Chapter VII

 

Incomes Forming Part of Total Income on which no
Income-tax is payable

81 to 85C.       [Omitted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Provisions of sections 81, 82, 83, 84, 85, 85A, 85B and 85C were incorporated from the same date in sections 80P, 80Q, 10(29), 80J, 80K (now omitted), 80M, 80N (now omitted) and 80-O, respectively.]

 

94[R1] [Share of member of an association of persons or body of indi­viduals in the income of the association or body.

86.       Where the assessee is a member of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India), income-tax shall not be payable by the assessee in respect of his share in the income of the association or body computed in the manner provided in sec­tion 67A:

            Provided that,—

(a)        where the association or body is chargeable to tax on its total income at the maximum marginal rate or any higher rate under any of the provisions of this Act, the share of a member computed as aforesaid shall not be included in his total income;

(b)        in any other case, the share of a member computed as aforesaid shall form part of his total income:

 

Provided further that where no income-tax is chargeable on the total income of the association or body, the share of a member computed as aforesaid shall be chargeable to tax as part of his total income and nothing contained in this section shall apply to the case.]

 

Deduction from tax on certain securities.

95[R2] 86A. [Omitted by the Finance Act, 1988, w.e.f. 1-4-1989. Original section was inserted by the Finance Act, 1965, w.e.f. 1-4-1965.]

 

 [R1]Substituted by the Finance Act, 1992, w.e.f. 1-4-1993. Prior to substitution, section 86, as amended by the Finance Act, 1964, w.e.f. 1-4-1964, the Finance act, 1965, w.e.f. 1-4-1965, the Finance Act, 1968, w.e.f. 1-4-1969, the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971, the Finance Act, 1981, w.e.f. 1-4-1981, the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, read as under:

“86. Other incomes.—Income-tax shall not be payable by an assessee in respect of the following—

(i) [* * *]

(ii) [* * *]

(iii) if the assessee is a partner of an unregistered firm [not being an unregistered firm assessed as a registered firm under clause (b) of section 183], any portion of the assessee’s share in the profits and gains of the firm computed in the manner laid down in section 67 on which income-tax is payable by the firm;

(iv) [* * *]

(v) if the assessee is a member of an association of per­sons or a body of individuals [other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860), or under any law correspond­ing to that Act in force in any part of India], his share in the income of the association or body computed in the manner provided in section 67A:

Provided that,—

(a) where the association or body is chargeable to tax on its total income at the maximum marginal rate or any higher rate, under any of the provisions of this Act, the share of a member computed as aforesaid shall not be included in his total income;

(b) in any other case, the share of a member computed as aforesaid shall form part of his total income:

Provided further that where no income-tax is chargeable on the total income of the association or body, the share of a member computed as aforesaid shall be chargeable to tax as part of his total income and nothing contained in this section shall apply to the case.”

 [R2]Prior to its omission, section 86A as amended by the Finance Act, 1966, w.e.f. 1-4-1966, stood as under :

“Where there is included in the total income of an assessee—

(i) the interest due on any security of the Central Govern­ment issued or declared to be income-tax free, or

(ii) the interest due on any security of a State Government issued income-tax free, the income-tax whereon is payable by the State Government,

the assessee shall be entitled to a deduction from the amount of income-tax with which he is chargeable on his total income, of an amount equal to the income-tax calculated on the amount so in­cluded at the average rate of income-tax or at the rate of twen­ty-seven and a half per cent whichever is less.”