section (2) is in consideration for the transfer or grant of all or any rights (including the granting of a licence)—
    1. in respect of copyright in any book to an Indian concern; or
    2. in respect of any computer software to a person resident in India,
    then the provisions of sub-section (2) shall apply in relation to such royalty without application of provisions of clause (a) or (b) of that sub-section.
  4. For the purposes of this section,—
    1. “computer software” means any computer programme recorded on any disc, tape, perforated media or other information storage device; or any customised electronic data or any product or service of similar nature as may be notified by the Board, which is transmitted or exported from India to a place outside India by any means;
    2. “fees for technical services” shall have the meaning assigned to it in section 9;
    3. “royalty” shall have the meaning assigned to it in section 9.
  5. No deduction in respect of any expenditure or allowance shall be allowed under sections 28 to 58, 60 and 61 and section 93 for computing income referred to in sub-sections (1) and (2).
  6. Where the gross total income of an assessee—
    1. consists only of the income referred to in sub-section (1) (Table: Sl. No. 1 to 7), no deduction shall be allowed under Chapter VIII and Schedule XV;
    2. includes any income referred to in sub-section (1) (Table: Sl. No. 1 to 7), the gross total income shall be reduced by such income and the deduction under Chapter VIII shall be allowed as if such reduced amount were the gross total income of the assessee.
  7. The provisions of sub-section (6) shall not apply to a deduction allowed to Unit of an International Financial Services Centre under section 147.
  8. It shall not be necessary for an assessee to furnish a return of income under section 263(1), if—
    1. the total income during the tax year consisted only of income referred to in sub-section (1) (Table: Sl. Nos. 1 to 7) and sub-section (2) (Table: Sl. Nos. 1 and 2); and
    2. the tax deductible at source under the provisions of Chapter XIX-B has been deducted from such income at a rate not less than the rate specified in sub-sections (1) and (2).

Tax on income from units purchased in foreign currency or capital gains arising from their transfer

  1. The income-tax payable on the total income of an assessee, being an overseas financial organisation (herein referred to as Offshore Fund), which includes income specified in column B of the Table below, shall be the aggregate of income-tax computed at the rate specified in the column C applied on the corresponding income specified in column B.
  2. Where the gross total income of the Offshore Fund—
    1. consists only of income from units or income by way of long-term capital gains arising from the transfer of units, or both, no deduction shall be allowed to the assessee under sections 28 to 58, 60 and 61 or section 93(1)(a) or (e) or under Chapter VIII;
    2. includes any income referred to in clause (a),—
      1. the gross total income shall be reduced by such income; and
      2. the deduction under Chapter VIII shall be allowed as if the gross total income so reduced were the gross total income of the assessee.
  3. For the purposes of this section,—
    1. “overseas financial organisation” means any fund, institution, association or body, whether incorporated or not, established under the laws of a country outside India,—
      1. which has entered into an arrangement for investment in India with any public sector bank or public financial institution or a mutual fund specified in Schedule VII (Table: Sl. No. 20 or 21); and
      2. such arrangement is approved by the Securities and Exchange Board of India, established under the Securities and Exchange Board of India Act, 1992 (15 of 1992), for this purpose;
    2. “public financial institution” shall have the same meaning as assigned to it in section 2(72) of the Companies Act, 2013 (18 of 2013);
    3. “unit” means unit of,—
      1. a mutual fund specified in Schedule VII (Table: Sl. No. 20 or 21); or
      2. the Unit Trust of India.

Tax on income from bonds or Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer

  1. The income-tax payable, on the total income of an assessee, being a non-resident, which includes income specified in column B of the Table below, shall be the aggregate of income-tax computed at the rate specified in the column C applied on the corresponding income specified in column B.
  2. Where the gross total income of the non-resident—
    1. consists only of income by way of interest or dividends in respect of—
      1. bonds referred to in sub-section (1) (Table: Sl. No. 1); or
      2. Global Depository Receipts referred to in sub-section (1) (Table: Sl. No. 2),
      no deduction shall be allowed under sections 28 to 58, 60 and 61 or section 93(1)(a) or (e) or under Chapter VIII;
    2. includes any income referred to in sub-section (1) (Table: Sl. No. 1) to (Table: Sl. No. 3),—
      1. the gross total income shall be reduced by such income; and
      2. the deduction under Chapter VIII shall be allowed as if the gross total income so reduced were the gross total income of the assessee.
  3. The provisions of section 72(6) shall not apply for computation of long-term capital gains arising out of the transfer of long-term capital asset being bonds or Global Depository Receipts referred to in sub-section (1) (Table: Sl. No. 3).
  4. It shall not be necessary for a non-resident to furnish a return of his income under section 263(1), if—
    1. his total income during the tax year consisted only of income referred to in sub-section (1) (Table: Sl. No. 1) and (Table: Sl. No. 2); and
    2. the tax deductible at source under the provisions of Chapter XIX-B has been deducted from such income.
  5. Where the assessee acquired Global Depository Receipts or bonds in an amalgamated or resulting company by virtue of his holding Global Depository Receipts or bonds in the amalgamating or demerged company, as the case may be, as per the provisions of sub-section (1), the provisions of that sub-section shall apply to such Global Depository Receipts or bonds.
  6. For the purposes of this section,—
    1. “approved intermediary” means an intermediary which is approved as per a scheme as may be notified by the Central Government; and
    2. “Global Depository Receipts” shall have the meaning assigned to it in section 193(4)(a).

Tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer.

  1. The income-tax payable on the total income of an assessee, being a specified fund or Foreign Institutional Investor, which includes income referred to in column B of the Table below, shall be the aggregate of income-tax computed at the rate specified in the column C applied on the corresponding income specified in column B.
  2. In case of specified fund, provisions of this section shall apply only to the extent of income that is attributable to units held by non-resident (not being a permanent establishment of such non-resident in India) calculated in the manner as may be prescribed, irrespective of the provisions of sub-section (1).
  3. Irrespective of anything contained in sub-section (1), where the specified fund is an investment division of an offshore banking unit, the provisions of this section shall apply to the extent of income that is attributable to such investment division referred to in clause (g)(ii) of Note 1 of the Table in Schedule VI as a Category-I portfolio investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), calculated in such manner as may be prescribed.
  4. Where the gross total income of the specified fund or Foreign Institutional Investor—
    1. consists only of income in respect of securities referred in sub-section (1) (Table: Sl. No. 1), no deduction shall be allowed to it under sections 28 to 58, 60 and 61 or section 93(1)(a) or (e) or under Chapter VIII;
    2. includes any income referred to in sub-section (1) (Table: Sl. No. 1) to (Table: Sl. No. 5),—
      1. the gross total income shall be reduced by the amount of such income; and
      2. the deduction under Chapter VIII shall be allowed as if the gross total income as so reduced were the gross total income of the specified fund or Foreign Institutional Investor.
  5. The provisions of section 72(6) shall not apply for the computation of capital gains arising out of the transfer of securities referred to in sub-section (1) (Table: Sl. No. 2) to (Table: Sl. No. 5).
  6. For the purposes of this section,—
    1. “Foreign Institutional Investor” means such investor as specified in a notification by the Central Government;
    2. “permanent establishment” shall have the meaning assigned to it in section 173(c);
    3. “securities” shall have the same meaning as assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
    4. “specified fund” shall have the meaning assigned to it in Schedule VI [Note 1].

Tax on non-resident sportsmen or sports associations

  1. Where the total income of an assessee,—
    1. being a sportsman (including an athlete), who is not a citizen of India and is a non-resident, includes any income received or receivable by way of—
      1. participation in India in any game [other than a game the winnings from which are taxable as specified in section 194(1) (Table: Sl. No. 1)] or sport; or
      2. advertisement; or
      3. contribution of articles relating to any game or sport in India in newspapers, magazines or journals; or
    2. being a non-resident sports association or institution, includes any amount guaranteed to be paid or payable to such association or institution in relation to any game, other than a game the winnings from which are taxable as specified in section 194(1) (Table: Sl. No. 1) or sport played in India; or
    3. being an entertainer, who is not a citizen of India and is a non-resident, includes any income received or receivable from his performance in India,
    then, the aggregate of income-tax payable by the assessee shall be computed at the rate specified in the column C applied on the corresponding income specified in column B:—
  2. No deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the income referred to in sub-section (1).
  3. It shall not be necessary for the assessee to furnish a return of his income under section 263(1), if—
    1. his total income during the tax year consisted only of income referred to in sub-section (1); and
    2. the tax deductible at source under the provisions of Chapter XIX-B has been deducted from such income.

Interpretation

  1. In sections 213 to 218,—
    1. “foreign exchange asset” means any specified asset which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange;
    2. “investment income” means any income derived from a foreign exchange asset;
    3. “long-term capital gains” means income chargeable under the head “Capital gains” relating to a capital asset, being a foreign exchange asset which is not a short-term capital asset;
    4. “non-resident Indian” means an individual, who is not a resident and is—
      1. a citizen of India; or
      2. a person of Indian origin.
    5. “specified asset” means any of the following assets:—
      1. shares in an Indian company; or
      2. debentures issued by an Indian company which is not a private company as defined in the Companies Act, 2013 (18 of 2013); or
      3. deposits with an Indian company which is not a private company as defined in the Companies Act, 2013 (18 of 2013); or
      4. any security of the Central Government as defined in section 2(f) of the Government Securities Act, 2006 (38 of 2006); or
      5. such other assets as the Central Government may specify in this behalf by notification.

Search for your query