About the Author #! 2AVI #HHAWCHHARIA FROM 3URAT IS AN !LL )NDIA 2ANKHOLDER IN #HARTERED !CCOUNTANCY )#!) #OMPANY 3ECRETARIES )#3) AND #OST AND -ANAGEMENT !CCOUNTANCY )#-!) EXAMS (E IS ONE OF )NDIA S LEADING EDUCATIONIST IN PROFESSIONAL STUDIES OF #! AND #-! )N HIS CLASSES AT 3URAT COMPLETE SYSTEMATIC COACHING FOR ALL SUBJECTS IS PROVIDED FOR ALL THE THREE LEVELS OF #! AND #-! BOTH FACE TO FACE AND /NLINE MODE -ENTORED MORE THAN STUDENTS WHO HAVE QUALIlED AS #! WITH !LL )NDIA 2ANKS AND TIMES IN !)2 TO CA RAVI CHHAWCHHARIA (CA, CS, CMA, B.Com., LL.B., MBA(Fin.), CPISM, PGDFM) [CA Mentor, Author and Founder of CA STARS]
YEARS OF RICH TEACHING EXPERIENCE IN THE SUBJECTS OF $IRECT 4AXES &INANCIAL -ANAGEMENT AND "USINESS ,AWS !UTHORED SEVERAL BOOKS ON #! INCLUDING @$IRECT 4AX ,AWS @&INANCIAL -ANAGEMENT @#OST AND -ANAGEMENT !CCOUNTING PUBLISHED BY 4AXMANN ACROSS )NDIA 3PEAKER AT VARIOUS FORUMS OF )#!) )#-!) )#3) AND VARIOUS 5NIVERSITIES
)N LAST YEARS HIS STUDENTS ACHIEVED TIMES )NDIA &IRST 2ANKS IN #! &INAL !)2 IN $EC !)2 IN .OV AND !)2 IN *UNE IN #! &INAL #! 2AVI #HHAWCHHARIA ALSO RUNS A SPECIAL #! 34!23 PROGRAMME WHERE COMPLETE FREE #! EDUCATION FOR FULL YEARS IS PROVIDED TO TO SELECTED STUDENTS WHO ARE lNANCIALLY UNDERPRIVILEGED BUT ARE TALENTED 4HEY ARE ALSO PROVIDED FREE ACCOMMODATION AND OTHER FACILITIES IN 3URAT UNDER THIS PROGRAM .O DONATION OR ANY lNANCIAL ASSISTANCE IS TAKEN FROM ANYONE FOR THIS PROGRAMME OF HIS #! 34!23 STUDENTS ARE PASSING THE EXAMS YEAR AFTER YEAR AND ARE NOW SUCCESSFULLY LEADING IN CORPORATES OR ENGAGED IN #! PRACTICE !WARDED WITH g$R 3ARVEPALLI 2ADHAKRISHNAN %DUCATION %XCELLENCY !WARD g"EST 3PEAKERg BY )#!) g3URAT NI 3HAANg BY $IVYA "HASKAR @"EST #! 4EACHER BY 3'##) @%XCELLENCE IN #! %DUCATION !WARD AND ALSO CONFERRED AS A g3UPER g 4EACHER BY I"(UBS
I-5
Preface About Direct Taxes: 4HE SUBJECT OF $IRECT 4AXES IS UNDOUBTEDLY TECHNICAL INTRICATE AND VAST %SPECIALLY IN )NDIA IT IS SAID THAT MORE THE GOVERNMENT TRIES TO MAKE THE DIRECT TAX LAWS SIMPLE MORE IT GETS COMPLICATED "UT ONCE A PERSON GETS A RIGHT APPROACH TO DEAL WITH THE SUBJECT HE WILL NATURALLY DEVELOP GREAT INTEREST IN IT 4HE PAPER OF $IRECT 4AX ,AWS IN #! &INAL IS BASED ON THE PRACTICAL APPLICATION OF THE SUBJECT IN A HOLISTIC APPROACH AND TESTS THE ANALYTICAL SKILLS OF THE STUDENTS "UT MANY STUDENTS JUST GO ON READING THE VAST CONTENTS WITHOUT TAKING OUT THE CRUX WHICH COULD BE USED IN THEIR EXAMINATION AND FURTHER IN PROFESSIONAL CAREER $IRECT TAXES REQUIRE ANALYSIS IN DEPTH AND LOGICAL STUDY 3O A BALANCED COMPLETE UPDATED KNOWLEDGE WITH ANALYTICAL WRITING IS MUST FOR GETTING SUCCESS IN THE EXAMINATION 4HIS BOOK GIVES A PHENOMENAL STUDY OF THE ENTIRE SYLLABUS FOR THE STUDENTS OF #! &INAL AND OTHER PROFESSIONAL COURSES ON THE SUBJECT OF $IRECT 4AX ,AWS AND )NTERNATIONAL 4AXATION 4HE MAIN IDEA BEHIND THIS BOOK WAS TO STRIKE A PERFECT BALANCE BETWEEN DETAILED STUDIES AND SUMMARISED APPROACH Content of this book: Detailed Index: 'IVEN AT THE BEGINNING OF THE BOOK THE DETAILED INDEX WILL HELP STUDENTS TO EASILY NAVIGATE THROUGH THE ARRANGEMENT OF THE SECTIONS AND OTHER DETAILS GIVEN IN THE BOOK Provisions: 4HE MOST IMPORTANT FEATURE OF THIS BOOK IS THE WAY THE PROVISIONS HAVE BEEN ELUCIDATED +EEPING IN TACT THE TECHNICAL LANGUAGE THE PROVISIONS HAVE BEEN WRITTEN IN A LUCID MANNER ) WILL STRONGLY RECOMMEND STUDENTS TO ALSO REFER THE BARE )NCOME 4AX !CT ALONG WITH THIS BOOK Judicial Decisions: 4HE PROVISIONS ARE FOLLOWED BY LANDMARK JUDGMENTS AND ALSO THE LATEST JUDGMENTS COVERED BY )#!) FOR #! &INAL !TTENTION
Judicial Decisions WHICH ARE EITHER landmark or prescribed by ICAI BEEN HIGHLIGHTED
IN "OLD 5NDERLINE AND THE NAME OF SUCH CASE LAWS ARE MENTIONED BEFORE THE FACTS AND DECISION OF THE CASE
)N OTHER Judicial Decisions, WHERE ONLY THE POINT DECIDED IS RELEVANT BUT STUDENTS ARE NOT
EXPECTED TO REMEMBER THE NAMES OF SUCH CASES THE CASE NAMES ARE GIVEN AFTER DISCUSSING THE POINT OF THE CASE AND HAVE NOT BEEN HIGHLIGHTED Practical Questions: -OST APPROPRIATELY FRAMED PRACTICAL QUESTIONS WITH UPDATED SOLUTIONS HAVE BEEN DULY INCORPORATED AT TWO PLACES I QUESTIONS BASED ON A PARTICULAR SECTION ARE GIVEN BELOW THE PROVISIONS AND II QUESTIONS BASED ON MORE THAN ONE PROVISIONS ARE GIVEN AT THE END OF THE #HAPTER UNDER THE h0RACTICAL 1UESTIONSv SEGMENT
I-7
Acknowledgement 7RITING BOOK ON SUCH A MAMMOTH SUBJECT ALWAYS NEED SUPPORT AND INSPIRATION ) AM GRATEFUL TO MY PARENTS FAMILY AND COLLEAGUES FOR THEIR SUPPORT AND INSPIRATION I acknowledge the sincere efforts of CA Nozer Shroff and CA Yash Doctor for their valuable inputs for this book. ) AM ALSO GRATEFUL TO MY STUDENTS WHO HAVE ALWAYS BEEN INSTRUMENTAL IN CONTINUOUS IMPROVEMENT IN THIS BOOK (OPE READERS WILL lND THIS BOOK HELPFUL 9OUR COMMENTS AND SUGGESTIONS ARE ALWAYS WELCOME 7ISH YOU A HAPPY LEARNING EXPERIENCE CA Ravi Chhawchharia 0LACE 3URAT $ATE .OVEMBER
I-9
Chapter-heads Page No. About the Author
I-5
Preface
I-7
Acknowledgement
I-9
DIRECT TAX LAWS Chapter 1
"ASIC #ONCEPTS OF )NCOME 4AX ,AW AND 4AX 2ATES
1.3
Chapter 2
2.1
2ESIDENTIAL 3TATUS ;3EC =
Chapter 3
)NCOMES WHICH DO NOT &ORM 0ART OF 4OTAL )NCOME ;3EC TO 3EC =
3.1
Chapter 4
0ROFITS AND 'AINS OF "USINESS OR 0ROFESSION ;3EC TO 3EC $"=
4.1
Chapter 5
5.1
#APITAL 'AINS ;3EC TO 3EC !=
Chapter 6
)NCOME &ROM /THER 3OURCES ;3EC TO 3EC =
6.1
Chapter 7
)NCOME #OMPUTATION AND $ISCLOSURE 3TANDARDS
7.1
Chapter 8
4AX ON #ONVERSION OF 5NACCOUNTED -ONEY ;3EC x viib 3EC 3ECS TO $ 3EC ""%=
8.1
Chapter 9
)NCOME OF OTHER 0ERSONS INCLUDED IN !SSESSEE S 4OTAL )NCOME #LUBBING OF )NCOME ;3EC TO 3EC =
9.1
Chapter 10
3ET OFF OF ,OSSES OR #ARRY &ORWARD AND 3ET OFF OF ,OSSES ;3EC TO 3EC =
10.1
Chapter 11
$EDUCTIONS &ROM 'ROSS 4OTAL )NCOME ;#HAPTER 6) ! 3EC # TO 3EC 5=
11.1
Chapter 12
$EDUCTION FOR #O OPERATIVE 3OCIETIES ;3EC 0=
I-11
12.1
I-12
#(!04%2 (%!$3
Page No. Chapter 13
$EDUCTION FOR 3PECIAL %CONOMIC :ONE ;3EC !!=
13.1
Chapter 14
4AXATION OF "ONDS ;#IRCULAR .O DT =
14.1
Chapter 15
!GRICULTURAL )NCOME ITS 4AX 4REATMENT ;3EC ! AND 3EC =
15.1
Chapter 16
4AXATION OF 0OLITICAL 0ARTIES %LECTORAL 4RUST ;3EC ! AND 3EC "=
16.1
Chapter 17
%XPENDITURE ON %XEMPT )NCOME ;3EC ! AND 2ULE $=
17.1
Chapter 18
4AXATION OF #HARITABLE 2ELIGIOUS 4RUSTS ;3EC TO 3EC 3EC ""# 3EC ! 3EC # =
18.1
Chapter 19
4AXATION OF -UTUAL #ONCERNS ;3EC ! AND 3EC III =
19.1
Chapter 20
!PPLICATION VS $IVERSION OF )NCOME
20.1
Chapter 21
-INIMUM !LTERNATE 4AX -!4 ;#HAPTER 8)) " 3EC *" AND 3EC *!! =
21.1*
Chapter 22
4AXATION OF &IRMS ,,0 AND !/0 "/) ;3EC b 3EC ! 3EC " 3EC =
22.1*
Chapter 23
!LTERNATE -INIMUM 4AX !-4 ;#HAPTER 8)) "! 3ECS *# *%% =
23.1*
Chapter 24
4AXATION OF "UY "ACK ;#HAPTER 8)) $! 3ECS 1! TO 1# =
24.1*
Chapter 25
4AX ON )NCOME OF 3ECURITISATION 4RUST ;#HAPTER 8)) %! 3EC 4#!=
25.1*
Chapter 26
4AXATION OF "USINESS 4RUSTS 2%)4S )NV)4S AND !LTERNATIVE )NVESTMENT &UNDS !)& ;#HAPTER 8)) &! 3EC 5! AND #HAPTER 8)) &" 3EC 5"=
26.1*
Chapter 27
4ONNAGE 4AXATION 3CHEME ;#HAPTER 8)) ' 3EC 6! TO 3EC 6:#=
27.1*
Chapter 28
!SSESSMENT 0ROCEDURES ;3EC 3EC 3EC 3EC 3ECS TO 3EC !=
28.1*
Chapter 29
!PPEALS AND 2EVISIONS ;3EC ! TO 3EC 3EC ! TO 3EC AND 3EC " 3EC ! 3EC ! AND 3EC !! 3EC TO 3EC "=
3EE 6OLUME
29.1*
I-13
#(!04%2 (%!$3
Page No. Chapter 30
3URVEY 3EARCH AND 3EIZURE ;3EC ! 3ECS TO " 3ECS TO ! 3ECS ! TO $=
30.1*
Chapter 31
0ROVISIONS TO #OUNTERACT 5NETHICAL 4AX 0RACTICES ;#HAPTER 88) #HAPTER 88)) 3ECS ! TO $ "LACK -ONEY ,AW=
3ECS ! TO
31.1*
Chapter 32
$ISPUTE 2ESOLUTION ;#HAPTER 8)8 !! 3EC -!=
32.1*
Chapter 33
,IABILITY IN 3PECIAL #ASES ;#HAPTER 86 3EC TO 3EC =
33.1*
Chapter 34
!SSESSMENT OF (5& ;3EC =
34.1*
Chapter 35
!SSESSMENT OF &IRMS AND ,,0 ;#HAPTER 86) 3EC TO 3EC =
35.1*
Chapter 36
4AX $EDUCTION AND #OLLECTION AT 3OURCE ;#HAPTERS 86)) " AND 86)) "" 3ECS TO ##!=
36.1*
Chapter 37
4AXATION OF $IGITAL 4RANSACTIONS ;%QUALISATION ,EVY AND 6IRTUAL $IGITAL !SSETS=
37.1*
Chapter 38
!DVANCE 4AX ;#HAPTER 86)) # 3EC TO 3EC 3ECS =
38.1*
Chapter 39
#OLLECTION AND 2ECOVERY OF 4AX ;3EC AND #HAPTER 86)) $ 3EC TO 3EC =
39.1*
Chapter 40
)NTEREST ;3ECS ! # #HAPTER 86)) & 3ECS ! TO $ 3EC !=
40.1*
Chapter 41
-ISCELLANEOUS 4/0)#3 344 #44 AND )&3# ;3ECS 33 34 35 4 3EC ! 3EC !! 3ECS " ! "! "" # $ ""& ""'=
41.1*
Chapter 42
4AX !UDIT AND %THICAL #OMPLIANCES
42.1*
Chapter 43
4AX 0LANNING 4AX !VOIDANCE AND 4AX %VASION )NCLUDING '!!2
43.1*
INTERNATIONAL TAXATION Chapter 44
4AX )NCIDENCE IN )NDIA ;3EC 3EC TO 3EC ! 3EC *( 3EC AND 3EC !=
44.3*
Chapter 45
4AXATION OF .ON 2ESIDENTS ;3ECS ! TO !$ 3EC ""! AND #HAP 8))! 3ECS # TO )=
3EE 6OLUME
45.1*
I-14
#(!04%2 (%!$3
Page No. Chapter 46
$OUBLE 4AXATION 2ELIEF $4!! ;#HAPTER )8 3ECS ! AND =
46.1*
Chapter 47
4RANSFER 0RICING ;#HAPTER 8 3EC TO 3EC & 3ECS ! " # AND 3EC =
47.1*
Chapter 48
!DVANCE 2ULINGS ;#HAPTER 8)8 " 3EC . TO 3EC 5=
48.1*
Chapter 49
/VERVIEW OF -ODEL 4AX #ONVENTIONS
49.1*
Chapter 50
!PPLICATION AND )NTERPRETATION OF 4AX 4REATIES
50.1*
Chapter 51
&UNDAMENTALS OF "ASE %ROSION AND 0ROFIT 3HIFTING "%03
51.1*
Chapter 52
,ATEST $EVELOPMENTS IN )NTERNATIONAL 4AXATION
52.1*
-/$%, 4%34 0!0%2 3/,6%$
M.1*
3/,6%$ 0!0%2 .OV 35''%34%$ !.37%23
P.1*
3EE 6OLUME
Contents Page No. About the Author
I-5
Preface
I-7
Acknowledgement
I-9 DIRECT TAX LAWS
Topics
1 BASIC CONCEPTS OF INCOME-TAX LAW AND TAX RATES )NCOME 4AX ,AW
1.3
#HARGE OF )NCOME TAX ;3EC =
1.4
!SSESSMENT 9EAR ;3EC =
1.4
0REVIOUS 9EAR ;3EC =
1.4
0ERSON ;3EC =
1.4
!SSESSEE ;3EC =
1.5
#ERTAIN 0RINCIPLES RELATING TO )NCOME UNDER THE )NCOME TAX !CT
1.5
)NCOME ;3EC =
1.5
(EADS OF )NCOME ;3EC =
1.6
4OTAL )NCOME AND #OMPUTATION OF 4AX ,IABILITY
1.7
%XEMPTION AND $EDUCTION IN RESPECT OF INCOME
1.8
2OUNDING OFF OF )NCOME ;3EC !=
1.8
2OUNDING OFF OF 4AX ;3EC "=
1.8
$EFINITION OF g,IABLE TO 4AXg ;3EC ! =
1.9
$EFINITION OF g#OMPANYg ;3EC =
1.9
$EFINITION OF g#OMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTEDg ;3EC =
1.9
$EFINITION OF g0ERSON HAVING SUBSTANTIAL INTEREST IN THE COMPANYg ;3EC =
1.10
$EFINITION OF g)NDIAg ;3EC ! =
1.10
$EFINITION OF g)NDIAN #OMPANYg ;3EC =
1.10
$EFINITION OF g$OMESTIC #OMPANYg ;3EC ! =
1.10
$EFINITION OF g&OREIGN #OMPANYg ;3EC ! =
1.10
I-15
I-16
#/.4%.43
Topics
Page No.
$EFINITION OF g!MALGAMATIONg ;3EC " =
1.10
$EFINITION OF g$EMERGERg ;3EC !! =
1.11
Income Tax Rates )NTRODUCTION
1.12
4AX 2ATES FOR .ON #ORPORATE !SSESSEE UNDER /PTIONAL 4AX 2EGIME ;&OR ! 9 =
1.12
-AXIMUM -ARGINAL 2ATE ;3EC # =
1.14
-ARGINAL 2ELIEF FOR .ON CORPORATES
1.14
4AX 3CHEME FOR )NDIVIDUALS (5& AND OTHERS ;3EC "!#=
1.16
2EBATE OF )NCOME TAX FOR 2ESIDENT )NDIVIDUALS ;3EC !=
1.21
/PTION TO TAX
FOR CERTAIN 2ESIDENT #O OPERATIVE 3OCIETIES ;3EC "!$=
1.23
FOR CERTAIN .EW -ANUFACTURING #O OPERATIVE 3OCIETIES ;3EC "!%=
1.25
/PTION TO TAX
4AX RATES FOR #OMPANY !SSESSEE
1.28
-ARGINAL 2ELIEF FOR #OMPANIES
1.28
/PTION TO TAX
FOR CERTAIN $OMESTIC -ANUFACTURING #OMPANIES ;3EC "!=
1.29
/PTION TO TAX
FOR CERTAIN $OMESTIC #OMPANIES ;3EC "!!=
1.30
/PTION TO TAX
FOR CERTAIN .EW $OMESTIC -ANUFACTURING #OMPANIES ;3EC "!"=
1.32
2 RESIDENTIAL STATUS $ETERMINATION OF 2ESIDENTIAL 3TATUS OF )NDIVIDUAL ;3EC =
2.1
2ESIDENTIAL STATUS OF @3TATELESS 0ERSON ;3EC ! =
2.2
2ESIDENT AND /RDINARILY 2ESIDENT OR 2ESIDENT BUT .OT /RDINARILY 2ESIDENT ;3EC =
2.3
2ESIDENTIAL 3TATUS OF (5& &IRM OR !/0 ;3EC =
2.4
2ESIDENTIAL 3TATUS OF A #OMPANY ;3EC =
2.4
2ESIDENTIAL 3TATUS OF ANY OTHER PERSON ;3EC =
2.4
!SSESSEE DEEMED TO BE RESIDENT IN )NDIA IN RESPECT OF HIS OTHER SOURCES OF INCOME
2.4
;3EC =
3 INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME )NCOMES EXEMPT FROM TAX ;3EC
TO =
3.1
!MOUNT PAID ON LIFE INSURANCE POLICY ;3EC $ =
3.8
!MOUNT RECEIVED FROM 00& 30& 20& AND 520& ;3EC =
3.15
)NTEREST ON 3ECURITIES ;3EC =
3.16
0RACTICAL 1UESTIONS
3.17
4 PROFITS AND GAINS OF BUSINESS OR PROFESSION #HARGING 3ECTION ;3EC =
4.1
3UBSIDY TAXABLE AS )NCOME U S xviii
4.3
#/.4%.43
Topics -ETHOD OF !CCOUNTING ;3EC =
I-17 Page No. 4.4
-ETHOD OF !CCOUNTING FOR 6ALUATION OF 0URCHASE AND 3ALE OF 'OODS AND )NVENTORY
;3EC !=
4.4
)NCOME FROM 0'"0 HOW TO COMPUTE ;3EC =
4.5
2ENT 2ATES 4AXES 2EPAIRS AND )NSURANCE 0REMIUM OF "UILDINGS ;3EC =
4.6
2EPAIRS AND )NSURANCE PREMIUM OF -ACHINERY 0LANT AND &URNITURE ;3EC =
4.6
$EPRECIATION ;3EC =
4.6
#ONDITIONS FOR CLAIMING $EPRECIATION
4.7
7$6 FOR CHARGING g$EPRECIATIONg ;3EC =
4.8
h!CTUAL COSTv OF ASSET ;3EC =
4.9
2ATES OF $EPRECIATION FOR 7$6 ;2ULE !PPENDIX ) TO )NCOME TAX 2ULES =
4.10
$EPRECIATION RESTRICTED TO OF THE NORMAL DEPRECIATION
4.12
!DDITIONAL $EPRECIATION ON NEW PLANT OR MACHINERY ;3EC iia =
4.15
3,- $EPRECIATION FOR ASSESSEES ENGAGED IN 0OWER SECTOR ;3EC i =
4.17
4ERMINAL DEPRECIATION ;3EC iii =
4.17
"ALANCING #HARGE ;3EC =
4.17
5NABSORBED $EPRECIATION ;3EC =
4.18
!SSETS NOT EXCLUSIVELY USED FOR "USINESS 0ROFESSION ;3EC =
4.19
$ETERMINATION OF !CTUAL #OST IN 3PECIAL #ASES ;Explanations TO 3EC =
4.19
%FFECTS OF #HANGES IN 2ATE OF %XCHANGE OF #URRENCY ON THE !CTUAL #OST OF THE !SSET
4.23
;3EC != 0ROPORTIONATE $EPRECIATION ; TH PROVISO TO 3EC =
4.25
7$6 OF THE BLOCK OF ASSET ;Explanations 1 to 2C OF 3EC =
4.25
$EPRECIATION PROVIDED IN THE BOOKS OF ACCOUNT DEEMED TO BE DEPRECIATION ACTUALLY
4.28
ALLOWED ;Explanation 6 TO 3EC = $EPRECIATION ALLOWANCE ON COMPOSITE INCOME ;Explanation 7 TO 3EC =
4.29
$EDUCTION
4.29
4EA #OFFEE AND 2UBBER $EVELOPMENT ! C ;3EC !"=
4.30
3ITE 2ESTORATION &UND ;3EC !"!=
4.32
3CIENTIFIC 2ESEARCH ;3EC =
4.32
3ALE OF !SSETS USED FOR 3CIENTIFIC RESEARCH ;3EC =
4.33
)N (OUSE 2ESEARCH $EVELOPMENT ;3EC !" =
4.34
#ONTRIBUTION TO .ATIONAL ,ABORATORY ))4 5NIVERSITY 0ERSONS APPROVED BY 0RESCRIBED
4.34
OF !CTUAL COST OF INVESTMENT IN .EW 0LANT AND -ACHINERY IN NOTIFIED BACKWARD AREAS IN CERTAIN STATES ;3EC !$=
!UTHORITY ;3EC !! = /UTSIDE #ONTRIBUTION ;3EC =
4.34
#ONTRIBUTION TO )NDIAN #OMPANIES ENGAGED IN 3CIENTIFIC 2ESEARCH ;3EC iia =
4.34
)NTIMATION TO PRESCRIBED AUTHORITY TO AVOID WITHDRAWAL OF NOTIFICATION ;0ROVISOS TO 3EC
4.34
= !MORTIZATION OF 4ELECOM 3PECTRUM &EES ;3EC !"!=
4.35
!MORTIZATION OF 4ELECOM ,ICENSE &EES ;3EC !""=
4.37
)NVESTMENT LINKED TAX INCENTIVE TO @3PECIFIED "USINESS ;3EC !$=
4.37
I-18
#/.4%.43
Topics %XPENDITURE BY PAYMENT TO ASSOCIATION INSTITUTION FOR 2URAL $EVELOPMENT 0ROGRAMME
Page No. 4.41
2$0 ;3EC ##!= %XPENDITURE ON !GRICULTURAL %XTENSION 0ROJECT ;3EC ###=
4.42
%XPENDITURE ON 3KILL $EVELOPMENT 0ROJECT ;3EC ##$=
4.42
!MORTIZATION OF 0RELIMINARY %XPENDITURE ;3EC $=
4.42
!MORTIZATION OF %XPENDITURE OF !MALGAMATION OR $EMERGER ;3EC $$=
4.45
!MORTIZATION OF 623 %XPENDITURE ;3EC $$!=
4.45
!MORTIZATION OF %XPENDITURE ON 0ROSPECTING ETC OF MINERALS LISTED IN TH 3CHEDULE
4.46
;3EC %= #ERTAIN $EDUCTIONS U S
4.48
'ENERAL $EDUCTIONS ;3EC =
4.56
*UDICIAL $ECISIONS ON 3EC
4.57
!DVERTISEMENT TO POLITICAL PARTIES ;3EC " =
4.61
!MOUNTS NOT DEDUCTIBLE IN THE CASE OF ANY ASSESSEE ;3EC a =
4.62
0AYMENTS MADE TO 2ELATIVES 3PECIFIED 0ERSONS ;3EC ! =
4.64
$ISALLOWANCE OF OF EXPENDITURE IF PAYMENT IS MADE BY ANY MODE OTHER THAN !CCOUNT
4.65
0AYEE #HEQUE OR $RAFT ;3EC ! = 0AYMENTS MADE BY !CCOUNT 0AYEE #HEQUE IN VIOLATION OF CONTRACT ;3EC ! =
4.68
$ISALLOWANCE IN RESPECT OF -ARKED TO -ARKET LOSS ;3EC ! =
4.68
4AXATION OF FOREIGN EXCHANGE FLUCTUATIONS ;3EC !!=
4.69
!MOUNT NOT DEDUCTIBLE IN RESPECT OF CERTAIN UNPAID LIABILITIES ;3EC "=
4.69
3PECIAL 0ROVISION FOR #OST OF !CQUISITION IN #ERTAIN #ASES ;3EC #=
4.72
3PECIAL PROVISION FOR &ULL VALUE OF CONSIDERATION FOR 4RANSFER OF !SSETS /THER THAN
4.74
CAPITAL ASSETS ;3EC #!= #OMPUTATION OF INCOME FROM CONSTRUCTION AND SERVICE CONTRACTS ;3EC #"=
4.75
)NTEREST INCOME ON PRESCRIBED CATEGORIES OF "AD OR $OUBTFUL $EBTS ;3EC $=
4.75
-AINTENANCE OF !CCOUNTS ;3EC !!=
4.76
#OMPULSORY !UDIT OF !CCOUNTS ;3EC !"=
4.76
3PECIAL PROVISION FOR #OMPUTING 0ROFITS AND 'AINS OF ANY "USINESS ON 0RESUMPTIVE BASIS
4.78
;3EC !$= 3PECIAL PROVISION FOR #OMPUTING 0ROFITS AND 'AINS OF ANY 0ROFESSION ON 0RESUMPTIVE
4.81
BASIS ;3EC !$!= 3PECIAL PROVISION FOR #OMPUTING 0ROFITS AND 'AINS OF "USINESS OF PLYING HIRING OR LEASING
4.82
GOODS CARRIAGES ;3EC !%= 3PECIAL PROVISIONS FOR COMPUTING 0ROFITS OF 3HIPPING BUSINESS OF NON RESIDENTS ;3EC
4.83
"= 2ECOVERY OF 4AX ON THE 3HIPPING BUSINESS OF .ON RESIDENTS ;3EC =
4.83
3PECIAL PROVISIONS FOR COMPUTING PROFITS OF EXPLORATION ETC OF MINERAL OILS ;3EC ""=
4.86
3PECIAL PROVISIONS FOR COMPUTING PROFITS AND GAINS OF BUSINESS OF OPERATION OF AIRCRAFT
4.86
IN THE CASE OF NON RESIDENTS ;3EC ""!= 3PECIAL PROVISIONS FOR COMPUTING PROFITS AND GAINS OF FOREIGN COMPANIES ENGAGED IN THE
BUSINESS OF CIVIL CONSTRUCTION ETC IN CERTAIN TURNKEY POWER PROJECTS ;3EC """=
4.87
#/.4%.43
Topics
I-19 Page No.
4AXATION OF "RANCHES OF &OREIGN #OMPANY
(EAD /FFICE %XPENDITURE ;3EC #=
3PECIAL PROVISION FOR COMPUTING DEDUCTIONS IN THE CASE OF BUSINESS REORGANISATION OF
4.87 4.89
CO OPERATIVE BANKS ;3EC $"= $EEMED 0ROFITS ;3EC =
4.90
$EDUCTION OF EXPENDITURE ON PRODUCTION OF FEATURE FILMS FOR &ILM 0RODUCER ;2ULE !=
4.91
$EDUCTION OF EXPENDITURE ON ACQUISITION OF DISTRIBUTION RIGHTS OF &ILMS FOR @$ISTRIBUTOR
4.91
;2ULE "= 3UMMARIZED PROVISIONS OF 2ULE !
4.92
3UMMARIZED PROVISIONS OF 2ULE "
4.92
$EDUCTION IN RESPECT OF @#OST OF PRODUCTION ALLOWABLE U S IN CASE OF !BANDONED
4.94
&EATURE &ILMS ;#"$4 #IRCULAR .O DATED = 4.95
0RACTICAL 1UESTIONS
5 CAPITAL GAINS "ASIS OF #HARGE ;3EC =
5.1
$EFINITION OF g#APITAL !SSETg ;3EC =
5.1
$ETERMINING WHETHER AN ASSET IS 3TOCK IN TRADE OR #APITAL ASSET
5.2
)TEMS OF PRECIOUS METALS TO WHAT EXTENT CONSTITUTES *EWELLERY
5.3
3HORT 4ERM #APITAL !SSET ;3EC ! =
5.4
,ONG 4ERM #APITAL !SSET ;3EC !! =
5.4
4YPES OF #APITAL 'AINS
5.4
4AX ON 3HORT 4ERM #APITAL 'AINS WHERE 344 IS CHARGED ;3EC !=
5.4
4AX ON ,ONG 4ERM #APITAL 'AINS ;3EC =
5.5
/PTION TO 4AX ,4#'
5.6
WITHOUT )NDEXATION FOR 3PECIFIED 3ECURITIES &IRST PROVISO
TO 3EC $EDUCTIONS UNDER #HAPTER 6) ! NOT ALLOWED AGAINST ANY ,4#' ;3EC =
5.7
4AX ON ,4#' ON TRANSFER WHERE 344 IS CHARGED ;3EC !=
5.7
$EFINITION OF 4RANSFER ;3EC =
5.10
4RANSACTIONS NOT REGARDED AS 4RANSFER ;3ECS =
5.11
#OMPUTATION OF #APITAL 'AINS ;3EC =
5.18
#APITAL 'AINS ON TRANSFER OF SHARES DEBENTURES OF AN )NDIAN COMPANY BY A .ON 2ESIDENTS
5.19
[ ST 0ROVISO TO 3EC 48] )NDEXATION ; ND PROVISO TO 3EC =
5.20
.O INDEXATION ON LONG TERM CAPITAL GAINS REFERRED TO IN 3EC ! ; RD 0ROVISO TO
5.21
3EC = .O )NDEXATION ON "ONDS $EBENTURES ; TH 0ROVISO TO 3EC =
5.21
'AINS FROM APPRECIATION OF RUPEE AGAINST A FOREIGN CURRENCY ON REDEMPTION OF 2$"
5.21
SHALL BE IGNORED ; TH 0ROVISO TO 3EC = -ARKET VALUE DEEMED TO BE THE FULL VALUE OF CONSIDERATION ON TRANSFER OF SHARES DEBENTURES
5.22
OR WARRANTS ALLOTTED UNDER %3/0 ; TH 0ROVISO TO 3EC = 344 NOT TO BE ALLOWED AS $EDUCTION ; TH 0ROVISO TO 3EC =
5.22
I-20
#/.4%.43
Topics
Page No.
7ITHDRAWAL OF EXEMPTION UNDER CLAUSES iv
AND v OF 3EC ;3EC ! =
5.23
7ITHDRAWAL OF EXEMPTION UNDER CLAUSE xiii
OR xiv OF 3EC ;3EC ! =
5.24
OF 3EC ;3EC ! =
5.27
7ITHDRAWAL OF EXEMPTION UNDER CLAUSE xiiib
#APITAL 'AINS ON )NSURANCE #LAIMS FOR $AMAGE OR $ESTRUCTION OF #APITAL !SSET ;3EC
5.27
! = #APITAL 'AINS ON AMOUNT RECEIVED UNDER 5NIT ,INKED )NSURANCE 0OLICY 5,)0
WHICH IS
5.29
NOT EXEMPT U S $ ;3EC " = #APITAL 'AIN ON #ONVERSION OF #APITAL !SSETS INTO 3TOCK IN TRADE ;3EC =
5.30
4RANSFER OF 3ECURITY THROUGH $EPOSITORY ;3EC ! =
5.31
#APITAL 'AIN ON TRANSFER OF #APITAL !SSET BY A 0ARTNER -EMBER TO &IRM !/0 "/) ;3EC
5.31
= )NCOME ON RECEIPT OF CAPITAL ASSET OR STOCK IN TRADE OR BOTH BY PARTNER MEMBER FROM
5.33
FIRM OR !/0 "/) ;3EC "= #APITAL GAIN ON TRANSFER OF CAPITAL ASSET ON RECONSTITUTION OF SPECIFIED ENTITY ;3EC =
5.34
#APITAL GAIN ON TRANSFER BY WAY OF #OMPULSORY !CQUISITION OF #APITAL !SSET ;3EC =
5.38
#APITAL GAIN ON TRANSFER OF ,AND OR "UILDING OR BOTH UNDER A 3PECIFIED !GREEMENT *OINT
5.40
$EVELOPMENT !GREEMENT ;3EC ! = #APITAL 'AIN ON REPURCHASE OF UNITS OF -UTUAL &UND OR 54) ;3EC =
5.41
#APITAL 'AINS ON $ISTRIBUTION OF !SSETS BY #OMPANIES IN ,IQUIDATION ;3EC =
5.41
#OST OF !CQUISITION ;3EC =
5.43
#OST OF !CQUISITION OF !SSETS ACQUIRED BEFORE ;3EC b =
5.43
#OST OF !CQUISITION OF 3ELF 'ENERATED !SSETS
5.43
#OST OF !CQUISITION OF 2IGHT 3HARES ;3EC aa =
5.44
#OST OF !CQUISITION OF "ONUS 3HARES OR ANY OTHER FINANCIAL ASSET ALLOTTED WITHOUT PAYMENT
5.45
;3EC aa iiia = #OST OF !CQUISITION OF EQUITY SHARES ALLOTTED TO THE SHAREHOLDER OF A RECOGNISED STOCK
5.46
EXCHANGE ON CORPORATISATION ;3EC ab = #OST OF !CQUISITION OF CAPITAL ASSET REFERRED TO IN 3EC ! ACQUIRED BEFORE
5.46
;3EC ac = #OST OF )MPROVEMENT ;3EC b =
5.47
#OST TO THE PREVIOUS OWNER ;3EC =
5.48
#OST OF SHARES IN THE )NDIAN !MALGAMATED #OMPANY ;3EC =
5.49
#OST
OF ACQUISITION IN THE CASE OF SHARES DEBENTURES ACQUIRED ON CONVERSION OF DEBENTURES "ONDS ;3EC ! =
5.50
#OST OF ACQUISITION OF SPECIFIED SECURITY OR SWEAT EQUITY SHARES ALREADY TAXED AS PERQUISITE
5.51
IN THE HANDS OF THE EMPLOYEE ;3EC !! = #OST OF !CQUISITION OF SHARES ACQUIRED ON REDEMPTION OF '$2S ;3EC !"" =
5.51
#OST OF !CQUISITION OF UNIT OF BUSINESS TRUST ACQUIRED U S xvii
5.52
;3EC !# =
#OST OF !CQUISITION OF 5NITS ACQUIRED IN #ONSOLIDATED 3CHEME OF -UTUAL &UND U S
5.52
xviii ;3EC !$ = #OST OF !CQUISITION OF EQUITY SHARES ACQUIRED ON CONVERSION OF PREFERENCE SHARES
;3EC !% =
5.52
I-21
#/.4%.43
Topics
Page No.
#OST OF !CQUISITION OF 5NITS ACQUIRED IN #ONSOLIDATED 0LAN OF -UTUAL &UND 3CHEME U S
5.52
xix ;3EC !& = #OST OF !CQUISITION OF 5NITS ACQUIRED IN 3EGREGATED PORTFOLIO OF -UTUAL &UND 3CHEMES
5.52
;3EC !' = #OST OF ACQUISITION OF THE ORIGINAL UNITS IN THE -AIN 0ORTFOLIO ;3EC !( =
5.53
#OST OF ACQUISITION OF SHARES OF A COMPANY INCORPORATED OUTSIDE )NDIA ACQUIRED IN
5.53
EXCHANGE OF INTEREST IN A JOINT VENTURE ;3EC !) = #OST OF ACQUISITION OF THE SHARES IN THE RESULTING COMPANY ;3EC # =
5.53
#OST OF ACQUISITION OF ORIGINAL SHARES IN DEMERGED COMPANY ;3EC $ =
5.54
#OST OF ACQUISITION TO 4RANSFEREE #OMPANY WHERE SECTION ! IS APPLICABLE ;3EC =
5.54
#OST OF ACQUISITION OF PROPERTY ACQUIRED IN A MANNER GIVEN UNDER SECTION vii
5.54
viia x ;3EC =
5.54
#OST OF !CQUISITION OF 3PECIFIED #APITAL !SSET TRANSFERRED AFTER EXPIRY PERIOD SPECIFIED
5.55
#OST OF ACQUISITION OF AN ASSET DECLARED UNDER THE )NCOME $ECLARATION 3CHEME
SHALL BE THE &-6 OF THE ASSET AS ON ;3EC = U S ! ;3EC = ;3EC
5.55
#OST OF !CQUISITION OF !SSET IN RESPECT OF WHICH !CCRETED INCOME HAS BEEN COMPUTED
5.55
#OST OF !CQUISITION OF 3HARE IN THE FORM OF ,AND OR "UILDING OR BOTH U S !
= UNDER #HAPTER 8)) %" ;3EC = #OST OF !CQUISITION OF INVENTORY WHICH IS CONVERTED INTO OR TREATED AS CAPITAL ASSET AS
5.55
REFERRED TO IN 3EC via ;3EC = #OST OF !CQUISITION OF GOLD CONVERTED INTO %LECTRONIC 'OLD 2ECEIPT OR %LECTRONIC 'OLD
5.55
RECEIPT CONVERTED INTO GOLD AS REFERRED TO IN 3EC viid ;3EC = #APITAL GAINS IN CASE OF $EPRECIABLE !SSETS &OR BLOCK OF !SSET U S
;3EC =
#OMPUTATION OF CAPITAL GAINS IN CASE OF $EPRECIABLE !SSETS OF 0OWER 3ECTOR 5NITS
5.56 5.59
;3EC != 3PECIAL PROVISIONS FOR CAPITAL GAINS IN CASE OF UNIT OF 3PECIAL -UTUAL &UND OR -ARKET
5.60
,INKED $EBENTURE ;3EC !!= 3PECIAL PROVISIONS FOR CAPITAL GAINS IN 3LUMP 3ALE ;3EC "=
5.60
$ETERMINATION OF &AIR -ARKET 6ALUE U S " ;2ULE 5!%=
5.61
3PECIAL PROVISION FOR FULL VALUE OF CONSIDERATION FOR COMPUTATION OF CAPITAL GAINS IN REAL
5.65
ESTATE TRANSACTIONS ;3EC #= 3PECIAL
5.67
&-6 TO BE THE &ULL VALUE OF CONSIDERATION IN CERTAIN CASES ;3EC $=
5.67
4REATMENT OF !DVANCE -ONEY 2ECEIVED ;3EC =
5.68
#APITAL 'AINS %XEMPT ON COMPULSORY ACQUISITION OF 5RBAN !GRICULTURAL ,AND ;3EC =
5.68
%XEMPTION IN RESPECT OF #APITAL 'AINS IN CASE OF 3PECIFIED #APITAL !SSET ;3EC ! =
5.69
2EFERENCE TO 6ALUATION /FFICER ;3EC ! AND 2ULE !!=
5.70
PROVISION FOR FULL VALUE OF CONSIDERATION FOR TRANSFER OF UNLISTED SHARES ;3EC #!=
Exemptions from Capital Gains u/ss 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54H #APITAL 'AIN ON 4RANSFER OF ,ONG TERM 2ESIDENTIAL (OUSE 0ROPERTY ;3EC =
5.71
#APITAL 'AIN ON 4RANSFER OF ,AND USED FOR !GRICULTURAL 0URPOSES ;3EC "=
5.74
I-22
#/.4%.43
Topics
Page No.
#APITAL 'AIN ON #OMPULSORY !CQUISITION OF ,AND "UILDINGS FORMING PART OF AN )NDUSTRIAL
5.75
5NDERTAKING ;3EC $= #APITAL GAIN ON TRANSFER OF ,ONG TERM #APITAL !SSETS BEING LAND OR BUILDING OR BOTH NOT
5.77
TO BE CHARGED ON )NVESTMENT IN #ERTAIN "ONDS ;3EC %#= #APITAL 'AIN ON 4RANSFER OF ,ONG 4ERM #APITAL !SSET other than Residential House
5.79
;3EC &= #APITAL 'AIN ON 4RANSFER OF !SSETS IN CASES OF 3HIFTING OF )NDUSTRIAL 5NDERTAKING FROM
5.83
5RBAN !REAS ;3EC '= %XEMPTION OF #APITAL 'AIN ON 4RANSFER OF !SSETS OF 3HIFTING OF )NDUSTRIAL 5NDERTAKING
5.85
FROM 5RBAN !REA TO ANY 3%: ;3EC '!= %XTENSION OF 4IME ,IMIT FOR ACQUIRING .EW !SSET OR $EPOSITING OR )NVESTING !MOUNT OF
5.85
#APITAL 'AIN IN CASE OF #OMPULSORY !CQUISITION ;3EC (= 3NAPSHOTS OF %XEMPTION U SS " $ %# & ' '!
5.86
0RACTICAL 1UESTIONS
5.87
6 INCOME FROM OTHER SOURCES 6.1
"ASIS OF #HARGE ;3EC =
Deemed Dividends 6.3
$ISTRIBUTION OF !SSETS ;3EC a = $ISTRIBUTION OF "ONUS SHARES TO 0REFERENCE 3HAREHOLDERS AND $EBENTURES TO ANY
6.4
SHAREHOLDER ;3EC b = $ISTRIBUTION OF !SSETS IN THE %VENT OF ,IQUIDATION ;3EC c =
6.4
2EDUCTION OF 3HARE #APITAL ;3EC d =
6.4
,OANS AND !DVANCES BY #LOSELY (ELD #OMPANY ;3EC e =
6.5
#ASES NOT TO BE TREATED AS DEEMED DIVIDEND AS PER 3EC e
6.7
9EAR OF CHARGEABILITY OF $IVIDEND INCOME ;3EC =
6.8
!MOUNTS $EDUCTIBLE UNDER )NCOME FROM /THER 3OURCES ;3EC =
6.8
!MOUNTS .OT $EDUCTIBLE ;3EC =
6.9
$EEMED 0ROFITS ;3EC =
6.10
0RACTICAL 1UESTIONS
6.11
7 INCOME COMPUTATION AND DISCLOSURE STANDARDS [ICDS] )NTRODUCTION TO )NCOME #OMPUTATION AND $ISCLOSURES 3TANDARDS )#$3
7.1
)#$3 ) !CCOUNTING 0OLICIES
7.2
)#$3 )) 6ALUATION OF )NVENTORIES
7.3
)#$3 ))) #ONSTRUCTION #ONTRACTS
7.6
)#$3 )6 2EVENUE 2ECOGNITION
7.10
)#$3 6 4ANGIBLE &IXED !SSETS
7.12
)#$3 6) %FFECTS OF #HANGES IN &OREIGN %XCHANGE 2ATES
7.14
I-23
#/.4%.43
Topics
Page No.
)#$3 6)) 'OVERNMENT 'RANTS
7.16
)#$3 6))) 3ECURITIES
7.17
)#$3 )8 "ORROWING #OSTS
7.19
)#$3 8 0ROVISIONS #ONTINGENT ,IABILITIES AND #ONTINGENT !SSETS
7.21
#LARIFICATIONS MADE BY THE #"$4 ON CERTAIN ISSUES ARISING OUT OF THE NOTIFIED )#$3S
7.23
8 TAX ON CONVERSION OF UNACCOUNTED MONEY 'IFTS RECEIVED BY ANY PERSON ;3EC x =
8.1
0REMIUM ON )SSUE OF 3HARES BY #LOSELY HELD #OMPANY ;3EC viib =
8.9
"OND WASHING TRANSACTIONS ;3EC
8.12
=
)NTEREST 3TRIPPING ;3EC =
8.12
"ONUS 3TRIPPING ;3EC =
8.13
#ASH #REDITS ;3EC =
8.14
5NEXPLAINED )NVESTMENTS ;3EC =
8.16
5NEXPLAINED -ONEY OR OTHER 6ALUABLES ;3EC !=
8.16
!MOUNT OF )NVESTMENTS ETC NOT FULLY DISCLOSED IN BOOKS OF ACCOUNT ;3EC "=
8.16
5NEXPLAINED %XPENDITURE ;3EC #=
8.16
!MOUNT BORROWED OR REPAID ON HUNDI ;3EC $=
8.16
4AXATION OF #ASH #REDITS 5NEXPLAINED -ONEY )NVESTMENTS ETC ;3EC ""%=
8.17
0RACTICAL 1UESTIONS
8.18
9 INCOME OF OTHER PERSONS, INCLUDED IN ASSESSEE’S TOTAL INCOME )NTRODUCTION
9.1
4RANSFER OF INCOME WITHOUT TRANSFER OF !SSETS ;3EC =
9.1
2EVOCABLE TRANSFER OF !SSETS ;3EC =
9.1
4RANSFER IRREVOCABLE FOR A SPECIFIED PERIOD ;3EC =
9.1
@2EVOCABLE 4RANSFER DEFINED ;3EC =
9.2
)NCOME OF )NDIVIDUAL TO INCLUDE INCOME OF 3POUSE ;3EC ii =
9.2
)NCOME FROM !SSETS TRANSFERRED TO THE 3POUSE ;3EC iv =
9.4
)NCOME FROM !SSETS TRANSFERRED TO THE 3ON S WIFE ;3EC vi =
9.4
)NCOME FROM ASSETS TRANSFERRED TO ANY PERSON OR !/0 FOR THE BENEFIT OF THE SPOUSE
9.4
SON S WIFE ;3EC vii viii = #LUBBING WHEN TRANSFERRED ASSET IS INVESTED IN BUSINESS BY THE SPOUSE OR SON S WIFE
9.4
;%XPLANATION TO 3EC = #LUBBING OF )NCOME OF -INOR #HILD ;3EC ! =
9.6
)NCOME FROM SELF ACQUIRED PROPERTY CONVERTED TO JOINT FAMILY PROPERTY ;3EC =
9.7
,IABILITY OF THE 4RANSFEREE IN RESPECT OF CLUBBED INCOME ;3EC =
9.8
0RACTICAL 1UESTIONS
9.9
I-24
#/.4%.43
Topics
Page No.
10 SET-OFF OF LOSSES OR CARRY FORWARD AND SET-OFF OF LOSSES )NTRODUCTION
10.1
3ET OFF OF LOSS FROM ONE 3OURCE AGAINST INCOME FROM /THER 3OURCE UNDER THE 3!-%
10.1
HEAD OF INCOME )NTRA HEAD ADJUSTMENTS ;3EC = 3ET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER HEAD )NTER HEAD ADJUSTMENTS
10.2
;3EC = #ARRY FORWARD AND 3ET OFF OF ,OSS FROM (OUSE 0ROPERTY ;3EC "=
10.4
#ARRY &ORWARD AND 3ET OFF OF "USINESS ,OSSES ;3EC =
10.5
2EHABILITATION OF "USINESS $ISCONTINUED DUE TO .ATURAL #ALAMITIES ;0ROVISO TO 3EC =
10.6
3ET OFF AND #ARRY &ORWARD AND SET OFF OF 3PECULATION "USINESS ,OSS ;3EC =
10.7
-EANING OF 3PECULATIVE 4RANSACTION ;3EC =
10.7
#OMPANIES CARRYING ON BUSINESS OF BUYING AND SELLING OF SHARES ;%XPL TO 3EC =
10.8
3ET OFF AND #ARRY FORWARD SET OFF OF LOSS OF SPECIFIED BUSINESS REFERRED TO IN 3EC !$
10.9
;3EC != #ARRY FORWARD OF LOSSES UNDER THE HEAD g#APITAL GAINSg ;3EC =
10.10
,OSS FROM THE ACTIVITY OF /WNING AND -AINTAINING RACE HORSES ;3EC !=
10.10
,OSSES CAN BE SET OFF ONLY BY THE ASSESSEE WHO HAS INCURRED LOSS ;3EC =
10.12
%XCEPTIONS TO SECTION )NHERITANCE
10.12
!MALGAMATION ;3EC ! =
10.12
$EMERGER ;3EC !
10.13
=
3UCCESSION OF PROPRIETARY CONCERN OR A FIRM BY A COMPANY ;3EC ! =
10.13
3UCCESSION OF A PRIVATE COMPANY UNLISTED PUBLIC COMPANY BY AN ,,0 ;3EC ! ! =
10.13
$EFINITION OF !CCUMULATED ,OSS FOR THE PURPOSE OF 3ECTION ! ;3EC ! =
10.14
"USINESS LOSS CARRIED FORWARD FOR MORE THAN EIGHT ASSESSMENT YEARS ;3EC =
10.14
#ARRY &ORWARD AND SET OFF OF !CCUMULATED ,OSS AND 5NABSORBED $EPRECIATION IN CASE
10.14
OF !MALGAMATION ;3EC ! = #ARRY &ORWARD AND SET OFF OF ACCUMULATED LOSS AND UNABSORBED DEPRECIATION ALLOWANCE
10.17
IN SCHEME OF AMALGAMATION IN CERTAIN CASES ;3EC !!= #ARRY &ORWARD AND SET OFF OF !CCUMULATED ,OSS AND 5NABSORBED $EPRECIATION IN CASE
10.18
OF "USINESS 2E ORGANISATION OF #O OPERATIVE "ANKS ;3EC !" = #ARRY &ORWARD AND SET OFF OF ,OSSES OF #LOSELY (ELD #OMPANIES ;3EC =
10.18
.O SET OFF OF LOSSES CONSEQUENT TO SEARCH REQUISITION AND SURVEY ;3EC !=
10.20
,OSSES OF &IRMS
10.21
#ARRY FORWARD OF ,OSSES IN CASE OF #HANGE IN #ONSTITUTION OF &IRMS ;3EC =
10.21
0RACTICAL 1UESTIONS
10.23
11 DEDUCTIONS FROM GROSS TOTAL INCOME )NTRODUCTION
11.1
I-25
#/.4%.43
Topics
Page No.
$EDUCTION IN RESPECT OF PAYMENTS FOR LIFE INSURANCE PREMIUM
11.1
$EDUCTION ALLOWED U S # SUBSEQUENTLY TAXED IF CERTAIN INVESTMENTS WITHDRAWN
11.4
$EDUCTION FOR #ONTRIBUTION TO CERTAIN 0ENSION &UNDS ;3EC ###=
11.6
$EDUCTION FOR #ONTRIBUTION TO .ATIONAL 0ENSION 3CHEME .03
11.6
DEFERRED ANNUITY CONTRIBUTIONS TO PROVIDENT FUND SUBSCRIPTION TO UNITS OF MUTUAL FUND EQUITY SHARES ETC ;3EC #=
,IMIT ON $EDUCTION UNDER SECTIONS # ### ##$
;3EC ##$=
;3EC ##%=
11.8
$EDUCTION FOR #ONTRIBUTION TO !GNIPATH 3CHEME ;3EC ##(=
11.9
$EDUCTION IN RESPECT OF -EDICAL )NSURANCE 0REMIUM ;3EC $=
11.10
$EDUCTION FOR MAINTENANCE INCLUDING MEDICAL TREATMENT OF A DEPENDENT RELATIVE WITH
11.14
DISABILITY ;3EC $$= $EDUCTION IN RESPECT OF -EDICAL 4REATMENT ;3EC $$"=
11.16
$EDUCTION IN RESPECT OF )NTEREST PAID ON %DUCATION ,OAN ;3EC %=
11.18
$EDUCTION IN RESPECT OF LOAN TAKEN FOR RESIDENTIAL HOUSE PROPERTY ;3EC %%=
11.18
$EDUCTION IN RESPECT OF LOAN TAKEN FOR CERTAIN HOUSE PROPERTY ;3EC %%!=
11.18
$EDUCTION IN RESPECT OF PURCHASE OF ELECTRIC VEHICLE ;3EC %%"=
11.19
$EDUCTION FOR $ONATION TO CERTAIN &UNDS #HARITABLE )NSTITUTIONS ;3EC '=
11.19
$EDUCTION IN RESPECT OF 2ENT 0AID ;3EC ''=
11.25
$EDUCTION FOR $ONATIONS FOR 3CIENTIFIC 2ESEARCH OR 2URAL $EVELOPMENT ;3EC ''!=
11.26
$EDUCTION FOR #ONTRIBUTIONS GIVEN BY #OMPANIES TO 0OLITICAL 0ARTIES OR %LECTORAL 4RUST
11.27
;3EC ''"= $EDUCTION FOR #ONTRIBUTIONS TO 0OLITICAL 0ARTIES OR %LECTORAL 4RUST ;3EC ''#=
11.27
$EDUCTION IN RESPECT OF PROFITS AND GAINS FROM UNDERTAKINGS OR ENTERPRISES ENGAGED IN
11.28
INFRASTRUCTURE DEVELOPMENT ;3EC )!= 0ROFITS OF HOUSING OR OTHER ACTIVITIES WHICH ARE AN INTEGRAL PART OF THE (IGHWAY 0ROJECT
11.31
;3EC )! = $EDUCTION IN RESPECT OF 0ROFITS AND 'AINS FROM 5NDERTAKING OR %NTERPRISE ENGAGED IN
11.32
$EVELOPMENT OF 3PECIAL %CONOMIC :ONE ;3EC )!"= 3PECIAL PROVISION IN RESPECT OF SPECIFIED BUSINESS ;3EC )!#=
11.32
$EDUCTION OF 0ROFITS AND 'AINS FROM )NDUSTRIAL 5NDERTAKING OTHER THAN )NFRASTRUCTURE
11.33
$EVELOPMENT 5NDERTAKINGS ;3EC )"= 4EN YEAR TAX HOLIDAY FOR APPROVED COMPANIES CARRYING ON 3CIENTIFIC 2ESEARCH AND
11.36
$EVELOPMENT ;3EC )" ! = )NDUSTRIAL UNDERTAKING 0RODUCING OR 2EFINING -INERAL OIL IN THE .ORTH %ASTERN 2EGION
11.36
OR IN ANY PART OF )NDIA ;3EC )" = 5NDERTAKING ENGAGED IN $EVELOPING AND "UILDING (OUSING 0ROJECTS ;3EC )" =
11.37
5NDERTAKING ENGAGED IN THE BUSINESS OF 0ROCESSING
0RESERVATION AND 0ACKAGING OF FRUITS OR VEGETABLES MEATS PRODUCTS ETC OR INTEGRATED BUSINESS OF HANDLING STORAGE AND TRANSPORTATION OF FOOD GRAINS ;3EC )" ! =
11.38
$EDUCTION IN RESPECT OF OPERATING AND -AINTAINING A (OSPITAL LOCATED ANYWHERE IN )NDIA
11.38
OTHER THAN EXCLUDED AREA ;3EC )" # = $EDUCTION IN RESPECT OF PROFITS AND GAINS FROM (OUSING 0ROJECTS ;3EC )"!=
11.38
I-26
#/.4%.43
Topics
Page No.
3PECIAL PROVISIONS IN RESPECT OF CERTAIN UNDERTAKINGS OR ENTERPRISES IN CERTAIN SPECIAL
11.40
CATEGORY 3TATES ;3EC )#= $EDUCTION IN RESPECT OF 0ROFITS AND GAINS FROM "USINESS OF (OTELS AND #ONVENTION #ENTERS
11.41
IN 3PECIFIED !REA ;3EC )$= 3PECIAL PROVISIONS IN RESPECT OF CERTAIN UNDERTAKINGS IN .ORTH %ASTERN 3TATES ;3EC )%=
11.42
$EDUCTION IN RESPECT OF PROFITS AND GAINS FROM BUSINESS OF COLLECTING AND PROCESSING OF
11.45
BIO DEGRADABLE WASTE ;3EC **!= $EDUCTION IN RESPECT OF %MPLOYMENT OF .EW %MPLOYEES ;3EC **!!=
11.46
$EDUCTION IN RESPECT OF CERTAIN INCOMES OF /FFSHORE "ANKING 5NITS IN AN 3%: AND
11.48
)NTERNATIONAL &INANCIAL 3ERVICES #ENTRE ;3EC ,!= $EDUCTION IN RESPECT OF CERTAIN INTER CORPORATE DIVIDENDS ;3EC -=
11.48
$EDUCTION IN RESPECT OF 2OYALTY INCOME OF AUTHORS OF BOOKS ;3EC 11"=
11.49
$EDUCTION IN RESPECT OF 2OYALTY ON 0ATENTS ;3EC 22"=
11.50
$EDUCTIONS U SS )! TO 22" AND 3EC !! NOT TO EXCEED THE 0ROFITS ;3EC !=
11.52
$EDUCTION NOT TO BE ALLOWED UNLESS RETURN FURNISHED ;3EC !#=
11.52
$EDUCTION OF )NTEREST ON $EPOSITS IN 3AVINGS !CCOUNTS ;3EC 44!=
11.52
$EDUCTION OF )NTEREST ON $EPOSITS FOR 3ENIOR #ITIZEN ;3EC 44"=
11.53
$EDUCTION IN CASE OF A PERSON WITH DISABILITY ;3EC 5=
11.53
0RACTICAL 1UESTIONS
11.54
12 DEDUCTION FOR CO-OPERATIVE SOCIETIES $EFINITION OF @#O OPERATIVE 3OCIETY ;3EC =
12.1
$EDUCTION IN RESPECT OF )NCOME OF #O OPERATIVE 3OCIETIES ;3EC 0=
12.1
4AX RATES APPLICABLE FOR #O OPERATIVE 3OCIETIES
12.2
$EDUCTION IN RESPECT OF )NCOME OF 0RODUCER #OMPANIES ;3EC 0!=
12.2
0RACTICAL 1UESTIONS
12.4
13 DEDUCTION FOR SPECIAL ECONOMIC ZONE 3PECIAL 0ROVISIONS IN RESPECT OF .EWLY %STABLISHED 5NITS IN 3PECIAL %CONOMIC :ONES
13.1
3%: ;3EC !!= $EFINITION FOR THE PURPOSE OF 3EC !!
13.2
#OMPUTATION OF $EDUCTION U S !!
13.3
#OMPUTATION OF 0ROFITS FOR 3EC !!
13.3
%SSENTIAL CONDITIONS TO CLAIM DEDUCTION U S !!
13.4
#ONVERSION OF %0: &4: INTO @3PECIAL %CONOMIC :ONE ; ND 0ROVISO TO 3EC !!=
13.5
%XTRACTS FROM THE CLARIFICATION ON ISSUES RELATING TO %XPORT OF #OMPUTER 3OFTWARE
FOR
13.5
3EC !! ;#IRCULAR .O DT = 0RACTICAL 1UESTION
13.7
I-27
#/.4%.43
Topics
Page No.
14 TAXATION OF BONDS $EEP $ISCOUNT "OND
14.1
"ACKGROUND OF 4AXATION OF $EEP $ISCOUNT "OND
14.1
4AX TREATMENT OF INCOME FROM $EEP $ISCOUNT "ONDS $$"
;#IRCULAR .O DT
14.1
= 4AX $EDUCTED AT 3OURCE ON $$"
14.2
/PTION TO SMALL INVESTORS
14.3
$EFINITION OF :ERO #OUPON "OND ;3EC =
14.3
4AX TREATMENT IN THE HANDS OF THE COMPANY ISSUING :ERO #OUPON "ONDS
14.3
4AX TREATMENT IN THE HANDS OF THE INVESTOR
14.4
15 AGRICULTURAL INCOME AND ITS TAX TREATMENT !GRICULTURAL )NCOME %XEMPT ;3EC =
15.1
$EFINITION OF !GRICULTURAL )NCOME ;3EC ! =
15.1
)NCOME FROM &ARM "UILDING ;0ROVISO TO SEC ! c =
15.1
)NSTANCES OF !GRICULTURAL )NCOME
15.2
)NSTANCES OF .ON !GRICULTURAL )NCOME
15.3
#OMPUTATION OF !GRICULTURAL AND .ON !GRICULTURAL )NCOME OF 2UBBER #OFFEE 4EA
15.3
"USINESS ;2ULES ! " " ! = #OMPUTATION OF !GRICULTURAL )NCOME AND .ON !GRICULTURAL )NCOME FROM ANY PRODUCT
15.4
OTHER THAN TEA RUBBER AND COFFEE ;2ULE = 4AX ON .ON AGRICULTURAL INCOME IF THE ASSESSEE EARNS !GRICULTURAL INCOME ALSO
15.5
16 TAXATION OF POLITICAL PARTIES & ELECTORAL TRUST %XEMPTION TO )NCOMES OF 0OLITICAL 0ARTIES ;3EC !=
16.1
#ONTRIBUTIONS RECEIVED BY %LECTORAL 4RUST %XEMPT ;3EC "=
16.2
%XEMPTION OF )NCOME OF -0S AND -,!S ;3EC =
16.3
)NCOMES OF ,OCAL !UTHORITY %XEMPT ;3EC =
16.5
17 EXPENDITURE ON EXEMPT INCOME 3ECTION !
17.1
-ETHOD FOR DETERMINING THE AMOUNT OF EXPENDITURE IN RELATION TO INCOME NOT INCLUDIBLE
17.1
IN TOTAL INCOME ;2ULE $= #LARIlCATION REGARDING DISALLOWANCE OF EXPENSES U S ! WHERE CORRESPONDING EXEMPT
INCOME HAS NOT BEEN EARNED DURING THE FINANCIAL YEAR
17.3
I-28
#/.4%.43
Topics
Page No.
18 TAXATION OF CHARITABLE/RELIGIOUS TRUSTS 'ENERAL 5NDERSTANDING OF @4RUST
18.1
4RUST $EED
18.1
0RIVATE 4RUST AND 0UBLIC 4RUST
18.1
-EANING AND $ISTINCTION
"ASIC #ONDITIONS FOR %XEMPTION
18.2
$EFINITION OF #HARITABLE 0URPOSE ;3EC 15 =
18.2
-EANING OF THE TERM g'ENERAL 0UBLIC 5TILITYg
18.3
)NCOME
18.4
$EEMED !PPLICATIONS ;Explanation 1 TO 3EC =
18.4
g!PPLICATIONg FOR 2ELIGIOUS OR #HARITABLE 0URPOSE
18.6
FROM @0ROPERTY HELD FOR #HARITABLE OR 2ELIGIOUS 0URPOSE SHALL BE EXEMPT ;3EC =
$EPRECIATION NOT TO BE ALLOWED AS APPLICATION OF INCOME WHERE ACQUISITION OF ASSET HAS
18.9
BEEN CLAIMED AS APPLICATION OF INCOME ;3EC = #APITAL 'AINS DEEMED TO APPLY FOR #HARITABLE OR 2ELIGIOUS PURPOSE ;3EC ! =
18.9
#ONDITIONS FOR EXEMPTION FOR )NCOME @!CCUMULATED FOR 3PECIFIC 0URPOSES ;3EC =
18.11
7ITHDRAWAL OF %XEMPTION U S
18.11
;3EC =
18.12
0RESCRIBED -ODES OF )NVESTMENTS ;3EC = 0ROPERTY HELD UNDER THE TRUST INCLUDES "USINESS 5NDERTAKING ;3EC
AND ! =
18.12
4RUST CLAIMING EXEMPTION UNDER SECTIONS CANNOT CLAIM EXEMPTION UNDER ANY
CLAUSE OF SECTION ;OTHER THAN CLAUSES # AND = ;3EC =
18.13
)NCOME OF 4RUST )NSTITUTIONS FROM #ONTRIBUTIONS ;3EC =
18.14
#ONDITIONS FOR !PPLICABILITY OF 3ECTIONS ;3EC !=
18.14
2ETURN OF )NCOME OF #HARITABLE 4RUST AND )NSTITUTION ;3EC ! =
18.16
0ROCEDURE FOR 2EGISTRATION !PPLICABLE FROM
18.16
;3EC !"=
%XEMPTION U SS NOT AVAILABLE IN CERTAIN CASES ;3EC =
18.19
-EANING OF 3PECIFIED 0ERSONS ;3EC =
18.19
7HEN INCOME DEEMED TO HAVE BEEN APPLIED FOR THE BENEFIT OF A 3PECIFIED 0ERSON ;3EC
18.20
= #IRCUMSTANCES WHERE DEDUCTION OF EXPENDITURE SHALL BE ALLOWED ON FULFILMENT OF CERTAIN
18.21
CONDITIONS ;3EC = 4AXABILITY OF THE )NCOME OF #HARITABLE OR 2ELIGIOUS 4RUST ;3EC =
18.21
!NONYMOUS $ONATIONS ;3EC ""#=
18.22
!PPLICABILITY OF 3EC ""#
18.23
0RIVATE $ISCRETIONARY 4RUST ;3EC =
18.25
4RUST DEEMED TO BE EXECUTED IN WRITING
18.25
4AXABILITY OF 0RIVATE 4RUST
18.25
$EFINITION OF /RAL 4RUST ;Explanations TO 3EC =
18.26
#HARGE OF 4AX IN CASE OF /RAL 4RUST ;3EC !=
18.27
#/.4%.43
Topics
I-29 Page No.
Exemption to Income of Certain Funds, Educational Institutions and Medical Institutions [Sec. 10(23C)] %XEMPTION OF INCOME RECEIVED BY ANY PERSON ON BEHALF OF CERTAIN FUNDS TRUST INSTITUTION
18.28
UNIVERSITY EDUCATIONAL INSTITUTION HOSPITAL OR MEDICAL INSTITUTION ; ST 0ROVISO TO 3EC 23C =
18.29
0ROCEDURE ON RECEIPT OF APPLICATION ; ND 0ROVISO TO 3EC 23C =
18.30
!PPLICATION FOR APPROVAL U S 23C
%XEMPTION UNDER OTHER SECTIONS SHALL NOT BE AVAILABLE WHERE EXEMPTION U S 23C IS CLAIMED
18.30
!PPLICATION !CCUMULATION OF )NCOME
18.31
3UM PAYABLE TO BE CONSIDERED AS APPLICATION OF INCOME IN THE YEAR OF ACTUAL PAYMENT
18.32
0AYMENT TO /THER 4RUSTS
18.32
!PPLICATION FROM CORPUS OR LOAN BORROWING SHALL NOT BE TREATED AS APPLICATION OF INCOME ;%XPLANATION TO 3EC # =
18.32
7ITHDRAWAL OF !PPROVAL GRANTED TO &UND 4RUST )NSTITUTION %DUCATIONAL )NSTITUTION 5NIVERSITY (OSPITAL /THER -EDICAL )NSTITUTION ; TH 0ROVISO TO 3EC # =
18.33
-AINTENANCE AND !UDIT OF "OOKS OF !CCOUNT
18.34
&ILING OF 2/)
18.34
#IRCUMSTANCES WHERE DEDUCTION OF EXPENDITURE SHALL BE ALLOWED ON FULFILMENT OF CERTAIN CONDITIONS
18.35
4AX ON 3PECIlED )NCOME OF FUND INSTITUTION TRUST UNIVERSITY EDUCATIONAL INSTITUTION HOSPITAL OR MEDICAL INSTITUTION ;3EC "")=
18.36
Exit Tax on Accreted Income [Chapter XII-EB - Sections 115TD to 115TF] 18.37
4AX ON !CCRETED )NCOME ;3EC 4$ = $EEMED TO BE CONVERTED INTO ANY FORM NOT ELIGIBLE FOR GRANT OF REGISTRATION U S !! OR
3EC !" OR APPROVAL U S # ;3EC 4$ = -EANING OF @!CCRETED )NCOME ;3EC 4$ =
18.37 18.38
-ETHOD OF VALUATION OF &-6 OF TOTAL ASSETS AND TOTAL LIABILITIES FOR THE PURPOSE OF DETERMINING
18.38
@!CCREDITED )NCOME ;2ULE #"= 4IME ,IMIT FOR PAYMENT OF 4AX ON !CCRETED )NCOME ;3EC 4$ =
18.41
)NTEREST PAYABLE FOR NON PAYMENT OF TAX BY SPECIFIED PERSON ;3EC 4%=
18.43
3PECIFIED PERSON DEEMED TO BE ASSESSEE IN DEFAULT ;3EC 4&=
18.43
0RACTICAL 1UESTIONS
18.44
19 TAXATION OF MUTUAL CONCERNS 0RINCIPLE OF -UTUALITY
19.1
%XCEPTIONS TO THE 0RINCIPLE OF -UTUALITY
19.2
-UTUAL #ONCERN S INCOME WHEN TAXABLE
19.2
4REATMENT OF $EFICIT AS PER 3EC ! FOR 4RADE AND 0ROFESSIONAL !SSOCIATION
19.3
4AX 2ATE APPLICABLE FOR -UTUAL #ONCERN
19.3
0RACTICAL 1UESTIONS
19.4
I-30
#/.4%.43
Topics
Page No.
20 APPLICATION VS. DIVERSION OF INCOME !PPLICATION OF )NCOME
20.1
$IVERSION OF )NCOME
20.1
$IVERSION OF )NCOME VS !PPLICATION OF INCOME
20.1
0RACTICAL 1UESTIONS
20.3
Contents Page No. About the Author
I-5*
Preface
I-7*
Acknowledgement
I-9*
Topics
21 MINIMUM ALTERNATE TAX (MAT) #HARGING 3ECTION ;3EC *" =
21.1
0REPARATION OF 3TATEMENT OF 0ROFIT ,OSS !CCOUNT ;3EC *" =
21.1
#OMPUTATION OF "OOK 0ROFIT ;Explanation 1 TO 3EC *"=
21.4
&URNISHING OF 2EPORT ;3EC *" =
21.8
.ON !PPLICABILITY OF -!4
21.8
-!4
21.9
4AX #REDIT IN RESPECT OF -!4 ;3EC *!!=
21.9
TO UNIT LOCATED IN AN )NTERNATIONAL &INANCIAL 3ERVICES #ENTRE )&3# ;3EC *" =
-!4 ON COMPANY PREPARING FINANCIAL STATEMENT IN ACCORDANCE WITH )NDIAN !CCOUNTING
21.14
3TANDARDS )ND !3 ;3EC *" ! = -!4 ON FIRST TIME ADOPTION OF )ND !3
21.14
2ECOMPUTATION OF "OOK 0ROFIT OF PAST YEARS ;3EC *" $ =
21.16
0RACTICAL 1UESTIONS
21.18
22 TAXATION OF FIRMS, LLP AND AOP/BOI Taxation of Firms $EDUCTION FOR PAYMENT OF INTEREST SALARY BONUS COMMISSION OR REMUNERATION BY FIRM
22.1
TO ITS PARTNERS ;3EC b = 3HARE OF PROFIT FROM FIRM
%XEMPT IN THE HANDS OF PARTNER ;3EC 2A =
#ARRY FORWARD AND SET OFF OF LOSSES ON #HANGE IN #ONSTITUTION OF FIRM ;3EC =
3EE 6OLUME
I-9
22.4 22.5
I-10
#/.4%.43
Topics
Page No.
Taxation of LLP $EFINITION AS PER 3EC
22.6
;3EC 2(23)=
#ONVERSION OF 0RIVATE #OMPANY 5NLISTED 0UBLIC #OMPANY TO ,,0 ;3EC xiiib =
22.6
#ONVERSION OF 0ARTNERSHIP &IRM TO ,,0
22.6
3ET OFF AND #ARRY &ORWARD OF ,OSSES IN CASE OF 3UCCESSION OF 0RIVATE #OMPANY 5NLISTED
22.6
0UBLIC #OMPANY BY A ,,0 ;3EC ! ! = .O #ARRY &ORWARD OF -!4 CREDIT ;3EC *!!=
22.6
6ERIFYING SIGNING
22.7
2ETURN OF )NCOME OF ,,0 ;3EC =
,IABILITY OF 0ARTNERS OF ,,0 IN LIQUIDATION ;3EC #=
22.7
Taxation of AOP/BOI 22.8
#ONCEPT OF !/0 AND "/) $EDUCTION FOR 0AYMENT OF INTEREST SALARY BONUS COMMISSION OR REMUNERATION BY !/0
22.8
"/) TO ITS -EMBERS ;3EC ba = 4AXATION OF !/0 "/)
22.9
-ETHOD OF #OMPUTING A MEMBER S SHARE IN THE INCOME OF !/0 "/) ;3EC !=
22.10
4AX 4REATMENT OF MEMBER S SHARE IN THE INCOME OF !/0 "/)
22.10
0RACTICAL 1UESTIONS
22.12
23 ALTERNATE MINIMUM TAX (AMT) #HARGING 3ECTION FOR !-4 ;3EC *#=
23.1
2ATE OF !-4 ;3EC *&=
23.1
4O WHOM !-4 SHALL NOT BE APPLICABLE
23.1
!-4 AT LOWER RATE FOR CERTAIN ASSESSEES ;3EC *# =
23.2
4AX #REDIT FOR !LTERNATE -INIMUM 4AX ;3EC *$=
23.3
0RACTICAL 1UESTIONS
23.4
24 TAXATION OF BUY-BACK 4AX ON $OMESTIC COMPANIES ON "UY BACK OF SHARES SECURITIES ;3EC 1!=
24.1
$ETERMINATION OF AMOUNT RECEIVED BY THE COMPANY FOR ISSUE OF SHARES BEING BOUGHT BACK
24.1
UNDER VARIOUS CIRCUMSTANCES ;2ULE ""= )NTEREST PAYABLE FOR DELAYED PAYMENT OF TAX ;3EC 1"=
24.4
7HEN COMPANY IS DEEMED TO BE AN ASSESSEE IN DEFAULT ;3EC 1#=
24.5
%XEMPTION TO THE SHAREHOLDER ON BUY BACK OF SHARES ;3EC 34A =
24.5
25 TAX ON INCOME OF SECURITISATION TRUST %XEMPTION OF INCOME OF 3ECURITISATION TRUST FROM THE ACTIVITY OF 3ECURITISATION ;3EC
25.1
23DA = 4AX ON INCOME FROM 3ECURITISATION TRUST ;3EC 4#!=
25.1
#/.4%.43
Topics
I-11 Page No.
$EDUCTION OF TAX AT SOURCE ON INCOME PAYABLE TO INVESTOR BY 3ECURITISATION TRUST ;3EC
25.1
,"#=
26 TAXATION OF BUSINESS TRUSTS (REITs, InvITs) AND ALTERNATIVE INVESTMENT FUNDS (AIF) Taxation of Business Trust )NTRODUCTION
26.1
-EANING OF "USINESS 4RUST ;3EC ! =
26.1
4AXATION OF 2EAL %STATE )NVESTMENT 4RUST 2%)4
AND )NFRASTRUCTURE )NVESTMENT 4RUST )NV)4 AND ITS )NVESTORS ;3EC 23FC 23FCA 23FD AND #H 8)) &! 3EC 5!=
26.2
!NALYSIS OF PASS THROUGH STATUS FOR "USINESS 4RUST
26.3
3PONSOR
26.3
%XCHANGING @3HARES OF 306 WITH @5NITS OF "USINESS 4RUST
5NIT HOLDERS
4RANSFERRING LISTED UNITS OF "USINESS TRUST
26.3
)NTEREST INCOME RECEIVED BY "USINESS TRUST FROM 306
26.4
)NTEREST PAYMENTS TO .ON 2ESIDENT LENDERS ON %#"S BY THE "USINESS 4RUST ;3EC ,#=
26.4
$IVIDEND INCOME RECEIVED BY "USINESS TRUST FROM 306
26.4
)NCOME BY WAY OF 2ENTING ,EASING ETC OF THE 2EAL %STATE !SSETS OWNED DIRECTLY BY THE
26.5
2%)4 #APITAL GAINS ON DISPOSAL OF ASSETS BY THE "USINESS 4RUST
26.5
0RACTICAL 1UESTIONS
26.6
Taxation of Income from Alternative Investment Funds [AIF] )NTRODUCTION
26.7
4YPES OF CATEGORIES OF !)&S
26.7
4AX ON )NCOME OF )NVESTMENT &UNDS AND )NCOME RECEIVED FROM )NVESTMENT &UNDS ;#HAP
26.8
8)) &" 3EC 5" AND 2ULE #!= %XEMPTION TO )NCOME OF )NVESTMENT &UNDS AND )NCOME OF UNIT HOLDERS
26.9
4$3 ON )NCOME DISTRIBUTED BY THE )NVESTMENT &UND ;3EC ,""=
26.9
27 TONNAGE TAXATION SCHEME #OMPUTING OF 0ROFITS FROM THE BUSINESS OF OPERATING 1UALIFYING 3HIPS ;3EC 6!=
27.1
1UALIFYING #OMPANY ;3EC 6#=
27.1
1UALIFYING 3HIP ;3EC 6$=
27.1
$ETERMINATION OF 4ONNAGE
27.1
-ANNER OF #OMPUTATION OF )NCOME UNDER 4ONNAGE 4AX 3CHEME ;3EC 6%=
27.2
#OMPUTATION OF 4ONNAGE )NCOME ;3EC 6'=
27.2
#OMPUTATION OF 2ELEVANT 3HIPPING )NCOME ;3EC 6 )=
27.3
4REATMENT OF #OMMON #OSTS ;3EC 6*=
27.3
%FFECTS OF OPTING FOR 4ONNAGE 4AX 3CHEME ;3EC 6,=
27.3
0ROVISIONS OF -!4 UNDER SECTION *" NOT APPLICABLE ;3EC 6/=
27.4
I-12
#/.4%.43
Topics
Page No.
0ERIOD FOR WHICH 4ONNAGE 4AX OPTION TO REMAIN IN &ORCE ;3EC 61=
27.5
0ROHIBITION TO OPT FOR 4ONNAGE 4AX 3CHEME IN CERTAIN CASES ;3EC 63=
27.5
4RANSFER OF 0ROFITS TO 4ONNAGE 4AX 2ESERVE !CCOUNT ;3EC 64=
27.5
-INIMUM 4RAINING 2EQUIREMENT FOR 4ONNAGE 4AX #OMPANY ;3EC 65=
27.5
-AINTENANCE AND !UDIT OF !CCOUNTS ;3EC 67=
27.6
!VOIDANCE OF 4AX ;3EC 6:"=
27.6
%XCLUSION FROM 4ONNAGE 4AX 3CHEME ;3EC 6:#=
27.6
28 ASSESSMENT PROCEDURES )NCOME 4AX !UTHORITIES ;3EC =
28.1
!SSESSING /FFICER ! /
28.1
;3EC 7A =
*URISDICTION OF !SSESSING /FFICERS ;3EC =
28.1
2IGHTS OF AN ASSESSEE TO CHALLENGE JURISDICTION OF ! / ;3EC =
28.2
0OWER TO 4RANSFER #ASES ;3EC =
28.2
#HANGE OF )NCUMBENT OF AN /FFICE ;3EC =
28.3
4YPES OF !SSESSMENT WHICH ! / CAN MAKE
28.3
Filing of Return of Income [Chapter XIV] /BLIGATION TO &ILE 2ETURN OF )NCOME ;3EC =
28.3
&OURTH 0ROVISO TO 3EC
28.3
&IFTH 0ROVISO TO 3EC
28.3
3EVENTH 0ROVISO TO 3EC
28.4
$UE DATE UNDER 3EC
28.4
2ETURN OF )NCOME
28.5
&ORMS -ANNER OF &ILING ;2ULE =
3ALARIED %MPLOYEES MAY lLE RETURN THROUGH EMPLOYER "ULK RETURN ON COMPUTER READABLE
28.6
MEDIA ;3EC ! = 0OWER OF # ' TO EXEMPT ANY PERSON ;3EC # =
28.6
&ILING 2ETURN OF ,OSS ;3EC
28.7
READ WITH 3EC =
"ELATED 2ETURN ;3EC =
28.9
2EVISED 2ETURN ;3EC =
28.9
5PDATED 2ETURN ;3EC ! =
28.10
4AX ON 5PDATED 2ETURN FILED U S !
;3EC "=
28.12
2ETURNS OF #HARITABLE OR 2ELIGIOUS 4RUSTS ;3EC ! =
28.13
2ETURNS OF 0OLITICAL 0ARTIES ;3EC " =
28.13
2ETURNS BY #ERTAIN !SSOCIATIONS OR )NSTITUTIONS ;3EC # =
28.13
2ETURNS BY !SSOCIATIONS OR )NSTITUTIONS APPROVED U S ;3EC $ =
28.14
2ETURN BY "USINESS 4RUST ;3EC % =
28.14
2ETURN BY )NVESTMENT &UND ;3EC & =
28.14
$EFECTIVE 2ETURN ;3EC =
28.14
3CHEME FOR 3UBMISSION OF 2ETURNS 4HROUGH 4AX 2ETURN 0REPARERS ;420= ;3EC "=
28.14
#/.4%.43
Topics
I-13 Page No.
2ETURN BY WHOM TO BE VERIFIED ;3EC =
28.15
3ELF !SSESSMENT 4AX 3!4
28.15
;3EC !=
Assessment Procedures [Chapter XIV] )NQUIRY BEFORE ASSESSMENT
)SSUE OF NOTICE U S ;3EC =
0OWER TO /RDER 3PECIAL !UDIT ;3EC !
TO $ =
28.16 28.16
%STIMATION OF 6ALUE OF !SSETS BY 6ALUATION /FFICER ;3EC !=
28.17
&ACELESS )NQUIRY OR 6ALUATION ;3EC "=
28.18
.EW 3CHEME OF 0ROCESSING OF 2ETURNS ;3EC =
28.18
.OTICE FOR MAKING ASSESSMENT ;3EC =
28.20
.OTICE DEEMED TO BE VALID IN CERTAIN CIRCUMSTANCES ;3EC ""=
28.20
2ETURN OF INCOME ETC NOT TO BE INVALID ON CERTAIN GROUNDS ;3EC "=
28.21
2EGULAR 3CRUTINY !SSESSMENT ;3EC =
28.22
"EST *UDGMENT !SSESSMENT ;3EC =
28.22
-ETHOD OF !CCOUNTING ;3EC =
28.23
&ACELESS !SSESSMENT ;3EC "=
28.24
0OWERS OF *OINT #OMMISSIONER TO ISSUE DIRECTIONS IN CERTAIN CASES ;3EC !=
28.27
2EFERENCE TO 0RINCIPAL #OMMISSIONER #OMMISSIONER IN CERTAIN CASES ;3EC "!=
28.27
2EFERENCE TO $ISPUTE 2ESOLUTION 0ANEL ;3EC #=
28.29
0OWERS AND 0ROCEDURE OF $ISPUTE 2ESOLUTION 0ANEL
28.30
0OWER OF #' TO MAKE A SCHEME FOR &ACELESS ISSUE OF DIRECTIONS BY $20 ;3EC # "
28.31
AND # # = !SSESSMENT OR REASSESSMENT OF INCOMES ESCAPING ASSESSMENT ;3EC =
28.31
3ERVICE OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMENT ;3EC =
28.32
)NFORMATION WHICH SUGGESTS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT
;Explanation 1 TO 3EC =
28.32
$EEMED CASES WHICH SUGGESTS THAT THE INCOME HAS ESCAPED ASSESSMENT ;Explanation 2 TO
28.32
3EC = #ONDUCTING INQUIRY PROVIDING OPPORTUNITY BEFORE ISSUE OF NOTICE U S ;3EC !=
28.33
4IME LIMITS FOR ISSUE OF NOTICE U S ;3EC =
28.34
.O 4IME ,IMIT FOR )SSUE OF .OTICE U S ;3EC =
28.36
%XCEPTION TO 3EC
28.37
;3EC =
3ANCTIONS FOR ISSUE OF NOTICE U SS AND ! ;3EC =
28.38
&ACELESS ASSESSMENT OF INCOME ESCAPING ASSESSMENT ;3EC !=
28.38
/THER 0ROVISIONS ;3EC =
28.38
4IME LIMIT FOR COMPLETION OF !SSESSMENT 2EASSESSMENTS ;3EC =
28.39
%XCEPTION TO TIME LIMIT U S
28.40
AND ;3EC =
%XCLUSION OF 4IME ;Explanation 1 TO 3EC =
28.41
2ECTIFICATION OF -ISTAKE ;3EC =
28.43
&ACELESS RECTIFICATION AMENDMENTS AND ISSUANCE OF NOTICE OR INTIMATION ;3EC !=
28.44
0ROTECTIVE ASSESSMENT
28.44
0RACTICAL 1UESTIONS
28.46
I-14
#/.4%.43
Topics
Page No.
29 APPEALS AND REVISIONS 29.1
)NTRODUCTION !PPEALABLE ORDERS BEFORE *OINT #OMMISSIONER !PPEALS
3CHEME FOR DISPOSAL OF APPEALS BY *OINT #OMMISSIONER !PPEALS !PPEALABLE ORDERS BEFORE #OMMISSIONER !PPEALS
29.2
;3EC = ;3EC =
29.3 29.5
;3EC !=
!PPLICATION FOR REFUND OF TAX PAID BY PERSON DENYING LIABILITY TO DEDUCT TAX ;3EC !=
29.6
0ROCEDURE FOR FILING APPEAL ;3EC =
29.7
4IME LIMIT FOR FILING APPEAL ;3EC =
29.8
!MOUNT OF 4AX PAYABLE BEFORE FILING APPEAL TO #)4 !PPEALS
;3EC =
29.9
3TAY OF $EMAND ;3EC =
29.9
'RANT OF 3TAY ;#"$4 )NSTRUCTION DATED =
29.9
0ROCEDURE IN (EARING !PPEAL ;3EC =
29.10
3CHEME FOR &ACELESS DISPOSAL OF APPEAL BY #)4 ! 0OWERS OF THE #)4 !PPEALS
;3EC " # =
29.10 29.15
;3EC =
0RODUCTION AND !DMISSION OF !DDITIONAL %VIDENCE ;2ULE !=
29.16
!PPELLATE 4RIBUNAL ;3EC =
29.16
!PPEALS TO THE )4!4 !PPELLATE 4RIBUNAL
29.17
;3EC =
3CHEME FOR &ACELESS DISPOSAL OF APPEAL BY )4!4 ;3EC
=
29.18
/RDER OF !PPELLATE 4RIBUNAL ;3EC =
29.18
'RANT OF 3TAY BY )4!4 ;0ROVISO TO 3EC =
29.20
0ROCEDURE OF !PPELLATE 4RIBUNAL ;3EC =
29.21
3CHEME FOR DISPOSAL OF APPEALS BY !PPELLATE 4RIBUNAL ;3EC
TO =
29.21
0OWER OF )4!4 TO ADMIT !DDITIONAL %VIDENCE
29.22
)4!4
29.22
4HE &INAL &ACT &INDING !UTHORITY
!PPEAL TO (IGH #OURT ;3EC !=
29.22
0ROCEDURE FOR &ILING !PPEAL
29.23
#ASE BEFORE (IGH #OURT TO BE HEARD BY NOT LESS THAN TWO JUDGES ;3EC "=
29.23
!PPEAL TO THE 3UPREME #OURT ;3EC =
29.26
(EARING AND *UDGMENT BY 3UPREME #OURT ;3EC =
29.26
!DMINISTRATIVE INSTRUCTION FIXING MONETARY LIMITS FOR FILING APPEAL ;3EC !=
29.26
.ON FILING OF APPEAL AS PER AFORESAID ORDERS
29.27
.OT TO DEBAR $EPARTMENT FROM FILING APPEAL
IN OTHER CASE 3PECIAL 0ROVISIONS FOR AVOIDANCE OF 2EPETITIVE !PPEALS ;3EC !=
29.28
0ROCEDURE WHERE AN IDENTICAL QUESTION OF LAW IS PENDING BEFORE (IGH #OURTS OR 3UPREME
#OURT ;3EC !"=
29.29
2EVISION OF ORDERS PREJUDICIAL TO REVENUE ;3EC =
29.30
/RDERS WHICH ARE DEEMED TO BE ERRONEOUS ;Explanation 2 TO 3EC =
29.31
2EVISION OF /RDERS IN FAVOUR OF !SSESSEE ;3EC =
29.32
&ACELESS REVISION OF ORDERS ;3EC !=
29.33
I-15
#/.4%.43
Topics
Page No.
&ACELESS EFFECT OF ORDERS ;3EC "=
29.34
0RACTICAL 1UESTIONS
29.35
30 SURVEY, SEARCH AND SEIZURE 4AXPAYER S #HARTER ;3EC !=
30.1
&ACELESS JURISDICTION OF INCOME TAX AUTHORITIES ;3EC =
30.1
0OWER REGARDING DISCOVERY PRODUCTION OF EVIDENCE ETC ;3EC =
30.1
0OWER TO #ALL FOR )NFORMATION ;3EC =
30.2
0OWER OF 3URVEY ;3EC !=
30.3
0RESUMPTION OF OWNERSHIP OF "OOKS OF ACCOUNT ASSETS AND ITS TRUTHFULNESS ;3EC #=
30.5
0OWER OF )NCOME TAX AUTHORITY TO #OLLECT )NFORMATION $OOR TO $OOR SURVEY
30.5
;3EC "=
0OWER TO CALL FOR INFORMATION BY PRESCRIBED INCOME TAX AUTHORITY ;3EC #=
30.5
0OWER TO )NSPECT 2EGISTERS OF #OMPANIES ;3EC =
30.6
0OWER TO -AKE %NQUIRY ;3EC =
30.6
&ACELESS COLLECTION OF INFORMATION ;3EC !=
30.6
0OWERS AND PROCEDURE FOR CONDUCTING 3EARCH AND 3EIZURE ;3EC =
30.6
0OWER OF /FFICER TO WHOM AUTHORITY IS GIVEN FOR SEARCH AND 3EIZURE
30.7
!UTHORIZATION OF 3EARCH BY AN AUTHORITY OTHER THAN JURISDICTIONAL AUTHORITY
30.7
0OWERS TO 2EQUISITION "OOKS OF !CCOUNT ETC ;3EC !=
30.11
!UTHORISATION AND ASSESSMENT IN CASE OF SEARCH OR REQUISITION ;3EC ##=
30.11
!PPLICATION OF 3EIZED OR 2EQUISITIONED !SSETS ;3EC "=
30.12
0ERIOD OF )NTEREST
30.14
2IGHTS AND DUTIES OF PERSON SEARCHED
30.14
!SSESSMENT IN CASE OF 3EARCH AND 2EQUISITION ;3ECS ! TO $=
30.15
0RACTICAL 1UESTIONS
30.16
31 PROVISIONS TO COUNTERACT UNETHICAL TAX PRACTICES 0ENALTY FOR UNDER REPORTING AND MISREPORTING OF INCOME ;3EC !=
31.1
!UTHORITY TO IMPOSE 0ENALTY ;3EC ! =
31.1
7HEN )NCOME IS SAID TO BE UNDER REPORTED ;3EC ! =
31.1
#ALCULATION OF AMOUNT OF UNDER REPORTED )NCOME ;3EC ! =
31.2
!MOUNT NOT CONSIDERED AS UNDER REPORTED INCOME IN PRECEDING YEAR
TO BE CONSIDERED UNDER REPORTED INCOME IN CERTAIN CASES )NTANGIBLE !DDITIONS ;3EC ! =
31.2
)TEMS NOT CONSIDERED AS UNDER REPORTED INCOME ;3EC ! =
31.3
0ENALTY IN RESPECT OF -ISREPORTING OF )NCOME ;3EC ! =
31.4
#ASES OF -ISREPORTING OF INCOME ;3EC ! =
31.4
#ALCULATION OF @4AX PAYABLE ON THE UNDER REPORTED INCOME ;3EC ! =
31.5
)MMUNITY FROM IMPOSITION OF PENALTY ;3EC !!=
31.7
I-16
#/.4%.43
Topics
Page No. 31.8
0ENALTY WHERE SEARCH HAS BEEN INITIATED ;3EC !!"= 0ENALTY WHERE )NCOME DETERMINED INCLUDES )NCOME REFERRED U SS ! TO $ ;3EC
31.8
!!#= 0ENALTY FOR FALSE ENTRY ETC IN BOOKS OF ACCOUNT ;3EC !!$=
31.9
0ENALTY FOR APPLYING INCOME FOR BENEFITS TO 2ELATED PERSONS ;3EC !!%=
31.9
0OWER TO REDUCE OR WAIVE PENALTY ;3EC !=
31.10
.O PENALTY ON SHOWING OF REASONABLE CAUSE ;3EC "=
31.11
0ROCEDURE FOR IMPOSING PENALTY ;3EC =
31.11
3CHEME FOR IMPOSING PENALTY UNDER THIS #HAPTER ;3EC !
" =
31.11
"AR OF LIMITATION FOR IMPOSING PENALTIES ;3EC =
31.14
0ENALTY MODIFIED CANCELLED ON RE ASSESSMENT IN !PPEAL OR 2EVISION ;3EC ! =
31.15
/THER 0ENALTIES
31.15
/FFENCES AND 0ROSECUTION ;#HAPTER 88))=
31.21
3CHEME FOR IMPOSING SANCTION OR COMPOUNDING U S ;3EC
=
31.23 31.23
1UANTUM OF 0UNISHMENTS
Black Money Law
"ASIS OF #HARGE ;3EC =
31.26
-EANING OF CERTAIN TERMS FOR THE PURPOSES OF THIS !CT
31.26
6ALUE OF AN 5NDISCLOSED !SSET ;3EC =
31.27
2ATE OF CONVERSION OF CURRENCY USED TO DETERMINE &-6 OF AN ASSET
31.29
3COPE OF 4OTAL 5NDISCLOSED &OREIGN )NCOME AND !SSET ;3EC =
31.30
#OMPUTATION OF TOTAL UNDISCLOSED FOREIGN INCOME AND ASSET ;3EC =
31.31
0ENALTIES
31.32
/FFENCES AND 0ROSECUTION
31.32
0RACTICAL 1UESTIONS
31.34
32 DISPUTE RESOLUTION )NTRODUCTION
32.1
$ISPUTE 2ESOLUTION #OMMITTEE ;3EC -!=
32.1
33 LIABILITY IN SPECIAL CASES ,EGAL 2EPRESENTATIVES ;3EC =
33.1
%XECUTORS ;3ECS =
33.1
2EPRESENTATIVE !SSESSEE ;3EC =
33.2
,IABILITY OF 2EPRESENTATIVE !SSESSEE ;3EC =
33.2
$IRECT ASSESSMENT OR RECOVERY NOT BARRED ;3EC =
33.2
2EMEDIES AGAINST PROPERTY IN CASE OF 2EPRESENTATIVE !SSESSEE ;3EC =
33.2
2IGHTS OF 2EPRESENTATIVE !SSESSEE ;3EC =
33.3
#/.4%.43
Topics
I-17 Page No.
7HO MAY BE REGARDED AS AN !GENT OF .ON 2ESIDENT ;3EC =
33.3
3UCCESSION TO BUSINESS OTHERWISE THAN ON DEATH ;3EC =
33.3
%FFECT OF ORDER OF 4RIBUNAL OR #OURT IN RESPECT OF "USINESS 2EORGANISATION ;3EC !=
33.4
Provisions for Accelerated Assessment 3HIPPING BUSINESS OF .ON RESIDENTS ;3EC =
33.5
!SSESSMENT OF 0ERSONS LEAVING )NDIA ;3EC =
33.6
!SSESSMENT OF !/0 "/) !RTIFICIAL JURIDICAL PERSON FORMED FOR A PARTICULAR EVENT OR PURPOSE
33.6
;3EC != !SSESSMENT OF 0ERSONS LIKELY TO TRANSFER PROPERTY TO AVOID TAX ;3EC =
33.6
Assessment on Discontinuance of Business $ISCONTINUED "USINESS ;3EC =
33.7
!SSOCIATION DISSOLVED OR BUSINESS DISCONTINUED ;3EC =
33.7
#OMPANY IN LIQUIDATION ;3EC =
33.8
,IABILITY OF $IRECTORS OF 0RIVATE #OMPANY ;3EC =
33.8
34 ASSESSMENT OF HUF )NTRODUCTION
34.1
0ARTITION OF (5&
34.1
!SSESSMENT AFTER 0ARTITION OF (INDU 5NDIVIDED &AMILY ;3EC =
34.2
0ARTITION TO BE BY METES AND BOUNDS
34.2
#OMPUTATION OF 4OTAL )NCOME OF (5&
34.3
3CHOOL OF (INDU ,AW $AYABHAGA V -ITAKSHARA
34.4
0RACTICAL 1UESTIONS
34.5
35 ASSESSMENT OF FIRMS AND LLP !SSESSMENT AS A FIRM ;3EC =
35.1
!SSESSMENT WHEN SECTION NOT COMPLIED WITH ;3EC =
35.1
#HANGE IN CONSTITUTION OF &IRM ;3EC =
35.2
3UCCESSION OF ONE FIRM BY ANOTHER FIRM ;3EC =
35.2
*OINT AND 3EVERAL LIABILITY OF PARTNERS FOR TAX PAYABLE BY FIRM ;3EC !=
35.2
&IRM DISSOLVED OR BUSINESS DISCONTINUED ;3EC =
35.2
36 TAX DEDUCTION AND COLLECTION AT SOURCE )NTRODUCTION
36.1
3URCHARGE AND #ESS ON 4$3 2ATES PRESCRIBED
36.1
4$3 WHERE INCOME IS PAYABLE IN &OREIGN CURRENCY ;2ULE =
36.2
.O 4$3 ON @'34 ON 3ERVICES #OMPONENTg ON 0AYMENTS MADE TO 2ESIDENTS
36.2
I-18
#/.4%.43
Topics
Page No.
TDS Provisions [Chapter XVII-B] 4$3 ON 3ALARIES ;3EC =
36.2
4$3 ON 0RE MATURE WITHDRAWAL FROM ACCUMULATED BALANCE OF 20& BY THE %MPLOYEE
36.6
;3EC != 4$3 ON )NTEREST ON 3ECURITIES ;3EC =
36.6
4$3 ON $IVIDEND ;3EC =
36.7
4$3 ON )NTEREST /THER THAN @)NTEREST ON 3ECURITIES ;3EC !=
36.8
4$3 ON 7INNING FROM ,OTTERY #ROSSWORD 0UZZLE ETC ;3EC "=
36.10
4$3 ON 7INNINGS FROM /NLINE 'AMES ;3EC "!=
36.11
4$3 ON 7INNING FROM (ORSE 2ACE ;3EC ""=
36.16
4$3 ON 0AYMENT TO #ONTRACTORS FOR g7ORK #ONTRACTg ;3EC #=
36.16
4$3 ON )NSURANCE #OMMISSION ;3EC $=
36.19
4$3 ON 0AYMENT IN RESPECT OF ,IFE )NSURANCE 0OLICY ;3EC $!=
36.19
4$3 ON 0AYMENT TO .ON 2ESIDENT 3PORTSMAN 3PORTS !SSOCIATION %NTERTAINER ;3EC %=
36.19
0AYMENTS IN RESPECT OF .33 $EPOSITS ;3EC %%=
36.20
4$3 ON #OMMISSION ETC ON 3ALE OF ,OTTERY 4ICKETS ;3EC '=
36.20
4$3 ON #OMMISSION OTHER THAN )NSURANCE #OMMISSION
36.20
OR "ROKERAGE ;3EC (=
4$3 ON 2ENT ;3EC )=
36.22
4$3 ON 4RANSFER OF )MMOVABLE 0ROPERTY ;3EC )!=
36.25
4$3 ON PAYMENT OF RENT BY CERTAIN )NDIVIDUAL OR (5& ;3EC )"=
36.27
4$3 ON PAYMENT UNDER SPECIFIED AGREEMENT ;i.e. *OINT $EVELOPMENT !GREEMENT REFERRED
36.28
IN SEC ! = ;3EC )#= 4$3 ON &EES FOR 0ROFESSIONAL 3ERVICES &03
OR &EES FOR 4ECHNICAL 3ERVICE &43 OR 2OYALTY OR $IRECTORgS &EES OR !NY SUM REFERRED IN CLAUSE va OF 3EC i.e. NON COMPETE FEES ;3EC *=
36.28 36.31
4$3 ON )NCOME IN RESPECT OF 5NITS ;3EC += 0AYMENT OF #OMPENSATION ON #OMPULSORY !CQUISITION OF ANY )MMOVABLE 0ROPERTY OTHER
36.31
THAN !GRICULTURAL LAND ;3EC ,!= )NCOME OF )NTEREST FROM )NFRASTRUCTURE $EBT &UND REFERRED IN 3EC 47
;3EC ,"=
36.31
#ERTAIN )NCOME FROM UNITS OF A "USINESS 4RUST ;3EC ,"!=
36.31
)NCOME IN RESPECT OF UNITS OF )NVESTMENT &UND ;3EC ,""=
36.32
)NCOME IN RESPECT OF INVESTMENT IN 3ECURITISATION TRUST ;3EC ,"#=
36.32
)NCOME OF )NTEREST FROM )NDIAN #OMPANY ;3EC ,#=
36.32
)NTEREST INCOME ON CERTAIN BONDS AND 'OVERNMENT SECURITIES ;3EC ,$=
36.33
0AYMENT OF #OMMISSION OR "ROKERAGE OR &EES FOR 0ROFESSIONAL SERVICES BY CERTAIN
36.33
INDIVIDUALS OR (5& ;3EC -= 0AYMENT OF CERTAIN AMOUNTS IN CASH ;3EC .=
36.34
0AYMENT OF CERTAIN SUMS BY E COMMERCE OPERATOR TO E COMMERCE PARTICIPANT ;3EC /=
36.36
$EDUCTION OF TAX IN CASE OF SPECIFIED SENIOR CITIZEN ;3EC 0=
36.39
4$3 ON PAYMENT OF CERTAIN SUM FOR PURCHASE OF GOODS ;3EC 1=
36.39
4$3 ON BENEFIT OR PERQUISITE IN RESPECT OF BUSINESS OR PROFESSION ;3EC 2=
36.41
I-19
#/.4%.43
Topics 4$3 ON PAYMENT ON TRANSFER OF 6IRTUAL $IGITAL !SSET 6$!
Page No. ;3EC 3=
36.45
)NTEREST OR OTHER SUM PAYABLE TO .ON 2ESIDENT OR &OREIGN #OMPANY ;3EC =
36.45
)NCOME PAYABLE gNET OF TAXg ;3EC !=
36.47
4$3 ON )NCOME IN RESPECT OF UNITS OF .ON RESIDENT ;3EC !=
36.47
4$3 ON ,4#' FROM UNITS REFERRED TO IN SECTION !" ;3EC "=
36.47
4$3 ON )NCOME FROM &OREIGN #URRENCY "ONDS OR '$2S REFERRED IN 3EC !# ;3EC #=
36.47
4$3 ON )NTEREST )NCOME OF &OREIGN )NSTITUTIONAL )NVESTORS FROM 3ECURITIES REFERRED TO IN
3EC !$ ;3EC $=
36.48
.O 4$3 ON SUMS PAYABLE TO 'OVERNMENT 2") #ORPORATIONS -& ;3EC =
36.48
#ERTIFICATE FOR NO LOWER DEDUCTION OF 4AX ;3EC =
36.49
3ELF DECLARATION FOR NON DEDUCTION OF 4AX ;3EC !=
36.49
4AX DEDUCTED IS INCOME RECEIVED ;3EC =
36.51
#REDIT OF TAX DEDUCTED ;3EC =
36.51
4IME LIMITS FOR PAYMENT OF 4$3 4#3 ;3EC =
36.51
&URNISHING OF 3TATEMENT BY THE /FFICE OF 'OVERNMENT IN CASE OF PAYMENT OF 4$3 WITHOUT
#HALLAN ;3EC ! =
36.52
4IME LIMIT FOR FURNISHING QUARTERLY RETURNS OF 4$3
36.52
4IME LIMIT FOR ISSUE OF 4$3 CERTIFICATE
36.52
0ROCESSING OF 3TATEMENTS OF 4$3 ;3EC !=
36.53
#ONSEQUENCES OF &AILURE TO $EDUCT OR 0AY 4$3 ;3EC =
36.53
'UIDELINES FOR WAIVER OF INTEREST CHARGED UNDER SECTION !
36.55
4AX $EDUCTION AND #OLLECTION !CCOUNT .UMBER ;3EC !=
36.56
&URNISHING OF STATEMENT IN RESPECT OF PAYMENT OF ANY INCOME TO RESIDENTS WITHOUT DEDUCTION
OF TAX ;3EC !=
36.56
4$3 AT (IGHER 2ATE ON &AILURE TO FURNISH 0!. ;3EC !!=
36.56
4$3 AT (IGHER 2ATE FOR .ON FILERS OF 2/) ;3EC !"=
36.57
TCS Provisions [Chapter XVII-BB] 4AX
#OLLECTION ON 3ALE OF !LCOHOLIC ,IQUOR &OREST 0RODUCE 3CRAP -INERALS ETC ;3EC # =
36.58
'RANT OF LEASE LICENCE OR TRANSFER OF ANY RIGHT OR INTEREST IN ANY PARKING LOT OR TOLL PLAZA
OR MINE OR QUARRY ;3EC # # =
36.59
#ERTIFICATE FOR ,OWER 2ATE OF 4#3 ;3EC # =
36.59
4#3 ON 3ALE OF -OTOR 6EHICLE ;3EC # & =
36.60
4#3 ON FOREIGN REMITTANCE THROUGH ,IBERALISED 2EMITTANCE 3CHEME AND ON SELLING OF
36.60
OVERSEAS TOUR PACKAGE ;3EC # ' = 4#3 ON SALE OF GOODS ABOVE ` LAKHS ;3EC # ( =
36.63
4IME LIMIT FOR FURNISHING QUARTERLY RETURNS OF 4#3
36.65
2EQUIREMENT TO FURNISH 0!. BY COLLECTEE ;3EC ##=
36.65
4#3 AT (IGHER 2ATE FOR .ON FILERS OF 2/) ;3EC ##!=
36.65
3UMMARY OF 4$3
36.66
0RACTICAL 1UESTIONS
36.71
I-20
#/.4%.43
Topics
Page No.
37 TAXATION OF DIGITAL TRANSACTIONS )NTRODUCTION
37.1
7HAT IS % #OMMERCE
37.1
#ONDUCT OF "USINESS IN $IGITAL %CONOMY
37.1
4AXATION ISSUES RELATING TO $IGITAL %CONOMY
Equalisation Levy
%QUALISATION ,EVY ;#HAPTER 6))) IN &INANCE !CT =
37.2
#HARGE OF %QUALISATION ,EVY ON 3PECIFIED 3ERVICES ;3EC =
37.3
#HARGE OF %QUALISATION LEVY ON E COMMERCE SUPPLY OR SERVICES ;3EC !=
37.3
#OLLECTION AND 2ECOVERY OF %QUALISATION ,EVY ON 3PECIFIED 3ERVICES ;3EC =
37.4
#OLLECTION AND 2ECOVERY OF %QUALIZATION ,EVY ON E COMMERCE 3UPPLY OR 3ERVICES ;3EC !=
37.4
&URNISHING OF 3TATEMENT IN RESPECT OF 3PECIFIED 3ERVICES ;3EC =
37.4
0ROCESSING OF 3TATEMENT ;3EC =
37.5
3CHEME FOR #ENTRALISED 0ROCESSING OF 3TATEMENT ;3EC =
37.5
2ECTIFICATION OF MISTAKE IN INTIMATION ;3EC =
37.6
)NTEREST ON FAILURE TO CREDIT EQUALISATION LEVY WITHIN SPECIFIED PERIOD ;3EC =
37.6
0ENALTY FOR FAILURE TO DEDUCT OR PAY %QUALISATION ,EVY ;3EC =
37.6
0UNISHMENT FOR &ALSE STATEMENT ;3EC =
37.7
#ENTRAL 'OVERNMENT EMPOWERED TO MAKE 2ULES ;3ECS AND =
37.7
Relevant Provisions in Income-tax Act, 1961 related to Equalisation Levy
%XEMPTION FOR PROVIDING 3PECIFIED SERVICES ;3EC =
37.7
$ISALLOWANCE IF EQUALISATION ,EVY IS NOT DEDUCTED OR NOT PAID ;3EC A IB =
37.7
Virtual Digital Assets:
)NTRODUCTION
37.8
-EANING OF 6IRTUAL $IGITAL !SSET 6$! ;3EC ! =
37.8
4AX ON )NCOME FROM 6IRTUAL $IGITAL !SSET 6$! ;3EC ""(=
37.9
2ECEIPT OF 6IRTUAL $IGITAL !SSET AS GIFT OR FOR INADEQUATE CONSIDERATION ;3EC X =
37.10
4$3 ON PAYMENT ON TRANSFER OF 6IRTUAL $IGITAL !SSET 6$! ;3EC 3=
37.10
0RACTICAL 1UESTIONS
37.14
38 ADVANCE TAX 7HO IS LIABLE TO PAY !DVANCE 4AX ;3EC =
38.1
!MOUNT OF !DVANCE 4AX PAYABLE
38.1
.O !DVANCE TAX PAYABLE BY SENIOR CITIZENS NOT HAVING 0'"0 ;3EC =
38.1
$UE DATES FOR PAYMENT OF ADVANCE TAX ;3EC =
38.1
!DVANCE TAX PAID IN CASE OF #APITAL GAIN #ASUAL )NCOME &IRST TIME 0'"0 $IVIDEND
;0ROVISO TO 3EC #=
38.2
I-21
#/.4%.43
Topics
Page No.
!SSESSEE $EEMED TO BE IN $EFAULT ;3EC =
38.2
#REDIT FOR !DVANCE 4AX ;3EC =
38.2
0AYMENT OF ADVANCE TAX IN PURSUANCE OF AN ORDER OF ! / ;3EC =
38.2
0RACTICAL 1UESTIONS
38.3
39 COLLECTION AND RECOVERY OF TAX 39.1
.OTICE OF DEMAND ;3EC =
-ODIFICATION AND 2EVISION OF .OTICE OF DEMAND IN CERTAIN CASES ;3EC !=
39.1
4IME LIMIT FOR PAYMENT OF TAX IN A NOTICE OF DEMAND ;3EC =
39.2
)NTEREST FOR LATE PAYMENT OF TAX ;3EC =
39.2
!SSESSEE DEEMED TO BE IN DEFAULT IF PAYMENT NOT MADE WITHIN TIME ;3EC =
39.3
!SSESSEE NOT DEEMED TO BE IN DEFAULT IN CERTAIN CASES
39.4
#ONSEQUENCES IF THE PERSON IS DEEMED TO BE IN DEFAULT
39.4
0ENALTY PAYABLE WHEN ASSESSEE IS IN DEFAULT ;3EC =
39.4
#ERTIFICATE TO BE DRAWN BY 4AX 2ECOVERY /FFICER AND PROCEDURE FOR RECOVERY OF TAX
39.4
;3EC 2ULE "= 2ECOVERY TO BE EFFECTED BY WHICH 4AX 2ECOVERY /FFICER 42/
;3EC =
39.5
42/ MAY FORWARD CERTIFICATE TO ANOTHER 42/ ;3EC =
39.5
6ALIDITY OF CERTIFICATE AND CANCELLATION OR AMENDMENT THEREOF ;3EC =
39.5
3TAY OF PROCEEDINGS ;3EC =
39.5
/THER MODES OF 2ECOVERY OF 4AX ;3EC =
39.5
2ECOVERY THROUGH 3TATE 'OVERNMENT ;3EC =
39.6
2ECOVERY OF TAX IN PURSUANCE OF AGREEMENTS WITH FOREIGN COUNTRIES ;3EC !=
39.6
2ECOVERY OF PENALTIES FINE INTEREST AND OTHER SUM ;3EC =
39.6
4AX #LEARANCE #ERTIFICATE ;3EC =
39.6
&ACELESS COLLECTION AND RECOVERY OF TAX ;3EC =
39.7
0RACTICAL 1UESTIONS
39.8
40 INTEREST )NTEREST FOR FAILURE TO DEDUCT OR PAY 4$3 ;3EC ! =
40.1
)NTEREST FOR FAILURE TO COLLECT ANY TAX OR PAY 4#3 ;3EC # =
40.1
&EES FOR DEFAULT IN FURNISHING 1UARTERLY 2ETURNS OF 4$3 4#3 ;3EC %=
40.2
)NTEREST ON DELAYED PAYMENT OF TAX OTHER THAN !DVANCE 4AX ;3EC =
40.2
)NTEREST FOR DEFAULTS IN FURNISHING RETURN OF INCOME ;3EC !=
40.2
)NTEREST FOR DEFAULT IN PAYING !DVANCE 4AX ;3EC "=
40.3
)NTEREST FOR DEFAULTS IN PAYMENT OF INTEREST DUE TO INCREASE DECREASE OF AMOUNT AS A RESULT
40.4
OF CERTAIN ORDERS ;3EC " = )NTEREST FOR DEFERMENT OF !DVANCE 4AX ;3EC #=
40.4
I-22
#/.4%.43
Topics
Page No.
)NTEREST CHARGED ON REFUND GRANTED EARLIER ;3EC $=
40.6
)NTEREST IS PAYABLE TO ASSESSEE ON REFUND ;3EC !=
40.6
3ET OFF AND WITHHOLDING OF REFUNDS IN CERTAIN CASES ;3EC =
40.7
0RACTICAL 1UESTIONS
40.8
41 MISCELLANEOUS TOPICS, STT/CTT AND IFSC -ODE OF 4AKING OR !CCEPTING #ERTAIN ,OANS AND $EPOSITS ;3EC 33=
41.1
-ODE OF UNDERTAKING TRANSACTIONS ;3EC 34=
41.2
!CCEPTANCE OF PAYMENT THROUGH PRESCRIBED ELECTRONIC MODES ;3EC 35=
41.4
-ODE OF 2EPAYMENT OF CERTAIN LOANS OR DEPOSITS ;3EC 4=
41.5
0ERMANENT !CCOUNT .UMBER ;3EC !=
41.7
2ULES FRAMED BY THE 'OVERNMENT FOR 0!. ;2ULES " TO $=
41.10
1UOTING OF !ADHAAR .UMBER IN APPLICATION FOR ALLOTMENT OF 0!. 2/) ;3EC !!=
41.11
/BLIGATION TO FURNISH 3TATEMENT OF &INANCIAL 4RANSACTION OR 2EPORTABLE !CCOUNT ;3EC
41.13
"!= &URNISHING OF 3TATEMENT OF &INANCIAL 4RANSACTION ;2ULE %=
41.14
!NNUAL )NFORMATION 3TATEMENT ;3EC ""=
41.16
#ERTAIN 4RANSFERS TO BE 6OID ;3EC =
41.16
0ROVISIONAL !TTACHMENT TO 0ROTECT THE )NTEREST OF THE 2EVENUE IN CERTAIN CASES ;3EC "=
41.17
3ERVICE OF .OTICE 'ENERALLY ;3EC =
41.18
!UTHENTICATION OF .OTICES AND /THER $OCUMENTS ;3EC !=
41.18
0UBLICATION OF INFORMATION IN CERTAIN CASES ;3EC =
41.19
!PPEARANCE BY REGISTERED VALUER IN CERTAIN MATTERS ;3EC !=
41.19
!PPEARANCE BY !UTHORISED 2EPRESENTATIVE ;3EC =
41.19
2OUNDING OFF OF )NCOME !MOUNT 0AYABLE 2EFUND $UE ;3ECS ! "=
41.21
0OWER TO 7ITHDRAW !PPROVAL ;3EC #=
41.21
&ACELESS APPROVAL OR REGISTRATION ;3EC $=
41.21
4AX ON )NCOME FROM 0ATENT ;3EC ""&=
41.22
4AX OF )NCOME FROM TRANSFER OF #ARBON #REDITS ;3EC ""'=
41.22
4AX ON 7INNINGS FROM /NLINE 'AMES ;3EC ""*=
41.22
0RIZES !WARDS AND 2EWARDS RECEIVED BY 3PORTSMAN
41.23
Securities Transaction Tax (STT)
3ECURITIES 4RANSACTION 4AX 344
41.24
#HARGE OF 3ECURITIES 4RANSACTION 4AX 344
41.24
6ALUE OF TAXABLE SECURITIES
41.24
2ATES OF 3ECURITIES 4RANSACTION 4AX
41.24
#OLLECTION AND RECOVERY OF 344
41.25
$EPOSIT OF TAX
41.25
2ETURN
41.25
!SSESSMENT
41.25
#/.4%.43
Topics
I-23 Page No.
2ECTIFICATION
41.25
)NTEREST
41.25
0ENALTY
41.26
0ROSECUTION
41.26
!PPLICATION OF CERTAIN PROVISIONS OF THE )NCOME TAX !CT
41.26
Commodities Transaction Tax (CTT)
#OMMODITIES 4RANSACTION 4AX #44
41.26
2ATES OF #OMMODITIES 4RANSACTION 4AX
41.26
Tax Incentives to International Financial Services Centres [IFSC]
)NTRODUCTION
41.27
4AX INCENTIVES TO )NTERNATIONAL &INANCIAL 3ERVICES #ENTRES
41.27
42 TAX AUDIT AND ETHICAL COMPLIANCES
)NTRODUCTION
42.1
4AX !UDIT U S !"
42.1
-EANING OF 3ALES 4URNOVER AND 'ROSS 2ECEIPT
42.3
0ARTICULARS OF &ORM #$
42.5
#ASE 3TUDIES
42.9
0RACTICAL 1UESTIONS
42.20
43 TAX PLANNING, TAX AVOIDANCE AND TAX EVASION (INCLUDING GAAR) 4AX 0LANNING
43.1
/BJECTIVES OF 4AX 0LANNING
43.1
-ETHODS OF 4AX 0LANNING
43.1
4ESTS FOR EVALUATION OF 3UCCESSFUL 4AX 0LANNING
43.2
$OCTRINE OF &ORM AND 3UBSTANCE IN THE CONTEXT OF 4AX 0LANNING
43.2
4AX 0LANNING V 4AX -ANAGEMENT
43.3
4AX !VOIDANCE
43.3
4AX %VASION
43.3
4AX 0LANNING V 4AX !VOIDANCE v. 4AX %VASION
43.4
%FFECT OF 2ETROSPECTIVE ,EGISLATION
43.4
%FFECT OF 2ULES UNDER THE )NCOME TAX !CT
43.5
%FFECT OF #"$4 #IRCULARS )NSTRUCTIONS
43.5
$OCTRINE OF 0RECEDENCE IN 4AX ,AW
43.6
0RACTICAL 1UESTIONS
43.7
General Anti-Avoidance Rules [GAAR] )NTRODUCTION
43.9
!PPLICABILITY OF 'ENERAL !NTI !VOIDANCE 2ULE ;3EC =
43.10
I-24
#/.4%.43
Topics
Page No.
)MPERMISSIBLE !VOIDANCE !RRANGEMENT ;3EC =
43.11
!RRANGEMENT TO LACK COMMERCIAL SUBSTANCE ;3EC =
43.13
#ONSEQUENCE OF )MPERMISSIBLE !VOIDANCE !RRANGEMENT ;3EC =
43.15
4REATMENT OF #ONNECTED 0ERSONS AND !CCOMMODATING 0ARTY ;3EC =
43.16
@#ONNECTED PERSON DEFINED ;3EC =
43.16
&RAMING OF GUIDELINES UNDER )NCOME TAX 2ULES ;3EC =
43.16
#LARIFICATIONS ON CERTAIN QUERIES ABOUT IMPLEMENTATION OF '!!2 ;#IRCULAR .O OF
43.17
DATED = 43.20
0RACTICAL 1UESTIONS
INTERNATIONAL TAXATION
44 TAX INCIDENCE IN INDIA 44.3
2ESIDENTIAL 3TATUS OF A #OMPANY ;3EC = 'UIDING PRINCIPLES FOR DETERMINATION OF 0LACE OF %FFECTIVE -ANAGEMENT 0/%-
OF A
COMPANY OTHER THAN AN )NDIAN COMPANY
44.3
0LACE OF %FFECTIVE -ANAGEMENT ;0/%-=
44.4
4RANSITION -ECHANISM FOR A COMPANY INCORPORATED OUTSIDE )NDIA AND HAS NOT BEEN ASSESSED
TO TAX EARLIER IN )NDIA ;#HAPTER 8)) "# 3EC *(=
44.8
4AXATION OF 4OTAL )NCOME AS PER 2ESIDENTIAL 3TATUS
44.11
)NCOMES DEEMED TO BE 2ECEIVED IN )NDIA ;3EC =
44.12
)NCOME DEEMED TO BE ACCRUE OR ARISE IN )NDIA THROUGH "USINESS #ONNECTION ;3EC i =
44.12
3ITUATIONS WHICH SHALL NOT CONSTITUTE )NCOME DEEMED TO ACCRUE OR ARISE IN )NDIA ;Explanation
44.14
1 TO 3EC i = )NCOME THROUGH PROPERTY ASSET OR SOURCE OF INCOME SITUATED IN )NDIA ;3EC i =
44.15
)NCOME THROUGH THE TRANSFER OF A CAPITAL ASSET SITUATED IN )NDIA ;3EC i =
44.15
4HE ,ANDMARK *UDGMENT ON 6odafone International Holdings B.V V Union of India
44.15
)42 3# )NCOME FROM @3ALARIES EARNED IN )NDIA ;3EC ii =
44.17
)NCOME FROM @3ALARIES PAYABLE BY 'OVERNMENT OUTSIDE )NDIA TO A CITIZEN OF )NDIA FOR
SERVICES RENDERED OUTSIDE )NDIA ;3EC iii =
44.18
$IVIDEND PAID BY AN )NDIAN #OMPANY OUTSIDE )NDIA ;3EC iv =
44.18
)NTEREST 0AYABLE /UTSIDE )NDIA ;3EC v =
44.18
2OYALTY ;3EC vi =
44.19
&EES FOR 4ECHNICAL 3ERVICES ;3EC vii =
44.21
-ONEY PAID BY A 2ESIDENT )NDIAN TO A PERSON OUTSIDE )NDIA ;3EC viii =
44.21
0RESENCE OF %LIGIBLE &UND -ANAGER IN )NDIA ./4 TO CONSTITUTE BUSINESS CONNECTION IN )NDIA
OF SUCH %LIGIBLE )NVESTMENT &UND ON BEHALF OF WHICH HE UNDERTAKES &UND -ANAGEMENT ACTIVITY ;3EC != 3UBMISSION OF 3TATEMENT BY A .ON 2ESIDENT HAVING ,IAISON /FFICE ;3EC =
44.22 44.24
I-25
#/.4%.43
Topics
Page No.
&URNISHING OF INFORMATION OR DOCUMENTS BY AN )NDIAN CONCERN IN CERTAIN CASES ;3EC !=
44.24
0RACTICAL 1UESTIONS
44.25
45 TAXATION OF NON-RESIDENTS )NCOME OF .ON 2ESIDENTS FROM CERTAIN SPECIlED !SSETS 3OURCES #HARGEABLE TO TAX AT
45.1
3PECIAL 2ATE ;3ECS ! !" !# !#! !$= 2ATE OF 3URCHARGE FOR )NDIVIDUALS !/0S "/)S !RTIFICIAL *URIDICAL 0ERSONS HAVING ANY
45.4
INCOME U S !$ IN CASE OF .ON
45.5
4AXATION OF .ON 2ESIDENT 3PORTSMEN 3PORTS !SSOCIATIONS OR %NTERTAINER ;3EC ""!=
45.11
3PECIAL PROVISIONS FOR 2OYALTIES OR &EES FOR 4ECHNICAL 3ERVICES &43
RESIDENTS AND &OREIGN COMPANIES ;3EC $!= Chapter XII-A [Secs. 115C to 115-I]
!PPLICABILITY
45.12
$EFINITIONS ;3EC #=
45.12
3PECIAL 0ROVISIONS FOR COMPUTING THE )NVESTMENT )NCOME OF .2) ;3EC $=
45.12
4AX 2ATES ;3EC %=
45.12
,4#' %XEMPT ON TRANSFER OF @3PECIFIED &OREIGN %XCHANGE !SSETS ;3EC &=
45.13
.O REQUIREMENT OF &ILING 2/) ;3EC '=
45.13
/PTION CAN BE CONTINUED EVEN AFTER BECOMING 2ESIDENT ;3EC (=
45.13
#HAPTER 8)) ! OPTIONAL TO ASSESSEE ;3EC )=
45.13
#ONVERSION OF AN )NDIAN "RANCH OF &OREIGN #OMPANY INTO 3UBSIDIARY )NDIAN #OMPANY
45.15
;3EC *'= 2ELIEF FROM TAXATION IN INCOME FROM RETIREMENT BENElT ACCOUNT MAINTAINED IN A NOTIFIED
45.17
COUNTRY ;3EC != )NCOMES EXEMPT FOR NON RESIDENTS U S
45.18
0RACTICAL 1UESTIONS
45.25
46 DOUBLE TAXATION RELIEF (DTAA) 2ELIEF FROM $OUBLE 4AXATION
46.1
#ONSTITUTIONAL VALIDITY OF $OUBLE 4AXATION !VOIDANCE !GREEMENT
46.1
#ONCEPT OF 4REATY 3HOPPING
46.1
6ALIDITY OF 4REATY 3HOPPING
46.2
0URPOSES FOR WHICH $4!! MAY BE ENTERED INTO ;3EC =
46.2
#HARGE OF 4AX WHERE $4!! EXISTS ;3EC
46.2
4AX 2ESIDENCE #ERTIFICATE 42#
! =
NECESSARY FOR CLAIMING TREATY BENEFITS ;3EC =
46.3
!DOPTION BY #ENTRAL 'OVERNMENT OF AGREEMENTS BETWEEN SPECIFIED ASSOCIATIONS FOR
DOUBLE TAXATION RELIEF ;3EC !=
46.3
/BTAINING 42# #ERTIFICATE FOR CLAIMING RELIEF UNDER AN AGREEMENT REFERRED TO IN SECTIONS
AND ! ;2ULE !"=
46.3
I-26
#/.4%.43
Topics
Page No.
5NILATERAL 2ELIEF ;3EC =
46.5
#ONCEPT OF 0ERMANENT %STABLISHMENT 0%
46.7
4AXATION OF "USINESS 0ROCESS /UTSOURCING 5NITS IN )NDIA
46.8
0RACTICAL 1UESTIONS
46.9
47 TRANSFER PRICING )NTRODUCTION
47.1
!PPLICABILITY OF 3PECIAL 0ROVISIONS RELATING TO AVOIDANCE OF TAX
47.1
!SSOCIATED %NTERPRISE ;3EC ! =
47.1
$EEMED !SSOCIATED %NTERPRISES ;3EC ! =
47.2
)NTERNATIONAL 4RANSACTION ;3EC "=
47.2
-EANING OF SPECIFIED DOMESTIC TRANSACTION ;3EC "!=
47.4
!RM S ,ENGTH 0RICE !,0
47.4
;3EC & ii =
#OMPUTATION OF )NCOME HAVING REGARD TO THE ARM S LENGTH PRICE ;3EC =
47.4
-ETHODS FOR COMPUTATION OF !RM S LENGTH PRICE ;3EC #=
47.5
$ETERMINATION OF !,0 U S # ;2ULE "=
47.6
-OST APPROPRIATE METHOD ;2ULE #=
47.7
#OMPARABLE 5NCONTROLLED 0RICE ;#50= METHOD
47.7
2ESALE PRICE METHOD
47.8
0ROFIT SPLIT METHOD
47.9
#OST 0LUS -ETHOD
47.10
4RANSACTIONAL .ET -ARGIN -ETHOD
47.11
4RANSFER 0RICING /FFICER
47.12
2EFERENCE AND 0OWERS ;3EC #!=
!DVANCE PRICING AGREEMENT ;3EC ##=
0RICING !GREEMENT 3CHEME FOR THE PURPOSE OF SECTION ## PRESCRIBED ;2ULE & TO 2ULE 4=
47.13
!DVANCE
47.14
%FFECT TO ADVANCE PRICING AGREEMENT ;3EC #$=
47.21
3ECONDARY ADJUSTMENT IN CERTAIN CASES ;3EC #%=
47.22
$OCUMENTS
TO BE MAINTAINED BY PERSONS ENTERING INTO )NTERNATIONAL 4RANSACTION
;3EC $=
47.24
&URNISHING OF REPORT FROM AN !CCOUNTANT ;3EC %=
47.24
&URNISHING OF REPORT IN RESPECT OF INTERNATIONAL GROUP ;3EC =
47.24
3AFE
47.27
3AFE (ARBOUR FOR 3PECIFIED $OMESTIC 4RANSACTION
47.32
(ARBOUR FOR %LIGIBLE )NTERNATIONAL 4RANSACTION ;2ULE 4$ READ WITH 2ULE 4! 4" 4#=
2EFERENCE TO $ISPUTE 2ESOLUTION 0ANEL $20 FOR ASSESSMENT OF TRANSFER PRICING OR FOREIGN
COMPANIES ;3EC #= 0OWERS AND 0ROCEDURE OF $ISPUTE 2ESOLUTION 0ANEL
47.34 47.34
0OWER OF #' TO MAKE A SCHEME FOR &ACELESS ISSUE OF DIRECTIONS BY $ISPUTE 2ESOLUTION
0ANEL $20 ;3EC # " AND # # =
47.35
#/.4%.43
Topics
I-27 Page No.
4RANSFER OF )NCOME TO .ON 2ESIDENTS ;3EC =
47.36
3PECIAL MEASURES IN RESPECT OF TRANSACTIONS WITH PERSONS LOCATED IN .OTIFIED *URISDICTIONAL
47.36
!REA .*! ;3EC != ,IMITATION OF INTEREST DEDUCTION IN CERTAIN CASES ;3EC "=
47.37
0RACTICAL 1UESTIONS
47.39
48 ADVANCE RULINGS
)NTRODUCTION
48.1
"OARD FOR !DVANCE 2ULINGS "!2 ;3EC /"=
48.1
6ACANCIES ETC NOT TO INVALIDATE PROCEEDINGS ;3EC 0=
48.1
-EANING OF @!DVANCE RULING ;3EC . a =
48.1
-EANING OF @!PPLICANT ;3EC . b ! =
48.2
0ROCEDURE FOR &ILING AN !PPLICATION FOR !DVANCE 2ULING ;3EC 1=
48.2
!PPLICATION FOR OBTAINING AN ADVANCE RULING ;2ULE %=
48.2
0ROCEDURE FOLLOWED BY THE "OARD FOR !DVANCE 2ULING "!2 ON 2ECEIPT OF !PPLICATION ;3EC 2=
48.3
3CHEME FOR THE PURPOSES OF GIVING ADVANCE RULINGS ;3EC 2 TO 2 =
48.3
!PPELLATE !UTHORITY NOT TO PROCEED IN CERTAIN CASES ;3EC 22=
48.6
!DVANCE 2ULING TO BECAME 6OID ;3EC 4=
48.6
0OWERS OF THE "OARD FOR !DVANCE 2ULINGS ;3EC 5=
48.6
!PPEAL AGAINST RULING PRONOUNCED OR ORDER PASSED BY "OARD FOR !DVANCE 2ULINGS ;3EC 7 =
48.6
0RACTICAL 1UESTIONS
48.7
49 OVERVIEW OF MODEL TAX CONVENTIONS )NTRODUCTION
49.1
3IGNIFICANT -ODEL #ONVENTIONS
49.1
!RTICLES CONTAINED IN /%#$ -ODEL AND 5. -ODEL
49.2
#OMPARATIVE
49.3
!NALYSIS OF SOME OF THE SIGNIFICANT ARTICLES OF /%#$ AND 5. -ODEL
#ONVENTIONS !RTICLE g0ERSONS #OVEREDg
49.3
!RTICLE g4AXES #OVEREDg
49.4
!RTICLE g2ESIDENTg
49.4
!RTICLE g0ERMANENT %STABLISHMENTg
49.5
!RTICLE g"USINESS 0ROFITSg
49.6
!RTICLE g)NTERESTg
49.7
!RTICLE g2OYALTIESg
49.7
!RTICLE ! g&EES FOR 4ECHNICAL 3ERVICESg
49.7
!RTICLE " @)NCOME FROM !UTOMATED $IGITAL 3ERVICES
49.8
I-28
#/.4%.43
Topics
Page No.
!RTICLE g#APITAL 'AINSg
49.8
!RTICLE g)NDEPENDENT 0ERSONAL 3ERVICESg
49.9
!RTICLE g/THER )NCOMEg
49.10
!RTICLES ! " g%LIMINATION OF $OUBLE 4AXATIONg
49.10
!RTICLE g-UTUAL !GREEMENT 0ROCEDUREg
49.10
!RTICLE g%XCHANGE OF )NFORMATIONg
49.10
50 APPLICATION AND INTERPRETATION OF TAX TREATIES )NTRODUCTION
50.1
3OURCES OF )NTERNATIONAL 4AX ,AW
50.1
$OUBLE 4AXATION AND #ONNECTING &ACTORS
50.1
/VERVIEW OF 4AX 4REATIES
50.2
Interpretation of Tax Treaties 50.4
)NTRODUCTION
2OLE OF 6IENNA #ONVENTION IN !PPLICATION AND )NTERPRETATION OF 4AX 4REATIES
50.4
0RINCIPLES ENUNCIATED IN THE 6IENNA #ONVENTION ON ,AW OF 4REATIES
50.5
"ASIC 0RINCIPLES OF )NTERPRETATION OF LAW FOR INTERPRETING A 4REATY
50.7
%XTRINSIC !IDS TO )NTERPRETATION OF A 4AX 4REATY
50.9
#OMMENTARIES ON /%#$ 5. -ODELS AND THEIR IMPORTANCE
50.10
&OREIGN #OURTS $ECISIONS
50.11
!MBULATORY V 3TATIC !PPROACH
50.11
51 FUNDAMENTALS OF BASE EROSION AND PROFIT SHIFTING (BEPS) "ACKGROUND FOR THE NEED OF "%03
51.1
/VERVIEW OF "%03
51.2
!CTION 0LAN !DDRESSING THE #HALLENGES OF THE $IGITAL %CONOMY
51.3
!CTION 0LAN .EUTRALISE THE %FFECTS OF (YBRID -ISMATCH !RRANGEMENTS
51.5
!CTION 0LAN 3TRENGTHEN #ONTROLLED &OREIGN #OMPANY #&#
51.7
2ULES
!CTION 0LAN )NTEREST $EDUCTIONS AND /THER &INANCIAL 0AYMENTS
51.8
!CTION 0LAN #OUNTER (ARMFUL 4AX 0RACTICES
51.9
!CTION 0LAN 0REVENTING 4REATY !BUSE
51.10
!CTION 0LAN 0REVENT THE !RTIFICIAL !VOIDANCE OF 0% 3TATUS
51.11
!CTION 0LAN 4RANSFER 0RICING /UTCOMES IN ,INE 7ITH 6ALUE #REATION )NTANGIBLES
2ISK AND #APITAL AND /THER (IGH 2ISK 4RANSACTIONS
51.11
!CTION 0LAN -EASURING AND -ONITORING "%03
51.12
!CTION 0LAN $ISCLOSURE OF !GGRESSIVE 4AX 0LANNING !RRANGEMENTS
51.13
!CTION 0LAN 2E %XAMINE 4RANSFER 0RICING $OCUMENTATION
51.13
#/.4%.43
Topics
I-29 Page No.
!CTION 0LAN -AKING $ISPUTE 2ESOLUTION -ORE %FFECTIVE
51.15
!CTION 0LAN $EVELOPING A -ULTILATERAL )NSTRUMENT
51.16
52 LATEST DEVELOPMENTS IN INTERNATIONAL TAXATION )NTRODUCTION
52.1
%STABLISHMENT OF )NCLUSIVE &RAMEWORK )&
52.1
)NTRODUCTION OF 4WO 0ILLAR 3OLUTION "%03
52.2
0ILLAR /NE
52.2
0ILLAR 4WO
52.4
-/$%, 4%34 0!0%2 3/,6%$
M.1
3/,6%$ 0!0%2 ./6 35''%34%$ !.37%23
P.1
Capital Gains
[Sec. 45 to Sec. 55A]
C H A P T E R
Basis of Charge : [Sec. 45(1)] !NY PROFITS AND GAINS ARISING FROM THE transfer of a capital asset effected in the previous year SHALL BE CHARGEABLE TO TAX UNDER THE HEAD @#APITAL 'AINS IN THE PREVIOUS YEAR IN WHICH TRANSFER TOOK PLACE unless SUCH CAPITAL GAIN IS EXEMPT UNDER SECTIONS " $ %# & ' '! AND (
Definition of ‘Capital Asset’ : [Sec. 2(14)] Capital Asset means a PROPERTY OF ANY KIND HELD BY AN ASSESSEE WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION b ANY 3ECURITIES HELD BY A &OREIGN )NSTITUTIONAL )NVESTOR &)) WHICH HAS INVESTED IN SUCH SECURITIES IN ACCORDANCE WITH THE REGULATIONS MADE UNDER THE 3%") !CT c ANY 5NIT ,INKED )NSURANCE 0OLICY 5,)0 ISSUED ON OR AFTER TO WHICH EXEMPTION U S $ DOES NOT APPLY ON ACCOUNT OF PREMIUM PAYABLE EXCEEDING ` FOR ANY OF THE PREVIOUS YEARS DURING THE TERM OF SUCH POLICY OR THE AGGREGATE AMOUNT OF PREMIUM EXCEEDING ` IN ANY OF THE PREVIOUS YEARS DURING THE TERM OF ANY SUCH 5,)0 S IN A CASE WHERE PREMIUM IS PAYABLE FOR MORE THAN ONE 5,)0 ISSUED ON OR AFTER [Inserted by Finance Act, 2021] but does NOT include i !NY stock-in-trade [other than the securities referred to in sub-clause (b) above] consumable stores or raw materials HELD FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION
Note: 3ECURITIES HELD BY &))S &OREIGN )NSTITUTIONAL )NVESTORS SHALL ALWAYS BE REGARDED AS CAPITAL ASSET WHETHER HELD AS STOCK IN TRADE OR AS INVESTMENT BY THE &))S ii Personal effects of movable nature INCLUDING WEARING APPAREL AND FURNITURE HELD FOR PERSONAL USE BY THE ASSESSEE OR ANY MEMBER OF HIS FAMILY DEPENDENT ON HIM other than a. *EWELLERY b. $RAWINGS c. 0AINTING d. !RCHAEOLOGICAL COLLECTIONS e. 3CULPTURES OR f. !NY WORK OF ART iii Agricultural land in India NOT BEING LAND SITUATED n a IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN OR b IN ANY AREA WITHIN THE DISTANCE MEASURED aerially n i NOT BEING MORE THAN KMS FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM a AND WHICH HAS A POPULATION OF MORE THAN BUT NOT EXCEEDING OR 5.1
5.2
$)2%#4 4!8 ,!73
ii NOT BEING MORE THAN KMS FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM a AND WHICH HAS A POPULATION OF MORE THAN BUT NOT EXCEEDING OR iii NOT BEING MORE THAN KMS FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM a AND WHICH HAS A POPULATION OF MORE THAN iv Special Bearer Bond, 1991, ISSUED BY THE #ENTRAL 'OVERNMENT v Gold Deposit Bonds ISSUED UNDER THE 'OLD $EPOSIT 3CHEME OR Deposit Certificates ISSUED UNDER THE Gold Monetisation Scheme, 2015 NOTIFIED BY THE #ENTRAL 'OVERNMENT Reason for including Unit linked insurance policies in the definition of Capital Asset u/s 2(14): 4HE &INANCE !CT HAD INSERTED TH AND TH PROVISO TO 3EC $ TO PROVIDE AN UPPER LIMIT OF ` IN RESPECT OF PREMIUM PAYABLE FOR UNIT LINKED INSURANCE POLICY )F THE PREMIUM PAYABLE EXCEEDS ` FOR ANY OF THE PREVIOUS YEAR DURING THE TERM OF THE POLICY THEN THE EXEMPTION U S $ SHALL NOT BE AVAILABLE !CCORDINGLY FOR TAXING THE AMOUNT RECEIVABLE AT THE TIME OF SALE REDEMPTION OF 5,)0S THE &INANCE !CT HAD INCLUDED SUCH 5,)0S TO WHICH EXEMPTION U S $ SHALL NOT BE AVAILABLE WITHIN THE SCOPE OF CAPITAL ASSET AND PROVIDE FOR DEEMED TAXATION OF PROFIT AND GAINS FROM THE REDEMPTION OF 5,)0 AS CAPITAL GAINS BY INSERTING 3EC " )N SHORT WHERE THE EXEMPTION U S $ DOES NOT APPLY TO UNIT LINKED INSURANCE POLICY ON ACCOUNT OF APPLICABILITY OF TH AND TH PROVISO SUCH 5,)0 WILL BE TREATED AS CAPITAL ASSET U S AND SHALL BE TAXABLE AS CAPITAL GAINS AS PER THE PROVISIONS OF 3EC " Explanation to Sec. 2(14): 4O NULLIFY THE JUDGMENT OF 3# IN Vodafone International Holdings B.V. v. Union of India (2012) AN Explanation HAS BEEN INSERTED BY THE &INANCE !CT WHICH CLARIFIES AS UNDER &OR THE REMOVAL OF DOUBTS IT IS HEREBY CLARIFIED THAT @PROPERTY INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED ANY rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever.
Determining whether an asset is Stock-in-trade or Capital asset: 4HE DETERMINATION OF THE ISSUE THAT WHETHER AN ASSET WILL BE REGARDED AS A #APITAL ASSET OR STOCK IN TRADE DOES NOT DEPEND UPON THE NATURE OF ARTICLE BUT THE MANNER IN WHICH IT IS HELD &OR EXAMPLE A DEALER IN REAL ESTATE HOLDS A PIECE OF LAND OR HOUSE PROPERTY AS STOCK IN TRADE "UT IT WILL BE A CAPITAL ASSET IN THE HAND OF A PERSON WHO HOLDS IT AS AN INVESTMENT AND DERIVES INCOME FROM LEASING AND RENTING OF THE PROPERTY 4HE QUESTION WHETHER THE SHARES ARE HELD AS AN INVESTMENT SO AS TO ATTRACT CAPITAL GAIN ON ITS SALE OR AS A TRADING ASSET TO GIVE RISE TO BUSINESS INCOME IS not a pure question of law but essentially a question of fact. 4HE CHARACTER OF A TRANSACTION CANNOT BE DETERMINED SOLELY ON THE APPLICATION OF ANY ABSTRACT RULE PRINCIPLE OR TEST BUT MUST DEPEND UPON ALL THE FACTS AND CIRCUMSTANCES OF THE CASE 4HE FACTS THAT MAY BE CONSIDERED WHILE DETERMINING THE SAME ARE THE magnitude and frequency of buying and selling of shares, the period of holding of such shares, ratio of sales to purchases and the total holdings ETC -ERE CLASSIFICATION OF SHARES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IS NOT RELEVANT FOR DETERMINING THE NATURE OF INCOME FOR INCOME TAX PURPOSES [PVS Raju v. ACIT (2012) 340 ITR 75 (AP)]
Surplus on sale of shares or securities taxable as ‘Business Income’ or ‘Capital Gains’? [Circular No. 06/2016, dated 29.02.2016] /VER THE YEARS THE COURTS HAVE LAID DOWN DIFFERENT PARAMETERS to distinguish the shares held as investments from the shares held as stock-in-trade. 4HE #"$4 HAS ALSO THROUGH VARIOUS CIRCULARS AND INSTRUCTIONS SUMMARIZED THE SAID PRINCIPLES FOR GUIDANCE OF THE FIELD FORMATIONS "UT HOWEVER DISPUTES CONTINUE TO EXIST ON THE APPLICATION OF THESE PRINCIPLES )N THIS BACKGROUND WHILE RECOGNIZING THAT no universal principle in absolute terms can be laid down to decide the character of income from sale of shares and securities (i.e. whether the same is in the nature
#!0)4!, '!).3
5.3
of capital gain or business income), THE #"$4 HAS WITH A VIEW TO REDUCE LITIGATION AND UNCERTAINTY IN THE MATTER IN PARTIAL MODIFICATION TO THE #IRCULARS ISSUED EARLIER FURTHER INSTRUCTED vide Circular No. 06/2016 dated 29.02.2016 THAT the Assessing Officers in holding whether the surplus from sale of listed shares or securities would be treated as Capital Gain or Business Income, shall take into account the following: a )F THE assessee opts TO TREAT SUCH SHARES AND SECURITIES AS STOCK IN TRADE THE INCOME ARISING FROM TRANSFER OF SUCH SHARES SECURITIES WOULD BE TREATED AS ITS BUSINESS INCOME b 7HERE THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM THE TRANSFER OF LISTED SHARES OR SECURITIES HELD FOR more than 12 months as Capital Gains THE SAME shall not be put to dispute by the Assessing Officer (OWEVER THIS STAND once taken BY THE ASSESSEE IN A PARTICULAR !SSESSMENT 9EAR SHALL REMAIN applicable in subsequent Assessment Years ALSO AND THE TAXPAYERS SHALL NOT BE ALLOWED TO ADOPT A DIFFERENT CONTRARY STAND IN THIS REGARD IN SUBSEQUENT YEARS c )N ALL OTHER CASES THE NATURE OF TRANSACTION i.e WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN OR BUSINESS INCOME SHALL CONTINUE TO BE DECIDED KEEPING IN VIEW THE #IRCULARS ISSUED BY THE #"$4 !S PER AN INSTRUCTION ISSUED BY #"$4 ON ND -AY AS REGARD unlisted shares, irrespective of the period of holding, it shall be treated as Capital asset.
Items of precious metals; to what extent constitutes Jewellery: !S PER Explanation 1 to section 2(14), jewellery includes: a ORNAMENTS MADE OF GOLD SILVER PLATINUM OR ANY OTHER PRECIOUS METAL OR ANY ALLOY CONTAINING ONE OR MORE SUCH PRECIOUS METALS WHETHER OR NOT CONTAINING ANY PRECIOUS OR SEMI PRECIOUS STONE AND WHETHER OR NOT WORKED OR SEWN INTO ANY WEARING APPAREL b PRECIOUS OR SEMI PRECIOUS STONES WHETHER OR NOT SET IN ANY FURNITURE UTENSIL OR OTHER ARTICLE OR WORKED OR SEWN INTO ANY WEARING APPAREL )T MAY BE NOTED THAT AS PER THE DEFINITION GIVEN ABOVE ONLY ORNAMENTS MADE OF PRECIOUS METAL ARE INCLUDED 4HUS ITEMS MADE OF PRECIOUS METALS OTHER THAN ORNAMENTS CAN BE TREATED AS PERSONAL EFFECTS PROVIDED THEY ARE COMMONLY AND ORDINARILY USED OR INTENDED TO BE USED FOR PERSONAL OR HOUSEHOLD USE BY THE ASSESSEE OR ANY DEPENDENT MEMBER OF HIS FAMILY Gold utensils cannot be regarded as of personal effects and thereby they are capital assets #APITAL GAINS SHALL ARISE ON SALE OF GOLD UTENSILS )T IS A TRADITION IN )NDIAN FAMILIES TO USE SILVER UTENSILS FOR VARIOUS OCCASIONS BUT THERE IS NO SUCH TRADITION TO USE GOLD UTENSILS JUDICIAL DECISIONS: CIT v. Benarashilal Kataruka (1990) 185 ITR 493 (Cal.) Items of silverware including dinner plates of different sizes, finger bowls, and jugs were held to be personal effects. 4HE (IGH #OURT HELD THAT SILVER UTENSILS IN THE GIVEN CASE CONSISTED OF THALIS KATORIS JUGS ETC ARE MEANT FOR PERSONAL USE ALTHOUGH NOT USED DAILY The main factor in deciding whether an article constitutes personal effect is the nature of the article. 4HEREFORE IN THE PRESENT CASE SILVER UTENSILS CONSTITUTE PERSONAL EFFECTS AND no capital gains will arise on the sale of silver utensils. "UT AT THE SAME TIME IN THE CASE OF Ramanathan Chettiar v. CIT 1985 Mad. , IT WAS HELD THAT a large number of the same type of silver articles CANNOT BE TREATED AS HAVING BEEN HELD FOR PERSONAL USE AND THE ASSESSING AUTHORITY HAS TO FIND OUT AS TO WHAT ARE THE ARTICLES WHICH SHOULD REASONABLY BE HELD BY THE ASSESSEE FOR PERSONAL USE Maharaja Rana Hemanth Singhji v. CIT (1976) 103 ITR 61 (SC) Only those effects can be legitimately said to be personal which pertain to the assessee’s person. )N OTHER WORDS AN INTIMATE CONNECTION BETWEEN THE EFFECT AND THE PERSON OF THE ASSESSEE MUST BE SHOWN TO RENDER THEM @PERSONAL EFFECTS )N THIS CASE THE 3UPREME #OURT HELD THAT THE GOLD SOVEREIGNS SILVER COINS AND SILVER BARS HAVE BEEN USED FOR PUJA OF THE DEITIES AS A MATTER OF PRIDE OR ORNAMENTATION AND
5.4
$)2%#4 4!8 ,!73
IT IS DIFFICULT TO UNDERSTAND HOW SUCH USE CAN BE CHARACTERIZED AS PERSONAL USE 4HEREFORE capital gains are taxable in the present case. ,OOSE DIAMONDS HELD BY AN ASSESSEE ARE NOT PERSONAL EFFECTS AND THUS ARE CAPITAL ASSETS CIT v. Saroj Goenka 1983 140 ITR 88 Chen.
Short Term Capital Asset: [Sec. 2(42A)] !NY CAPITAL ASSET held BY THE ASSESSEE FOR A PERIOD OF not more than 36 months IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER IS REFERRED AS SHORT TERM CAPITAL ASSET (OWEVER FOLLOWING ASSETS SHALL BE TREATED AS SHORT TERM CAPITAL ASSET IF THEY ARE HELD FOR Not more than 12 months a 3ECURITIES other than unit listed IN A RECOGNIZED STOCK EXCHANGE IN )NDIA, b 5NITS OF 54)
Not more than 24 months a 5NLISTED SHARES AND b )MMOVABLE PROPERTY BEING LAND OR BUILDING OR BOTH
c 5NITS OF AN equity oriented MUTUAL FUND d %QUITY ORIENTED 5,)0 WHICH ARE TREATED AS CAPITAL ASSET U S e :ERO #OUPON BOND IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER Units of specified mutual fund ACQUIRED ON OR AFTER AND market linked debentures WOULD ALWAYS BE DEEMED AS SHORT TERM CAPITAL ASSETS irrespective of the period of holding Note: 4HE 0ERIOD OF HOLDING AND THE PERIOD OF OWNERSHIP NEED NOT BE SAME Explanations to Sec. 2(42A) DEAL WITH DIFFERENT CASES WHERE THE PERIOD OF HOLDING IS DETERMINED BY EXCLUDING OR INCLUDING SPECIFIED PERIODS AS PROVIDED THEREIN 4HESE PROVISIONS ARE EXPLAINED FURTHER WITH THE RELEVANT SECTIONS
Long Term Capital Asset: [Sec. 2(29AA)] )T MEANS A CAPITAL ASSET WHICH IS NOT A SHORT TERM CAPITAL ASSET !N ASSET WHICH IS SOLD THE VERY NEXT DAY AFTER THE PERIOD OF MONTHS IS OVER WOULD BE TREATED AS LONG TERM CAPITAL ASSET BY INCLUDING BOTH THE DATE ON WHICH THE ASSET IS ACQUIRED AND THE DATE ON WHICH THE ASSET IS TRANSFERRED FOR COMPUTING PERIOD OF HOLDING Bharti Gupta Ramola v. CIT [2012] (Delhi)
Types of Capital Gain: Short Term Capital Gain [Sec. 2(42B)]: #APITAL GAIN ARISING ON THE TRANSFER OF SHORT TERM CAPITAL ASSET Long Term Capital Gain [Sec. 2(29B)]: #APITAL GAIN ARISING ON THE TRANSFER OF LONG TERM CAPITAL ASSET
TAX RATES ON CAPITAL GAINS Short Term Capital Gains: 3HORT 4ERM #APITAL 'AINS IS TAXABLE AT THE regular income-tax RATE APPLICABLE TO THE ASSESSEE except in the case covered under section 111A as below.
Tax on Short Term Capital Gains where STT is charged: [Sec. 111A] 7HERE THE TOTAL INCOME OF AN ASSESSEE INCLUDES ANY 3HORT 4ERM #APITAL 'AINS FROM THE TRANSFER OF a short term capital asset BEING AN EQUITY SHARE OR UNIT OF AN EQUITY ORIENTED MUTUAL FUND OR 5,)0 TO WHICH EXEMPTION U S $ DOES NOT APPLY OR UNIT OF BUSINESS TRUST AND SUCH TRANSACTION IS chargeable to Securities Transaction Tax (STT),
#!0)4!, '!).3
5.5
THE TAX PAYABLE SHALL BE THE AGGREGATE OF i tax @ 15% ON SUCH SHORT TERM CAPITAL GAINS AND ii REGULAR INCOME TAX ON THE BALANCE INCOME Note: 3ECTION ! IS APPLICABLE ONLY IF THE SALE TRANSACTION IS CHARGEABLE TO 344 )N RESPECT OF EQUITY SHARES 344 IS PAYABLE ONLY IN RESPECT OF TRANSACTIONS ON A RECOGNIZED STOCK EXCHANGE IN )NDIA 344 IS ALSO PAYABLE ON SALE OF UNLISTED EQUITY SHARES UNDER AN OFFER FOR SALE TO PUBLIC INCLUDED IN PUBLIC OFFER Provided THAT IN THE CASE OF A Resident Individual or Resident HUF WHERE THE TOTAL INCOME AS REDUCED BY SUCH SHORT TERM CAPITAL GAINS IS BELOW THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME TAX THEN 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 incometax AND THE TAX ON THE BALANCE OF SUCH SHORT TERM CAPITAL GAINS SHALL BE Example: 4OTAL INCOME OF -R !SHISH FOR ! 9 IS ` INCLUDING SHORT TERM CAPITAL GAIN OF ` ON TRANSFER OF EQUITY SHARES ON WHICH 344 WAS LEVIED 4AX U S ! SHALL BE ON FOLLOWING AMOUNT 34#' REFERRED IN 3EC ! - ;"ASIC %XEMPTION LIMIT TOTAL INCOME OTHER THAN 34#' AS PER 3EC ! = ` n ; ` n ` n ` = ` n ; ` n ` = ` n ` = ` 3,50,000 4AX UNDER 3EC !
ON ` ` AND 4AX ON REGULAR INCOME IS Nil
Provided further THAT THIS SECTION SHALL ALSO APPLY ON TRANSACTION UNDERTAKEN IN FOREIGN CURRENCY ON A RECOGNISED STOCK EXCHANGE LOCATED IN AN )NTERNATIONAL &INANCIAL 3ERVICES #ENTRE )&3# EVEN IF 344 IS NOT PAID ON SUCH TRANSACTION [For Details on Taxation of transactions under International Financial Services Centre IFSC refer at the end of the Chapter ‘Miscellaneous Topics’] 7HERE THE GROSS TOTAL INCOME INCLUDES ANY 34#' REFERRED TO IN THIS SECTION THE DEDUCTION UNDER #HAPTER 6) ! SHALL BE ALLOWED FROM THE GROSS TOTAL INCOME AS REDUCED BY SUCH CAPITAL GAINS i.e. DEDUCTIONS UNDER SECTIONS # TO 5 SHALL NOT BE ALLOWED FROM 34#' REFERRED U S !
Tax on Long Term Capital Gains : [Sec. 112] 7HERE THE TOTAL INCOME OF AN ASSESSEE INCLUDES ,ONG 4ERM #APITAL 'AINS THEN THE TAX PAYABLE BY THE ASSESSEE AS PER SECTION SHALL BE THE AGGREGATE OF a) In case of a Resident Individual or Resident HUF: i tax @ 20% ON ,ONG 4ERM #APITAL 'AINS INCLUDED IN TOTAL INCOME AND ii REGULAR INCOME TAX ON THE TOTAL INCOME as reduced by ,ONG 4ERM #APITAL 'AINS HAD THE TOTAL INCOME AS SO REDUCED BEEN HIS TOTAL INCOME AND Provided THAT IN THE CASE OF A Resident individual or Resident HUF WHERE THE TOTAL INCOME AS REDUCED BY LONG TERM CAPITAL GAINS IS BELOW THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME TAX THEN 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 THE TAX ON THE BALANCE OF LONG TERM CAPITAL GAINS SHALL BE (b) In case of a Domestic Company: i tax @ 20% ON ,ONG 4ERM #APITAL 'AINS INCLUDED IN TOTAL INCOME AND ii REGULAR INCOME TAX ON THE BALANCE INCOME (c) In case of a Non-resident (not being a company) or a Foreign Company: i tax @ 20% ON LONG TERM CAPITAL GAINS INCLUDED IN TOTAL INCOME other than the LTCG on unlisted securities or shares of closely held company referred to in ii below; AND
5.6
$)2%#4 4!8 ,!73
ii tax @ 10% ON ,ONG 4ERM #APITAL 'AINS ON TRANSFER OF 5NLISTED 3ECURITIES OR 3HARES OF #LOSELY (ELD #OMPANY i.e. COMPANY IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED COMPUTED WITHOUT GIVING EFFECT TO THE ST 0ROVISO AND ND 0ROVISO TO SECTION iii REGULAR INCOME TAX ON THE BALANCE INCOME Note: )N CASE OF A NON RESIDENT INDIVIDUAL THE BENEFIT OF EXEMPTION SLAB IS ./4 AVAILABLE FOR ALL CATEGORIES OF ,4#' 34#' REFERRED IN SEC ! AND CERTAIN INCOMES REFERRED IN SEC ! Example: )F THE 4AXABLE )NCOME OTHER THAN ,ONG 4ERM #APITAL 'AIN IS ` AND ,ONG 4ERM #APITAL 'AIN IS ` 4AX LIABILITY FOR A RESIDENT INDIVIDUAL AND FOR A NON RESIDENT INDIVIDUAL SHALL BE CALCULATED AS UNDER ;)GNORE 3EC "!#= In case of Resident Individual: 4OTAL 4AXABLE )NCOME OTHER THAN ,ONG 4ERM #APITAL 'AIN -AXIMUM %XEMPTION ,IMIT )NCOME WHICH FALLS SHORT FROM "ASIC %XEMPTION ,IMIT
` ` `
4AX WILL BE COMPUTED AS UNDER /N 4OTAL )NCOME other than Long Term Capital Gain ` X Nil 4AX ON ,ONG 4ERM #APITAL 'AIN WILL BE ; ` ` X = ,ESS 2EBATE U S ! !DD (EALTH %DUCATION #ESS 4OTAL TAX LIABILITY
Nil ` ` ` ` ` 5,720
In case of Non-Resident Individual: 4OTAL 4AXABLE )NCOME other than Long Term Capital Gain
`
,ONG 4ERM #APITAL 'AIN
`
Tax will be computed as under: /N 4OTAL )NCOME other than Long Term Capital Gain ` Nil
Nil
4AX ON ,ONG 4ERM #APITAL 'AIN `
`
!DD (EALTH %DUCATION #ESS
`
4OTAL TAX LIABILITY
` 39,520
Option to Tax LTCG @ 10% without Indexation for Specified Securities: (First proviso to Sec. 112) 7HERE TAX PAYABLE ON INCOME ARISING FROM transfer of long term capital asset, being:
listed securities (other than units), or
zero coupon bonds
EXCEEDS OF THE AMOUNT OF CAPITAL GAINS COMPUTED before giving effect to 2nd proviso to section 48 (i.e. indexation), THEN SUCH EXCESS SHALL BE IGNORED FOR COMPUTING TAX PAYABLE BY THE ASSESSEE )N OTHER WORDS TAX ON LONG TERM CAPITAL GAINS ARISING FROM TRANSFER OF LISTED SECURITIES other than units OR ZERO COUPON BONDS SHALL BE lower of the following:
TAX
ON ,4#' AFTER INDEXATION OR
TAX
ON ,4#' BUT WITHOUT GIVING THE BENEFIT OF INDEXATION
Practical Question: i -R 8 HAD PURCHASED LISTED SHARES ON FOR ` PER SHARE #OMPUTE HIS TAX LIABILITY IF HE SOLD SUCH SHARES ON FOR a ` OR b ` ii 7ILL YOUR ANSWER CHANGE IF -R 8 HAS MADE THE ABOVE TRANSACTION IN RESPECT OF LISTED UNITS OF -UTUAL &UND iii 7HAT WILL BE YOUR ANSWER IF -R 8 IS A NON RESIDENT AND INSTEAD OF LISTED SHARES HE MADE THE ABOVE TRANSACTION IN UNLISTED SHARES
5.7
#!0)4!, '!).3
.OTE )GNORE 2EBATE AVAILABLE U S ! Solution: i !S PER FIRST PROVISO TO 3EC WHERE LONG TERM CAPITAL GAIN ARISES FROM THE TRANSFER OF LISTED SECURITIES OTHER THAN A UNIT OR ZERO COUPON BONDS THE ASSESSEE HAS AN OPTION TO COMPUTE CAPITAL GAINS WITH INDEXATION WITHOUT INDEXATION ON SUCH LONG TERM CAPITAL GAINS OR
3ALE CONSIDERATION ,ESS )NDEXED COST OF ACQUISITION ; SHARES
` =
,4#' AFTER )NDEXATION 4AX
ON ,4#' AFTER )NDEXATION !
,4#' WITHOUT INDEXATION 3ALE CONSIDERATION n ` 4AX
ON ,4#' WITHOUT INDEXATION "
Tax Payable [Lower of (A) or (B)] !DD (EALTH %DUCATION CESS
Total Tax liability
Case (a) `
Case (b) `
38,000
5,631
39,520
5,856
Note: )T IS ASSUMED THAT THE TRANSACTION HAS NOT BEEN ENTERED THROUGH RECOGNISED STOCK EXCHANGE AND HENCE 344 HAS NOT BEEN PAID ON IT 4HEREFORE THE TRANSACTION SHALL NOT BE TAXABLE U S ! ii )F -R 8 HAS TRANSACTED IN RESPECT OF LISTED UNITS OF MUTUAL FUNDS THE OPTION TO CALCULATE LONG TERM CAPITAL GAIN WITHOUT INDEXATION SHALL NOT BE AVAILABLE TO HIM (E HAS TO PAY TAX AFTER CALCULATING LONG TERM CAPITAL GAIN WITH INDEXED COST OF ACQUISITION iii )F -R 8 A NON RESIDENT HAS TRANSACTED IN UNLISTED SHARES INSTEAD OF LISTED SHARES THEN AS PER SECTION c HE WILL BE TAXABLE ONLY ON , 4 # ' WITHOUT GIVING EFFECT TO THE ST AND ND PROVISO TO SEC (E HAS NO OPTION IN SUCH CASE !NS #ASE a ` #ASE b `
Deductions under Chapter VI-A not allowed against any LTCG: [Sec. 112(2)] 4HE 'ROSS 4OTAL )NCOME '4) SHALL BE REDUCED BY ,ONG 4ERM #APITAL 'AINS IF ANY INCLUDED AND DEDUCTION UNDER #HAPTER 6) ! SHALL BE ALLOWED AS IF THE '4) SO REDUCED WERE THE GROSS TOTAL INCOME OF THE ASSESSEE
Tax on LTCG on transfer where STT is charged: [Sec. 112A] .OTWITHSTANDING ANYTHING CONTAINED IN SECTION WHERE THE CAPITAL GAINS ARISES FROM THE TRANSFER of long term capital asset BEING
EQUITY SHARE IN A COMPANY OR
UNIT OF EQUITY ORIENTED MUTUAL FUND OR UNIT LINKED INSURANCE POLICIES TO WHICH EXEMPTION U S $ DOES NOT APPLY OR
UNIT OF BUSINESS TRUST
THE TAX PAYABLE ON SUCH LONG TERM CAPITAL GAINS EXCEEDING ` SHALL BE IF THE 344 HAS a 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 b IN A CASE WHERE THE LONG TERM CAPITAL ASSET IS IN THE nature of a unit of an equity oriented mutual fund OR A ULIP to which exemption u/s 10(10D) does not apply OR A unit of a business trust BEEN PAID ON TRANSFER OF SUCH CAPITAL ASSET Provided THAT IN CASE OF AN INDIVIDUAL OR A (5& BEING A RESIDENT WHERE THE TOTAL INCOME AS REDUCED BY SUCH LONG TERM CAPITAL GAINS IS BELOW THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME TAX THEN 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
5.8
$)2%#4 4!8 ,!73
4HIS SECTION SHALL ALSO BE APPLICABLE IN CASE OF A TRANSFER UNDERTAKEN ON A RECOGNISED STOCK EXCHANGE LOCATED IN ANY )NTERNATIONAL &INANCIAL 3ERVICES #ENTRE )&3# AND CONSIDERATION FOR WHICH IS PAID OR PAYABLE IN FOREIGN CURRENCY EVEN IF 344 HAS NOT BEEN PAID ON SUCH TRANSFER 4HE #ENTRAL 'OVERNMENT MAY BY NOTIFICATION IN THE OFFICIAL GAZETTE SPECIFY THE NATURE OF ACQUISITION OF EQUITY SHARE WHERE THIS SECTION SHALL BE APPLICABLE EVEN IF THE 344 HAS NOT BEEN PAID ON ITS ACQUISITION Points to Note: 7HERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY LONG TERM CAPITAL GAINS U S ! DEDUCTION
UNDER #HAPTER 6) ! SHALL BE ALLOWED FROM '4) AS REDUCED BY SUCH CAPITAL GAINS 7HERE THE TOTAL INCOME OF AN ASSESSEE INCLUDES ANY LONG TERM CAPITAL GAINS U S ! THE REBATE U S
! SHALL BE ALLOWED FROM THE INCOME TAX ON THE TOTAL INCOME AS REDUCED BY TAX PAYABLE ON SUCH CAPITAL GAINS The following are the transactions where benefit of Sec. 112A shall not be available, if STT was not paid at the time of acquisition: [Notification 60/2018, dated 01.10.2018] 4HE CONDITION OF PAYMENT OF 344 ON ACQUISITION OF EQUITY SHARES SHALL NOT APPLY TO EQUITY SHARES ACQUIRED BEFORE &OR EQUITY SHARES ACQUIRED ON OR AFTER SECTION ! SHALL NOT APPLY TO THE FOLLOWING ACQUISITION WHERE 344 HAS NOT BEEN PAID a 7HERE ACQUISITION OF EXISTING LISTED EQUITY SHARE IN A COMPANY WHOSE EQUITY SHARES ARE NOT FREQUENTLY TRADED IN A RECOGNISED STOCK EXCHANGE IS MADE THROUGH A PREFERENTIAL ISSUE other than acquisition of listed equity shares in a company: i WHICH HAS BEEN APPROVED BY 3UPREME #OURT (IGH #OURT .#,4 3%") OR 2") IN THIS BEHALF ii BY ANY NON RESIDENT AS PER FOREIGN DIRECT INVESTMENT GUIDELINES ISSUED BY THE 'OVERNMENT iii BY AN INVESTMENT FUND REFERRED TO IN CLAUSE a OF Explanation 1 TO SECTION 5" OR A VENTURE CAPITAL FUND REFERRED TO IN CLAUSE 23FB OF SECTION OR A 1UALIFIED )NSTITUTIONAL "UYER iv THROUGH PREFERENTIAL ISSUE TO WHICH THE PROVISIONS OF #HAPTER 6)) OF THE 3%") )SSUE OF #APITAL AND $ISCLOSURE 2EQUIREMENTS 2EGULATIONS DOES NOT APPLY b 7HERE TRANSACTION FOR ACQUISITION OF EXISTING LISTED EQUITY SHARE IN A COMPANY IS NOT ENTERED THROUGH RECOGNISED STOCK EXCHANGE other than the following acquisition of listed equity shares in a company made as per Securities Contracts Regulation Act, 1956, if applicable: i ACQUISITION THROUGH AN ISSUE OF SHARE BY A COMPANY OTHER THAN THE ISSUE REFERRED TO IN CLAUSE a ii ACQUISITION BY SCHEDULED BANKS RECONSTRUCTION OR SECURITISATION COMPANIES OR PUBLIC FINANCIAL INSTITUTIONS DURING THEIR ORDINARY COURSE OF BUSINESS iii ACQUISITION WHICH HAS BEEN APPROVED BY 3UPREME #OURT (IGH #OURTS .#,4 3%") OR 2") IN THIS BEHALF iv ACQUISITION UNDER EMPLOYEE STOCK OPTION SCHEME OR EMPLOYEE STOCK PURCHASE SCHEME FRAMED UNDER THE 3%") %MPLOYEE 3TOCK /PTION 3CHEME AND %MPLOYEE 3TOCK 0URCHASE 3CHEME 'UIDELINES v ACQUISITION BY ANY NON RESIDENT AS PER FOREIGN DIRECT INVESTMENT GUIDELINES OF THE 'OVERNMENT vi WHERE ACQUISITION OF SHARES OF COMPANY IS MADE UNDER 3%") 3UBSTANTIAL !CQUISITION OF 3HARES AND 4AKEOVERS 2EGULATION vii ACQUISITION FROM THE 'OVERNMENT viii ACQUISITION BY AN INVESTMENT FUND REFERRED TO IN Explanation 1 TO SECTION 5" a OR A VENTURE CAPITAL FUND REFERRED TO IN 3EC 23FB OR A 1UALIFIED )NSTITUTIONAL "UYER
5.9
#!0)4!, '!).3
ix ACQUISITION BY MODE OF TRANSFER REFERRED TO IN SECTION OR " OR OR IF THE PREVIOUS OWNER OF SUCH SHARES HAS NOT ACQUIRED THEM BY ANY MODE REFERRED TO IN CLAUSE a OR CLAUSE b OR CLAUSE c ;OTHER THAN THE TRANSACTIONS REFERRED TO IN THE PROVISO TO CLAUSE a OR CLAUSE b = c !CQUISITION OF EQUITY SHARE OF A COMPANY DURING THE PERIOD BEGINNING FROM THE DATE ON WHICH THE COMPANY IS DELISTED FROM A RECOGNISED STOCK EXCHANGE AND ENDING ON THE DATE IMMEDIATELY PRECEDING THE DATE ON WHICH THE COMPANY IS AGAIN LISTED ON A RECOGNISED STOCK EXCHANGE AS PER THE 3ECURITIES #ONTRACTS 2EGULATION !CT READ WITH 3%") !CT AND THE RULES MADE THEREUNDER Practical Question: #ALCULATE THE TAX LIABILITY FOR THE ! 9 IN THE FOLLOWING CASES Mr. A (age 45)
Mrs. B (age 62)
Mr. C (age 81)
Mr. D (age 82)
Residential Status
Resident
Non-resident
Resident
Non-resident
4OTAL INCOME OTHER THAN LONG TERM CAPITAL GAIN
`
`
`
`
,ONG TERM CAPITAL GAIN
` FROM SALE OF VACANT SITE
` FROM SALE OF AGRICULTURAL LAND IN RURAL AREA 344 PAID ON SALE AND PURCHASE OF SHARES ` FROM SALE OF LISTED EQUITY SHARES
.IL
i )F -R ! -RS " -R # AND -R $ PAY TAX UNDER DEFAULT TAX REGIME U S "!# ii )F -R ! -RS " -R # AND -R $ EXERCISE THE OPTION TO SHIFT OUT OF THE DEFAULT TAX REGIME AND PAY TAX UNDER THE OPTIONAL TAX REGIME AS PER THE NORMAL PROVISIONS OF THE !CT Solution: (i) If Mr. A, Mrs. B, Mr. C and Mr. D pay tax under default tax regime u/s 115BAC. Computation of Tax liability for the A.Y. 2024-25
Residential Status
Mr. A (age 45)
Mrs. B (age 62)
Mr. C (age 81)
Mr. D (age 82)
Resident
Non-resident
Resident
Non-resident
!PPLICABLE BASIC EXEMPTION LIMIT
`
`
`
!SSET SOLD
6ACANT SITE
,ISTED EQUITY SHARES 344 PAID ON BOTH SALE AND PURCHASE OF SHARES
2URAL AGRICULTURAL LAND
` ;4AXABLE U S =
` ;EXEMPT U S ! SINCE IT IS LESS THAN ` =
` %XEMPT SINCE IT NOT A CAPITAL ASSET
`
`
`
`
.IL
`
`
`
`
`
`
`
,ONG TERM CAPITAL GAIN ON SALE OF ABOVE ASSET /THER INCOME
`
4AX LIABILITY / N ,4 # ' A F T E R ADJUSTING UNEXHAUSTED BASIC EXEMPTION LIMIT OF ` /N /THER INCOME ,ESS 2EBATE U S !
`
`
`
.IL
`
.IL
`
.IL
{
.IL
{
4OTAL TAX LIABILITY
.IL
`
.IL
`
!DD (%#
5.10
$)2%#4 4!8 ,!73
Note: 3INCE -R ! AND -R # ARE RESIDENTS WHOSE TOTAL INCOME DOES NOT EXCEED ` LAKHS THEY ARE ELIGIBLE FOR REBATE OF ` OR THE ACTUAL TAX PAYABLE WHICHEVER IS LOWER AS PER 3EC ! (ii) If Mr. A, Mrs. B, Mr. C and Mr. D exercise the option to shift out of the default tax regime and pay tax under the optional tax regime as per the normal provisions of the Act Computation of Tax liability for the A.Y. 2024-25
Residential Status
Mr. A (age 45)
Mrs. B (age 62)
Mr. C (age 81)
Mr. D (age 82)
Resident
Non-resident
Resident
Non-resident
!PPLICABLEBASICEXEMPTION LIMIT
`
`
`
!SSET SOLD
6ACANT SITE
,ISTED EQUITY SHARES 344 PAID ON BOTH SALE AND PURCHASE OF SHARES
2URAL AGRICULTURAL LAND
` ;4AXABLE U S =
` ;EXEMPT U S ! SINCE IT IS LESS THAN ` =
` %XEMPT n NOT A CAPITAL ASSET
`
`
`
`
.IL
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
4OTAL TAX LIABILITY
`
`
`
`
,ONG TERM CAPITAL GAIN ON SALE OF ABOVE ASSET /THER INCOME
`
4AX LIABILITY /N ,4#' AFTER ADJUSTING UNEXHAUSTED BASIC EXEMPTION LIMIT OF `
`
/N /THER INCOME
,ESS 2EBATE U S !
!DD (%#
`
Notes: 3INCE -RS " AND -R $ ARE NON RESIDENTS THEY CANNOT AVAIL THE HIGHER BASIC EXEMPTION LIMIT OF ` AND ` FOR PERSONS OVER THE AGE OF YEARS AND YEARS RESPECTIVELY !LSO THEY ARE NOT ELIGIBLE FOR REBATE U S ! EVEN THOUGH THEIR TOTAL INCOME DOES NOT EXCEED ` LAKH 3INCE -R ! IS A RESIDENT WHOSE TOTAL INCOME DOES NOT EXCEED ` LAKH HE IS ELIGIBLE FOR REBATE OF ` OR THE ACTUAL TAX PAYABLE WHICHEVER IS LOWER AS PER 3EC !
Definition of Transfer : [Sec. 2(47)] 4RANSFER IN RELATION TO CAPITAL ASSET INCLUDES i THE SALE EXCHANGE OR RELINQUISHMENT OF THE CAPITAL ASSET OR ii THE EXTINGUISHMENT OF ANY RIGHTS THEREIN OR iii THE COMPULSORY ACQUISITION THEREOF UNDER ANY LAW OR iv WHERE THE CAPITAL ASSET IS CONVERTED BY THE OWNER INTO OR IS TREATED BY HIM AS STOCK IN TRADE OF A BUSINESS CARRIED ON BY HIM SUCH CONVERSION OR TREATMENT OR v THE MATURITY OR REDEMPTION OF :ERO #OUPON "ONDS OR vi ANY TRANSACTION INVOLVING THE ALLOWING THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION ! OF THE 4RANSFER OF 0ROPERTY !CT OR
5.11
#!0)4!, '!).3
vii 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 /N REDUCTION OF SHARE CAPITAL PAYMENT MADE BY THE COMPANY TO THE SHAREHOLDERS TOWARDS SUCH REDUCTION SHALL BE TREATED AS AN EXTINGUISHMENT OF RIGHT IN SHARES HELD BY SHAREHOLDERS #ONSEQUENTLY REDUCTION OF SHARE CAPITAL IS SUBJECT TO CAPITAL GAIN Kartikeya Sarabhai v. CIT (1997) 228 ITR 163 (SC) 2EDEMPTION OF 0REFERENCE SHARES AMOUNTS TO TRANSFER AND TAXABLE TO THE SHAREHOLDER 4HERE IS A RELINQUISHMENT OF RIGHTS IN SHARES WHICH AMOUNT TO TRANSFER RESULTING IN CAPITAL GAINS Anarkali Sarabhai v. CIT (1982) 224 ITR 422 (SC) Explanation 2 to Sec. 2(47): 4O NULLIFY THE JUDGMENT OF 3# IN 6ODAFONE )NTERNATIONAL (OLDINGS " 6 V 5NION OF )NDIA AN Explanation HAS BEEN INSERTED BY THE &INANCE !CT WHICH CLARIFIES AS UNDER @4RANSFER INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED a DISPOSING OF OR PARTING WITH AN ASSET OR ANY INTEREST THEREIN OR b CREATING ANY INTEREST IN ANY ASSET IN ANY MANNER WHATSOEVER DIRECTLY OR INDIRECTLY ABSOLUTELY OR CONDITIONALLY VOLUNTARILY OR INVOLUNTARILY BY WAY OF AN AGREEMENT WHETHER ENTERED INTO IN )NDIA OR OUTSIDE )NDIA
OR OTHERWISE
4HE ABOVE TRANSACTION WILL BE DEEMED AS 4RANSFER NOTWITHSTANDING THAT SUCH TRANSFER OF RIGHTS HAS BEEN CHARACTERIZED AS BEING EFFECTED OR DEPENDENT UPON OR FLOWING FROM THE TRANSFER OF A SHARE OR SHARES OF A COMPANY REGISTERED OR INCORPORATED OUTSIDE )NDIA Seshasayee Steels (P.) Ltd. v. ACIT [2020] 421 ITR 46 (SC) Any transaction which enables the enjoyment of immovable property will be considered as enjoyment as a purported owner thereof for being treated as a “transfer” of a capital asset u/s 2(47)(vi). Facts: 4HE ASSESSEE LAND OWNER ENTERED INTO AN hAGREEMENT TO SELLv WITH A BUILDER 6 ,TD WHICH PROVIDED THAT BOTH PARTIES WERE ENTITLED TO SPECIFIC PERFORMANCE OF THE AGREEMENT 5NDER THE AGREEMENT THE ASSESSEE GAVE PERMISSION TO THE BUILDER TO START CONSTRUCTION ON THE LAND 0URSUANT TO THE AGREEMENT A POWER OF ATTORNEY WAS GIVEN BY THE ASSESSEE TO A DIRECTOR OF THE BUILDER COMPANY TO EXECUTE AND JOIN IN EXECUTION OF THE SALE AGREEMENTS OR SALE DEEDS IN RESPECT OF THE SUBJECT PROPERTY AFTER DEVELOPING IT INTO FLATS 4HE ! / OPINED THAT SUCH TRANSACTION ENABLES THE ENJOYMENT OF IMMOVABLE PROPERTY TO BE CONSIDERED AS ENJOYMENT AS A PURPORTED OWNER THEREOF FOR BEING TREATED AS A hTRANSFERv OF A CAPITAL ASSET U S 47 vi AND LEVY TAX ON CAPITAL GAINS ARISING THEREFROM Decision: 4HE 3UPREME #OURT TOOK NOTE OF THE DECISION IN CIT V Balbir Singh Maini WHERE IT WAS HELD THAT ANY TRANSACTION WHICH HAS THE EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT OF ANY IMMOVABLE PROPERTY WOULD COME WITHIN THE PURVIEW OF SECTION 47 vi )T IS CLEAR THAT ANY TRANSACTION WHICH ENABLES THE ENJOYMENT OF IMMOVABLE PROPERTY MUST BE ENJOYMENT AS A PURPORTED OWNER THEREOF 4HE IDEA IS TO BRING WITHIN THE TAX NET TRANSACTIONS WHERE THOUGH TITLE MAY NOT BE TRANSFERRED IN LAW THERE IS IN SUBSTANCE A TRANSFER OF TITLE IN FACT 4HE 3UPREME #OURT HELD THAT THE ASSESSEEgS RIGHTS IN THE SAID IMMOVABLE PROPERTY WERE EXTINGUISHED ON THE RECEIPT OF THE LAST CHEQUE AND HENCE IT IS A TRANSFER IN RELATION TO THE CAPITAL ASSET AND CAPITAL GAINS TAX LIABILITY WOULD BE ATTRACTED
Transactions not regarded as Transfer : [Secs. 46 and 47] &OLLOWING TRANSACTIONS ARE NOT REGARDED AS TRANSFER FOR PURPOSES OF CAPITAL GAINS AND THEREFORE NOT TAXABLE UNDER #APITAL 'AINS Sec. 46(1): 7HERE THE ASSETS OF A COMPANY ARE DISTRIBUTED TO ITS SHAREHOLDERS ON liquidation of the company SUCH DISTRIBUTION SHALL NOT BE REGARDED AS TRANSFER BY THE COMPANY
5.12
$)2%#4 4!8 ,!73
Sec. 47: [Under the following clauses of section 47; transactions are not regarded as transfer] i ANY DISTRIBUTION OF CAPITAL ASSETS ON THE TOTAL OR PARTIAL PARTITION OF AN (5& iii ANY TRANSFER OF A CAPITAL ASSET UNDER A GIFT WILL OR AN IRREVOCABLE TRUST Provided THAT WHERE CAPITAL ASSET BEING SHARES DEBENTURES OR WARRANTS ALLOTTED BY A COMPANY DIRECTLY OR INDIRECTLY TO ITS EMPLOYEES UNDER THE %3/0 OR %3/3 OF THE COMPANY ARE TRANSFERRED BY SUCH EMPLOYEE UNDER A GIFT OR AN IRREVOCABLE TRUST THEN THIS CLAUSE SHALL NOT APPLY i.e IT SHALL BE REGARDED AS TRANSFER &URTHER AS PER 6th Proviso to section 48, THE &-6 OF SUCH SHARES DEBENTURES OR WARRANTS ON THE DATE OF TRANSFER BY EMPLOYEE SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION iv ANY TRANSFER OF A CAPITAL ASSET by a holding company to its 100% subsidiary company, BEING AN Indian company v ANY TRANSFER OF A CAPITAL ASSET by a 100% subsidiary company to its holding company BEING AN Indian company; Note: For the purpose of clauses (iv) and (v):
4HE WHOLE OF THE SHARE CAPITAL OF THE SUBSIDIARY COMPANY SHOULD BE HELD BY THE HOLDING COMPANY OR ANY OF ITS NOMINEES
%XEMPTION MAY BE WITHDRAWN IF CONDITIONS LAID DOWN IN 3EC ! ARE NOT COMPLIED WITH
)F THE TRANSFER OF CAPITAL ASSET IS MADE AS STOCK IN TRADE THEN CLAUSES iv AND v SHALL NOT APPLY AND IT WILL BE REGARDED AS TRANSFER
vi ANY TRANSFER IN A SCHEME OF AMALGAMATION OF A capital asset by the amalgamating company TO THE Indian amalgamated company; via ANY TRANSFER IN A SCHEME OF AMALGAMATION OF SHARES HELD IN AN )NDIAN COMPANY BY THE AMALGAMATING FOREIGN COMPANY TO THE AMALGAMATED FOREIGN COMPANY IF n a AT LEAST OF THE SHAREHOLDERS OF THE AMALGAMATING FOREIGN COMPANY CONTINUE TO REMAIN SHAREHOLDERS OF THE AMALGAMATED FOREIGN COMPANY AND b SUCH TRANSFER DOES NOT ATTRACT TAX ON CAPITAL GAINS IN THE COUNTRY IN WHICH THE AMALGAMATING COMPANY IS INCORPORATED viaa ANY TRANSFER IN A SCHEME OF AMALGAMATION OF A BANKING COMPANY WITH A BANKING INSTITUTION SANCTIONED AND BROUGHT INTO FORCE BY THE #' UNDER SECTION OF THE "ANKING 2EGULATION !CT OF A CAPITAL ASSET BY THE BANKING COMPANY TO THE BANKING INSTITUTION viab ANY TRANSFER IN A SCHEME OF AMALGAMATION OF A CAPITAL ASSET BEING A SHARE OF A FOREIGN COMPANY REFERRED TO IN Explanation TO SECTION i WHICH DERIVES DIRECTLY OR INDIRECTLY ITS VALUE SUBSTANTIALLY FROM THE SHARE OR SHARES OF AN )NDIAN COMPANY HELD BY THE AMALGAMATING FOREIGN COMPANY TO THE AMALGAMATED FOREIGN COMPANY SHALL NOT BE REGARDED AS TRANSFER IF n a AT LEAST OF THE SHAREHOLDERS OF THE AMALGAMATING FOREIGN COMPANY CONTINUE TO REMAIN SHAREHOLDERS OF THE AMALGAMATED FOREIGN COMPANY AND b SUCH TRANSFER DOES NOT ATTRACT TAX ON CAPITAL GAINS IN THE COUNTRY IN WHICH THE AMALGAMATING COMPANY IS INCORPORATED vib ANY TRANSFER IN A DEMERGER OF A CAPITAL ASSET BY THE DEMERGED COMPANY TO THE )NDIAN RESULTING COMPANY vic ANY TRANSFER IN A DEMERGER OF A CAPITAL ASSET BEING A SHARE OR SHARES HELD IN AN )NDIAN COMPANY BY THE DEMERGED FOREIGN COMPANY TO THE RESULTING FOREIGN COMPANY, IF n a THE SHAREHOLDERS HOLDING NOT LESS THAN IN VALUE OF THE SHARES OF THE DEMERGED FOREIGN COMPANY CONTINUE TO REMAIN SHAREHOLDERS OF THE RESULTING FOREIGN COMPANY AND
#!0)4!, '!).3
5.13
b SUCH TRANSFER DOES NOT ATTRACT TAX ON CAPITAL GAINS IN THE COUNTRY IN WHICH THE DEMERGED FOREIGN COMPANY IS INCORPORATED Provided THAT THE PROVISIONS OF 3ECTIONS TO OF THE #OMPANIES !CT SHALL NOT APPLY IN CASE OF DEMERGERS REFERRED TO IN THIS CLAUSE vica ANY TRANSFER IN A BUSINESS REORGANIZATION OF A CAPITAL ASSET BY THE PREDECESSOR CO OPERATIVE BANK TO THE SUCCESSOR CO OPERATIVE BANK OR TO THE CONVERTED BANKING COMPANY vicb ANY TRANSFER BY A SHAREHOLDER IN A BUSINESS REORGANISATION OF A CAPITAL ASSET BEING A SHARE OR SHARES HELD BY HIM IN THE PREDECESSOR CO OPERATIVE BANK IF THE TRANSFER IS MADE IN CONSIDERATION OF THE ALLOTMENT TO HIM OF ANY SHARE OR SHARES IN THE SUCCESSOR CO OPERATIVE BANK OR TO THE CONVERTED BANKING COMPANY vicc ANY TRANSFER IN A DEMERGER OF A CAPITAL ASSET BEING A SHARE OF A FOREIGN COMPANY REFERRED TO IN Explanation 5 TO SECTION i WHICH DERIVES DIRECTLY OR INDIRECTLY ITS VALUE SUBSTANTIALLY FROM THE SHARES OF AN )NDIAN COMPANY HELD BY THE DEMERGED FOREIGN COMPANY TO THE RESULTING FOREIGN COMPANY SHALL NOT BE REGARDED AS TRANSFER IF n a THE SHAREHOLDERS HOLDING NOT LESS THAN IN VALUE OF THE SHARES OF THE DEMERGED FOREIGN COMPANY CONTINUE TO REMAIN SHAREHOLDERS OF THE RESULTING FOREIGN COMPANY AND b SUCH TRANSFER DOES NOT ATTRACT TAX ON CAPITAL GAINS IN THE COUNTRY IN WHICH THE DEMERGED FOREIGN COMPANY IS INCORPORATED Provided THAT THE PROVISIONS OF SECTIONS TO OF THE #OMPANIES !CT SHALL NOT APPLY IN CASE OF DEMERGERS REFERRED TO IN THIS CLAUSE vid ANY transfer or issue of shares by the resulting company IN A SCHEME OF DEMERGER TO THE SHAREHOLDERS OF DEMERGED COMPANY IF THE TRANSFER OR ISSUE IS MADE IN CONSIDERATION OF DEMERGER OF UNDERTAKING vii ANY TRANSFER BY A SHAREHOLDER IN A SCHEME OF AMALGAMATION OF shares held by him in the amalgamating company, if: a THE TRANSFER IS MADE IN CONSIDERATION OF ALLOTMENT TO HIM OF ANY SHARE OR SHARES IN AMALGAMATED COMPANY except where the shareholder itself is the amalgamated company AND b THE AMALGAMATED COMPANY IS AN )NDIAN COMPANY )F THE CONSIDERATION FOR TRANSFER OF SHARES IN AMALGAMATING COMPANY is discharged in any other form along with the shares IN THE AMALGAMATED COMPANY THEN EXEMPTION UNDER SECTION WILL NOT BE AVAILABLE 4HIS IS SO BECAUSE COMPOSITE CONSIDERATION IS NOT CONTEMPLATED BY THIS CLAUSE )F SHAREHOLDER OF AMALGAMATING COMPANY RECEIVES SHARES AND ALSO CASH DEBENTURE ETC FROM AMALGAMATED COMPANY THEN CAPITAL GAIN SHALL NOT BE EXEMPT IN THE HANDS OF SHAREHOLDER [Gautam Sarabhai Trust Case] viia ANY TRANSFER OF &OREIGN #URRENCY #ONVERTIBLE "ONDS &##" S OR 'LOBAL $EPOSITORY 2ECEIPTS '$2 S REFERRED TO IN SEC !# i.e. BONDS '$2S BONDS OR SHARES OF A PUBLIC SECTOR COMPANY PURCHASED IN FOREIGN CURRENCY MADE outside India by a non-resident to another non-resident; viiaa
ANY TRANSFER MADE OUTSIDE )NDIA OF A CAPITAL ASSET BEING 2UPEE $ENOMINATED "OND OF AN )NDIAN COMPANY ISSUED OUTSIDE )NDIA BY A NON RESIDENT TO ANOTHER NON RESIDENT
viiab ANY TRANSFER OF A CAPITAL ASSET BEING a BOND OR '$2 REFERRED TO IN 3EC !# b RUPEE DENOMINATED BOND OF AN )NDIAN #OMPANY c DERIVATIVE d SUCH OTHER SECURITIES AS MAY BE NOTIFIED BY THE #ENTRAL 'OVERNMENT IN THIS BEHALF MADE BY A NON RESIDENT ON A RECOGNISED STOCK EXCHANGE LOCATED IN ANY )NTERNATIONAL &INANCIAL 3ERVICES #ENTRE AND WHERE THE CONSIDERATION FOR SUCH TRANSACTION IS PAID OR PAYABLE IN FOREIGN CURRENCY
5.14
$)2%#4 4!8 ,!73
Notification No. 16/2020 and Notification No. 89/2022: 4HE #ENTRAL 'OVERNMENT HAS NOTIFIED THE FOLLOWING SECURITIES FOR THE ABOVE SUB CLAUSE d NAMELY i &OREIGN #URRENCY $ENOMINATED "OND ii UNIT OF -UTUAL &UND iii UNIT OF "USINESS 4RUST iv &OREIGN #URRENCY $ENOMINATED %QUITY 3HARE v UNIT OF !LTERNATIVE )NVESTMENT &UND (vi) Bullion Depository Receipt with underlying bullion (vii) unit of Investment Trust (viii) unit of a Scheme (ix) unit of a Exchange Traded Fund (ETF) launched under IFSC Authority (Fund Management) Regulations, 2022, WHICH ARE LISTED ON 23% IN ANY )NTERNATIONAL &INANCIAL 3ERVICES #ENTRE AS PER THE REGULATIONS MADE BY 3%") UNDER THE 3%") !CT OR THE )NTERNATIONAL &INANCIAL 3ERVICES #ENTRES !UTHORITY UNDER THE )NTERNATIONAL &INANCIAL 3ERVICES #ENTRES !UTHORITY !CT (viiac) ANY TRANSFER IN A RELOCATION OF A CAPITAL ASSET BY THE ORIGINAL FUND TO THE RESULTING FUND (viiad) ANY TRANSFER BY A SHAREHOLDER OR UNIT HOLDER OR INTEREST HOLDER IN A RELOCATION OF A CAPITAL ASSET BEING A SHARE OR UNIT OR INTEREST HELD BY HIM IN THE ORIGINAL FUND IN CONSIDERATION FOR THE SHARE OR UNIT OR INTEREST IN THE RESULTANT FUND 'Original fund' means: (A) a fund established or incorporated or registered outside India, which collects funds from its members for investing it for their benefit and fulfils the following conditions: (i)
the fund is not a person resident in India;
(ii) the fund is a resident of a country or specified territory with which an agreement u/s 90(1) or Sec. 90A(1) has been entered into; or is established or incorporated or registered in a country or a specified territory as may be notified by the Central Government in this behalf; (iii) the fund and its activities are subject to applicable investor protection regulations in the country or specified territory where it is established or incorporated or is a resident; and (iv) fulfils such other conditions as may be prescribed; or (B) an investment vehicle, in which Abu Dhabi Investment Authority is the direct or indirect sole shareholder or unit holder or beneficiary or interest holder and such investment vehicle is wholly owned and controlled, directly or indirectly, by the Abu Dhabi Investment Authority or the Government of Abu Dhabi; or (C) a fund notified by CG in this behalf subject to such conditions as may be specified. [Substituted by Finance Act, 2023 w.e.f. A.Y. 2023-24] 'Relocation' MEANS TRANSFER OF ASSETS OF THE ORIGINAL FUND OR OF ITS WHOLLY OWNED 3PECIAL 0URPOSE 6EHICLE 306 TO A RESULTANT FUND ON OR BEFORE 31.03.2025 WHERE CONSIDERATION FOR SUCH TRANSFER IS DISCHARGED IN THE FORM OF SHARE OR UNIT OR INTEREST IN THE RESULTING FUND TO i
SHAREHOLDER OR UNIT HOLDER OR INTEREST HOLDER OF THE ORIGINAL FUND IN THE SAME PROPORTION IN WHICH THE SHARE OR UNIT OR INTEREST WAS HELD BY SUCH SHAREHOLDER OR UNIT HOLDER OR INTEREST HOLDER IN SUCH ORIGINAL FUND IN LIEU OF THEIR SHARES OR UNITS OR INTERESTS IN ORIGINAL FUND OR
ii THE ORIGINAL FUND IN THE SAME PROPORTION AS REFERRED TO IN SUB CLAUSE I IN RESPECT OF WHICH THE SHARE OR UNIT OR INTEREST IS NOT ISSUED BY RESULTANT FUND TO ITS SHAREHOLDER OR UNIT HOLDER OR INTEREST HOLDER
#!0)4!, '!).3
5.15
'Resultant fund' MEANS A FUND ESTABLISHED OR INCORPORATED IN )NDIA IN THE FORM OF A TRUST OR COMPANY OR ,,0 WHICH i HAS BEEN GRANTED A CERTIFICATE OF REGISTRATION AS A #ATEGORY ) OR #ATEGORY )) OR #ATEGORY ))) !)& AND IS REGULATED UNDER THE 3%") !)& 2EGULATIONS MADE UNDER THE 3%") !CT or regulated under the IFSC Authority (Fund Management) Regulations, 2022 made under THE )&3# !UTHORITY !CT AND ii IS LOCATED IN ANY )&3# AS REFERRED TO IN 3EC ,! ! [Amended by Finance Act, 2023] (viiae) ANY TRANSFER OF CAPITAL ASSET BY )NDIA )NFRASTRUCTURE &INANCE #OMPANY ,IMITED TO AN INSTITUTION ESTABLISHED FOR FINANCING THE INFRASTRUCTURE AND DEVELOPMENT SET UP UNDER AN !CT OF 0ARLIAMENT AND NOTIFIED BY THE # ' FOR THIS PURPOSE (viiaf) ANY TRANSFER OF CAPITAL ASSET UNDER A PLAN APPROVED BY # ' BY A PUBLIC SECTOR COMPANY TO ANOTHER PUBLIC SECTOR COMPANY AS NOTIFIED BY THE # ' OR TO THE # ' OR TO A 3 ' &OR THE PURPOSE OF THIS CLAUSE THE # ' HAS NOTIlED THE TRANSFER OF CAPITAL ASSET FROM .40# ,IMITED BEING TRANSFEROR PUBLIC SECTOR COMPANY TO .40# 'REEN %NERGY ,IMITED BEING TRANSFEREE PUBLIC SECTOR COMPANY UNDER THE PLAN APPROVED BY # ' ON TO BE EXEMPT viib ANY TRANSFER OF A CAPITAL ASSET BEING A 'OVERNMENT 3ECURITY CARRYING A PERIODIC PAYMENT OF INTEREST MADE OUTSIDE )NDIA THROUGH AN INTERMEDIARY DEALING IN SETTLEMENT OF SECURITIES BY A NON RESIDENT TO ANOTHER NON RESIDENT viic ANY TRANSFER OF 3OVEREIGN 'OLD "OND ISSUED BY THE 2ESERVE "ANK OF )NDIA UNDER THE 3OVEREIGN 'OLD "OND 3CHEME BY WAY OF REDEMPTION BY AN ASSESSEE BEING AN INDIVIDUAL (viid) any transfer of a capital asset, being conversion of gold into Electronic Gold Receipt issued by a Vault Manager, or conversion of Electronic Gold Receipt into gold; [Inserted by Finance Act, 2023 w.e.f. A.Y. 2024-25] Reason for Inserting clause (viid): 0URSUANT TO THE ANNOUNCEMENT ABOUT 'OLD %XCHANGE 3%") HAS BEEN MADE THE REGULATOR OF THE ENTIRE ECOSYSTEM OF THE PROPOSED GOLD EXCHANGE !CCORDINGLY 3%") HAS COME OUT WITH A DETAILED REGULATORY FRAMEWORK FOR SPOT TRADING IN GOLD ON EXISTING STOCK EXCHANGES THROUGH THE INSTRUMENT OF %LECTRONIC 'OLD 2ECEIPTS %'2 )N ORDER TO PROMOTE THE CONCEPT OF %LECTRONIC 'OLD THE &INANCE !CT HAS INSERTED CLAUSE VIID TO 3EC TO EXCLUDE THE CONVERSION OF PHYSICAL FORM OF GOLD INTO %'2 AND VICE VERSA BY A 3%") REGISTERED 6AULT -ANAGER FROM THE PURVIEW OF @TRANSFER FOR THE PURPOSES OF #APITAL GAINS ix ANY TRANSFER OF A CAPITAL ASSET BEING ANY WORK OF ART ARCHAEOLOGICAL SCIENTIFIC OR ART COLLECTION BOOK MANUSCRIPT DRAWING PAINTING PHOTOGRAPH OR PRINT TO THE 'OVERNMENT OR A 5NIVERSITY OR THE .ATIONAL -USEUM .ATIONAL !RT 'ALLERY .ATIONAL !RCHIVES OR ANY SUCH OTHER PUBLIC MUSEUM OR INSTITUTION AS MAY BE NOTIFIED BY THE #' IN THE /FFICIAL 'AZETTE TO BE OF NATIONAL IMPORTANCE OR TO BE OF RENOWN THROUGHOUT ANY 3TATE OR 3TATES x ANY TRANSFER BY WAY OF CONVERSION OF BONDS OR DEBENTURES DEBENTURE STOCK OR DEPOSIT CERTIFICATES IN ANY FORM OF A COMPANY INTO SHARES OR DEBENTURES INCLUDING &##" S OF THAT COMPANY xa ANY TRANSFER BY WAY OF CONVERSION OF BONDS REFERRED TO IN SECTION !# a i.e &OREIGN #URRENCY %XCHANGEABLE "ONDS &#%" INTO SHARES OR DEBENTURES OF ANY COMPANY; xb ANY TRANSFER BY WAY OF CONVERSION OF PREFERENCE SHARES OF A COMPANY INTO EQUITY SHARES OF THAT COMPANY xii ANY TRANSFER OF A CAPITAL ASSET BEING LAND OF A SICK INDUSTRIAL COMPANY MADE UNDER A SCHEME PREPARED AND SANCTIONED U S OF 3ICK )NDUSTRIAL #OMPANIES 3PECIAL 0ROVISIONS !CT WHERE SUCH SICK INDUSTRIAL COMPANY IS BEING MANAGED BY ITS WORKERS CO OPERATIVE (OWEVER TRANSFER SHOULD BE MADE DURING THE PERIOD COMMENCING FROM THE 0 9 IN WHICH THE SAID COMPANY HAS BECOME A SICK INDUSTRIAL COMPANY U S OF THAT !CT AND ENDING WITH THE 0 9 DURING WHICH ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES
5.16 xiii
$)2%#4 4!8 ,!73
ANY TRANSFER OF A CAPITAL ASSET OR INTANGIBLE ASSET BY A FIRM TO A COMPANY AS A RESULT OF SUCCESSION OF THE FIRM BY A COMPANY IN THE BUSINESS CARRIED ON BY THE FIRM or ANY TRANSFER OF CAPITAL ASSET TO A COMPANY IN THE COURSE OF DEMUTUALISATION OR CORPORATISATION OF A RECOGNIZED STOCK EXCHANGE IN )NDIA AS A RESULT OF WHICH AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS IS SUCCEEDED BY SUCH COMPANY Provided THE FOLLOWING CONDITIONS ARE SATISFIED a !LL THE ASSETS AND LIABILITIES OF THE FIRM OR !/0 "/) AS THE CASE MAY BE RELATING TO THE BUSINESS IMMEDIATELY BEFORE THE SUCCESSION BECOME THE ASSETS AND LIABILITIES OF THE COMPANY b !LL THE PARTNERS OF THE FIRM IMMEDIATELY BEFORE THE SUCCESSION BECOME THE SHAREHOLDERS OF THE COMPANY IN THE SAME PROPORTION IN WHICH THEIR CAPITAL ACCOUNTS STOOD IN THE BOOKS OF THE FIRM ON THE DATE OF THE SUCCESSION c 4HE PARTNERS OF THE FIRM DO NOT RECEIVE ANY CONSIDERATION OR BENEFIT DIRECTLY OR INDIRECTLY IN ANY FORM OR MANNER OTHER THAN BY WAY OF ALLOTMENT OF SHARES IN THE COMPANY d 4HE AGGREGATE OF THE SHAREHOLDING IN THE COMPANY OF THE PARTNERS OF THE FIRM IS NOT LESS THAN OF THE TOTAL VOTING POWER IN THE COMPANY AND THEIR SHAREHOLDING CONTINUES TO BE AS SUCH FOR A PERIOD OF YEARS FROM THE DATE OF THE SUCCESSION AND e 4HE DEMUTUALISATION OR CORPORATISATION OF A RECOGNIZED STOCK EXCHANGE IN )NDIA IS CARRIED OUT IN ACCORDANCE WITH A SCHEME OF CORPORATISATION WHICH IS APPROVED BY THE 3%") Points to Note: "USINESS PROFITS ARE NOT EXEMPT 4HEREFORE THE PROFIT ON SALE OF STOCK IN TRADE BY THE FIRM TO THE COMPANY SHALL BE TAXABLE IN THE HANDS OF THE FIRM AS BUSINESS PROFITS !S PER )#$3 IN CASE OF DISSOLUTION OF A PARTNERSHIP FIRM OR !/0 OR "/) notwithstanding whether business is discontinued or not THE INVENTORY ON THE DATE OF DISSOLUTION SHALL BE VALUED AT THE .ET 2EALISABLE 6ALUE %XEMPTION U S xiii IS APPLICABLE FOR A PARTNERSHIP FIRM CARRYING ON BUSINESS. %XEMPTION IS ./4 APPLICABLE WHERE THE FIRM IS CARRYING ON PROFESSION
xiiia ANY TRANSFER OF A CAPITAL ASSET BEING A MEMBERSHIP RIGHT HELD BY A MEMBER OF A RECOGNIZED STOCK EXCHANGE IN )NDIA FOR ACQUISITION OF SHARES AND TRADING OR CLEARING RIGHTS ACQUIRED BY SUCH MEMBER IN THAT RECOGNIZED STOCK EXCHANGE IN ACCORDANCE WITH A SCHEME FOR DEMUTUALISATION OR CORPORATISATION WHICH IS APPROVED BY THE 3%") xiiib ANY TRANSFER OF A CAPITAL ASSET OR INTANGIBLE ASSET BY A PRIVATE COMPANY OR AN UNLISTED PUBLIC COMPANY TO AN ,,0 OR ANY TRANSFER OF SHARE s HELD IN THE COMPANY BY A SHAREHOLDER AS A RESULT OF CONVERSION OF THE COMPANY INTO AN ,,0 Provided FOLLOWING CONDITIONS ARE SATISFIED a !LL THE ASSETS AND LIABILITIES OF THE COMPANY IMMEDIATELY BEFORE THE CONVERSION BECOME THE ASSETS AND LIABILITIES OF THE ,,0 b !LL THE SHAREHOLDERS OF THE COMPANY IMMEDIATELY BEFORE THE CONVERSION BECOME THE PARTNERS OF THE ,,0 AND THEIR CAPITAL CONTRIBUTION AND PROFIT SHARING RATIO IN THE ,,0 ARE IN THE SAME PROPORTION AS THEIR SHAREHOLDING IN THE COMPANY ON THE DATE OF CONVERSION c 4HE SHAREHOLDERS OF THE COMPANY DO NOT RECEIVE ANY CONSIDERATION OR BENEFIT DIRECTLY OR INDIRECTLY IN ANY FORM OR MANNER OTHER THAN BY WAY OF SHARE IN PROFIT AND CAPITAL CONTRIBUTION IN THE ,,0 d 4HE AGGREGATE OF THE PROFIT SHARING RATIO OF THE SHAREHOLDERS OF THE COMPANY IN THE ,,0 SHALL NOT BE LESS THAN AT ANY TIME DURING THE PERIOD OF YEARS FROM THE DATE OF CONVERSION e 4HE TOTAL SALES TURNOVER OR GROSS RECEIPTS IN BUSINESS OF THE COMPANY IN ANY OF THE 0 9 PRECEDING THE 0 9 IN WHICH THE CONVERSION TAKES PLACE DOES NOT EXCEED ` LAKHS
#!0)4!, '!).3
5.17
ea 4HE TOTAL VALUE OF THE ASSETS AS APPEARING IN THE BOOKS OF ACCOUNT OF THE COMPANY IN ANY OF THE THREE PREVIOUS YEARS PRECEDING THE PREVIOUS YEAR IN WHICH THE CONVERSION TAKES PLACE DOES NOT EXCEED ` CRORES AND f .O AMOUNT IS PAID EITHER DIRECTLY OR INDIRECTLY TO ANY PARTNER OUT OF BALANCE OF ACCUMULATED PROFIT STANDING IN THE ACCOUNTS OF THE COMPANY ON THE DATE OF CONVERSION FOR A PERIOD OF YEARS FROM THE DATE OF CONVERSION xiv 7HERE A SOLE PROPRIETARY CONCERN IS SUCCEEDED BY A COMPANY IN THE BUSINESS IF THE FOLLOWING CONDITIONS ARE SATISFIED a !LL THE ASSETS AND LIABILITIES OF THE SOLE PROPRIETARY CONCERN RELATING TO THE BUSINESS IMMEDIATELY BEFORE THE SUCCESSION BECOME THE ASSETS AND LIABILITIES OF THE COMPANY b 4HE SHAREHOLDING OF THE SOLE PROPRIETOR IN THE COMPANY IS NOT LESS THAN OF THE TOTAL VOTING POWER IN THE COMPANY AND HIS SHAREHOLDING CONTINUES TO REMAIN AS SUCH FOR A PERIOD OF YEARS FROM THE DATE OF THE SUCCESSION AND c 4HE SOLE PROPRIETOR DOES NOT RECEIVE ANY CONSIDERATION OR BENEFIT DIRECTLY OR INDIRECTLY IN ANY FORM OR MANNER OTHER THAN BY WAY OF ALLOTMENT OF SHARES IN THE COMPANY xv ANY TRANSFER IN A SCHEME FOR LENDING OF ANY SECURITIES UNDER AN AGREEMENT OR ARRANGEMENT WHICH THE ASSESSEE HAS ENTERED INTO WITH THE BORROWER OF SUCH SECURITIES AND WHICH IS SUBJECT TO THE GUIDELINES ISSUED BY THE 3%") OR 2") IN THIS REGARD xvi ANY TRANSFER OF A CAPITAL ASSET IN A TRANSACTION OF REVERSE MORTGAGE UNDER A SCHEME MADE AND NOTIFIED BY THE #ENTRAL 'OVERNMENT Concept of Reverse Mortgage Scheme: 2EVERSE -ORTGAGE A FINANCIAL PLANNING SCHEME BENEFITS RETIRED CITIZEN WHO OWNS 2ESIDENTIAL (OUSE 0ROPERTY BUT ARE IN NEED OF REGULAR FLOW OF INCOME (ERE THE RETIRED CITIZEN CAN MORTGAGE HIS HOUSE WITH THE BANK OR THE &INANCE #OMPANY IN RETURN FOR A LUMP SUM AMOUNT OR FOR A REGULAR MONTHLY QUARTERLY ANNUAL INCOME 4HEY CAN CONTINUE TO LIVE IN THE HOUSE AND RECEIVE REGULAR INCOME WITHOUT THE BURDEN OF REPAYING THE LOAN 4HE "ANK RECOVERS THE LOAN ALONG WITH THE ACCUMULATED INTEREST BY SELLING THE HOUSE AFTER THE DEATH OF THE BORROWER 4HE EXCESS AMOUNT WILL BE GIVEN TO THE LEGAL HEIRS (OWEVER BEFORE RESORTING TO THE SALE OF THE HOUSE PREFERENCE IS GIVEN TO THE LEGAL HEIRS TO REPAY THE LOAN AND INTEREST AND GET THE MORTGAGED PROPERTY RELEASED Note: 4AX "ENEFITS UNDER 2EVERSE -ORTGAGE 3CHEME Transfer of Capital Asset IN 2EVERSE -ORTGAGE SCHEME IS NOT A TRANSFER FOR THE PURPOSE OF #APITAL 'AINS AND THUS exempt vide Sec. 47(xvi). &URTHER THE amount received BY 3ENIOR #ITIZEN AS LOAN EITHER IN LUMP SUM OR IN INSTALMENTS IS exempt u/s 10(43).
xvii ANY TRANSFER OF A CAPITAL ASSET BEING SHARE OF A 3PECIAL 0URPOSE 6EHICLE 306 TO A BUSINESS TRUST IN EXCHANGE OF UNITS ALLOTTED BY THAT TRUST TO THE TRANSFEROR xviii ANY TRANSFER BY A UNIT HOLDER OF A CAPITAL ASSET BEING A UNIT OR UNITS HELD BY HIM IN THE CONSOLIDATING SCHEME OF A MUTUAL FUND IN CONSIDERATION FOR ALLOTMENT OF A CAPITAL ASSET BEING A UNIT OR UNITS IN THE CONSOLIDATED SCHEME OF THE MUTUAL FUND xix ANY TRANSFER BY A UNIT HOLDER OF A CAPITAL ASSET BEING A UNIT OR UNITS HELD BY HIM IN THE CONSOLIDATING PLAN OF A MUTUAL FUND SCHEME IN CONSIDERATION OF THE ALLOTMENT OF A CAPITAL ASSET BEING A UNIT OR UNITS IN THE CONSOLIDATED PLAN OF THAT SCHEME OF THE MUTUAL FUND (xx) any transfer of a capital asset, being an interest in a joint venture, held by a public sector company, in exchange of shares of a company incorporated outside India by the Government of a foreign State, as per the laws of that foreign State. 'Joint venture' shall mean a business entity, as may be notified by the Central Government. [Inserted by Finance Act, 2023 w.e.f. A.Y. 2023-24]
Direct Tax Laws & International Taxation (DT) | A.Y. 2024-25 | Study Material AUTHOR : PUBLISHER : DATE OF PUBLICATION : EDITION : ISBN NO : NO. OF PAGES : BINDING TYPE :
RAVI CHHAWCHHARIA TAXMANN DECEMBER 2023 6TH EDITION 9789357780421 1246 PAPERBACK
Rs. 1725 | USD 63
Description This book provides practical application of Direct Tax Laws & International Tax in a holistic approach while testing the analytical skills of the reader. The crux of this book is to strike a perfect balance between ‘detailed studies’ and a ‘summarised approach’. This book is written with an explanatory & analytical approach. This book will be helpful for CA-Final, CS-Professional, CMA-Final, M.Com/MBA/LL.B./LL.M students—& other professional exams. The Present Publication is the 6th Edition applicable for the CA Final | New Syllabus | May 2024 Exam. This book is authored by CA Ravi Chhawchharia, with the following noteworthy features: u [Detailed Index] given at the beginning of the book helps the students navigate through the
arrangement of sections and other details.
u [Provisions] have been elucidated thoroughly yet briefly throughout the book, keeping the
technical language intact.
u [Judicial Decisions] are covered for the following:
Landmark/Prescribed by ICAI – have been highlighted in Bold + Underlined along with the name of such case laws are mentioned before the facts and decisions of the case Other Judicial Decisions – where only the point decided (i.e. the ratio of the case) is relevant & students are not expected to remember the names of such cases, are also covered in this book
u [Practical Questions along with Updated Solutions] are covered throughout the book in two
formats:
[Questions based on a Particular Section] are given below the provisions [Questions based on more than one Section] are given at the end of the chapter under the ‘Practical Questions’ segment
u [Amended & Updated] The law stated in this book is amended up to 31st October 2023,
applicable for A.Y. 2024-25. It covers the latest applicable provisions and amendments applicable for May 2024 exams
u [Judicial Decisions, Circular & Notifications] are covered u [Past Exam Solved Questions] including the CA-Final | Nov. 2023 paper with solutions is covered
ORDER NOW