Chapter II
Basis
of charge
4. (1) Where any Central Act enacts that income-tax shall be charged for
any assessment year at any rate or rates, income-tax at that rate or those
rates shall be charged for that year in accordance with, and [subject to the
provisions (including provisions for the levy of additional income-tax) of,
this Act] in respect of the total income of the previous year [* * *] of every person :
Provided that where by virtue of any provision of this
Act income-tax is to be charged in respect of the income of a period other than
the previous year, income-tax shall be charged accordingly.
(2) In
respect of income chargeable under sub-section (1), income-tax shall be
deducted at the source or paid in advance, where it is so deductible or payable
under any provision of this Act.
5. (1) Subject to the provisions of this Act, the total income of any
previous year of a person who is a resident includes all income from whatever
source derived which—
(a) is received
or is deemed to be received in India in such year by or on behalf of such
person ; or
(b) accrues or
arises or is deemed to accrue or arise to him in India during such year ; or
(c) accrues or
arises to him outside India during such year :
Provided that, in the case of a person
not ordinarily resident in India within the meaning of sub-section (6) of section
6, the income which accrues or arises to him outside India shall not be so
included unless it is derived from a business controlled in or a profession set
up in India.
(2) Subject
to the provisions of this Act, the total income of any previous year of a
person who is a non-resident includes all income from whatever source derived
which—
(a) is received
or is deemed to be received in India in such year by or on behalf of such
person ; or
(b) accrues or
arises or is deemed to accrue or arise to him in India during such year.
Explanation
1.—Income accruing or arising
outside India shall not be deemed to be received in India within the meaning of
this section by reason only of the fact that it is taken into account in a
balance sheet prepared in India.
Explanation
2.—For the removal of doubts,
it is hereby declared that income which has been included in the total income
of a person on the basis that it has accrued or arisen or is deemed to have
accrued or arisen to him shall not again be so included on the basis that it is
received or deemed to be received by him in India.
[Apportionment of income between
spouses governed by Portuguese Civil Code.
5A.(1) Where the husband and wife are governed by
the system of community of property (known under the Portuguese Civil Code of
1860 as “COMMUNIAO DOS BENS”) in force in the State of Goa and in the Union territories of Dadra
and Nagar Haveli and Daman
and Diu, the income of the husband and of the wife
under any head of income shall not be assessed as that of such community of
property (whether treated as an association of persons or a body of
individuals), but such income of the husband and of the wife under each head of
income (other than under the head “Salaries”) shall be apportioned equally
between the husband and the wife and the income so apportioned shall be
included separately in the total income of the husband and of the wife
respectively, and the remaining provisions of this Act shall apply accordingly.
(2) Where
the husband or, as the case may be, the wife governed by the aforesaid system
of community of property has any income under the head “Salaries”, such income
shall be included in the total income of the spouse who has actually earned
it.]
6. For the purposes of this Act,—
(1) An individual is said to be resident
in India in any previous year, if he—
(a) is in India in that
year for a period or periods amounting in all to one hundred and eighty-two
days or more ; or
(b) [* * *]
(c) having within the four years preceding that
year been in India for a period or periods amounting in all to three hundred
and sixty-five days or more, is in India for a period or periods amounting in
all to sixty days or more in that year.
[Explanation.—In the case
of an individual,—
(a) being a citizen of India, who leaves India in
any previous year [as a member of the crew of an Indian ship as defined in
clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of
1958), or] for the purposes of employment outside India, the provisions of
sub-clause (c) shall apply in relation to that year as if for the words
“sixty days”, occurring therein, the words “one hundred and eighty-two days”
had been substituted ;
(b) being a citizen of India, or a person of Indian
origin within the meaning of Explanation to clause (e) of section
115C, who, being outside India, comes on a visit to India in any previous year,
the provisions of sub-clause (c) shall apply in relation to that year as
if for the words “sixty days”, occurring therein, the words “one hundred and [eighty-two]
days” had been substituted.]
(2) A Hindu undivided family, firm or
other association of persons is said to be resident in India in any previous
year in every case except where during that year the control and management of
its affairs is situated wholly outside India.
(3) A company is said to be resident in
India in any previous year, if—
(i) it is an Indian company ; or
(ii) during that year, the
control and management of its affairs is situated wholly in India.
(4) Every other person is said to be resident
in India in any previous year in every case, except where during that year the
control and management of his affairs is situated wholly outside India.
(5) If a person is resident in India in
a previous year relevant to
an assessment year in respect of any source of income, he
shall be deemed to be resident in India
in the previous year relevant to the
assessment year in respect of each of his other sources of income.
[(6) A person is said to
be “not ordinarily resident” in India in any previous year if such person is—
(a) an individual who has been a non-resident in
India in nine out of the ten previous years preceding that year, or has during
the seven previous years preceding that year been in India for a period of, or
periods amounting in all to, seven hundred and twenty-nine days or less; or
(b) a Hindu undivided family whose manager has
been a non-resident in India in nine out of the ten previous years preceding
that year, or has during the seven previous years preceding that year been in
India for a period of, or periods amounting in all to, seven hundred and twenty-nine
days or less.]
7. The following incomes shall be deemed to be
received in the previous year :—
(i) the annual accretion
in the previous year to the balance at the credit of an employee participating
in a recognised provident fund, to the extent
provided in rule 6 of Part A of the Fourth Schedule ;
(ii) the
transferred balance in a recognised provident fund,
to the extent provided in sub-rule (4) of rule 11 of Part A of the Fourth
Schedule ;
[(iii)
the contribution made, by the Central Government [or any other
employer] in the previous year, to the account of an employee under
a pension scheme referred to in section 80CCD.]
8. [For the purposes of inclusion in the total income of an assessee,—
(a) any dividend] declared by a company
or distributed or paid by it within the meaning of sub-clause (a) or
sub-clause (b) or sub-clause (c) or sub-clause (d) or
sub-clause (e) of clause (22) of section 2 shall be deemed to be
the income of the previous year in which it is so declared, distributed or
paid, as the case may be ;
[(b)
any interim dividend shall be deemed to be the income
of the previous year in which the amount of such dividend is unconditionally
made available by the company to the member who is entitled to it.]
Income deemed to
accrue or arise in India.
9. (1) The following incomes shall be deemed to accrue or arise in India :—
(i) all income accruing or arising, whether directly or
indirectly, through or from any business connection in India, or through or
from any property in India, or through or from any asset or source of income in
India, [* * *] or through the transfer of a capital asset situate in India.
[Explanation
1].—For the purposes of this clause—
(a) in the case of a business of which all the
operations are not carried out in India,
the income of the business deemed under this clause to accrue or arise in India
shall be only such part of the income as is reasonably attributable to the operationscarried out in India ;
(b) in the case of a
non-resident, no income shall be deemed to
accrue or arise in India to him through or from operations which are
confined to the purchase of goods in India for the purpose of export ;
[* * *]
[(c) in the case of a non-resident, being a person
engaged in the business of running a news agency or of publishing newspapers,
magazines or journals, no income shall be deemed to accrue or arise in India to
him through or from activities which are confined to the collection of news and
views in India for transmission out of India ;]
[(d) in the case of a
non-resident, being—
(1) an individual who is
not a citizen of India ; or
(2) a firm which does not
have any partner who is a citizen of India or who is resident in India ; or
(3) a company which does
not have any shareholder who is a citizen of India or who is resident in India,
no income shall be deemed
to accrue or arise in India to such individual, firm or company through or from
operations which are confined to the shooting of any cinematograph film in
India.]
[Explanation 2.—For the removal of doubts, it is hereby declared that
“business connection” shall include any business activity carried out through a
person who, acting on behalf of the non-resident,—
(a) has and habitually
exercises in India, an authority to conclude contracts on behalf of the
non-resident, unless his activities are limited to the purchase of goods or
merchandise for the non-resident; or
(b) has no such authority,
but habitually maintains in India a stock of goods or merchandise from which he
regularly delivers goods or merchandise on behalf of the non-resident; or
(c) habitually secures
orders in India, mainly or wholly for the non-resident or for that non-resident
and other non-residents controlling, controlled by, or subject to the same
common control, as that non-resident:
Provided that such business connection shall not
include any business activity carried out through a broker, general commission
agent or any other agent having an independent status, if such broker, general
commission agent or any other agent having an independent status is acting in
the ordinary course of his business :
Provided
further that where such
broker, general commission agent or any other agent works mainly or wholly on
behalf of a non-resident (hereafter in this proviso referred to as the
principal non-resident) or on behalf of such non-resident and other
non-residents which are controlled by the principal non-resident or have a
controlling interest in the principal non-resident or are subject to the same
common control as the principal non-resident, he shall not be deemed to be a
broker, general commission agent or an agent of an independent status.
Explanation
3.—Where a business is
carried on in India through a person referred to in clause (a) or clause
(b) or clause (c) of Explanation 2, only so much of income
as is attributable to the operations carried out in India shall be deemed to
accrue or arise in India;]
(ii) income which falls under the head “Salaries”, if it is
earned in India.
[Explanation.—For the removal of doubts, it is hereby declared that the
income of the nature referred to in this clause payable for—
(a) service rendered
in India; and
(b) the rest period or
leave period which is preceded and succeeded by services rendered in India and
forms part of the service contract of employment,
shall be regarded
as income earned in India ;]
(iii) income chargeable under the head “Salaries” payable by the
Government to a citizen of India for service outside India ;
(iv) a dividend paid by an Indian company outside India ;
[(v) income by way of
interest payable by—
(a) the Government ; or
(b) a person who is a resident, except where the
interest is payable in respect of any debt incurred, or moneys borrowed and used,
for the purposes of a business or profession carried on by such person outside
India or for the purposes of making or earning any income from any source
outside India ; or
(c) a person who is a non-resident, where the
interest is payable in respect of any debt incurred, or moneys borrowed and
used, for the purposes of a business or profession carried on by such person in
India ;
(vi) income by way of royalty payable by—
(a) the Government ; or
(b) a person who is a resident, except where the
royalty is payable in respect of any right, property or information used or
services utilised for the purposes of a business or
profession carried on by such person outside India or for the purposes of
making or earning any income from any source outside India ; or
(c) a person who is a
non-resident, where the royalty is payable in respect of any right, property or
information used or services utilised for the
purposes of a business or profession carried on by such person in India or for
the purposes of making or earning any income from any source in India :
Provided that nothing contained in this clause shall apply in relation to so
much of the income by way of royalty as consists of lump sum consideration for
the transfer outside India of, or the imparting of information outside India in
respect of, any data, documentation, drawing or specification relating to any
patent, invention, model, design, secret formula or process or trade mark or
similar property, if such income is payable in pursuance of an agreement made
before the 1st day of April, 1976, and the agreement is approved by the Central
Government :
[Provided
further that nothing contained in this clause shall apply in relation to so
much of the income by way of royalty as consists of lump sum payment made by a
person, who is a resident, for the transfer of all or any rights (including the
granting of a licence) in respect of computer
software supplied by a non-resident manufacturer along with a computer or
computer-based equipment under any scheme approved under the Policy on Computer
Software Export, Software Development and Training, 1986 of the Government of
India.]
Explanation 1.—For the purposes of the [first]
proviso, an agree-ment made on or after the 1st
day of April, 1976, shall be deemed to have been made before that date if the
agreement is made in accordance with proposals approved by the Central
Government before that date; so, however, that, where the recipient of the
income by way of royalty is a foreign company, the agreement shall not be
deemed to have been made before that date unless, before the expiry of the time
allowed under sub-section (1) or sub-section (2) of section 139 (whether fixed
originally or on extension) for furnishing the return of income for the
assessment year commencing on the 1st day of April, 1977, or the assessment
year in respect of which such income first becomes chargeable to tax under this
Act, whichever assessment year is later, the company exercises an option by
furnishing a declaration in writing to the [Assessing] Officer (such option
being final for that assessment year and for every subsequent assessment year)
that the agreement may be regarded as an agreement made before the 1st day of
April, 1976.
Explanation 2.—For the purposes of this
clause, “royalty” means consideration (including any lump sum consideration but
excluding any consideration which would be the income of the recipient
chargeable under the head “Capital gains”) for—
(i) the transfer of all or any rights (including the granting of
a licence) in respect of a patent, invention, model,
design, secret formula or process or trade mark or similar property ;
(ii) the imparting of any information concerning the
working of, or the use of, a patent, invention, model, design, secret formula
or process or trade mark or similar property ;
(iii) the use of any patent,
invention, model, design, secret formula or process or trade mark or similar
property ;
(iv) the imparting of any
information concerning technical, industrial, commercial or scientific
knowledge, experience or skill ;
[(iva) the
use or right to use any industrial, commercial or scientific equipment but not
including the amounts referred to in section 44BB;]
(v) the transfer of all or any rights (including the
granting of a licence) in respect of any copyright,
literary, artistic or scientific work including films or video tapes for use in
connection with television or tapes for use in connection with radio
broadcasting, but not including consideration for the sale, distribution or
exhibition of cinematographic films ; or
(vi) the rendering of any
services in connection with the activities referred to in sub-clauses (i) to [(iv), (iva)
and] (v).
[Explanation
3.—For the purposes of this clause, “computer software” means any computer programme recorded on any disc, tape, perforated media or
other information storage device and includes any such programme
or any customized electronic data;]
(vii) Income
by way of fees for technical services payable by—
(a) The
Government ; or
(b) a person who is a resident, except where the
fees are payable in respect of services utilised in a
business or profession carried on by such person outside India or for the
purposes of making or earning any income from any source outside India ; or
(c) a person who is a
non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such
person in India or for the purposes of making or earning any income from any
source in India :
[Provided that nothing
contained in this clause shall apply in relation to any income by way of fees
for technical services payable in pursuance of an agreement made before the 1st
day of April, 1976, and approved by the Central Government.]
[Explanation
1.—For the purposes of the foregoing proviso, an
agreement made on or after the 1st day of April, 1976, shall be deemed to have
been made before that date if the agreement is made in accordance with
proposals approved by the Central Government before that date.]
Explanation [2].—For the
purposes of this clause, “fees for technical services” means any consideration
(including any lump sum consideration) for the rendering of any managerial,
technical or consultancy services (including the provision of services of
technical or other personnel) but does not include consideration for any construction,
assembly, mining or like project undertaken by the recipient or consideration
which would be income of the recipient chargeable under the head “Salaries”.]
(2)
Notwithstanding anything contained in sub-section (1), any pension payable
outside India to a person residing permanently outside India shall not be
deemed to accrue or arise in India, if the pension is payable to a person referred
to in article 314 of the Constitution or to a person who, having been appointed
before the 15th day of August, 1947, to be a Judge of the Federal Court or of a
High Court within the meaning of the Government of India Act, 1935, continues
to serve on or after the commencement of the Constitution as a Judge in India.
[Explanation.—For the removal of doubts, it is hereby declared that
for the purposes of this section, where income is deemed to accrue or arise in
India under clauses (v), (vi) and (vii) of sub-section
(1), such income shall be included in the total income of the non-resident,
whether or not the non-resident has a residence or place of business or
business connection in India.]