CHAPTER III

INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME

10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—

(1) agricultural income;

⁶²[R1] (2) ⁶³[R2] [subject to the provisions of sub-section (2) of section 64,] any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family;

⁶⁴[R3] [(2A) in the case of a person being a partner of a firm which is separately assessed as such, his share in the total income of the firm.

Explanation.—For the purposes of this clause, the share of a partner in the total income of a firm separately assessed as such shall, notwithstanding anything contained in any other law, be an amount which bears to the total income of the firm the same proportion as the amount of his share in the profits of the firm in accordance with the partnership deed bears to such profits;]

(3) ⁶⁵[R4] [***]

⁶⁶[R5] [(4) (i) in the case of a non-resident, any income by way of interest on such securities or bonds as the Central Government may, by notification in the Official Gazette⁶⁷[R6] , specify in this behalf, including income by way of premium on the redemption of such bonds:

⁶⁸[R7] [Provided that the Central Government shall not specify, for the purposes of this sub-clause, such securities or bonds on or after the 1st day of June, 2002;]

⁶⁹[R8] [⁷⁰[R9] (ii) in the case of an individual, any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Regulation Act, 1973 (46 of 1973), and the rules made thereunder:

Provided that such individual is a person resident outside India as defined in clause (q) of section 2^71-73[R10] of the said Act or is a person who has been permitted by the Reserve Bank of India to maintain the aforesaid Account;]]

Following second proviso to sub-clause (ii) in clause (4) of section 10, which was inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2006, shall be omitted by the Finance Act, 2005, w.e.f. 1-4-2006:

Provided further that nothing contained in this sub-clause shall apply to any income by way of interest paid or credited on or after the 1st day of April, 2005 to the Non-Resident (External) Account of such individual;

⁷⁴[R11] [(4B) in the case of an individual, being a citizen of India or a person of Indian origin, who is a non-resident, any income from interest on such savings certificates issued ⁷⁵[R12] [before the 1st day of June, 2002] by the Central Government as that Government may, by notification in the Official Gazette⁷⁶[R13] , specify in this behalf:

Provided that the individual has subscribed to such certificates in convertible foreign exchange remitted from a country outside India in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made there under.

Explanation.—For the purposes of this clause,—

(a) a person shall be deemed to be of Indian origin if he, or either of his parents or any of his grandparents, was born in undivided India;

(b) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made there under;]

⁷⁷[R14] [(5) in the case of an individual, the value of any travel concession or assistance received by, or due to, him,—

(a) from his employer for himself and his family, in connection with his proceeding on leave to any place in India;

(b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service,subject to such conditions as may be prescribed⁷⁸[R15] (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government:

Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.

Explanation.—For the purposes of this clause, “family”, in relation to an individual, means—

(i) the spouse and children of the individual; and

(ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual; ]

(5A) ⁷⁹[R16] [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]

(5B) ⁸⁰[R17] [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003.]

(6) in the case of an individual who is not a citizen of India,—

(i) ⁸¹[R18] [***]

⁸²[R19] [(ii) the remuneration received by him as an official, by whatever name called, of an embassy, high commission, legation, commission, consulate or the trade representation of a foreign State, or as a member of the staff of any of these officials, for service in such capacity:

Provided that the remuneration received by him as trade commissioner or other official representative in India of the Government of a foreign State (not holding office as such in an honorary capacity), or as a member of the staff of any of those officials, shall be exempt only if the remuneration of the corresponding officials or, as the case may be, members of the staff, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country:

Provided further that such members of the staff are subjects of the country represented and are not engaged in any business or profession or employment in India otherwise than as members of such staff;]

(vi) the remuneration received by him as an employee of a foreign enterprise for services rendered by him during his stay in India, provided the following conditions are fulfilled—

(a) the foreign enterprise is not engaged in any trade or business in India;

(b) his stay in India does not exceed in the aggregate a period of ninety days in such previous year; and

(via) ⁸³[R20] [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]

(vii) ⁸⁴[R21] [Omitted by the Finance Act, 1993, w.e.f. 1-4-1993;]

(viia) ⁸⁵[R22] [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]

(viii) any income chargeable under the head “Salaries” received by or due to any such individual being a non-resident as remuneration for services rendered in connection with his employment on a foreign ship where his total stay in India does not exceed in the aggregate a period of ninety days in the previous year;

(ix) ⁸⁶[R23] [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]

(x) ⁸⁷[R24] [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]

⁸⁸[R25] [(xi) the remuneration received by him as an employee of the Government of a foreign State during his stay in India in connection with his training in any establishment or office of, or in any undertaking owned by,—

(i) the Government; or

(ii) any company in which the entire paid-up share capital is held by the Central Government, or any State Government or Governments, or partly by the Central Government and partly by one or more State Governments; or

(iii) any company which is a subsidiary of a company referred to in item (ii); or

(iv) any corporation established by or under a Central, State or Provincial Act; or

(v) any society registered under the Societies Registration Act, 1860 (14 of 1860), or under any other corresponding law for the time being in force and wholly financed by the Central Government, or any State Government or State Governments, or partly by the Central Government and partly by one or more State Governments;]

⁸⁹[R26] [(6A) where in the case of a foreign company deriving income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31st day of March, 1976 ⁹⁰[R27] [but before the 1st day of June, 2002] ⁹¹[R28] [and,—

(a) where the agreement relates to a matter included in the industrial policy, for the time being in force, of the Government of India, such agreement is in accordance with that policy; and

(b) in any other case, the agreement is approved by the Central Government,the tax on such income is payable, under the terms of the agreement, by Government or the Indian concern to the Central Government, the tax so paid].

Explanation.—For the purposes of this clause ⁹²[R29] [and clause (6B)],—

(a) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;

(b) “foreign company” shall have the same meaning as in section 80B;

⁹³[R30] [(6B) where in the case of a non-resident (not being a company) or of a foreign company deriving income (not being salary, royalty or fees for technical services) from Government or an Indian concern in pursuance of an agreement entered into ⁹⁴[R31] [before the 1st day of June, 2002] by the Central Government with the Government of a foreign State or an international organisation, the tax on such income is payable by Government or the Indian concern to the Central Government under the terms of that agreement or any other related agreement approved ⁹⁴[R32] [before that date] by the Central Government, the tax so paid;]

⁹⁵[R33] [(6BB) where in the case of the Government of a foreign State or a foreign enterprise deriving income from an Indian company engaged in the business of operation of aircraft, as a consideration of acquiring an aircraft or an aircraft engine (other than payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease under ⁹⁶[R34] [an agreement entered after the 31st day of March, 1997 ⁹⁷[R35] [but before the 1st day of April, 1999] and approved by the Central Government in this behalf] and the tax on such income is payable by such Indian company under the terms of that agreement to the Central Government, the tax so paid.

Explanation.—For the purposes of this clause, the expression “foreign enterprise” means a person who is a non-resident;]

⁹⁸[R36] [(6C) any income arising to such foreign company, as the Central Government may, by notification⁹⁹[R37] in the Official Gazette, specify in this behalf, by way of ¹[R38] [royalty or] fees for technical services received in pursuance of an agreement entered into with that Government for providing services in or outside India in projects connected with security of India;]

(7) any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering service outside India;

(8) in the case of an individual who is assigned to duties in India in connection with any co-operative technical assistance programmes and projects in accordance with an agreement entered into by the Central Government and the Government of a foreign State (the terms whereof provide for the exemption given by this clause)—

(a) the remuneration received by him directly or indirectly from the Government of that foreign State for such duties, and

(b) any other income of such individual which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such individual is required to pay any income or social security tax to the Government of that foreign State;

²[R39] [(8A) in the case of a consultant—

(a) any remuneration or fee received by him or it, directly or indirectly, out of the funds made available to an international organisation [hereafter referred to in this clause and clause (8B) as the agency] under a technical assistance grant agreement between the agency and the Government of a foreign State; and

(b) any other income which accrues or arises to him or it outside India, and is not deemed to accrue or arise in India, in respect of which such consultant is required to pay any income or social security tax to the Government of the country of his or its origin.

Explanation.—In this clause, “consultant” means—

(i) any individual, who is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India; or

(ii) any other person, being a non-resident,engaged by the agency for rendering technical services in India in connection with any technical assistance programme or project, provided the following conditions are fulfilled, namely:—

(1) the technical assistance is in accordance with an agreement entered into by the Central Government and the agency; and

(2) the agreement relating to the engagement of the consultant is approved by the prescribed authority3 for the purposes of this clause;

(8B) in the case of an individual who is assigned to duties in India in connection with any technical assistance programme and project in accordance with an agreement entered into by the Central Government and the agency—

(a) the remuneration received by him, directly or indirectly, for such duties from any consultant referred to in clause (8A); and

(i) the individual is an employee of the consultant referred to in clause (8A) and is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India; and

(ii) the contract of service of such individual is approved by the prescribed authority³[R40] before the commencement of his service;]

(9) the income of any member of the family of any such individual as is referred to in clause (8) ^4-5[R41] [or clause (8A) or, as the case may be, clause (8B)] accompanying him to India, which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such member is required to pay any income or social security tax to the Government of that foreign State ^4-5[R42] [or, as the case may be, country of origin of such member];

⁶[R43] [⁷[R44] (10) ⁸[R45] (i) any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services;

(ii) any gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972), to the extent it does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of section 4⁹[R46] of that Act;

(iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month’s salary for each year of completed service¹⁰[R47] , ¹¹[R48] [calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit¹²[R49] as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government]:

Provided that where any gratuities referred to in this clause¹³[R50] are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this clause ¹⁴[R51] [shall not exceed the limit so specified]:

Provided further that where any such gratuity or gratuities was or were received in any one or more earlier previous years also and the whole or any part of the amount of such gratuity or gratuities was not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this clause ¹⁵[R52] [shall not exceed the limit so specified] as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.

¹⁶[R53] [* * *]

Explanation.—¹⁷[R54] [In this clause, and in clause (10AA)], “salary” shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule;]

¹⁸[R55] [¹⁹[R56] (10A) ²⁰[R57] (i) any payment in commutation of pension received under the Civil Pensions (Commutation) Rules of the Central Government or under any similar scheme applicable ²¹[R58] [to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the defence services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority] or a corporation established by a Central, State or Provincial Act;

(ii) any payment in commutation of pension received under any scheme of any other employer, to the extent it does not exceed—

(a) in a case where the employee receives any gratuity, the commuted value of one-third of the pension which he is normally entitled to receive, and

(b) in any other case, the commuted value of one-half of such pension,such commuted value being determined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality;

²²[R59] [* * *]

²³[R60] [(iii) any payment in commutation of pension received from a fund under clause (23AAB);]

²⁴[R61] [²⁵[R62] (10AA) (i) any payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his ²⁶[R63] retirement ²⁷[R64] [whether] on superannuation or otherwise;

(ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement ²⁸[R65] [whether] on superannuation or otherwise as does not exceed ²⁹[R66] [ten] months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement ²⁸[R67] [whether] on superannuation or otherwise, ³⁰[R68] [subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit³¹[R69] applicable in this behalf to the employees of that Government]:

Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this sub-clause ³²[R70] [shall not exceed the limit so specified]:

Provided further that where any such payment or payments was or were received in any one or more earlier previous years also and the whole or any part of the amount of such payment or payments was or were not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this sub-clause ³³[R71] [shall not exceed the limit so specified], as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.

³⁴[R72] [* * *]

Explanation.—For the purposes of sub-clause (ii),—

³⁵[R73] [* * *] the entitlement to earned leave of an employee shall not exceed thirty days for every year of actual service rendered by him as an employee of the employer from whose service he has retired ;

³⁶[R74] [* * *]

³⁷[R75] [(10B) any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, ³⁸[R76] [at the time of his retrenchment :

Provided that the amount exempt under this clause shall not exceed—

(i) an amount calculated in accordance with the provisions of ³⁹[R77] clause (b) of section 25F of the Industrial Disputes Act, 1947 (14 of 1947) ; or

⁴⁰[R78] [(ii) such amount, not being less than fifty thousand rupees, as the Central Government may, by notification⁴¹[R79] in the Official Gazette, specify in this behalf,] whichever is less :

Provided further that the preceding proviso shall not apply in respect of any compensation received by a workman in accordance with any scheme which the Central Government may, having regard to the need for extending special protection to the workmen in the undertaking to which such scheme applies and other relevant circumstances, approve in this behalf.]

Explanation.—For the purposes of this clause—

(a) compensation received by a workman at the time of the closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment ;

(b) compensation received by a workman, at the time of the transfer (whether by agreement or by operation of law) of the ownership or management of the undertaking in which he is employed from the employer in relation to that undertaking to a new employer, shall be deemed to be compensation received at the time of his retrenchment if—

(i) the service of the workman has been interrupted by such transfer ; or

(ii) the terms and conditions of service applicable to the workman after such transfer are in any way less favourable to the workman than those applicable to him immediately before the transfer ; or

(iii) the new employer is, under the terms of such transfer or otherwise, legally not liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer ;

⁴²[R80] (c) the expressions “employer” and “workman” shall have the same meanings as in the Industrial Disputes Act, 1947 (14 of 1947);]

⁴³[R81] [(10BB) any payments made under the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 (21 of 1985), and any scheme framed thereunder except payment made to any assessee in connection with the Bhopal Gas Leak Disaster to the extent such assessee has been allowed a deduction under this Act on account of any loss or damage caused to him by such disaster ;]

⁴⁴[R82] [(10C) ⁴⁵[R83] any amount received⁴⁶[R84] ⁴⁷[R85] [or receivable] by an employee of—

(i) a public sector company ; or

(ii) any other company ; or

(iii) an authority established under a Central, State or Provincial Act ; or

(iv) a local ⁴⁸[R86] [authority ; or]

⁴⁹[R87] [(v) a co-operative society ; or

(vi) a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956) ; or

(vii) an Indian Institute of Technology within the meaning of clause (g) of section 3⁵⁰[R88] of the Institutes of Technology Act, 1961 (59 of 1961) ; or

⁵¹[R89] [(viia) any State Government; or]

⁵²[R90] [(viib) the Central Government; or]

⁵³[R91] [(viic) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette⁵⁴[R92] , specify in this behalf; or]

(viii) such institute of management as the Central Government may, by notification⁵⁵[R93] in the Official Gazette, specify in this behalf,] ⁵⁶[R94] [on his] ⁵⁷[R95] [voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees] :

Provided that the schemes of the said companies or authorities ⁵⁸[R96] [or societies or Universities or the Institutes referred to in sub-clauses (vii) and (viii)], as the case may be, governing the payment of such amount are framed in accordance with such guidelines (including inter alia criteria of economic viability) as may be ⁵⁹[R97] prescribed ⁶⁰[R98] [***] :

Provided further that where exemption has been allowed to an employee under this clause for any assessment year, no exemption there under shall be allowed to him in relation to any other assessment year ;]

⁶¹[R99] [(10CC) in the case of an employee, being an individual deriving income in the nature of a perquisite, not provided for by way of monetary payment, within the meaning of clause (2) of section 17, the tax on such income actually paid by his employer, at the option of the employer, on behalf of such employee, notwithstanding anything contained in section 200⁶²[R100] of the Companies Act, 1956 (1 of 1956);]

⁶³[R101] [(10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than—

(a) any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA; or

(b) any sum received under a Keyman insurance policy; or

(c) any sum received under an insurance policy issued on or after the 1st day of April, 2003 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured:

Provided that the provisions of this sub-clause shall not apply to any sum received on the death of a person:

Provided further that for the purpose of calculating the actual capital sum assured under this sub-clause, effect shall be given to the ⁶⁴[R102] [Explanation to sub-section (2A) of section 88].

Explanation.—For the purposes of this clause, “Keyman insurance policy” means a life insurance policy taken by a person on the life of another person who is or was the employee of the first-mentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person;]

(11) any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies ⁶⁵[R103] [or from any other provident fund set up by the Central Government and notified⁶⁶[R104] by it in this behalf in the Official Gazette];

(12) the accumulated balance due and becoming payable to an employee participating in a recognised provident fund, to the extent provided in rule 8 of Part A of the Fourth Schedule ;

⁶⁷[R105] [(13) any payment from an approved superannuation fund made—

(i) on the death of a beneficiary ; or

(ii) to an employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapacitated prior to such retirement ; or

(iii) by way of refund of contributions on the death of a beneficiary ; or

(iv) by way of refund of contributions to an employee on his leaving the service in connection with which the fund is established otherwise than by retirement at or after a specified age or on his becoming incapacitated prior to such retirement, to the extent to which such payment does not exceed the contributions made prior to the commencement of this Act and any interest thereon;]

⁶⁸[R106] [⁶⁹[R107] (13A) any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent ⁷⁰[R108] [* * *] as may be prescribed⁷¹[R109] having regard to the area or place in which such accommodation is situate and other relevant considerations.]

⁷²[R110] [Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where—

(a) the residential accommodation occupied by the assessee is owned by him ; or

(b) the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him ;]

⁷³[R111] [(14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred⁷⁴[R112] in the performance of the duties of an office or employment of profit⁷⁵[R113] , ⁷⁶[R114] [as may be prescribed], to the extent to which such expenses are actually incurred for that purpose ;

(ii) any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit⁷⁵[R115] are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living, ⁷⁷[R116] [as may be prescribed and to the extent as may be prescribed] :]

⁷⁸[R117] [Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence ;]

(14A) ⁷⁹[R118] [***]

(15) ⁸⁰[R119] [(i) income by way of interest, premium on redemption or other payment on such securities, bonds, annuity certificates, savings certificates, other certificates issued by the Central Government and deposits as the Central Government may, by notification⁸¹[R120] in the Official Gazette, specify in this behalf, subject to such conditions and limits as may be specified in the said notification ;]

⁸²[R121] [(iib) ⁸³[R122] [in the case of an individual or a Hindu undivided family,] interest on such Capital Investment Bonds as the Central Government may, by notification⁸⁴[R123] in the Official Gazette, specify in this behalf :]

⁸⁵[R124] [Provided that the Central Government shall not specify, for the purposes of this sub-clause, such Capital Investment Bonds on or after the 1st day of June, 2002;]

⁸⁶[R125] [(iic) in the case of an individual or a Hindu undivided family, interest on such Relief Bonds⁸⁷[R126] as the Central Government may, by notification in the Official Gazette, specify in this behalf ;]

⁸⁸[R127] [(iid) interest on such bonds, as the Central Government may, by notification⁸⁹[R128] in the Official Gazette, specify, arising to—

(a) a non-resident Indian, being an individual owning the bonds ; or

(b) any individual owning the bonds by virtue of being a nominee or survivor of the non-resident Indian ; or

Provided that the aforesaid bonds are purchased by a non-resident Indian in foreign exchange and the interest and principal received in respect of such bonds, whether on their maturity or otherwise, is not allowable to be taken out of India :

Provided further that where an individual, who is a non-resident Indian in any previous year in which the bonds are acquired, becomes a resident in India in any subsequent year, the provisions of this sub-clause shall continue to apply in relation to such individual :

Provided also that in a case where the bonds are encashed in a previous year prior to their maturity by an individual who is so entitled, the provisions of this sub-clause shall not apply to such individual in relation to the assessment year relevant to such previous year :

⁹⁰[R129] [Provided also that the Central Government shall not specify, for the purposes of this sub-clause, such bonds on or after the 1st day of June, 2002.]

Explanation.—For the purposes of this sub-clause, the expression “non-resident Indian” shall have the meaning assigned to it in clause (e) of section 115C;]

(iii) interest on securities held by the Issue Department of the Central Bank of Ceylon constituted under the Ceylon Monetary Law Act, 1949;

⁹¹[R130] [(iiia) interest payable to any bank incorporated in a country outside India and authorised to perform central banking functions in that country on any deposits made by it, with the approval of the Reserve Bank of India, with any scheduled bank.

Explanation.—For the purposes of this sub-clause, “scheduled bank” shall have the meaning assigned to it in ⁹²[R131] [clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36];]

⁹³[R132] [(iiib) interest payable to the Nordic Investment Bank, being a multilateral financial institution constituted by the Governments of Denmark, Finland, Iceland, Norway and Sweden, on a loan advanced by it to a project approved by the Central Government in terms of the Memorandum of Understanding entered into by the Central Government with that Bank on the 25th day of November, 1986;]

⁹⁴[R133] [(iiic) interest payable to the European Investment Bank, on a loan granted by it in pursuance of the framework-agreement for financial co-operation entered into on the 25th day of November, 1993 by the Central Government with that Bank;]

(iv) interest payable—

⁹⁵[R134] [(a) by Government or a local authority on moneys borrowed by it before the 1st day of June, 2001 from, or debts owed by it before the 1st day of June, 2001 to, sources outside India;]

(b) by an industrial undertaking in India on moneys borrowed by it under ^96-99[R135] [a loan agreement entered into before the 1st day of June, 2001 with any such financial institution] in a foreign country as may be approved¹[R136] in this behalf by the Central Government by general or special order ;

²[R137] (c) by an industrial undertaking in India on any moneys borrowed or debt incurred by it ³[R138] [before the 1st day of June, 2001] in a foreign country in respect of the purchase outside India of raw materials ⁴[R139] [or components] or capital plant and machinery, ⁵[R140] [to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf⁶[R141] , having regard to the terms of the loan or debt and its repayment.]

⁷[R142] [⁸[R143] [Explanation 1.]—For the purposes of this item, “purchase of capital plant and machinery” includes the purchase of such capital plant and machinery under a hire-purchase agreement or a lease agreement with an option to purchase such plant and machinery.]

⁹[R144] [Explanation 2.—For the removal of doubts, it is hereby declared that the usance interest payable outside India by an undertaking engaged in the business of ship-breaking in respect of purchase of a ship from outside India shall be deemed to be the interest payable on a debt incurred in a foreign country in respect of the purchase outside India;]

¹⁰[R145] [(d) by the Industrial Finance Corporation of India established by the Industrial Finance Corporation Act, 1948 (15 of 1948), or the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964), ¹¹[R146] [or the Export-Import Bank of India established under the Export-Import Bank of India Act, 1981 (28 of 1981),] ¹²[R147] [or the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987),] ¹³[R148] [or the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989),] or the Industrial Credit and Investment Corporation of India [a company formed and registered under the Indian Companies Act, 1913 (7 of 1913)], on any moneys borrowed by it from sources outside India ¹⁴[R149] [before the 1st day of June, 2001], to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;]

¹⁵[R150] [(e) by any other financial institution established in India or a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act), on any moneys borrowed by it from sources outside India ¹⁶[R151] [before the 1st day of June, 2001] under a loan agreement approved by the Central Government where the moneys are borrowed either for the purpose of advancing loans to industrial undertakings in India for purchase outside India of raw materials or capital plant and machinery or for the purpose of importing any goods which the Central Government may consider necessary to import in the public interest, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;]

¹⁷[R152] [(f) by an industrial undertaking in India on any moneys borrowed by it in foreign currency from sources outside India under a loan agreement approved by the Central Government ¹⁸[R153] [before the 1st day of June, 2001] having regard to the need for industrial development in India, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;

¹⁹[R154] [(fa) by a scheduled bank ^20-21[R155] [before the 1st day of April, 2005] ²²[R156] [to a non-resident or to a person who is not ordinarily resident within the meaning of sub-section (6)^†[R157] of section 6] on deposits in foreign currency where the acceptance of such deposits by the bank is approved by the Reserve Bank of India.

Explanation.—For the purposes of this item, the expression “scheduled bank” shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36;]

²³[R158] [(g) by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes, ²⁴[R159] [being a company eligible for deduction under clause (viii) of sub-section (1) of section 36] on any moneys borrowed by it in foreign currency from sources outside India under a loan agreement approved by the Central Government ²⁵[R160] [before the 1st day of June, 2003], to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment.]

Explanation.—For the purposes of ²⁶[R161] [items (f) ²⁷[R162] [, (fa)] and (g)], the expression ²⁸[R163] “foreign currency” shall have the meaning assigned to it in the Foreign Exchange Regulation Act, 1973 (46 of 1973);]

²⁹[R164] [(h) by any public sector company in respect of such bonds or debentures and subject to such conditions, including the condition that the holder of such bonds or debentures registers his name and the holding with that company, as the Central Government may, by notification³⁰[R165] in the Official Gazette, specify in this behalf;]

³¹[R166] [(i) by Government on deposits made by an employee of the Central Government or a State Government ³²[R167] [or a public sector company], in accordance with such scheme as the Central Government may, by notification³³[R168] in the Official Gazette, frame in this behalf, out of the moneys due to him on account of his retirement, whether on superannuation or otherwise.]

³⁴[R169] [³⁵[R170] [Explanation 1].—For the purposes of this sub-clause, the expression “industrial undertaking” means any undertaking which is engaged in—

(a) the manufacture or processing of goods; or

³⁶[R171] [(aa) the manufacture of computer software or recording of programme on any disc, tape, perforated media or other information device; or]

(b) the business of generation or distribution of electricity or any other form of power; or

³⁷[R172] [(ba) the business of providing telecommunication services; or]

(d) the construction of ships; or

³⁸[R173] [(da) the business of ship-breaking; or]

³⁹[R174] [(e) the operation of ships or aircrafts or construction or operation of rail systems.]]

⁴⁰[R175] [Explanation 1A.—For the purposes of this sub-clause, the expression “interest” shall not include interest paid on delayed payment of loan or on default if it is in excess of two per cent per annum over the rate of interest payable in terms of such loan.]

⁴¹[R176] [Explanation 2.—For the purposes of this clause, the expression “interest” includes hedging transaction charges on account of currency fluctuation;]

⁴²[R177] [(v) interest on—

(a) securities held by the Welfare Commissioner, Bhopal Gas Victims, Bhopal, in the Reserve Bank’s SGL Account No. SL/DH 048;

(b) deposits for the benefit of the victims of the Bhopal gas leak disaster held in such account, with the Reserve Bank of India or with a public sector bank, as the Central Government may, by notification⁴³[R178] in the Official Gazette, specify, whether prospectively or retrospectively but in no case earlier than the 1st day of April, 1994 in this behalf.

Explanation.—For the purposes of this sub-clause, the expression “public sector bank” shall have the meaning assigned to it in the Explanation to clause (23D);]

⁴⁴[R179] [(vi) interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government;]

⁴⁵[R180] [(vii) interest on bonds—

(a) issued by a local authority; and

(b) specified by the Central Government by notification⁴⁶[R181] in the Official Gazette;]

⁴⁷[R182] [(15A) any payment made, by an Indian company engaged in the business of operation of aircraft, to acquire an aircraft or an aircraft engine (other than a payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease from the Government of a foreign State or a foreign enterprise under an agreement ⁴⁸[R183] [⁴⁹[R184] [, not being an agreement entered into between the 1st day of April, 1997 and the 31st day of March, 1999,] and] approved by the Central Government in this behalf.

The following proviso shall be inserted in clause (15A) of section 10 by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2006 :

Provided that nothing contained in this clause shall apply to any such agreement entered into on or after the ^50-51[R185] [1st day of April, 2005].

Explanation.—For the purposes of this clause, the expression “foreign enterprise” means a person who is a non-resident;]

⁵²[R186] (16) ⁵³[R187] scholarships granted to meet the cost of education;

⁵⁴[R188] [(17) any income by way of—

(i) daily allowance received by any person by reason of his membership of Parliament or of any State Legislature or of any Committee thereof; ⁵⁵[R189] [* * *]

⁵⁶[R190] [(ii) any allowance received by any person by reason of his membership of Parliament under the Members of Parliament (Constituency Allowance) Rules, 1986;

(iii) all other allowances not exceeding ⁵⁷[R191] [two thousand] rupees per month in the aggregate received by any person by reason of his membership of any State Legislature or of any Committee thereof, which the Central Government may, by notification⁵⁸[R192] in the Official Gazette, specify in this behalf;]]

⁵⁹[R193] [(17A) any payment made, whether in cash or in kind,—

(i) in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved⁶⁰[R194] by the Central Government in this behalf; or

(ii) as a reward by the Central Government or any State Government for such purposes as may be approved⁶⁰[R195] by the Central Government in this behalf in the public interest;]

⁶¹[R196] [(18) any income by way of—

(i) pension received by an individual who has been in the service of the Central Government or State Government and has been awarded “Param Vir Chakra” or “Maha Vir Chakra” or “Vir Chakra” or such other gallantry award as the Central Government may, by notification⁶²[R197] in the Official Gazette, specify in this behalf;

(ii) family pension received by any member of the family of an individual referred to in sub-clause (i).

Explanation.—For the purposes of this clause, the expression “family” shall have the meaning assigned to it in the Explanation to clause (5);]

(18A) ⁶³[R198] [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]

⁶⁴[R199] [(19) family pension received by the widow or children or nominated heirs, as the case may be, of a member of the armed forces (including para-military forces) of the Union, where the death of such member has occurred in the course of operational duties, in such circumstances and subject to such conditions, as may be prescribed^64a[R200] ;]

⁶⁵[R201] [(19A) the annual value of any one palace in the occupation of a Ruler, being a palace, the annual value whereof was exempt from income-tax before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, by virtue of the provisions of the Merged States (Taxation Concessions) Order, 1949, or the Part B States (Taxation Concessions) Order, 1950, or, as the case may be, the Jammu and Kashmir (Taxation Concessions) Order, 1958:

Provided that for the assessment year commencing on the 1st day of April, 1972, the annual value of every such palace in the occupation⁶⁶[R202] of such Ruler during the relevant previous year shall be exempt from income-tax;]

⁶⁷[R203] (20) the income of a local authority which is chargeable under the head ⁶⁸[R204] [* * *] “Income from house property”, “Capital gains” or “Income from other sources” or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service ⁶⁹[R205] [(not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area].

⁷⁰[R206] [Explanation.—For the purposes of this clause, the expression “local authority” means—

(i) Panchayat as referred to in clause (d) of article 243 of the Constitution⁷¹[R207] ; or

(ii) Municipality as referred to in clause (e) of article 243P of the Constitution⁷¹[R208] ; or

(iii) Municipal Committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or

(iv) Cantonment Board as defined in section 3⁷¹[R209] of the Cantonments Act, 1924 (2 of 1924);]

(20A) ⁷²[R210] [***]

⁷³[R211] [⁷⁴[R212] (21) ⁷⁵[R213] any income of a scientific research association for the time being approved for the purpose of clause (ii) of sub-section (1) of section 35:

Provided that the scientific research association—

(a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established, and the provisions of sub-section (2) and sub-section (3) of section 11 shall apply in relation to such accumulation subject to the following modifications, namely :—

(i) in sub-section (2),—

(1) the words, brackets, letters and figure “referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section” shall be omitted;

(2) for the words “to charitable or religious purposes”, the words “for the purposes of scientific research” shall be substituted;

(3) the reference to “Assessing Officer” in clause (a) thereof shall be construed as a reference to the “prescribed authority” referred to in clause (ii) of sub-section (1) of section 35;

(ii) in sub-section (3), in clause (a), for the words “charitable or religious purposes”, the words “the purposes of scientific research” shall be substituted; and

⁷⁶[R214] [(b) does not invest or deposit its funds, other than—

(i) any assets held by the scientific research association where such assets form part of the corpus of the fund of the association as on the 1st day of June, 1973;

(ii) any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the scientific research association before the 1st day of March, 1983;

(iii) any accretion to the shares, forming part of the corpus of the fund mentioned in sub-clause (i), by way of bonus shares allotted to the scientific research association;

(iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify, for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11:]

⁷⁷[R215] [Provided further that the exemption under this clause shall not be denied in relation to voluntary contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred to in clause (b) of the first proviso to this clause, subject to the condition that such voluntary contribution is not held by the scientific research association, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later:

Provided also] that nothing contained in this clause shall apply in relation to any income of the scientific research association, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business:]

⁷⁸[R216] [Provided also that where the scientific research association is approved by the Central Government and subsequently that Government is satisfied that—

(i) the scientific research association has not applied its income in accordance with the provisions contained in clause (a) of the first proviso; or

(ii) the scientific research association has not invested or deposited its funds in accordance with the provisions contained in clause (b) of the first proviso; or

(iii) the activities of the scientific research association are not genuine; or

(iv) the activities of the scientific research association are not being carried out in accordance with all or any of the conditions subject to which such association was approved, it may, at any time after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association, by order, withdraw the approval and forward a copy of the order withdrawing the approval to such association and to the Assessing Officer;]

(22) ⁷⁹[R217] [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]

(22A) ⁸⁰[R218] [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]

⁸¹[R219] [(22B) any income of such news agency set up in India solely for collection and distribution of news as the Central Government may, by notification⁸²[R220] in the Official Gazette, specify in this behalf:

Provided that the news agency applies its income or accumulates it for application solely for collection and distribution of news and does not distribute its income in any manner to its members:

Provided further that any notification issued by the Central Government under this clause shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification:]

⁸³[R221] [Provided also that where the news agency has been specified, by notification, by the Central Government and subsequently that Government is satisfied that such news agency has not applied or accumulated or distributed its income in accordance with the provisions contained in the first proviso, it may, at any time after giving a reasonable opportunity of showing cause, rescind the notification and forward a copy of the order rescinding the notification to such agency and to the Assessing Officer;]

(23) ⁸⁴[R222] [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]

⁸⁵[R223] [⁸⁶[R224] (23A) any income (other than income chargeable under the head ⁸⁷[R225] [* * *] “Income from house property” or any income received for rendering any specific services or income by way of interest or dividends derived from its investments) of an association or institution established in India having as its object the control, supervision, regulation or encouragement of the profession of law, medicine, accountancy, engineering or architecture or such other profession⁸⁸[R226] as the Central Government may specify in this behalf, from time to time, by notification in the Official Gazette:

Provided that—

(i) the association or institution applies its income, or accumulates it for application, solely to the objects for which it is established; and

(ii) the association or institution is for the time being approved⁸⁹[R227] for the purpose of this clause by the Central Government by general or special order:]

⁹⁰[R228] [Provided further that where the association or institution has been approved by the Central Government and subsequently that Government is satisfied that—

(i) such association or institution has not applied or accumulated its income in accordance with the provisions contained in the first proviso; or

(ii) the activities of the association or institution are not being carried out in accordance with all or any of the conditions subject to which such association or institution was approved, it may, at any time after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association or institution, by order, withdraw the approval and forward a copy of the order withdrawing the approval to such association or institution and to the Assessing Officer;]

⁹¹[R229] [(23AA) any income received by any person on behalf of any Regimental Fund or Non-Public Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependants;]

⁹²[R230] [(23AAA) any income received by any person on behalf of a fund established, for such purposes as may be notified⁹³[R231] by the Board in the Official Gazette, for the welfare of employees or their dependants and of which fund such employees are members if such fund fulfils the following conditions, namely :—

(a) the fund—

(i) applies its income or accumulates it for application, wholly and exclusively to the objects for which it is established; and

(ii) invests its funds and contributions and other sums received by it in the forms or modes specified in sub-section (5) of section 11;

(b) the fund is approved by the Commissioner in accordance with the rules⁹⁴[R232] made in this behalf:

Provided that any such approval shall at any one time have effect for such assessment year or years not exceeding three assessment years as may be specified in the order of approval;]

⁹⁵[R233] [(23AAB) any income of a fund, by whatever name called, set up by the Life Insurance Corporation of India on or after the 1st day of August, 1996 ⁹⁶[R234] [or any other insurer] under a pension scheme,—

(i) to which contribution is made by any person for the purpose of receiving pension from such fund;

(ii) which is approved by the Controller of Insurance ⁹⁶[R235] [or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), as the case may be].

Explanation.—For the purposes of this clause, the expression “Controller of Insurance” shall have the meaning assigned to it in clause (5B) of section 2 of the Insurance Act, 1938 (4 of 1938)⁹⁷[R236] ;]

⁹⁸[R237] [(23B) any income of an institution constituted as a public charitable trust or 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, and existing solely for the development of khadi or village industries or both, and not for purposes of profit, to the extent such income is attributable to the business of production, sale, or marketing, of khadi or products of village industries:

Provided that—

(i) the institution applies its income, or accumulates it for application, solely for the development of khadi or village industries or both; and

(ii) the institution is, for the time being, approved for the purpose of this clause by the Khadi and Village Industries Commission:

Provided further that the Commission shall not, at any one time, grant such approval for more than three assessment years beginning with the assessment year next following the financial year in which it is granted:

⁹⁹[R238] [Provided also that where the institution has been approved by the Khadi and Village Industries Commission and subsequently that Commission is satisfied that—

(i) the institution has not applied or accumulated its income in accordance with the provisions contained in the first proviso; or

(ii) the activities of the institution are not being carried out in accordance with all or any of the conditions subject to which such institution was approved, it may, at any time after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned institution, by order, withdraw the approval and forward a copy of the order withdrawing the approval to such institution and to the Assessing Officer.]

Explanation.—For the purposes of this clause,—

(i) “Khadi and Village Industries Commission” means the Khadi and Village Industries Commission established under the Khadi and Village Industries Commission Act, 1956 (61 of 1956);

(ii) ¹[R239] “khadi” and “village industries” have the meanings respectively assigned to them in that Act;]

²[R240] [(23BB) any income of an authority (whether known as the Khadi and Village Industries Board or by any other name) established in a State by or under a State or Provincial Act for the development of khadi or village industries in the State.

Explanation.—For the purposes of this clause, ³[R241] “khadi” and “village industries” have the meanings respectively assigned to them in the Khadi and Village Industries Commission Act, 1956 (61 of 1956);]

⁴[R242] [(23BBA) any income of any body or authority (whether or not a body corporate or corporation sole) established, constituted or appointed by or under any Central, State or Provincial Act which provides for the administration of any one or more of the following, that is to say, public religious or charitable trusts or endowments (including maths, temples, gurdwaras, wakfs, churches, synagogues, agiaries or other places of public religious worship) or societies for religious or charitable purposes registered as such under the Societies Registration Act, 1860 (21 of 1860), or any other law for the time being in force:

Provided that nothing in this clause shall be construed to exempt from tax the income of any trust, endowment or society referred to therein;]

⁵[R243] [(23BBB) any income of the European Economic Community derived in India by way of interest, dividends or capital gains from investments made out of its funds under such scheme⁶[R244] as the Central Government may, by notification in the Official Gazette, specify in this behalf.

Explanation.—For the purposes of this clause, “European Economic Community” means the European Economic Community established by the Treaty of Rome of 25th March, 1957;]

⁷[R245] [(23BBC ) any income of the SAARC Fund for Regional Projects set up by Colombo Declaration issued on the 21st day of December, 1991 by the Heads of State or Government of the Member Countries of South Asian Association for Regional Cooperation established on the 8th day of December, 1985 by the Charter of the South Asian Association for Regional Cooperation;]

⁸[R246] [(23BBD) any income of the Secretariat of the Asian Organisation of the Supreme Audit Institutions registered as “ASOSAI-SECRETARIAT” under the Societies Registration Act, 1860 (21 of 1860) for ⁹[R247] [seven previous years relevant to the assessment years beginning on the 1st day of April, 2001 and ending on the 31st day of March, 2008];

(23BBE) any income of the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);]

¹⁰[R248] [¹¹[R249] (23C) any income received by any person on behalf of—

(i) the Prime Minister’s National Relief Fund; or

(ii) the Prime Minister’s Fund (Promotion of Folk Art); or

(iii) the Prime Minister’s Aid to Students Fund; ¹²[R250] [or]

¹³[R251] [(iiia) the National Foundation for Communal Harmony; or]

¹⁴[R252] [(iiiab) any university or other educational institution¹⁵[R253] existing¹⁵[R254] solely¹⁵[R255] for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or

(iiiac) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or

(iiiad) any university or other educational institution¹⁵[R256] existing¹⁵[R257] solely¹⁵[R258] for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed¹⁶[R259] ; or

(iiiae) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, if the aggregate annual receipts of such hospital or institution do not exceed the amount of annual receipts as may be prescribed¹⁷[R260] ; or]

¹⁸[R261] [(iv) any other fund or institution established for charitable purposes which may be notified¹⁹[R262] by the Central Government in the Official Gazette, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or

(v) any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, which may be notified²⁰[R263] by the Central Government in the Official Gazette, having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof;

²¹[R264] [(vi) any university or other educational institution²²[R265] existing²²[R266] solely²²[R267] for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved²³[R268] by the prescribed authority²⁴[R269] ; or

(via) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiac) or sub-clause (iiiae) and which may be approved²⁵[R270] by the prescribed authority²⁶[R271] :]

Provided that the fund or trust or institution ²⁷[R272] [or any university or other educational institution²⁸[R273] or any hospital or other medical institution] referred to in sub-clause (iv) or sub-clause (v) ²⁷[R274] [or sub-clause (vi) or sub-clause (via)] shall make an application in the prescribed form²⁹[R275] and manner to the prescribed authority³⁰[R276] for the purpose of grant of the exemption, or continuance thereof, under sub-clause (iv) or sub-clause (v) ²⁷[R277] [or sub-clause (vi) or sub-clause (via)] :

³¹[R278] [Provided further that the Central Government, before notifying the fund or trust or institution, or the prescribed authority, before approving any university or other educational institution or any hospital or other medical institution, under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), may call for such documents (including audited annual accounts) or information from the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, as it thinks necessary in order to satisfy itself about the genuineness of the activities of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, and the Central Government or the prescribed authority, as the case may be, may also make such inquiries as it deems necessary in this behalf :]

Provided also that the fund or trust or institution ³²[R279] [or any university or other educational institution³³[R280] or any hospital or other medical institution] referred to in sub-clause (iv) or sub-clause (v) ³²[R281] [or sub-clause (vi) or sub-clause (via)]—

³⁴[R282] [(a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five years; and]

³⁵[R283] [(b) does not invest or deposit its funds, other than—

(i) any assets held by the fund, trust or institution ³⁶[R284] [or any university or other educational institution³⁷[R285] or any hospital or other medical institution] where such assets form part of the corpus of the fund, trust or institution ^37a[R286] [or any university or other educational institution or any hospital or other medical institution] as on the 1st day of June, 1973;

³⁸[R287] [(ia) any asset, being equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1998;]

(ii) any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the fund, trust or institution ³⁹[R288] [or any university or other educational institution⁴⁰[R289] or any hospital or other medical institution] before the 1st day of March, 1983;

(iii) any accretion to the shares, forming part of the corpus mentioned in sub-clause (i) ⁴¹[R290] [and sub-clause (ia)], by way of bonus shares allotted to the fund, trust or institution ³⁹[R291] [or any university or other educational institution or any hospital or other medical institution] ;

Provided also that the exemption under sub-clause (iv) or sub-clause (v) shall not be denied in relation to any funds invested or deposited before the 1st day of April, 1989, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 if such funds do not continue to remain so invested or deposited after the 30th day of March, ⁴²[R292] [1993] :

⁴³[R293] [Provided also that the exemption under sub-clause (vi) or sub-clause (via) shall not be denied in relation to any funds invested or deposited before the 1st day of June, 1998, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 if such funds do not continue to remain so invested or deposited after the 30th day of March, 2001 :]

⁴⁴[R294] [Provided also that the exemption under sub-clause (iv) or sub-clause (v) ⁴³[R295] [or sub-clause (vi) or sub-clause (via)] shall not be denied in relation to voluntary contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred to in clause (b) of the third proviso to this sub-clause, subject to the condition that such voluntary contribution is not held by the trust or institution ⁴⁵[R296] [or any university or other educational institution or any hospital or other medical institution], otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later:]

Provided also that nothing contained in sub-clause (iv) or sub-clause (v) ⁴⁶[R297] [or sub-clause (vi) or sub-clause (via)] shall apply in relation to any income of the fund or trust or institution ⁴⁶[R298] [or any university or other educational institution or any hospital or other medical institution], being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business:

Provided also that any notification issued by the Central Government under sub-clause (iv) or sub-clause (v) shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification:]

⁴⁷[R299] [Provided also that any amount of donation received by the fund or institution in terms of clause (d) of sub-section (2) of section 80G ⁴⁸[R300] [in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of sub-section (5C) of that section, in the manner specified in that clause, or] which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister’s National Relief Fund on or before the 31st day of March, ⁴⁹[R301] [2004] shall be deemed to be the income of the previous year and shall accordingly be charged to tax:]

⁵⁰[R302] [***]

⁵¹[R303] [Provided also that where the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) does not apply its income during the year of receipt and accumulates it, any payment or credit out of such accumulation to any trust or institution registered under section 12AA or to any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall not be treated as application of income to the objects for which such fund or trust or institution or university or educational institution or hospital or other medical institution, as the case may be, is established :

Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) is notified by the Central Government or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), is approved by the prescribed authority and subsequently that Government or the prescribed authority is satisfied that—

(i) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not—

(A) applied its income in accordance with the provisions contained in clause (a) of the third proviso; or

(B) invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso; or

(ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution—

(A) are not genuine; or

(B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved, it may, at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer;]

⁵²[R304] [(23D) ⁵³[R305] [⁵⁴[R306] [⁵⁵[R307] [subject to the provisions of Chapter XII-E, any income of]—]

(i) a Mutual Fund registered under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or regulations made thereunder;

(ii) such other Mutual Fund set up by a public sector bank or a public financial institution or authorised by the Reserve Bank of India and subject to such conditions as the Central Government may, by notification⁵⁶[R308] in the Official Gazette, specify in this behalf.]

Explanation.—For the purposes of this clause,—

(a) the expression “public sector bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corres-ponding new Bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Under-takings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Under-takings) Act, 1980 (40 of 1980);

(b) the expression “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956)⁵⁷[R309] ;]

⁵⁸[R310] [(c) the expression ⁵⁹[R311] “Securities and Exchange Board of India” shall have the meaning assigned to it in clause (a) of sub-section (1) of section 2 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);]

(23E) ⁶⁰[R312] [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]

⁶¹[R313] [(23EA) any income of such Investor Protection Fund set up by recognised stock exchanges in India, either jointly or separately, as the Central Government may, by notification in the Official Gazette, specify in this behalf:

Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part, with a recognised stock exchange, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall accordingly be chargeable to income-tax;]

⁶²[R314] [(23EB) any income of the Credit Guarantee Fund Trust for Small ⁶³[R315] [***] Industries, being a trust created by the Government of India and the Small Industries Development Bank of India established under sub-section (1) of section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989), for five previous years relevant to the assessment years beginning on the 1st day of April, 2002 and ending on the 31st day of March, 2007;]

⁶⁴[R316] [(23F) any income by way of dividends or long-term capital gains of a venture capital fund or a venture capital company from investments made by way of equity shares in a venture capital undertaking :

Provided that such venture capital fund or venture capital company is approved for the purposes of this clause by the prescribed authority⁶⁵[R317] in accordance with the rules⁶⁶[R318] made in this behalf and satisfies the prescribed conditions :

Provided further that any approval by the prescribed authority shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years, as may be specified in the order of approval :

⁶⁷[R319] [Provided also that nothing contained in this clause shall apply in respect of any investment made after the 31st day of March, 1999.]

⁶⁸[R320] [* * *]

⁶⁸[R321] [* * *]

Explanation.—For the purposes of this clause,—

(a) “venture capital fund” means such fund, operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908), established to raise monies by the trustees for investments mainly by way of acquiring equity shares of a venture capital undertaking in accordance with the prescribed guidelines;

(b) “venture capital company” means such company as has made investments by way of acquiring equity shares of venture capital undertakings in accordance with the prescribed guidelines; and

⁶⁹[R322] [(c) “venture capital undertaking” means such domestic company whose shares are not listed in a recognised stock exchange in India and which is engaged in the business of generation or generation and distribution of electricity or any other form of power or engaged in the business of providing telecommunication services or in the business of developing, maintaining and operating any infrastructure facility or engaged in the manufacture or production of such articles or things (including computer software) as may be notified⁷⁰[R323] by the Central Government in this behalf;

(d) “infrastructure facility” means a road, highway, bridge, airport, port, rail system, a water supply project, irrigation project, sanitation and sewerage system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette and which fulfils the conditions specified in sub-section (4A) of section 80-IA;]

⁷¹[R324] [(23FA) any income by way of dividends ⁷²[R325] [, other than dividends referred to in section 115-O], or long-term capital gains of a venture capital fund or a venture capital company from investments made by way of equity shares in a venture capital undertaking :

Provided that such venture capital fund or venture capital company is approved, for the purposes of this clause, by the Central Government on an application made to it in accordance with the rules⁷³[R326] made in this behalf and which satisfies the prescribed conditions :

Provided further that any approval by the Central Government shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years, as may be specified in the order of approval :

⁷⁴[R327] [Provided also that nothing contained in this clause shall apply in respect of any investment made after the 31st day of March, 2000.]

Explanation.—For the purposes of this clause,—

(b) “venture capital company” means such company as has made investments by way of acquiring equity shares of venture capital undertakings in accordance with the prescribed guidelines; and

(c) “venture capital undertaking” means such domestic company whose shares are not listed in a recognised stock exchange in India and which is engaged in the—

(i) business of—

(A) software;

(B) information technology;

(D) bio-technology;

(E) agriculture and allied sectors; or

(F) such other sectors as may be notified⁷⁵[R328] by the Central Government in this behalf; or

(ii) production or manufacture of any article or substance for which patent has been granted to the National Research Laboratory or any other scientific research institution approved by the Department of Science and Technology;]

⁷⁶[R329] [(23FB) any income of a venture capital company or venture capital fund set up to raise funds for investment in a venture capital undertaking.

Explanation ⁷⁷[R330] [1].—For the purposes of this clause,—

(a) “venture capital company” means such company—

(i) which has been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992 (15 of 1992), and regulations made thereunder;

(ii) which fulfils the conditions as may be specified, with the approval of the Central Government, by the Securities and Exchange Board of India, by notification⁷⁸[R331] in the Official Gazette, in this behalf;

(b) “venture capital fund” means such fund—

⁷⁹[R332] [(i) operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908) or operating as a venture capital scheme made by the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963);]

(ii) which has been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992 (15 of 1992), and regulations made thereunder;

(iii) which fulfils the conditions as may be specified, with the approval of the Central Government, by the Securities and Exchange Board of India, by notification⁷⁸[R333] in the Official Gazette, in this behalf; and

⁸⁰[R334] [(c) venture capital undertaking” means a venture capital undertaking referred to in the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and notified as such in the Official Gazette^80a[R335] by the Board for the purposes of this clause;]]

⁸¹[R336] [***]

⁸²[R337] [⁸³[R338] (23G) any income by way of dividends ⁸⁴[R339] [, other than dividends referred to in section 115-O], interest or long-term capital gains of an infrastructure capital fund or an infrastructure capital company ⁸⁵[R340] [or a co-operative bank] from investments made on or after the 1st day of June, 1998 by way of shares or long-term finance in ⁸⁶[R341] [any enterprise or undertaking wholly engaged in the business referred to in sub-section (4) of section 80-IA or a housing project referred to in sub-section (10) of section 80-IB] ⁸⁷[R342] [or a hotel project or a hospital project] and which has been approved⁸⁸[R343] by the Central Government on an application made by it in accordance with the rules⁸⁹[R344] made in this behalf and which satisfies the prescribed conditions :

⁹⁰[R345] [Provided that the income, by way of dividends, other than dividends referred to in section 115-O, interest or long-term capital gains of an infrastructure capital company, shall be taken into account in computing the book profit and income-tax payable under section 115JB.]

⁹¹[R346] [Explanation 1.]—For the purposes of this clause,—

(a) “infrastructure capital company” means such company as has made investments by way of acquiring shares or providing long term finance to an enterprise wholly engaged ⁹²[R347] [in the business referred to in this clause];

(b) “infrastructure capital fund” means such fund operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908) established to raise monies by the trustees for investment by way of acquiring shares or providing long-term finance to an enterprise wholly engaged ⁹³[R348] [in the business referred to in this clause];

(d) “long-term finance” shall have the meaning assigned to it in clause (viii) of sub-section (1) of section 36;

⁹⁵[R350] [(e) “co-operative bank” ⁹⁶[R351] shall have the meaning assigned to it in clause (dd) of section 2 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (47 of 1961);

(f) “interest” includes any fee or commission received by a financial institution for giving any guarantee to, or enhancing credit in respect of, an enterprise which has been approved by the Central Government for the purposes of this clause;]

⁹⁷[R352] [(g) “hotel project” means a project for constructing a hotel of not less than three-star category as classified by the Central Government;

(h) “hospital project” means a project for constructing a hospital with at least one hundred beds for patients.]

⁹⁸[R353] [Explanation 2.—For the removal of doubts, it is hereby declared that any income by way of dividends, interest or long-term capital gains of an infrastructure capital fund or an infrastructure capital company from investments made before the 1st day of June, 1998 by way of shares or long-term finance in any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility shall not be included and the provisions of this clause as it stood immediately before its amendment by the Finance (No. 2) Act, 1998 (21 of 1998) shall apply to such income;]

⁹⁹[R354] [¹[R355] (24) any income chargeable under the heads “Income from house property” and “Income from other sources” of—

(a) a registered union within the meaning of the Trade Unions Act, 1926 (16 of 1926), formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen;

(b) an association of registered unions referred to in sub-clause (a);]

(25) (i) interest on securities which are held by, or are the property of, any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies, and any capital gains of the fund arising from the sale, exchange or transfer of such securities;

(ii) any income received by the trustees on behalf of a recognised provident fund;

(iii) any income received by the trustees on behalf of an approved superannuation fund;

²[R356] [(iv) any income received by the trustees on behalf of an approved gratuity fund;]

³[R357] [(v) any income received—

(a) by the Board of Trustees constituted under the Coal Mines Provident Funds and Miscellaneous Provisions Act, 1948 (46 of 1948), on behalf of the Deposit-linked Insurance Fund established under section 3G of that Act; or

(b) by the Board of Trustees constituted under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), on behalf of the Deposit-linked Insurance Fund established under section 6C of that Act;]

⁴[R358] [(25A) any income of the Employees’ State Insurance Fund set up under the provisions of the Employees’ State Insurance Act, 1948 (34 of 1948);]

⁵[R359] [(26) ⁶[R360] in the case of a member of a ⁷[R361] Scheduled Tribe as defined in clause (25) of article 366 of the Constitution, residing in any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or in the ⁸[R362] [States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura] or in the areas covered by notification No. TAD/R/35/50/109, dated the 23rd February, 1951, issued by the Governor of Assam under the proviso to sub-paragraph (3) of the said paragraph 20 [as it stood immediately before the commencement of the North-Eastern Areas (Reorganisation) Act, 1971 (81 of 1971)] ⁹[R363] [or in the Ladakh region of the State of Jammu and Kashmir], any income which accrues or arises to him,—

(a) from any source in the areas ¹⁰[R364] [or States aforesaid], or

(b) by way of dividend or interest on securities;]

¹¹[R365] [(26A) any income accruing or arising to any person ¹²[R366] [* * *] from any source in the district of Ladakh or outside India in any previous year relevant to any assessment year commencing before the 1st day of April, ¹³[R367] [1989], where such person is resident in the said district in that previous year :

Provided that this clause shall not apply in the case of any such person unless he was resident in that district in the previous year relevant to the assessment year commencing on the 1st day of April, 1962.

¹⁴[R368] [Explanation 1].—For the purposes of this clause, a person shall be deemed to be resident in the district of Ladakh if he fulfils the requirements of sub-section (1)¹⁵[R369] or sub-section (2) or sub-section (3) or sub-section (4) of section 6, as the case may be, subject to the modifications that—

(i) references in those sub-sections to India shall be construed as references to the said district; and

(ii) in clause (i) of sub-section (3), reference to Indian company shall be construed as reference to a company formed and registered under any law for the time being in force in the State of Jammu and Kashmir and having its registered office in that district in that year.]

¹⁶[R370] [Explanation 2.—In this clause, references to the district of Ladakh shall be construed as references to the areas comprised in the said district on the 30th day of June, 1979;]

(26AA) ¹⁷[R371] [* * *]

¹⁸[R372] [(26B) any income of a corporation established by a Central, State or Provincial Act or of any other body, institution or association (being a body, institution or association wholly financed by Government) where such corporation or other body or institution or association has been established or formed for promoting the interests of the ¹⁹[R373] [members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them].

²⁰[R374] [Explanation.—For the purposes of this clause,—

(a) ²¹[R375] “Scheduled Castes” and ²²[R376] “Scheduled Tribes” shall have the meanings respectively assigned to them in clauses (24) and (25) of article 366 of the Constitution;

(b) “backward classes” means such classes of citizens, other than the Scheduled Castes and the Scheduled Tribes, as may be notified—

(i) by the Central Government; or

(ii) by any State Government, as the case may be, from time to time;]

²³[R377] [(26BB) any income of a corporation established by the Central Government or any State Government for promoting the interests of the members of a minority community.

Explanation.—For the purposes of this clause, “minority community” means a community notified²⁴[R378] as such by the Central Government in the Official Gazette in this behalf;]

²⁵[R379] [(26BBB) any income of a corporation established by a Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen being the citizens of India.

Explanation.—For the purposes of this clause, “ex-serviceman” means a person who has served in any rank, whether as combatant or non-combatant, in the armed forces of the Union or armed forces of the Indian States before the commencement of the Constitution (but excluding the Assam Rifles, Defence Security Corps, General Reserve Engineering Force, Lok Sahayak Sena, Jammu and Kashmir Militia and Territorial Army) for a continuous period of not less than six months after attestation and has been released, otherwise than by way of dismissal or discharge on account of misconduct or inefficiency, and in the case of a deceased or incapacitated ex-serviceman includes his wife, children, father, mother, minor brother, widowed daughter and widowed sister, wholly dependant upon such ex-serviceman immediately before his death or incapacitation;]

²⁶[R380] [(27) any income of a co-operative society formed for promoting the interests of the members of either the Scheduled Castes or Scheduled Tribes or both referred to in clause (26B) :

Provided that the membership of the co-operative society consists of only other co-operative societies formed for similar purposes and the finances of the society are provided by the Government and such other societies;]

(28) ²⁷[R381] [* * *]

(29) ²⁸[R382] [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]

²⁹[R383] [(29A) any income accruing or arising to—

(a) the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later;

(b) the Rubber Board constituted under sub-section (1) of section 4 of the Rubber Board Act, 1947 (24 of 1947) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later;

(c) the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later;

(d) the Tobacco Board constituted under the Tobacco Board Act, 1975 (4 of 1975) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1975 or the previous year in which such Board was constituted, whichever is later;

(e) the Marine Products Export Development Authority established under section 4 of the Marine Products Export Development Authority Act, 1972 (13 of 1972) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1972 or the previous year in which such Authority was constituted, whichever is later;

(f) the Agricultural and Processed Food Products Export Development Authority established under section 4 of the Agricultural and Processed Food Products Export Development Act, 1985 (2 of 1986) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1985 or the previous year in which such Authority was constituted, whichever is later;

(g) the Spices Board constituted under sub-section (1) of section 3 of the Spices Board Act, 1986 (10 of 1986) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1986 or the previous year in which such Board was constituted, whichever is later;]

³⁰[R384] [(30) ³¹[R385] in the case of an assessee who carries on the business of growing and manufacturing tea in India, the amount of any subsidy received from or through the Tea Board under any such scheme³²[R386] for replantation or replacement of tea bushes ³³[R387] [or for rejuvenation or consolidation of areas used for cultivation of tea] as the Central Government may, by notification in the Official Gazette, specify:

Provided that the assessee furnishes to the ³⁴[R388] [Assessing] Officer, along with his return of income for the assessment year concerned or within such further time as the ³⁴[R389] [Assessing] Officer may allow, a certificate from the Tea Board as to the amount of such subsidy paid to the assessee during the previous year.

Explanation.—In this clause, “Tea Board” means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953);]

³⁵[R390] [(31) in the case of an assessee who carries on the business of growing and manufacturing rubber, coffee, cardamom or such other commodity in India, as the Central Government may, by notification in the Official Gazette, specify in this behalf, the amount of any subsidy received from or through the concerned Board under any such scheme for replantation or replacement of rubber plants, coffee plants, cardamom plants or plants for the growing of such other commodity or for rejuvenation or consolidation of areas used for cultivation of rubber, coffee, cardamom or such other commodity as the Central Government may, by notification in the Official Gazette, specify:

Provided that the assessee furnishes to the Assessing Officer, along with his return of income for the assessment year concerned or within such further time as the Assessing Officer may allow, a certificate from the concerned Board, as to the amount of such subsidy paid to the assessee during the previous year.

Explanation.—In this clause, “concerned Board” means,—

(i) in relation to rubber, the Rubber Board constituted under section 4 of the Rubber Act, 1947 (24 of 1947),

(ii) in relation to coffee, the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942),

(iii) in relation to cardamom, the Spices Board constituted under section 3 of the Spices Board Act, 1986 (10 of 1986),

(iv) in relation to any other commodity specified under this clause, any Board or other authority established under any law for the time being in force which the Central Government may, by notification in the Official Gazette, specify in this behalf;]

³⁶[R391] [(32) in the case of an assessee referred to in sub-section (1A) of section 64, any income includible in his total income under that sub-section, to the extent such income does not exceed one thousand five hundred rupees in respect of each minor child whose income is so includible;]

³⁷[R392] [(33) any income arising from the transfer of a capital asset, being a unit of the Unit Scheme, 1964 referred to in Schedule I to the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002)³⁸[R393] and where the transfer of such asset takes place on or after the 1st day of April, 2002;]

³⁹[R394] [(34) any income by way of dividends referred to in section 115-O;

(35) any income by way of,—

(a) income received in respect of the units of a Mutual Fund specified under clause (23D); or

(b) income received in respect of units from the Administrator of the specified undertaking; or

Provided that this clause shall not apply to any income arising from transfer of units of the Administrator of the specified undertaking or of the specified company or of a mutual fund, as the case may be.

Explanation.—For the purposes of this clause,—

(a) “Administrator” means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002) ³⁸[R395] ;

(b) “specified company” means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002) ³⁸[R396] ;

(36) any income arising from the transfer of a long-term capital asset, being an eligible equity share in a company purchased on or after the 1st day of March, 2003 and before the 1st day of March, 2004 and held for a period of twelve months or more.

Explanation.—For the purposes of this clause, “eligible equity share” means,—

(i) any equity share in a company being a constituent of BSE-500 Index of the Stock Exchange, Mumbai as on the 1st day of March, 2003 and the transactions of purchase and sale of such equity share are entered into on a recognised stock exchange in India;

(ii) any equity share in a company allotted through a public issue on or after the 1st day of March, 2003 and listed in a recognised stock exchange in India before the 1st day of March, 2004 and the transaction of sale of such share is entered into on a recognised stock exchange in India;]

⁴⁰[R397] [(37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head “Capital gains” arising from the transfer of agricultural land, where—

(i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2;

(ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;

(iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;

(iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004.

Explanation.—For the purposes of this clause, the expression “compensation or consideration” includes the compensation or con-sideration enhanced or further enhanced by any court, Tribunal or other authority;

(38) any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund where—

(a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No.2) Act, 2004 comes into force; and

(b) such transaction is chargeable to securities transaction tax under that Chapter.

Explanation.—For the purposes of this clause, “equity oriented fund” means a fund—

(i) where the investible funds are invested by way of equity shares in domestic companies to the extent of more than fifty per cent of the total proceeds of such fund; and

(ii) which has been set up under a scheme of a Mutual Fund specified under clause (23D) :

Provided that the percentage of equity shareholding of the fund shall be computed with reference to the annual average of the monthly averages of the opening and closing figures.]

⁴¹[R398] [Special provision in respect of newly established undertakings in free trade zone, etc.

10A. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee :

Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years :

Provided further that where an undertaking initially located in any free trade zone or export processing zone is subsequently located in a special economic zone by reason of conversion of such free trade zone or export processing zone into a special economic zone, the period of ten consecutive assessment years referred to in this sub-section shall be reckoned from the assessment year relevant to the previous year in which the ⁴²[R399] [undertaking began to manufacture or produce such articles or things or computer software] in such free trade zone or export processing zone :

⁴³[R400] [Provided also that for the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of such articles or things or computer software :]

Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2010 and subsequent years.

⁴⁴[R401] [(1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be,—

(i) hundred per cent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, and thereafter, fifty per cent of such profits and gains for further two consecutive assessment years, and thereafter;

(ii) for the next three consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the “Special Economic Zone Re-investment Allowance Reserve Account”) to be created and utilised for the purposes of the business of the assessee in the manner laid down in sub-section (1B).

The following proviso shall be inserted after clause (ii) of sub-section (1A) of section 10A by the Finance Act, 2005, w.e.f. 1-4-2006 :

Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139.

(1B) The deduction under clause (ii) of sub-section (1A) shall be allowed only if the following conditions are fulfilled, namely:—

(a) the amount credited to the Special Economic Zone Re-investment Allowance Reserve Account is to be utilised—

(i) for the purposes of acquiring new machinery or plant which is first put to use before the expiry of a period of three years next following the previous year in which the reserve was created; and

(ii) until the acquisition of new machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India;

(b) the particulars, as may be prescribed⁴⁵[R402] in this behalf, have been furnished by the assessee in respect of new machinery or plant along with the return of income for the assessment year relevant to the previous year in which such plant or machinery was first put to use.

(1C) Where any amount credited to the Special Economic Zone Re-investment Allowance Reserve Account under clause (ii) of sub-section (1A),—

(a) has been utilised for any purpose other than those referred to in sub-section (1B), the amount so utilised; or

(b) has not been utilised before the expiry of the period specified in sub-clause (i) of clause (a) of sub-section (1B), the amount not so utilised, shall be deemed to be the profits,—

(i) in a case referred to in clause (a), in the year in which the amount was so utilised; or

(ii) in a case referred to in clause (b), in the year immediately following the period of three years specified in sub-clause (i) of clause (a) of sub-section (1B), and shall be charged to tax accordingly.]

(2) This section applies to any undertaking which fulfils all the following conditions, namely :—

(i) it has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year—

(a) commencing on or after the 1st day of April, 1981, in any free trade zone; or

(b) commencing on or after the 1st day of April, 1994, in any electronic hardware technology park, or, as the case may be, software technology park;

(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence :

Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertakings as is referred to in section 33B, in the circumstances and within the period specified in that section;

(iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.

Explanation.—The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.

(3) This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.

Explanation 1.—For the purposes of this sub-section, the expression “competent authority” means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.

Explanation 2.—The sale proceeds referred to in this sub-section shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India.

⁴⁶[R403] [(4) For the purposes of ⁴⁷[R404] [sub-sections (1) and (1A)], the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking.]

(5) The deduction under ⁴⁷[R405] [this section] shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form^48-49[R406] , alongwith the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.

(6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year,—

(i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as if every allowance or deduction referred to therein and relating to or allowable for any of the relevant assessment years ⁵⁰[R407] [ending before the 1st day of April, 2001], in relation to any building, machinery, plant or furniture used for the purposes of the business of the undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such business in such previous year had been given full effect to for that assessment year itself and accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33, sub-section (4) of section 35 or the second proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not apply in relation to any such allowance or deduction;

(ii) no loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, shall be carried forward or set off where such loss relates to any of the relevant assessment years ⁵⁰[R408] [ending before the 1st day of April, 2001];

(iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB in relation to the profits and gains of the undertaking; and

(iv) in computing the depreciation allowance under section 32, the written down value of any asset used for the purposes of the business of the undertaking shall be computed as if the assessee had claimed and been actually allowed the deduction in respect of depreciation for each of the relevant assessment year.

(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA.

⁵¹[R409] [(7A) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger,—

(a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and

(b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place.]

(8) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment years.

(9) ⁵²[R410] [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

(9A) ⁵³[R411] [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

Explanation 1.— ⁵⁴[R412] [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

Explanation 2.—For the purposes of this section,—

(i) “computer software” means—

(a) any computer programme recorded on any disc, tape, perforated media or other information storage device; or

(b) any customized electronic data or any product or service of similar nature, as may be notified⁵⁵[R413] by the Board, which is transmitted or exported from India to any place outside India by any means;

(ii) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder or any other corresponding law for the time being in force;

(iii) “electronic hardware technology park” means any park set up in accordance with the Electronic Hardware Technology Park (EHTP) Scheme notified by the Government of India in the Ministry of Commerce and Industry;

(iv) “export turnover” means the consideration in respect of export ⁵⁶[R414] [by the undertaking] of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India;

(v) “free trade zone” means the Kandla Free Trade Zone and the Santacruz Electronics Export Processing Zone and includes any other free trade zone which the Central Government may, by notification in the Official Gazette,⁵⁷[R415] specify for the purposes of this section;

(vi) “relevant assessment year” means any assessment year falling within a period of ten consecutive assessment years referred to in this section;

(vii) “software technology park” means any park set up in accordance with the Software Technology Park Scheme notified by the Government of India in the Ministry of Commerce and Industry;

(viii) “special economic zone” means a zone which the Central Government may, by notification in the Official Gazette, specify as a special economic zone for the purposes of this section.]

⁵⁸[R416] [Explanation 3.—For the removal of doubts, it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.]

⁵⁹[R417] [Explanation 4.—For the purposes of this section, “manufacture or produce” shall include the cutting and polishing of precious and semi-precious stones.]

⁶⁰[R418] [Special provisions in respect of newly established hundred per cent export-oriented undertakings^60a[R419] .

10B. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee :

Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to the deduction referred to in this sub-section only for the unexpired period of aforesaid ten consecutive assessment years :

⁶¹[R420] [Provided also^*[R421] that for the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of such articles or things or computer software:]

Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2010 and subsequent years.

(2) This section applies to any undertaking which fulfils all the following conditions, namely :—

(i) it manufactures or produces any articles or things or computer software;

(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence :

Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section ;

(iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.

⁶²[R422] [(4) For the purposes of sub-section (1), the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking.]

(5) The deduction under sub-section (1) shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form⁶³[R423] , along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.

(i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as if every allowance or deduction referred to therein and relating to or allowable for any of the relevant assessment years ⁶⁴[R424] [ending before the 1st day of April, 2001], in relation to any building, machinery, plant or furniture used for the purposes of the business of the undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such business in such previous year had been given full effect to for that assessment year itself and accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33, sub-section (4) of section 35 or the second proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not apply in relation to any such allowance or deduction;

(ii) no loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, shall be carried forward or set-off where such loss relates to any of the relevant assessment years ⁶⁴[R425] [ending before the 1st day of April, 2001];

(iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB in relation to the profits and gains of the undertaking; and

⁶⁵[R426] [(7A) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger—

(a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and

(b) the provisions of this section shall, as far as may be, apply to the amalgamated or resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or the demerger had not taken place.]

(9) ⁶⁶[R427] [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

(9A) ⁶⁷[R428] [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

Explanation 1.— ⁶⁸[R429] [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

Explanation 2.—For the purposes of this section,—

(i) “computer software” means—

(a) any computer programme recorded on any disc, tape, perforated media or other information storage device; or

(b) any customized electronic data or any product or service of similar nature as may be notified⁶⁹[R430] by the Board, which is transmitted or exported from India to any place outside India by any means;

(iii) “export turnover” means the consideration in respect of export ⁷⁰[R431] [by the undertaking] of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India;

(iv) “hundred per cent export-oriented undertaking” means an undertaking which has been approved as a hundred per cent export-oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14⁷¹[R432] of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act;

(v) “relevant assessment years” means any assessment years falling within a period of ten consecutive assessment years, referred to in this section.]

⁷²[R433] [Explanation 3.—For the removal of doubts, it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.]

⁷³[R434] [Explanation 4.—For the purposes of this section, “manufacture or produce” shall include the cutting and polishing of precious and semi-precious stones.]

⁷⁴[R435] [Special provisions in respect of export of certain articles or things.

10BA. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export out of India of eligible articles or things, shall be allowed from the total income of the assessee :

Provided that where in computing the total income of the undertaking for any assessment year, deduction under section 10A or section 10B has been claimed, the undertaking shall not be entitled to the deduction under this section :

Provided further that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2010 and subsequent years.

(2) This section applies to any undertaking which fulfils the following conditions, namely :—

(a) it manufactures or produces the eligible articles or things without the use of imported raw materials;

(b) it is not formed by the splitting up, or the reconstruction, of a business already in existence :

Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section;

Explanation.—The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of this clause as they apply for the purposes of clause (ii) of sub-section (2) of that section;

(d) ninety per cent or more of its sales during the previous year relevant to the assessment year are by way of exports of the eligible articles or things;

(e) it employs twenty or more workers during the previous year in the process of manufacture or production.

(3) This section applies to the undertaking, if the sale proceeds of the eligible articles or things exported out of India are received in or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.

Explanation.—For the purposes of this sub-section, the expression “competent authority” means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.

(4) For the purposes of sub-section (1), the profits derived from export out of India of the eligible articles or things shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things bears to the total turnover of the business carried on by the undertaking.

(5) The deduction under sub-section (1) shall not be admissible, unless the assessee furnishes in the prescribed form⁷⁵[R436] , along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.

(6) Notwithstanding anything contained in any other provision of this Act, where a deduction is allowed under this section in computing the total income of the assessee, no deduction shall be allowed under any other section in respect of its export profits.

Explanation.—For the purposes of this section,—

(a) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999), and any rules made thereunder or any other corresponding law for the time being in force;

(b) “eligible articles or things” means all hand-made articles or things, which are of artistic value and which requires the use of wood as the main raw material;

(c) “export turnover” means the consideration in respect of export by the undertaking of eligible articles or things received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India;

(d) “export out of India” shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance of any customs station⁷⁶[R437] as defined in the Customs Act, 1962 (52 of 1962).]

⁷⁷[R438] [Meaning of computer programmes in certain cases.

10BB. The profits and gains derived by an undertaking from the production of computer programmes under section 10B, as it stood prior to its substitution by section 7 of the Finance Act, 2000 (10 of 2000), shall be construed as if for the words “computer programmes”, the words “computer programmes or processing or management of electronic data” had been substituted in that section.]

⁷⁸[R439] [Special provision in respect of certain industrial undertakings in North-Eastern Region.

10C. (1) Subject to the provisions of this section, any profits and gains derived by an assessee from an industrial undertaking, which has begun or begins to manufacture or produce any article or thing on or after the 1st day of April, 1998 in any Integrated Infrastructure Development Centre or Industrial Growth Centre located in the North-Eastern Region (hereafter in this section referred to as the industrial undertaking) shall not be included in the total income of the assessee.

(2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :—

(i) it is not formed by the splitting up, or the reconstruction of, a business already in existence :

Provided that this condition shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section ;

(ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.

Explanation.—The provisions of Explanation 1 and Explanation 2 to sub-section (3) of section 80-IA shall apply for the purposes of clause (ii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.

(3) The profits and gains referred to in sub-section (1) shall not be included in the total income of the assessee in respect of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things.

(4) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of any previous year relevant to any subsequent assessment year,—

(i) section 32, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as if deduction referred to therein and relating to or allowable for any of the relevant assessment years, in relation to any building, machinery, plant or furniture used for the purposes of the business of the industrial undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such business in such previous year had been given full effect to for that assessment year itself and, accordingly, sub-section (2) of section 32, sub-section (4) of section 35 or the second proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not apply in relation to any such deduction;

(ii) no loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the industrial undertaking, shall be carried forward or set off where such loss relates to any of the relevant assessment years;

(iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB or section 80JJA in relation to the profits and gains of the industrial undertakings; and

(iv) in computing the depreciation allowance under section 32, the written down value of any asset used for the purposes of the business of the industrial undertaking shall be computed as if the assessee had claimed and been actually allowed the deduction in respect of depreciation for each of the relevant assessment years.

(5) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the industrial undertaking referred to in this section as they apply for the purposes of the industrial undertaking referred to in section 80-IA or section 80-IB, as the case may be.

(6) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee before the due date for furnishing the return of his income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him in any of the relevant assessment years:

⁷⁹[R440] [Provided that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2004 and subsequent years.]

Explanation.—For the purposes of this section,—

(i) “Integrated Infrastructure Development Centre” means such centres located in the States of the North-Eastern Region, which the Central Government, may, by notification in the Official Gazette, specify⁸⁰[R441] for the purposes of this section;

(ii) “Industrial Growth Centre” means such centres located in the States of the North-Eastern Region, which the Central Government may, by notification in the Official Gazette, specify^80a[R442] for the purposes of this section;

(iii) “North-Eastern Region” means the region comprising the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura;

(iv) “relevant assessment years” means the ten consecutive years beginning with the year in which the industrial undertaking begins to manufacture or produce articles or things.]

⁸¹[R443] Income⁸²[R444] from property held for charitable or religious purposes.

⁸³[R445] 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income—

⁸⁴[R446] [(a) income derived from property⁸²[R447] held under trust wholly for charitable or religious purposes, to the extent to which such income⁸²[R448] is applied⁸²[R449] to such purposes in India; and, where any such income⁸²[R450] is accumulated⁸²[R451] or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart⁸²[R452] is not in excess of ⁸⁵[fifteen] per cent of the income from such property;

(b) income derived from property held under trust in part⁸²[R453] only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of ⁸⁵[R454] [fifteen] per cent of the income from such property;

(i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and

(ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India:

Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income;

⁸⁸[R456] [(d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution.]

⁸⁹[R457] [Explanation.—For the purposes of clauses (a) and (b),—

(1) in computing the ⁹⁰[R458] [fifteen] per cent of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income;

(2) if, in the previous year, the income applied to charitable or religious purposes in India falls short of ⁹¹[R459] [eighty-five] per cent of the income derived during that year from property held under trust, or, as the case may be, held under trust in part, by any amount—

(i) for the reason that the whole or any part of the income has not been received during that year, or

(ii) for any other reason, then—

(a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and

(b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income (such option to be exercised in writing before the expiry of the time allowed under sub-section (1) ⁹²[R460] [* * *] of section 139 ⁹³[R461] [* * *] for furnishing the return of income) be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not be taken into account in calculating the amount of income applied to such purposes, in the case referred to in sub-clause (i), during the previous year in which the income is received or during the previous year immediately following, as the case may be, and, in the case referred to in sub-clause (ii), during the previous year immediately following the previous year in which the income was derived.]

⁹⁴[R462] [(1A) For the purposes of sub-section (1),—

(a) where a capital asset, being property held under trust wholly for charitable or religious purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the extent specified hereunder, namely:—

(i) where the whole of the net consideration is utilised in acquiring the new capital asset, the whole of such capital gain ;

(ii) where only a part of the net consideration is utilised for acquiring the new capital asset, so much of such capital gain as is equal to the amount, if any, by which the amount so utilised exceeds the cost of the transferred asset;

(b) where a capital asset, being property held under trust in part only for such purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the appropriate fraction of the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the extent specified hereunder, namely:—

(i) where the whole of the net consideration is utilised in acquiring the new capital asset, the whole of the appropriate fraction of such capital gain;

(ii) in any other case, so much of the appropriate fraction of the capital gain as is equal to the amount, if any, by which the appropriate fraction of the amount utilised for acquiring the new asset exceeds the appropriate fraction of the cost of the transferred asset.

Explanation.—In this sub-section,—

(i) “appropriate fraction” means the fraction which represents the extent to which the income derived from the capital asset transferred was immediately before such transfer applicable to charitable or religious purposes;

(ii) “cost of the transferred asset” means the aggregate of the cost of acquisition (as ascertained for the purposes of sections 48 and 49) of the capital asset which is the subject of the transfer and the cost of any improvement thereto within the meaning assigned to that expression in sub-clause (b) of clause (1) of section 55;

(iii) “net consideration” means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.]

⁹⁵[R463] [(1B) Where any income in respect of which an option is exercised under clause (2) of the Explanation to sub-section (1) is not applied to charitable or religious purposes in India during the period referred to in sub-clause (a) or, as the case may be, sub-clause (b), of the said clause, then, such income shall be deemed to be the income of the person in receipt thereof—

(a) in the case referred to in sub-clause (i) of the said clause, of the previous year immediately following the previous year in which the income was received; or

(b) in the case referred to in sub-clause (ii) of the said clause, of the previous year immediately following the previous year in which the income was derived.]

⁹⁶[R464] [(2) ⁹⁷[R465] [Where ⁹⁸[R466] [eighty-five] per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:—]

(a) such person specifies, by notice in writing given to the ⁹⁹[R467] [Assessing] Officer in the prescribed¹[R468] manner²[R469] , the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years;

³[R470] [(b) the money so accumulated⁴[R471] or set apart is invested or deposited in the forms or modes specified in sub-section (5)]:]

⁵[R472] [Provided that in computing the period of ten years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded:]

⁶[R473] [Provided further that in respect of any income accumulated or set apart on or after the 1st day of April, 2001, the provisions of this sub-section shall have effect as if for the words “ten years” at both the places where they occur, the words “five years” had been substituted.]

⁷[R474] [Explanation.—Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter.]

⁸[R475] [(3) Any income referred to in sub-section (2) which—

(a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or

⁹[R476] [(b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or]

(c) is not utilised¹⁰[R477] for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof,

¹¹[R478] [(d) is credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10,] shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or ^11a[R479] [credited or paid or], as the case may be, of the previous year immediately following the expiry of the period aforesaid.]

¹²[R480] [(3A) Notwithstanding anything contained in sub-section (3), where due to circumstances beyond the control of the person in receipt of the income, any income invested or deposited in accordance with the provisions of clause (b) of sub-section (2) cannot be applied for the purpose for which it was accumulated or set apart, the ¹³[R481] [Assessing] Officer may, on an application made to him in this behalf, allow such person to apply such income for such other charitable or religious purpose in India as is specified in the application by such person and as is in conformity with the objects of the trust; and thereupon the provisions of sub-section (3) shall apply as if the purpose specified by such person in the application under this sub-section were a purpose specified in the notice given to the ¹⁴[R482] [Assessing] Officer under clause (a) of sub-section (2):]

¹⁵[R483] [Provided that the Assessing Officer shall not allow application of such income by way of payment or credit made for the purposes referred to in clause (d) of sub-section (3) of section 11:]

¹⁶[R484] [Provided further that in case the trust or institution, which has invested or deposited its income in accordance with the provisions of clause (b) of sub-section (2), is dissolved, the Assessing Officer may allow application of such income for the purposes referred to in clause (d) of sub-section (3) in the year in which such trust or institution was dissolved.]

(4) For the purposes of this section “property held under trust” includes a business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the ¹⁷[R485] [Assessing] Officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes ¹⁸[R486] [* * *].

¹⁹[R487] [(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business.]

²⁰[R488] [²¹[R489] (5) The forms and modes of investing or depositing the money referred to in clause (b) of sub-section (2) shall be the following, namely :—

(i) investment in savings certificates as defined in clause (c) of section 2²²[R490] of the Government Savings Certificates Act, 1959 (46 of 1959), and any other securities or certificates issued by the Central Government under the Small Savings Schemes of that Government;

(ii) deposit in any account with the Post Office Savings Bank;

(iii) deposit in any account with a scheduled bank or a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank).

Explanation.—In this clause, “scheduled bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);

(iv) investment in units of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963);

(v) investment in any security for money created and issued by the Central Government or a State Government;

(vi) investment in debentures issued by, or on behalf of, any company or corporation both the principal whereof and the interest whereon are fully and unconditionally guaranteed by the Central Government or by a State Government;

(vii) investment or deposit in any ²³[R491] [public sector company]:

²⁴[R492] [Provided that where an investment or deposit in any public sector company has been made and such public sector company ceases to be a public sector company,—

(A) such investment made in the shares of such company shall be deemed to be an investment made under this clause for a period of three years from the date on which such public sector company ceases to be a public sector company;

(B) such other investment or deposit shall be deemed to be an investment or deposit made under this clause for the period up to the date on which such investment or deposit becomes repayable by such company;]

(viii) deposits with or investment in any bonds issued by a financial corporation which is engaged in providing long-term finance for industrial development in India and ²⁵[R493] [which is eligible for deduction under clause (viii) of sub-section (1) of section 36];

(ix) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes and ²⁵[R494] [which is eligible for deduction under clause (viii) of sub-section (1) of section 36];

²⁶[R495] [(ixa) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for urban infrastructure in India.

Explanation.—For the purposes of this clause,—

(a) “long-term finance” means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years;

(b) “public company”²⁷[R496] shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956);

(c) “urban infrastructure” means a project for providing potable water supply, sanitation and sewerage, drainage, solid waste management, roads, bridges and flyovers or urban transport;]

(x) investment in immovable property.

Explanation.—“Immovable property” does not include any machinery or plant (other than machinery or plant installed in a building for the convenient occupation of the building) even though attached to, or permanently fastened to, anything attached to the earth;]

²⁸[R497] [(xi) deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964);]

²⁹[R498] [(xii) any other form or mode of investment or deposit as may be prescribed.³⁰[R499] ]

³¹[R500] [Income of trusts or institutions from contributions.

³²[R501] 12. ³³[R502] [(1)] ³⁴[R503] Any voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly.]

³⁵[R504] [(2) The value of any services, being medical or educational services, made available by any charitable or religious trust running a hospital or medical institution or an educational institution, to any person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13, shall be deemed to be income of such trust or institution derived from property held under trust wholly for charitable or religious purposes during the previous year in which such services are so provided and shall be chargeable to income-tax notwithstanding the provisions of sub-section (1) of section 11.

Explanation.—For the purposes of this sub-section, the expression “value” shall be the value of any benefit or facility granted or provided free of cost or at concessional rate to any person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13.]

³⁶[R505] [(3) Notwithstanding anything contained in section 11, any amount of donation received by the trust or institution in terms of clause (d) of sub-section (2) of section 80G ³⁷[R506] [in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of sub-section (5C) of that section, in the manner specified in that clause, or] which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister’s National Relief Fund on or before the 31st day of March, ³⁸[R507] [2004] shall be deemed to be the income of the previous year and shall accordingly be charged to tax.]

³⁹[R508] [Conditions as to registration of trusts, etc.

⁴⁰[R509] 12A. ⁴¹[R510] The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:—

(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form⁴²[R511] and in the prescribed manner to the ⁴³[R512] [***] Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, ⁴⁴[R513] [whichever is later and such trust or institution is registered under section 12AA] :

⁴⁵[R514] [Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,—

(i) from the date of the creation of the trust or the establishment of the institution if the ⁴⁶[R515] [***] Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period⁴⁷[R516] aforesaid for sufficient reasons;

(ii) from the 1st day of the financial year in which the application is made, if the ⁴⁸[R517] [***] Commissioner is not so satisfied;]

(b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds ⁴⁹[R518] [fifty] thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form⁵⁰[R519] duly signed and verified by such accountant and setting forth such particulars as may be prescribed.]

⁵²[R521] [Procedure for registration.

12AA. (1) The ⁵³[R522] [***] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) of section 12A, shall—

(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and

(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he—

(i) shall pass an order in writing registering the trust or institution;

(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant :

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.

⁵⁴[R523] [(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.]

(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) of section 12A.]

⁵⁵[R524] [(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.]

⁵⁶[R525] [Section 11 not to apply in certain cases.

⁵⁷[R526] 13. (1) Nothing contained in section 11 ⁵⁸[R527] [or section 12] shall operate so as to exclude from the total income of the previous year of the person in receipt thereof—

(a) any part of the ⁵⁹[R528] income from the property held under a trust for private religious purposes which does not ensure for the benefit of the public;

(b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste;

(bb) ⁶⁰[R529] [* * *]

(c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof—

(i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or

(ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3) :

Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution :

Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3) in so far as such use or application relates to any period before the 1st day of June, 1970;

⁶¹[R530] [(d) ⁶²[R531] in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year—

(i) any funds⁶³[R532] of the trust or institution are invested⁶³[R533] or deposited⁶³[R534] after the 28th day of February, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11; or

(ii) any funds⁶³[R535] of the trust or institution invested⁶³[R536] or deposited⁶³[R537] before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983; or

(iii) any shares in a company [not being a ⁶⁴[R538] Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act] are held by the trust or institution after the 30th day of November, 1983:

Provided that nothing in this clause shall apply in relation to—

(i) any assets held by the trust or institution where such assets form part of the corpus of the trust or institution as on the 1st day of June, 1973 ⁶⁵[R539] [***];

⁶⁶[R540] [(ia) any accretion to the shares, forming part of the corpus mentioned in clause (i), by way of bonus shares allotted to the trust or institution;]

(ii) any assets (being debentures issued by, or on behalf of, any company or corporation) acquired by the trust or institution before the 1st day of March, 1983;

⁶⁷[R541] [(iia) any asset, not being an investment or deposit in any of the forms or modes specified in sub-section (5) of section 11, where such asset is not held by the trust or institution, otherwise than in any of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, ⁶⁸[R542] [1993], whichever is later;]

(iii) any funds representing the profits and gains of business, being profits and gains of any previous year relevant to the assessment year commencing on the 1st day of April, 1984 or any subsequent assessment year.

Explanation.—Where the trust or institution has any other income in addition to profits and gains of business, the provisions of clause (iii) of this proviso shall not apply unless the trust or institution maintains separate books of account in respect of such business.]

⁶⁹[R543] [Explanation.—For the purposes of sub-clause (ii) of clause (c), in determining whether any part of the income or any property of any trust or institution is during the previous year used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to this section by section 7 [other than sub-clause (ii) of clause (a) thereof] of the Finance Act, 1972.]

(2) Without prejudice to the generality of the provisions of clause (c) ⁷⁰[R544] [and clause (d)] of sub-section (1), the income or the property⁷¹[R545] of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3),—

(a) if any part of the income or property⁷¹[R546] of the trust or institution is, or continues to be, lent⁷¹[R547] to any person referred to in sub-section (3) for any period during the previous year without either adequate security or adequate interest or both;

(b) if any land, building or other property⁷¹[R548] of the trust or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation;

(c) if any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services;

(d) if the services of the trust or institution are made available to any person referred to in sub-section (3) during the previous year without adequate remuneration or other compensation;

(e) if any share, security or other property is purchased by or on behalf of the trust or institution from any person referred to in sub-section (3) during the previous year for consideration which is more than adequate;

(f) if any share, security or other property is sold by or on behalf of the trust or institution to any person referred to in sub-section (3) during the previous year for consideration which is less than adequate;

⁷²[R549] [(g) if any income or property of the trust or institution is diverted during the previous year in favour of any person referred to in sub-section (3):

Provided that this clause shall not apply where the income, or the value of the property or, as the case may be, the aggregate of the income and the value of the property, so diverted does not exceed one thousand rupees;]

(h) if any funds⁷³[R550] of the trust or institution are, or continue to remain, invested⁷³[R551] for any period during the previous year (not being a period before the 1st day of January, 1971), in any concern⁷³[R552] in which any person referred to in sub-section (3) has a substantial interest.

(3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely :—

(a) the author of the trust or the founder of the institution⁷³[R553] ;

(b) any person who has made a substantial contribution to the trust or institution, ⁷⁴[R554] [that is to say, any person whose total contribution up to the end of the relevant previous year exceeds ⁷⁵[R555] [fifty] thousand rupees];

⁷⁶[R556] [(cc) any trustee of the trust or manager (by whatever name called) of the institution;]

(d) any relative of any such author, founder, person, ⁷⁷[R557] [member, trustee or manager] as aforesaid;

(e) any concern in which any of the persons referred to in clauses (a), (b), (c) ⁷⁸[R558] [, (cc)] and (d) has a substantial interest.

(4) Notwithstanding anything contained in clause (c) of sub-section (1) ⁷⁹[R559] [but without prejudice to the provisions contained in clause (d) of that sub-section], in a case where the aggregate of the funds of the trust or institution invested in a concern in which any person referred to in sub-section (3) has a substantial interest, does not exceed five per cent of the capital⁸⁰[R560] of that concern, the exemption under section 11 ⁷⁸[R561] [or section 12] shall not be denied in relation to any income other than the income arising to the trust or the institution from such investment, by reason only that the ⁸¹[R562] [funds] of the trust or the institution have been invested in a concern in which such person has a substantial interest.

⁸²[R563] [(5) Notwithstanding anything contained in clause (d) of sub-section (1), where any assets (being debentures issued by, or on behalf of, any company or corporation) are acquired by the trust or institution after the 28th day of February, 1983 but before the 25th day of July, 1991, the exemption under section 11 or section 12 shall not be denied in relation to any income other than the income arising to the trust or the institution from such assets, by reason only that the funds of the trust or the institution have been invested in such assets if such funds do not continue to remain so invested in such assets after the 31st day of March, 1992.]

⁸³[R564] [(6) Notwithstanding anything contained in sub-section (1) or sub-section (2), but without prejudice to the provisions contained in sub-section (2) of section 12, in the case of a charitable or religious trust running an educational institution or a medical institution or a hospital, the exemption under section 11 or section 12 shall not be denied in relation to any income, other than the income referred to in sub-section (2) of section 12, by reason only that such trust has provided educational or medical facilities to persons referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3).]

⁸⁴[R565] [Explanation 1.—For the purposes of sections 11, 12, 12A and this section, “trust” includes any other legal obligation and for the purposes of this section “relative”, in relation to an individual, means—

(i) spouse of the individual;

(ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) any lineal ascendant or descendant of the individual;

(v) any lineal ascendant or descendant of the spouse of the individual;

(vi) spouse of a person referred to in sub-clause (ii), sub-clause (iii), sub-clause (iv) or sub-clause (v);

(vii) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.]

Explanation 2.—A trust or institution created or established for the benefit of Scheduled Castes, backward classes, Scheduled Tribes or women and children shall not be deemed to be a trust or institution created or established for the benefit of a religious community or caste within the meaning of clause (b) of sub-section (1).

Explanation 3.—For the purposes of this section, a person shall be deemed to have a substantial interest in a concern,—

(i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than twenty per cent of the voting power are, at any time during the previous year, owned beneficially by such person or partly by such person and partly by one or more of the other persons referred to in sub-section (3);

(ii) in the case of any other concern, if such person is entitled, or such person and one or more of the other persons referred to in sub-section (3) are entitled in the aggregate, at any time during the previous year, to not less than twenty per cent of the profits of such concern.]

⁸⁵[R566] [Special provision relating to incomes of political parties.

13A. Any income of a political party which is chargeable under the head ⁸⁶[R567] [***] “Income from house property” or “Income from other sources” or ⁸⁷[R568] [“Capital gains” or] any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political party :

Provided that—

(a) such political party keeps and maintains such books of account and other documents as would enable the ⁸⁸[R569] [Assessing] Officer to pro-perly deduce its income there from;

(b) in respect of each such voluntary contribution in excess of ⁸⁹[R570] [twenty] thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution; and

(c) the accounts of such political party are audited by an accountant as defined in the Explanation below sub-section (2) of section 288 :

⁹⁰[R571] [Provided further that if the treasurer of such political party or any other person authorised by that political party in this behalf fails to submit a report under sub-section (3) of section 29C of the Representation of the People Act, 1951 (43 of 1951) for a financial year, no exemption under this section shall be available for that political party for such financial year.]

⁹¹[R572] [Explanation.—For the purposes of this section, “political party” means a political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951).]

[R1]

[R2]Inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.

[R3]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. Earlier, clause (2A) was inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and was omitted by the Direct Tax Laws (Amendment) Act, 1989, with effect from the same date.

[R4]Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its omission, clause (3), as substituted by the Finance Act, 1972, w.e.f. 1-4-1972, and amended by the Finance Act, 1986, w.e.f. 1-4-1987, Finance (No. 2) Act, 1991, w.e.f. 1-10-1991 and Finance Act, 1992, w.e.f. 1-4-1992, read as under:

‘(3) any receipts which are of a casual and non-recurring nature, to the extent such receipts do not exceed five thousand rupees in the aggregate:

Provided that where such receipts relate to winnings from races including horse races, the provisions of this clause shall have effect as if for the words “five thousand rupees”, the words “two thousand five hundred rupees” had been substituted:

Provided further that this clause shall not apply to—

(i) capital gains chargeable under the provisions of section 45; or

(ii) receipts arising from business or the exercise of a profession or occupation; or

(iii) receipts by way of addition to the remuneration of an employee;’

[R5]Substituted for clauses (4) and (4A) by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Prior to their substitution, clause (4) was amended by the Finance Act, 1964, w.e.f. 1-4-1964. Clause (4A) was inserted by the Finance Act, 1964, w.e.f. 1-4-1965, subsequently amended by the Finance Act, 1968, w.e.f. 1-4-1969 and substituted by the Finance Act, 1982, w.e.f. 1-4-1982.

[R6]For specified securities, see Notification No. SO 3331, dated 19-10-1965.

[R7]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R8]Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

[R9]See also Circular No. 592, dated 4-2-1991.

[R10]Clause (q) of section 2 of the Foreign Exchange Regulation Act, 1973, defines “person resident outside India” as follows:

‘(q) “person resident outside India” means a person who is not resident in India;’

For definition of the above term in FEMA, 1999, see Appendix One.

[R11]Inserted by the Finance Act, 1982, w.e.f. 1-4-1983.

[R12]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R13]For specified savings certificates, see Notification No. SO 653(E), dated 8-9-1982.

[R14]Substituted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier clause (5) was amended by the Finance Act, 1975, w.e.f. 1-4-1975, the Taxation Laws (Amendment) Act, 1970, w.r.e.f. 1-4-1962 and the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

[R15]Rule 2B prescribes the conditions as well as quantum of exemption, which are as follows :

Conditions to be satisfied - Conditions to be satisfied are as under :

u The exemption is admissible on the value of any travel concession or assistance received by or due to an assessee from his employer or former employer, as the case may be, for himself and his family, in connection with his proceeding (i) on leave to any place in India, or (ii) to any place in India after the retirement from service, or (iii) to any place in India after the termination of his service.

u The exemption is admissible in respect of actual expenditure incurred for journeys performed, not only by the assessee but also by his family.

For this purpose, ‘family’ means (i) the spouse and children of the assessee, and (ii) the parents, brothers and sisters of the assessee provided that they are wholly or mainly dependent on the assessee. With effect from 1-10-1997, the Central Civil Service Leave Travel Concession Rules have been amended in this respect.

u The exemption can be availed only in respect of two journeys performed in a block of four calendar years. For this purpose, the first four-year block commenced with the calendar year 1986. Thus, the four-year blocks will be 1986-89, 1990-93, 1994-97, 1998-2001, 2002-2005 and so on.

u If an assessee has not availed travel concession or assistance during any of the specified four-year block periods on one of the two permitted occasions, or on both occasions, exemption can be claimed provided he avails the concession or assistance in the calendar year immediately following that block. This is popularly known as the ‘carry-over’ concession. In such cases, the exemption so availed will not be counted for purposes of regulating the future exemptions allowable for the succeeding block of four years.

Quantum of exemption.—The basic rule is that the quantum of exemption will be limited to the actual expenses incurred on the journey. This pre-supposes that, without performing any journey and incurring expenses thereon, no exemption can be claimed.

In addition to the above general limitation, the quantum of exemption will also be subject to the following maximum limits, depending upon the mode of transport used or available:

*journeys performed on or after 1-10-1997*
n For journeys performed by Air	n Air economy fare of the national carrier (Indian Airlines or Air India) by the shortest route to the place of destination.
n Where place of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than by air	n Air-conditioned first class rail fare by the shortest route to the place of destination.
n Where place of origin of journey and destination or part thereof are not connected by rail	n (i) Where a recognised public transport system exists, the first class or deluxe class fare on such transport by the shortest route to the place of destination.
	(ii) Where no recognised public transport system exists, the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey has been performed by rail.

Restricted concession for children.—Under sub-rule (4) of rule 2B, inserted with effect from 1-10-1997, exemption on travel concession will not be admissible to more than two surviving children of an individual born after 1-10-1998. This restriction will not however apply in respect of children born before 1-10-1998, and also in cases where an individual, after getting one child, begets multiple children (twins/triplets/quadruplets, etc.) on the second occasion. The implications of this restriction will be as follows:

u In respect of journeys performed on or before 1-10-1998 exemption will be admissible in respect of all the surviving children of the individual.

u In respect of journeys performed after 1-10-1998

- the exemption will be admissible to all surviving children born before 1-10-1998;

- in addition, the exemption will be admissible to only two surviving children born on or after 1-10-1998. In reckoning this limit of two children, children born out of multiple birth after the first child will be treated as ‘one child’ only.

It may be noted that section 2(15B) of the Act defines a ‘child’ as includes ‘a step-child and an adopted child of the individual’. Hence the aforesaid restrictions will operate in respect of step-children and adopted children also provided they are born on or after 1-10-1998.

[R16]Prior to its omission, clause (5A), as inserted by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1982, read as under :

“(5A) in the case of an individual who is not a citizen of India and is a non-resident, who comes to India solely in connection with the shooting of a cinematograph film in India by the individual, firm or company referred to in clause (d) of the Explanation to clause (i) of sub-section (1) of section 9, any remuneration received by him for rendering any service in connection with such shooting ;”

[R17]Prior to its omission, clause (5B), as inserted by the Finance Act, 1993, w.e.f. 1-4-1994, and later on amended by the Finance Act, 1999, w.e.f. 1-4-1999, read as under :

‘(5B) in the case of an individual who renders services as a technician in the employment (commencing from a date after the 31st day of March, 1993) of the Government or of a local authority or of any corporation set up under any special law or of any such institution or body established in India for carrying on scientific research as is approved for the purposes of this clause by the prescribed authority or in any business carried on in India and the individual was not resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India and the tax on his income for such services chargeable under the head “Salaries” is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956)], the tax so paid by the employer for a period not exceeding forty-eight months commencing from the date of his arrival in India :

Provided that the Central Government may, if it considers it necessary or expedient in the public interest so to do, waive the condition relating to non-residence in India as specified in this clause in the case of any individual who is employed in India for designing, erection or commissioning of machinery or plant or supervising activities connected with such designing, erection or commissioning.

Explanation.—For the purposes of this clause, “technician” means a person having specialised knowledge and experience in—

(i) constructional or manufacturing operations, or in mining or in the generation of electricity or any other form of power, or

(ii) agriculture, animal husbandry, dairy farming, deep sea fishing or ship building, or

(iii) such other field as the Central Government may, having regard to availability of Indians having specialised knowledge and experience therein, the needs of the country and other relevant circumstances, by notification in the Official Gazette, specify,

who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised ;’

[R18]Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its omission, sub-clause (i), as substituted by the Taxation Laws (Amendment) Act, 1970, w.r.e.f. 1-4-1962 and amended by the Finance (No. 2) Act, 1977, w.r.e.f. 1-4-1972 and the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999, read as under:

“(i) subject to such conditions as the Central Government may prescribe, passage moneys or the value of any free or concessional passage received by or due to such individual—

(a) from his employer, for himself, his spouse and children, in connection with his proceeding on home leave out of India;

(aa) [* * *]

(b) from his employer or former employer for himself, his spouse and children, in connection with his proceeding to his home country out of India after retirement from service in India or after the termination of such service;”

[R19]Substituted for sub-clauses (ii) to (v) by the Finance Act, 1988, w.e.f. 1-4-1989.

[R20] Prior to its omission, sub-clause (via), as inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975, read as under :

“(via) the remuneration received by him as an employee of, or a consultant to, an institution or association or a body established or formed outside India solely for philanthropic purposes, for services rendered by him in India in connection with such purposes ; provided that such institution or association or body and the purposes for which his services are rendered in India are approved by the Central Government ;”

[R21]Prior to omission, sub-clause (vii) was amended by the Finance Act, 1964, w.e.f. 1-4-1964, Finance Act, 1965, w.e.f. 1-4-1965 and Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.

[R22]Prior to its omission, sub-clause (viia), as inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971 and later on amended by the Direct Taxes (Amendment) Act, 1974, w.r.e.f. 1-4-1973, Finance Act, 1979, w.e.f. 1-6-1979, Finance Act, 1988, w.e.f. 1-4-1988, Finance Act, 1992, w.e.f. 1-6-1992 and Finance Act, 1993, w.e.f. 1-4-1993, read as under:

‘(viia) where such individual renders services as a technician in the employment of the Government or of a local authority or of any corporation set up under any special law or of any such institution or body established in India for carrying on scientific research as is approved for the purposes of this sub-clause by the prescribed authority or in any business carried on in India and the individual was not resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India,

the remuneration for such services due to or received by him, which is chargeable under the head “Salaries”, to the extent mentioned below, namely:—

(I) where such services commence from a date after the 31st day of March, 1971 but before the 1st day of April, 1988,—

(A) such remuneration due to or received by him during the period of twenty-four months commencing from the date of his arrival in India, in so far as such remuneration does not exceed an amount calculated at the rate of four thousand rupees per month, and where the tax on the excess, if any, of such remuneration for the period aforesaid over the amount so calculated is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956)], also the tax so paid by the employer; and

(B) where he continues, with the approval of the Central Government obtained before the 1st day of October of the relevant assessment year, to remain in employment in India after the expiry of the period of twenty-four months aforesaid and the tax on his income chargeable under the head “Salaries” is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956)], the tax so paid by the employer for a period not exceeding twenty-four months next following the expiry of the first-mentioned twenty-four months;

(II) where such services commence from a date after the 31st day of March, 1988 but before the 1st day of April, 1993, and tax on his income chargeable under the head “Salaries” is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956)], the tax so paid by the employer for a period not exceeding forty-eight months commencing from the date of his arrival in India:

Provided that the Central Government may, if it considers it necessary or expedient in the public interest so to do, waive the condition relating to non-residence in India as specified in this sub-clause in the case of any individual who is employed in India for designing, erection or commissioning of machinery or plant or supervising activities connected with such designing, erection or commissioning.

Explanation.—For the purposes of this sub-clause, “technician” means a person having specialised knowledge and experience in—

(i) constructional or manufacturing operations, or in mining or in the generation of electricity or any other form of power, or

(ii) agriculture, animal husbandry, dairy farming, deep sea fishing or ship building, or

(iii) such other field as the Central Government may, having regard to the availability of Indians having specialised knowledge and experience therein, the needs of the country and other relevant circumstances, by notification in the Official Gazette, specify,

who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised;’

[R23] Prior to its omission, sub-clause (ix), as inserted by the Finance Act, 1964, w.e.f. 1-4-1964, read as under :

‘(ix) any income chargeable under the head “Salaries” received by or due to him during the thirty-six months commencing from the date of his arrival in India for service rendered as a professor or other teacher in a University or other educational institution, and where any such individual continues to remain in employment in India after the expiry of the thirty-six months aforesaid and the tax on his income chargeable under the head “Salaries” is paid by the University or other educational institution concerned to the Central Government, the tax so paid for a period not exceeding twenty-four months following the expiry of the thirty-six months aforesaid, provided in either case the following conditions are fulfilled, namely :—

(i) such individual was not resident in any of the four financial years immediately preceding the financial year in which he arrived in India ; and

(ii) his contract of service is approved by the Central Government—

(a) on or before the 1st day of October, 1964, in the case of a professor or other teacher whose service commenced before the 1st day of April, 1964 ;

(b) before the commencement of his service or within one year of such commencement, in any other case ;’

[R24]Prior to its omission, sub-clause (x), as inserted by the Finance Act, 1964, w.e.f. 1-4-1964, read as under :

“(x) any sum due to or received by him, during the twenty-four months commencing from the date of his arrival in India, for undertaking any research work in India, provided the following conditions are fulfilled, namely :—

(a) the research work is undertaken in connection with a research scheme approved in this behalf by the Central Government on or before the 1st day of October of the relevant assessment year ; and

(b) such sum is payable or paid directly or indirectly by the Government of a foreign State or any institution or association or other body established outside India ;”

[R25]Inserted by the Finance Act, 1976, w.e.f. 1-4-1976.

[R26]Inserted by the Finance Act, 1983, w.e.f. 1-4-1984.

[R27]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R28]Substituted for “and approved by the Central Government, the tax on such income is payable, under the terms of such agreement, by Government or the Indian concern to the Central Government, the tax so paid” by the Finance Act, 1992, w.e.f. 1-6-1992.

[R29]Inserted by the Finance Act, 1988, w.e.f. 1-4-1988.

[R30]Inserted by the Finance Act, 1988, w.e.f. 1-4-1988.

[R31]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R32]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R33]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.

[R34]Words “an agreement entered into after the 31st day of March, 1997 but before the 1st day of April, 1999, or entered into after the 31st day of March, 2005† and approved by the Central Government in this behalf” shall be substituted for “an agreement entered after the 31st day of March, 1997 but before the 1st day of April, 1999 and approved by the Central Government in this behalf” by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2006.

†Words “30th day of September, 2005” shall be substituted for the italicised words “31st day of March, 2005” by the Finance Act, 2005, w.e.f. 1-4-2006.

[R35]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.

[R36]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

[R37]

[R38]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R39]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

[R40]The prescribed authority under rule 16B is Additional Secretary, Department of Economic Affairs in Ministry of Finance, Government of India in concurrence with Member (Income-tax), CBDT.

[R41]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

[R42]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

[R43]Substituted for existing clause (10) by the Finance Act, 1974, w.e.f. 1-4-1975. Original clause was amended first by the Finance Act, 1972, w.e.f. 1-4-1973 and then by the Finance Act, 1974, with retrospective effect from 1-6-1972/1-4-1962.

[R44]See also Letter F. No. 1(179)-62/TPL, dated 13-12-1962 and Letter F. No. 194/6/73-IT(A-I), dated 19-6-1973.

[R45]For relevant case laws, see Case Laws

[R46]For text of sub-sections (2) and (3) of section 4 of the Payment of Gratuity Act, 1972, see Appendix One.

The limit laid down under section 4(3) of the Payment of Gratuity Act, 1972 [as amended by the Payment of Gratuity (Amendment) Act, 1998, w.r.e.f. 24-9-1997] is Rs. 3,50,000.

[R47]For the meaning of the expression “each year of completed service”

[R48]Substituted for “calculated on the basis of the average salary for the three years immediately preceding the year in which the gratuity is paid, subject to a maximum of *thirty-six thousand rupees or twenty months’ salary so calculated, whichever is less” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

*Substituted for “thirty thousand rupees” by the Finance Act, 1983, w.r.e.f. 1-4-1982.

[R49]Rs. 3,50,000 has been specified as the limit in case of retirement, etc., on or after 24-9-1997 vide Notification No. 10772 [F. No. 200/77/97-IT(A-I)], dated 20-1-1999.

[R50]

[R51]Substituted for “shall not exceed *thirty-six thousand rupees” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

*Substituted for “thirty thousand rupees” by the Finance Act, 1983, w.r.e.f. 1-4-1982.

[R52]Substituted for “shall not exceed *thirty-six thousand rupees” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

*Substituted for “thirty thousand rupees” by the Finance Act, 1983, w.r.e.f. 1-4-1982.

[R53]Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Original third and fourth provisos were inserted by the Finance Act, 1983, with retrospective effect from 1-4-1982.

[R54]Substituted for “In this clause” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

[R55]Inserted by the Finance (No. 2) Act, 1965, w.r.e.f. 1-4-1962.

[R56]See also Circular No. 286, dated 17-11-1980 and Circular No. 623, dated 6-1-1992.

[R57]For relevant case laws, see Case Laws

[R58]Substituted for “to the members of the Defence Services or to the employees of a State Government, a local authority” by the Finance Act, 1974, w.r.e.f. 1-4-1962.

[R59]Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

[R60]Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.

[R61]Inserted by the Finance Act, 1982, w.r.e.f. 1-4-1978.

[R62]

[R63]

[R64]Inserted by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from 1-4-1978.

[R65]Inserted by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from 1-4-1978.

[R66]Substituted for “eight” by the Finance Act, 1999, w.r.e.f. 1-4-1998. Earlier “eight” was substituted for “six” by the Direct Tax Laws (Amendment) Act, 1987, with retrospective effect from 1-7-1986.

[R67]Inserted by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from 1-4-1978.

[R68]Substituted for “or thirty thousand rupees, whichever is less” by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986.

[R69]Specified exemption limit applicable in relation to employees who retire, whether on superannuation or otherwise, after 1-4-1998: Rs. 3,00,000 - Notification No. SO 588(E), dated 31-5-2002.

[R70]Substituted for “shall not exceed thirty thousand rupees” by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986.

[R71]Substituted for “shall not exceed thirty thousand rupees” by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986.

[R72]Third and fourth provisos omitted by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986. Prior to their omission, the third and fourth provisos were amended by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1978.

[R73]“(i)” omitted by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986.

[R74]Clause (ii) omitted by the Direct Tax Laws (Amendment) Act, 1987, w.r.e.f. 1-7-1986.

[R75]Inserted by the Finance Act, 1975, w.e.f. 1-4-1976.

[R76]Substituted for the following by the Finance Act, 1985, w.e.f. 1-4-1986 :

“at the time of his retrenchment, to the extent such compensation does not exceed—

(i) an amount calculated in accordance with the provisions of clause (b) of section 25F of the Industrial Disputes Act, 1947 (14 of 1947) ; or

(ii) twenty thousand rupees,

whichever is less.”

[R77]Clause (b) of section 25F of the Industrial Disputes Act, 1947, read as follows :

“(b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay for every completed year of continuous service or any part thereof in excess of six months ; and”

[R78]Substituted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

[R79]Maximum limit is Rs. 5,00,000 where retrenchment is on or after 1-1-1997 - Notification No. 10969 [F. No. 200/21/97-

IT (A-I)], dated 25-6-1999. See also Division Two.

[R80]For text of clause (g) and clause (s) of section 2 of the Industrial Disputes Act, 1947, defining “employer” and “workman”, respectively, see Appendix One.

[R81]Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.

[R82]Substituted by the Finance Act, 1993, w.e.f. 1-4-1993. Prior to substitution, clause (10C) was inserted by the Finance Act, 1987, w.e.f. 1-4-1987 and later substituted by the Finance Act, 1992, w.e.f. 1-4-1993.

[R83]See also Circular No. 640, dated 26-11-1992 and Circular F. No. 184/7/2003-ITAT, dated 4-3-2004

[R84]

[R85]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R86]Substituted for “authority,” by the Finance Act, 1994, w.e.f. 1-4-1995.

[R87]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.

[R88]Clause (g) of section 3 of the Institutes of Technology Act, 1961, defines “Institute” as follows :

‘(g) “Institute” means any of the Institutions mentioned in section 2 and includes the Indian Institute of Technology, Kharagpur, incorporated under the Indian Institute of Technology (Kharagpur) Act, 1956 (5 of 1956);’

[R89] Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.

[R90]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.

[R91]Inserted by the Finance Act, 2002, w.e.f. 1-4-2002.

[R92]

[R93]

[R94]Substituted for “at the time of his” by the Finance Act, 2003, w.e.f. 1-4-2004.

[R95]Substituted for “voluntary retirement, in accordance with any scheme or schemes of voluntary retirement, to the extent such amount does not exceed five lakh rupees” by the Finance Act, 2000, w.e.f. 1-4-2001.

[R96]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.

[R97]Rule 2BA prescribes requirements for a Scheme of Voluntary Retirement, which are as follows :

(1) It applies to an employee who has completed ten years of service or completed 40 years of age. This condition is not applicable in case of amount received by an employee of a public sector company under scheme of voluntary separation framed by the said company. (2) It applies to all employees (by whatever name called), including workers and executives of the company/authority/co-operative society excepting directors of the company/co-operative society. (3) The scheme of voluntary retirement/separation has been drawn to result in overall reduction in the existing strength of the employees. (4) The vacancy caused by voluntary retirement/separation is not to be filled up, nor, the retiring employee is to be employed in another company or concern belonging to the same management. (5) The amount receivable on account of voluntary retirement/separation of the employees, does not exceed the amount equivalent to three months’ salary for each completed year of service or salary at the time of retirement multiplied by the balance months of service left before the date of his retirement on superannuation.

[R98]Words “and such schemes in relation to companies referred to in sub-clause (ii) or co-operative societies referred to in sub-clause (v) are approved by the Chief Commissioner or, as the case may be, Director-General in this behalf” omitted by the Finance Act, 2000, w.e.f. 1-4-2001. Earlier the quoted words were amended by the Finance Act, 1994, w.e.f. 1-4-1995.

[R99]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R100]For text of section 200 of the Companies Act, 1956, see Appendix One.

[R101]Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Prior to its substitution, clause (10D), as inserted by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1962, and later on amended by the Finance Act, 1995, w.e.f. 1-4-1996 and Finance (No. 2) Act, 1996, w.e.f. 1-10-1996, read as under :

‘(10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy other than any sum received under sub-section (3) of section 80DDA or under a Keyman insurance policy.

Explanation.—For the purposes of this clause, “Keyman insurance policy” means a life insurance policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first mentioned person;’

[R102]Words “Explanation to sub-section (3) of section 80C or the Explanation to sub-section (2A) of section 88, as the case may be” shall be substituted for “Explanation to sub-section (2A) of section 88” by the Finance Act, 2005, w.e.f. 1-4-2006.

[R103]Inserted by the Finance Act, 1968, w.e.f. 1-4-1969.

[R104]For notified public provident fund, see Notification No. SO 2430, dated 2-7-1968.

[R105]Substituted by the Finance Act, 1965, w.r.e.f. 1-4-1962.

[R106]Inserted by the Direct Taxes (Amendment) Act, 1964, w.e.f. 6-10-1964.

[R107]See also Circular No. 90, dated 26-6-1972, Letter F. No. 12/19/64-IT (A-I), dated 2-1-1967 and Circular No. 9/2003, dated 18-11-2003.

[R108] “(not exceeding four hundred rupees per month)” omitted by the Finance Act, 1986, w.e.f. 1-4-1987. Earlier, in this omitted expression “four” was substituted for “three” by the Finance Act, 1975, w.e.f. 1-4-1975.

[R109]Rule 2A prescribes the quantum of exemption available, which will be the least of the following :

Bombay/Calcutta/Delhi/Madras	Other Cities
n Allowance actually received	n Allowance actually received
n Rent paid in excess of 10% of salary	n Rent paid in excess of 10% of salary
n 50 per cent of salary	n 40 per cent of salary

‘Salary’ for this purpose includes basic salary as well as dearness allowance if the terms of employment so provide. It also includes commission based on a fixed percentage of turnover achieved by an employee as per terms of contract of employment but excludes all other allowances and perquisites. In view of Explanation (ii) to rule 2A, basic pay, dearness allowance and commission are determined on ‘due’ basis in respect of the period during which rental accommodation is occupied by the employee in the previous year. Thus, emoluments of a period other than previous year are not to be considered, even though such amount is received (as well as taxed) during the previous year. Again, emoluments of the period during which rental accommodation is not occupied in the previous year are left out of computation. It is important to note that where rent paid is 10 per cent or less than 10 per cent of salary, no exemption will be admissible. Again exemption is denied where an employee lives in his own house, or in a house for which he does not pay rent.

[R110]Inserted by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1976.

[R111]Substituted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Prior to its substitution, clause (14), was amended by the Finance Act, 1975, w.r.e.f. 1-4-1962.

[R112]

[R113]

[R114]Substituted for “as the Central Government may, by notification in the Official Gazette, specify” by the Finance Act, 1995, w.e.f. 1-7-1995.

For prescribed allowances, see rule 2BB(1). For an analysis of rule 2BB, see Appendix Two.

[R115]

[R116]Substituted for “as the Central Government may, by notification in the Official Gazette, specify, to the extent specified in the notification” by the Finance Act, 1995, w.e.f. 1-7-1995.

For prescribed allowances, see rule 2BB(2). For an analysis of rule 2BB, see Appendix Two.

[R117]Inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989.

[R118]Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its omission, clause (14A), as inserted by the Finance Act, 1989, w.e.f. 1-4-1989, read as under :

‘ (14A) any income received by a public financial institution as exchange risk premium from any person borrowing foreign currency from such institution, provided the amount of such premium is credited by such institution to a fund specified under clause (23E).

Explanation.—For the purposes of this clause,—

(i) the expression “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956) ;

(ii) the expression “exchange risk premium” means a premium paid by a person borrowing foreign currency from a public financial institution to cover the risk which may be borne by such institution on account of fluctuations in exchange rate of foreign currencies borrowed by such institution ;’

[R119]Substituted for sub-clauses (i), (ia), (ib), (ii) and (iia) by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Original sub-clauses (ia) and (ib) were inserted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1965, w.e.f. 4-12-1965 and Special Bearer Bonds (Immunities & Exemptions) Act, 1981, w.e.f. 12-1-1981, respectively ; sub-clause (ii) was amended by the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965, the Finance Act, 1979, w.e.f. 1-4-1980 and the Finance Act, 1987, with retrospective effect from 1-4-1983 and sub-clause (iia) was inserted by the Finance Act, 1968, w.e.f. 1-4-1969.

[R120]

[R121]Inserted by the Finance Act, 1982, w.e.f. 1-4-1983.

[R122]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.

[R123]

[R124]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R125] Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.

[R126]

[R127]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

[R128]

[R129]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R130]Inserted by the Finance Act, 1985, w.e.f. 1-4-1985.

[R131]Substituted for “the Explanation to clause (iii) of sub-section (5) of section 11” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

[R132]Inserted by the Taxation Laws (Amendment) Act, 2003, w.r.e.f. 1-4-2001.

[R133]Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.

[R134]Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to its substitution, item (a), as amended by the Finance Act, 1983, w.e.f. 1-4-1983, read as under :

“(a) by Government or a local authority on moneys borrowed by it from, or debts owed by it to, sources outside India ;”

[R135]Substituted for “a loan agreement entered into with any such financial institution” by the Finance Act, 2001, w.e.f. 1-4-2002.

[R136]

[R137]See also Letter [F. No. 21/221/64-IT(A-I)], dated 24-8-1964.

[R138]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.

[R139]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.

[R140]Substituted for “in any case where the loan or debt is approved by the Central Government, having regard to its terms generally and in particular to the terms of its repayment” by the Finance Act, 1964, w.e.f. 1-4-1964.

[R141]

[R142]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.

[R143]Explanation renumbered as Explanation 1 by the Taxation Laws (Amendment) Act, 2003, w.r.e.f. 1-4-1962.

[R144]Inserted by the Taxation Laws (Amendment) Act, 2003, w.r.e.f. 1-4-1962.

[R145]Inserted by the Direct Taxes (Amendment) Act, 1974, w.r.e.f. 1-4-1973.

[R146]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.

[R147]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

[R148]Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.

[R149]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.

[R150]Inserted by the Direct Taxes (Amendment) Act, 1974, w.r.e.f. 1-4-1973.

[R151]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.

[R152]Inserted by the Finance Act, 1976, w.e.f. 1-6-1976.

[R153]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.

[R154]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

[R155]The italicised words shall be omitted by the Finance Act, 2005, w.e.f. 1-4-2006. The said italicised words were inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2006.

[R156]Inserted by the Finance Act, 1993, w.e.f. 1-4-1993.

[R157]Should be read as ‘clause’.

[R158] Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.

[R159]Substituted for “being a company approved by the Central Government for the purposes of clause (viii) of sub-section (1) of section 36” by the Finance Act, 2000, w.e.f. 1-4-2000.

[R160]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R161]Substituted for “this item” by the Finance Act, 1983, w.e.f. 1-4-1983.

[R162]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

[R163]Clause (g) of section 2 of the Foreign Exchange Regulation Act, 1973, defines “foreign currency” as follows:

‘(g) “foreign currency” means any currency other than *Indian currency;’

*“Indian currency” has been defined in clause (k)

For definitions of above terms under FEMA, 1999, see Appendix one.

[R164]Inserted by the Finance Act, 1987, w.e.f. 1-4-1987.

[R165]

[R166]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.

[R167]Inserted by the Finance Act, 1990, w.e.f. 1-4-1991.

[R168]For notified deposit schemes for retired Government employees/employees of public sector companies

[R169]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

[R170]Explanation renumbered as Explanation 1 by the Finance Act, 1999, w.e.f. 1-4-2000.

[R171] Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R172]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.

[R173]Inserted by the Taxation Laws (Amendment) Act, 2003, w.r.e.f. 1-4-1991.

[R174]Substituted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997. Prior to its substitution, clause (e), as inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991, read as under :

“(e) the operation of ships or aircrafts;”

[R175]Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to its substitution, Explanation 1A, as inserted by the Finance Act, 2000, w.e.f. 1-4-2001, read as under :

‘Explanation 1A.—For the purposes of this sub-clause, the expression “interest” shall not include interest paid on delayed payment of loan or on default.’

[R176]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.

[R177]Substituted by the Finance Act, 1995, w.e.f. 1-4-1995. Prior to its substitution, sub-clause (v), as inserted by the Finance Act, 1990, w.r.e.f. 1-4-1989 and later amended by the Finance Act, 1993, w.r.e.f. 2-11-1992, read as under:

“(v) interest on securities held by the Welfare Commissioner, Bhopal Gas Victims, Bhopal, in Reserve Bank’s SGL Account No. SL/DH 048;”

[R178]

[R179]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.

[R180]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.

[R181]

[R182]Substituted by the Finance Act, 1995, w.e.f. 1-4-1996. Prior to its substitution, clause (15A), as inserted by the Income-tax (Amendment) Act, 1989, w.e.f. 24-1-1989, read as under :

‘(15A) any payment made, by an Indian company engaged in the business of operation of aircraft, to acquire an aircraft on lease from the Government of a foreign State or a foreign enterprise under an agreement approved by the Central Government in this behalf.

Explanation.—For the purpose of this clause, “foreign enterprise” means a person who is a non-resident;’

[R183]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.

[R184]Substituted for “entered before the 1st day of April, 1997” by the Finance Act, 1999, w.e.f. 1-4-2000.

[R185]Words “1st day of October, 2005” shall be substituted for “1st day of April, 2005” by the Finance Act, 2005, w.e.f. 1-4-2006.

[R186]See also Letter [F. No. 24/35/66-IT(A-I)], dated 4-10-1966, Letter [F. No. 24/2/69-IT(A-I)], dated 14-1-1968, Letter [F. No. 24/25/68-IT(A-I)], dated 18-9-1966, Letter [F. No. 24/22/67-IT(A-I)], dated 7-7-1967, Letter [F. No. 25/37/66-IT(A-I)], dated 2-12-1966, Letter [F. No. 24/7/64-IT(A-I)], dated 24-3-1964, Letter [F. No. 24/4/64-IT(A-I)], dated 12-2-1964, Letter [F. No. 24/34/62-IT(A-I)], dated 25-1-1963, Circular No. 3(XXIII-23), dated 12-1-1961, Circular No. 49 (XXIII-12), dated 13-12-1956, Income-tax Circulars, published by Directorate of Inspection (Research, Statistics and Publication), 1968 edn., p. 89 and Circular No. 11 (XXIII-24), dated 4-4-1961.

[R187]

[R188]Substituted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1986. Prior to its substitution, clause (17), was amended by the Finance Act, 1976, w.e.f. 1-4-1976.

[R189]Word “and” omitted by the Finance Act, 1987, w.r.e.f. 1-4-1986.

[R190]Substituted by the Finance Act, 1987, w.r.e.f. 1-4-1986. Earlier sub-clause (ii) was amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1986.

[R191]Substituted for “six hundred” by the Finance Act, 1997, w.e.f. 1-4-1998.

[R192]

[R193]Substituted for clauses (17A), (17B) and (18) by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Original clauses (17A) and (17B) were inserted by the Direct Taxes (Amendment) Act, 1974, with retrospective effect from 1-4-1973. Clause (17A) was later on amended by the Finance Act, 1980, w.e.f. 1-4-1980.

[R194]

[R195]

[R196] Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.

[R197]

[R198]Prior to its omission, clause (18A), as inserted by the Rulers of Indian States (Abolition of Privileges) Act, 1972, w.e.f. 9-9-1972, read as under :

“(18A) any ex gratia payments made by the Central Government consequent on the abolition of privy purse;”

[R199]Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. Earlier original clause (19) was omitted by the Rulers of Indian States (Abolition of Privileges) Act, 1972, w.e.f. 2-4-1973.

[R200]See rule 2BBA for prescribed circumstances and conditions.

[R201]Inserted by the Rulers of Indian States (Abolition of Privileges) Act, 1972, w.r.e.f. 28-12-1971.

[R202]

[R203]

[R204]‘ “Interest on securities,” ’ omitted by the Finance Act, 1988, w.e.f. 1-4-1989.

[R205]Substituted for “within its own jurisdictional area” by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.

[R206]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R207]See Appendix One.

[R208]See Appendix One.

[R209]See Appendix One.

[R210]Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its omission, clause (20A), as inserted by the Finance Act, 1970, w.r.e.f. 1-4-1962, read as under :

“ (20A) any income of an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;”

[R211]Substituted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1990. Earlier clause (21), was amended by the Finance Act, 1983, w.e.f. 1-4-1984, Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

[R212]See also Circular No. 400, dated 19-10-1984 and Circular No. 584, dated 13-11-1990.

[R213]See rule 17 and Form No. 10, for notice of accumulation of income by charitable trust or institution [to be furnished before expiry of time allowed under section 139(1)].

[R214]Substituted by the Finance Act, 1992, w.r.e.f. 1-4-1990.

[R215]Substituted for the words “Provided further” by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1990.

[R216]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R217] Prior to its omission, clause (22) read as under :

“(22) any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit;”

Clauses (22) and (22A) are now re-enacted in section 10(23C).

[R218]Prior to its omission, clause (22A), as inserted by the Finance Act, 1970, w.e.f. 1-4-1970, read as under :

“(22A) any income of a hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit;”

[R219]Inserted by the Finance Act, 1994, w.e.f. 1-4-1994.

[R220]

[R221] Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R222]Prior to its omission, clause (23), as amended by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, substituted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1990 and further amended by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1990, Finance Act, 1992, w.r.e.f. 1-4-1990/w.e.f. 1-4-1992 and Finance Act, 2000, w.e.f. 1-4-2001, read as under :

‘(23) any income of an association or institution established in India which may be notified by the Central Government in the Official Gazette having regard to the fact that the association or institution has as its object the control, supervision, regulation or encouragement in India of the games of cricket, hockey, football, tennis or such other games or sports as the Central Government may, by notification in the Official Gazette, specify in this behalf :

Provided that the association or institution shall make an application in the prescribed form and manner to the prescribed authority for the purpose of grant of the exemption, or continuance thereof, under this clause:

Provided further that the Central Government may, before notifying the association or institution under this clause, call for such documents (including audited annual accounts) or information from the association or institution as it thinks necessary in order to satisfy itself about the genuineness of the activities of the association or institution and that Government may also make such inquiries as it may deem necessary in this behalf:

Provided also that the association or institution,—

(a) applies its income or accumulates it for application, wholly and exclusively to the objects for which it is established and the provisions of sub-section (2) and sub-section (3) of section 11 shall apply in relation to such accumulation subject to the following modifications, namely :—

(i) in sub-section (2),—

(1) the words, brackets, letters and figure “referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section” shall be omitted;

(2) for the words “to charitable or religious purposes”, the words “for the purposes of games or sports” shall be substituted;

(3) the reference to “Assessing Officer” in clause (a) thereof shall be construed as a reference to the “prescribed authority” referred to in the first proviso to this clause;

(ii) in sub-section (3), in clause (a), for the words “charitable or religious purposes”, the words “the purposes of games or sports” shall be substituted; and

(b) does not invest or deposit its funds, other than—

(i) any assets held by the association or institution where such assets form part of the corpus of the fund of the association or institution as on the 1st day of June, 1973;

(ii) any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the association or institution before the 1st day of March, 1983;

(iii) any accretion to the shares, forming part of the corpus of the fund mentioned in sub-clause (i), by way of bonus shares allotted to the association or institution;

(iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify,

for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11; and

(c) does not distribute any part of its income in any manner to its members except as grants to any association or institution affiliated to it;

(d) applies the amount received by way of donations referred to in clause (c) of sub-section (2) of section 80G for purposes of development of infrastructure for games or sports in India or for sponsoring of games and sports in India :

Provided also that the exemption under this clause shall not be denied in relation to any funds invested or deposited before the 1st day of April, 1989 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 if such funds do not continue to remain so invested or deposited after the 30th day of March, 1993 :

Provided also that the exemption under this clause shall not be denied in relation to voluntary contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred to in clause (b) of the third proviso to this clause, subject to the condition that such voluntary contribution is not held by the association or institution, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later :

Provided also that nothing contained in this clause shall apply in relation to any income of the association or institution, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business :

Provided also that any notification issued by the Central Government under this clause in relation to any association or institution shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued), as may be specified in the notification*;’

*For approved sports associations/institutions

[R223]Inserted by the Finance (No. 2) Act, 1965, w.r.e.f. 1-4-1962.

[R224]See also Circular No. 584, dated 13-11-1990.

[R225]‘ “Interest on securities” or’ omitted by the Finance Act, 1988, w.e.f. 1-4-1989.

[R226]

[R227]

[R228]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R229]Inserted by the Finance (No. 2) Act, 1980, w.r.e.f. 1-4-1962.

[R230]Inserted by the Finance Act, 1995, w.e.f. 1-4-1996.

[R231]

[R232]See rule 16C and Form No. 9.

[R233]Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.

[R234]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.

[R235]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.

[R236]For text of section 2(5B) of the Insurance Act, 1938, see Appendix One.

[R237]Inserted by the Finance Act, 1974, w.e.f. 1-6-1974.

[R238]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R239]Clauses (d) and (h) of section 2 of the Khadi and Village Industries Commission Act, 1956, define “khadi” and “village industries” as follows :

‘(d) “khadi” means any cloth woven on handlooms in India from cotton, silk or woollen yarn handspun in India or from a mixture of any two or all of such yarns;

(h) “village industries” means all or any of the industries specified in the Schedule and includes any other industry deemed to be specified in the Schedule by reason of a notification under section 3.’

[R240]Inserted by the Finance Act, 1979, w.r.e.f. 1-4-1962.

[R241]

[R242]Inserted by the Finance Act, 1979, w.r.e.f. 1-4-1962.

[R243]Inserted by the Finance Act, 1993, w.e.f. 1-4-1994.

[R244]

[R245]Inserted by the Finance (No. 2) Act, 1996, w.r.e.f. 1-4-1992.

[R246]Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.

[R247]Substituted for “three previous years relevant to the assessment years beginning on the 1st day of April, 2001 and ending on the 31st day of March, 2004” by the Finance Act, 2003, w.e.f. 1-4-2004.

[R248]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.

[R249]See also Circular No. 557, dated 19-3-1990, Circular No. 580, dated 14-9-1990 and Circular No. 584, dated 13-11-1990.

[R250]Reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, it was omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date.

[R251]Inserted by the Finance Act, 1993, w.e.f. 1-4-1993.

[R252]Sub-clauses (iiiab) to (iiiae) inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R253]For the meaning of the terms/expressions “education”, “educational institution”, “other educational institution”, “existing” and “solely”

[R254]For the meaning of the terms/expressions “education”, “educational institution”, “other educational institution”, “existing” and “solely”

[R255]For the meaning of the terms/expressions “education”, “educational institution”, “other educational institution”, “existing” and “solely”

[R256]For the meaning of the terms/expressions “education”, “educational institution”, “other educational institution”, “existing” and “solely”

[R257]For the meaning of the terms/expressions “education”, “educational institution”, “other educational institution”, “existing” and “solely”

[R258]For the meaning of the terms/expressions “education”, “educational institution”, “other educational institution”, “existing” and “solely”

[R259]Amount prescribed is Rs. 1 crore vide rule 2BC.

[R260]Amount prescribed is Rs. 1 crore vide rule 2BC.

[R261]Substituted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1990. Earlier, sub-clauses (iv) and (v), were omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and later reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

[R262]For complete list of approved funds/institutions

[R263]For complete list of approved trusts/institutions

[R264]Sub-clauses (vi) and (via) inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R269]Prescribed authority is Chief Commissioner or Director General. See rule 2CA and Form No. 56D.

[R270]For notified hospital/institution

[R271]Prescribed authority is Chief Commissioner or Director General. See rule 2CA and Form No. 56D.

[R272]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R273]

[R274]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R275]See rule 2C(3) and Form No. 56.

[R276]The prescribed authority, for purposes of section 10(23C)(iv)/(v), under rule 2C(1) is Director General (Income-tax Exemptions). For purposes of section 10(23C)(vi)/(via) prescribed authority is Chief Commissioner or Director General under rule 2CA.

[R277] Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R278] Substituted by the Finance Act, 1999, w.e.f. 1-4-1999. Prior to its substitution, the second proviso, as amended by the

Finance (No. 2) Act, 1998, w.e.f. 1-4-1999, read as under :

“Provided further that the Central Government may, before notifying the fund or trust or institution or any university or other educational institution or any hospital or other medical institution under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), call for such documents (including audited annual accounts) or information from the fund or trust or institution or any university or other educational institution or any hospital or other medical institution as it thinks necessary in order to satisfy itself about the genuineness of the activities of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution and that Government may also make such inquiries as it may deem necessary in this behalf :”

[R279] Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R280]

[R281]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R282]Substituted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its substitution, clause (a), as amended by the Finance Act, 2001, w.e.f. 1-4-2002, read as under :

“(a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established and in a case where more than twenty-five per cent of its income is accumulated on or after the 1st day of April, 2001, the period of the accumulation of the amount exceeding twenty-five per cent of its income shall in no case exceed five years; and”

[R283]Substituted by the Finance Act, 1992, w.r.e.f. 1-4-1990.

[R284] Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R285]

[R286]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R287]Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.

[R288]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R289]

[R290]Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.

[R291]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R292]Substituted for “1992” by the Finance Act, 1992, w.e.f. 1-4-1992. Earlier “1992” was substituted for “1990” by the

Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1990.

[R293]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R294]Inserted by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1990.

[R295] Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R296]Inserted by the Finance Act, 1998, w.e.f. 1-4-1999.

[R297]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R298]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R299]Inserted by the Taxation Laws (Amendment) Act, 2001, w.r.e.f. 3-2-2001.

[R300]Inserted by the Finance Act, 2002, w.r.e.f. 3-2-2001.

[R301]Substituted for “2003” by the Finance Act, 2003, w.r.e.f. 3-2-2001. Earlier “2003” was substituted for “2002” by the Finance Act, 2002, w.r.e.f. 3-2-2001.

[R302]Omitted by the Finance Act, 2002, w.e.f. 1-4-2002. Prior to its omission, the tenth proviso, as inserted by the Finance Act, 2001, w.e.f. 1-4-2002, read as under :

“Provided also that where the total receipts of the fund or institution referred to in sub-clause (iv) or of any trust or institution referred to in sub-clause (v) or of any University or other educational institution referred to in sub-clause (vi) or of any hospital or other institution referred to in sub-clause (via) exceed one crore rupees in any preceding year, the fund or trust or institution or University or other educational institution or hospital or other institution, as the case may be, shall—

(i) publish its accounts in a local newspaper; and

(ii) furnish along with the application prescribed in the first proviso to this clause, the copy of the local newspaper in which such accounts have been published;”

[R303]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R304]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R305]Substituted for the portion beginning with the words “any income of such Mutual Fund” and ending with the words

“specify in this behalf” by the Finance Act, 1995, w.e.f. 1-7-1995. Prior to substitution, the said portion, as amended by the Finance Act, 1988, w.e.f. 1-4-1988, the Direct Tax Laws (Amendment) Act, 1989, w.r.e.f. 1-4-1988 and the Finance Act, 1992, w.e.f. 1-4-1993, read as under :

“any income of such Mutual Fund set up by a public sector bank or a public financial institution or authorised by the Securities and Exchange Board of India or the Reserve Bank of India and subject to such conditions as the Central Government may, by notification in the Official Gazette, specify in this behalf.”

[R306]Substituted for “any income of—” by the Finance Act, 1999, w.e.f. 1-4-2000.

[R307]Substituted for “any income of” by the Finance Act, 2003, w.e.f. 1-4-2004. Earlier the words “subject to the provisions of Chapter XII-E,” were omitted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R308]

[R309]For text of section 4A of the Companies Act, 1956, and notified institutions thereunder, see Appendix One.

[R310]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

[R311]Clause (a) of section 2(1) of the Securities and Exchange Board of India Act, 1992, defines “Board” as follows:

‘(a) “Board” means the Securities and Exchange Board of India established under section 3;’

[R312]Prior to its omission, clause (23E), as inserted by the Finance Act, 1989, w.e.f. 1-4-1989, read as under :

‘(23E) any income of such Exchange Risk Administration Fund set up by public financial institutions, either jointly or separately, as the Central Government may, by notification in the Official Gazette, specify in this behalf:

Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part, with a public financial institution, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall accordingly be chargeable to income-tax.

Explanation.—For the purposes of this clause, the expression “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);’

[R313]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.

[R314]Inserted by the Finance Act, 2002, w.e.f. 1-4-2002.\

[R315]Word “Scale” omitted by the Finance Act, 2003, w.r.e.f. 1-4-2002.

[R316]Inserted by the Finance Act, 1995, w.e.f. 1-4-1996.

[R317]Prescribed authority is Director of Income-tax (Exemptions).

[R318]See rule 2D and Form Nos. 56A, 56B and 56C.

[R319]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.

[R320]Third and fourth provisos omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Prior to their omission, the third and fourth provisos, as inserted by the Finance Act, 1995, w.e.f. 1-4-1996, read as under :

“Provided also that if the aforesaid equity shares are transferred (other than in the event of the said shares being listed in a recognised stock exchange in India) by a venture capital fund or a venture capital company to any person at any time within a period of three years from the date of their acquisition, the aggregate amount of income by way of dividends on such equity shares which has not been included in the total income of the previous year or years preceding the previous year in which such transfer has taken place shall be deemed to be the income of the venture capital fund or of the venture capital company of the previous year in which such transfer has taken place:

Provided also that the exemption shall not be allowed in respect of the long-term capital gains, if any, arising on such transfer of equity shares as is mentioned in the third proviso.”

[R321]Third and fourth provisos omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Prior to their omission, the third and fourth provisos, as inserted by the Finance Act, 1995, w.e.f. 1-4-1996, read as under :

Provided also that the exemption shall not be allowed in respect of the long-term capital gains, if any, arising on such transfer of equity shares as is mentioned in the third proviso.”

[R322]Clauses (c) and (d) substituted for clause (c) by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Prior to substitution, clause (c), as amended by the Finance Act, 1997, w.e.f. 1-4-1998, read as under :

‘(c) “venture capital undertaking” means such domestic company whose shares are not listed in a recognised stock exchange in India and which is engaged in the business of generation or generation and distribution of electricity or any other form of power or business of providing telecommunication services or in the manufacture or production of such articles or things (including computer software) as may be notified by the Central Government in this behalf;’

[R323]

[R324]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.

[R325]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004. Earlier, it was omitted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R326]See rule 2DA and Form Nos. 56AA, 56BA and 56CA.

[R327]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.

[R328]See also notification issued under section 10(23F).

[R329]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.

[R330]Explanation numbered as Explanation 1 by the Finance Act, 2001, w.e.f. 1-4-2001.

[R331]For notified venture capital company/fund

[R332]Substituted by the Finance Act, 2001, w.e.f. 1-4-2001. Prior to its substitution, sub-clause (i) read as under :

“(i) operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908);”

[R333]For notified venture capital company/fund.

[R334]Substituted by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004. Prior to its substitution, clause (c) of Explanation 1

read as under :

‘(c) “venture capital undertaking” means a domestic company—

(i) whose shares are not listed in a recognised stock exchange in India;

(ii) which is engaged in the business for providing services, production or manufacture of an article or thing but does not include such activities or sectors which are specified, with the approval of the Central Government, by the Securities and Exchange Board of India, by notification in the Official Gazette, in this behalf.’

[R335]

[R336]Omitted by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004. Prior to its omission, Explanation 2, as inserted by the Finance Act, 2001, w.e.f. 1-4-2001, read as under :

“Explanation 2.—For the removal of doubts it is hereby declared that the income of a venture capital company or venture capital fund shall continue to be exempt if the shares of the venture capital undertaking, in which the venture capital company or venture capital fund has made the initial investment, are subsequently listed in a recognised stock exchange in India;”

[R337]Substituted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Prior to its substitution, clause (23G), as inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and later on amended by the Finance Act, 1997, w.e.f. 1-4-1998, read as under :

‘(23G) any income by way of dividends, interest or long-term capital gains of an infrastructure capital fund or an infrastructure capital company from investments made by way of shares or long-term finance in any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility.

Explanation.—For the purposes of this clause,—

(a) “infrastructure capital company” means such company as has made investments by way of acquiring shares or providing long-term finance to an enterprise carrying on the business of developing, maintaining and operating infrastructure facility;

(b) “infrastructure capital fund” means such fund operating under a trust deed, registered under the provisions of the Registration Act, 1908 (16 of 1908), established to raise monies by the trustees for investment by way of acquiring shares or providing long-term finance to an enterprise carrying on the business of developing, maintaining and operating infrastructure facility;

(i) a road, highway, bridge, airport, port, rail system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette which fulfils the conditions specified in sub-section (4A) of section 80-IA;

(ii) a water supply project, irrigation project, sanitation and sewerage system which fulfils the conditions specified in sub-section (4A) of section 80-IA;

(iii) a project for generation or generation and distribution of electricity or any other form of power where such project starts generating power on or after 1st day of April, 1993;

(iv) a project for providing telecommunication services on or after the 1st day of April, 1995;

(d) “long-term finance” shall have the meaning assigned to it in clause (viii) of sub-section (1) of section 36;’

[R338]See also Circular No. 780, dated 4-10-1999 and Circular No. 793, dated 23-6-2000.

[R339]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004. Earlier the said words were omitted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R340]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.

[R341]Substituted for “any enterprise wholly engaged in the business of (i) developing, (ii) maintaining and operating, or (iii) developing, maintaining and operating any infrastructure facility” by the Finance Act, 2001, w.e.f. 1-4-2002. Earlier the quoted words were amended by the Finance Act, 1999, w.e.f. 1-4-2000.

[R342]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R343]For notified infrastructure capital fund/enterprise

[R344]See rule 2E and Form No. 56E.

[R345]Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.

[R346]Explanation numbered as Explanation 1 by the Income-tax (Second Amendment) Act, 1998, w.e.f. 1-4-1999.

[R347]Substituted for the portion beginning with the words “in the business of” and ending with “any infrastructure facility” by the Finance Act, 2003, w.r.e.f 1-4-2002. Prior to its substitution, the above mentioned portion as substituted for “in the business of developing, maintaining and operating infrastructure facility;” by the Finance Act, 2000, w.e.f. 1-4-2000, read as under :

“in the business of—

(i) developing; or

(ii) maintaining and operating; or

(iii) developing, maintaining and operating,

any infrastructure facility;”

[R348]Substituted for the portion beginning with the words “in the business of” and ending with “any infrastructure facility” by the Finance Act, 2003, w.r.e.f 1-4-2002. Prior to its substitution, the above mentioned portion as substituted for “in the business of developing, maintaining and operating infrastructure facility;” by the Finance Act, 2000, w.e.f. 1-4-2000, read as under :

“in the business of—

(i) developing; or

(ii) maintaining and operating; or

(iii) developing, maintaining and operating,

any infrastructure facility;”

[R349]Omitted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to its omission, clause (c), as amended by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999, Finance Act, 1999, w.e.f. 1-4-2000 and Finance Act, 2000, w.e.f. 1-4-2001, read as under :

‘(c) “infrastructure facility” means—

(i) a road, highway, bridge, airport, port, rail system, a water supply project, irrigation project, water treatment system, solid waste management system, sanitation and sewerage system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette and which fulfils the conditions specified in clause (i) of sub-section (4) of section 80-IA ;

(ii) an industrial undertaking which—

(a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2003;

(b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 2003;

(iii) a project for providing telecommunication services on or after the 1st day of April, 1995;

(iv) a project for housing which fulfils the conditions specified in sub-section (10) of section 80-IB;

(v) an undertaking for developing, developing and operating or maintaining and operating an industrial park notified by the Central Government under clause (iii) of sub-section (4) of section 80-IA;’

[R350]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.

[R351]Clause (dd) of section 2 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, defines “co-operative bank” as follows :

‘(dd)“co-operative bank” means a State Co-operative Bank, a Central Co-operative Bank and a Primary Co-operative Bank;’

[R352]Clauses (g) and (h) inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R353]Inserted by the Income-tax (Second Amendment) Act, 1998, w.e.f. 1-4-1999.

[R354]Substituted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997. Prior to its substitution, clause (24), as amended by the Finance Act, 1988, w.e.f. 1-4-1989, read as under :

‘(24) any income chargeable under the heads “Income from house property” and “Income from other sources” of a registered union within the meaning of the Indian Trade Unions Act, 1926 (16 of 1926), formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen;’

[R355]

[R356]Inserted by the Finance Act, 1972, w.e.f. 1-4-1973.

[R357]Inserted by the Labour Provident Fund Laws (Amendment) Act, 1976, w.e.f. 1-8-1976.

[R358]Inserted by the Finance Act, 1995, w.r.e.f. 1-4-1962.\

[R359]Substituted by the North-Eastern Areas (Reorganisation) (Adaptation of Laws on Union Subjects) Order, 1974, with retrospective effect from 21-1-1972. Earlier, clause (26) was amended first by the State of Nagaland (Adaptation of Laws on Union Subjects) Order, 1965, with retrospective effect from 1-12-1963 and then by the Taxation Laws (Amendment) Act, 1970, with retrospective effect from 1-4-1962.

[R360]

[R361]Clause (25) of article 366 of the Constitution defines “Scheduled Tribes” as under :

‘(25) “Scheduled Tribes” means such tribes or tribal communities or parts of or groups within such tribes or tribal communities as are deemed under article 342 to be Scheduled Tribes for the purposes of this Constitution;’

[R362]Substituted for “States of Nagaland, Manipur and Tripura or in the Union territories of Arunachal Pradesh and Mizoram” by the Finance Act, 1994, w.e.f. 1-4-1995.

[R363]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.

[R364]Substituted for “, States or Union territories aforesaid” by the Finance Act, 1994, w.e.f. 1-4-1995.

[R365]Inserted by the Finance (No. 2) Act, 1965, w.r.e.f. 1-4-1962.

[R366]“(not being an individual who is in the service of Government)” omitted by the Finance (No. 2) Act, 1971, w.r.e.f. 1-4-1962.

[R367]Substituted for “1986” by the Finance Act, 1985, w.e.f. 1-4-1985. Earlier “1986” was substituted for “1983” by the Finance Act, 1983, w.e.f. 1-4-1983, “1983” was substituted for “1980” by the Finance Act, 1980, w.e.f. 1-4-1980, “1980” was substituted for “1975” by the Finance (No. 2) Act, 1977, with retrospective effect from 1-4-1975 and “1975” was substituted for “1970” by the Finance (No. 2) Act, 1971, w.r.e.f. 1-4-1970.

[R368]Existing Explanation renumbered as Explanation 1 by the Finance Act, 1983, w.r.e.f. 1-4-1980.

[R369] Should be read as clause (1), etc.

[R370]Inserted by the Finance Act, 1983, w.r.e.f. 1-4-1980.

[R371]Omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Prior to its omission, clause (26AA), as inserted by the Finance Act, 1989, w.e.f. 1-4-1990, read as under :

“(26AA) any income of a person by way of winnings from any lottery, the draw of which is held in pursuance of any agreement entered into on or before the 28th day of February, 1989 between the State Government of Sikkim and the organising agents of such lottery, where such person is resident in the State of Sikkim in any previous year.

Explanation.—For the purposes of this clause, a person shall be deemed to be resident in the State of Sikkim if he fulfils the requirements of clause (1) or clause (2) or clause (3) or clause (4) of section 6, as the case may be, subject to the modifications that—

(i) references in those clauses to India shall be construed as references to the State of Sikkim; and

(ii) in sub-clause (i) of clause (3), reference to Indian company shall be construed as reference to a company formed and registered under any law for the time being in force in the State of Sikkim and having its registered office in that State in that year;”

[R372]Inserted by the Finance Act, 1980, w.r.e.f. 1-4-1972.

[R373]Substituted for “members of either the Scheduled Castes or the Scheduled Tribes or of both” by the Finance Act, 1994, w.r.e.f. 1-4-1993.

[R374]Substituted by the Finance Act, 1994, w.r.e.f. 1-4-1993. Earlier Explanation, as inserted by the Finance Act, 1980, w.r.e.f. 1-4-1972, read as under :

‘Explanation.—For the purposes of this clause, “Scheduled Castes” and “Scheduled Tribes” shall have the meanings respectively assigned to them in clauses (24) and (25) of article 366 of the Constitution;’

[R375]Clause (24) of article 366 of the Constitution defines “Scheduled Castes” as under:

‘(24) “Scheduled Castes” means such castes, races or tribes or parts of or groups within such castes, races or tribes as are deemed under article 341 to be Scheduled Castes for the purposes of this Constitution;’

[R376]

[R377]Inserted by the Finance Act, 1995, w.e.f. 1-4-1995.

[R378]

[R379]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R380] Inserted by the Finance Act, 1992, w.r.e.f. 1-4-1989. Earlier clause (27) was omitted by the Finance Act, 1975, w.e.f. 1-4-1976 and re-enacted in section 80JJ with modification. Originally, clause (27) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964 and later on amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.

[R381]Omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Prior to its omission, clause (28) was inserted by the Finance Act, 1965, w.e.f. 1-4-1965 and substituted by the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965.

[R382]Prior to its omission, clause (29), as inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968, read as under :

“(29) in the case of an authority constituted under any law for the time being in force for the marketing of commodities, any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities;”

[R383]Inserted by the Finance Act, 1999, w.e.f. 11-5-1999.

[R384]Inserted by the Taxation Laws (Amendment) Act, 1970, w.r.e.f. 1-4-1969.

[R385]See rule 8(2).

[R386]

[R387]Inserted by the Finance Act, 1984, w.e.f. 1-4-1985.

[R388]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R389]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R390]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.

[R391]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

[R392]Inserted by the Finance Act, 2003, w.e.f. 1-4-2003. Earlier section 33 was inserted by the Finance Act, 1997, w.e.f. 1-4-1998, substituted by the Finance Act, 1999, w.e.f. 1-4-2000, amended by the Finance Act, 2001, w.r.e.f. 1-4-2000 and later on omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to omission, clause (33) read as under :

“(33) any income by way of—

(i) dividends referred to in section 115-O; or

(ii) income received in respect of units from the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963); or

(iii) income received in respect of the units of a mutual fund specified under clause (23D) :

Provided that this clause shall not apply to any income arising from transfer of units of the Unit Trust of India or of a mutual fund, as the case may be.”

[R393]For text of the Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, see Direct Taxes Manual, Vol. 3.

[R394]Clauses (34), (35) and (36) inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R395]For text of the Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, see Direct Taxes Manual, Vol. 3.

[R396]For text of the Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, see Direct Taxes Manual, Vol. 3.

[R397]Clauses (37) and (38) inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.

[R398]Substituted by the Finance Act, 2000, w.e.f. 1-4-2001. Prior to its substitution, section 10A was inserted by the Finance Act, 1981, w.e.f. 1-4-1981, and later on amended by the Taxation Laws (Amendments and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1987, Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988/1-4-1989, Finance Act, 1987, w.r.e.f. 1-4-1981/w.e.f. 1-4-1988, Finance Act, 1988, w.e.f. 1-4-1989, Finance Act, 1993, w.e.f. 1-4-1994/w.r.e.f. 1-4-1991, Finance Act, 1995, w.e.f. 1-4-1996, Income-tax (Second Amendment) Act, 1998, w.e.f. 1-4-1999 and Finance Act, 1999, w.e.f. 1-4-2000.

[R399]Substituted for “undertaking was first set up” by the Finance Act, 2001, w.e.f. 1-4-2001.

[R400]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003. Earlier the third proviso was omitted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to omission, third proviso read as under :

“Provided also that the profits and gains derived from such domestic sales of articles or things or computer software as do not exceed twenty-five per cent of total sales shall be deemed to be the profits and gains derived from the export of articles or things or computer software:”

[R401]Sub-sections (1A) to (1C) substituted for sub-section (1A) by the Finance Act, 2003, w.e.f. 1-4-2004. Prior to its substitution, sub-section (1A), as inserted by the Finance Act, 2002, w.e.f. 1-4-2003, read as under :

“(1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be hundred per cent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, and thereafter, fifty per cent of such profits and gains for further two assessment years.”

[R402]See rule 16DD & Form No. 56FF.

[R403]Substituted by the Finance Act, 2001, w.e.f. 1-4-2001. Prior to its substitution, sub-section (4) read as under :

“(4) For the purposes of sub-section (1), the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the assessee.”

[R404]Substituted for “sub-section (1)” by the Finance Act, 2003, w.e.f. 1-4-2003.

[R405]Substituted for “sub-section (1)” by the Finance Act, 2003, w.e.f. 1-4-2003.

[R406]See rule 16D and Form No. 56F.

[R407]Inserted by the Finance Act, 2003, w.r.e.f. 1-4-2001.

[R408]Inserted by the Finance Act, 2003, w.r.e.f. 1-4-2001.

[R409]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R410]Prior to its omission, sub-section (9) read as under :

“(9) Where during any previous year, the ownership or the beneficial interest in the undertaking is transferred by any means, the deduction under sub-section (1) shall not be allowed to the assessee for the assessment year relevant to such previous year and the subsequent years.”

[R411]Prior to its omission, sub-section (9A), as inserted by the Finance Act, 2002, w.e.f. 1-4-2003, read as under :

“(9A) Notwithstanding anything contained in sub-section (9), where as a result of reorganisation of business, a firm or a sole proprietary concern is succeeded by a company and the ownership or beneficial interest in the undertaking of the firm or the sole proprietary concern is transferred to the company, the deduction under sub-section (1) in respect of such undertaking shall be allowed to the company, as the same would have been allowed to such firm or sole proprietary concern, as the case may be, if the reorganisation had not taken place:

Provided that,—

(a) in the case of a firm, the aggregate of the shareholding in the company of the partners of the firm is not less than fifty-one per cent of the total voting power in the company and their shareholding continues to be as such for the period for which the company is eligible for deduction under this section;

(b) in the case of a sole proprietary concern, the shareholding of the sole proprietor in the company is not less than fifty-one per cent of the total voting power in the company and his shareholding continues to remain as such for the period for which the company is eligible for deduction under this section.”

[R412]Prior to its omission, Explanation 1, as amended by the Finance Act, 2001, w.e.f. 1-4-2001, read as under :

“Explanation 1.—For the purposes of this section, in the case of a company, where on the last day of any previous year, the shares of the company carrying not less than fifty-one per cent of the voting power are not beneficially held by persons who held the shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year in which the undertaking was set up, the company shall be presumed to have transferred its ownership or the beneficial interest in the undertaking :

Provided that nothing contained in this Explanation shall apply to any change in the shareholding of the company as a result of—

(a) its becoming a company in which the public are substantially interested; or

(b) disinvestment of its equity shares by any venture capital company or venture capital fund.”

[R413]

[R414]Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.

[R415]

[R416]Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.

[R417]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R418]Substituted by the Finance Act, 2000, w.e.f. 1-4-2001. Prior to its substitution, section 10B, as inserted by the Finance Act, 1988, w.e.f. 1-4-1989 and later on amended by the Finance Act, 1993, w.r.e.f. 1-4-1991, Finance Act, 1994, w.e.f. 1-4-1994/1-4-1995, Income-tax (Second Amendment) Act, 1998, w.e.f. 1-4-1999 and Finance Act, 1999, w.e.f. 1-4-2000, read as under :

‘10B. Special provision in respect of newly established hundred per cent export-oriented undertakings.—(1) Subject to the provisions of this section, any profits and gains derived by an assessee from a hundred per cent export-oriented undertaking (hereafter in this section referred to as the undertaking) to which this section applies shall not be included in the total income of the assessee.

(2) This section applies to any undertaking which fulfils all the following conditions, namely :—

(i) it manufactures or produces any article or thing;

(ia) in relation to an undertaking which begins to manufacture or produce any article or thing on or after the 1st day of April, 1994, its exports of such articles and things are not less than seventy-five per cent of the total sales thereof during the previous year;

(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence :

Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section;

(iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.

Explanation.—The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.

(3) The profits and gains referred to in sub-section (1) shall not be included in the total income of the assessee in respect of any ten consecutive assessment years, beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things.

(4) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year relevant to any subsequent assessment year,—

(i) section 32, section 32A, section 33 and clause (ix) of sub-section (1) of section 36 shall apply as if every allowance or deduction referred to therein and relating to or allowable for any of the relevant assessment years, in relation to any building, machinery, plant or furniture used for the purposes of the business of the undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such business in such previous year had been given full effect to for that assessment year itself and accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33 or the second proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not apply in relation to any such allowance or deduction;

(iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB in relation to the profits and gains of the undertaking; and

(5) Where the undertaking has begun to manufacture or produce articles or things in any previous year relevant to the assessment year commencing before the 1st day of April, 1989, the assessee may, at his option, before the due date for furnishing the return of his income under sub-section (1) of section 139 for the assessment year commencing on the 1st day of April, 1989, furnish to the Assessing Officer a declaration in writing that the provisions of sub-section (1) may be made applicable to him for any five consecutive assessment years falling within a period of eight years beginning with the assessment year commencing on the 1st day of April, 1989, and if he does so, then, the provisions of sub-section (1) shall apply to him for each of such assessment years and the provisions of sub-section (4) shall also apply in computing the total income of the assessee for the assessment year immediately succeeding the last of such assessment years and any subsequent assessment year.

(6) The provisions of sub-section (8) and sub-section (9) of section 80-I shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the industrial undertaking referred to in section 80-I.

(7) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, before the due date for furnishing the return of his income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment years.

Explanation.— For the purposes of this section,—

(i) “hundred per cent export-oriented undertaking” means an undertaking which has been approved as a hundred per cent export-oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act;

(ii) “relevant assessment years” means the ten consecutive assessment years referred to in sub-section (3);

(iii) “manufacture” includes any—

(a) process, or

(b) assembling, or

(iv) “produce”, in relation to any article or thing referred to in clause (i) of sub-section (2) includes production of computer programmes.’

[R419]See Circular No. 1/2005, dated 6-1-2005.

[R420] Inserted by the Finance Act, 2002, w.e.f. 1-4-2003. Earlier the second proviso was omitted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to omission it read as under :

“Provided further that the profits and gains derived from such domestic sales of articles or things or computer software as do not exceed twenty-five per cent of the total sales shall be deemed to be the profits and gains derived from the export of articles or things or computer software:”

[R421]Word “further” should be read for word “also”.

[R422]Substituted by the Finance Act, 2001, w.e.f. 1-4-2001. Prior to its substitution, sub-section (4) read as under :

[R423]See rule 16E and Form No. 56G.

[R424]Inserted by the Finance Act, 2003, w.r.e.f. 1-4-2001.

[R425] Inserted by the Finance Act, 2003, w.r.e.f. 1-4-2001.

[R426]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R427]Prior to its omission, sub-section (9) read as under :

[R428]Prior to its omission, sub-section (9A), as inserted by the Finance Act, 2002, w.e.f. 1-4-2003, read as under :

Provided that,—

[R429]Prior to its omission, Explanation 1, as amended by the Finance Act, 2001, w.e.f. 1-4-2001, read as under :

Provided that nothing contained in this Explanation shall apply to any change in the shareholding of the company as a result of—

(a) its becoming a company in which the public are substantially interested; or

(b) disinvestment of its equity shares by any venture capital company or venture capital fund.”

[R430]

[R431] Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.

[R432]For text of section 14 of the Industries (Development and Regulation) Act, 1951, see Appendix One.

[R433]Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.

[R434]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R435]Inserted by the Taxation Laws (Amendment) Act, 2003, w.e.f. 1-4-2004.

[R436]See rule 16F and Form No. 56H.

[R437]

[R438]Inserted by the Finance Act, 2001, w.r.e.f. 1-4-1994.

[R439]Inserted by the Finance Act, 1999, w.e.f. 1-4-1999.

[R440]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

[R441]For notified “Integrated Infrastructure Development Centre” and “Industrial Growth Centre”

[R442]

[R443]Section 11, which was omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, was reintroduced by the Direct Tax Laws (Amendment) Act, 1989, with effect from the same date with modifications.

[R444]For the meaning of the terms/expressions “income”, “property”, “such income”, “applied”, “accumulated or set apart” and “in part”.

[R445]See also Circular No. 100, dated 24-1-1973, Circular No. 273, dated 3-6-1980, Circular No. 52, dated 30-12-1970, Circular No. 12-P (LXX-7 of 1968), dated 26-11-1968, Circular No. 5-P (LXX-6 of 1968), dated 19-6-1968, Circular No. 29, dated 23-8-1968, Circular No. 566, dated 17-7-1990, Circular No. 584, dated 13-11-1990; Instruction No. 1132, dated 5-1-1978; relevant extracts from Official Minutes of Twelfth Meeting of Direct Taxes Advisory Committee (Central) held in New Delhi on 17-8-1968 and Circular No. 335, dated 13-4-1982.

[R446]Substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. Earlier, clauses (a) and (b) were amended by the Finance Act, 1970, w.e.f. 1-4-1971.

[R447]For the meaning of the terms/expressions “income”, “property”, “such income”, “applied”, “accumulated or set apart” and “in part”

[R448]For the meaning of the terms/expressions “income”, “property”, “such income”, “applied”, “accumulated or set apart” and “in part”.

[R449]For the meaning of the terms/expressions “income”, “property”, “such income”, “applied”, “accumulated or set apart” and “in part”.

[R450]For the meaning of the terms/expressions “income”, “property”, “such income”, “applied”, “accumulated or set apart” and “in part”.

[R451]For the meaning of the terms/expressions “income”, “property”, “such income”, “applied”, “accumulated or set apart” and “in part.

[R452]For the meaning of the terms/expressions “income”, “property”, “such income”, “applied”, “accumulated or set apart” and “in part”.

[R453] For the meaning of the terms/expressions “income”, “property”, “such income”, “applied”, “accumulated or set apart” and “in part”.

[R454]Substituted for “twenty-five” by the Finance Act, 2002, w.e.f. 1-4-2003.

[R455] Inserted by the Finance Act, 1972, w.e.f. 1-4-1973.

[R456]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

[R457] Substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. Earlier, the Explanation was also substituted by the Finance Act, 1970, w.e.f. 1-4-1971.

[R458]Substituted for “twenty-five” by the Finance Act, 2002, w.e.f. 1-4-2003.

[R459]Substituted for “seventy-five”, by the Finance Act, 2002, w.e.f. 1-4-2003.

[R460] “or sub-section (2)” omitted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

[R461]“, whether fixed originally or on extension” omitted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

[R462]Inserted by the Finance (No. 2) Act, 1971, w.r.e.f. 1-4-1962.

[R463]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.

[R464]Substituted by the Finance Act, 1970, w.e.f. 1-4-1971.

[R465]Substituted for the portion beginning with “Where any income referred to in” and ending with “are complied with, namely :—” by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.

[R466]Substituted for “seventy-five” by the Finance Act, 2002, w.e.f. 1-4-2003.

[R467]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R468]See rule 17 and Form No. 10 for notice of accumulation of income by charitable trust or institution [to be furnished before expiry of time allowed under section 139(1)].

[R469]

[R470]Substituted by the Finance Act, 1983, w.e.f. 1-4-1983. Original clause (b) was earlier amended by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.

[R471]For the meaning of the expression “the money so accumulated”.

[R472]Inserted by the Finance Act, 1993, w.r.e.f. 1-4-1962.

[R473]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.

[R474]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R475] Substituted by the Finance Act, 1970, w.e.f. 1-4-1971.

[R476]Substituted by the Finance Act, 1983, w.e.f. 1-4-1983.

[R477]

[R478]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R479]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R480]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.

[R481]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R482]Substituted for “Income-tax”, by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R483]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.

[R484]Inserted by the Finance Act, 2003, w.e.f. 1-4-2003.

[R485]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R486]“and accordingly chargeable to tax within the meaning of sub-section (3)” omitted by the Finance Act, 1970, w.e.f. 1-4-1971.

[R487]Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Prior to its substitution, sub-section (4A) was inserted by the Finance Act, 1983, w.e.f. 1-4-1984.

[R488]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.

[R489] See also Circular No. 566, dated 17-7-1990..

[R490]Clause (c) of section 2 of the Government Savings Certificates Act, 1959, defines “savings certificates” as under:

‘(c) “savings certificate” means a savings certificate to which this Act applies.’

Section 1(3) provides that the Act would apply to such class of savings certificates as the Central Government specifies by notification in the Official Gazette.

[R491]Substituted for “Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956)” by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

[R492]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.

[R493]Substituted for “which is approved by the Central Government for the purposes of clause (viii) of sub-section (1) of section 36” by the Finance Act, 2000, w.e.f. 1-4-2000.

[R494] Substituted for “which is approved by the Central Government for the purposes of clause (viii) of sub-section (1) of section 36” by the Finance Act, 2000, w.e.f. 1-4-2000.

[R495]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.

[R496]For definition of “public company” under clause (iv) of section 3(1) of the Companies Act, 1956, see Appendix One.

[R497]Inserted by the Finance Act, 1984, w.e.f. 1-4-1985.

[R498] Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

[R499] Rule 17C specifies the following other modes: (1) Investments in units issued under any scheme of mutual fund referred to in section 10(23D); (2) Any transfer of deposits to Public Account of India; (3) Deposits made with an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; and (4) investment by way of acquiring equity shares of a ‘depository’.

[R500]Reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, section 12 was omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. Original section 12 was substituted by the Finance Act, 1972, w.e.f. 1-4-1973.

[R501]See also Circular No. 584, dated 13-11-1990..

[R502]Section 12 renumbered as section 12(1) by the Finance Act, 2000, w.e.f. 1-4-2001.

[R503]

[R504]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.

[R505]Inserted by the Taxation Laws (Amendment) Act, 2001, w.r.e.f. 3-2-2001.

[R506]Inserted by the Finance Act, 2002, w.r.e.f. 3-2-2001.

[R507]Substituted for “2003” by the Finance Act, 2003, w.r.e.f. 3-2-2001. Earlier “2003” was substituted for “2002” by the Finance Act, 2002, w.r.e.f. 3-2-2001.

[R508]Reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, section 12A was omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. Original section 12A was inserted by the Finance Act, 1972, w.e.f. 1-4-1973.

[R509]See Circular No. 143, dated 20-8-1974 and CBDT Instruction, dated 9-2-1978.

[R510]For relevant case laws, see case laws

[R511]See rule 17A and Form No. 10A for form of application for registration of charitable/religious trust, and the necessary accompanying documents, viz., 1. Original copy of instrument creating the trust/institution, i.e., trust deed, with one copy thereof, where trust/institution is created under an instrument. Certified copy in lieu of original copy of trust deed can also be accepted by the Commissioner. 2. Documents evidencing the creation of trust/institution, with one copy thereof, where trust/institution is created otherwise than under an instrument. 3. Where the trust/institution has been in existence during any year(s) prior to financial year in which application for registration is made, the application should be accompanied by two copies of accounts of trust/institution relating to prior year or years, not being more than 3 years immediately preceding the year in which application is made.

[R512]Words “Chief Commissioner or” omitted by the Finance Act, 1999, w.e.f. 1-6-1999. Earlier the quoted words were inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R513]Substituted for “whichever is later” by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.

[R514]Substituted for the following by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991:

“Provided that the Chief Commissioner or Commissioner may, in his discretion, admit an application for the registration of any trust or institution after the expiry of the period aforesaid;”

[R515]Words “Chief Commissioner or” omitted by the Finance Act, 1999, w.e.f. 1-6-1999. Earlier the quoted words were inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R516]

[R517]Words “Chief Commissioner or” omitted by the Finance Act, 1999, w.e.f. 1-6-1999. Earlier the quoted words were inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R518]Substituted for “twenty-five” by the Finance Act, 1994, w.e.f. 1-4-1995.

[R519]See rule 17B and Form No. 10B for audit report in case of trust/institution.

[R520]Omitted by the Finance Act, 2002, w.e.f. 1-4-2002. Prior to its omission, clause (c), as inserted by the Finance Act, 2001, w.e.f. 1-4-2002, read as under :

“(c) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of sections 11 and 12 exceeds one crore rupees in any previous year, the trust or institution—

(i) publishes its accounts in a local newspaper, before the due date for furnishing the return of income under sub-section (4A) of section 139; and

(ii) furnishes a copy of such newspaper along with such return.”

[R521]Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.

[R522]Words “Chief Commissioner or” omitted by the Finance Act, 1999, w.e.f. 1-6-1999. Earlier the quoted words were inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.

[R523]Inserted by the Finance Act, 1999, w.e.f. 1-6-1999.

[R524]Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004.

[R525]Reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, it was omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. Original section 13 was substituted by the Finance Act, 1970, w.e.f. 1-4-1971 and prior to its substitution, it was amended by the Finance Act, 1966, w.e.f. 1-4-1966 and the Finance Act, 1963, w.r.e.f. 1-4-1962.

[R526] See also Circular No. 596, dated 15-3-1991..

For relevant case laws, see case laws

[R527]Inserted by the Finance Act, 1972, w.e.f. 1-4-1973.

[R528]

[R529]Omitted by the Finance Act, 1983, w.e.f. 1-4-1984. Original clause (bb), was inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1977.

[R530]Substituted by the Finance Act, 1983, w.e.f. 1-4-1983. Original clause was inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1977. It was later on amended by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978 and by the Finance Act, 1982, w.e.f. 1-4-1982.

[R531]See also Circular No. 596, dated 15-3-1991.

[R539]Words “and such assets were not purchased by the trust or institution or acquired by it by conversion of, or in exchange for, any other asset” omitted by the Finance Act, 1992, w.r.e.f. 1-4-1983.

[R540]Inserted, by the Finance Act, 1992, w.r.e.f. 1-4-1983.

[R541]Inserted by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1983.

[R542]Substituted for “1992” by the Finance Act, 1992, w.e.f. 1-4-1992.

[R543]Inserted by the Finance Act, 1972, w.e.f. 1-4-1973.

[R544]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.

[R549]Substituted by the Finance Act, 1972, w.e.f. 1-4-1973.

[R550]For the meaning of the terms/expressions “funds”, “founder”, “invest”, “any concern” and “institution”

[R551]For the meaning of the terms/expressions “funds”, “founder”, “invest”, “any concern” and “institution”

[R552]For the meaning of the terms/expressions “funds”, “founder”, “invest”, “any concern” and “institution”

[R553]For the meaning of the terms/expressions “funds”, “founder”, “invest”, “any concern” and “institution”

[R554] Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1977.

[R555]Substituted for “twenty-five” by the Finance Act, 1994, w.e.f. 1-4-1995. Earlier, “twenty-five” was substituted for “five” by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.

[R556]Inserted by the Finance Act, 1972, w.e.f. 1-4-1973.

[R557]Substituted for “or member” by the Finance Act, 1972, w.e.f. 1-4-1973.

[R558]Inserted, by the Finance Act, 1972, w.e.f. 1-4-1973.

[R559]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.

[R560]

[R561]Inserted, by the Finance Act, 1972, w.e.f. 1-4-1973.

[R562]Substituted for “moneys” by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971.

[R563]Inserted by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1983. Original sub-section (5) was inserted by the Taxation

Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 and omitted by the Finance Act, 1983, w.e.f. 1-4-1983.

[R564]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001. Earlier sub-section (6) was omitted by the Finance Act, 1983, w.e.f. 1-4-1983. Original sub-section (6) was inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1977.

[R565]Substituted by the Finance Act, 1972, w.e.f. 1-4-1973.

[R566]Inserted by the Taxation Laws (Amendment) Act, 1978, w.e.f. 1-4-1979.

[R567]‘ “Interest on securities” ,’ omitted by the Finance Act, 1988, w.e.f. 1-4-1989.

[R568] Inserted by the Finance Act, 2003, w.r.e.f. 1-4-1979.

[R569]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R570]Substituted for “ten” by the Election and Other Related Laws (Amendment) Act, 2003, w.e.f. 11-9-2003.

[R571]Inserted by the Election and Other Related Laws (Amendment) Act, 2003, w.e.f. 11-9-2003.

[R572]Substituted by the Election and Other Related Laws (Amendment) Act, 2003, w.e.f. 11-9-2003.. Prior to its substitution, Explanation read as under :

‘Explanation.—For the purposes of this section, “political party” means an association or body of individual citizens of India registered with the Election Commission of India as a political party under paragraph 3 of the Election Symbols (Reservation and Allotment) Order, 1968, and includes a political party deemed to be registered with that Commission under the proviso to sub-paragraph (2) of that paragraph.’