CHAPTER XII

Determination of tax in certain special cases

⁷⁹[R1] [Determination of tax where total income includes income on which no tax is payable.

110. Where there is included in the total income of an assessee any income on which no income-tax is payable under the provisions of this Act, the assessee shall be entitled to a deduction, from the amount of income-tax with which he is chargeable on his total income, of an amount equal to the income-tax calculated at the average rate of income-tax on the amount on which no income-tax is payable.]

Tax on accumulated balance of recognised provident fund.

111. (1) Where the accumulated balance due to an employee participating in a recognised provident fund is included in his total income, owing to the provisions of rule 8 of Part A of the Fourth Schedule not being applicable, the ⁸⁰[R2] [Assessing] Officer shall calculate the total of the various sums of ⁸¹[R3] [tax] in accordance with the provisions of sub-rule (1) of rule 9 thereof.

(2) Where the accumulated balance due to an employee participating in a recognised provident fund which is not included in his total income under the provisions of rule 8 of Part A of the Fourth Schedule becomes payable, super-tax shall be calculated in the manner provided in sub-rule (2) of rule 9 thereof.

⁸²[R4] [Tax on long-term capital gains.

⁸³[R5] 112. (1) Where the total income of an assessee includes any income, arising from the transfer of a long-term capital asset, which is chargeable under the head “Capital gains”, the tax payable by the assessee on the total income shall be the aggregate of,—

(a) in the case of an individual or a Hindu undivided family, ⁸⁴[R6] [being a resident,]—

(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been his total income ; and

(ii) the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent :

Provided that where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate of twenty per cent ;

(b) in the case of a ^84a[[R7] domestic] company,—

(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income ; and

(ii) the amount of income-tax calculated on such long-term capital gains at the rate of ⁸⁵[R8] [twenty] per cent :

⁸⁶[R9] [***]

⁸⁷[R10] [(c) in the case of a non-resident (not being a company) or a foreign company,—

(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income ; and

(ii) the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent ;]

⁸⁸[R11] [(d)] in any other case ⁸⁹[R12] [of a resident],—

(i) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income ; and

(ii) the amount of income-tax calculated on such long-term capital gains at the rate of ⁹⁰[R13] [twenty] per cent.

Explanation.—⁹¹[R14] [***]

⁹²[R15] [Provided that where the tax payable in respect of any income arising from the transfer of a long-term capital asset, being listed securities ⁹³[R16] [or unit], exceeds ten per cent of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee.

⁹⁴[R17] [Explanation.—For the purposes of this sub-section,—

(a) “listed securities” means the securities—

(i) as defined in clause (h) of section 2⁹⁵[R18] of the Securities Contracts (Regulation) Act, 1956 (32 of 1956); and

(ii) listed in any recognised stock exchange in India;

(b) “unit” shall have the meaning assigned to it in clause (b) of Explanation to section 115AB.]]

(2) Where the gross total income of an assessee includes any income arising from the transfer of a long-term capital asset, the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.

(3) Where the total income of an assessee includes any income arising from the transfer of a long-term capital asset, the total income shall be reduced by the amount of such income and the rebate under section 88 shall be allowed from the income-tax on the total income as so reduced.

Tax on interest on National Savings Certificates (First Issue).

112A. [Omitted by the Finance Act, 1988, w.e.f. 1-4-1989. Original section 112A was inserted by the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965 and later on amended by the Finance Act, 1966, w.e.f. 1-4-1966, Finance (No. 2) Act, 1967, w.e.f. 1-4-1968, Taxation Laws (Amendment) Act, 1970, with retrospective effect from 1-4-1968/1969 and Finance Act, 1973, with retrospective effect from 1-4-1972.]

⁹⁶[R19] [Tax in the case of block assessment of search cases.

113. The total undisclosed income of the block period, determined under section 158BC, shall be chargeable to tax at the rate of sixty per cent.]

Tax on capital gains in cases of assessees other than companies.

114. [Omitted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 and reintroduced with material modifications in section 80T. Section 114 was substituted first by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962 and later on amended by the Finance Act, 1964, w.e.f. 1-4-1964, the Finance Act, 1965, w.e.f. 1-4-1965, the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965 and the Finance Act, 1966, w.e.f. 1-4-1966.]

Tax on capital gains in case of companies.

115. ⁹⁷[R20] [Omitted by the Finance Act, 1987, w.e.f. 1-4-1988.]

⁹⁸[R21] [Tax on dividends, royalty and technical service fees in the case of foreign companies.

⁹⁹[R22] 115A. ¹[R23] [(1) Where the total income of—

(a) a non-resident (not being a company) or of a foreign company, includes any income by way of—

(i) dividends²[R24] [other than dividends referred to in section 115-O] ; or

(ii) interest received from Government or an Indian concern on monies borrowed or debt incurred by Government or the Indian concern in foreign currency ; or

(iii) income received in respect of units, purchased in foreign currency, of a Mutual Fund specified under clause (23D) of section 10 or of the Unit Trust of India,the income-tax payable shall be aggregate of—

(A) the amount of income-tax calculated on the amount of income by way of dividends ^2a[R25] [other than dividends referred to in section 115-O], if any, included in the total income, at the rate of twenty per cent ;

(B) the amount of income-tax calculated on the amount of income by way of interest referred to in sub-clause (ii), if any, included in the total income, at the rate of twenty per cent ;

(C) the amount of income-tax calculated on the income in respect of units referred to in sub-clause (iii), if any, included in the total income, at the rate of twenty per cent ; and

(D) the amount of income-tax with which he or it would have been chargeable had his or its total income been reduced by the amount of income referred to in sub-clause (i), sub-clause (ii) and sub-clause (iii) ;

(b) a foreign company, includes any 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, and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy, then, subject to the provisions of sub-sections (1A) and (2), the income-tax payable shall be the aggregate of,—

³[R26] [(A) the amount of income-tax calculated on the income by way of royalty, if any, included in the total income, at the rate of thirty per cent if such royalty is received in pursuance of an agreement made on or before the 31st day of May, 1997 and twenty per cent where such royalty is received in pursuance of an agreement made after the 31st day of May, 1997;

(B) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of thirty per cent if such fees for technical services are received in pursuance of an agreement made on or before the 31st day of May, 1997 and twenty per cent where such fees for technical services are received in pursuance of an agreement made after the 31st day of May, 1997; and]

(C) the amount of income-tax with which it would have been chargeable had its total income been reduced by the amount of income by way of royalty and fees for technical services.

Explanation.—For the purposes of this section,—

(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 currency” shall have the same meaning as in the Explanation below item (g) of sub-clause (iv) of clause (15) of section 10 ;

(d) “Unit Trust of India” means the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963).]

⁴[R27] [(1A) Where the royalty referred to in clause (b) of sub-section (1) is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book to an Indian concern ⁵[R28] [or in respect of any computer software to a person resident in India], the provisions of sub-section (1) shall apply in relation to such royalty as if the words ⁶[R29] [⁷[R30] [the agreement is approved by the Central Government or where it relates to a matter] included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy] occurring in the said clause had been omitted :

Provided that such book is on a subject, the books on which are permitted, according to the Import Trade Control Policy of the Government of India for the period commencing from the 1st day of April, 1977, and ending with the 31st day of March, 1978, to be imported into India under an Open General Licence :

⁸[R31] [Provided further that such computer software is permitted according to the Import Trade Control Policy of the Government of India for the time being in force to be imported into India under an Open General Licence.]

⁹[R32] [Explanation 1].—In this sub-section, “Open General Licence” means an Open General Licence issued by the Central Government in pursuance of the Imports (Control) Order, 1955.]

¹⁰[R33] [Explanation 2.—In this sub-section, the expression “computer software” shall have the meaning assigned to it in clause (b) of the Explanation to section 80HHE.]

(2) Nothing contained in sub-section (1) shall apply in relation to any income by way of royalty received by a foreign company from an Indian concern in pursuance of an agreement made by it with the Indian concern after the 31st day of March, 1976, if such agreement is deemed, for the ¹¹[R34] [purposes of the first proviso] to clause (vi) of sub-section (1) of section 9, to have been made before the 1st day of April, 1976; and the provisions of the annual Finance Act for calculating, charging, deducting or computing income-tax shall apply in relation to such income as if such income had been received in pursuance of an agreement made before the 1st day of April, 1976.]

¹²[R35] [(3) No deduction in respect of any expenditure or allowance shall be allowed to the assessee under sections 28 to 44C and section 57 in computing his or its income referred to in sub-section (1).

(4) Where in the case of an assessee referred to in sub-section (1),—

(a) the gross total income consists only of the income referred to in clause (a) of that sub-section, no deduction shall be allowed to him or it under Chapter VI-A;

(b) the gross total income includes any income referred to in clause (a) of that sub-section, the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.

(5) It shall not be necessary for an assessee referred to in sub-section (1) to furnish under sub-section (1) of section 139 a return of his or its income if—

(a) his or its total income in respect of which he or it is assessable under this Act during the previous year consisted only of income referred to in clause (a) of sub-section (1); and

(b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income.]

¹³[R36] [Tax on income from units purchased in foreign currency or capital gains arising from their transfer.

115AB. (1) Where the total income of an assessee, being an overseas financial organisation (hereinafter referred to as Offshore Fund) includes—

(a) income received in respect of units purchased in foreign currency; or

(b) income by way of long-term capital gains arising from the transfer of units purchased in foreign currency,the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated on the income in respect of units referred to in clause (a), if any, included in the total income, at the rate of ten per cent;

(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, at the rate of ten per cent; and

(iii) the amount of income-tax with which the Offshore Fund would have been chargeable had its total income been reduced by the amount of income referred to in clause (a) and clause (b).

(2) Where the gross total income of the Offshore Fund,—

(a) consists only of income from units or income by way of long-term capital gains arising from the transfer of units, or both, no deduction shall be allowed to the assessee under sections 28 to 44C ¹⁴[R37] [***]or clause (i) or clause (iii) of section 57 or under Chapter VI-A ¹⁵[R38] [and nothing contained in the provisions of the second proviso to section 48 shall apply to income referred to in clause (b) of sub-section (1)];

(b) includes any income referred to in clause (a), the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.

Explanation.—For the purposes of this section,—

(a) “overseas financial organisation” means any fund, institution, association or body, whether incorporated or not, established under the laws of a country outside India, which has entered into an arrangement for investment in India with any public sector bank or public financial institution or a mutual fund specified under clause (23D) of section 10 and such arrangement is approved by the ^15a[R39] [Securities and Exchange Board of India, established under the Securities and Exchange Board of India Act, 1992 (15 of 1992),] for this purpose;

(b) “unit” means unit of a mutual fund specified under clause (23D) of section 10 or of the Unit Trust of India;

(d) “public sector bank” shall have the meaning assigned to it in clause (23D) of section 10;

(e) “public financial institution” shall have the meaning assigned to it in section 4A¹⁷ [R41] of the Companies Act, 1956 (1 of 1956);

(f) “Unit Trust of India” means the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963)].

¹⁸[R42] [Tax on income from bonds or shares purchased in foreign currency or capital gains arising from their transfer.

115AC. (1) Where the total income of an assessee, being a non-resident, includes—

(a) income by way of interest or dividends ¹⁹[R43] [other than dividends referred to in section 115-O], on bonds or shares of an Indian company issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette²⁰[R44] , specify in this behalf ²¹[R45] [or on bonds or shares of a public sector company, sold by the Government] and purchased by him in foreign currency; or

(b) income by way of long-term capital gains arising from the transfer of bonds or, as the case may be, shares referred to in clause (a),the income-tax payable shall be the aggregate of—

(i) amount of income-tax calculated on the income by way of interest or dividends ²²[R46] [other than dividends referred to in section 115-O], as the case may be, in respect of bonds or shares referred to in clause (a), if any, included in the total income the, at the rate of ten per cent;

(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, at the rate of ten per cent; and

(iii) the amount of income-tax with which the non-resident would have been chargeable had his total income been reduced by the amount of income referred to in clause (a) and clause (b).

(2) Where the gross total income of the non-resident—

(a) consists only of income by way of interest or dividends ²³[R47] [other than dividends referred to in section 115-O] in respect of bonds or, as the case may be, shares referred to in clause (a) of sub-section (1), no deduction shall be allowed to him under sections 28 to 44C or clause (i) or clause (iii) of section 57 or under Chapter VI-A;

(b) includes any income referred to in clause (a) or clause (b) of sub-section (1) the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced, were the gross total income of the assessee.

(3) Nothing contained in the first and second provisos to section 48 shall apply for the computation of long-term capital gains arising out of the transfer of long-term capital asset, being bonds or shares referred to in clause (b) of sub-section (1).

(4) It shall not be necessary for a non-resident to furnish under sub-section (1) of section 139 a return of his income if—

(a) his total income in respect of which he is assessable under this Act during the previous year consisted only of income referred to in clause (a) of sub-section (1); and

(b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income.]

²⁴[R48] [(5) Where the assessee acquired shares or bonds in an amalgamated or resulting company by virtue of his holding shares or bonds in the amalgamating or demerged company, as the case may be, in accordance with the provisions of sub-section (1), the provisions of the said sub-section shall apply to such shares or bonds.]

The following section 115AC shall be substituted for the existing section 115AC by the Finance Act, 2001, w.e.f. 1-4-2002 :

Tax on income from bonds or Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer.

115AC. (1) Where the total income of an assessee, being a non-resident, includes—

(a) income by way of interest on bonds of an Indian company issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, or on bonds of a public sector company sold by the Government, and purchased by him in foreign currency; or

(b) income by way of dividends, other than dividends referred to in section 115-O, on Global Depository Receipts—

(i) issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, against the initial issue of shares of an Indian company and purchased by him in foreign currency through an approved intermediary; or

(ii) issued against the shares of a public sector company sold by the Government and purchased by him in foreign currency through an approved intermediary; or

(iii) re-issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, against the existing shares of an Indian company purchased by him in foreign currency through an approved intermediary; or

(iv) issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, and purchased by him in foreign currency through an approved intermediary, against the shares of an Indian company arising out of disinvestment by such company in its subsidiary company, and the shares of both such Indian companies are listed in a recognised stock exchange in India; or

(c) income by way of long-term capital gains arising from the transfer of bonds referred to in clause (a) or, as the case may be, Global Depository Receipts referred to in clause (b), the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated on the income by way of interest or dividends other than dividends referred to in section 115-O, as the case may be, in respect of bonds referred to in clause (a) or Global Depository Receipts referred to in clause (b), if any, included in the total income, at the rate of ten per cent;

(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (c), if any, at the rate of ten per cent; and

(iii) the amount of income-tax with which the non-resident would have been chargeable had his total income been reduced by the amount of income referred to in clauses (a), (b) and (c).

(2) Where the gross total income of the non-resident—

(a) consists only of income by way of interest or dividends other than dividends referred to in section 115-O in respect of bonds referred to in clause (a) of sub-section (1) or, as the case may be, Global Depository Receipts referred to in clause (b) of that sub-section, no deduction shall be allowed to him under sections 28 to 44C or clause (i) or clause (iii) of section 57 or under Chapter VI-A;

(b) includes any income referred to in clause (a) or clause (b) or clause (c) of sub-section (1), the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced, were the gross total income of the assessee.

(3) Nothing contained in the first and second provisos to section 48 shall apply for the computation of long-term capital gains arising out of the transfer of long-term capital asset, being bonds or Global Depository Receipts referred to in clause (c) of sub-section (1).

(4) It shall not be necessary for a non-resident to furnish under sub-section (1) of section 139 a return of his income if—

(a) his total income in respect of which he is assessable under this Act during the previous year consisted only of income referred to in clauses (a) and (b) of sub-section (1); and

(b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income.

(5) Where the assessee acquired Global Depository Receipts or bonds in an amalgamated or resulting company by virtue of his holding Global Depository Receipts or bonds in the amalgamating or demerged company, as the case may be, in accordance with the provisions of sub-section (1), the provisions of that sub-section shall apply to such Global Depository Receipts or bonds.

Explanation.—For the purposes of this section,—

(a) “approved intermediary” means an intermediary who is approved in accordance with such scheme as may be notified by the Central Government in the Official Gazette;

(b) “Global Depository Receipts” shall have the same meaning as in clause (a) of the Explanation to section 115ACA.

²⁵ [[R49] Tax on income from Global depository receipts purchased in foreign currency or capital gains arising from their transfer.

115ACA.²⁶[R50] [(1) Where the total income of an assessee, being an individual, who is a resident and an employee of an Indian company engaged in specified knowledge based industry or service, or an employee of its subsidiary engaged in specified knowledge based industry or service (hereafter in this section referred to as the resident employee), includes—

(a) income by way of dividends, other than dividends referred to in section 115-O, on Global Depository Receipts of an Indian company engaged in specified knowledge based industry or service, issued in accordance with such Employees’ Stock Option Scheme as the Central Government may, by notification in the Official Gazette^†[R51] , specify in this behalf and purchased by him in foreign currency; or

(b) income by way of long-term capital gains arising from the transfer of Global Depository Receipts referred to in clause (a), the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated on the income by way of dividends, other than dividends referred to in section 115-O, in respect of Global Depository Receipts referred to in clause (a), if any, included in the total income, at the rate of ten per cent;

(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, at the rate of ten per cent; and

(iii) the amount of income-tax with which the resident employee would have been chargeable had his total income been reduced by the amount of income referred to in clauses (a) and (b).

Explanation.—For the purposes of this sub-section,—

(a) “specified knowledge based industry or service” means—

(i) information technology software;

(ii) information technology service;

(iii) entertainment service;

(iv) pharmaceutical industry;

(v) bio-technology industry; and

(vi) any other industry or service, as may be specified by the Central Government, by notification in the Official Gazette;

(b) “subsidiary” shall have the meaning assigned to it in section 4 of the Companies Act, 1956 (1 of 1956) and includes subsidiary incorporated outside India.]

(2) Where the gross total income of the resident employee—

(a) consists only of income by way of dividends, other than dividends referred to in section 115-O, in respect of Global Depository Receipts referred to in clause (a) of sub-section (1), no deduction shall be allowed to him under any other provision of this Act;

(b) includes any income referred to in clause (a) or clause (b) of sub-section (1), the gross total income shall be reduced by the amount of such income and the deduction under any provision of this Act shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.

(3) Nothing contained in the first and second provisos to section 48 shall apply for the computation of long-term capital gains arising out of the transfer of long-term capital asset, being Global Depository Receipts referred to in clause (b) of sub-section (1).

Explanation.—For the purposes of this section,—

(a) “Global Depository Receipts” means any instrument in the form of a depository receipt or certificate (by whatever name called) created by the Overseas Depository Bank outside India and issued to non-resident investors against the issue of ordinary shares or foreign currency convertible bonds of issuing company;

(b) “information technology service” means any service which results from the use of any information technology software over a system of information technology products for realising value addition;

(c) “information technology software” means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form and capable of being manipulated or providing inter-activity to a user, by means of an automatic data processing machine falling under heading information technology products but does not include non-information technology products;

(d) “Overseas Depository Bank” means a bank authorised by the issuing company to issue Global Depository Receipts against issue of Foreign Currency Convertible Bonds or ordinary shares of the issuing company.]

²⁷[R52] [Tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer.

115AD. (1) Where the total income of a Foreign Institutional Investor includes—

²⁸[R53] [(a) income ²⁹[R54] [other than income by way of dividends referred to in section 115-O] received in respect of securities (other than unit referred to in section 115AB); or]

(b) income by way of short-term or long-term capital gains arising from the transfer of such securities,the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated on the income in respect of securities referred to in clause (a), if any, included in the total income, at the rate of twenty per cent;

(ii) the amount of income-tax calculated on the income by way of short-term capital gains referred to in clause (b), if any, included in the total income, at the rate of thirty per cent;

(iii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, at the rate of ten per cent; and

(iv) the amount of income-tax with which the Foreign Institutional Investor would have been chargeable had its total income been reduced by the amount of income referred to in clause (a) and clause (b).

(2) Where the gross total income of the Foreign Institutional Investor—

(a) consists only of income in respect of securities referred to in clause (a) of sub-section (1), no deduction shall be allowed to it under sections 28 to 44C or clause (i) or clause (iii) of section 57 or under Chapter VI-A;

(b) includes any income referred to in clause (a) or clause (b) of sub-section (1), the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced, were the gross total income of the Foreign Institutional Investor.

(3) Nothing contained in the first and second provisos to section 48 shall apply for the computation of capital gains arising out of the transfer of securities referred to in clause (b) of sub-section (1).

Explanation.—For the purposes of this section,—

(a) the expression “Foreign Institutional Investor” means such investor as the Central Government may, by notification in the Official Gazette³⁰[R55] , specify in this behalf;

(b) the expression “securities”³¹[R56] shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).]

³²[R57] [Tax on profits and gains of life insurance business.

115B.³³[R58] [(1)] Where the total income of an assessee includes any profits and gains from life insurance business, the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated on the amount of profits and gains of the life insurance business included in the total income, at the rate of twelve and one-half per cent; and

(ii) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of profits and gains of the life insurance business.]

³⁴[R59] [(2) Notwithstanding anything contained in sub-section (1) or in any other law for the time being in force or any instrument having the force of law, the assessee shall, in addition to the payment of income-tax computed under sub-section (1), deposit, during ³⁵[R60] [the previous years relevant to the assessment years commencing on the 1st day of April, 1989 and the 1st day of April, 1990], an amount equal to thirty-three and one-third per cent of the amount of income-tax computed under clause (i) of sub-section (1), in such social security fund (hereafter in this sub-section referred to as the security fund), as the Central Government may, by notification³⁶[R61] in the Official Gazette, specify in this behalf :

Provided that where the assessee makes during the said previous ³⁷[R62] [years] any deposit of an amount of not less than two and one-half per cent of the profits and gains of the life insurance business in the security fund, the amount of income-tax payable by the assessee under the said clause (i) shall be reduced by an amount equal to two and one-half per cent of such profits and gains and, accordingly, the deposit of thirty-three and one-third per cent required to be made under this sub-section shall be calculated on the income-tax as so reduced.]

³⁸[R63] [Tax on winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever.

115BB. Where the total income of an assessee includes any income by way of winnings from any lottery or crossword puzzle or race including horse race (not being income from the activity of owning and maintaining race horses) or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated on income by way of winnings from such lottery or crossword puzzle or race including horse race or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, at the rate of ^38a[R64] [forty] per cent; and

(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).

Explanation.—For the purposes of this section, “horse race” shall have the same meaning as in section 74A.]

³⁹[R65] [Tax on non-resident sportsmen or sports associations.

115BBA. (1) Where the total income of an assessee,—

(a) being a sportsman (including an athlete), who is not a citizen of India and is a non-resident, includes any income received or receivable by way of—

(i) participation in India in any game (other than a game the winnings wherefrom are taxable under section 115BB) or sport; or

(ii) advertisement; or

(iii) contribution of articles relating to any game or sport in India in newspapers, magazines or journals; or

(b) being a non-resident sports association or institution, includes any amount guaranteed to be paid or payable to such association or institution in relation to any game (other than a game the winnings wherefrom are taxable under section 115BB) or sport played in India, the income-tax payable by the assessee shall be the aggregate of—

(i) the amount of income-tax calculated on income referred to in clause (a) or clause (b) at the rate of ten per cent; and

(ii) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of income referred to in clause (a) or clause (b) :

Provided that no deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the income referred to in clause (a) or clause (b).

(2) It shall not be necessary for the assessee to furnish under sub-section (1) of section 139 a return of his income if—

(a) his total income in respect of which he is assessable under this Act during the previous year consisted only of income referred to in clause (a) or clause (b) of sub-section (1); and

(b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income.]

[R1]Substituted by the Finance Act, 1965, w.e.f. 1-4-1965.

[R2]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

[R3]Substituted for “income-tax and super tax” by the Finance Act, 1965, w.e.f. 1-4-1965.

[R4]k Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. Earlier section 112 was omitted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 and replaced by section 80-S. Before its omission, the section was first amended by the Finance Act, 1965, w.e.f. 1-4-1965 and then by the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965

[R5] See also Circular No. 721, dated 13-9-1995.

[R6]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.

[R7]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.

[R8]Substituted for “thirty” by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997. Earlier “thirty” was substituted for “forty” by the Finance Act, 1994, w.e.f. 1-4-1995.

[R9]The proviso omitted by the Finance Act, 1995, w.e.f. 1-4-1996. Prior to its omission the proviso, as amended by the Finance Act,1994, w.e.f. 1-4-1995, read as under :

‘Provided that in relation to long-term capital gains arising to a venture capital company from the transfer of equity shares of venture capital undertakings, the provisions of sub-clause (ii) shall have effect as if for the words “thirty per cent”, the words “twenty per cent” had been substituted ;’

[R10]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.

[R11]Existing clause (c) relettered as clause (d) by the Finance Act, 1994, w.e.f. 1-4-1995.

[R12]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.

[R13]Substituted for “thirty” by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.

[R14]The Explanation omitted by the Finance Act, 1995, w.e.f. 1-4-1996. Prior to its omission, the Explanation read as under :

‘Explanation.—For the purposes of this sub-section,—

(a) “venture capital company” means such company as is engaged in providing finance to venture capital undertakings mainly by way of acquiring equity shares of such undertakings or, if the circumstances so require, by way of advancing loans to such undertakings, and is approved by the Central Government in this behalf ;

(b) “venture capital undertaking” means such company as the prescribed authority may, having regard to the following factors, approve for the purposes of this sub-section, namely :—

(1) the total investment in the company does not exceed ten crore rupees or such other higher amount as may be prescribed ;

(2) the company does not have adequate financial resources to undertake projects for which it is otherwise professionally or technically equipped ; and

(3) the company seeks to employ any technology which will result in significant improvement over the existing technology in India in any field and the investment in such technology involves high risk.’

[R15]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.

[R16]Inserted by the Finance Act, 2000, w.e.f. 1-4-2000.

[R17]Substituted by the Finance Act,2000,w.e.f. 1-4-2000 Prior to its substitution, Explanation, as inserted by the Finance Act, 1999, w.e.f. 1-4-2000, read as under :

‘Explanation.—For the purposes of this sub-section, “listed securities” means the securities—

(a) as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (32 of 1956); and

(b) listed in any recognised stock exchange in India.’

[R18]For definition of “securities”

[R19] Inserted by the Finance Act, 1995, w.e.f. 1-7-1995. Earlier section 113 dealing with “Tax in the case of non-resident” was omitted by the Finance Act, 1965, w.e.f. 1-4-1965.

[R20]Omitted section 115, as amended by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962, the Finance Act, 1964, w.e.f. 1-4-1964, the Finance Act, 1965, w.e.f. 1-4-1965, the Finance Act, 1966, w.e.f. 1-4-1966, the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972, the Finance (No. 2) Act, 1974, w.e.f. 1-4-1975, the Finance Act, 1976, w.e.f. 1-4-1977 and the Finance Act, 1985, w.e.f. 1-4-1986, stood as under :

‘115. Tax on capital gains in case of companies.—Where the total income of a company includes any income chargeable under the head “Capital gains” relating to capital assets other than short-term capital assets (such income being hereinafter referred to as long-term capital gains), the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated on the amount of long-term capital gains included in the total income—

(a) on so much of the amount of such long-term capital gains as relate to buildings or lands or any rights in buildings or lands, at the rate of fifty per cent ; and

(b) on the balance of such long-term capital gains, if any, at the rate of forty per cent ; and

(ii) the amount of income-tax with which it would have been chargeable had its total income been reduced by the amount of long-term capital gains referred to in clause (i).’

[R21]Inserted by the Finance Act, 1976, w.e.f. 1-6-1976.

[R22] See also Circular No. 473, dated 29-10-1986 and Circular No. 740, dated 17-4-1996..

[R23]Substituted by the Finance Act, 1994, w.e.f. 1-4-1995. Prior to substitution, sub-section (1), as amended by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977/1-4-1978, the Finance Act, 1983, w.e.f. 1-6-1983, the Finance Act, 1986, w.e.f. 1-4-1987, the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989 and the Finance Act, 1992, w.e.f. 1-6-1992, read as under :

‘(1) Subject to the provisions of sub-sections (1A) and (2), where the total income of an assessee, being a foreign company, includes any income by way of—

(a) dividends ; or

(aa) interest received from Government or an Indian concern on moneys borrowed or debt incurred by Government or the Indian concern in foreign currency ; or

(ab) income received in respect of units, purchased in foreign currency, of a Mutual Fund specified under clause (23D) of section 10 ; or

(b) 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, and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy,

the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated on the amount of income by way of dividends, if any, included in the total income, at the rate of twenty-five per cent ;

(ia) the amount of income-tax calculated on the income, by way of interest referred to in clause (aa), if any, included in the total income, at the rate of twenty-five per cent ;

(ib) the amount of income-tax calculated on the income in respect of units referred to in clause (ab), if any, included in the total income, at the rate of twenty-five per cent ;

(ii) the amount of income-tax calculated on the income by way of royalty, if any, included in the total income, at the rate of thirty per cent ;

(iii) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of thirty per cent ; and

(iv) the amount of income-tax with which it would have been chargeable had its total income been reduced by the amount of income referred to in clause (a), clause (aa) and clause (b).

Explanation.—For the purposes of this section,—

(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 currency” shall have the same meaning as in the Explanation below item (g) of sub-clause (iv) of clause (15) of section 10 ;

[R24] Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.

[R25] Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.

[R26]Substituted by the Finance Act, 1997, w.e.f. 1-4-1998. Prior to its substitution, sub-clauses (A) and (B), read as under :

“(A) the amount of income-tax calculated on the income by way of royalty, if any, included in the total income, at the rate of thirty per cent ;

(B) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of thirty per cent ; and”

[R27]Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.

[R28]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

[R29]Substituted for “and approved by the Central Government” by the Finance Act, 1992, w.e.f. 1-6-1992.

[R30]Substituted for “approved by the Central Government or where the agreement relates to a matter” by the Finance Act, 1994, w.e.f. 1-4-1995.

[R31]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

[R32]Renumbered by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.

[R33]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991

[R34]Substituted for “purposes of the proviso” by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991

[R35]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.

[R36]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992

[R37]Words “or sub-section (2) of section 48” omitted by the Finance Act, 1992, w.e.f. 1-4-1993.

[R38]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

[R39]Substituted for “Central Government” by the Finance Act, 2001, w.e.f. 1-6-2001.

[R40]For definition of “foreign currency”

[R41]For text of section 4A of the Companies Act, 1956, and notified institutions thereunder, see Appendix One.

[R42] Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

[R43] Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.

[R44]Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme has been notified—Notification No. SO 1032(E), dated 24-12-1993

[R45] Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996.

[R46] Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.

[R47]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.

[R48]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.

[R49] Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.

[R50] Substituted by the Finance Act, 2001, w.e.f. 1-4-2001. Prior to its substitution, sub-section (1) read as under :

“(1) Where the total income of an assessee, being an individual, who is a resident and an employee of an Indian company engaged in information technology software and information technology services (hereafter in this section referred to as the resident employee), includes—

(a) income by way of dividends, other than dividends referred to in section 115-O, on Global Depository Receipts of an Indian company engaged in information technology software and information technology services, issued in accordance with such employees’ stock option scheme as the Central Government may, by notificationin the Official Gazette, specify in this behalf and purchased by him in foreign currency; or

(b) income by way of long-term capital gains arising from the transfer of Global Depository Receipts referred to in clause (a),

the income-tax payable shall be the aggregate of—

(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, at the rate of ten per cent; and

(iii) the amount of income-tax with which the resident employee would have been chargeable had his total income been reduced by the amount of income referred to in clauses (a) and (b).”

[R51]For notified Scheme

[R52]Inserted by the Finance Act, 1993, w.e.f. 1-4-1993.

[R53]Substituted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Prior to its substitution, clause (a), as amended by the Finance Act, 1997, w.e.f. 1-4-1998, read as under :

“(a) income other than income by way of dividends referred to in section 115-O received in respect of securities (other than units referred to in section 115AB) listed in a recognised stock exchange in India in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder; or”

[R54] Inserted by the Finance Act, 1999, w.e.f. 1-4-1999.

[R55] For list of notified Foreign Institutional Investors

[R56]For definition of “securities

[R57]Inserted by the Finance Act, 1976, w.e.f. 1-6-1976.

[R58]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.

[R59]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989

[R60] Substituted for “the previous year relevant to the assessment year commencing on the 1st day of April, 1989” by the Finance Act, 1989, w.e.f. 1-4-1990.

[R61]For notified Social Security Fund.

[R62] Substituted for “year” by the Finance Act, 1989, w.e.f. 1-4-1990.

[R63]Inserted by the Finance Act, 1986, w.e.f. 1-4-1987.

[R64]Word “thirty” shall be substituted for “forty” by the Finance Act, 2001, w.e.f. 1-4-2002.

[R65]Inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990.