PART I: STATUTORY UPDATE

The Income-tax law, as amended by the Finance Act, 2018, including significant notifications/ circulars issued
upto 30th April, 2019 are applicable for November, 2019 examination. The relevant assessment year for
November, 2019 examination is A.Y.2019-20. The July 2018 edition of the Study Material is based on the
provisions of income-tax law as amended by the Finance Act, 2018 and significant notifications/circu lars issued
upto 30th April, 2018.
The significant notifications/circulars made between 1.4.2018 and 30.4.2019 which are relevant for November,
2019 examination are given hereunder.
Chapter 3: Incomes which do not form part of Total Income

Computation of admissible deduction u/s 10AA of the Income-tax Act, 1961 [Circular No. 4/2018, Dated
14-8-2018]
As per the provisions of section 10AA(7), the profits derived from export of articles or things or services (including
computer software) shall be the amount which bears to the profits of the business of the undertaking, being the
Unit, the same proportion as the export turnover in respect of such articles or things or services bears to the total
turnover of the business carried on by the undertaking.
Further as per clause (i) to Explanation 1 to section 10AA, "export turnover" means the consideration in respect
of export by the undertaking, being the Unit of articles or things or services received in, or brought into, India by
the assessee, but does not include freight, telecommunication charges or insurance attributable to the delivery
of the articles or things outside India or expenses, if any, incurred in foreign exchange in rendering of services
(including computer software) outside India.
The issue of whether freight, telecommunication charges and insurance expenses are to be excluded from both
"export turnover"' and "total turnover' while working out deduction admissible under section 10AA on the ground
that they are attributable to delivery of articles or things outside India has been highly contentious. Similarly, the
issue whether charges for rendering services outside India are to be excluded both from "export turnover" and
"total turnover" while computing deduction admissible under section 10AA on the ground that such charges are
relatable towards expenses incurred in convertible foreign exchange in rendering services outside India has also
been highly contentious.
The controversy has been finally settled by the Hon'ble Supreme Court vide its judgment dated 24.4.2018 in the
case of Commissioner of Income Tax, Central-III Vs. M/s HCL Technologies Ltd. (CA No. 8489-8490 of 2013,
NJRS Citation 2018-LL-0424-40), in relation to section 10A.
The issue had been examined by CBDT and it is clarified, in line with the above decision of the Supreme Court,
that freight, telecommunication charges and insurance expenses are to be excluded both from "export
turnover" and "total turnover', while working out deduction admissible under section 10AA to the ex tent
they are attributable to the delivery of articles or things outside India .
Similarly, expenses incurred in foreign exchange for rendering services outside India are to be excluded
from both "export turnover" and "total turnover" while computing deduction admissible under section
10AA.
Note: Though this CBDT Circular is issued in relation to erstwhile section 10A, the same is also relevant in the
context of section 10AA. Accordingly, the reference to section 10A in the Circular and the relevant sub -section
and Explanation number thereto have been modified and given with reference to section 10AA and the
corresponding sub-sections, Explanation number and clause of Explanation.
Chapter 4: Salaries

Notified limit for exemption in respect of gratuity increased, in case of employees not covered under the
Payment of Gratuity Act, 1972 [Notification No. 16 /2019, dated 08.03.2019]
As per section 10(10)(iii), in case of an employee not covered under the Payment of Gratuity Act, 1972, any

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gratuity received by an employee on his retirement or his becoming incapacitated prior to such retirement or on
termination of his employment or any gratuity received by his widow, children or dependents on his death is
exempt from tax to the extent of least of the following limits:
(i) One-half month’s salary for each year of completed service
(ii) Actual gratuity received
(iii) Specified limit (i.e., limit notified by the Central Government)
The Central Government, having regard to the maximum amount of any gratuity payable to employees, has
specified Rs.20 lakh as the limit for the purposes of section 10(10)(iii) in relation to the employees who retire or
become incapacitated prior to such retirement or die on or after 29th March, 2018 or whose employment is
terminated on or after the said date. In effect, the Central Government has, vide this notification, increased the
specified limit from Rs.10 lakhs to Rs.20 lakh with effect from 29.03.2018.

Chapter 9: Advance Tax, Tax Deduction at Source and Introduction to Tax Collection at Source

No tax is required to be deducted at source on interest payable on “Power Finance Corporation Limited
54EC Capital Gains Bond” and “Indian Railway Finance Corporation Limited 54EC Capital Gains Bond” –
[Notification No. 27 & 28/2018, dated 18-06-2018]
Section 193 (Interest on securities) provides that the person responsible for paying to a resident any income by
way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time
of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct
income-tax @ 10%, being the rates in force on the amount of the interest payable.
As per clause (iib) of the proviso to section 193, no tax is required to be deducted at source from any interest
payable on such debentures, issued by any institution or authority, or any public sector company, or any co -
operative society (including a co-operative land mortgage bank or a co-operative land development bank), as the
Central Government may, by notification in the Official Gazette, specify in this behalf.
Accordingly, the Central Government has, vide this notification, specified -
(i) “Power Finance Corporation Limited 54EC Capital Gains Bond” issued by Power Finance Corporation
Limited {PFCL} and
(ii) “Indian Railway Finance Corporation Limited 54EC Capital Gains Bond” issued by Indian Railway Finance
Corporation Limited {IRFCL}
The benefit of this exemption would, however, be admissible in the case of transfer of such bonds by endorsement
or delivery, only if the transferee informs PFCL/IRFCL by registered post within a period of sixty days of such
transfer.
No tax to be deducted at source under section 194A, in case of Senior Citizens if the aggregate amount of
interest does not exceed Rs. 50,000 [Notification No. 6/2018, dated 6-12-2018]
Section 194A requires deduction of tax at source on interest other than interest on securities. However, section 194A(3)
provides for exemption from this requirement where such interest credited or paid or likely to be credited or paid during
the Financial Year does not exceed Rs.10,000 and the payer is a banking company, co-operative society engaged in
banking business or post office. In case of a senior citizen (being a resident), however, a higher threshold of
Rs. 50,000 has been specified for non-deduction of tax at source in such cases.
Accordingly, as per the third proviso to section 194A(3), no tax is required to be deducted at source in the case of
senior citizens where the amount of interest or the aggregate of the amount of interest credited or paid during the
financial year by a banking company, co-operative society engaged in banking business or post office does not exceed
Rs.50,000. However, it has come to the notice of the CBDT, that, some tax deductors/banks are making tax deductions
even when the amount of interest does not exceed Rs. 50,000.

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Under Rule 31A(5) of the Income-tax Rules, 1962, the DGIT (Systems) is authorized to specify the procedures,
formats and standards for the purposes of furnishing and verification of the statements or claim for refund and
shall be responsible for the day-to-day administration in relation to furnishing and verification of the statements
or claim for refund in the manner so specified.
Accordingly, the Principal Director General of Income-tax (Systems) has, in exercise of the powers delegated by
the CBDT under Rule 31A(5), clarified that no tax deduction at source under section 194A shall be made in the case
of senior citizens where the amount of such income or the aggregate of the amounts of such income credited or paid
during the financial year does not exceed Rs.50,000.
Housing and Urban Development Corporation Ltd. (HUDCO), New Delhi notified for the purpose of section
194A(3)((iii)(f) [Notification No. 26/2019, dated 20.03.2019]
Section 194A(3)((iii)(f) provides that no tax is required to be deducted on interest income paid or credited to such
other institution, association or body or class of institutions, associations, or bodies which is notified by the Central
Government. Accordingly, the Central Government has, vide this notification, notified the Housing and Urban
Development Corporation Ltd.(HUDCO), New Delhi for the purpose of the said section.
Consequent to such notification, no tax need to be deducted at source from interest other than interest on securities
credited or paid to HUDCO.
Chapter 10: Provisions for filing return of income and self-assessment

Time limit for making an application for allotment of PAN in respect of certain persons [Notification No.
82/2018, dated 19-11-2018]
Section 139A(1) lists out the persons, who have not allotted PAN, to apply to the Assessing Officer for allotment of
PAN within such time, as may be prescribed. The time limit for making such application is prescribed in Rule 114(3).
The Finance Act, 2018 has expanded the list of persons covered under section 139A(1) to include the persons
mentioned in (iv) & (v) in column (2) of the table below, who have not been allotted a PAN, to apply to the Assessing
Officer for allotment of PAN. Accordingly, Rule 114(3) has been amended vide this notification to provide the time limit
(indicated in column (3) of the table below) for such persons to apply to the Assessing Officer for allotment of PAN.
The table below contains the list of persons mentioned in section 139A(1), who have not been allotted PAN, to apply
for PAN and the time limit for making such application in each such case.

(1) (2) (3)

Persons required to apply for PAN Time limit for making such application

(i) Every person, if his total income or the total income of any on or before the 31st May of the
other person in respect of which he is assessable under the assessment year for which such income is
Act during any previous year exceeds the maximum amount assessable
which is not chargeable to income-tax

(ii) Every person carrying on any business or profession whose before the end of that financial year
total sales, turnover or gross receipts are or is likely to (previous year).
exceed Rs. 5 lakhs in any previous year

(iii) Every person who is required to furnish a return of income before the end of the financial year
under section 139(4A) (previous year).

(iv) Every person being a resident, other than an individual, on or before 31st May of the immediately
which enters into a financial transaction of an amount following financial year
aggregating to Rs. 2,50,000 or more in a financial year

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 (v) Every person who is a managing director, director, partner, on or before 31st May of the immediately
trustee, author, founder, karta, chief executive officer, following financial year in which the person
principal officer or office bearer of any person referred in (iv) referred in (iv) enters into financial
above or any person competent to act on behalf of such transaction specified therein.
person referred in (iv) above

Quoting of Aadhaar Number mandatory in returns filed on or after 1.4.2019 [Circular No. 6/2019 dated
31.03.2019]
As per section 139AA(1)(ii), with effect from 01.07.2017, every person who is eligible to obtain Aadhaar number has
to quote Aadhaar number in the return of income.
The Apex Court in a series of judgments has upheld the validity of section 139AA. Consequently, with effect from
01.04.2019, the CBDT clarified that it is mandatory to quote Aadhaar number while filing the return of income unless
specifically exempted as per any notification issued under section 139AA(3). Thus, returns being filed either
electronically or manually on or after 1.4.2019 cannot be filed without quoting the Aadhaar number.
Time limit for intimation of Aadhar Number to Prescribed Authority [Notification No. 31/2019, dated
31.03.2019]
Section 139AA(2) provides that every person who has been allotted Permanent Account Number (PAN) as on 1st
July, 2017, and who is eligible to obtain Aadhar Number, shall intimate his Aadhar Number to prescribed authority on
or before a date as may be notified by the Central Government.
Accordingly, the Central Government has, vide this notification, notified that every person who has been allotted
permanent account number as on 1st July, 2017, and who is eligible to obtain Aadhaar number, shall intimate
his Aadhaar number to the Principal DGIT (Systems) or Principal Director of Income-tax (Systems) by 30th
September, 2019.

This notification would, however, not be applicable to those persons or such class of persons or any State or part of
any State who/which are/is specifically excluded under section 139AA(3).

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