INCOME TAX NOTES

PART A

INCOME-TAX

CHAPTER  II

BASIS OF CHARGE

2. (1) In accordance with the provisions of this Code, every person shall be liable to

pay income-tax in respect of his total income of the financial year.

(2) Subject to the provisions of this Code, income-tax, including additional income-tax,

shall be charged in respect of the total income of a financial year of every person.

(3)  Where the income-tax referred to in sub-section (2) is to be charged in respect of

the income of a period other than the financial year, the income-tax for such period shall be

charged accordingly.

(4)  The income-tax referred to in sub-section (2) shall be charged at the rate specified

in the First Schedule in the manner provided therein.

(5) In respect of the income chargeable under sub-section (2), income tax shall be

deducted or collected at source or paid in advance, in accordance with the provisions of this

Code.

(6) The chargeability of income-tax on the income of a financial year under the foregoing

provisions shall be determined in accordance with the provisions of this Code as they stand

on the 1st day of April of that financial year.

3. (1) Subject to the provisions of this Code, the total income of any financial year of

a person, who is a resident, shall include all income from whatever source derived which—

(a)  accrues, or is deemed to accrue, to him in India during the year;

(b)  accrues to him outside India during the year;

(c)  is received, or is deemed to be received, by him, or on his behalf, in India

during the year; or

(d)  is received by him, or on his behalf, outside India during the year.

(2)  Subject to the provisions of this Code, the total income of any financial year of a

person, who is a non-resident, shall include all income from whatever source derived which—

(a)  accrues, or is deemed to accrue, to him in India during the year; or

(b)  is received, or is deemed to be received, by him, or on his behalf, in India

during the year.

(3) Any income which accrues to a resident outside India  during the year, or is

received outside India  during the year by, or on behalf of, such resident, shall be included in

the total income of the resident,  whether or not such income has been charged to tax outside

India.

4. (1) An individual shall be resident in India in any financial year, if he is in India—

(a) for a period, or periods, amounting in all to one hundred and eighty-two days

or more in that year; or

(b) for a period, or periods, amounting in all to— 

 (i) sixty days or more in that year; and

 (ii) three hundred and sixty-five days or more within the four years

immediately preceding that year.

(2) The provisions of clause (b) of sub-section (1) shall not apply in respect of an

individual who is—

(a) a citizen of India and who leaves India in that year as a member of the crew of

an Indian ship; or

(b) a citizen of India and who leaves India in that year for the purposes of

employment outside India.

(3) A company shall be resident in India in any financial year, if—

(a) it is an Indian company; or

(b) its place of effective management, at any time in the year, is in India.

(4)  Every other person shall be resident in India in any financial year, if the place of

control and management of its affairs, at any time in the year, is situated wholly, or partly, in

India.

5.  (1) The income shall be deemed to accrue in India, if it accrues, whether directly or

indirectly, through or from:

(a) any business connection in India;

(b)  any property in India;

(c) any asset or source of income in India; or

(d) the transfer of a capital asset situated in India.

(2) Without prejudice to the generality of the provisions of sub-section (1), the

following income shall be deemed to accrue in India, namely:— 

(a) income from employment, if it is for–

 (i) service rendered in India;

(ii) service rendered outside India by a citizen of India and the income is

receivable from the Government; or

(iii) the rest period, or leave period, which precedes, or succeeds, the

period of service rendered in  India and forms part of the service contract of

employment;

(b) any dividend paid by a domestic company outside India;

(c) any  insurance premium including re-insurance premium accrued from or

payable by any  resident or non-resident in respect of insurance  covering any risk in

India;

(d) interest accrued from or payable by any resident or the Government;

(e) interest accrued from or payable by any non-resident, if the interest is in

respect of any debt incurred  and used for the purposes of—

(i) a business carried on by the non-resident in India; or

(ii)  earning any income  from any source in India;

(f) royalty accrued from or payable by any resident or the Government;

(g) royalty accrued from or payable by a non-resident, if the royalty is for the

purposes of— 

(i) a business carried on by the non-resident in India; or

(ii) earning any income from any source in India;

(h) fees for technical services accrued from or payable by  any resident or the

Government;

(i) fees for technical services accrued from or payable by any non-resident, in

respect of services utilised for the purposes of—

(i) a business carried on by the non-resident in India; or

(ii) earning any income from any source in India;

(j)  transportation charges accrued from or payable by  any resident or the

Government;

(k) transportation charges accrued from or payable by any non-resident, if the

transportation charges are in respect of the carriage to, or from, a place in India.

  (3) For the purposes of clause (a) of sub-section (1), in the case of a business of

which all the operations are not carried out in India, the income of the business deemed to

accrue in India shall be only such part of the income as is reasonably attributable to the

operations carried out in India.

(4) The income deemed to accrue in India under sub-section (1) shall, in the case of a

non-resident, not include the following, namely:— 

(a)  any income accruing through, or from, operations which are confined to the

purchase of goods in India for the purposes of export out of India;

(b)  interest accrued from or payable by a resident, in respect of any debt incurred

and used for the purposes of—

 (i) a business carried on by the resident outside India; or

(ii) earning any income from any source outside India;

(c)  royalty accrued from or payable by a resident for the purposes of—

(i) a business carried on by the resident outside India; or

(ii) earning any income from any source outside India;

(d) royalty consisting of lump sum consideration accrued from or payment made

by a resident for the transfer of any rights (including the granting of a licence) in

respect of computer software supplied by the 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 issued by

the Government of India;

(e) fees for technical services accrued from or payable by a resident, in respect of

services utilised for the purposes of—

(i) a business carried on by the resident outside India; or

(ii) earning any income from any source outside India;

(f)  transportation charges for the carriage by aircraft or ship accrued from or

payable by any resident, if the transportation charges are in respect of the carriage

from a place outside India to another place outside India, except where the  airport or

port of origin of departure of such carriage is in India;

(g) income from transfer, outside India, of any share or interest in a foreign

company unless at any time in twelve months preceeding the transfer, the fair market

value of the assets in India, owned, directly or indirectly, by the company,  represent at

least fifty per cent. of the fair market value of all assets owned by the company;

(h) interest accrued from or payable by a non-resident as referred to in subclause (ii) of clause (e) of sub-section (2), if such interest has not been claimed by the

non-resident as a deduction from his tax bases chargeable in India.

 (5)  The provisions of clauses (c) to (k) of sub-section (2) shall be applicable, whether

or not,—

(a) the payment is made in India;

(b) the services are rendered in India;

(c) the non-resident has a residence or place of business or any business

connection in India; or

(d) the income has accrued in India.

(6) Where the income of a non-resident, in respect of transfer, outside India, of any

share or interest in a foreign company, is deemed to accure in India under clause (d) of subsection (1), it shall be computed in accordance with the following formula—

A x B

C

Where A = Income from the transfer computed in accordance with

provisions of this Code as if the transfer was effected in

India;

B = fair market value of the assets in India, owned, directly

or indirectly, by the company;

C = fair market value of all assets owned by the company.

6. The following income shall be deemed to be received in the financial year, namely:—

(a) any contribution made by an employer, in the financial year, to the account of

an employee under a pension fund;

(b) any contribution made by an employer, in the financial year, to the account of

an employee in any other fund;

(c) the annual accretion, in the financial year, to the balance at the credit of any

employee in a fund referred to in clause (b) to the extent it exceeds the limit as may be

prescribed.

7.  For the purposes of inclusion in the total income of an assessee—

(a) any dividend declared, distributed or paid by a company within the meaning

of  item (a) or item (b) or item (c) or item (d) or item (e) of clause (81) of section 314 shall

be deemed to be the income of the financial 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 financial year in

which the amount of such dividend is unconditionally made available by the company

to the member who is entitled to it.

8. (1) The total income of any person, being a transferor, shall include the following,

namely:—

(a) any income accruing to any other person, by virtue of a transfer, whether

revocable or not, without transfer of the asset from which the income accrues; or

(b) any income accruing to any other person, by virtue of a revocable transfer of

an asset.

(2) The provisions of clause (b) of sub-section (1) shall not apply in a case where—

(a) any income accrues from an asset transferred to any trust, if the transfer is

not revocable during the life time of the beneficiary of the trust; or

(b) any income accrues from an asset transferred to any other person, not being

a trust, if the transfer is not revocable during the lifetime of such other person.

(3) In this section,—

(a) a transfer shall be deemed to be revocable if—

(i) it contains any provision for the re-transfer, directly or indirectly, of the

whole or any part of the income or assets to the transferor; or

(ii) it, in any way, gives the transferor a right to re-assume power, directly

or indirectly, over the whole or any part of the income or assets;

(b) a transfer shall include any settlement, trust, covenant, agreement or

arrangement.

Thanks for Sharing !!