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(1) This Act may be called the Income-tax Act, 1961.

(2) It extends to the whole of India.

(3) Save as otherwise provided in this Act, it shall come into force on the 1st day of April, 1962.

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In this Act, unless the context otherwise requires, - (1) "Advance tax" means the advance tax payable in
accordance with the provisions of Chapter XVII-C;

(1A) "Agricultural income" means - (a) any rent or revenue derived from land which is situated in India and
is used for agricultural purposes;

(b) Any income derived from such land by - (i) Agriculture; or

(ii) The performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a
cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market;
or

(iii) The sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of
which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-
clause;

(c) Any income derived from any building owned and occupied by the receiver of the rent or revenue of any
such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or
the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on :

Provided that - (i) The building is on or in the immediate vicinity of the land, and is a building which the
receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection
with the land, requires as a dwelling house, or as a store-house, or other out-building, and

(ii) The land is either assessed to land revenue in India or is subject to a local rate assessed and collected by
officers of the Government as such or where the land is not so assessed to land revenue or subject to a local
rate, it is not situated - (A) In any area which is comprised within the jurisdiction of a municipality (whether
known as a municipality, municipal corporation, notified area committee, town area committee, town
committee or by any other name) or a cantonment board and which has a population of not less than ten
thousand according to the last preceding census of which the relevant figures have been published before the
first day of the previous year; or

(B) In any area within such distance, not being more than eight kilometres, from the local limits of any
municipality or cantonment board referred to in item (A), as the Central Government may, having regard to
the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf
by notification in the Official Gazette.
xplanation : For the removal of doubts, it is hereby declared that revenue derived from land shall not include
and shall be deemed never to have included any income arising from the transfer of any land referred to in
item (a) or item (b) of sub-clause (iii) of clause (14) of this section;

(1B) "Amalgamation", in relation to companies, means the merger of one or more companies with another
company or the merger of two or more companies to form one company (the company or companies which so
merge being referred to as the amalgamating company or companies and the company with which they merge
or which is formed as a result of the merger, as the amalgamated company) in such a manner that - (i) all the
property of the amalgamating company or companies immediately before the amalgamation becomes the
property of the amalgamated company by virtue of the amalgamation;

(ii) All the liabilities of the amalgamating company or companies immediately before the amalgamation
become the liabilities of the amalgamated company by virtue of the amalgamation;

(iii) Shareholders holding not less than nine-tenths in value of the shares in the amalgamating company or
companies (other than shares already held therein immediately before the amalgamation by, or by a nominee
for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue
of the amalgamation, otherwise than as a result of the acquisition of the property of one company by another
company pursuant to the purchase of such property by the other company or as a result of the distribution of
such property to the other company after the winding up of the first mentioned company;

(2) "Annual value", in relation to any property, means its annual value as determined under section 23;

(4) "Appellate Tribunal" means the Appellate Tribunal constituted under section 252;

(5) "Approved gratuity fund" means a gratuity fund which has been and continues to be approved by the
Chief Commissioner or Commissioner in accordance with the rules contained in Part C of the Fourth
Schedule;

(6) "Approved superannuation fund" means a superannuation fund or any part of a superannuation fund which
has been and continues to be approved by the Chief Commissioner or Commissioner in accordance with the
rules contained in Part B of the Fourth Schedule;

(7) "Assessee" means a person by whom any tax or any other sum of money is payable under this Act, and
includes - (a) very person in respect of whom any proceeding under this Act has been taken for the
assessment of his income or of the income of any other person in respect of which he is assessable, or of the
loss sustained by him or by such other person, or the amount of refund due to him or to such other person;

(b) very person who is deemed to be an assessee under any provision of this Act;

(c) very person who is deemed to be an assessee in default under any provision of this Act;

(7A) "Assessing Officer" means the Assistant Commissioner or Deputy Commissioner or Assistant Director
or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of
directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of
this Act, and the Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of
that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an
Assessing Officer under this Act;
(8) "Assessment" includes reassessment;

(9) "Assessment year" means the period of twelve months commencing on the 1st day of April every year;

(9A) "Assistant Commissioner" means a person appointed to be an Assistant Commissioner of Income-tax or

a Deputy Commissioner of Income-tax" under sub-section (1) of section 117;

(10) "Average rate of income-tax" means the rate arrived at by dividing the amount of income-tax calculated
on the total income, by such total income;

(11) "Block of assets" means a group of assets falling within a class of assets comprising - (a) Tangible
assets, being buildings, machinery, plant or furniture;

(b) Intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other
business or commercial rights of similar nature, in respect of which the same percentage of depreciation is
prescribed;

(12) "Board" means the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act,
1963 (54 of 1963);

(13) "Business" includes any trade, commerce or manufacture or any adventure or concern in the nature of
trade, commerce or manufacture;

(14) "Capital asset" means property of any kind held by an assessee, whether or not connected with his
business or profession, but does not include -

(i) Any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession;

(ii) Personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding
jewellery) held for personal use by the assessee or any member of his family dependent on him.

(b) Precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or
sewn into any wearing apparel;

(iii) Agricultural land in India, not being land situate -

(a) In any area which is comprised within the jurisdiction of a municipality (whether known as a municipality,
municipal corporation, notified area committee, town area committee, town committee, or by any other name)
or a cantonment board and which has a population of not less than ten thousand according to the last
preceding census of which the relevant figures have been published before the 1st day of the previous year; or

(b) In any area within such distance, not being more than eight kilometres from the local limits of any
municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the
extent of, and scope for, urbanisation of that area and other relevant considerations, specify 20 in this behalf
by notification in the Official Gazette;

(iv) 6 1/2 per cent Gold Bonds, 1977, 22 or 7 per cent Gold Bonds, 1980, National Defence Gold Bonds,
1980, issued by the Central Government;
(v) Special Bearer Bonds, 1991, issued by the Central Government;

(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government

(15) "Charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any
other object of general public utility

(15A) "Chief Commissioner" means a person appointed to be a Chief Commissioner of Income-tax under
sub-section (1) of section 117;

(15B) "Child", in relation to an individual includes a step child and an adopted child of that individual;

(16) "Commissioner" means a person appointed to be a Commissioner of Income-tax under sub-section (1) of
section 117

(16A) "Commissioner (Appeals)" means a person appointed to be a Commissioner of Income-tax (Appeals)

under sub-section (1) of section 117;

(17) "Company" means - (i) Any Indian company, or

(ii) Any body corporate incorporated by or under the laws of a country outside India, or

(iii) Any institution, association or body which is or was assessable or was assessed as a company for any
assessment year under the Indian Income-tax Act, 1922 (11 of 1922), or which is or was assessable or was
assessed under this Act as a company for any assessment year commencing on or before the 1st day of April,
1970, or

(iv) Any institution, association or body, whether incorporated or not and whether Indian or non-Indian,
which is declared by general or special order of the Board to be a company :

Provided that such institution, association or body shall be deemed to be a company only for such assessment
year or assessment years (whether commencing before the 1st day of April, 1971 or on or after that date) as
may be specified in the declaration;

(18) "Company in which the public are substantially interested" - a company is said to be a company in which
the public are substantially interested -

(a) If it is a company owned by the Government or the Reserve Bank of India or in which not less than forty
per cent of the shares are held (whether singly or taken together) by the Government or the Reserve Bank of
India or a corporation owned by that bank;

(aa) If it is a company which is registered under section 25 of the Companies Act, 1956 (1 of 1956); or

(ab) If it is a company having no share capital and if, having regard to its objects, the nature and composition
of its membership and other relevant considerations, it is declared by order of the Board to be a company in
which the public are substantially interested :
Provided that such company shall be deemed to be a company in which the public are substantially interested
only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or
on or after that date) as may be specified in the declaration;

(ac) If it is a mutual benefit finance company, that is to say, a company which carries on, as its principal
business, the business of acceptance of deposits from its members and which is declared by the Central
Government under section 620A of the Companies Act, 1956 (1 of 1956), to be a Nidhi or Mutual Benefit
Society;

(ad) If it is a company, wherein shares (not being shares entitled to a fixed rate of dividend whether with or
without a further right to participate in profits) carrying not less than fifty per cent of the voting power have
been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous
year beneficially held by, one or more co-operative societies;

(b) If it is a company which is not a 39 private company as defined in the Companies Act, 1956 (1 of 1956),
and the conditions specified either in item (A) or in item (B) are fulfilled, namely :-

(A) Shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a
further right to participate in profits) were, as on the last day of the relevant previous year, listed in a
recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of
1956), and any rules made thereunder;

(B) Shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a
further right to participate in profits) carrying not less than fifty per cent of the voting power have been
allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year
beneficially held by -

(a) The Government, or

(b) A corporation established by a Central, State or Provincial Act, or

(c) Any company to which this clause applies or any subsidiary company of such company if the whole of the
share capital of such subsidiary company has been held by the parent company or by its nominees throughout
the previous year.

(19) "Co-operative society" means a co-operative society registered under the Co-operative Societies Act,
1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-
operative societies;

(19A) "Deputy Commissioner" means a person appointed to be a Deputy Commissioner of Income-tax under
sub-section (1) of section 117;

(19AA) "Demerger", in relation to companies, means the transfer, pursuant to a scheme of arrangement under
sections 391 to 394 of the Companies Act, 1956 (1 of 1956), by a demerged company of its one or more
undertakings to any resulting company in such a manner that - (i) All the property of the undertaking, being
transferred by the demerged company, immediately before the demerger, becomes the property of the
resulting company by virtue of the demerger;
(ii) All the liabilities relatable to the undertaking, being transferred by the demerged company, immediately
before the demerger, become the liabilities of the resulting company by virtue of the demerger;

(iii) The property and the liabilities of the undertaking or undertakings being transferred by the demerged
company are transferred at values appearing in its books of account immediately before the demerger;

(iv) The resulting company issues, in consideration of the demerger, its shares to the shareholders of the
demerged company on a proportionate basis;

(v) The shareholders holding not less than three-fourths in value of the shares in the demerged company
(other than shares already held therein immediately before the demerger, or by a nominee for, the resulting
company or, its subsidiary) become shareholders of the resulting company or companies by virtue of the
demerger, otherwise than as a result of the acquisition of the property or assets of the demerged company or
any undertaking thereof by the resulting company;

(vi) The transfer of the undertaking is on a going concern basis;

(vii) The demerger is in accordance with the conditions, if any, notified under sub-section (5) of section 72A
by the Central Government in this behalf.

xplanation 1 : For the purposes of this clause, "undertaking" shall include any part of an undertaking, or a
unit or division of an undertaking or a business activity taken as a whole, but does not include individual
assets or liabilities or any combination thereof not constituting a business activity.

xplanation 2 : For the purposes of this clause, the liabilities referred to in sub-clause (ii), shall include - (a)
The liabilities which arise out of the activities or operations of the undertaking;

(b) The specific loans or borrowings (including debentures) raised, incurred and utilised solely for the
activities or operations of the undertaking; and

(c) In cases, other than those referred to in clause (a) or clause (b), so much of the amounts of general or
multipurpose borrowings, if any, of the demerged company as stand in the same proportion which the value
of the assets transferred in a demerger bears to the total value of the assets of such demerged company
immediately before the demerger

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(1) Save as otherwise provided in this section, "previous year" for the purposes of this Act, means the
financial year immediately preceding the assessment year :

Provided that, in the case of a business or profession newly set up, or a source of income newly coming into
existence, in the said financial year, the previous year shall be the period beginning with the date of setting up
of the business or profession or, as the case may be, the date on which the source of income newly comes into
existence and ending with the said financial year.
(2)"Previous year", in relation to the assessment year, commencing on the 1st day of April, 1989, means the
period which begins with the date immediately following the last day of the previous year relevant to the
assessment year commencing on the 1st day of April, 1988 and ends on the 31st day of March, 1989:

(3) Where the previous year in relation to the assessment year commencing on the 1st day of April, 1989,
referred to in sub-section (2) exceeds a period of twelve months, the provisions of this Act shall apply subject
to the modifications specified in the rules in the Tenth Schedule.

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(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

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(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)
127a 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.

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(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 BNS") 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.

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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

(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.

xplanation : 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 xplanation 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 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) very 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 not been resident in India in nine out of the ten previous years preceding that year, or has
not during the seven previous years preceding that year been in India for a period of, or periods amounting in
all to, seven hundred and thirty days or more, or

(b) A Hindu undivided family whose manager has not been resident in India in nine out of the ten previous
years preceding that year, or has not during the seven previous years preceding that year been in India for a
period of, or periods amounting in all to, seven hundred and thirty days or more.

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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.

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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

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(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;

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In computing the total income of a previous year of any person, any income falling within any of the
following clauses shall not be included - (1) Agricultural income;

(2) Subject to the provisions of sub-section (2) of section 64, any sum received by an individual as a member
of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of
any impartible estate, where such sum has been paid out of the income of the estate belonging to the family;
(2A) In the case of a person being a partner of a firm which is separately assessed as such, his share in the
total income of the firm.

(3) 145 any receipts which are of a casual and non-recurring nature, to the extent such receipts do not exceed
five thousand rupees in the aggregate :

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(1) Subject to the provisions of this section, any profits and gains derived by an assessee from an industrial
undertaking to which this section applies shall not be included in the total income of the assessee.

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

(i) It has begun or begins to manufacture or produce articles or things during the previous year relevant to the
assessment year -

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

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

(ia) In relation to an undertaking which begins to manufacture or produce any article or thing on or after the
1st day of April, 1995, its exports of such articles or things are not less than seventy-five per cent of the total
sales thereof during the previous year;

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

(iii) It is not formed by the transfer to a new business of machinery or plant previously used for any purpose.
xplanation : The provisions of xplanation 1 and xplanation 2 to sub-section (2) of section 80-I shall apply
for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-
section.

(3) The profits and gains referred to in sub-section (1) shall not be included in the total income of the assessee
in respect of any five consecutive assessment years, falling within a period of eight years beginning with the
assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or
produce articles or things specified by the assessee at his option

"Provided that nothing in this sub-section shall be construed to extend the aforesaid five assessment years to
cover any period after the expiry of the said period of eight years."

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(1) Subject to the provisions of this section, any profits and gains derived by an assessee from a hundred per
cent export-oriented undertaking (hereafter in this section referred to as the undertaking) to which this section
applies shall not be included in the total income of the assessee.

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

(i) It manufactures or produces any article or thing;

(ia) In relation to an undertaking which begins to manufacture or produce any article or thing on or after the
1st day of April, 1994, its exports of such articles and things are not less than seventy-five per cent of the total
sales thereof during the previous year;

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

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

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

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(1) 320 Subject to the provisions of sections 60 to 63, the following income shall not be included in the total
income of the previous year of the person in receipt of the income -

(a) Income 322 derived from property held under trust wholly for charitable or religious purposes, to the
extent to which such income is applied to such purposes in India; and, where any such income is accumulated
or set apart for application to such purposes in India, to the extent to which the income so accumulated or set
apart is not in excess of twenty-five per cent of the income from such property;

(b) Income derived from property held under trust in part only for such purposes, the trust having been created
before the commencement of this Act, to the extent to which such income is applied to such purposes in India;
and, where any such income is finally set apart for application to such purposes in India, to the extent to
which the income so set apart is not in excess of twenty-five per cent of the income from such property;

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

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(1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the
previous year of the person in receipt thereof - (a) any part of the income from the property held under a trust
for private religious purposes which does not enure for the benefit of the public;

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

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

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

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

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Any income of a political party which is chargeable under the head "Income from house property" or
"Income from other sources" or any income by way of voluntary contributions received by a political party
from any person shall not be included in the total income of the previous year of such political party

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Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and
computation of total income, be classified under the following heads of income -

A. - Salaries.

C. - Income from house property.

D. - Profits and gains of business or profession.

. - Capital gains.

F. - Income from other sources.

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The following income shall be chargeable to income-tax under the head "Salaries" :- (a) Any salary due from
an employer 377 or a former employer to an assessee in the previous year, whether paid or not;

(b) Any salary paid or allowed to him in the previous year by or on behalf of an employer or a former
employer though not due or before it became due to him;

(c) Any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a
former employer, if not charged to income-tax for any earlier previous year.

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The income chargeable under the head "Salaries" shall be computed after making the following deductions,
namely :-

(i) In the case of an assessee whose income from salary, before allowing a deduction under the clause, - (a)
Does not exceed one lakh rupees, a deduction of a sum equal to thirty-three and one-third per cent of the
salary or twenty-five thousand rupees, whichever is less;

(b) xceeds one lakh rupees but does not exceed five lakh rupees, a deduction of a sum of twenty thousand
rupees.

(ii) A deduction in respect of any allowance in the nature of an entertainment allowance specifically granted
to the assessee by his employer -

(a) In the case of an assessee who is in receipt of a salary from the Government, a sum equal to one-fifth of
his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees, whichever is less;
and

(b) In the case of any other assessee who is in receipt of such entertainment allowance and has been
continuously in receipt of such entertainment allowance regularly from his present employer from a date
before the 1st day of April, 1955, the amount of such entertainment allowance regularly received by the
assessee from his present employer in any previous year ending before the 1st day of April, 1955, or a sum
equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or seven thousand five
hundred rupees, whichever is the least;

(iii) A deduction of any sum paid by the assessee on account of a tax on employment within the meaning of
clause (2) of article 276 of the Constitution, leviable by or under any law

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For the purposes of sections 15 and 16 and of this section, -

(1) "Salary" includes -

(i) Wages;

(ii) Any annuity or pension;

(iii) Any gratuity;

(iv) Any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages;

(v) Any advance of salary;

(va) Any payment received by an employee in respect of any period of leave not availed of by him; 388 ]

(vi) The annual accretion to the balance at the credit of an employee participating in a recognised provident
fund, to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth Schedule; and

(vii) The aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of
rule 11 of Part A of the Fourth Schedule of an employee participating in a recognised provident fund, to the
extent to which it is chargeable to tax under sub-rule (4) thereof;

(2) "Perquisite" includes -

(i) The value of rent-free accommodation provided to the assessee by his employer;

(ii) The value of any concession in the matter of rent respecting any accommodation provided to the assessee
by his employer;

(iii) The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the
following cases :-

(a) By a company to an employee who is a director thereof;

(b) By a company to an employee being a person who has a substantial interest in the company;
(c) By any employer (including a company) to an employee to whom the provisions of paragraphs (a) and (b)
of this sub-clause do not apply and whose income under the head "Salaries" (whether due from, or paid or
allowed by, one or more employers), exclusive of the value of all benefits or amenities not provided for by
way of monetary payment, exceeds twenty-four thousand rupees.

(iiia) The value of any specified security allotted or transferred, directly or indirectly, by any person free of
cost or at concessional rate, to an individual who is or has been in employment of that person :

(iv) Any sum paid by the employer in respect of any obligation which but for such payment, would have
been payable by the assessee;

(v) Any sum payable by the employer, whether directly or through a fund, other than a recognised provident
fund or an approved superannuation fund or a Deposit-linked Insurance Fund established under section 3G of
the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or, as the case may be,
section 6C of the mployees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), to effect
an assurance on the life of the assessee or to effect a contract for an annuity;

Provided that nothing in this clause shall apply to, - (i) The value of any medical treatment provided to an
employee or any member of his family in any hospital maintained by the employer;

(ii) Any sum paid by the employer in respect of any expenditure actually incurred by the employee on his
medical treatment or treatment of any member of his family -

(a) In any hospital maintained by the Government or any local authority or any other hospital approved by the
Government for the purposes of medical treatment of its employees;

(b) In respect of the prescribed diseases or ailments in any hospital approved by the Chief Commissioner
having regard to the prescribed guidelines :

Provided that, in a case falling in sub-clause (b), the employee shall attach with his return of income a
certificate from the hospital specifying the disease or ailment for which medical treatment was required and
the receipt for the amount paid to the hospital;

(iii) Any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force
an insurance on the health of such employee under any scheme approved by the Central Government for the
purposes of clause (ib) of sub-section (1) of section 36;

(iv) Any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in
force an insurance on his health or the health of any member of his family under any scheme approved by the
Central Government for the purposes of section 80D;

(v) Any sum paid by the employer in respect of any expenditure actually incurred by the employee on his
medical treatment or treatment of any member of his family [other than the treatment referred to in clauses (i)
and (ii)]; so, however, that such sum does not exceed five thousand rupees, in the previous year, in the case of
the employee and further five thousand rupees in the case of his family;

(vi) Any expenditure incurred by the employer on - (1) medical treatment of the employee, or any member of
the family of such employee, outside India;
(2) Travel and stay abroad of the employee or any member of the family of such employee for medical
treatment;

(3) Travel and stay abroad of one attendant who accompanies the patient in connection with such treatment,
subject to the condition that -

(A) The expenditure on medical treatment and stay abroad shall be excluded from perquisite only to the extent
permitted by the Reserve Bank of India; and

(B) The expenditure on travel shall be excluded from perquisite only in the case of an employee whose gross
total income, as computed before including therein the said expenditure, does not exceed two lakh rupees;

(vii) Any sum paid by the employer in respect of any expenditure actually incurred by the employee for any
of the purposes specified in clause (vi) subject to the conditions specified in or under that clause.

xplanation : For the purposes of clause (2), - (i) "Hospital" includes a dispensary or a clinic or a nursing
home;

(ii) "Family", in relation to an individual, shall have the same meaning as in clause (5) of section 10; and

(iii) "Gross total income" shall have the same meaning as in clause (5) of section 80B;

(3) "Profits in lieu of salary" includes -

(i) The amount of any compensation due to or received by an assessee from his employer or former employer
at or in connection with the termination of his employment the modification of the terms and conditions
relating thereto;

(ii) Any payment other than any payment referred to in clause (10), clause (10A), clause (10B), clause (11),
clause (12), clause (13) or clause (13A) of section (10), due to or received by an assessee from an employer
or a former employer or from a provident or other fund, to the extent to which it does not consist of
contributions by the assessee or interest on such contributions or any sum received under a Keyman insurance
policy including the sum allocated by way of bonus on such policy

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The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is
the owner 400 , other than such portions of such property as he may occupy for the purposes of any business
or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to
income-tax under the head "Income from house property".

1
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(1) For the purposes of section 22, the annual value of any property shall be deemed to be -
(a) The sum for which the property might reasonably be expected to let from year to year; or

(b) Where the property is let and the annual rent received or receivable by the owner in respect thereof is in
excess of the sum referred to in clause (a), the amount so received or receivable :

(i) In respect of any residential unit, whose annual value as so determined does not exceed six hundred
rupees, the amount of such annual value;

(ii) In respect of any residential unit whose annual value as so determined exceeds six hundred rupees, an
amount of six hundred rupees;

(b) In the case of a building comprising one or more residential units, the erection of which is begun after the
1st day of April, 1961, and completed after the 31st day of March, 1970, but before the 1st day of April, 1978,
for a period of five years from the date of completion of the building, be reduced by a sum equal to aggregate
of -

(i) In respect of any residential unit whose annual value as so determined does not exceed one thousand two
hundred rupees, the amount of such annual value;

(ii) In respect of any residential unit whose annual value as so determined exceeds one thousand two hundred
rupees, an amount of one thousand two hundred rupees;

(c) In the case of a building comprising one or more residential units, the erection of which is completed after
the 31st day of March, 1978 but before the 1st day of April, 1982, for a period of five years from the date of
completion of the building, be reduced by a sum equal to the aggregate of -

(i) In respect of any residential unit whose annual value as so determined does not exceed two thousand four
hundred rupees, the amount of such annual value;

(ii) In respect of any residential unit whose annual value as so determined exceeds two thousand four hundred
rupees, an amount of two thousand four hundred rupees;

(d) In the case of a building comprising one or more residential units, the erection of which is completed after
the 31st day of March, 1982 but before the 1st day of April, 1992, for a period of five years from the date of
completion of the building, be reduced by a sum equal to the aggregate of - (i) In respect of any residential
unit whose annual value as so determined does not exceed three thousand six hundred rupees, the amount of
such annual value;

(ii) In respect of any residential unit whose annual value as so determined exceeds three thousand six hundred
rupees, an amount of three thousand six hundred rupees.

Provided that the following conditions are fulfilled, namely :-

(i) Such house is not actually let, and

(ii) No other benefit therefrom is derived by the owner.

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(1) Income chargeable under the head "Income from house property" shall, subject to the provisions of sub-
section (2), be computed after making the following deductions, namely :-

(i) In respect of repairs of, and collection of rent from, the property, a sum equal to one-fourth of the annual
value;

(ii) The amount of any premium paid to insure the property against risk of damage or destruction;

(iv) Where the property is subject to an annual charge, (not being a charge created by the assessee voluntarily
or a capital charge), the amount of such charge;

(v) Where the property is subject to a ground rent, the amount of such ground rent;

(vi) Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed
capital, the amount of any interest payable on such capital;

(vii) Any sums paid on account of land revenue or any other tax levied by the State Government in respect
of the property;

(ix) Where the property is let and was vacant during a part of the year, that part of the annual value which is
proportionate to the period during which the property is wholly unoccupied or, where the property is let out in
parts, that portion of the annual value appropriate to any vacant part, which is proportionate to the period
during which such part is wholly unoccupied.

xplanation : The deduction under this clause shall be made irrespective of whether the period during which
the property or, as the case may be, part of the property was vacant precedes or follows the period during
which it is let;

(x) Subject to such rules 421 as may be made in this behalf, the amount in respect of rent from property let to
a tenant which the assessee cannot realise.

(2) No deduction shall be allowed under sub-section (1) In respect of property of the nature referred to in sub-
clause (i) of clause (a) of sub-section (2), or sub-section (3) of section 23

Provided that nothing in this sub-section shall apply to the allowance of a deduction under clause (vi) of sub-
section (1) of an amount not exceeding thirty thousand rupees in respect of the property of the nature referred
to in sub-clause (i) of clause (a) of sub-section (2) of section 23 or sub-section (3) of section 23.

Provided further that where the property is acquired or constructed with capital borrowed on or after the 1st
day of April, 1999 and such acquisition or construction is completed before the 1st day of April, 2001, the
provisions of the first proviso shall have effect as if for the words "thirty thousand rupees", the words
"seventy-five thousand rupees" had been substituted.

(3) The total amount deductible under sub-section (1) in respect of property of the nature referred to in sub-
clause (ii) of clause (a) of sub-section (2) of section 23 shall not exceed the annual value of the property as
determined under that section.
1
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Notwithstanding anything contained in section 24, any annual charge or interest chargeable under this Act
which is payable outside India (not being interest on a loan issued for public subscription before the 1st day
of April, 1938), on which tax has not been paid or deducted under Chapter XVII-B and in respect of which
there is no person in India who may be treated as an agent under section 163 shall not be deducted in
computing the income chargeable under the head "Income from house property".

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Where a deduction has been made under clause (x) of sub-section (1) of section 24 in the assessment for any
year in respect of rent from property let to a tenant which the assessee cannot realise and subsequently during
any previous year the assessee has realised any amount in respect of such rent, the amount so realised shall be
deemed to be income chargeable under the head "Income from house property" and accordingly charged to
income-tax (without making any deduction under section 23 or section 24) as the income of that previous
year, whether the assessee is the owner of that property in that year or not.

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Where property consisting of building or buildings and lands appurtenant thereto is owned by two or more
persons and their respective shares are definite and ascertainable, such persons shall not in respect of such
property be assessed as an association of persons but the share of each such person in the income from the
property as computed in accordance with sections 22 to 25 shall be included in his total income.

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For the purposes of sections 22 to 26 - (i) An individual who transfers otherwise than for adequate
consideration any house property to his or her spouse, not being a transfer in connection with an agreement to
live apart, or to a minor child not being a married daughter, shall be deemed to be the owner of the house
property so transferred;

(ii) The holder of an impartible estate shall be deemed to be the individual owner of all the properties
comprised in the estate;

(iii) A member of a co-operative society, company or other association of persons to whom a building or part
thereof is allotted or leased under a house building scheme of the society, company or association, as the case
may be, shall be deemed to be the owner of that building or part thereof;
(iiia) A person who is allowed to take or retain possession of any building or part thereof in part performance
of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882), shall
be deemed to be the owner of that building or part thereof;

(iiib) A person who acquires any rights (excluding any rights by way of a lease from month to month or for a
period not exceeding one year) in or with respect to any building or part thereof by virtue of any such
transaction as is referred to in clause (f) of section 269UA, shall be deemed to be the owner of that building or
part thereof; 426 ]

(iv) "Annual charge" means a charge to secure an annual liability, but does not include any tax in respect of
property or income from property imposed by a local authority, or the Central or a State Government;

(v) "Capital charge" means a charge to secure the discharge of a liability of a capital nature;

(vi) Taxes levied by a local authority in respect of any property shall be deemed to include service taxes
levied by the local authority in respect of the property.

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The following income shall be chargeable to income-tax under the head "Profits and gains of business or
profession", - (i) The profits and gains of any business or profession which was carried on by the assessee at
any time during the previous year;

(ii) Any compensation or other payment due to or received by, - (a) Any person, by whatever name called,
managing the whole or substantially the whole of the affairs of an Indian company, at or in connection with
the termination of his management or the modification of the terms and conditions relating thereto;

(b) Any person, by whatever name called, managing the whole or substantially the whole of the affairs in
India of any other company, at or in connection with the termination of his office or the modification of the
terms and conditions relating thereto;

(c) Any person, by whatever name called, holding an agency in India for any part of the activities relating to
the business of any other person, at or in connection with the termination of the agency or the modification of
the terms and conditions relating thereto;

(d) Any person, for or in connection with the vesting in the Government, or in any corporation owned or
controlled by the Government, under any law for the time being in force, of the management of any property
or business;

(iii) Income derived by a trade, professional or similar association from specific services performed for its
members;

(iiia) Profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and
xports (Control) Act, 1947 (18 of 1947);

(iiib) Cash assistance (by whatever name called) received or receivable by any person against exports under
any scheme of the Government of India;
(iiic) Any duty of customs or excise re-paid or re-payable as drawback to any person against exports under the
Customs and Central xcise Duties Drawback Rules, 1971;

(iv) The value of any benefit or perquisite, whether convertible into money or not, arising from business or
the exercise of a profession;

(v) Any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by,
a partner of a firm from such firm :

Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or
any part thereof has not been allowed to be deducted under clause

(b) Of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to
be deducted;

(vi) Any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such
policy.

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The income referred to in section 28 shall be computed in accordance with the provisions contained in
sections 30 to 43D

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In respect of rent, rates, taxes, repairs and insurance for premises, used for the purposes of the business or
profession, the following deductions shall be allowed - (a) Where the premises are occupied by the assessee -

(i) As a tenant, the rent paid for such premises; and further if he has undertaken to bear the cost of repairs to
the premises, the amount paid on account of such repairs;

(ii) Otherwise than as a tenant, the amount paid by him on account of current repairs to the premises;

(b) Any sums paid on account of land revenue, local rates or municipal taxes;

(c) The amount of any premium paid in respect of insurance against risk of damage or destruction of the
premises.

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In respect of repairs and insurance of machinery, plant or furniture used for the purposes of the business or
profession, the following deductions shall be allowed -
(i) The amount paid on account of current repairs thereto;

(ii) The amount of any premium paid in respect of insurance against risk of damage or destruction thereof.

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(1) In respect of depreciation of - (i) Buildings, machinery, plant or furniture, being tangible assets;

(ii) Know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial
rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly
or partly, by the assessee and used for the purposes of the business or profession, the following deductions
shall be allowed - (i) In the case of assets of an undertaking engaged in generation or generation and
distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed;

(ii) In the case of any block of assets, such percentage on the written down value thereof as may be prescribed
440 439 ]:

Provided that no deduction shall be allowed under this clause in respect of - (a) Any motor car manufactured
outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975, unless it
is used - (i) In a business of running it on hire for tourists; or

(ii) Outside India in his business or profession in another country; and

(b) Any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an
agreement entered into by the Central Government under section 42 : 443 ]

Provided further that where an asset referred to in clause (i) or clause (ii), as the case may be, is acquired by
the assessee during the previous year and is put to use for the purposes of business or profession for a period
of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect
of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an
asset under clause (i) or clause (ii), as the case may be :

Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day
of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for
the purposes of business or profession, the deduction in respect of such asses shall be allowed on such
percentage on the written down value thereof as may be prescribed.

xplanation : For the purposes of this proviso, - (a) The expression "commercial vehicle" means "heavy
goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle" and
"medium passenger motor vehicle" but does not include "maxi-cab", "motor-cab", "tractor" and "road-roller";

(b) The expression "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium
goods vehicle", "medium passenger motor vehicle", "maxi-cab", "motor-cab", "tractor" and "road roller" shall
have the meanings respectively as assigned to them in section 2 of the 

c 1=c 1/c " 99c (59 of
1988).
Provided also that, in respect of the previous year relevant to the assessment year commencing on the 1st day
of April, 1991 the deduction in relation to any block of assets under this clause shall, in the case of a
company, be restricted to seventy-five per cent of the amount calculated at the percentage, on the written
down value of such assets, prescribed under this Act immediately before the commencement of the Taxation
Laws (Amendment) Act, 1991.

Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or
furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any
other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and
the successor in the case of succession referred to in clause (xiii) and clause (xiv) of section 47 or section 170
or to the amalgamating company and the amalgamated company in the case of amalgamation, as the case may
be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession
had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or
the amalgamating company and the amalgamated company, as the case may be, in the ratio of the number of
days for which the assets were used by them.

xplanation 1 : Where the business or profession of the assessee is carried on in a building not owned by him
but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is
incurred by the assessee for the purposes of the business or profession on the construction of any structure or
doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the
building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by
the assessee.

xplanation 2 : For the purposes of this clause "written down value of the block of assets" shall have the same
meaning as in clause (c) of sub-section (6) of section 43;

xplanation 3 : For the purposes of this sub-section, the expressions "assets" and "block of assets" shall mean
- (a) Tangible assets, being buildings, machinery, plant or furniture;

(b) Intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other
business or commercial rights of similar nature.

xplanation 4 : For the purposes of this sub-section, the expression "know-how" means any industrial
information or technique likely to assist in the manufacture or processing of goods or in the working of a
mine, oil-well or other sources of mineral deposits (including searching for discovery or testing of deposits
for the winning of access thereto);

(iii) In the case of any building, machinery, plant or furniture in respect of which depreciation is claimed
under clause (i) and which is sold, discarded, demolished or destroyed in the previous year (other than the
previous year in which it is first brought into use), the amount by which the moneys payable in respect of
such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the
written down value thereof :

1
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(1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the
assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with
and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which
the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or
plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a
sum by way of investment allowance equal to twenty-five per cent. of the actual cost of the ship, aircraft,
machinery or plant to the assessee :

Provided that in respect of a ship or an aircraft or machinery or plant specified in sub-section (8B), this sub-
section shall have effect as if for the words "twenty-five per cent", the words "twenty per cent" had been
substituted :

Provided further that no deduction shall be allowed under this section in respect of - (a) Any machinery or
plant installed in any office premises or any residential accommodation, including any accommodation in the
nature of a guest-house;

(b) Any office appliances or road transport vehicles;

(c) Any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable
under section 33; and

(d) Any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way
of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of
business or profession" of any one previous year.

(2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely :-
(a) A new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the
business of operation of ships or aircraft;

(b) Any new machinery or plant installed after the 31st day of March, 1976 - (i) For the purposes of business
of generation or distribution of electricity or any other form of power; or

(ii) 454 in a small-scale industrial undertaking for the purposes of business of manufacture or production of
any article or thing; or

(iii) In any other industrial undertaking for the purposes of business of construction, manufacture or
production of any article or thing, not being an article or thing specified in the list in the leventh Schedule :

Provided that nothing contained in clauses (a) and (b) shall apply in relation to, - (i) A new ship or new
aircraft acquired, or

(ii) Any new machinery or plant installed, after the 31st day of March, 1987 but before the 1st day of April,
1988, unless such ship or aircraft is acquired or such machinery or plant is installed in the circumstances
specified in clause (a) of sub-section (8B) and the assessee furnishes evidence to the satisfaction of the
Assessing Officer as specified in that clause;

(c) Any new machinery or plant installed after the 31st day of March, 1983, but before the 1st day of April,
1987, for the purposes of business of repairs to ocean-going vessels or other powered craft if the business is
carried on by an Indian company and the business so carried on is for the time being approved for the
purposes of this clause by the Central Government.

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(1) In respect of planting of tea bushes in any land in India owned by an assessee who carries on business of
growing and manufacturing tea in India, a sum by way of development allowance equivalent to - (i) Where
tea bushes have been planted on any land not planted at any time with tea bushes or on any land which had
been previously abandoned, fifty per cent of the actual cost of planting; and

(ii) Where tea bushes are planted in replacement of tea bushes that have died or have become permanently
useless on any land already planted, thirty per cent of the actual cost of planting, shall, subject to the
provisions of this section, be allowed as a deduction in the manner specified hereunder, namely :-

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(1) Where an assessee carrying on business of growing and manufacturing tea in India has, before the expiry
of six months from the end of the previous year or before furnishing the return of his income, whichever is
earlier, - (a) Deposited with the National Bank any amount or amounts in an account (hereinafter in this
section referred to as the special account) maintained by the assessee with that Bank in accordance with, and
for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this
behalf by the Tea Board; or

(b) Deposited any amount in an account (hereafter in this section referred to as the Tea Deposit Account)
opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Tea
Board (hereafter in this section referred to as the deposit scheme) with the previous approval of the Central
Government, the assessee shall, subject to the provisions of this section, be allowed a deduction (such
deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72)

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(1) In the case of an assessee, being a Government company or a public company formed and registered in
India with the main object of carrying on the business of operation of ships, there shall, in accordance with
and subject to the provisions of this section, be allowed a deduction of an amount not exceeding fifty per cent
of profits derived from the business of operation of ships (computed under the head "Profits and gains of
business or profession" and before making any deduction under this section), as is debited to the profit and
loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve
account, to be utilised in the manner laid down in sub-section (2) :

(2) The amount credited to the reserve account under sub-section (1) shall be utilised by the assessee before
the expiry of a period of eight years next following the previous year in which the amount was credited - (a)
For acquiring a new ship for the purposes of the business of the assessee; and

(b) Until the acquisition of a new ship, for the purposes of the business of the assessee other than for
distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any
asset outside India.

(3) Where any amount credited to the reserve account under sub-section (1), - (a) Has been utilised for any
purpose other than that referred to in clause (a) or clause (b) of sub-section (2), the amount so utilised; or

(b) Has not been utilised for the purpose specified in clause (a) of sub-section (2), the amount not so utilised;
or

(c) Has been utilised for the purpose of acquiring a new ship as specified in clause (a) of sub-section (2), but
such ship is sold or otherwise transferred, other than in any scheme of demerger by the assessee to any person
at any time before the expiry of eight years from the end of the previous year in which it was acquired, the
amount so utilised in acquiring the ship, shall be deemed to be the profits, - (i) In a case referred to in clause
(a), in the year in which the amount was so utilised; or

(ii) In a case referred to in clause (b), in the year immediately following the period of eight years specified in
sub-section (2); or

(iii) In a case referred to in clause (c), in the year in which the sale or transfer took place, and shall be
charged to tax accordingly.

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Where the business of any industrial undertaking carried on in India is discontinued in any previous year by
reason of extensive damage to, or destruction of, any building, machinery, plant or furniture owned by the
assessee and used for the purposes of such business as a direct result of - (i) Flood, typhoon, hurricane,
cyclone, earth-quake or other convulsion of nature; or

(ii) Riot or civil disturbance; or

(iii) Accidental fire or explosion; or

(iv) Action by an enemy or action taken in combating an enemy (whether with or without a declaration of
war), and, thereafter, at any time before the expiry of three years from the end of such previous year, the
business is re-established, reconstructed or revived by the assessee, he shall, in respect of the previous year in
which the business is so re-established, reconstructed or revived, be allowed a deduction of a sum by way of
rehabilitation allowance equivalent to sixty per cent of the amount of the deduction allowable to him under
clause (iii) of sub-section (1) of section 32 in respect of the building, machinery, plant or furniture so
damaged or destroyed
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(1)(a) The deduction referred to in section 33 shall not be allowed unless an amount equal to seventy-five per
cent of the development rebate to be actually allowed is debited to the profit and loss account any previous
year in respect of which the deduction is to be allowed under sub-section (2) of that section or any earlier
previous year (being a previous year not earlier than the year in which the ship was acquired or the machinery
or plant was installed or the ship, machinery or plant was put to use) and credited to a reserve account to be
utilised by the assessee during a period of eight years next following for the purposes of the business of the
undertaking, other than - (i) For distribution by way of dividends or profits; or

(ii) For remittance outside India as profits or for the creation of any asset outside India :

Provided that this clause shall not apply where the assessee is a company, being a licensee within the meaning
of the lectricity (Supply) Act, 1948 (54 of 1948), or where the ship has been acquired or the machinery or
plant has been installed before the 1st day of January, 1958 :

Provided further that where a ship has been acquired after the 28th day of February, 1966, this clause shall
have effect in respect of such ship as if for the words "seventy-five", the word "fifty" had been substituted.

(b) If any ship, machinery or plant is sold or otherwise transferred by the assessee to any person at any time
before the expiry of eight years from the end of the previous year in which it was acquired or installed, any
allowance made under section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922
(11 of 1922), in respect of that ship, machinery or plant shall be deemed to have been wrongly made for the
purposes of this Act, and the provisions of sub-section (5) of section 155 shall apply accordingly :

Provided that this clause shall not apply - (i) Where the ship has been acquired or the machinery or plant has
been installed before the 1st day of January, 1958; or

(ii) Where the ship, machinery or plant is sold or otherwise transferred by the assessee to the Government, a
local authority, a corporation established by a Central, State or Provincial Act or a Government company as
defined in section 617 of the Companies Act, 1956 (1 of 1956); or

(iii) Where the sale or transfer of the ship, machinery or plant is made in connection with amalgamation or
succession, referred to in sub-section (3) or sub-section (4) of section 33.

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(1) In computing the profits and gains of the business of a domestic company in relation to the previous year
relevant to the assessment year commencing on the 1st day of April, 1992, where effect is to be given to the
unabsorbed depreciation allowance or unabsorbed investment allowance or both in relation to any previous
year relevant to the assessment year commencing on or before the 1st day of April, 1991, the deduction shall
be restricted to two-third of such allowance or allowances and the balance, - (a) Where it relates to
depreciation allowance, be added to the depreciation allowance for the previous year relevant to the
assessment year commencing on the 1st day of April, 1993 and be deemed to be part of that allowance or if
there is no such allowance for that previous year, be deemed to be the allowance for that previous year and so
on for the succeeding previous years;

(b) Where it relates to investment allowance, be carried forward to the assessment year commencing on the
1st day of April, 1993 and the balance of the investment allowance, if any, still outstanding shall be carried
forward to the following assessment year and where the period of eight years has expired before the portion of
such balance is adjusted, the said period shall be extended beyond eight years till such time the portion of the
said balance is absorbed in the profits and gains of the business of the domestic company.

(2) For the assessment year commencing on the 1st day of April, 1992, the provisions of sub-section (2) of
section 32 and sub-section (3) of section 32A shall apply to the extent such provisions are not inconsistent
with the provisions of sub-section (1) of this section.

(3) Nothing contained in sub-section (1) shall apply where the amount of unabsorbed depreciation allowance
or of the unabsorbed investment allowance, as the case may be, or the aggregate amount of such allowances
in the case of a domestic company is less than one lakh rupees.

(4) Nothing contained in sections 234B and 234C shall apply to any shortfall in the payment of any tax due on
the assessed tax or, as the case may be, returned income where such shortfall is on account of restricting the
amount of depreciation allowance or investment allowance under this section and the assessee has paid the
amount of shortfall before furnishing the return of income under sub-section (1) of section 139

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(1) In respect of any expenditure of a capital nature incurred after the 28th day of February, 1966 but before
the 1st day of April, 1998, on the acquisition of patent rights or copyrights (hereafter, in this section, referred
to as rights) used for the purposes of the business, there shall, subject to and in accordance with the provisions
of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate
fraction of the amount of such expenditure.

(2) Where the rights come to an end without being subsequently revived or where the whole or any part of
the rights is sold and the proceeds of the sale (so far as they consist of capital sums) are not less than the cost
of acquisition thereof remaining unallowed, no deduction under sub-section (1) shall be allowed in respect of
the previous year in which the rights come to an end or, as the case may be, the whole or any part of the rights
is sold or in respect of any subsequent previous year.

(3) Where the rights either come to an end without being subsequently revived or are sold in their entirety and
the proceeds of the sale (so far as they consist of capital sums) are less than the cost of acquisition thereof
remaining unallowed, a deduction equal to such cost remaining unallowed or, as the case may be, such cost
remaining unallowed as reduced by the proceeds of the sale, shall be allowed in respect of the previous year
in which the rights come to an end, or, as the case may be, are sold.

(4) Where the whole or any part of the rights is sold and the proceeds of the sale (so far as they consist of
capital sums) exceed the amount of the cost of acquisition thereof remaining unallowed, so much of the
excess as does not exceed the difference between the cost of acquisition of the rights and the amount of such
cost remaining unallowed shall be chargeable to income-tax as income of the business of the previous year in
which the whole or any part of the rights is sold.
 (5) Where a part of the rights is sold and sub-section (4) does not apply, the amount of the deduction to be
allowed under sub-section (1) shall be arrived at by - (a) Subtracting the proceeds of the sale (so far as
theyconsist of capital sums) from the amount of the cost of acquisition of the rights remaining unallowed; and

(b) Dividing the remainder by the number of relevant previous years which have not expired at the beginning
of the previous year during which the rights are sold.

(6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers the rights to
the amalgamated company (being an Indian company), - (i) The provisions of sub-sections (3) and (4) shall
not apply in the case of the amalgamating company, and

(ii) The provisions of this section shall, as far as may be, apply to the amalgamated company as they would
have applied to the amalgamating company if the latter had not so sold or otherwise transferred the rights.

(7) Where in a scheme of demerger, the demerged company sells or otherwise transfers the rights to the
resulting company (being an Indian company), - (i) The provisions of sub-sections (3) and (4) shall not apply
in the case of the demerged company; and

(ii) The provisions of this section shall, as far as may be, apply to the resulting company as they would have
applied to the demerged company, if the latter had not sold or otherwise transferred the rights.

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(1) Where an assessee, being an Indian company, incurs any expenditure, on or after the 1st day of April,
1999, wholly and exclusively for the purposes of amalgamation or demerger of an undertaking, the assessee
shall be allowed a deduction of an amount equal to one-fifth of such expenditure for each of the five
successive previous years beginning with the previous year in which the amalgamation or demerger takes
place.

(2) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under any other
provision of this Act.

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(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with
therein, in computing the income referred to in section 28 - (i) The amount of any premium paid in respect of
insurance against risk of damage or destruction of stocks or stores used for the purposes of the business or
profession;

(ia) The amount of any premium paid by a federal milk co-operative society to effect or to keep in force an
insurance on the life of the cattle owned by a member of a co-operative society, being a primary society
engaged in supplying milk raised by its members to such federal milk co-operative society;

(ib) The amount of any premium paid by cheque by the assessee as an employer to effect or to keep in force
an insurance on the health of his employees under a scheme framed in this behalf by the General Insurance
Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972
(57 of 1972), and approved by the Central Government;

(ii) Any sum paid to an employee as bonus or commission for services rendered, where such sum would not
have been payable to him as profits or dividend if it had not been paid as bonus or commission;

(iia) A sum equal to one and one-third times the amount of the expenditure incurred on payment of any salary
for any period of employment before the 1st day of March, 1984 to an employee who, as at the end of the
previous year, - (a) Is totally blind, or

(b) Is subject to or suffers from a permanent physical disability (other than blindness) which has the effect of
reducing substantially his capacity to engage in a gainful employment or occupation :

Provided that the assessee produces before the Assessing Officer, in respect of the first assessment year for
which deduction is claimed in relation to each such employee under this clause, - (i) In a case referred to in
sub-clause (a), a certificate as to his total blindness from a registered medical practitioner being an oculist;
and
(ii) In a case referred to in sub-clause (b), a certificate as to the permanent physical disability referred to in the
said sub-clause from a registered medical practitioner :

Provided further that nothing contained in this clause shall apply in the case of an employee whose income in
the previous year chargeable under the head "Salaries" exceeds twenty thousand rupees.

xplanation 1 : In this clause, "salary" includes the pay, allowances, bonus or commission payable monthly or
otherwise.

xplanation 2 : For the removal of doubts, it is hereby declared that where a deduction under this clause is
allowed for any assessment year in respect of any expenditure, deduction shall not be allowed in respect of
such expenditure under any other provision of this Act for the same or any other assessment year; 575 ]

(iii) The amount of the interest paid in respect of capital borrowed for the purposes of the business or
profession.

xplanation : Recurring subscriptions paid periodically by shareholders or subscribers in Mutual Benefit

Societies which fulfil such conditions as may be prescribed, shall be deemed to be capital borrowed within the
meaning of this clause;

(iv) Any sum paid by the assessee as an employer by way of contribution towards a recognised provident fund
or an approved superannuation fund, subject to such limits as may be prescribed 579 for the purpose of
recognising the provident fund or approving the superannuation fund, as the case may be; and subject to such
conditions 580 as the Board may think fit to specify in cases where the contributions are not in the nature of
annual contributions of fixed amounts or annual contributions fixed on some definite basis by reference to the
income chargeable under the head "Salaries" or to the contributions or to the numbers of members of the
fund;

(v) Any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund
created by him for the exclusive benefit of his employees under an irrevocable trust;

(va) Any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of
clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant
fund or funds on or before the due date.

xplanation : For the purposes of this clause, "due date" means the date by which the assessee is required as
an employer to credit an employee's contribution to the employee's account in the relevant fund under any
Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or
otherwise;

(vi) In respect of animals which have been used for the purposes of the business or profession otherwise than
as stock-in-trade and have died or become permanently useless for such purposes, the difference between the
actual cost to the assessee of the animals and the amount, if any, realised in respect of the carcasses or
animals;

(vii) Subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written
off as irrecoverable in the accounts of the assessee for the previous year:
Provided that in the case of an assessee to which clause (viia) applies, the amount of the deduction relating to
any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the
credit balance in the provision for bad and doubtful debts account made under that clause;

(viia) In respect of any provision for bad and doubtful debts made by - (a) A scheduled bank not being a
bank incorporated by or under the laws of a country outside India or a non-scheduled bank, an amount not
exceeding five per cent of the total income (computed before making any deduction under this clause and
Chapter VI-A) and an amount not exceeding [ 585c ten per cent of the aggregate average advances made by
the rural branches of such bank computed in the prescribed manner;

Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be
allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any
assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the
guidelines issued by it in this behalf, for an amount not exceeding five per cent. of the amount of such assets
shown in the books of account of the bank on the last day of the previous year.

xplanation. - For the purposes of this sub-clause, "relevant assessment years" means the five consecutive
assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April,
2005. 585g

(b) A bank, being a bank incorporated by or under the laws of a country outside India, an amount not
exceeding five per cent of the total income (computed before making any deduction under this clause and
Chapter VI-A);

(c) A public financial institution or a State financial corporation or a State industrial investment corporation,
an amount not exceeding five per cent of the total income (computed before making any deduction under this
clause and Chapter VI-A).

xplanation : For the purposes of this clause - (i) "Non-scheduled bank" means a banking company 585f as
defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) which is not a scheduled
bank;

(a) "Rural branch" means a branch of a scheduled bank or a non-scheduled bank situated in a place which has
a population of not more than ten thousand according to the last preceding census of which the relevant
figures have been published before the first day of the previous year;

(ii) "Scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955, (23
of 1955) a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, (38 of 1959) 1959, a
corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970, (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer
of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to
the Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative bank;

(iii) "Public financial institution" shall have the meaning assigned to it in section 4A of the Companies Act,
1956 (1 of 1956);

(iv) "State financial corporation" means a financial corporation established under section 3 or section 3A or
an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);
(v) "State industrial investment corporation" means a Government company within the meaning of section
617 of the Companies Act, 1956 (1 of 1956) engaged in the business of providing long-term finance for
industrial projects and approved by the Central Government under clause (viii) of this sub-section;

(viii) In respect of any special reserve created and maintained by a financial corporation which is engaged in
providing long-term finance for industrial or agricultural development or development of infrastructure
facility in India or by a public company formed and registered in India with the main object of carrying on the
business of providing long-term finance for construction or purchase of houses in India for residential
purposes, an amount not exceeding forty per cent of the profits derived from such business of providing long-
term finance (computed under the head "Profits and gains of business or profession" before making any
deduction under this clause 590a ]) carried to such reserve account :

Provided that the corporation or as the case may be the company is for the time being approved by the Central
Government for the purposes of clause :

Provided further that where the aggregate of the amounts carried to such reserve account from time to time
exceeds twice the amount of the paid up share capital and general reserves of the corporation or, as the case
may be, the company, no allowance under this clause shall be made in respect of such excess;

xplanation : In this clause, - (a) "Financial corporation" shall include a public company and a Government
company;

(b) "Public company" 595 shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of
1956);

(c) "Government company" shall have the meaning assigned to it in section 617 of the Companies Act, 1956
(1 of 1956).

(d) "Infrastructure facility" shall have the meaning assigned to it in clause (23G) of section 10;

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

(ix) Any expenditure bona fide incurred by a company for the purpose of promoting family planning amongst
its employees :

Provided that where such expenditure or any part thereof is of a capital nature, one-fifth of such expenditure
shall be deducted for the previous year in which it was incurred; and the balance thereof shall be deducted in
equal instalments for each of the four immediately succeeding previous years :

Provided further that the provisions of sub-section (2) of section 32 or sub-section (2) of section 72 shall
apply in relation to deductions allowable under this clause as they apply in relation to deductions allowable in
respect of depreciation :

Provided further that the provisions of clauses (ii), (iii), (iv) and (v) of sub-section (2) and sub-section (5) of
section 35, of sub-section (3) of section 41 and of xplanation 1 to clause (1) of section 43 shall, so far as
may be, apply in relation to an asset representing expenditure of a capital nature for the purposes of promoting
family planning as they apply in relation to an asset representing expenditure of a capital nature on scientific
research;
(x) Any sum paid by a public financial institution by way of contribution towards any fund specified under
clause (23) of section 10.

xplanation : For the purposes of this clause, "public financial institution" shall have the meaning assigned to
it in section 4A of the Companies Act, 1956 (1 of 1956).

(xi) Any expenditure incurred by the assessee, on or after the 1st day of April, 1999 but before the 1st day of
April, 2000, wholly and exclusively in respect of a non-Y2K compliant computer system, owned by the
assessee and used for the purposes of his business or profession, so as to make such computer system Y2K
compliant computer system :

Provided that no such deduction shall be allowed in respect of such expenditure under any other provisions of
this Act :

Provided further that no such deduction shall be admissible unless the assessee furnishes in the prescribed
form, along with the return of income, the report of an accountant, as defined in the xplanation below sub-
section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the
provisions of this clause.

xplanation. - For the purposes of this clause, - (a) "Computer system" means a device or collection of
devices including input and output support devices and excluding calculators which are not programmable
and capable of being used in conjunction with external files, or more of which contain computer programmes,
electronic instructions, input data and output data, that performs functions including, but not limited to, logic,
arithmetic, data storage and retrieval, communication and control;

(b) "Y2K compliant computer system" means a computer system capable of correctly processing, providing
or receiving data relating to date within and between the twentieth and twenty-first century.

(2) In making any deduction for a bad debt or part thereof, the following provisions shall apply - (i) No such
deduction shall be allowed unless such debt or part thereof has been taken into account in computing the
income of the assessee of the previous year in which the amount of such debt or part thereof is written off or
of an earlier previous year, or represents money lent in the ordinary course of the business of banking or
money-lending which is carried on by the assessee;

(ii) If the amount ultimately recovered on any such debt or part of debt is less than the difference between the
debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the
ultimate recovery is made;

(iii) Any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the
accounts of an earlier previous year (being a previous year relevant to the assessment year commencing on the
1st day of April, 1988, or any earlier assessment year), but the Assessing Officer had not allowed it to be
deducted on the ground that it had not been established to have become a bad debt in that year;

(iv) Where any such debt or part of debt is written off as irrecoverable in the accounts of the previous year
(being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any
earlier assessment year) and the Assessing Officer is satisfied that such debt or part became a bad debt in any
earlier previous year not falling beyond a period of four previous years immediately preceding the previous
year in which such debt or part is written off, provisions of sub-section (6) of section 155 shall apply;
(v) Where such debt or part of debt relates to advances made by an assessee to which clause (viia) of sub-
section (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such
debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that
clause.

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(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the
nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and
exclusively for the purposes of the business or profession shall be allowed in computing the income
chargeable under the head "Profits and gains of business or profession".

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(1) Where a part of any premises is used as dwelling house by the assessee, - (a) The deduction under sub-
clause (i) of clause (a) of section 30, in the case of rent, shall be such amount as the Assessing Officer may
determine having regard to the proportionate annual value of the part used for the purpose of the business or
profession, and in the case of any sum paid for repairs, such sum as is proportionate to the part of the
premises used for the purpose of the business or profession;

(b) The deduction under clause (b) of section 30 shall be such sum as the Assessing Officer may determine
having regard to the part so used.

(2) Where any building, machinery, plant or furniture is not exclusively used for the purposes of the business
or profession, the deductions under sub-clause (ii) of clause (a) and clause (c) of section 30, clauses (i) and (ii)
of section 31 and clause (ii) of sub-section (1) of section 32 shall be restricted to a fair proportionate part
thereof which the Assessing Officer may determine, having regard to the user of such building, machinery,
plant or furniture for the purposes of the business or profession.

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Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in
computing the income chargeable under the head "Profits and gains of business or profession", - (a) In the
case of any assessee - (i) Any interest (not being interest on a loan issued for public subscription before the
1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is
payable outside India, on which tax has not been paid or deducted under Chapter XVII-B :

Provided that where in respect of any such sum, tax has been paid or deducted under Chapter XVII-B in any
subsequent year, such sum shall be allowed as a deduction in computing the income of the previous year in
which such tax has been paid or deducted.

xplanation : For the purposes of this sub-clause, - (A) "Royalty" shall have the same meaning as in
xplanation 2 to clause (vi) of sub-section (1) of section 9;
(B) "Fees for technical services" shall have the same meaning as in xplanation 2 to clause (vii) of sub-
section (1) of section 9;

(ii) Any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or
assessed at a proportion of, or otherwise on the basis of, any such profits or gains;

(iia) Any sum paid on account of wealth-tax.

(iii) Any payment which is chargeable under the head "Salaries", if it is payable outside India and if the tax
has not been paid thereon nor deducted therefrom under Chapter XVII-B;

(iv) Any payment to a provident or other fund established for the benefit of employees of the assessee, unless
the assessee has made effective arrangements to secure that tax shall be deducted at source from any payment
made from the fund which are chargeable to tax under the head "salaries";

(b) In the case of any firm assessable as such, - (i) Any payment of salary, bonus, commission or
remuneration, by whatever name called (hereinafter referred to as remuneration) to any partner who is not a
working partner; or

(ii) Any payment of remuneration to any partner who is a working partner, or of interest to any partner,
which, in either case, is not authorised by, or is not in accordance with, the terms of the partnership deed; or

(iii) Any payment of remuneration to any partner who is a working partner, or of interest to any partner,
which, in either case, is authorised by, and is in accordance with, the terms of the partnership deed, but which
relates to any period (falling prior to the date of such partnership deed) for which such payment was not
authorised by, or is not in accordance with, any earlier partnership deed, so, however, that the period of
authorisation for such payment by any earlier partnership deed does not cover any period prior to the date of
such earlier partnership deed; or

(iv) Any payment of interest to any partner which is authorised by, and is in accordance with, the terms of the
partnership deed and relates to any period falling after the date of such partnership deed in so far as such
amount exceeds the amount calculated at the rate of eighteen per cent simple interest per annum; or

(v) Any payment of remuneration to any partner who is a working partner, which is authorised by, and is in
accordance with, the terms of the partnership deed and relates to any period falling after the date of such
partnership deed in so far as the amount of such payment to all the partners during the previous year exceeds
the aggregate amount computed as hereunder :- (1) In case of a firm carrying on a profession referred to in
section 44AA or which is notified for the purpose of that section -

(a) On the first Rs. 1,00,000 of the Rs. 50,000 or at the rate book-profit or in case of a loss of 90 per cent of
the book-profit, whichever is more;

(b) On the next Rs. 1,00,000 of the at the rate of 60 per cent; book-profit

(c) On the balance of the book-profit at the rate of 40 per cent;

(2) In the case of any other firm - (a) On the first Rs. 75,000 of the Rs. 50,000 or at the rate of book-profit or
in case of a loss 90 per cent of the book-profit, whichever is more;
(b) On the next Rs. 75,000 of the book-profit at the rate of 60 per cent;

(c) On the balance of the book-profit at the rate of 40 per cent :

Provided that in relation to any payment under this clause to the partner during the previous year relevant to
the assessment year commencing on the 1st day of April, 1993, the terms of the partnership deed may, at any
time during the said previous year, provide for such payment.

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(1) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any
other provision of this Act relating to the computation of income under the head "Profits and gains of business
or profession".

(2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to
any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion that such
expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or
facilities for which the payment is made or the legitimate needs of the business or profession of the assessee
or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him
to be excessive or unreasonable shall not be allowed as a deduction;

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(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss,
expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person)
and subsequently during any previous year, - (a) The first-mentioned person has obtained, whether in cash or
in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect
of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the
value of benefit accruing to him shall be deemed to be profits and gains of business or profession and
accordingly chargeable to income-tax as the income of that previous year, whether the business or profession
in respect of which the allowance or deduction has been made is in existence in that year or not; or

(b) The successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in
respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of
the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by
the successor in business or the value of benefit accruing to the successor in business shall be deemed to be
profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of
that previous year.

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In sections 28 to 41 and in this section, unless the context otherwise requires - (1) "Actual cost" means the
actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met
directly or indirectly by any other person or authority :

Provided that where the actual cost of an asset, being a motor car which is acquired by the assessee after the
31st day of March, 1967 but before the 1st day of March, 1975, and is used otherwise than in a business of
running it on hire for tourists, exceeds twenty-five thousand rupees, the excess of the actual cost over such
amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five thousand rupees

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Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under
this Act in respect of -

(a) Any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law
for the time being in force,

(b) Any sum payable by the assessee as an employer by way of contribution to any provident fund or
superannuation fund or gratuity fund or any other fund for the welfare of employees,

(c) Any sum referred to in clause (ii) of sub-section (1) of section 36,

(d) Any sum payable by the assessee as interest on any loan or borrowing from any public financial institution
or a state financial corporation or a state industrial investment corporation, in accordance with the terms and
conditions of the agreement [ 692c governing such loan or borrowing.

(e) Any sum payable by the assessee as interest on any term loan from a scheduled bank in accordance with
the terms and conditions of the agreement governing such loan, shall be allowed (irrespective of the previous
year in which the liability to pay such sum was incurred by the assessee according to the method of
accounting regularly employed by him) only in computing the income referred to in section 28 of that
previous year in which sum is actually paid by him.

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(1) Where an asset not being an asset referred to in sub-section (2) of section 45 which becomes the property
of an amalgamated company under a scheme of amalgamation, is sold after the 29th day of February, 1988,
by the amalgamated company as stock-in-trade of the business carried on by it, the cost of acquisition of the
said asset to the amalgamated company in computing the profits and gains from the sale of such asset shall be
the cost of acquisition of the said asset to the amalgamating company, as increased by the cost, if any, of any
improvement made thereto, and the expenditure, if any, incurred, wholly and exclusively in connection with
such transfer by the amalgamating company.

(2) Where an asset [not being an asset referred to in sub-section (2) of section 45] which becomes the property
of the assessee on the total or partial partition of a Hindu undivided family or under a gift or will or an
irrevocable trust, is sold after the 29th day of February, 1988, by the assessee as stock-in-trade, of the
business carried on by him, the cost of acquisition of the said asset to the assessee in computing the profits
and gains from the sale of such asset shall be the cost of acquisition of the said asset to the transferor or the
donor, as the case may be, as increased by the cost, if any, of any improvement made thereto, and the
expenditure, if any, incurred, wholly and exclusively in connection with such transfer (by way of effecting the
partition, acceptance of the gift, obtaining probate in respect of the will or the creation of the trust), including
the payment of gift-tax, if any, incurred by the transferor or the donor, as the case may be.

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Notwithstanding anything to the contrary contained in any other provision of this Act, in the case of a public
financial institution or a scheduled bank or a state financial corporation or a state industrial investment
corporation, the income by way of interest in relation to such categories of bad or doubtful debts as may be
prescribed having regard to the guidelines issued by the Reserve Bank of India in relation to such debts, shall
be chargeable to tax in the previous year in which it is credited by the public financial institution or the
scheduled bank or the state financial corporation or the state industrial investment corporation to its profit and
loss account for that year or, as the case may be, in which it is actually received by that institution or bank or
corporation, whichever is earlier.

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Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of
income chargeable under the head "Interest on securities" 701a , "Income from house property", "Capital
gains" or "Income from other sources", or in section 199 or in sections 28 to 43B the profits and gains of any
business of insurance, including any such business carried on by a mutual insurance company or by a co-
operative society, shall be computed in accordance with the rules contained in the First Schedule.

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(1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee
engaged in the business of civil construction or supply of labour for civil construction, a sum equal to eight
per cent of the gross receipts paid or payable to the assessee in the previous year on account of such business
or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of
income, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits
and gains of business or profession" :

Provided that nothing contained in this sub-section shall apply in case the aforesaid gross receipts paid or
payable exceed an amount of forty lakh rupees.

(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section
(1), be deemed to have been already given full effect to and no further deduction under those sections shall be
allowed :

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(1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee, who
owns not more than ten goods carriages and who is engaged in the business of plying, hiring or leasing such
goods carriages, the income of such business chargeable to tax under the head "Profits and gains of business
or profession" shall be deemed to be the aggregate of the profits and gains, from all the goods carriages
owned by him in the previous year, computed in accordance with the provisions of sub-section (2).

(2) For the purposes of sub-section (1), the profits and gains from each goods carriage, - (i) Being a heavy
goods vehicle, shall be an amount equal to two thousand rupees for every month or a part of month during
which the heavy goods vehicle is owned by the assessee in the previous year or, as the case may be, an
amount higher than the aforesaid amount as declared by him in his return of income.

(ii) Other than a heavy goods vehicle, shall be an amount equal to one thousand eight hundred rupees for
every month or part of a month during which the goods carriage is owned by the assessee in the previous year
or, as the case may be, an amount higher than the aforesaid amount as declared by him in his return of
income.

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(1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee
engaged in retail trade in any goods or merchandise, a sum equal to five per cent of the total turnover in the
previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as
declared by the assessee in his return of income shall be deemed to be the profits and gains of such business
chargeable to tax under the head "Profits and gains of business or profession" :

Provided that nothing contained in this sub-section shall apply in respect of an assessee whose total turnover
exceeds an amount of forty lakh rupees in the previous year.

(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section
(1), be deemed to have been already given full effect to and no further deduction under those sections shall be
allowed

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(1) Any profits or gains arising from the transfer 737 of a capital asset effected in the previous year shall,
save as otherwise provided in sections 54, 54B, 54D, 54, 54A, 54B, 54F , 54G and 54H be chargeable to
income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in
which the transfer took place.

(1A) Notwithstanding anything contained in sub-section (1), where any person receives at any time during
any previous year any money or other assets under an insurance from an insurer on account of damage to, or
destruction of, any capital asset, as a result of - (i) Flood, typhoon, hurricane, cyclone, earthquake or other
convulsion of nature; or

(ii) Riot or civil disturbance; or

(iii) Accidental fire or explosion; or

(iv) Action by an enemy or action taken in combating an enemy (whether with or without a declaration of
war), then, any profits or gains arising from receipt of such money or other assets shall be chargeable to
income-tax under the head "Capital gains" and shall be deemed to be the income of such person of the
previous year in which such money or other asset was received and for the purposes of section 48, value of
any money or the fair market value of other assets on the date of such receipt shall be deemed to be the full
value of the consideration received or accruing as a result of the transfer of such capital asset.

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(1) Notwithstanding anything contained in section 45, where the assets of a company are distributed to its
shareholders on its liquidation, such distribution shall not be regarded as a transfer by the company for the
purposes of section 45.

(2) Where a shareholder on the liquidation of a company receives any money or other assets from the
company, he shall be chargeable to income-tax under the head "Capital gains", in respect of the money so
received or the market value of the other assets on the date of distribution, as reduced by the amount assessed
as dividend within the meaning of sub-clause (c) of clause (22) of section 2 and the sum so arrived at, shall be
deemed to be the full value of the consideration for the purposes of section 48.

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Nothing contained in section 45 shall apply to the following transfers : (i) Any distribution of capital assets
on the total or partial partition of a Hindu undivided family;

(iii) Any transfer of a capital asset under a gift or will or an irrevocable trust;

(iv) Any transfer of a capital asset by a company to its subsidiary company, if - (a) The parent company or its
nominees hold the whole of the share capital of the subsidiary company; and

(b) The subsidiary company is an Indian company;

(v) Any transfer of a capital asset by a subsidiary company to the holding company, if - (a) The whole of the
share capital of the subsidiary company is held by the holding company, and

(b) The holding company is an Indian company

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(1) Where at any time before the expiry of a period of eight years from the date of the transfer of a capital
asset referred to in clause (iv) or, as the case may be, clause (v) of section 47, - (i) Such capital asset is
converted by the transferee company into, or is treated by it as, stock-in-trade of its business; or

(ii) The parent company or its nominees or, as the case may be, the holding company ceases or cease to hold
the whole of the share capital of the subsidiary company, the amount of profits or gains arising from the
transfer of such capital asset not charged under section 45 by virtue of the provisions contained in clause (iv)
or, as the case may be, clause (v) of section 47 shall, notwithstanding anything contained in the said clauses,
be deemed to be income chargeable under the head "Capital gains" of the previous year in which such transfer
took place.

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The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of
the consideration received or accruing as a result of the transfer of the capital asset the following amounts,
namely :-

(i) xpenditure incurred wholly and exclusively in connection with such transfer;

(ii) The cost of acquisition of the asset and the cost of any improvement thereto
1
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(1) Where the capital asset became the property of the assessee - (i) On any distribution of assets on the total
or partial partition of a Hindu undivided family;

(ii) Under a gift or will;

(a) By succession, inheritance or devolution, or

(b) On any distribution of assets on the dissolution of a firm, body of individuals, or other association of
persons, where such dissolution had taken place at any time before the 1st day of April, 1987,

(c) On any distribution of assets on the liquidation of a company, or

(d) Under a transfer to a revocable or an irrevocable trust, or

(e) Under any such transfer as is referred to in clause (iv) or clause (v) or clause (vi) or clause

(via) 762a of section 47

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Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming
part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian
Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following
modifications :- (1) Where the full value of the consideration received or accruing as a result of the transfer
of the asset together with the full value of such consideration received or accruing as a result of the transfer of
any other capital asset falling within the block of assets during the previous year, exceeds the aggregate of the
following amounts, namely :-

(i) xpenditure incurred wholly and exclusively in connection with such transfer or transfers;

(ii) The written down value or the block of assets at the beginning of the previous year; and

(iii) The actual cost of any asset falling within the block of assets acquired during the previous year, such
excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets

1
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Where the capital asset is an asset in respect of which a deduction on account of depreciation under clause (i)
of sub-section (1) of section 32 has been obtained by the assessee in any previous year, the provisions of
sections 48 and 49 shall apply subject to the modification that the written down value, as defined in clause (6)
of section 43, of the asset, as adjusted, shall be taken as the cost of acquisition of the asset.

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(1) Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to
income-tax as capital gains arising from the transfer of long-term capital assets and shall be deemed to be the
income of the previous year in which the transfer took place :

Provided that any profits or gains arising from the transfer under the slump sale of any capital asset being one
or more undertakings owned and held by an assessee for not more than thirty-six months immediately
preceding the date of its transfer shall be deemed to be the capital gains arising from the transfer of short-term
capital assets.(2) In relation to capital assets being an undertaking or division transferred by way of such sale,
the "net worth" of the undertaking or the division, as the case may be, shall be deemed to be the cost of
acquisition and the cost of improvement for the purposes of sections 48 and 49 and no regard shall be given to
the provisions contained in the second proviso to section 48.

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Where any capital asset was on any previous occasion the subject of negotiations for its transfer, any advance
or other money received and retained by the assessee in respect of such negotiations shall be deducted from
the cost for which the asset was acquired or the written down value or the fair market value, as the case may
be, in computing the cost of acquisition.

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(1) Subject to the provisions of sub-section (2), where in the case of an assessee being an individual or a
Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings
or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head
"Income from house property" (hereafter in this section referred to as the original asset), and the assessee has
within a period of one year before or two years after the date on which the transfer took place purchased, or
has within a period of three years after that date constructed, a residential house, then, instead of the capital
gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be
dealt with in accordance with the following provisions of this section, that is to say, - (i) If the amount of the
capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this
section referred to as the new asset), the difference between the amount of the capital gain and the cost of the
new asset shall be charged under section 45 as the income of the previous year; and for the purpose of
computing in respect of the new asset any capital gain arising from its transfer within a period of three years
of its purchase or construction, as the case may be, the cost shall be nil; or

(ii) If the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not
be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain
arising from its transfer within a period of three years of its purchase or construction, as the case may be, the
cost shall be reduced by the amount of the capital gain.
1
c55c

#%'%c-2c3>&
#3/c3 -
c-2c'.-##%
3c%c3 -
c-2c <&''
'-%3$c

(1) For the purposes of sections 48 and 49 , - (a) "Cost of any improvement", - (1) In relation to a capital
asset being goodwill of a business or a right to manufacture, produce or process any article or thing shall be
taken to be nil; and

(2) In relation to any other capital asset, - (i) Where the capital asset became the property of the previous
owner 852 or the assessee before the 1st day of April, 1981, means all expenditure of a capital nature incurred
in making any additions or alterations to the capital asset on or after the said date by the previous owner or the
assessee, and

(ii) In any other case, means all expenditure of a capital nature incurred in making any additions or alterations
to the capital asset by the assessee after it became his property, and, where the capital asset became the
property of the assessee by any of the modes specified in sub-section (1) of section 49, by the previous owner,
but does not include any expenditure which is deductible in computing the income chargeable under the head
"Interest on securities", 853c "Income from house property", "Profits and gains of business or profession", or
"Income from other sources", and the expression "improvement" shall be construed accordingly.

1
c57c

'% -#c2.-c-
,#.c-&. #$c

(1) Income of every kind 860 which is not to be excluded from the total income under this Act shall be
chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax
under any of the heads specified in section 14, items A to .

(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following
incomes shall be chargeable to income-tax under the head "Income from other sources", namely :- (i)
Dividends;

(ia) Income referred to in sub-clause (viii) of clause (24) of section 2;

(ib) Income referred to in sub-clause (ix) of clause (24) of section 2;

(ic) Income referred to in sub-clause (x) of clause (24) of section 2, if such income is not chargeable to
income-tax under the head "Profits and gains of business or profession";

(id) Income by way of interest on securities, if the income is not chargeable to income-tax under the head
"Profits and gains of business or profession";

(ii) Income from machinery, plant or furniture belonging to the assessee and let on hire, if the income is not
chargeable to income-tax under the head "Profits and gains of business or profession";

(iii) Where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the
letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, the income
from such letting, if it is not chargeable to income-tax under the head "Profits and gains of business or
profession";
(iv) Income referred to in sub-clause (xi) of clause (24) of section 2, if such income is not chargeable to
income-tax under the head "Profits and gains of business or profession" or under the head "Salaries".

1
c58c

#&
'-%$c

The income chargeable under the head "Income from other sources" shall be computed after making the
following deductions, namely :- (i) In the case of dividends or interest on securities, any reasonable sum paid
by way of commission or remuneration to a banker or any other person for the purpose of realising such
dividend or interest on behalf of the assessee;

(ia) In the case of income of the nature referred to in sub-clause (x) of clause (24) of section 2 which is
chargeable to income-tax under the head "Income from other sources", deductions, so far as may be, in
accordance with the provisions of clause (va) of sub-section (1) of section 36;

(ii) In the case of income of the nature referred to in clauses (ii) and (iii) of sub-section (2) of section 56,
deductions, so far as may be, in accordance with the provisions of sub-clause (ii) of clause (a) and clause (c)
of section 30, section 31, and sub-sections (1), and (2) of section 32 and subject to the provisions of section
38;

1
c5 c

.-2'
c ,.##c
-c
0$c

(1) The provisions of sub-section (1) of section 41 shall apply, so far as may be, in computing the income of
an assessee under section 56, as they apply in computing the income of an assessee under the head "Profits
and gains of business or profession".

1
c7c

.%2#.c-2c'% -#c6,#.#c
,#.#c'c%-c
.%2#.c-2c#
$c

All income arising to any person by virtue of a transfer whether revocable or not and whether effected
before or after the commencement of this Act shall, where there is no transfer of the assets from which the
income arises, be chargeable to income-tax as the income of the transferor and shall be included in his
total income.

1
c7"c

.#- #c
.%2#.c-2c#
$c

All income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income-
tax as the income of the transferor and shall be included in his total income.

1
c7(c

.%2#.c'..#- #c2-.cc# '2'#c#.'-$c
(1) The provisions of section 61 shall not apply to any income arising to any person by virtue of a transfer
- (i) By way of trust which is not revocable during the lifetime of the beneficiary, and, in the case of any
other transfer, which is not revocable during the life time of the transferee; or

(ii) Made before the day of April, 1961, which is not revocable for a period exceeding six years :

Provided that the transferor derives no direct or indirect benefit from such income in either case.

(2) Notwithstanding anything contained in sub-section (1), all income arising to any person by virtue of
any such transfer shall be chargeable to income-tax as the income of the transferor as and when the power
to revoke the transfer arises, and shall then be included in his total income.

1
c7*c

3
.%2#.3c%c3.#- #c
.%2#.3c#2'%#$c

For the purposes of sections 60, 61 and 62 and of 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) "Transfer" includes any settlement, trust, covenant, agreement or arrangement.

1
c7)c

'% -#c-2c'%''&c
-c'% &#c'% -#c-2c-&#/c'%-.c ,'/c#
$c

(1) In computing the total income of any individual, there shall be included all such income as arises
directly or indirectly -

(ii) To the spouse of such individual by way of salary, commission, fees or any other form of
remuneration whether in cash or in kind from a concern in which such individual has a substantial interest
:

Provided that nothing in this clause shall apply in relation to any income arising to the spouse where the
spouse possesses technical or professional qualification and the income is solely attributable to the
application of his or her technical or professional knowledge and experience

1
c75c

'''
4c -2c #.-%c '%c .##
c -2c '% -#c '% &#c '%c
,#c '% -#c -2c
%-
,#.c#.-%$c

Where, by reason of the provisions contained in this Chapter or in clause (i) of section 27, the income
from any asset or from membership in a firm of a person other than the assessee is included in the total
income of the assessee, the person in whose name such asset stands or who is a member of the firm shall,
notwithstanding anything to the contrary contained in any other law for the time being in force, be liable,
on the service of a notice of demand by the Assessing Officer in this behalf, to pay that portion of the tax
levied on the assessee which is attributable to the income so included, and the provisions of Chapter
XVII-D shall, so far as may be, apply accordingly

1
c77c

-
c'% -#$c

In computing the total income of an assessee, there shall be included all income on which no income-tax
is payable under Chapter VII

1
c79c

,c .#'
$c

Where any sum is found credited in the books of an assessee maintained for any previous year, and
assessee offers no explanation about the nature and source thereof or the explanation offered by him is
not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-
tax as the income of the assessee of that previous year.

1
c7 c

&%#0'%#c'%#
#%
$c

Where in the financial year immediately preceding the assessment year the assessee has made investments
which are not recorded in the books of account, if any, maintained by him for any source of income, and
the assessee offers no explanation about the nature and source of the investments or the explanation
offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments
may be deemed to be the income of the assessee of such financial year.

1
c7 c

&%#0'%#c-%#4/c#
$c

Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or
other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books
of account, if any, maintained by him for any source of income, and the assessee offers no explanation
about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the
explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the
value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee of
such financial year.

1
c7 c

-&%
c-2c'%#
#%
/c#
$/c%-
c2&4c' -#c'%c--:c-2c -&%
$c

Where in any financial year the assessee has made investments or is found to be the owner of any bullion,
jewellery, or other valuable article, and the Assessing Officer finds that the amount expended on making
such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount
recorded in this behalf in the books of account maintained by the assessee for any source of income, and
the assessee offers no explanation about such excess amount or the explanation offered by him is not, in
the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of
the assessee for such financial year.

1
c7 c

&%#0'%#c#0#%'
&.#/c#
$c

Where in any financial year an assessee has incurred any expenditure and he offers no explanation about
the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the
opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as
the case may be, may be deemed to be the income of the assessee for such financial year

1
c7 c

-&%
c-..-6#c-.c.#'c-%c,&%'$c

Where any amount is borrowed on a hundi from, or any amount due thereon is repaid to, any person
otherwise than through an account payee cheque drawn on a bank, the amount so borrowed or repaid shall
be deemed to be the income of the person borrowing or repaying the amount aforesaid for the previous
year in which the amount was borrowed or repaid, as the case may be :

Provided that, if in any case amount borrowed on hundi has been deemed under the provisions of this
section to be the income of any person, such person shall not be liable to be assessed again in respect of
such amount under the provisions of this section on repayment of such amount.

1
c8"c

.%'
'-%c .-''-%c 2-.c #
c -22c -2c -c &%#.c
,#c ,#c 3'% -#c
2.-c,-&#c.-#.
43$c

Where in respect of the assessment year commencing on the 1st day of April, 1993 or the 1st day of April,
1994, the net result of the computation under the head "Income from house property" is a loss, such loss
in so far as it relates to interest on borrowed capital referred to in clause (vi) of sub-section (1) of section
24 and to the extent it has not been set off shall be carried forward and set off in the assessment year
commencing on the 1st day of April, 1995, and the balance, if any, in the assessment year commencing on
the 1st day of April, 1996, against the income under any head.

1
c8(c

..4c2-.6.c%c#
c-22c-2c&'%#c-#$cc

(1) Where for any assessment year, the net result of the computation under the head "Profits and gains of
business or profession" is a loss to the assessee, not being a loss sustained in a speculation business, and
such loss cannot be or is not wholly set off against income under any head of income in accordance with
the provisions of section 71, so much of the loss as has not been so set off or, where he has no income
under any other head, the whole loss shall, subject to the other provisions of this
Chapter, be carried forward to the following assessment year, and - (i) It shall be set be off against the
profits and gains, if any, of any business or profession carried on by him and assessable for that
assessment year :

Provided that the business or profession for which the loss was originally computed continued to be
carried on by him in the previous year relevant for that assessment year; and

(ii) If the loss cannot be wholly set off, the amount of loss not so set off shall be carried forward to the
following assessment year and so on 925 ]

1
c8*c

-#c'%c# &
'-%c&'%#$c

(1) Any loss, computed in respect of a speculation business 932 carried on by the assessee, shall not be set
off except against profits and gains, if any, of another speculation business.

(2) Where for any assessment year any loss computed in respect of a speculation business has not been
wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the
assessee had no income from any other speculation business shall, subject to the other provisions of this
Chapter, be carried forward to the following assessment year, and - (i) It shall be set off against the
profits and gains, if any, of any speculation business carried on by him assessable for that assessment
year; and

(ii) If the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the
following assessment year and so on.

1
c8)c

-#c&%#.c
,#c,#c3 '
c'%3$c

(1) Where in respect of any assessment year, the net result of the computation under the head "Capital
gains" is a loss to the assessee, the whole loss shall, subject to the other provisions of this Chapter, be
carried forward to the following assessment year, and - (a) It shall be set off aginst income, if any, under
the head "Capital gains" assessable for that assessment year; and

(b) If the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the
following assessment year, and so on.

(2) No loss shall be carried forward under this section for more than eight assessment years immediately
succeeding the assessment year for which the loss was first computed.

1
c8)c

-#c2.-c #.
'%c# '2'#c-&. #c2'%c&%#.c
,#c,#c3'% -#c
2.-c-
,#.c-&. #3$c

(1) In the case of an assessee, being the owner of horses maintained by him for running in horse races
(such horses being hereafter in this sub-section referred to as race horses), the amount of the loss incurred
by the assessee in the activity of owning and maintaining race horses in any assessment year shall not be
set off against income, if any, from any source other than the activity of owning and maintaining race
horses in that year and shall, subject to the other provisions of this Chapter, be carried forward to the
following assessment year and - (a) It shall be set off against the income, if any, from the activity of
owning and maintaining race horses assessable for that assessment year

1
c85c

-#c-2c2'.$c

Where the assessee is a firm, any loss in relation to the assessment year commencing on or before the 1st
day of April, 1992, which could not be set off against any other income of the firm and which had been
apportioned to a partner of the firm but could not be set off by such partner prior to the assessment year
commencing on the 1st day of April, 1993, then, such loss shall be allowed to be set off against the
income of the firm subject to the condition that the partner continues in the said firm and to be carried
forward for set off under sections 70, 71, 72, 73, 74 and 74A.

1
c9c

#&
'-%c
-c#c#c'%c -&
'%c
-
c'% -#$c

(1) In computing the total income of an assessee, there shall be allowed from his gross total income, in
accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80C to
80U.

(2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross
total income of the assessee.

(3) Where, in computing the total income of an association of persons or a body of individuals, any
deduction is admissible under section 80G or section 80GGA or section 80HH or section 80HHA or
section 80HHB or section 80HHC or section 80HHD or section 80-I or section 80-IA, 80-IB or section
80J or section 80JJ, no deduction under the same section shall be made in computing the total income of a
member of the association of persons or body of individuals in relation to the share of such member in the
income of the association of persons or body of individuals.

1
c9c

#&
'-%c
-c #c #c 6'
,c .#2#.#% #c
-c
,#c '% -#c '% &#c '%c
,#c
.-c
-
c'% -#$c

Where any deduction is required to be made or allowed under any section included in this Chapter under
the heading "C. - Deductions in respect of certain incomes" in respect of any income of the nature
specified in that section which is included in the gross total income of the assessee, then, notwithstanding
anything contained in that section, for the purpose of computing the deduction under that section, the
amount of income of that nature as computed in accordance with the provisions of this Act (before
making any deduction under this Chapter) shall alone be deemed to be the amount of income of that
nature which is derived or received by the assessee and which is included in his gross total income.

1
c9c
#2'%'
'-%$c

In this Chapter - (1) "Gross total income" means the total income computed in accordance with the
provisions of this Act, before making any deduction under this Chapter

1
c9 c

#&
'-%c '%c .##
c -2c #-'
c &%#.c %
'-%c '%c  ,##c -.c
4#%
c
-cc#2#..#c%%&'
4c%$c

(1) Where an assessee, being - (a) An individual, or

(b) A Hindu undivided family, has in the previous year - (i) Deposited any amount in accordance with
such scheme as the Central Government may, by notification 995 in the Official Gazette, specify in this
behalf; or

(ii) Paid any amount to effect or to keep in force a contract for such annuity plan of the Life Insurance
Corporation as the Central Government may, by notification in the Official Gazette, specify 996 , out of
his income chargeable to tax, he shall, in accordance with, and subject to, the provisions of this section,
be allowed a deduction in the computation of his total income of the whole of the amount deposited or
paid (excluding interest or bonus accrued or credited to the assessee's account, if any) as does not exceed
the amount of twenty thousand rupees in the previous year

1
c97c

,.#c-2c##.c-2c%c- '
'-%c-2c#.-%c-.c-4c-2c'%''&c'%c

,#c'% -#c-2c
,#c- '
'-%c-.c-4$c

Where the assessee is a member of an association of persons or body of individuals [other than a company
or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860) or
under any law corresponding to that Act in force in any part of India], income-tax shall not be payable by
the assessee in respect of his share in the income of the association or body computed in the manner
provided in section 67A

1
c98c

.#
#c
-c#c-6#c'%c -&
'%c'% -#!
0$c

(1) In computing the amount of income-tax on the total income of an assessee with which he is chargeable
for any assessment year, there shall be allowed from the amount of income-tax (as computed before
allowing the deductions under this Chapter), in accordance with and subject to the provisions of sections
88, 88A and 88B, the deductions specified in those sections.

(2) The aggregate amount of the deductions under section 88 or section 88A or section 88B shall not, in
any case, exceed the amount of income-tax (as computed before allowing the deductions under this
Chapter) on the total income of the assessee with which he is chargeable for any assessment year.

1
c99c
.#
#c-%c'2#c'%&.% #c.#'/c -%
.'&
'-%c
-c.-'#%
c2&%/c#
$c

(1) Subject to the provisions of this section, an assessee, being - (a) An individual, or

(b) A Hindu undivided family, shall be entitled to a deduction, from the amount of income-tax (as
computed before allowing the deductions, under this Chapter) on his total income with which he is
chargeable for any assessment year, of an amount equal to twenty per cent of the aggregate of the sums
referred to in sub-section (2)

1
c99c

.#
#c -2c '% -#!
0c '%c #c -2c '%''&c -2c '0
4!2'#c 4#.c -.c
-#$c

An assessee, being an individual resident in India, who is of the age of sixty-five years or more at any
time during the previous year shall be entitled to a deduction from the amount of income-tax (as
computed before allowing the deductions under this Chapter) on his total income, with which he is
chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an
amount of ten thousand rupees, whichever is less.

1
c9 c

.#'#2c6,#%c.4/c#
$/c'c'c'%c..#.c-.c'%c% #$c

(1) Where by reason of any portion of an assessee's salary being paid in arrears or in advance or by reason
of his having received in any one financial year salary for more than twelve months or a payment which
under the provisions of clause (3) of section 17 is a profit in lieu of salary, his income is assessed at a rate
higher than that at which it would otherwise have been assessed the Assessing Officer shall, on an
application made to him in this behalf, grant such relief as may be prescribed

1
c c

.###%
c6'
,c2-.#'%c -&%
.'#$c

(1) The Central Government may enter into an agreement with the Government of any country outside
India - (a) For the granting of relief in respect of income on which have been paid both income-tax under
this Act and income-tax in that country, or

(b) For the avoidance of double taxation of income under this Act and under the corresponding law in
force in that country, or

1
c "c

-&%
.'#c6'
,c6,' ,c%-c.###%
c#0'
$c

(1) If any person who is resident in India in any previous year proves that, in respect of his income which
accrued or arose during that previous year outside India (and which is not deemed to accrue or arise in
India), he has paid in any country with which there is no agreement under section 90 for the relief or
avoidance of double taxation, income-tax, by deduction or otherwise, under the law in force in that
country, he shall be entitled to the deduction from the Indian income-tax payable by him of a sum
calculated on such doubly taxed income at the Indian rate of tax or the rate of tax of the said country,
whichever is the lower, or at the Indian rate of tax if both the rates are equal.

(2) If any person who is resident in India in any previous year proves that in respect of his income which
accrued or arose to him during that previous year in Pakistan he has paid in that country, by deduction or
otherwise, tax payable to the Government under any law for the time being in force in that country
relating to taxation of agricultural income, he shall be entitled to a deduction from the Indian income-tax
payable by him

1
c (c

'% -#c 2.-c

.%
'-%c 6'
,c %-%!.#'#%
/c ,-6c -&
#c '%c
#.
'%c #$c

Where a business is carried on between a resident and a non-resident and it appears to the Assessing
Officer that, owing to the close connection between them, the course of business is so arranged that the
business transacted between them produces to the resident either no profits or less than the ordinary
profits which might be expected to arise in that business, the Assessing Officer shall determine the
amount of profits which may reasonably be deemed to have been derived therefrom and include such
amount in the total income of the resident.

1
c *c

-'% #c -2c '% -#!

0c 4c
.%
'-%c .#&
'%c '%c
.%2#.c -2c
'% -#c
-c%-%!.#'#%
$c

(1) Where there is a transfer of assets by virtue or in consequence whereof, either alone or in conjunction
with associated operations, any income becomes payable to a non-resident, the following provisions shall
apply - (a) Where any person has, by means of any such transfer, either alone or in conjunction with
associated operations, acquired any rights by virtue of which he has, within the meaning of this section,
power to enjoy, whether forthwith or in the future, any income of a non-resident person which, if it were
income of the first-mentioned person, would be chargeable to income-tax, that income shall, whether it
would or would not have been chargeable to income-tax apart from the provisions of this section, be
deemed to be income of the first-mentioned person for all the purposes of this Act;

(b) Where, whether before or after any such transfer, any such first-mentioned person receives or is
entitled to receive any capital sum the payment whereof is in any way connected with the transfer or any
associated operations, then any income which, by virtue or in consequence of the transfer, either alone or
in conjunction with associated operations, has become the income of a non-resident shall, whether it
would or would not have been chargeable to income-tax apart from the provisions of this section, be
deemed to be the income of the first-mentioned person for all the purposes of this Act.

1
c )c

-'% #c-2c
0c4c #.
'%c
.%
'-%c'%c# &.'
'#$c

(1) Where the owner of any securities [in this sub-section and in sub-section (2) referred to as "the
owner") sells or transfers those securities, and buys back or reacquires the securities, then, if the result of
the transaction is that any interest becoming payable in respect of the securities is receivable otherwise
than by the owner, the interest payable as aforesaid shall, whether it would or would not have been
chargeable to income-tax apart from the provisions of this sub-section be deemed, for all the purposes of
this Act, to be the income of the owner and not to be the income of any other person.

1
c""c

#
#.'%
'-%c-2c
0c6,#.#c
-
c'% -#c'% &#c'% -#c-%c6,' ,c%-c

0c'c4#$c

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.

1
c"""c

0c-%c &&
#c% #c-2c.# -%'#c.-'#%
c2&%$c

(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 [Assessing Officer] shall calculate the total of the various sums of [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.

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(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,
[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

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

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(1) The [Assessing Officer], [Deputy Commissioner (Appeals)], [Deputy Commissioner], [Commissioner
(Appeals)] and [Chief Commissioner or Commissioner] shall, for the purposes of this Act, have the same
powers as are vested in a Court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in
respect of the following matters, namely :- (a) Discovery and inspection;

(b) nforcing the attendance of any person, including any officer of a banking company and examining
him on oath;

(c) Compelling the production of books of account and other documents; and

(d) Issuing commissions.

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(1)(a) The Board or any other income-tax authority specified 1408 by it by a general or special order in
this behalf may furnish or cause to be furnished to - (i) Any officer, authority or body performing any
functions under any law relating to the imposition of any tax, duty or cess, or to dealings in foreign
exchange 1409 as defined in section 2(d) of the Foreign xchange Regulation Act, 1947 (7 of 1947) 1410

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(1) A firm shall be assessed as a firm for the purposes of this Act, if -

(i) The partnership is evidenced by an instrument; and

(ii) The individual shares of the partners are specified in that instrument.

(2) A certified copy of the instrument of partnership referred to in sub-section (1) shall accompany the
return of income of the firm of the previous year relevant to the assessment year commencing on or after
the 1st day of April, 1993, in respect of which assessment as a firm is first sought.

(3) Where a firm is assessed as such for any assessment year, it shall be assessed in the same capacity for
every subsequent year if there is no change in the constitution of the firm or the shares of the partners as
evidenced by the instrument of partnership on the basis of which the assessment as a firm was first
sought.
(4) Where any such change had taken place in the previous year, the firm shall furnish a certified copy of
the revised instrument of partnership along with the return of income for the assessment year relevant to
such previous year and all the provisions of this section shall apply accordingly.

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Where a firm does not comply with the provisions of section 184 for any assessment year, the firm shall
be assessed for that assessment year in the same manner as an association of persons, and all the
provisions of this Act shall apply accordingly.

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(1) Where at the time of making an assessment under section 143 or section 144 it is found that a change
has occurred in the constitution of a firm, the assessment shall be made on the firm as constituted at the
time of making the assessment :

(2) For the purposes of this section, there is a change in the constitution of the firm - (a) If one or more of
the partners cease to be partners or one or more new partners are admitted, in such circumstances that one
or more of the persons who were partners of the firm before the change continue as partner or partners
after the change; or

(b) Where all the partners continue with a change in their respective shares or in the shares of some of
them :

Provided that nothing contained in clause (a) shall apply to a case where the firm is dissolved on the death
of any of its partners.

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Where a firm carrying on a business or profession is succeeded by another firm, and the case is not one
covered by section 187, separate assessments shall be made on the predecessor firm and the successor
firm in accordance with the provisions of section 170.

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very person who was, during the previous year, a partner of a firm, and the legal representative of any
such person who is deceased, shall be jointly and severally liable along with the firm for the amount of
tax, penalty or other sum payable by the firm for the assessment year to which such previous year is
relevant, and all the provisions of this Act, so far as may be, shall apply to the assessment of such tax or
imposition or levy of such penalty or other sum.
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(1) Where any business or profession carried on by a firm has been discontinued or where a firm is
dissolved, the Assessing Officer shall make an assessment of the total income of the firm as if no such
discontinuance or dissolution had taken place, and all the provisions of this Act, including the provisions
relating to the levy of a penalty or any other sum chargeable under any provision of this Act, shall apply,
so far as may be, to such assessment.

(2) Without prejudice to the generality of the foregoing sub-section, if the Assessing Officer or the
Commissioner (Appeals) in the course of any proceeding under this Act in respect of any such firm as is
referred to in that sub-section is satisfied that the firm was guilty of any of the acts specified in Chapter
XXI, he may impose or direct the imposition of a penalty in accordance with the provisions of that
Chapter.

(3) very person who was at the time of such discontinuance or dissolution a partner of the firm, and the
legal representative of any such person who is deceased, shall be jointly and severally liable for the
amount of tax, penalty or other sum payable, and all the provisions of this Act, so far as may be, shall
apply to any such assessment or imposition of penalty or other sum.

(4) Where such discontinuance or dissolution takes place after any proceedings in respect of an
assessment year have commenced, the proceedings may be continued against the persons referred to in
sub-section (3) from the stage atwhich the proceedings stood at the time of such discontinuance or
dissolution, and all the provisions of this Act shall, so far as may be, apply accordingly.

(5) Nothing in this section shall affect the provisions of sub-section (6) of section 159.`

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In relation to the assessment of any firm and its partners for the assessment year commencing on the 1st
day of April, 1992, or any earlier assessment year, the provisions of this Chapter as they stood
immediately before the 1st day of April, 1993, shall continue to apply.

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(1) Notwithstanding that the regular assessment in respect of any income is to be made in later assessment
year, the tax on such income shall be payable by deduction or collection at source or by advance payment,
as the case may be, in accordance with the provisions of this Chapter.

(2) Nothing in this section shall prejudice the charge of tax on such income under the provisions of sub-
section (1) of section 4.

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The principal officer of an Indian company or a company which has made the prescribed arrangements
for declaration and payment of dividends (including dividends on preference shares) within India, shall,
before making any payment in cash or before issuing any cheque or warrant in respect of any dividend or
before making any distribution or payment to a shareholder who is resident in India, of any dividend
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, deduct from the amount of such dividend, income-tax at the rates in force.

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(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a
resident any income by way of interest other than 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 thereon at the
rates in force :

(3) The provisions of sub-section (1) shall not apply -

(i) Where the amount of such income or, as the case may be, the aggregate of the amounts of such income
credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-
section (1) To the account of, or to, the payee, does not exceed two thousand five hundred rupees:

(b) Time deposits with a co-operative society engaged in carrying on the business of banking;

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The person responsible for paying to any person any income by way of winnings from any lottery or
crossword puzzle in an amount exceeding five thousand rupees shall, at the time of payment thereof,
deduct income-tax thereon at the rates in force :

Provided that no deduction shall be made under this section from any payment made before the 1st day of
June, 1972;

Provided further that in a case where the winnings are wholly in kind or partly in cash and partly in kind
but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the
winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been
paid in respect of the winnings.