Chapter XII
Determination of Tax in Certain Special
Cases
34[1] [Determination of tax where total income includes income on
which no tax is payable.
110. Where there is included in the total income of an assessee any income on which no income-tax is payable under the provisions of this Act, the assessee shall be entitled to a deduction, from the amount of income-tax with which he is chargeable on his total income, of an amount equal to the income-tax calculated at the average rate of income-tax on the amount no which on income-tax is payable.]
Tax on accumulated balance of recognised
provident fund.
111. (1) Where the accumulated balance due to an employee participating in a recognised provident fund is included in his total income, owing to the provisions of rule 8 of Part A of the Fourth Schedule not being applicable, the 35[2] [Assessing] Officer shall calculate the total of the various sums of 36[3] [tax] in accordance with the provisions of sub-rule (1) of rule 9 thereof.
(2) Where the accumulated balance due to an employee participating in a recognised provident fund which is not included in his total income under the provisions of rule 8 of Part A of the Fourth Schedule becomes payable, super-tax shall be calculated in the manner provided in sub-rule (2) of rule 9 thereof.
37[4] [Tax on long-term capital gains.
112. (1) Where the total income of an assessee includes any income, arising from the transfer of a long-term capital assets, which is chargeable under the head “Capital gains”, the tax payable by the assessee on the total income shall be the aggregate of,—
(a) in the case of an individual or a Hindu undivided family,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been his total income; and
(ii) the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent :
Provided that 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 and the tax on the balance of such long-term capital gains shall be computed at the rate of twenty per cent ;
(b) in the case of a company,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and
(ii) the amount of income-tax calculated on such long-term capital gains at the rate of forty per cent :
Provided that in relation to long-term capital gains arising to a venture capital company from the transfer of equity shares of venture capital undertaking, the provisions of sub-clause (ii) shall have effect as if for the words “forty per cent”, the words “twenty per cent” had been substituted;
(c) in any other case,—
(i) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income; and
(ii) the amount of income-tax calculated on such long-term capital gains at the rate of thirty per cent.
Explanation.—For the purposes of this sub-section,—
(a) “venture capital company” means such company as is engaged in providing finance to venture capital undertakings mainly by way of acquiring equity shares of such undertakings or, if the circumstances so require, by way of advancing loans to such undertakings, and is approved by the Central Government in this behalf;
(b) “venture capital undertaking” means such company as the prescribed authority may, having regards to the following factors, approve for the purposes of this sub-section, namely :—
(1) the total investment in the company does not exceed ten crore rupees or such other higher amount as may be prescribed;
(2) the company does not have adequate financial resources to undertake projects for which it is otherwise professionally or technically equipped; and
(3) the
company seeks to employ any technology which will result in significant
improvement over the existing technology in
(2) Where the gross total income of an assessee includes any income arising from the transfer of a long-term capital asset, the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.
(3) Where the total income of an assessee includes any income arising from the transfer of a long-term capital asset, the total income shall be reduced by the amount of such income and the rebate under section 88 shall be allowed from the income-tax on the total income as so reduced.]
Tax on interest on National Savings
Certificates (First Issue).
112A. [Omitted by the Finance Act, 1988, w.e.f. 1-4-1989. Original section 11 was inserted by the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965 and later on amended by the Finance Act, 1966, w.e.f. 1-4-1966, Finance (No. 2) Act, 1967, w.e.f. 1-4-1968, Taxation Laws (Amendment) Act, 1970, with retrospective effect from 1-4-1958/1969 and Finance Act, 1973, with retrospective effect from 1-4-1972.]
Tax in the case of non-resident.
113. [Omitted by the Finance Act, 1965, w.e.f. 1-4-1965.]
Tax on capital gains in cases of
assessee other than companies.
114. [Omitted by the Finance (No.2) Act, 1967, w.e.f. 1-4-1968, and reintroduced with material modifications in section 80T. Section 114 was substituted first by the Finance (No.2) Act, 1962, w.e.f. 1-4-1962 and later on amended by the Finance Act, 1964, w.e.f. 1-4-1964, the Finance Act, 1965, w.e.f. 1-4-1965, the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965 and the Finance Act, 1966, w.e.f. 1-4-1966.]
Tax on capital gains in case of
companies.
38[5] 115. [Omitted by the Finance Act, 1987, w.e.f. 1-4-1988.]
39[6] [Tax on dividends, royalty and technical service fees in the
case of foreign companies.
40[7] 115A. (1) Subject to the provision of 41[8] [sub-section (1A) and (2)], where the total income of an assessee, being a foreign company, includes any income by way of—
(a) dividends; or
42[9] [(aa) interest received from Government or an Indian concern on moneys borrowed or debt incurred by Government or the Indian concern in foreign currency; or]
43[10] [(ab) income received in respect of units, purchased in foreign currency, of a Mutual Fund specified under clause (23D) of section 10; or]
44[11] [(b) royalty of fees for technical services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31st day of March, 1976, and where such agreement is with an Indian concern, 45[12] [the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy],the income-tax payable shall be the aggregate of—
(i) amount of income-tax calculated on the amount of income by way of dividends, if any, included in the total income, at the rate of twenty-five per cent;
46[13] [(ia) the amount of income-tax calculated on the income by way of interest referred to in clause (aa), if any, included in the total income, at the rate of twenty-five per cent;]
47[14] [(ib) the amount of income-tax calculated on the income in respect of units referred to in clause (ab), if any, included in the total income, at the rate of twenty-five per cent;]
48[15] [(ii) the amount of income-tax calculated on the income by way of royalty, if any, included in the total income, at the rate of thirty per cent;]
(iii) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of 49[16] [thirty per cent]; and
(iv) the amount of income-tax with which it would have been chargeable had its total income been reduced by the amount of income referred to in clause (a) 50[17] [,clause (aa)] and clause (b).
Explanation.—For the purposes of this section,—
(a) “fees for technical services” shall have the same meaning as in 51[18] [Explanation 2] to clause (vii) of sub-section (1) of section 9;
50[20] [53[21] [(b)] “foreign currency” shall have the same meaning as in the Explanation below item (g) of sub-clause (iv) of clause (15) of section 10;]
(c) “royalty” shall have the same meaning as in 51[22] [Explanation 2] to clause (vi) of sub-section (1) of section 9.
54[23] [(1A) Where the royalty referred to in clause (b) of sub-section (1) is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book to an Indian concern 55[24] [or in respect of any computer software to a person resident in India], the provisions of sub-section (1) shall apply in relation to such royalty as if the words 56[25] [approved by the Central Government or where the agreement relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy] occurring in the said clause had been omitted :
Provided that such book is on a
subject, the books on which are permitted, according to the Import Trade
Controls Policy of the Government of India for the period commencing from the
1st day of April, 1977, and ending with the 31st day of March, 1978, to be
imported into
55[26] [Provided further that such computer
software is permitted according to the Import Trade Control Policy of the
Government of India for the time being in force to be imported into
57[27] [Explanation 1].—In this sub-section, “Open General Licence” means an open General Licence issued by the Central Government in pursuance of the Imports (Control) Order, 1955.]
55[28] [Explanation 2].—In this sub-section, the expression “Computer software” shall have the meaning assigned to it in clause (b) of the Explanation to section 80HHE.]
(2) Nothing contained in sub-section (1) shall apply in relation to any income by way of royalty received by a foreign company from an Indian concern in pursuance of an agreement made by it with the Indian concern after the 31st day of March, 1976, if such agreement is deemed, for the 58[29] [purposes of the first proviso] to clause (vi) of sub-section (1) of section 9, to have been made before the 1st day of April, 1976; and the provisions of the annual Finance Act for calculating, charging, deducting or computing income-tax shall apply in relation to such income as if such income had been received in pursuance of an agreement made before the 1st day of April, 1976.]
59[30] [Tax on income from units
purchased in foreign currency or capital gains arising from their transfer.
115AB. (1) Where the total income of an assessee, being an overseas financial organisation (hereinafter referred to as Offshore Fund) includes—
(a) income received in respect of units purchased in foreign currency; or
(b) income by way of long-term capital gains arising from the transfer of units purchased in foreign currency,the income-tax payable shall be the aggregate of—
(i) the amount of income-tax calculated on the income in respect of units referred to in clause (a), if any, included in the total income, at the rate of ten per cent;
(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, at the rate of ten per cent; and
(iii) the amount of income-tax with which the Offshore Fund would have been chargeable had its total income been reduced by the amount of income referred to in clause (a) and clause (b).
(2) Where the gross total income of the Offshore Fund,—
(a) consists only of income from units or income by way of long-term capital gains arising from the transfer of units, or both, no deduction shall be allowed to the assessee under sections 28 to 44C 60[31] [***] or clause (i) or clause (iii) of section 57 or under Chapter VI-A 61[32] [and nothing contained in the provisions of the second proviso to section 48 shall apply to income referred to in clause (b) of sub-section (1)];
(b) includes any income referred to in clause (a), the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.
Explanation.—For the purposes of this section,—
(a) “overseas financial organisation” means any fund, institution, association or body, whether incorporated or not, established under the laws of a country outside India, which has entered into an arrangement for investment in India with any public sector bank or public financial institution or a mutual fund specified under clause (23D) of section 10 and such arrangement is approved by the Central Government for this purpose;
(b) “unit” means unit of a mutual fund specified under clause (23D) of section 10 or of the Unit Trust of India;
(c) “foreign currency”61a[33] shall have the meaning as in the Foreign Exchange Regulation Act, 1973 (46 of 1973);
(d) “public sector bank” shall have the meaning assigned to it in clause (23D) of section 10;
(e) “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);
(f) “Unit Trust of India” means the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963)].
62[34] [Tax on income from bonds
or shares purchased in foreign currency or capital gains arising from their
transfer.
115AC. (1) Where the total income of an assessee, being a non-resident, includes—
(a) income by way of interest or dividends, on bonds or shares of an Indian company issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf and purchased by him in foreign currency; or
(b) income by way of long-term capital gains arising from the transfer of bonds or, as the case may be, shares referred to in clause (a),the income-tax payable shall be the aggregate of—
(i) the amount of income-tax calculated on the income by way of interest or dividends, as the case may be, in respect of bonds or shares referred to in clause (a), if any, included in the total income, at the rate of ten per cent;
(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, at the rate of ten per cent; and
(iii) the amount of income-tax with which the non-resident would have been chargeable had his total income been reduced by the amount of income referred to in clause (a) and clause (b).
(2) Where the gross total income of the non-resident—
(a) consists only of income by way of interest or dividends in respect of bonds or, as the case may be, shares referred to in clause (a) of sub-section (1), no deductions shall be allowed to him under section 28 to 44C or clause (i) or clause (iii) of section 57 or under Chapter VI-A;
(b) includes any income referred to in clause (a) or clause (b) of sub-section (1) the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced, were the gross total income of the assessee.
(3) Nothing contained in the first and second provisos to section 48 shall apply for the computation of long-term capital gains arising out of the transfer of long-term capital assets, being bonds or shares referred to in clause (b) of sub-section (1).
(4) It shall not be necessary for a non-resident to furnish under sub-section (1) of section 139 a return of his income if—
(a) his total income in respect of which he is assessable under this Act during the previous year consisted only of income referred to in clause (a) of sub-section (1); and
(b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income.]
62a[35] [Tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer.
115AD. (1) Where the total income of a Foreign Institutional Investor includes—
(a) income received in respect of securities (other than units referred to in section 115AB) listed in a recognised stock exchange in India in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made there under; or
(b) income by way of short-term or long-term capital gains arising from the transfer of such securities,the income-tax payable shall be the aggregate of—
(i) the amount of income-tax calculated on the income in respect of securities referred to in clause (a), if any, included in the total income, at the rate of twenty per cent;
(ii) the amount of income-tax calculated on the income by way of short-term capital gains referred to in clause (b), if any included in the total income, at the rate of thirty per cent;
(iii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any included in the total income, at the rate of ten per cent; and
(iv) the amount of income-tax with which the foreign Institutional Investor would have been chargeable had its total income been reduced by the amount of income referred to in clause (a) and clause (b).
(2) Where the gross total income of the Foreign Institutional Investor—
(a) consists only of income in respect of securities referred to in clause (a) of sub-section (1), no deduction shall be allowed to it under sections 28 to 44 C or clause (i) or clause (iii) of section 57 or under Chapter VI-A;
(b) includes any income referred to in clause (a) or clause (b) of sub-section (1), the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced, were the gross total income of the Foreign Institutional Investor.
(3) Nothing contained in the first and second provisos to section 48 shall apply for the computation of capital gains arising out of the transfer of securities referred to in clause (b) of sub-section (1).
Explanation.—for the purposes of this section,—
(a) the expression “Foreign Institutional Investor” means such investor as the Central Government may, by notification in the Official Gazette, specify in this behalf;
(b) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).]
63[36] [Tax on profits and gains
of life insurance business.
115B. 64[37] [(1)] Where the total income of an assessee includes any profits and gains from life insurance business, the income-tax payable shall be the aggregate of—
(i) the amount of income-tax calculated on the amount of profits and gains of the life insurance business included in the total income, at the rate of twelve and one-half per cent; and
(ii) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of profits and gains of the life insurance business.]
65[38] [(2) Notwithstanding anything contained in sub-section (1) or in any other law for the time being in force or any instrument having the force of law, the assessee shall, in addition to the payment of income-tax computed under sub-section (1), deposit, during 66[39] [the previous years relevant to the assessment years commencing on the 1st day of April, 1989 and the 1st day of April, 1990], and amount equal to thirty-three and one-third per cent of the amount of income-tax computed under clause (i) of sub-section (1), in such social security fund (hereafter in its sub-section referred to as the security fund), as the Central Government may, by notification67[40] in the Official Gazette, specify in this behalf :
Provided that where the assessee makes during the said previous 68[41] [years] any deposit of an amount of not less that two and one-half per cent of the profits and gains of the life insurance business in the security fund, the amount of income-tax payable by the assessee under the said clause (i) shall be reduced by an amount equal to two and one-half per cent of such profits and gains and, accordingly, the deposit of thirty-three and one-third per cent required to be made under this sub-section shall be calculated on the income-tax as so reduced.]
69[42] [Tax on winnings from
lotteries, crossword puzzles, and races including horse races, card games and
other games of any sort or gambling or betting of any form or nature
whatsoever.
115BB. Where the total income of an assessee includes any income by way of winnings from any lottery or crossword puzzle or race including horse race (not being income from the activity of owning and maintaining race horses) or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, the income-tax payable shall be the aggregate of—
(i) the amount of income-tax calculated on income by way of winnings from such lottery or crossword puzzle or race including horse race or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, at the rate of forty per cent; and
(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).
Explanation.—For the purposes of this section, “horses race” shall have the same meaning as in section 74A.]
70[43] [Tax on non-resident
sportsmen or sports associations.
115BBA. (1) Where the total income of an assessee,—
(a) being
a sportsman (including an athlete), who is not a citizen of
(i) participation
in
(ii) advertisement; or
(iii) contribution of articles relating to any game or sport in
(b) being a non-resident sports association or institution, includes any amount guaranteed to be paid or payable to such association or institution in relation to any game (other than a game the winnings wherefrom are taxable under section 115BB) or sport played in India,the income-tax payable by the assessee shall be the aggregate of—
(i) the amount of income-tax calculated on income referred to in clause (a) or clause (b) at the rate of ten per cent; and
(ii) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of income referred to in clause (a) or clause (b) :
Provided that no deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the income referred to in clause (a) or clause (b).
(2) It shall not be necessary for the assessee to furnish under sub-section (1) of section 139 a return of his income if—
(a) his total income in respect of which he is assessable under this Act during the previous year consisted only of income referred to in clause (a) or clause (b) of sub-section (1); and
(b) the tax deducted at source under the provisions of Chapter XVII-B has been deducted from such income.]
[1]Substituted by the Finance Act, 1965, w.e.f. 1-4-1965.
[2]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[3]Substituted for “Income-tax and super-tax” by the Finance Act, 1965, w.e.f. 1-4-1965.
[4]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. Earlier section 112 was omitted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 and replaced by section 80S. Before its omission, the section was first amended by the Finance Act, 1965, w.e.f. 1-4-1965 and then by the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965.
[5]Omitted section 115, as amended by the Finance (No. 2)
Act, 1962, w.e.f. 1-4-1962, the Finance Act, 1964, w.e.f. 1-4-1964, the Finance
Act, 1965, w.e.f. 1-4-1965, the Finance Act, 1966, w.e.f. 1-4-1966, the Finance
(No.2) Act, 1971, w.e.f. 1-4-1972, the Finance (No. 2) Act, 1974, w.e.f.
1-4-1975, the Finance Act, 1976, w.e.f. 1-4-1977 and the Finance Act, 1985,
w.e.f. 1-4-1986, stood as under :
‘Where
the total income of a company includes any income chargeable under the head
“Capital gains” relating to capital assets other than short-term capital assets
(such income being hereinafter referred to as long-term capital gains), the
income-tax payable shall be the aggregate of—
(i) the amount of income-tax
calculated on the amount of long-term capital gains included in the total
income—
(a) on so much the amount of such
long-term capital gains as relate to buildings or lands or any rights in
buildings or lands, at the rate of fifty per cent; and
(b) on the balance of such long-term
capital gains, if any, at the rate of forty per cent; and
(ii) the amount of income-tax with which it would have been chargeable had its total income been reduced by the amount of long-term capital gains referred to in clause (i).’
[6]Inserted by the Finance Act, 1976, w.e.f. 1-6-1976.
[7]See also Circular No. 473, dated 29-10-1986.
[8]Substituted for “sub-section (2)” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[9]Inserted by the Finance Act, 1983, w.e.f. 1-6-1983.
[10]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[11]Substituted by the Finance Act, 1983, w.e.f. 1-6-1983.
[12]Substituted for the words “such agreement is approved by the Central Government” by the Finance Act, 1992, w.e.f. 1-6-1992.
[13]Inserted by the Finance Act, 1983, w.e.f. 1-6-1983.
[14]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[15]Substituted for the following clause (ii) by the Finance Act, 1986, w.e.f.
1-4-1987 :
“(ii) the amount of income-tax
calculated on the income by way of royalty, if any, included in the total
income—
(1) on so much of the amount of such
income as consists of lump sum consideration for the transfer outside India of,
or the imparting of information outside India in respect of, any data,
documentation, drawing, or specification relating to any patent, invention,
model, design, secret formula or process or trade mark or similar property, at
the rate of twenty per cent;
(2) on the balance of such income, if any, at the rate of forty per cent;”
[16]Substituted for “forty per cent” by the Finance Act, 1986, w.e.f. 1-4-1987.
[17]Inserted by the Finance Act, 1983, w.e.f. 1-6-1983.
[18]Substituted for “the Explanation” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977.
[19]Clause (b)
omitted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Prior to
its omission clause (b) stood
as under :
‘(b) “foreign company” shall have the same meaning as in section 80B;’
[20]Inserted by the Finance Act, 1983, w.e.f. 1-6-1983.
[21]Relettered, ibid.
[22]Substituted for “the Explanation” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977.
[23]Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[24]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.
[25]Substituted for the words “and approved by the Central Government” by the Finance Act, 1992, w.e.f. 1-6-1992.
[26]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.
[27]Renumbered by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.
[28]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.
[29]Substituted for ‘purposes of the proviso’, ibid.
[30]Inserted, ibid. w.e.f. 1-4-1992.
[31]Words “or sub-section (2) of section 48” omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
[32]Inserted, ibid.
[34]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[35]Inserted by the Finance Act, 1993, w.e.f. 1-4-1993.
[36]Inserted by the Finance Act, 1976, w.e.f. 1-6-1976.
[37]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[38]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[39]Substituted for “the previous year relevant to the assessment year commencing on the 1st day of April, 1989” by the Finance Act, 1989, w.e.f. 1-4-1990.
[40]For notified Social Security Fund, Refer, 1990.
[41]Substituted for “year” by the Finance Act, 1989, w.e.f. 1-4-1990.
[42]Inserted by the Finance Act, 1986, w.e.f. 1-4-1987.
[43]Inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990.