Income Tax Act 1961

INCOME-TAX ACT, 1961*
[43 OF 1961]
[AS AMENDED BY FINANCE ACT, 2008]
An Act to con solidate an d am en d th e law relatin g

to in com e-tax an d super-tax
BE it enacted by Parliam ent in the Twelfth Year of the Repu blic of
India as follows :
CHAPTER I
PRELIMINARY
Short title, extent and commencement.
1
1.
(1) This Act m ay be called the Incom e-tax Act, 1961.

(2)
It extends to the whole of India.
(3) Save as otherwise provided in this Act, it shall com e into force on the 1st day of
April, 1962.
Definitions.
2.
In this Act, u nless the context otherwise requ ires,

3
[(1) ad van ce tax m eans the advance tax payable in accordance with the
provisions of Chapter XVII-C;]
1. For applicability of the Act to State of Sikkim , see section 26 of the Finance Act, 1989.
For extension of Act to Continental Shelf of India, see Notification No. GSR 304(E), dated
31-3-1983. For details, see Taxm a nn s Master Gu ide to Incom e-tax Act.
2. For effective date for the applicability of the Act in the State of Sikkim , see Notification
No. SO 148(E), dated 23-2-1989. For details, see Taxm a nn s Master Gu ide to Incom e-tax
Act.
3. Inserted by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1989.
*Am endm ents m ade by the Finance Act, 2008 notw ithstanding the dates from w hich
they com e into effect, have been printed in italics enclosed w ith bold square brackets.
Am endm ents m ade by the Finance Act, 2007 com ing into force from April 1, 2008 have
also been printed in italics but enclosed w ithin m edium square brackets.
1 .1
S. 2(1A)
I.T. ACT, 1961
[ (1A)]
4 5
1 .2
a gricu ltu ral incom e7 m eans 8
[(a) any rent 1 0 or revenu e derived from land 10 which is situ ated in
India and is u sed for agricu ltu ral pu rposes;]
(b) any incom e derived from su ch land 10 by
(i) agricu ltu re 10 ; or
(ii) the perform ance by a cu ltivator or receiver of rent-in-kind of
any process ordinarily em ployed by a cu ltivator or receiver
of rent-in-kind to render the produ ce raised or received by
him fit to be taken to m arket 10 ; or
(iii)
the sale by a cu ltivator or receiver of rent-in-kind of the
produ ce raised or received by him , in respect of which no
process has been perform ed other than a process of the
natu re described in paragraph (ii) of this su b-clau se ;
(c) any incom e derived from any bu ild ing owned and occu pied
by the receiver of the rent or revenu e of any su ch land, or occu
pied by the cu ltivator or the receiver of rent-in-kind, of any land
with respect to which, or the produ ce of which, any process m
entioned in paragraphs (ii) and (iii) of su b-clau se (b) is carried
on :
9
[Provided that
(i) the bu ild ing is on or in the im m ediate vicinity of the land,
and is a bu ild ing which the receiver of the rent or revenu e
or the cu ltivator, or the receiver of rent-in-kind, by reason
of his connection with the land, requ ires as a dwelling hou
se, or as a store-hou se, or other ou t-bu ild ing, and
(ii) the land is either assessed to land revenu e in India or is
su bject to a local rate assessed and collected by officers of the
Governm ent as su ch or where the land is not so assessed to
land revenu e or su bject to a local rate, it is not situ ated
(A) in any area which is com prised within the ju r isdiction
of a m u nicipality (whether known as a m u nicipality,
m u nicipal corporation, notified area com m ittee, town
area com m ittee, town com m ittee or by any other nam
e)
4. Renu m bered as clau se (1A ) by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f.
1-4-1989.
5. For relevant case laws, see Taxm a nn s Master Gu ide to Incom e-tax Act.
6. See ru les 7 and 8 for m anner of com pu tation of incom e which is partially agricu ltu ral
and partially from bu siness. See also ru les 7A & 7B.
7. The Finance Act, 1973 introdu ced for the fir st tim e a schem e of partially integrated
taxation of non-agricu ltu ral incom e with incom es derived from agricu ltu re for the
pu rposes of determ ining the rate of incom e-tax that will apply to certain non-corporate
assessees. The schem e is since continu ed by the Annu al Finance Acts. The provisions
applicable for the assessm ent year 2008-09 are contained in section 2(2)/ 2(13)(c) and Part
IV of the First Schedu le to the Finance Act, 2008.
8. See also Circu lar No. 310, dated 29-7-1981 and Circu lar No. 5/ 2003, dated 22-5-2003. For
details, see Taxm ann s Master Gu ide to Incom e-tax Act.
9. Su bstitu ted by the Taxation Laws (Am endm ent) Act, 1970, w.r.e.f. 1-4-1962.
10. For m eaning of the term s/ expressions rent, r even u e, derived, r evenu e derived
from
land, su ch land, agricu ltu re and m ar ket, see Taxm a nn s Direct Taxes
Manu al, Vol. 3.
1 .3
CH. I - PRELIMINARY
S. 2(1B)
or a cantonm ent board and which has a popu la tion of

not less than ten thou sand according to the last preceding censu s of which the relevant figu res have been
pu blished before the first day of the previou s year ; or
(A) in any area within su ch distance, not being m ore than
eight kilom etres, from the local lim its of any m u
nicipality or cantonm ent board referred to in item
(A ), as the Central Governm ent m ay, having regard to
the extent of, and scope for, u rbanisation of that area
and other relevant considerations, specify in this
behalf by notification in the Official Gazette 11 .]
12 13
[ [Explan ation 1.]For the rem oval of dou bts, it is hereby declared
that revenu e derived from land shall not inclu de and shall be deem ed
never to have inclu ded any incom e arising from the transfer of any
land referred to in item (a) or item (b) of su b-clau se (iii) of clau se
(14) of this section.]
14
[Explan ation 2.For the rem oval of dou bts, it is hereby declared
that incom e derived from any bu ild ing or land referred to in su bclau se (c) arising from the u se of su ch bu ild ing or land for any pu
rpose (inclu ding letting for residential pu rpose or for the pu rpose
of any bu siness or profession) other than agricu ltu re falling u nder
su b- clau se (a) or su b-clau se (b) shall not be agricu ltu ral incom e;]
The following Explanation 3 shall be inserted after Explanation 2
in clause (1A) of section 2 by the Finance Act, 2008, w.e.f. 1-4-2009 :
Explanation 3.For th e purposes of th is clause, an y in com e
derived from saplin gs or seedlin gs grow n in a n ursery sh all be deem
ed to be agricultural in com e;
[ [(1B)] am algam a tion, in relation to com panies, m eans the m erger of one
or m ore com panies with another com pany or the m erger of two or
m ore com panies to form one com pany (the com pany or com
panies which so m erge being referred to as the am algam ating com
pany or com panies and the com pany with which they m erge or
which is form ed as a resu lt of the m erger, as the am algam ated
com pany) in su ch a m anner that
(i) all the property of the am algam ating com pany or com panies
im m ediately before the am algam ation becom es the property
of the am algam ated com pany by virtu e of the am algam ation ;
(ii) all the liabilities of the am algam ating com pany or com panies
im m ediately before the am algam ation becom e the liabilities
of the am algam ated com pany by virtu e of the am algam ation ;
15 16
11.
12.
13.
14.
15.
16.
For specified u rban areas, refer Taxm a nn s Direct Taxes Circu lars.
Inserted by the Finance Act, 1989, w.r.e.f. 1-4-1970.
Explan ation renu m bered as Explan ation 1 by the Finance Act, 2000, w.e.f. 1-4-2001.
Inser ted, ibid.
Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
Renu m bered as clau se (1B) by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f.
1-4-1989.
S. 2(7)
I.T. ACT, 1961
1 .4
(iii)
shareholders holding not less than 17 [three-fou r ths] in
valu e of the shares in the am algam ating com pany or com
panies (other than shares already held therein im m ediately
before the am alga- m ation by, or by a nom inee for, the am
algam ated com pany or its su bsidiary) becom e shareholders of
the am algam ated com pany by virtu e of the am algam ation,
otherwise than as a resu lt of the acqu isition of the property of one
com pany by another com pany pu rsu ant to the pu rchase of su ch
property by the other com pany or as a resu lt of the distribu tion
of su ch property to the other com pany after the winding u p of the
first- m entioned com pany ;]
18
[(1C) Add itiona l Com m issioner m eans a person appointed to be an Additional Com m issioner of Incom e-tax u nder su b-section (1) of section
117;
(1D) Add itiona l Director m eans a person appointed to be an
Additional Director of Incom e-tax u nder su b-section (1) of
section 117 ;]
(2) ann u al valu e, in relation to any property, m eans its annu al valu e
as determ ined u nder section 23 ;
(3)
19
[* * *]
(4) Appella te Tribu nalm eans the Appellate Tribu nal constitu ted u
nder section 252 ;
(5) a pproved gratu ity fu nd m eans a gratu ity fu nd which has been
and
continu es to be approved by the 20 [Chief Com m issioner or
Com m issioner] in accordance with the ru les contained in Part C of
the Fou r th Schedu le ;
(6) approved su perannu ation fu nd m eans a su perannu ation fu nd
any part of a su perannu ation fu nd which has been and continu
to be approved by the 20[Chief Com m issioner or Com m issioner]
accordance with the ru les contained in Part B of the Fou r
Sche- du le ;
21
or
es
in
th
(7) a ssessee22 m eans a person by whom 23 [any tax] or any other su m

of m oney is payable u nder this Act, and inclu des
(a) every person in respect of whom any proceeding u nder this Act
has been taken for the assessm ent of his incom e 24[or assessm ent
of fr inge benefits] or of the incom e of any other person in respect
of which he is assessable, or of the loss su stained by him or by
su ch other person, or of the am ou nt of refu nd du e to him or
to su ch other person ;
17.
18.
19.
20.
21.
22.
23.
24.
Su bstitu ted for nine-ten th s by the Finance Act, 1999, w.e.f. 1-4-2000.
Clau ses (1C) and (1D) inserted by the Finance Act, 2007, w.r.e.f. 1-6-1994.
Clau se (3) om itted by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1988.
Su bstitu ted for Com m issioner, ibid.
For relevant case laws, see Taxm a nn s Master Gu ide to Incom e-tax Act.
For m eaning of the term assessee, see Taxm ann s Direct Taxes Manu al, Vol. 3.
Su bstitu ted for incom e-tax or su per-tax by the Finance Act, 1965, w.e.f. 1-4-1965.
Inserted by the Finance Act, 2005, w.e.f. 1-4-2006.
1 .5
CH. I - PRELIMINARY
S. 2(11)
(b) every person who is deem ed to be an assessee u nder any

provision of this Act ;
(c) every person who is deem ed to be an assessee in defau lt u nder
any provision of this Act ;
25
[(7A) Assessin g Officer m eans the Assistant Com m issioner 26[or Depu ty
Com m issioner] 27[or Assistant Director] 26[or Depu ty Director] or the
Incom e-tax Officer who is vested with the relevant ju r isdiction by
virtu e of directions or orders issu ed u nder su b-section (1) or su bsection (2) of section 120 or any other provision of this Act, and the
28
[Additional Com m issioner or] 29 [Additional Director or] 30 [Joint
Com m issioner or Joint Director] who is directed u nder clau se (b)
of su b-section (4) of that section to exercise or perform all or any of
the powers and fu nctions conferred on, or assigned to, an Assessing
Officer u nder this Act ;]
(8) a ssessm ent31 inclu des reassessm ent ;
(9) a ssessm ent year m eans the period of twelve m onths com m
encing on the 1st day of April every year ;
32
34
[(9A) Assistan t Com m issionerm eans a person appointed to be an Assistant

Com m issioner of Incom e-tax 33 [or a Depu ty Com m issioner of
Incom e-tax] u nder su b-section (1) of section 117 ;]
[(9B) Assistan t Director m eans a person appointed to be an Assistant

Director of Incom e-tax u nder su b-section (1) of section 117;]
(10) a ver age rate of incom e-taxm eans the rate arrived at by dividing the
am ou nt of incom e-tax calcu la ted on the total incom e, by su ch
total incom e ;
35
[(11) b lock of assetsm eans a grou p of assets falling within a class of assets
com prising
(a) tangible assets, being bu ild ings, m achinery, plant or fu rnitu re;
26. Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998.
27. Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-101996. 28. Inserted by the Finance Act, 2007, w.r.e.f. 1-61994.
29. Inserted, ibid., w.r.e.f. 1-10-1996.
30. Su bstitu ted for Depu ty Com m issioner or Depu ty Director by the Finance (No. 2)
Act, 1998, w.e.f. 1-10-1998. Earlier or Depu ty Director was inserted by the Finance (No.
2) Act, 1996, w.e.f. 1-10-1996.
31. For the m eaning of the term assessm ent, see Taxm ann s Direct Taxes Manu al, Vol. 3.
34. Inserted by the Finance Act, 2007, w.r.e.f. 1-4-1988.
35. Su bstitu ted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Prior to its su bstitu tion, clau
se (11), as inserted by the Taxation Laws (Am endm ent & Miscellaneou s Provisions) Act,
1986, w.e.f. 1-4-1988, read as u nder :
(11) block of assets m eans a grou p of assets falling within a class of assets, being
bu ild ings, m achinery, plant or fu rnitu re, in respect of which the sam e
percentage of depreciation is prescribed ;
Original clau se was earlier om itted by the Finance Act, 1965, w.e.f. 1-4-1965.
S. 2(14)
I.T. ACT, 1961
1 .6
(b) intangible assets, being know-how, patents, copyrights, tradem arks, licences, franchises or any other bu siness or com m
ercial r ights of sim ila r natu re,
in respect of which the sam e percentage of depreciation is prescribed ;]
(12)
37
Boa rd m eans the 36 [Central Board of Direct Taxes constitu ted

u nder the Central Boards of Revenu e Act, 1963 (54 of 1963)] ;
[(12A ) books or books of accou nt inclu des ledgers, day-books, cash books,
accou nt-books and other books, whether kept in the written form or
as print-ou ts of data stored in a floppy, disc, tape or any other form of
electro-m agnetic data storage device;]
38
(13) bu siness39 inclu des any trade 3 9 , com m erce or m anu factu re or any
adventu re 39 or concern in the natu re of trade 3 9 , com m erce or m anu
- factu re ;
40
(14) capital asset m eans property 4 1 of any kind held by an assessee,

whether or not connected with his bu siness or profession, bu t does
not inclu de
(i) any stock-in-trade, consu m able stores or raw m aterials held for
the pu rposes of his bu siness or profession ;
42
(a)
[(ii) person al effects 43, th at is to say, m ovable property (in cludin g

w earin g apparel an d fu rn itu re) h eld for person al use 43 by th
e assessee or an y m em ber of h is fam ily depen den t on h im ,
but excludes
) jew ellery;
(b) ) arch aeological collection s;
36. Su bstitu ted for Cen tr a l Board of Revenu e constitu ted u nder the Central Board
of Revenu e Act, 1924 (4 of 1924) by the Central Boards of Revenu e Act, 1963, w.e.f. 1-11964.
37. Inserted by the Finance Act, 2001, w.e.f. 1-6-2001.
39. For the m eaning of the term s/ expressions bu siness, trade, a d ven tu re and in
the
natu re of tr a d e, see Taxm ann s Direct Taxes Manu al, Vol. 3.
41. For the m eaning of the term property, see Taxm ann s Direct Taxes Manu al, Vol. 3.
42. Su bstitu ted by the Finance Act, 2007, w.e.f. 1-4-2008. Prior to its su bstitu tion, su b-clau
se (ii), as su bstitu ted by the Finance Act, 1972, w.e.f. 1-4-1973, read as u nder :
(ii) personal effects, that is to say, m ovable property (inclu ding wearing apparel and
fu rnitu re, bu t exclu ding jewellery) held for personal u se by the assessee or any
m em ber of his fam ily dependent on him .
Explan ation .For the pu rposes of this su b-clau se, jewellery inclu des
(a) ornam ents m ade of gold, silver, platinu m or any other preciou s m etal or
any alloy containing one or m ore of su ch preciou s m etals, whether or not
containing any preciou s or sem i-preciou s stone, and whether or not worked
or sewn into any wearing apparel ;
(b) ) preciou s or sem i-preciou s stones, whether or not set in any fu rnitu re, u
tensil or other article or worked or sewn into any wearing apparel ;
43. For the m eaning of the expressions per sona l effects and per sona l u se, see Taxm
a nn s
Direct Taxes Manu al, Vol. 3.
1 .7
CH. I - PRELIMINARY
S. 2(14)
(c) draw in gs; (d

) pain tin gs;
(e) scu lptu res; or
(f) an y w ork of art.
Explana tion .For th e pu rposes of th is su b-clau se, jew
ellery in cludes
(a) ) orn am en ts m ade of gold, silver, platin um or an y oth
er precious m etal or an y alloy con tain in g on e or m ore of
such precious m etals, w h eth er or n ot con tain in g an y
precious or sem i-preciou s ston e, an d w h eth er or n ot w
orked or sew n in to an y w earin g apparel;
(b) ) precious or sem i-preciou s ston es, w h eth er or n ot set in
an y fu rn itu re, u ten sil or oth er article or w orked or sew n in
to an y w earin g apparel ;]
44
[(iii) agricu ltu ral land
45
in India, not being land situ ate
(a) in any area which is com prised within the ju r isdiction of a

m u nicipality 45 (whether known as a m u nicipality, m u
nicipal corporation, notified area com m ittee, town area com
m ittee, town com m ittee, or by any other nam e) or a
cantonm ent board and which has a popu la tion 45 of not
less than ten thou sand according to the last preceding censu
s of which the relevant figu res have been pu blished before
the first day of the previou s year ; or
(b) in any area within su ch distance, not being m ore than eight
kilom etres, from the local lim its of any m u nicipality or
cantonm ent board referred to in item (a), as the Central
Governm ent m ay, having regard to the extent of, and scope
for, u rbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official
Gazette 46 ;]
47
[(iv ) 6 per cent Gold Bonds, 1977,48[or 7 per cent Gold Bonds, 1980,]
49
[or National Defence Gold Bonds, 1980,] issu ed by the Central
Governm ent ;]
50
[(v) Special Bearer Bonds, 1991, issu ed by the Central Governm ent ;]
44. Su bstitu ted for (iii) agricu ltu ral land in India by the Finance Act, 1970, w.e.f. 1-4-1970.
45. For the m eaning of the term s/ expressions agricu ltu ral land, m u nicipality and popu
- la tion, see Taxm a nn s Direct Taxes Manu al, Vol. 3.
46. For specified u rban areas, refer Taxm a nn s Direct Taxes Circu lars.
47. Inserted by the Taxation Laws (Am endm ent) Act, 1962, w.e.f. 13-12-1962.
49. Inserted by the Taxation Laws (Am endm ent & Miscellaneou s Provisions) Act, 1965, w.e.f.
4-12-1965.
50. Inserted by the Special Bearer Bonds (Im m u nities and Exem ptions) Act, 1981, w.e.f.
12-1-1981.
S. 2(17)
I.T. ACT, 1961
1 .8
[(vi) Gold Deposit Bonds issu ed u nder the Gold Deposit Schem e,
1999 notified by the Central Governm ent ;]
52
53
(15) ch a r ita b le pu r pose54 inclu des relief of the poor, edu cation 54
,
m edical relief, and the advancem ent of any other 54 object of
general pu blic u tility 55[* * *] ;
51
(15)
The following clause (15) shall be substituted for clause (15) of

section 2 by the Finance Act, 2008, w.e.f. 1-4-2009 :
ch aritable pu rpose in clu des relief of th e poor, edu cation , m
edical relief, an d th e advan cem en t of an y oth er object of gen eral
public u tility:
Provided th at th e advan cem en t of an y oth er object of gen eral
public u tility sh all n ot be a ch aritable purpose, if it in volves th e
carryin g on of an y activity in th e n atu re of trade, com m erce or
busin ess, or an y activity of ren derin g an y service in relation to an y
trade, com m erce or busin ess, for a cess or fee or an y oth er con
sideration , irrespective of th e n atu re of use or application , or reten
tion , of th e in com e from such activity;
[(15A ) Chief Com m issioner m eans a person appointed to be a

Chief Com m issioner of Incom e-tax u nder su b-section (1) of
section 117 ;]
57 58
[ [(15B)] child, in relation to an individu al, inclu des a step-child and an
adopted child of that individu al ;]
59
[(16) Com m issioner m eans a person appointed to be a Com m issioner of
Incom e-tax u nder su b-section (1) of section 117 60[* * *] ;]
61
[(16A ) Com m issioner (Appeals)m eans a person appointed to be a Com m
issioner of Incom e-tax (Appeals) u nder su b-section (1) of section
117 ;]
62
[(17) com pany m eans
56
(i) any Indian com pany, or

(ii) any body corporate incorporated by or u nder the laws of a
cou ntry ou tside India, or
(iii)
any institu tion, association or body which is or was
assessable or was assessed as a com pany for any assessm ent
year u nder the
52. See also Circu lar No. 395, dated 24-9-1984. For details, see Taxm a nn s Master Gu ide to
Incom e-tax Act.
54. For the m eaning of term s/ expression cha r itab le pu rpose, edu cation and object
of
general pu blic u tility, see Taxm a nn s Direct Taxes Manu al, Vol. 3.
55. not involving the carrying on of any activity for profit om itted by the Finance Act, 1983,
w.e.f. 1-4-1984.
58. Renu m bered by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1988.
59. Su bstitu ted by the Finance Act, 1970, w.e.f. 1-4-1970.
60. Words , and inclu des a person appointed to be an Additional Com m issioner of Incom etax u nder that su b-section om itted by the Direct Tax Laws (Am endm ent) Act, 1987,
w.e.f. 1-4-1988.
62. Su bstitu ted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971.
1 .9
CH. I - PRELIMINARY
S. 2(18)
Indian Incom e-tax Act, 1922 (11 of 1922), or which is or was

assessable or was assessed u nder this Act as a com pany for any
assessm ent year com m encing on or before the 1st day of April,
1970, or
(iv) ) any institu tion, 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 com pany :
Provided that such institu tion, association or body shallbe deem ed
to be a com pany only for su ch assessm ent year or assessm
ent years (whether com m encing before the 1st day of April,
1971, or on or after that date) as m ay be specified in the
declaration ;]
(18) com pany in which the pu blic are su bstantially interesteda com
pany is said to be a com pany in which the pu blic 63 are su
bstantially interested
64
[(a) if it is a com pany owned by the Governm ent 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 Governm ent or the
Reserve Bank of India or a corporation owned by that bank ; or]
65
[(aa) if it is a com pany which is registered u nder section 25 of the
Com panies Act, 1956 (1 of 1956) 66 ; or
(ab) if it is a com pany having no share capital and if, having regard to
its objects, the natu re and com position of its m em bership and
other relevant considerations, it is declared by order of the Board
to be a com pany in which the pu blic are su bstantially interested
:
Provided that su ch com pany shall be deem ed to be a com pany in
which the pu blic are su bstantially interested only for su ch assessm ent year or assessm ent years (whether com m encing before the
1st day of April, 1971, or on or after that date) as m ay be specified
in the declaration ; or]
67
[(ac) if it is a m u tu al benefit finance com pany, that is to say, a com
pany which carries on, as its principal bu siness, the bu siness
of acceptance of deposits from its m em bers and which is
declared by the Central Governm ent u nder section 620A68 of
the Com - panies Act, 1956 (1 of 1956), to be a Nidh i or Mu tu al
Benefit Society ; or]
69
[(ad) if it is a com pany, wherein shares (not being shares entitled to a
fixed rate of dividend whether with or withou t a fu r ther r
ight to participate in profits) carrying not less than fifty per
cent of the
voting
power
have
been
allotted
u
nconditionally to, or
63.
64.
65.
66.
67.
68.
For the m eaning of the term pu blic, see Taxm ann s Direct Taxes Manu al, Vol. 3.
Su bstitu ted by the Finance Act, 1964, w.e.f. 1-4-1964.
For text of section 25 of the Com panies Act, 1956, see Appendix.
For text of section 620A of the Com panies Act, 1956, and notified Nidhi(s) thereu nder, see
Appendix.
S. 2(19)
I.T. ACT, 1961
1 .10
acqu ired u nconditionally by, and were throu ghou t the relevant
previou s year beneficially held by, one or m ore co-operative
societies ;]
70
[(b) if it is a com pany which is not a 71 private com pany as defined in
the Com panies Act, 1956 (1 of 1956), and the conditions specified
either in item (A ) or in item (B) are fu lfilled, nam ely :
(A) shares in the com pany (not being shares entitled to a
fixed rate of dividend whether with or withou t a fu r
ther r ight to participate in profits) were, as on the last day
of the relevant previou s year, listed in a recognised stock
exchange in In d ia in a ccor d a n ce w ith th e Secu r it ies
Con t r a cts (Regu la tion) Act, 1956 (42 of 1956), and any ru
les m ade thereu nder ;
72
[(B) shares in the com pany (not being shares entitled to a
fixed rate of dividend whether with or withou t a fu r ther
r ight to participate in profits) carrying not less than fifty
per cent of the voting power have been allotted u ncondit ion a lly to, or a cqu ir ed u n con d it ion a lly b y, a n d w er
e throu ghou t the relevant previou s year beneficially held
by
(a) the Governm ent, or
(19)
(b) a corporation established by a Central, State or Provincial Act, or

(c) any com pany to which this clau se applies or any
su bsidiary com pany of su ch com pany 73[if the whole
of the share capital of su ch su bsidiary com pany has
been held by the parent com pany or by its nom inees
throu ghou t the previou s year.]
Explan ation .In its application to an Indian com pany whose
bu siness consists m ainly in the constru ction of ships or in the
m anu factu re or processing of goods or in m ining or in the
generation or distribu tion of electricity or any other form of
power, item (B) shall have effect as if for the words not less
than fifty per cent, the words not less than forty per cent
had been su bstitu ted ;]]
co-oper ative society m eans a co-operative society registered u nder
the Co-operative Societies Act, 1912 (2 of 1912), or u nder any other
law for the tim e being in force in any State for the registration of cooperative societies ;
70. Su bstitu ted by the Finance Act, 1969, w.e.f. 1-4-1970. Earlier, clau se (b) was am ended fir
st by the Finance Act, 1965, w.e.f. 1-4-1965 and then by the Finance Act, 1966, w.e.f. 1-41966.
71. Clau se (iii) of section 3(1) of the Com panies Act, 1956, defines private com pany. For
text of section 3, see Appendix.
73. Su bstitu ted for w h er e su ch su bsidiary com pany fu lfils the conditions la id down in clau
se (b) of section 108 by the Finance Act, 1987, w.e.f. 1-4-1988.
1.11
74
76
1
S. 2(19AA)
CH. I - PRELIMINARY
[(19A ) Depu ty Com m issioner m eans a person appointed to be a Depu

ty Com m issioner of Incom e-tax 75[** *] u nder su b-section (1) of
section 117 ;
[(19AA ) dem erger, in relation to com panies, m eans the transfer, pu rsu ant
to
a schem e of arrangem ent u nder sections 391 to 39477 of the
Com panies Act, 1956 (1 of 1956), by a dem erged com pany of its
one or m ore u ndertakings to any resu lting com pany in su ch a m
anner that
(i) all the property of the u ndertaking, being transferred by the
dem erged com pany, im m ediately before the dem erger, becom
es the property of the resu lting com pany by virtu e of the dem
erger;
(ii) all the liabilities relatable to the u ndertaking, being transferred by
the dem erged com pany, im m ediately before the dem erger,
becom e the liabilities of the resu lting com pany by virtu e of the
dem erger;
(iii)
the property and the liabilities of the u ndertaking or u
ndertakings being transferred by the dem erged com pany are
transferred at valu es appearing in its books of accou nt im m
ediately before the dem erger;
(iv) ) the resu lting com pany issu es, in consideration of the dem
erger, its shares to the shareholders of the dem erged com
pany on a proportionate basis;
(v) ) the shareholders holding not less than three-fou r ths in valu e
of the shares in the dem erged com pany (other than shares
already held therein im m ediately before the dem erger, or by a
nom inee for, the resu lting com pany or, its su bsidiary)
becom e shareholders of the resu lting com pany or com panies
by virtu e of the dem erger,
otherwise than as a resu lt of the acqu isition of the property or
assets of the dem erged com pany or any u ndertaking thereof by
the resu lting com pany;
(vi) the transfer of the u ndertaking is on a going concern basis;
(vii)
the dem erger is in accordance with the conditions, if any,
notified u nder su b-section (5) of section 72A by the Central
Governm ent in this behalf.
Explan ation 1.For the pu rposes of this clau se, u ndertaking shall
inclu de any part of an u ndertaking, or a u nit or division of an
u ndertaking or a bu siness activity taken as a whole, bu t does not
inclu de individu al assets or liabilities or any com bination thereof not
constitu ting a bu siness activity.
75. Words or an Additional Com m issioner of Incom e-tax om itted by the Finance (No. 2)
Act, 1998, w.e.f. 1-10-1998. Earlier the qu oted words were inserted by the Finance Act,
1994, w.e.f. 1-6-1994.
76. Clau ses (19AA) and (19AAA) inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
77. For text of sections 391 to 394 of the Com panies Act, 1956, see Appendix.
S. 2(20)
I.T. ACT, 1961
1 .12
Explan ation 2.For the pu rposes of this clau se, the liabilities referred
to in su b-clau se (ii), shall inclu de
(a) the liabilities which arise ou t of the activities or operations of the
u nd ertaking;
(b) the specific loans or borrowings (inclu ding debentu res) raised,
incu r red and u tilised solely for the activities or operations of the
u ndertaking; and
(c) in cases, other than those referred to in clau se (a) or clau se (b),
so m u ch of the am ou nts of general or m u ltipu rpose

borrowings, if any, of the dem erged com pany as stand in the
sam e proportion which the valu e of the assets transferred in a
dem erger bears to the total valu e of the assets of su ch dem
erged com pany im m ediately before the dem erger.
Explan ation 3.For determ ining the valu e of the property referred to
in su b-clau se (iii), any change in the valu e of assets consequ ent
to their revalu ation shall be ignored.
Explan ation 4.For the pu rposes of this clau se, the splitting u p or the
reconstru ction of any au thority or a body constitu ted or established
u nder a Central, State or Provincial Act, or a local au thority or a pu
blic sector com pany, into separate au thorities or bodies or local au
thorities or com panies, as the case m ay be, shall be deem ed to
be a dem erger if su ch split u p or reconstru ction fu lfils 78[su ch
conditions as m ay be notified in the Official Gazette 79 ,by the Central
Governm ent];
(19AAA) dem erged com pany m eans the com pany whose u ndertaking is
transferred, pu rsu ant to a dem erger, to a resu lting com pany;]
(19B) Depu ty Com m issioner (Appeals) m eans a person appointed to be a
Depu ty Com m issioner of Incom e-tax (Appeals) 80[or an Additional
Com m issioner of Incom e-tax (Appeals)] u nder su b-section (1) of
section 117 ;]
81
[(19C) Depu ty Director m eans a person appointed to be a Depu ty

Director of Incom e-tax 82[* * *] u nder su b-section (1) of section
117 ;]
(20)
d irector, m anager and m anaging a gen t, in relation to a com

pany, have the m eanings respectively assigned to them in the
Com panies Act, 1956 (1 of 1956) ;
83
78. Su bstitu ted for the conditions specified in su b-clau ses (i) to (vii) of this clau se, to
the extent applicable by the Finance Act, 2000, w.e.f. 1-4-2000.
79. For notified conditions, see Taxm a nn s Master Gu ide to Incom e-tax Act.
81. In ser ted , ibid.
82. Words or an Additional Director of Incom e-tax om itted by the Finance (No. 2) Act, 1998,
w.e.f. 1-10-1998.
83. Clau ses (13), (24) and (25) of section 2 of the Com panies Act, 1956, define expressions
director, m anager and m anaging a gen t, respectively. For text of provisions, see
Appendix.
1 .13
84
CH. I - PRELIMINARY
S. 2(22)
[(21) Director General or Director m eans a person appointed to be a

Director General of Incom e-tax or, as the case m ay be, a Director of
Incom e-tax, u nder su b-section (1) of section 117, and inclu des a
person appointed u nder that su b-section to be 85 [an Additional
Director of Incom e-tax or] a 86 [Joint] Director of Incom e-tax or an
Assistant Director 87[or Depu ty Director] of Incom e-tax ;]
(22)
88
d ividend 89 inclu des
(a) any distribu tion 89 by a com pany of accu m u lated

profits 89 ,whether capitalised or not, if su ch distribu tion entails
the release by the com pany to its shareholders of all or any part
of the assets of the com pany ;
(b) any distribu tion 89 to its shareholders by a com pany of debentu
res, debentu re-stock, or deposit certificates in any form ,
whether with or withou t interest, and any distribu tion to its
preference shareholders of shares by way of bonu s, to the extent
to which the com pany possesses accu m u la ted profits 89 , whether
capitalised or not ;
(c) any distribu tion 89 m ade to the shareholders of a com pany on its
liqu idation, to the extent to which the distribu tion is attribu table
to the accu m u la ted profits of the com pany im m ediately before
its liqu idation, whether capitalised or not ;
(d) any distribu tion 89 to its shareholders by a com pany on the redu
c- tion of its capital, to the extent to which the com pany
possesses accu m u la ted profits 89 which arose after the end of
the previou s year ending next before the 1st day of April, 1933,
whether su ch accu m u la ted profits have been capitalised or
not ;
(e) any paym ent by a com pany, not being a com pany in which the
pu blic are su bstantially interested, of any su m (whether as
representing a part of the assets of the com pany or
otherwise) 90[m ade after the 31st day of May, 1987, by way of
advance or loan to a shareholder 91, being a person who is the
beneficial owner of shares (not being shares entitled to a fixed
rate of dividend whether with or withou t a r ight to participate
in profits) holding not less than ten per cent of the voting power,
or to any concern
84. Su bstitu ted by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1988.
86. Su bstitu ted for Depu ty by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998.
89. For the m eaning of the term s dividend, distribu tion and profits, see Taxm ann s
90. Su bstitu ted for by way of advance or loan to a shareholder, being a person who has a
su bstantial interest in the com pany, by the Finance Act, 1987, w.e.f. 1-4-1988.
91. For the m eaning of the term sha r eh old er , see Taxm ann s Direct Taxes Manu al, Vol. 3.
S. 2(22)
I.T. ACT, 1961
1 .14
in which su ch shareholder is a m em ber or a partner and in which

he has a su bstantial interest (hereafter in this clau se referred to
as the said concern)] or any paym ent by any su ch com pany on
behalf, or for the individu al benefit, of any su ch shareholder, to
the extent to which the com pany in either case possesses accu m u
- la ted profits 92 ;
bu t d ivid end does not inclu de
(i) a distribu tion m ade in accordance with su b-clau se (c) or su bclau se (d) in respect of any share issu ed for fu ll cash consideration, where the holder of the share is not entitled in the event of
liqu idation to participate in the su rplu s assets ;
93
[(ia) a distribu tion m ade in accordance with su b-clau se (c) or su bclau se (d) in so far as su ch distribu tion is attribu table to the
capitalised profits of the com pany representing bonu s shares
allotted to its equ ity shareholders after the 31st day of March,
1964, 94 [and before the 1st day of April, 1965] ;]
(ii) any advance or loan m ade to a shareholder 95[or the said concern]
by a com pany in the ordinary cou rse of its bu siness, where the
lending of m oney is a su bstantial part of the bu siness of the
com pany ;
(iii)
any dividend paid by a com pany which is set off by the
com pany against the whole or any part of any su m previou sly
paid by it and treated as a dividend within the m eaning of su bclau se (e), to the extent to which it is so set off;
96
[(iv ) any paym ent m ade by a com pany on pu rchase of its own shares
from a shareholder in accordance with the provisions of section
77A 97 of the Com panies Act, 1956 (1 of 1956);
(v ) any distribu tion of shares pu rsu ant to a dem erger by the resu
lting com pany to the shareholders of the dem erged com pany
(whether or not there is a redu ction of capital in the dem erged
com pany).]
Explan ation 1.The expression accu m u la ted profits, wherever
it
occu rs in this clau se, shall not inclu de capital gains arising
before the 1st day of April, 1946, or after the 31st day of March, 1948,
and before the 1st day of April, 1956.
Explan ation 2.The expression a ccu m u la ted profitsin su b-clau
ses (a), (b), (d) and (e), shall inclu de all profits of the com pany u p to
the date of distribu tion or paym ent referred to in those su b-clau
ses, and in su b-clau se (c) shall inclu de all profits of the com pany u
p to the date
92. For the m eaning of the term s profits and distribu tion, see Taxm ann s Direct Taxes
Manu al, Vol. 3.
94. Inserted by the Finance Act, 1966, w.e.f. 1-41966. 95. Inserted by the Finance Act, 1987, w.e.f.
1-4-1988. 96. Inserted by the Finance Act, 1999,
w.e.f. 1-4-2000.
97. For text of section 77A of the Com panies Act, 1956, see Appendix.
1.15
CH . I -
PRELIMINARY
S. 2(23)
of liqu idation, 98 [bu t shall not, where the liqu idation is consequ ent
on the com pu lsory acqu isition of its u ndertaking by the Governm
ent or a corporation owned or controlled by the Governm ent u nder
any law for the tim e being in force, inclu de any profits of the com
pany prior to three su ccessive previou s years im m ediately
preceding the previou s year in which su ch acqu isition took
place].
99
[Explan ation 3.For the pu rposes of this clau se,
(a) con cern m eans a Hindu u ndivided fam ily, or a firm or an

association of persons or a body of individu als or a com pany ;
(b) a person shall be deem ed to have a su bstantial interest in a
concern, other than a com pany, if he is, at any tim e du r ing
the previou s year, beneficially entitled to not less than twenty
per cent of the incom e of su ch concern ;]
1
[(22A ) d om estic com pany m eans an Indian com pany, or any other com
- pany which, in respect of its incom e liable to tax u nder this Act,
has m ade the prescribed arrangem ents for the declaration and paym
ent, within India, of the dividends (inclu ding dividends on
preference shares) payable ou t of su ch incom e ;]
[(22AA ) docu m ent inclu des an electronic record as defined in clau se (t)3
of su b-section (1) of section 2 of the Inform ation Technology Act,
2000 (21 of 2000);]
[ [(22B)] fair m arket valu e, in relation to a capital asset, m eans
4 5
(i) the price that the capital asset wou ld ordinarily fetch on sale in the
open m arket on the relevant date ; and
(ii) where the price referred to in su b-clau se (i) is not ascertainable,
su ch price as m ay be determ ined in accordance with the ru
les m ade u nder this Act ;]
(23)
98.
99.
1.
2.
3.
firm , par tner and par tnership have the m eanings

respectively
assigned to them in the Indian Partnership Act,
1932 (9 of 1932) ; bu t the expression pa rtn er shall also inclu de
any person who, being a
m inor, has been adm itted to the
benefits of partnership ;
6
Inserted by the Direct Taxes (Am endm ent) Act, 1964, w.r.e.f. 1-4-1962.
Inserted by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1989.
For definition of docu m ent u nder section 2(1)(t) of the Inform ation Technology
Act, 2000, see Appendix.
5. Renu m bered as clau se (22B) by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f.
1-4-1989.
6. Section 4 of the Indian Partnership Act, 1932, defines expressions firm , pa r tn er and
pa r tn er sh ip as follows :
Pa r tner ship is the relation between persons who have agreed to share the profits of a
bu siness carried on by all or any of them acting for all.
Persons who have entered into partnership with one another are called individu ally
par tn er s and collectively a firm , and the nam e u nder which their bu siness is carried
on
is called the firm nam e.
S. 2(24)
7
I.T. ACT, 1961
1 .16
[(23A ) foreign com pany m eans a com pany which is not a dom
estic com pany ;]
[(23B) fr inge benefits m eans any fr inge benefits referred to in

section 115WB;]
9
(24) incom e10 inclu des 10

(i) profits and gains 10 ;
(ii) dividend ;
[(iia) volu ntary contribu tions received by a tru st created wholly or
partly for charitable or religiou s pu rposes or by an institu tion
established wholly or partly for su ch pu rposes 12[or by an association or institu tion referred to in clau se (21) or clau se (23), or by a
fu nd or tru st or institu tion referred to in su b-clau se (iv ) or su
b- clau se (v ) 13[or by any u niversity or other edu cational institu
tion referred to in su b-clau se (iiiad) or su b-clau se (vi) or by any
hospital or other institu tion referred to in su b-clau se (iiiae) or su
b- clau se (via)] of clau se (23C) of section 10].
11
Explan ation .For th e pu r poses of th is su b -cla u se, tr u

st inclu des any other legal obligation ;]
(iii)
the valu e of any perqu isite or profit in lieu of salary
taxable u nder clau ses (2) and (3) of section 17 ;
14
[(iiia) any special allowance or benefit, other than perqu isite inclu ded
u nder su b-clau se (iii), specifically granted to the assessee to m eet
expenses wholly, necessarily and exclu sively for the perform ance of the du ties of an office or em ploym ent of profit ;
(iiib) any allowance granted to the assessee either to m eet his personal
expenses at the place where the du ties of his office or em ploym ent of profit are ordinarily perform ed by him or at a place
where he ordinarily resides or to com pensate him for the increased cost of living ;]
10. For the m eaning of the term s/ expression incom e, inclu des and profits and gains, see
Taxm a nn s Direct Taxes Manu al, Vol. 3.
12. Su bstitu ted for or by a tru st or institu tion of national im portance referred to in clau
se (d) of su b-section (1) of section 80F by the Direct Tax Laws (Am endm ent) Act, 1989,
w.e.f. 1-4-1989. Earlier, the said expression was su bstitu ted for , not being contribu tions
m ade with a specific direction that they shall form part of the corpu s of the tru st or
institu tion by the Direct Tax Laws (Am endm ent) Act, 1987, with effect from the sam e
date.
13. Su bstitu ted for or by any u niversity or other edu cational institu tion referred to in su
b- clau se (v i) or by any hospital or other institu tion referred to in su b-clau se (v ia)
by the Finance Act, 2006, w.e.f. 1-4-2007. Earlier the qu oted words were inserted by the
Finance Act, 2006, w.r.e.f. 1-4-1999.
14. Inserted by the Direct Tax Laws (Am endm ent) Act, 1989, w.r.e.f. 1-4-1962.
1 .17
CH. I - PRELIMINARY
S. 2(24)
(iv) ) the valu e of any benefit or perqu isite 15, whether convertible
into m oney or not, obtained from a com pany either by a director
or by a person who has a su bstantial interest in the com pany,
or by a relative of the director or su ch person, and any su m
paid by any su ch com pany in respect of any obligation which,
bu t for su ch paym ent, wou ld have been payable by the
director or other person aforesaid ;
16
[(iva) the valu e of any benefit or perqu isite15, whether convertible into
m oney or not, obtained by any representative assessee m entioned in clau se (iii) or clau se (iv ) of su b-section (1) of section
160 or by any person on whose behalf or for whose benefit any
incom e is receivable by the representative assessee (su ch person
being hereafter in this su b-clau se referred to as the
beneficiar y)
and any su m paid by the representative
assessee in respect of any obligation which, bu t for su ch paym
ent, wou ld have been payable by the beneficiary ;]
(v) ) any su m chargeable to incom e-tax u nder clau ses (ii) and (iii)
of section 28 or section 41 or section 59 ;
17
18
[(va) any su m chargeable to incom e-tax u nder clau se (iiia) of section

28 ;]
[(vb) any su m chargeable to incom e-tax u nder clau se (iiib) of section

28 ;]
19
20
[(vc) any su m chargeable to incom e-tax u nder clau se (iiic) of section

28 ;]
[(vd )] the valu e of any benefit or perqu isite taxable u nder clau se (iv )
of section 28 ;
21
[(ve) any su m chargeable to incom e-tax u nder clau se (v ) of section

28 ;]
(vi) any capital gains chargeable u nder section 45 ;
(vii) the profits and gains of any bu siness of insu rance carried on by
a m u tu al insu rance com pany or by a co-operative society, com
- pu ted in accordance with section 44 or any su rplu s taken to
be su ch profits and gains by virtu e of provisions contained in
the First Schedu le ;
16.
17.
18.
19.
21.
15. For the m eaning of the expression benefit or perqu isite, see Taxm ann s Direct Taxes
Manu al, Vol. 3.
Inserted, ibid., w.r.e.f. 1-4-1967.
20. Relettered by the Finance Act, 1990, w.r.e.f. 1-4-1962. Earlier the original su b-clau se (va)
was inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
S. 2(25)
I.T. ACT, 1961
22
1 .18
[(viia) the profits and gains of any bu siness of banking (inclu ding
providing credit facilities) carried on by a co-operative society
with its m em bers;]
(viii) [Om itted by th e Fin an ce Act, 1988, w .e.f. 1-4-1988. Origin al
sub- clause (viii) w as in serted by th e Fin an ce Act, 1964, w .e.f. 14-1964;]
23
[(ix) any winnings from lotteries 24 , crossword pu zzles, races inclu ding
horse races, card gam es and other gam es of any sort or from
gam bling or betting of any form or natu re whatsoever.]
25
[Explan ation .For the pu rposes of this su b-clau se,
(i) lottery inclu des winnings from prizes awarded to any person by draw of lots or by chance or in any other m anner
whatsoever, u nder any schem e or arrangem ent by whatever
nam e called ;
(ii) ca rd gam e and other gam e of any sort inclu des any gam
e show, an entertainm ent program m e on television or
electronic m ode, in which people com pete to win prizes or
any other sim ila r gam e ;]
26
27
[(x) any su m received by the assessee from his em ployees as

contribu tions to any provident fu nd or su perannu ation fu nd
or any fu nd set u p u nder the provisions of the Em ployees
State Insu rance Act, 1948 (34 of 1948), or any other fu nd for the
welfare of su ch em ployees ;]
[(xi) any su m received u nder a Keym an insu rance policy inclu ding the
su m allocated by way of bonu s on su ch policy.
Explan ation .For the pu rposes of this clau se*, the expression
Keym an insu rance policy shall have the m eaning assigned to
it in the Explan ation to clau se (10D) of section 10 ;]
28
30
29
[clau se (va)] of section 28;]
[(xiii) any su m referred to in clau se (v ) of su b-section (2) of section 56;]
31
[(xiv ) any su m referred to in clau se (vi) of su b-section (2) of section 56;]
(25)
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
[(xii) any su m referred to in
In com e-tax Officer m eans a person appointed to be an Incom etax Officer u nder 32[* * *] section 117 ;

For the m eaning of the term lotteries, see Taxm ann s Direct Taxes Manu al, Vol. 3.
Su bstitu ted for clau se (v ii) by the Finance Act, 2003, w.e.f. 1-4-2003.
32. Words su b-section (1) of om itted by the Direct Tax Laws (Am endm ent) Act, 1989,
w.r.e.f. 1-4-1988. Earlier, that expression was inserted by the Direct Tax Laws (Am endm
ent) Act, 1987, with effect from the sam e date.
*Shou ld be read as su b-clau se.
1 .19
CH. I - PRELIMINARY
S. 2(26A)
[(25A ) Ind ia m eans the territory of India as referred to in article 1 of the

Constitu tion, its territorial waters, seabed and su bsoil u nderlying
su ch waters, continental shelf, exclu sive econom ic zone or any other
m aritim e zone as referred to in the Territorial Waters, Continental
Shelf, Exclu sive Econom ic Zone and other Maritim e Zones Act, 1976
(80 of 1976), and the air space above its territory and territorial
waters;]
(26) Ind ian com pany m eans a com pany form ed and registered u
nder the Com panies Act, 1956 (1 of 1956), and inclu des
(i) a com pany form ed and registered u nder any law relating to
com panies form erly in force in any part of India (other than the
State of Jam m u and Kashm ir 34 [and the Union territories
specified in su b-clau se (iii) of this clau se]) ;
35
[(ia) a corporation established by or u nder a Central, State or
Provincial Act ;
(ib) any institu tion, association or body which is declared by the
Board to be a com pany u nder clau se (17) ;]
(ii) in the case of the State of Jam m u and Kashm ir , a com pany
form ed and registered u nder any law for the tim e being in force
in that State ;
36
[(iii) in the case of any of the Union territories of Dadra and Nagar
Haveli, Goa, Dam an and Diu , and Pondicherry, a com pany
form ed and registered u nder any law for the tim e being in force
in that Union territory :]
Provided that the 37 [registered or, as the case m ay be, principal office
of the com pany, corporation, institu tion, association or body] in all
cases is in India ;
38
[(26A ) infra stru ctu re capital com panym eans su ch com pany which m
akes
investm ents by way of acqu ir ing shares or providing longterm finance to any enterprise or u ndertaking wholly engaged
in the
33
34.
35.
36.
37.
38.
33. Su bstitu ted by the Finance Act, 2007, w.r.e.f. 25-8-1976. Prior to its su bstitu tion, clau se
(25A), as inserted by the Taxation Laws (Extension to Union Territories) Regu la tion, 1963,
w.e.f. 1-4-1963, read as u nder :
(25A ) India shall be deem ed to inclu de the Union territories of Dadra and Nagar
Haveli, Goa, Dam an and Diu , and Pondicherry,
(a) as respects any period, for the pu rposes of section 6 ; and
(b) ) as respects any period inclu ded in the previou s year, for the pu rposes
of m aking any assessm ent for the assessm ent year com m encing on the 1st
day of April, 1963, or for any su bsequ ent year ;
Inserted by the Taxation Laws (Extension to Union Territories) Regu la tion, 1963, w.e.f.
1-4-1963.
Inserted by the Taxation Laws (Extension to Union Territories) Regu la tion, 1963, w.e.f.
1-4-1963.
Su bstitu ted for r egister ed office of the com pany by the Finance (No. 2) Act, 1971, w.e.f.
1-4-1971.
Clau ses (26A) and (26B) inserted by the Finance Act, 2006, w.e.f. 1-4-2006.
Now State of Goa.
S. 2(28C)
I.T. ACT, 1961
1 .20
bu siness referred to in su b-section (4) of section 80-IA or su b-section

(1) of section 80-IAB or an u ndertaking developing and bu ild ing a hou
sing project referred to in su b-section (10) of section 80-IB or a
project for constru cting a hotel of not less than three-star category as
classified by the Central Governm ent or a project for constru cting a
hospital with at least one hu ndred beds for patients;
(26B) infrastru ctu re capital fu ndm eans su ch fu nd operating u nder a tru
st
deed registered u nder the provisions of the Registration Act,
1908 (16 of 1908) established to raise m onies by the tru stees for
investm ent by way of acqu ir ing shares or providing long-term
finance to any enterprise or u ndertaking wholly engaged in the bu
siness referred to in su b-section (4) of section 80-IA or su b-section
(1) of section 80-IAB or an u ndertaking developing and bu ild ing a
hou sing project referred to in su b-section (10) of section 80-IB or a
project for constru cting a hotel of not less than three-star category
as classified by the Central Governm ent or a project for constru
cting a hospital with at least one hu ndred beds for patients;]
(27) 39[* * *]
(28) Inspector of Incom e-tax m eans a person appointed to be
an
Inspector of Incom e-tax u nder su b-section 40[(1)] of section
117 ;
41 42
[ (28A) interest m eans interest payable in any m anner in respect of any
m oneys borrowed or debt incu r red (inclu ding a deposit, claim or
other sim ila r r ight or obligation) and inclu des any service fee or
other charge in respect of the m oneys borrowed or debt incu r red
or in respect of any credit facility which has not been u tilised ;]
43
[(28B) interest on secu r ities m eans,
(i) interest on any secu r ity of the Central Governm ent or a State
Governm ent ;
(ii) interest on debentu res or other secu r ities for m oney issu ed by
or on behalf of a local au thority or a com pany or a corporation
established by a Central, State or Provincial Act ;]
44
[(28BB) insu rer m eans an insu rer, being an Indian insu rance com pany, as
defined u nder clau se (7A) of section 2 45 of the Insu rance Act, 1938 (4
of 1938), which has been granted a certificate of registration u nder
section 3 of that Act;]
46
[(28C) Joint Com m issioner m eans a person appointed to be a Joint Com m issioner of Incom e-tax or an Additional Com m issioner of Incom etax u nder su b-section (1) of section 117;
39. Om itted by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1988.
40. Su bstitu ted for (2), ibid.
42. See also Letter F. No. 164/ 18/ 77-IT(A-I), dated 13-7-1978. For details, see Taxm ann s
Master Gu ide to Incom e-tax Act.
45. For text of section 2(7A) of the Insu rance Act, see Appendix.
1 .21
CH. I - PRELIMINARY
S. 2(31)
(28D) Join t Director m eans a person appointed to be a Joint Director of

Incom e-tax or an Additional Director of Incom e-tax u nder su bsection (1) of section 117;]
(29) legal representative has the m eaning assigned to it in clau se (11)
of section 2 of the Code of Civil Procedu re, 1908 (5 of 1908) 47 ;
48
[(29A ) long-term capital asset m eans a capital asset which is not a shortterm capital asset ;
(29B) lon g-term capital gain m eans capital gain arising from the transfer
of a long-term capital asset ;]
49
[(29C) m axim u m m arginal rate m eans the rate of incom e-tax (inclu ding
su rcharge on incom e-tax, if any) applicable in relation to the highest
slab of incom e in the case of an individu al 50[, association of persons
or, as the case m ay be, body of individu als] as specified in the
Finance Act of the relevant year ;]
51
[(29D) National Tax Tribu nalm eans the National Tax Tribu nal established
u nder section 3 of the National Tax Tribu nal Act, 2005;]
(30) non-resid en t m eans a person who is not a resident 52[, and for
the
pu rposes of sections 92, 93 53[* * *] and 168, inclu des a
person who is not ordinarily resident within the m eaning of clau se
(6) of section 6] ;
54
(31) person inclu des
(i) an individu al55,
(ii) a Hindu u ndivided fam ily55,
(iii)a com pany,
(iv ) a firm
56
,
(v) ) an association of persons 5 6 or a body of individu als 56 ,
whether incorporated or not,
(vi) a local au thority, and
(vii)
every artificial ju r idical person, not falling within
any of the preceding su b-clau ses.
48.
49.
50.
51.
53.
54.
55.
47. Clau se (11) of section 2 of the Code of Civil Procedu re defines legal representative as
follows :
(11) legal representative m eans a person who in law represents the estate of a deceased
person, and inclu des any person who interm eddles with the estate of the deceased
and where a party su es or is su ed in a representative character the person on whom
the estate devolves on the death of the party so su ing or su ed ;
Inserted by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1989.
Inserted by the National Tax Tribu nal Act, 2005, with effect from a date yet to be notified.
52. Inserted by the Finance Act, 1999, w.e.f. 1-4-1999. Earlier these words were om itted by the
Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
, 113 om itted by the Finance Act, 1965, w.e.f. 1-4-1965.
For the m eaning of the term / expression individu al and Hindu u ndivided fam ily, see
56. For the m eaning of the term / expressions firm , association of persons and body
of individu als, see Taxm a nn s Direct Taxes Manu al, Vol. 3.
S. 2(37A)
I.T. ACT, 1961
1 .22
(33)
[Explan ation .For the pu rposes of this clau se, an association of

persons or a body of individu als or a local au thority or an artificial
ju r idical person shall be deem ed to be a person, whether or not su
ch person or body or au thority or ju r idical person was form ed or
established or incorporated with the object of deriving incom e,
profits or gain s;]
person who has a su bstantial interest in the com pan y, in relation
to
a com pany, m eans a person who is the beneficial owner of
shares, not being shares entitled to a fixed rate of dividend whether
with or withou t a r ight to participate in profits, carrying not less
than twenty per cent of the voting power ;
prescrib ed m eans prescribed by ru les m ade u nder this Act ;
(34)
previou s year m eans the previou s year as defined in section 3 ;
57
(32)
(35) principa l officer, u sed with reference to a local au thority or a

com pany or any other pu blic body or any association of persons or
any body of individu als, m eans
(a) the secretary, treasu rer, m anager or agent of the au thority,
com pany, association or body, or
(b) any person connected with the m anagem ent or adm inistration of
the local au thority, com pany, association or body u pon whom
the 59[Assessing] Officer has served a notice of his intention of
treat- ing him as the principal officer thereof ;
60
(36) profession inclu des vocation 61 ;
58
[(36A ) pu blic sector com pany m eans any corporation established by or

u nder any Central, State or Provincial Act or a Governm ent com pany 6 3 as defined in section 617 of the Com panies Act, 1956
(1 of 1956) ;]
(37) 64pu blic servant has the sam e m eaning as in section 21 of the Indian
Penal Code (45 of 1860) ;
65
[(37A ) r ate or rates in force or ra tes in force, in relation to an assessm
ent
year or financial year, m eans
62

59. Su bstitu ted for Incom e-tax by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f.
1-4-1988.
61. For the m eaning of the term vocation, see Taxm a nn s Direct Taxes Manu al, Vol. 3.
63. Section 617 of the Com panies Act, 1956, defines Gover n m ent com pany as follows :
617. Defin ition of Gov ern m en t com pan y.For th e pu r poses of th is Act, Gover n m
ent com pany m eans any com pany in which not less than fifty-one per cent of the paid-u p
share capital is held by the Central Governm ent, or by any State Governm ent or
Governm ents, or partly by the Central Governm ent and partly by one or m ore State
Governm ents and inclu des a com pany which is a su bsidiary of a Governm ent com
pany as thu s defined.
64. Section 21 of the Indian Penal Code defines pu blic ser va n t. For text of section 21, see
Appendix.
1.23
CH . I -
PRELIMINARY
S. 2(37A)
(i) for the pu rposes of calcu la ting incom e-tax u nder the first
proviso to su b-section (5) of section 132, or com pu ting the
incom e-tax chargeable u nder su b-section (4) of section 172 or su
b-section (2) of section 174 or section 175 or su b-section (2) of
section 176 or dedu cting incom e-tax u nder section 192 from
incom e chargeable u nder the head Sa la ries 66[* * *] or
67
[com pu tation of the ad van ce tax payable u nder Chapter
XVII-C in a case not falling
u nder 68 [section 115A or section
69
70
115B [or section 115BB [or section 115BBB] or section 115E]
or] section 164 69[or section 164A 71[* * *]] 72[or section 167B], the
rate or rates of incom e-tax specified in this behalf in the Finance
Act of the relevant year, and for the pu rposes of com pu tation
of the ad van ce tax payable
u nder Chapter XVII-C 73[in a
case falling u nder section 115A or section 115B 74[or section
115BB 75[or section 115BBB] or section 115E] or section 164 74[or
section 164A 76 [***]] 77[or section 167B],
the rate or rates
specified in section 115A or 78 [section 115B or section 115BB
79
[or section 115BBB] or section 115E or section 164 or section
164A 76 [***] 77[or section 167B], as the case m ay be,] or the rate
or rates of incom e-tax specified in this behalf in the Finance
Act of the relevant year, whichever is applicable ;]
(ii) for the pu rposes of dedu ction of tax u nder sections 193, 194,
194A 80[, 194B] 81[, 194BB] 82 [and 194D], the rate or rates of
incom e-tax specified in this behalf in the Finance Act of the
relevant year ;]
68. Inserted by
69. Inserted by
70. Inserted by
72. Inserted by
74. Inserted by
75. Inserted by
77. Inserted by
66. or su b-section (9) of section 80E from any paym ent referred to therein om itted by the
Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1989. Originally, the said expression
was inserted by the Finance Act, 1968, w.e.f. 1-4-1968.
67. Su bstitu ted for com pu tation of the a d va n ce tax payable u nder Chapter XVII-C, the
rate
or rates of incom e-tax specified in this behalf in the Finance Act of the relevant
year by the Finance Act, 1970, w.e.f. 1-4-1971.
the Finance Act, 1976, w.e.f. 1-6-1976.
the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1988.
71. or section 167A om itted by the Direct Tax Laws (Am endm ent) Act, 1989, w.e.f. 1-4-1989.
Earlier this expression was inserted by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f.
1-4-1988.
73. Su bstitu ted for in a case falling u nder section 164, the rate specified in that section by
76. or section 167A om itted by the Direct Tax Laws (Am endm ent) Act, 1989, w.e.f. 1-4-1989.
Earlier this expression was inserted by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f.
1-4-1988.
78. Su bstitu ted for section 115B or, as the case m ay be, section 164 by the Direct Tax Laws
(Am endm ent) Act, 1987, w.e.f. 1-4-1988.
80. Inserted by the Finance Act, 1972, w.e.f. 1-41972. 81. Inserted by the Finance Act, 1978,
w.e.f. 1-4-1978.
82. Su bstitu ted for , 194D and 195 by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
S. 2(42)
I.T. ACT, 1961
1 .24
[(iii) for the pu rposes of dedu ction of tax u nder section 195, the rate
or rates of incom e-tax specified in this behalf in the Finance Act
of the relevant year or the rate or rates of incom e-tax specified in
84
[an agreem ent entered into by the Central Governm ent u nder
section 90, or an agreem ent notified by the Central Governm ent
u nder section 90A, whichever is applicable by virtu e of the
provisions of section 90, or section 90A, as the case m ay be];
85
(38) recognised provident fu nd m eans a provident fu nd which has been
and continu es to be recognised by the 86[Chief Com m issioner or
Com m issioner] in accordance with the ru les contained in Part Aof the
Fou r th Schedu le, and inclu des a provident fu nd established u nder
a schem e fram ed u nder the Em ployeesProvident Fu nds Act, 1952
(19 of 1952) ;
(39) 87[Om itted by th e Fin an ce Act, 1992, w .e.f. 1-4-1993;]
(40) regu lar assessm ent m eans the assessm ent m ade u nder 88[su bsection (3) of] section 143 or section 144 ;
(41) relative, in relation to an individu al, m eans the hu sband, wife,
brother or sister or any lineal ascendant or descendant of that
individu al ;
89
[(41A ) resu lting com pany m eans one or m ore com panies (inclu ding a
wholly owned su bsidiary thereof) to which the u ndertaking of the
dem erged com pany is transferred in a dem erger and, the resu lting
com pany in consideration of su ch transfer of u ndertaking, issu es
shares to the shareholders of the dem erged com pany and inclu des
any au thority or body or local au thority or pu blic sector com pany or
a com pany established, constitu ted or form ed as a resu lt of dem
erger;]
(42) resid entm eans a person who is resident in India within the m eaning
of section 6 ;
83
83. Su bstitu ted by the Finance Act, 1992, w.e.f. 1-6-1992. Prior to its su bstitu tion, su b-clau se
(iii) was inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
84. Su bstitu ted for an agreem ent entered into by the Central Governm ent u nder section
90, whichever is applicable by virtu e of the provisions of section 90 by the Finance Act,
2006, w.e.f. 1-6-2006.
Incom e-tax Act.
86. Su bstitu ted for Com m issioner by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f.
1-4-1988.
87. Prior to om ission, clau se (39) was su bstitu ted by the Direct Tax Laws (Second Am
end- m ent) Act, 1989, w.e.f. 1-4-1989. Earlier clau se (39) was om itted by the Direct Tax
Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1989 and was la ter reintrodu ced by the Direct
Tax Laws (Am endm ent) Act, 1989, w.e.f. 1-4-1989.
1.25
[ (42A)
CH .
PRELIMINARY
S. 2(42A)
[sh ort-term capital asset m eans a capital asset held by an assessee

for not m ore than 93 [thirty-six] m onths im m ediately preceding the
date of its transfer :]
94
[Provided that in the case of a share held in a com pany 95[or any
other secu r ity listed in a recognised stock exchange in India or a u nit
of the Unit Tru st of India established u nder the Unit Tru st of India Act,
1963 (52 of 1963) or a u nit of a Mu tu al Fu nd specified u nder clau
se (23D) of section 10] 96[or a zero cou pon bond], the provisions of
this clau se shall have effect as if for the words thirty-six m
on th s, the
words twelve m onths had been su bstitu ted.]
97
[Explan ation 1].(i) In determ ining the period for which any capital
asset is held by the assessee
(a) in the case of a share held in a com pany in liqu idation, there shall
be exclu ded the period su bsequ ent to the date on which the
com pany goes into liqu idation ;
(b) in the case of a capital asset which becom es the property of the
assessee in the circu m stances m entioned in 98[su b-section (1)]
of section 49, there shall be inclu ded the period for which the
asset was held by the previou s owner referred to in the said
section ;
90 91
92
[(c) in the case of a capital asset being a share or shares in an Indian

com pany, which becom es the property of the assessee in
consideration of a transfer referred to in clau se (vii) of section 47,
there shall be inclu ded the period for which the share or shares
in the am algam ating com pany were held by the assessee ;]
1
[(d) in the case of a capital asset, being a share or any other secu r ity
(hereafter in this clau se referred to as the financial asset) su bscribed to by the assessee on the basis of his r ight to su bscribe to
su ch financial asset or su bscribed to by the person in whose
favou r the assessee has renou nced his r ight to su bscribe to su
ch financial asset, the period shall be reckoned from the date of
allotm ent of su ch financial asset ;
(e) in the case of a capital asset, being the r ight to su bscribe to any
financial asset, which is renou nced in favou r of any other
person, the period shall be reckoned from the date of the offer
of su ch
99
1.

91. See also Circu lar No. 415, dated 14-3-1985 and Circu lar No. 704, dated 28-4-1995. For
details and relevant case laws, see Taxm a nn s Master Gu ide to Incom e-tax Act.
92. Su bstitu ted for the portion beginning with sh or t-ter m capital asset and ending with
preceding the date of its transfer ; by the Finance Act, 1973, w.e.f. 1-4-1974. Earlier clau
se
(42A) was first am ended by the Finance Act, 1966, w.e.f. 1-4-1966 and la ter by the
Finance Act, 1968, w.e.f. 1-4-1969.
93. Su bstitu ted for sixty by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
w.e.f. 1-4-2006.
97. Existing Explan ation renu m bered as Explan ation 1 by the Finance Act, 1994, w.e.f.
1-4-1995.
98. Su bstitu ted for clau ses (i) to (iii) by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
S. 2(42A)
I.T. ACT, 1961
1 .26
r ight by the com pany or institu tion, as the case m ay be, m

aking su ch offer ;]
2
[(f) in the case of a capital asset, being a financial asset, allotted
withou t any paym ent and on the basis of holding of any other
financial asset, the period shall be reckoned from the date of the
allotm ent of su ch financial asset ;]
[(g) in the case of a capital asset, being a share or shares in an Indian
com pany, which becom es the property of the assessee in consideration of a dem erger, there shall be inclu ded the period for
which the share or shares held in the dem erged com pany were
held by the assessee ;]
4
[(h ) in the case of a capital asset, being trading or clearing r ights of a
recognised stock exchange in India acqu ired by a person pu rsu
- ant to dem u tu alisation or corporatisation of the recognised
stock exchange in India as referred to in clau se (xiii) of section
47, there shall be inclu ded the period for which the person was a
m em ber of the recognised stock exchange in India im m
ediately prior to su ch dem u tu alisation or corporatisation;
(h a) in the case of a capital asset, being equ ity share or shares in a
com pany allotted pu rsu ant to dem u tu alisation or
corporatisation of a recognised stock exchange in India as
referred to in clau se (xiii) of section 47, there shall be inclu ded
the period for which the person was a m em ber of the recognised
stock exchange in India im m ediately prior to su ch dem u tu
alisation or corpor atisa tion;]
5
[(hb ) in th e case of a capital asset, bein g an y specified security or sw
eat equity sh ares allotted or tran sferred, directly or in directly, by
th e em ployer free of cost or at con cession al rate to h is em
ployees (in cludin g form er em ployee or em ployees), th e period
sh all be reckon ed from th e date of allotm en t or tran sfer of such
specified security or sw eat equity sh ares;]
(ii) In respect of capital assets other than those m entioned in
clau se (i), the period for which any capital asset is held by the assessee
shall be determ ined su bject to any ru les which the Board m ay m
ake in this behalf.]
6
[Explan ation 2.For the pu rposes of this clau se, the expression
secu r ity7 shall have the m eaning assigned to it in clau se (h ) of
section 2 of the Secu r ities Contracts (Regu la tion) Act, 1956 (42 of
1956).]
3
2. Inserted by the Finance Act, 1995, w.e.f. 1-4-1996. 3.

Inserted by the Finance Act, 1999, w.e.f. 1-4-2000. 4.
7. Clau se (h ) of section 2 of the Secu r it ies Contracts (Regu la t ion) Act, 1956,
defines secu r ities as follows :
(h ) secu r ities inclu de
(i) shares, scrips, stocks, bonds, debentu res, debentu re stock or other m arketable secu r ities of a like natu re in or of any incorporated com pany or
other b od y corpor ate;
(Con td. on p. 1.27)
1 .27
CH. I - PRELIMINARY
S. 2(43A)
[Explanation 3.For th e purposes of th is clause, th e expression s

specified securityan d sw eat equity sh aressh all h ave th e m ean in
gs respectively assign ed to th em in th e Explanation to clause (d ) of
sub- section (1) of section 115W B;]
9
[(42B) short-term capital gain m eans capital gain arising from the transfer
of a short-term capital asset ;]
10
[(42C) slu m p sale m eans the transfer of one or m ore u ndertakings as a
resu lt of the sale for a lu m p su m consideration withou t valu es
being assigned to the individu al assets and liabilities in su ch sales.
Explan ation 1.For the pu rposes of this clau se, u ndertaking shall
have the m eaning assigned to it in Explan ation 1 to clau se (19AA).
Explan ation 2.For the rem oval of dou bts, it is hereby declared
that the determ ination of the valu e of an asset or liability for the
sole pu rpose of paym ent of stam p du ty, registration fees or other
sim ila r taxes or fees shall not be regarded as assignm ent of valu es
to individu al assets or liabilities ; ]
11
[(43) tax in relation to the assessm ent year com m encing on the 1st day of
April, 1965, and any su bsequ ent assessm ent year m eans incom etax chargeable u nder the provisions of this Act, and in relation to
any other assessm ent year incom e-tax and su per-tax chargeable u
nder the provisions of this Act prior to the aforesaid date 12 [and in
relation to the assessm ent year com m encing on the 1st day of April,
2006, and any su bsequ ent assessm ent year inclu des the fr inge
benefit tax payable u nder section 115WA] ;]
13
[(43A ) ta x credit certificate m eans a tax credit certificate granted to any
person in accordance with the provisions of Chapter XXII-B14 and any
schem e m ade thereu nder ;]
8
(Con td. from p. 1.26)
(ia) derivative;
(ib ) u nits or any other instru m ent issu ed by any collective investm ent schem e
to the investors in su ch schem es;
(ic) secu r ity receipt as defined in clau se (zg) of section 2 of the Secu r itisa tion and
Reconstru ction of Financial Assets and Enforcem ent of Secu r ity Interest
Act, 2002;
(id ) u nits or any other su ch instru m ent issu ed to the investors u nder any m u tu
al fu nd schem e;
(ii) Governm ent secu r ities;
(iia) su ch other instru m ents as m ay be declared by the Central Governm ent to
be secu r ities; and
(iii) r ights or interest in secu r ities;
10. Inserted by the Finance Act, 1999, w.e.f. 1-4-2000. Earlier clau se (42C) was inserted by the
Direct Tax Laws (Second Am endm ent) Act, 1989, w.e.f. 1-4-1990 and la ter on om itted by
14. Chapter XXII-B was om itted by the Finance Act, 1990, w.e.f. 1-4-1990.
S. 2(47)
1 .28
I.T. ACT, 1961
(43B) 15[* * *]
[(44) Tax Recovery Officer m eans any Incom e-tax Officer who m ay be
au thorised by the Chief Com m issioner or Com m issioner, by general
or special order in writing, to exercise the powers of a Tax Recovery
Officer 17 [and also to exercise or perform su ch powers and fu nctions
which are conferred on, or assigned to, an Assessing Officer u nder this
Act and which m ay be prescribed];]
(45) tota l incom e m eans the total am ou nt of incom e referred to
in section 5, com pu ted in the m anner la id down in this Act ;
(46) 18[* * *]
19
(47) 20 [tran sfer 21, in relation to a capital asset, inclu des,
16
(i) the sale 21 , exchange 2 1 or relinqu ishm ent 21 of the asset ; or

(ii) the extingu ishm ent of any r ights therein
21
; or
(iii) the com pu lsory acqu isition thereof u nder any law ; or
(iv) ) in a case where the asset is converted by the owner thereof
into, or is treated by him as, stock-in-trade of a bu siness carried
on by him , su ch conversion or treatm ent ;] 22 [or]
23
[(iva) the m atu r ity or redem ption of a zero cou pon bond; or]
24
[(v) any transaction involving the allowing of the possession of any

im m ovable property to be taken or retained in part perform ance
of a contract of the natu re referred to in section 53A25 of the
Transfer of Property Act, 1882 (4 of 1882) ; or
(vi) any transaction (whether by way of becom ing a m em ber of, or
acqu ir ing shares in , a co-operative society, com pany or other
association of persons or by way of any agreem ent or any
arrangem ent or in any other m anner whatsoever) which has the
effect of transferring, or enabling the enjoym ent of, any im m ovable property.
Explan ation .For th e pu r poses of su b -c la u ses (v ) a n d (v
i), im m ovable property shall have the sam e m eaning as in clau se
(d) of section 269UA;]
15. Om itted by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1989. Original clau se
(43B) was inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-1-1972.
16. Su bstitu ted by the Direct Tax Laws (Am endm ent) Act, 1987 [as am ended by the Direct
Tax Laws (Am endm ent) Act, 1989], w.r.e.f. 1-4-1988. Prior to su bstitu tion clau se (44)
was su bstitu ted by the Finance Act, 1963, w.r.e.f. 1-4-1962.
18. Om itted by the Finance Act, 1965, w.e.f. 1-4-1965.
19. For relevant case laws, see Taxm a n n s Master Gu ide to Incom e-tax Act. For Letter F. No.
34/ 11/ 65-IT(A-I), dated 15-1-1966, Circu lar No. 751, dated 10-2-1997 and Circu lar No.
2/ 2008, dated 22-2-2008, see Taxm a nn s Master Gu ide to Incom e-tax Act.
20. Su bstitu ted by the Taxation Laws (Am endm ent) Act, 1984, w.e.f. 1-4-1985.
21. For the m eaning of the term s/ expression tr a n sfer , sale, exchange, relinqu ishm
ent
and extingu ishm ent of any r ights th er ein , see Taxm a nn s Direct Taxes Manu
al, Vol. 3.
w.e.f. 1-4-1988.
25. For text of section 53A of the Transfer of Property Act, 1882, see Appendix.
1.29
26
CH . II - BASIS
OF CHARGE
S. 4
[(48) zero cou pon bond m eans a bond

(a) issu ed by any infrastru ctu re capital com pany or infrastru ctu
re capital fu nd or pu blic sector com pany on or after the 1st
day of Ju ne, 2005;
(b) in respect of which no paym ent and benefit is received or
receivable before m atu r ity or redem ption from infrastru ctu re
capital com pany or infrastru ctu re capital fu nd or pu blic
sector com pany; and
(c) which the Central Governm ent m ay, by notification 27 in the
Official Gazette, specify in this behalf.
28
[***]]
29
[Previous year defined.
3. For the pu rposes of this Act, previou s year m eans the financial year im m
e- diately preceding the assessm ent year :
Provided that, in the case of a bu siness or profession newly set u p, or a sou rce
of incom e newly com ing into existence, in the said financial year, the previou s
year shall be the period beginning with the date of setting u p of the bu siness or
profession or, as the case m ay be, the date on which the sou rce of incom e newly
com es into existence and ending with the said financial year.]
CHAPTER II
Charge of income-tax.
BASIS OF CHARGE
31
(1) Where any Central Act enacts that incom e-tax 32 shall be charged for
any assessm ent year at any rate or rates, incom e-tax at that rate or those
rates shall be charged for that year in accordance with, and 33[su bject to the
30
4.
26. Inserted by the Finance Act, 2005, w.e.f. 1-4-2006. Earlier clau se (48) was om itted by the
Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1989. It was la ter re-introdu ced by the
Direct Tax Laws (Am endm ent) Act, 1989, w.e.f. 1-4-1989 and again om itted by the Finance
Act, 1992, w.e.f. 1-4-1993.
27. For specified bonds, see Taxm a nn s Master Gu ide to Incom e-tax Act. See also ru les 8B &
8C and Form No. 5B.
28. Explan ation om itted by the Finance Act, 2006, w.e.f. 1-4-2006. Prior to its om ission,
Explan ation read as u nder :
Explan ation .For the pu rposes of this clau se, the expressions in fr a str u ctu re capital
com pany and infr astr u ctu re capital fu nd shall have the sam e m eanings
respectively
assigned to them in clau ses (a) and (b) of Explan ation 1 to clau se (23G)
of section 10.
29. Su bstitu ted by the Finance Act, 1999, w.e.f. 1-4-2000. Prior to its su bstitu tion, section 3
was am ended by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1989 and the
Direct Tax Laws (Am endm ent) Act, 1989, w.e.f. 1-4-1989.
30. See also Circu lar No. 142, dated 1-8-1974, Circu lar No. 447, dated 22-1-1986, Circu lar
No. 573, dated 21-8-1990, Circu lar No. 776, dated 8-6-1999 and Instru ction No. 747 [F. No.
288/ 29/ 74-IT(A-II)], (r elevant extracts), dated 30-8-1974. For details, see Taxm a nn s
Master Gu ide to Incom e-tax Act.
32. For the m eaning of the term incom e-tax, see Taxm a nn s Direct Taxes Manu al, Vol. 3.
33. Su bstitu ted for su bject to the provisions of this Act by the Direct Tax Laws (Am endm
ent) Act, 1987, w.e.f. 1-4-1989.
S. 5
1 .30
I.T. ACT, 1961
provisions (inclu ding provisions for the levy of additional incom e-tax) of, this
Act]34 in respect of the total incom e 34 of the previou s year 35 [***] of every person
:
Provided that where by virtu e of any provision of this Act incom e-tax is to be
charged in respect of the incom e of a period other than the previou s year,
incom e-tax shall be charged accordingly.
(2) In respect of incom e chargeable u nder su b-section (1), incom e-tax
shall be dedu cted at the sou rce or paid in advance, where it is so
dedu ctible or payable u nder any provision of this Act.
Scope of total income.
37
(1) Su bject to 38 the provisions of this Act, the total incom e 38 of any previou
s year of a person who is a resident inclu des all incom e from whatever sou
rce
derived which
36
5.
(a) is received 39 or is deem ed to be received

or on behalf of su ch person ; or
39
in India in su ch year by
(b) accru es 39 or arises 39 or is deem ed 39 to accru e or arise to him in

India du r ing su ch year ; or
(c) accru es 39 or arises 39 to him ou tside India du r ing su ch year :
Provided that, in the case of a person not ordinarily resident in India
within the m eaning of su b-section (6)*of section 6, the incom e which
accru es or arises to him ou tside India shall not be so inclu ded u
nless it is derived from a bu siness controlled in or a profession set
u p in India.
(2) Su bject to 38 the provisions of this Act, the total incom e 38 of any previou s year
of a person who is a non-resident inclu des all incom e from whatever sou rce
derived which
(a) is received 39 or is deem ed to be received
or on behalf of su ch person ; or
39
in India in su ch year by
(b) accru es 39 or arises 39 or is deem ed to accru e or arise to him in

India du r ing su ch year.
Explan ation 1.Incom e accru ing or arising ou tside India shall not be deem ed
to be received 39 in India within the m eaning of this section by reason only of the
fact that it is taken into accou nt in a balance sheet prepared in India.
34. For the m eaning of the expressions in accordance with, and su bject to the provisions of,
this Act and total incom e, see Taxm ann s Direct Taxes Manu al, Vol. 3.
35. or previou s years, as the case m ay be, om itted by the Direct Tax Laws (Am endm ent)
Act, 1987, w.e.f. 1-4-1989.
36. See also Circu lar No. 369, dated 17-9-1983. For details, see Taxm a n n s Master Gu ide to
Incom e-tax Act.
38. For the m eaning of the term s/ expressions su bject to and total incom e, see Taxm
a nn s Direct Taxes Manu al, Vol. 3.
39. For the m eaning of the term s/ expressions is r eceived , deem ed to be received , a ccru
es
or arises, a ccr u ed or arisen and deem ed to have accru ed, see Taxm a nn s
Direct Taxes
Manu al, Vol. 3.
*Shou ld be read as clau se (6).
1 .31
CH. II - BASIS OF CHARGE
S. 6
Explan ation 2.For the rem oval of dou bts, it is hereby declared that incom e
which has been inclu ded in the total incom e of a person on the basis that it has
accru ed 40 or arisen 40 or is deem ed to have accru ed 40 or arisen 40 to him shall not
again be so inclu ded on the basis that it is received or deem ed to be received by
him in India.
41
[Apportionment of income between spouses governed by Portuguese Civil Code.
5A. (1) Where the hu sband and wife are governed by the system of com m u
- n ity of pr oper ty (kn ow n u n d er th e Por tu gu ese Civil Cod e of
1860
as COMMUNIAO DOS BENS ) in force in the State of Goa and in the Union
territories of Dadra and Nagar Haveli and Dam an and Diu , the incom e of
the hu sband and of the wife u nder any head of incom e shall not be assessed as
that of su ch com m u nity of property (whether treated as an association of
persons or a body of individu als), bu t su ch incom e of the hu sband and of the
wife u nder each head of incom e (other than u nder the head Salar ies) shall
be apportioned equ ally between the hu sband and the wife and the incom e so
apportioned shall be inclu ded separately in the total incom e of the hu sband and
of the wife respectively, and the rem aining provisions of this Act shall apply
accordingly.
(2)Where the hu sband or, as the case m ay be, the wife governed by the aforesaid
system of com m u nity of property has any incom e u nder the head Sa la ries, su
ch incom e shall be inclu ded in the total incom e of the spou se who has actu
ally earned it.]
Residence in India.
42
6. For the pu rposes of this Act,

(1) An individu al is said to be resident in India in any previou s year, if he
(a) is in India in that year for a period or periods am ou nting in all to

one hu ndred and eighty-two days or m ore ; or
(b)
43
[* * *]
(c) having within the fou r years preceding that year been in India for
a period or periods am ou nting in all to three hu ndred and
sixty- five days or m ore, is in India for a period or periods am
ou nting in all to sixty days or m ore in that year.
44
[Explan ation .In the case of an individu al,
40. For the m eaning of the term s/ expressions is r eceived , deem ed to be received , a ccru
es
or arises, a ccr u ed or arisen and deem ed to have accru ed or arisen, see
43. Om itted by the Finance Act, 1982, w.e.f. 1-4-1983.
44. Su bstitu ted by the Direct Tax Laws (Second Am endm ent) Act, 1989, w.e.f. 1-4-1990.
Original Explan ation was inserted by the Finance Act, 1978, w.e.f. 1-4-1979 and la ter
am ended by the Finance Act, 1982, w.e.f. 1-4-1983.
S. 6
I.T. ACT, 1961
1 .32
(a) being a citizen of India, who leaves India in any previou s year
45
[as a m em ber of the crew of an 46 Indian ship as defined in
clau se (18) of section 3 of the Merchant Shipping Act, 1958 (44
of 1958), or] for the pu rposes of em ploym ent ou tside India,
the provisions of su b-clau se (c) shall apply in relation to that
year as if for the words sixty days, occu r r ing therein, the
words on e hu ndred and eighty-two days had been su bstitu
ted ;
(b) being a citizen of India, or a person of Indian origin within the
m eaning of Explan ation to clau se (e) of section 115C, who,
being ou tside India, com es on a visit to India in any previou s
year, the provisions of su b-clau se (c) shall apply in relation to
that year as if for the words sixty days, occu r r ing therein,
the words on e hu ndred and 47 [eighty-two] days had been
su bstitu ted.]
(2) A Hindu u ndivided fam ily, firm or other association of persons is said
to be resident in India in any previou s year in every case except where
du r ing that year the control and m anagem ent 48 of its affairs 48 is
situ ated wholly 48 ou tside India.
(3) A com pany is said to be resident in India in any previou s year, if
(i) it is an Indian com pany ; or
(ii) du r ing that year, the control and m anagem ent 48 of its affairs 48
is situ ated wholly 48 in India.
(4) Every other person is said to be resident in India in any previou s year
in every case, except where du r ing that year the control and m
anage- m ent of his affairs is situ ated wholly ou tside India.
(5) If a person is resident in India in a previou s year relevant to
a n a ssessm en t yea r in r espect of a n y sou r ce of in com e, h e
shall be deem ed to be resident in India in the previou s year relevant
to the assessm ent year in respect of each of his other sou rces of
incom e.
49
[(6) A person is said to be not ordinarily resident in India in any previou

s year if su ch person is

46. Clau se (18) of section 3 of the Merchant Shipping Act, 1958, defines Indian ship as
follow s :
(18) Indian ship m eans a ship registered as su ch u nder this Act and inclu des any ship
registered at any port in India at the com m encem ent of this Act which is recognised
as an Indian ship u nder the proviso to su b-section (2) of section 22;
47. Su bstitu ted for fifty by the Finance Act, 1994, w.e.f. 1-4-1995.
48. For the m eaning of the term s/ expressions contr ol and m anagem ent, affairs
and
wholly, see Taxm ann s Direct Taxes Manu al, Vol. 3.
49. Su bstitu ted by the Finance Act, 2003, w.e.f. 1-4-2004. Prior to its su bstitu tion, clau se
(6) read as u nder :
(6) A person is said to be not ordinarily resident in India in any previou s year if su ch
person is
1.33
CH . II - BASIS
OF CHARGE
S. 8
(a) an individu al who has been a non-resident in India in nine ou t of

the ten previou s years preceding that year, or has du r ing the
seven previou s years preceding that year been in India for a
period of, or periods am ou nting in all to, seven hu ndred and
twenty-nine days or less; or
(b) a Hindu u ndivided fam ily whose m anager has been a nonresident in India in nine ou t of the ten previou s years preceding
that year, or has du r ing the seven previou s years preceding that
year been in India for a period of, or periods am ou nting in all to,
seven hu ndred and twenty-nine days or less.]
Income deemed to be received.
7. The following incom es shall be deem ed to be received in the previou s year :
(i) the annu al accretion in the previou s year to the balance at the credit
of an em ployee participating in a recognised provident fu nd, to the
extent provided in ru le 6 of Part A of the Fou r th Schedu le ;
(ii) the transferred balance in a recognised provident fu nd, to the extent
provided in su b-ru le (4) of ru le 11 of Part A of the Fou r th Schedu le
;
50
[(iii) the contribu tion m ade, by the Central Governm ent 51[or any other
em ployer] in the previou s year, to the accou nt of an em ployee u
nder a pension schem e referred to in section 80CCD.]
Dividend income.
8.
52
[For the pu rposes of inclu sion in the total incom e of an assessee,

(a) any dividend] declared by a com pany or distribu ted or paid by it
within the m eaning of su b-clau se (a) or su b-clau se (b) or su b-clau
se
(c) or su b-clau se (d) or su b-clau se (e) of clau se (22) of section 2
shall be deem ed to be the incom e of the previou s year in which
it is so declared, distribu ted or paid, as the case m ay be ;
53
[(b) any interim dividend shall be deem ed to be the incom e of the previou s
year in which the am ou nt of su ch dividend is u nconditionally m
ade available by the com pany to the m em ber who is entitled to it.]
50.
51.
52.
53.
(a) an individu al who has not been resident in India in nine ou t of the ten
previou s years preceding that year, or has not du r ing the seven previou s
years preceding that year been in India for a period of, or periods am ou nting
in all to, seven hu ndred and thirty days or m ore ; or
(b) ) a Hindu u ndivided fam ily whose m anager has not been resident in India
in nine ou t of the ten previou s years preceding that year, or has not du r ing
the seven previou s years preceding that year been in India for a period
of, or periods am ou nting in all to, seven hu ndred and thirty days or m
ore.
Inserted by the Finance (No. 2) Act, 2004, w.r.e.f. 1-4-2004.
Su bstitu ted for For the pu rposes of inclu sion in the total incom e of an assessee,
any dividend by the Finance Act, 1965, w.e.f. 1-4-1965.
Inserted , ibid.
S. 9
I.T. ACT, 1961
1 .34
Income deemed to accrue or arise in India.

9. 55(1) The following incom es shall be deem ed 56 to accru e or arise in India :
54
57
(i) all incom e accru ing or arising, whether directly or indirectly, throu gh
or from any bu siness connection 58 in India, or throu gh or from any
property 5 8 in India, or throu gh or from any asset or sou rce of incom
e in India, 59[* * *] or throu gh the transfer of a capital asset situ ate
in India.
60
[Explan ation 1].For the pu rposes of this clau se
(a) in the case of a bu siness of which all the operations 61 are not
carried ou t in India, the incom e of the bu siness deem ed u nder
this clau se to accru e or arise in India shall be only su ch part
of the incom e as is reasonably attribu table to the operations 6 1
carried ou t in Ind ia ;
(b) in the case of a non-resident, no incom e shall be deem ed to
accru e or arise in India to him throu gh or from operations which
are confined to the pu rchase of goods in India for the pu rpose of
export ;
62
[* * *]
63
[(c) in the case of a non-resident, being a person engaged in the
bu siness of ru nning a news agency or of pu blishing newspapers,
m agazines or jou rnals, no incom e shall be deem ed to accru e or
arise in India to him throu gh or from activities which are confined
to the collection of news and views in India for transm ission ou t
of India ;]
64
[(d) in the case of a non-resident, being
(1) an individu al who is not a citizen of India ; or
(2) a firm which does not have any partner who is a citizen of
India or who is resident in India ; or
(3) a com pany which does not have any shareholder who is a
citizen of India or who is resident in India,
54. See also Circu lar No. 23, dated 23-7-1969, Circu lar No. 163, dated 29-5-1975, Circu lar
No. 35(XXXIII-7) of 1956, dated 3-9-1956, Circu la r No. 4, dated 20-2-1969, Circu la r
No. 382, dated 4-5-1984, and Circu la r No. 5/ 2004, dated 28-9-2004. For details, see
Taxm a nn s Master Gu ide to Incom e-tax Act.
56. For the m eaning of the term deem ed, see Taxm ann s Direct Taxes Manu al, Vol. 3.
57. See ru le 10 for m anner of com pu tation of incom e of non-residents in certain cases.
58. For the m eaning of the term s/ expressions bu siness connection and property, see
59. Words or throu gh or from any m oney lent at interest and brou ght into India in cash or
in kind om itted by the Finance Act, 1976, w.e.f. 1-6-1976.
60. Explan ation renu m bered as Explan ation 1 by the Finance Act, 2003, w.e.f. 1-4-2004.
61. For the m eaning of the term operations, see Taxm a nn s Direct Taxes Manu al, Vol. 3.
62. Proviso om itted by the Finance Act, 1964, w.e.f. 1-4-1964.
64. Inserted by the Taxation Laws (Am endm ent) Act, 1984, w.r.e.f. 1-4-1982.
1.35
CH . II - BASIS
OF CHARGE
S. 9
no incom e shall be deem ed to accru e or arise in India to su ch

individu al, firm or com pany throu gh or from operations 65 which
are confined to the shooting of any cinem atograph film in India.]
[Explan ation 2.For the rem oval of dou bts, it is hereby declared
that bu siness connection shall inclu de any bu siness activity
carried ou t throu gh a person who, acting on behalf of the nonresident,
66
(a) has and habitu ally exercises in India, an au thority to conclu de

contracts on behalf of the non-resident, u nless his activities are
lim ited to the pu rchase of goods or m erchandise for the nonresident; or
(b) has no su ch au thority, bu t habitu ally m aintains in India a stock
of goods or m erchandise from which he regu larly delivers goods
or m erchandise on behalf of the non-resident; or
(c) habitu ally secu res orders in India, m ainly or wholly for the nonresident or for that non-resident and other non-residents controlling, controlled by, or su bject to the sam e com m on control, as
that non-resident:
Provided that su ch bu siness connection shall not inclu de any bu
siness activity carried ou t throu gh a broker, general com m ission
agent or any other agent having an independent statu s, if su ch
broker, general com m ission agent or any other agent having an
independent statu s is acting in the ordinary cou rse of his bu siness :
Provided further that where su ch broker, general com m ission agent
or any other agent works m ainly or wholly on behalf of a non-resident
(hereafter in this proviso referred to as the principal non-resident) or
on behalf of su ch non-resident and other non-residents which are
controlled by the principal non-resident or have a controlling interest
in the principal non-resident or are su bject to the sam e com m on
control as the principal non-resident, he shall not be deem ed to be a
broker, general com m ission agent or an agent of an independent
statu s.
Explan ation 3.Where a bu siness is carried on in India throu gh a
person referred to in clau se (a) or clau se (b) or clau se (c) of Explan
ation 2, only so m u ch of incom e as is attribu table to the operations
carried ou t in India shall be deem ed to accru e or arise in India;]
(ii) incom e which falls u nder the head Salar ies, if it is earned
67
in India.
[Explan ation .For the rem oval of dou bts, it is hereby declared
that the incom e of the natu re referred to in this clau se payable for
68
65.
66.
67.
68.
For the m eaning of the term operations, see Taxm a nn s Direct Taxes Manu al, Vol. 3.
For the m eaning of the term earned, see Taxm a nn s Direct Taxes Manu al, Vol. 3.
Su bstitu ted by the Finance Act, 1999, w.e.f. 1-4-2000. Prior to its su bstitu tion, Explan ation ,
as inserted by the Finance Act, 1983, w.r.e.f. 1-4-1979, read as u nder :
Explan ation .For the rem oval of dou bts, it is hereby declared that incom e of the natu
re referred to in this clau se payable for service rendered in India shall be regarded as
incom e earned in India ;
S. 9
I.T. ACT, 1961
1 .36
(a) service rendered in India; and

(b) the rest period or leave period which is preceded and su cceeded
by services rendered in India and form s part of the service
contract of em ploym ent,
shall be regarded as incom e earned in India ;]
(iii) incom e chargeable u nder the head Sa la ries payable by the
Govern- m ent to a citizen of India for service ou tside India ;
(iv) ) a dividend paid by an Indian com pany ou tside India ;
69
[(v) incom e by way of interest payable by

(a) the Governm ent ; or
(b) a person who is a resident, except where the interest is payable in
respect of any debt incu r red, or m oneys borrowed and u sed,
for the pu rposes of a bu siness or profession carried on by su ch
person ou tside India or for the pu rposes of m aking or earning
any incom e from any sou rce ou tside India ; or
(c) a person who is a non-resident, where the interest is payable in
respect of any debt incu r red, or m oneys borrowed and u sed,
for the pu rposes of a bu siness or profession carried on by su ch
person in India ;
(vi) incom e by way of royalty 70 payable by
(b) a person who is a resident, except where the royalty is payable in
respect of any r ight, property or inform ation u sed or services
u tilised for the pu rposes of a bu siness or profession carried on by
su ch person ou tside India or for the pu rposes of m aking or
earning any incom e from any sou rce ou tside India ; or
(c) a person who is a non-resident, where the royalty is payable in
respect of any r ight, property or inform ation u sed or services
u tilised for the pu rposes of a bu siness or profession carried on by
su ch person in India or for the pu rposes of m aking or earning
any incom e from any sou rce in India :
Provided that nothing contained in this clau se shall apply in relation
to so m u ch of the incom e by way of royalty as consists of lu m p su
m consideration for the transfer ou tside India of, or the im parting
of inform ation ou tside India in respect of, any data, docu m
entation, drawing or specification relating to any patent, invention,
m odel, design, secret form u la or process or trade m ark or sim ila r
property, if su ch incom e is payable in pu rsu ance of an agreem ent m
ade before the 1st day of April, 1976, and the agreem ent is
approved by the Central Governm ent :
69. Clau ses (v ), (v i) and (v ii) inserted by the Finance Act, 1976, w.e.f. 1-6-1976.
70. For the m eaning of the term royalty, see Taxm ann s Direct Taxes Manu al, Vol. 3.
1.37
CH . II - BASIS
OF CHARGE
S. 9
[Provided further that nothing contained in this clau se shall apply in

relation to so m u ch of the incom e by way of royalty as consists of
lu m p su m paym ent m ade by a person, who is a resident, for the
transfer of all or any r ights (inclu ding the granting of a licence) in
respect of com pu ter software su pplied by a non-resident m anu factu rer along with a com pu ter or com pu ter-based equ ipm ent u nder
any schem e approved u nder the Policy on Com pu ter Software
Export, Software Developm ent and Training, 1986 of the Governm ent of India.]
71
Explan ation 1.For the pu rposes of the 72[fir st] proviso, an agreem ent m ade on or after the 1st day of April, 1976, shall be deem ed to
have been m ade before that date if the agreem ent is m ade in
accordance with proposals approved by the Central Governm ent
before that date ; so, however, that, where the recipient of the incom
e by way of royalty is a foreign com pany, the agreem ent shall not
be deem ed to have been m ade before that date u nless, before the
expiry of the tim e allowed u nder su b-section (1) or su b-section (2) of
section 139 (whether fixed originally or on extension) for fu
rnishing the retu rn of incom e for the assessm ent year com m encing
on the 1st day of April, 1977, or the assessm ent year in respect of
which su ch incom e fir st becom es chargeable to tax u nder this Act,
whichever assessm ent year is la ter, the com pany exercises an
option by fu rnishing a declaration in writing to the 73 [Assessing]
Officer (su ch option being final for that assessm ent year and for
every su bsequ ent assessm ent year) that the agreem ent m ay be
regarded as an agreem ent m ade before the 1st day of April, 1976.
Explan ation 2.For the pu rposes of this clau se, royalty m eans
consideration (inclu ding any lu m p su m consideration bu t exclu
ding any consideration which wou ld be the incom e of the recipient
chargeable u nder the head Capita l gains) for
(i) the transfer of all or any r ights (inclu ding the granting of a
licence) in respect of a patent, invention, m odel, design, secret
form u la or process or trade m ark or sim ila r property ;
(ii) the im parting of any inform ation concerning the working of, or
the u se of, a patent, invention, m odel, design, secret form u la
or process or trade m ark or sim ila r property ;
(iii)
the u se of any patent, invention, m odel, design, secret
form u la or process or trade m ark or sim ila r property ;
(iv) ) th e im pa r t in g of a n y in for m a t ion con cer n in g t ech
n ica l, indu strial, com m ercial or scientific knowledge,
experience or skill ;

72. Su bstitu ted for foregoing, ibid.
73. Su bstitu ted for Incom e-tax by the Direct Tax Laws (Am endm ent) Act, 1987, w.e.f.
1-4-1988.
S. 9
I.T. ACT, 1961

74
1 .38
[(iva) the u se or r ight to u se any indu strial, com m ercial or

scientific equ ipm ent bu t not inclu ding the am ou nts referred
to in section 44BB;]
(v) ) the transfer of all or any r ights (inclu ding the granting of
a licence) in respect of any copyright, literary, artistic or
scientific work inclu ding film s or video tapes for u se in
connection with television or tapes for u se in connection with
radio broadcasting, bu t not inclu ding consideration for the
sale, distribu tion or exhibition of cinem atographic film s ; or
(vi)
the rendering of any services in connection with the
activities referred to in su b-clau ses (i) to 74[(iv ), (iva) and] (v ).
[Explan ation 3.For the pu rposes of this clau se, com pu ter software m eans any com pu ter program m e recorded on any disc,
tape, perforated m edia or other inform ation storage device and
inclu des any su ch program m e or any cu stom ized electronic da ta ;]
75
(vii)
incom e by way of fees for technical services payable 76 by

(b) a person who is a resident, except where the fees are payable in
respect of services u tilised in a bu siness or profession carried on
by su ch person ou tside India or for the pu rposes of m aking
or earning any incom e from any sou rce ou tside India ; or
(c) a person who is a non-resident, where the fees are payable in
respect of services u tilised in a bu siness or profession carried on
by su ch person in India or for the pu rposes of m aking or
earning any incom e from any sou rce in India :
[Provided that nothing contained in this clau se shall apply in relation
to any incom e by way of fees for technical services payable in
pu rsu ance of an agreem ent m ade before the 1st day of April,
1976, and approved by the Central Governm ent.]
77
[Explan ation 1.For the pu rposes of the foregoing proviso, an

agreem ent m ade on or after the 1st day of April, 1976, shall be deem
ed to have been m ade before that date if the agreem ent is m ade in
accordance with proposals approved by the Central Governm ent
before that date.]
77
Explan ation 77[2].For the pu rposes of this clau se, fees for
technical services m eans any consideration (inclu ding any lu m p
su m consi-

75. Su bstitu ted by the Finance Act, 2000, w.e.f. 1-4-2001. Prior to its su bstitu tion, Explan
ation 3, as inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991, read as u nder :
Explan ation 3.For the pu rposes of this clau se, the expression com pu ter
software shall have the m eaning assigned to it in clau se (b) of the Explan ation to
section 80HHE;
76. For the m eaning of the expression fees for technical services paya b le, see Taxm
a nn s
1.39
CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
S. 10(2A)
deration) for the rendering of any m anagerial,technicalor consu ltancy

services (inclu ding the provision of services of technical or other
personnel) bu t does not inclu de consideration for any constru ction
78
, assem bly, m ining or like project u ndertaken by the recipient or
consideration which wou ld be incom e of the recipient chargeable
u nder the head Salar ies.]
(2) Notwithstanding anything contained in su b-section (1), any pension payable
ou tside India to a person residing perm anently ou tside India shall not be deem
ed to accru e or arise in India, if the pension is payable to a person referred
to in article 314 of the Constitu tion or to a person who, having been appointed
before the 15th day of Au gu st, 1947, to be a Ju dge of the Federal Cou r t or of a
High Cou r t within the m eaning of the Governm ent of India Act, 1935, continu
es to serve on or after the com m encem ent of the Constitu tion as a Ju dge in
India.
[Explan ation .For the rem oval of dou bts, it is hereby declared that for the
pu rposes of this section, where incom e is deem ed to accru e or arise in
India u nder clau ses (v ), (vi) and (vii) of su b-section (1), su ch incom e shall be
inclu ded in the total incom e of the non-resident, whether or not the nonresident has a residence or place of bu siness or bu siness connection in India.]
79
CHAPTER III
INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
Incomes not included in total income.
10. In com pu ting the total incom e of a previou s year of any person, any incom
e falling within any of the following clau ses shall not be inclu ded
(1) agricu ltu ral incom e ;
80
82
(2)
[su bject to the provisions of su b-section (2) of section 64,] any su m

received by an individu al as a m em ber of a Hindu u ndivided fam
ily, where su ch su m has been paid ou t of the incom e of the fam ily,
or, in the case of any im partible estate, where su ch su m has been
paid ou t of the incom e of the estate belonging to the fam ily ;
81
[(2A) in the case of a person being a partner of a firm which is separately

assessed as su ch, his share in the total incom e of the firm .
Explan ation .For the pu rposes of this clau se, the share of a partner
in the total incom e of a firm separately assessed as su ch shall,
notwithstanding anything contained in any other law, be an am ou nt
which bears to the total incom e of the firm the sam e proportion as the
am ou nt of his share in the profits of the firm in accordance with the
partnership deed bears to su ch profits ;]
78.
79.
80.
81.
82.
For the m eaning of the term con str u ction, see Taxm ann s Direct Taxes Manu al, Vol. 3.
Inserted by the Taxation Laws (Am endm ent) Act, 1970, w.e.f. 1-4-1971.
Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. Earlier, clau se (2A) was inserted by the
Direct Tax Laws (Am endm ent) Act, 1987, w.e.f. 1-4-1989 and was om itted by the Direct
Tax Laws (Am endm ent) Act, 1989, with effect from the sam e date.
S. 10(4)
(3)
84
I.T. ACT, 1961

83
1 .40
[***]
[(4) (i) in the case of a non-resident, any incom e by way of interest

on su ch secu r ities or bonds as the Central Governm ent m ay,
by n otifica t ion in th e Officia l Ga zette 85 , specify in th is b eh a
lf, inclu ding incom e by way of prem iu m on the redem ption of su
ch bonds :
[Provided that the Central Governm ent shall not specify, for the
pu rposes of this su b-clau se, su ch secu r ities or bonds on or after
the 1st day of Ju ne, 2002;]
86
[ (ii) in the case of an individu al, any incom e by way of interest

on m oneys standing to his credit in a Non-Resident (External)
Accou nt in any bank in India in accordance with the Foreign
Exchange Regu la tion Act, 1973 (46 of 1973), and the ru les m ade
thereu nder :
87 88
Provided that su ch individu al is a person resident ou tside India

as defined in clau se (q) of section 289 of the said Act or is a person
who has been perm itted by the Reserve Bank of India to m aintain
the aforesaid Accou nt ;]]
83. Om itted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its om ission, clau se (3), as
su bstitu ted by the Finance Act, 1972, w.e.f. 1-4-1972, and am ended by the Finance Act,
1986, w.e.f. 1-4-1987, Finance (No. 2) Act, 1991, w.e.f. 1-10-1991 and Finance Act, 1992,
w.e.f. 1-4-1992, read as u nder :
(3) any receipts which are of a casu al and non-recu r r ing natu re, to the extent su ch
receipts do not exceed five thou sand ru pees in the aggregate :
Provided that where su ch receipts relate to winnings from races inclu ding horse
races, the provisions of this clau se shall have effect as if for the words five thou
sand ru pees, the words two thou sand five hu ndred ru pees had been su bstitu
ted :
Provided further that this clau se shall not apply to
(i) capital gains chargeable u nder the provisions of section 45 ; or
(ii) receipts arising from bu siness or the exercise of a profession or occu pation ; or
(iii) receipts by way of addition to the rem u neration of an em ployee ;
84. Su bstitu ted for clau ses (4) and (4A) by the Direct Tax Laws (Am endm ent) Act, 1987,
w.e.f. 1-4-1989. Prior to their su bstitu tion, clau se (4) was am ended by the Finance
Act, 1964, w.e.f. 1-4-1964. Clau se (4A ) was inserted by the Finance Act, 1964, w.e.f.
1-4-1965, su bsequ ently am ended by the Finance Act, 1968, w.e.f. 1-4-1969 and su bstitu
ted by the Finance Act, 1982, w.e.f. 1-4-1982.
85. For specified secu r ities, see Notification No. SO 3331, dated 19-10-1965. For details, see
Taxm a nn s Master Gu ide to Incom e-tax
Act.
87. Su bstitu ted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.
Incom e-tax Act.
89. Clau se (q) of section 2 of the Foreign Exchange Regu la tion Act, 1973, defines person
resident ou tside India as follows :
(q ) person resident ou tside India m eans a person who is not resident in India ;
For definition of the above term in FEMA, 1999, see Appendix.
1.41

90
91
S. 10(5)
[***]
[(4B) in the case of an individu al, being a citizen of India or a person of

Indian origin, who is a non-resident, any incom e from interest on su ch
savings certificates issu ed 92 [before the 1st day of Ju ne, 2002] by the
Central Governm ent as that Governm ent m ay, by notification in the
Official Gazette 93 , specify in this behalf :
Provided that the individu al has su bscribed to su ch certificates
in convertible foreign exchange rem it ted from a cou ntry ou tsid e In d ia in a ccor d a n ce w ith th e pr ovision s of th e For eign
Exchange Regu la tion Act, 1973 (46 of 1973), and any ru les m ade
thereu nder.
Explan ation .For the pu rposes of this clau se,
(a) a person shall be deem ed to be of Indian origin if he, or either of
his parents or any of his grandparents, was born in u ndivided
India ;
(b) con vertib le foreign exchange m eans foreign exchange which
is
for the tim e being treated by the Reserve Bank of India as
convertible foreign exchange for the pu rposes of the Foreign
Exchange Regu la tion Act, 1973 (46 of 1973), and any ru les m
ade thereu nder ;]
94
[(5) in the case of an individu al, the valu e of any travel concession or
assistance received by, or du e to, him ,
(a) from his em ployer for him self and his fam ily, in connection with
his proceeding on leave to any place in India ;
(b) from his em ployer or form er em ployer for him self and his
fam ily, in connection with his proceeding to any place in India
after retirem ent from service or after the term ination of his
service,
su bject to su ch conditions as m ay be prescribed 95 (inclu ding conditions as to nu m ber of jou rneys and the am ou nt which shall be exem
pt
90. Om itted by the Finance Act, 2005, w.e.f. 1-4-2006. Prior to its om ission, second proviso, as
inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2006, read as u nder :
Provided further that nothing contained in this su b-clau se shall apply to any incom e by
way of interest paid or credited on or after the 1st day of April, 2005 to the Non-Resident
(External) Accou nt of su ch individu al;
93. For specified savings certificates, see Notification No. SO 653(E), dated 8-9-1982. For
details, see Taxm ann s Master Gu ide to Incom e-tax Act.
94. Su bstitu ted by the Direct Tax Laws (Second Am endm ent) Act, 1989, w.e.f. 1-4-1989.
Earlier clau se (5) was am ended by the Finance Act, 1975, w.e.f. 1-4-1975, the Taxation
Laws (Am endm ent) Act, 1970, w.r.e.f. 1-4-1962 and the Direct Tax Laws (Am endm ent)
Act, 1987, w.e.f. 1-4-1989.
95. Ru le 2B prescribes the conditions as well as qu antu m of exem ption, which are as follows :
Con dition s to be satisfied - Conditions to be satisfied are as u nder :
S. 10(5)
I.T. ACT, 1961
1 .42
per head) having regard to the travel concession or assistance granted

to the em ployees of the Central Governm ent :
The exem ption is adm issible on the valu e of any travel concession or assistance received
by or du e to an assessee from his em ployer or form er em ployer, as the case m ay be,
for him self and his fam ily, in connection with his proceeding (i) on leave to any place in
India, or (ii) to any place in India after the retirem ent from service, or (iii) to any place
in India after the term ination of his service.
The exem ption is adm issible in respect of actu al expenditu re incu r red for jou rneys
perform ed, not only by the assessee bu t also by his fam ily.
For this pu rpose, fam ily m eans (i) the spou se and children of the assessee, and (ii) the
parents, brothers and sisters of the assessee provided that they are wholly or m ainly
dependent on the assessee. With effect from 1-10-1997, the Central Civil Service Leave
Travel Concession Ru les have been am ended in this respect.
The exem ption can be availed only in respect of two jou rn eys perform ed in a block of
four calen dar years. For this pu rpose, the fir st fou r -year block com m enced with the
calendar year 1986. Thu s, the fou r -year blocks will be 1986-89, 1990-93, 1994-97, 19982001, 2002-05 and so on.
If an assessee has not availed travel concession or assistance du r ing any of the specified
fou r -year block periods on one of the two perm itted occasions, or on both occasions,
exem ption can be claim ed provided he avails the concession or assistance in the calendar
year im m ediately following that block. This is popu la r ly known as the ca r r y-over
concession. In su ch cases, the exem ption so availed will not be cou nted for pu rposes of
regu la ting the fu tu re exem ptions allowable for the su cceeding block of fou r years.
Quan tum of exem ption .The basic ru le is that the qu antu m of exem ption will be lim
ited to the actu al expenses incu r red on the jou rney. This pre-su pposes that, withou t
perform - ing any jou rney and incu r r ing expenses thereon, no exem ption can be claim
ed.
In addition to the above general lim ita tion, the qu antu m of exem ption will also be su
bject to the following m axim u m lim its, depending u pon the m ode of transport u sed or
available:
JOUR NEY S PER FOR MED ON OR AFTER 1-10-1997
national carrier
For jou rneysAir
perform
edy by
Air of the
econom
fare
(Indian Airlines or Air India) by the shortest ro
Air-conditioned fir st class rail fare by the short
Where place of origin of jou rney

and destination are connected by rail and the jou rney is perform ed by any m ode of transport oth
Where place of origin of jou rney and destination or part thereof are not connected by rail
Where a recognised pu blic transport

system exists, the fir st class or delu xe class fare on su ch tr ansport by the shortest rou te to the p
Where no recognised pu blic transport system exists, the air-conditioned fir st class rail fare, for the d
R estricted con cession for ch ildren .Under su b-ru le (4) of ru le 2B, inserted with
effect from 1-10-1997, exem ption on travel concession will not be adm issible to m ore
than two
1.43
S. 10(5B)
Provided that the am ou nt exem pt u nder this clau se shall in no

case exceed the am ou nt of expenses actu ally incu r red for the pu
rpose of su ch travel.
Explan ation .For the pu rposes of this clau se, fam ily, in relation
to an individu al, m eans
(i) the spou se and children of the individu al ; and
(ii) the parents, brothers and sisters of the individu al or any of
them , wholly or m ainly dependent on the individu al; ]
(5A)
96
[Om itted by th e Fin an ce (No. 2) Act, 1998, w .e.f. 1-4-1999;]
(5B)
97
[Om itted by th e Fin an ce Act, 2002, w .e.f. 1-4-2003;]
su rviving children of an individu al born after 1-10-1998. This restriction will not however
apply in respect of children born before 1-10-1998, and also in cases where an individu al,
after getting one child, begets m u ltiple children (twins/ tr iplets/ qu adru plets, etc.) on
the second occasion. The im plications of this restriction will be as follows :
In respect of jou rneys perform ed on or before 1-10-1998 exem ption will be adm issible
in respect of all the su rviving children of the individu al.
In respect of jou rneys perform ed after 1-10-1998
- the exem ption will be adm issible to all su rviving children born before 1-10-1998;
- in addition, the exem ption will be adm issible to only two su rviving children born on
or after 1-10-1998. In reckoning this lim it of two children, children born ou t of
m u ltiple birth after the fir st child will be treated as on e child only.
It m ay be noted that section 2(15B) of the Act defines a ch ild as inclu des a step-child
and an adopted child of the individu al. Hence the aforesaid restrictions will operate in
respect of step-children and adopted children also provided they are born on or after
1-10-1998.
96. Prior to its om ission, clau se (5A), as inserted by the Taxation Laws (Am endm ent) Act,
1984, w.r.e.f. 1-4-1982, read as u nder :
(5A ) in the case of an individu al who is not a citizen of India and is a non-resident, who
com es to India solely in connection with the shooting of a cinem atograph film in
India by the individu al, firm or com pany referred to in clau se (d) of the Explan
ation to clau se (i) of su b-section (1) of section 9, any rem u neration received by
him for rendering any service in connection with su ch shooting ;
97. Prior to its om ission, clau se (5B), as inserted by the Finance Act, 1993, w.e.f. 1-4-1994, and
la ter on am ended by the Finance Act, 1999, w.e.f. 1-4-1999, read as u nder :
(5B) in the case of an individu al who renders services as a technician in the em ploym ent
(com m encing from a date after the 31st day of March, 1993) of the Governm ent or
of a local au thority or of any corporation set u p u nder any special law or of any su
ch institu tion or body established in India for carrying on scientific research as is
approved for the pu rposes of th is clau se by the prescribed au thority or in
any bu siness carried on in India and the individu al was not resident in India in any
of the fou r financial years im m ediately preceding the financial year in which he
arrived in India and the tax on his incom e for su ch services chargeable u nder the
head Salaries is paid to the Central Governm ent by the em ployer [which tax, in
the case of an em ployer, being a com pany, m ay be paid notwithstanding anything
contained in section 200 of the Com panies Act, 1956 (1 of 1956)], the tax so paid by
the em ployer for a period not exceeding forty-eight m onths com m encing from
the date of his arrival in India :
S. 10(6)
I.T. ACT, 1961
1 .44
(6) in the case of an individu al who is not a citizen of India,

(i) 98[***]
99
[(ii) the rem u neration received by him as an official, by whatever
nam e called, of an em bassy, high com m ission, legation, com m
ission, consu la te or the trade representation of a foreign
State, or as a m em ber of the staff of any of these officials, for
service in su ch capacity :
Provided that the rem u neration received by him as trade com m
issioner or other official representative in India of the Governm
ent of a foreign State (not holding office as su ch in an honorary
capacity), or as a m em ber of the staff of any of those officials,
shall be exem pt only if the rem u neration of the corresponding
officials or, as the case m ay be, m em bers of the staff, if any, of
the Governm ent resident for sim ila r pu rposes in the cou ntry
concerned enjoys a sim ila r exem ption in that cou ntry :
Provided further that su ch m em bers of the staff are su bjects
of the cou ntry represented and are not engaged in any bu siness
or profession or em ploym ent in India otherwise than as m em
bers of su ch staff ;]
Provided that the Central Governm ent m ay, if it considers it necessary or expedient
in the pu blic interest so to do, waive the condition relating to non-residence in India
as specified in this clau se in the case of any individu al who is em ployed in India for
designing, erection or com m issioning of m achinery or plant or su pervising
activities connected with su ch designing, erection or com m issioning.
Explan ation .For the pu rposes of this clau se, tech n icia n m eans a person
having specialised knowledge and experience in
(i) constru ctional or m anu factu r ing operations, or in m ining or in the
generation of electricity or any other form of power, or
(ii) agricu ltu re, anim a l hu sbandry, dairy farm ing, deep sea fishing or ship
bu ild ing, or
(iii) su ch other field as the Central Governm ent m ay, having regard to availability
of Indians having specialised knowledge and experience therein, the needs of
the cou ntry and other relevant circu m stances, by notification in the Official
Gazette, specify,
who is em ployed in India in a capacity in which su ch specialised knowledge and
experience are actu ally u tilised ;
98. Om itted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its om ission, su b-clau se (i), as
su bstitu ted by the Taxation Laws (Am endm ent) Act, 1970, w.r.e.f. 1-4-1962 and am ended
by the Finance (No. 2) Act, 1977, w.r.e.f. 1-4-1972 and the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999, read as u nder :
(i) su bject to su ch conditions as the Central Governm ent m ay prescribe, passage
m oneys or the valu e of any free or concessional passage received by or du e to su
ch individu a l
(a) from his em ployer, for him self, his spou se and children, in connection with
his proceeding on hom e leave ou t of India ;
(aa) [* * *]
(b) ) from his em ployer or form er em ployer for him self, his spou se and
children, in connection with his proceeding to his hom e cou ntry ou t of
India after retirem ent from service in India or after the term ination of su
ch ser vice ;
99. Su bstitu ted for su b-clau ses (ii) to (v ) by the Finance Act, 1988, w.e.f. 1-4-1989.
1 .45 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
S. 10(6)
(iii)
to (v ) [Sub-clause (ii) substitu ted for sub-clauses (ii) to
(v) by th e Fin an ce Act, 1988, w .e.f. 1-4-1989;]
(vi) the rem u neration received by him as an em ployee of a foreign
enterprise for services rendered by him du r ing his stay in India,
provided the following conditions are fu lfilled
(a) the foreign enterprise is not engaged in any trade or bu siness
in India ;
(b) his stay in India does not exceed in the aggregate a period of
ninety days in su ch previou s year ; and
(c) su ch rem u neration is not liable to be dedu cted from
the incom e of the em ployer chargeable u nder this Act ;
(via)
(vii)
[Om itted by th e Fin an ce Act, 1993, w .e.f. 1-4-1993;]
(viia)
1. Prior to its om ission, su b-clau se (via), as inserted by the Taxation Laws (Am endm ent)
Act, 1975, w.e.f. 1-10-1975, read as u nder :
(v ia) the rem u neration received by him as an em ployee of, or a consu ltant to, an
institu tion or association or a body established or form ed ou tside India solely for
philanthropic pu rposes, for services rendered by him in India in connection with
su ch pu rposes ; provided that su ch institu tion or association or body and the
pu rposes for which his services are rendered in India are approved by the Central
Governm ent ;
2. Prior to om ission, su b-clau se (vii) was am ended by the Finance Act, 1964, w.e.f. 1-4-1964,
Finance Act, 1965, w.e.f. 1-4-1965 and Taxation Laws (Am endm ent) Act, 1970, w.e.f. 14-1971.
3. Prior to its om ission, su b-clau se (viia), as inserted by the Taxation Laws (Am endm ent)
Act, 1970, w.e.f. 1-4-1971 and la ter on am ended by the Direct Taxes (Am endm ent) Act,
1974, w.r.e.f. 1-4-1973, Finance Act, 1979, w.e.f. 1-6-1979, Finance Act, 1988, w.e.f. 1-41988, Finance Act, 1992, w.e.f. 1-6-1992 and Finance Act, 1993, w.e.f. 1-4-1993, read as u
nder : (v iia) where su ch individu al renders services as a technician in the em ploym
ent of the Governm ent or of a local au thority or of any corporation set u p u nder any
special
law or of any su ch institu tion or body established in India for carrying on scientific
research as is approved for the pu rposes of this su b-clau se by the prescribed
au thority or in any bu siness carried on in India and the individu al was not resident
in India in any of the fou r financial years im m ediately preceding the financial year
in which he arrived in India,
the rem u neration for su ch services du e to or received by him , which is
chargeable u nder the head Salaries, to the extent m entioned below, nam ely :
(I) where su ch services com m ence from a date after the 31st day of March,
1971 bu t before the 1st day of April, 1988,
(A) su ch rem u neration du e to or received by him du r ing the period of
twenty-fou r m onths com m encing from the date of his arrival in
India, in so far as su ch rem u neration does not exceed an am ou nt
calcu la ted at the rate of fou r thou sand ru pees per m onth, and where
the tax on the excess, if any, of su ch rem u neration for the period
aforesaid over the am ou nt so calcu la ted is paid to the Central
Governm ent by the em - ployer [which tax, in the case of an em ployer,
being a com pany, m ay be paid notwithstanding anything contained in
section 200 of the Com panies Act, 1956 (1 of 1956)], also the tax so
paid by the em ployer ; and
S. 10(6)
I.T. ACT, 1961
1 .46
(viii) any incom e chargeable u nder the head Salar ies received by
or du e to any su ch individu al being a non-resident as rem u
neration for services rendered in connection with his em ploym
ent on a foreign ship where his total stay in India does not
exceed in the aggregate a period of ninety days in the previou s
year ;
(ix)

(Con td. from p.
1.45)
(B) where he continu es, with the approval of

the Central Governm ent obtained before
the 1st day of October of the relevant
assessm ent year, to rem ain in em ploym
ent in India after the expiry of the period of
twenty-fou r m onths aforesaid and the
tax on his incom e chargeable u nder the
head Salaries is paid to the Central
Governm ent by the em ployer [which tax,
in the case of an em ployer, being a com
pany, m ay be paid notwithstanding
anything contained in section 200 of the
Com panies Act, 1956 (1 of 1956)], the tax
so paid by the em ployer for a period not
exceeding twenty-fou r m onths next
following the expiry of the fir st-m
entioned twenty-fou r m onths ;
(II) where su ch services com m ence from a date after the 31st day of March, 1988
bu t before the 1st day of April, 1993, and tax on his incom e chargeable u nder
the head Salaries is paid to the Central Governm ent by the em ployer [which
tax, in the case of an em ployer, being a com pany, m ay be paid notwithstanding anything contained in section 200 of the Com panies Act, 1956 (1 of
1956)], the tax so paid by the em ployer for a period not exceeding forty-eight
m onths com m encing from the date of his arrival in India :
Provided that the Central Governm ent m ay, if it considers it necessary or expedient
in the pu blic interest so to do, waive the condition relating to non-residence in India
as specified in this su b-clau se in the case of any individu al who is em ployed in
India for designing, erection or com m issioning of m achinery or plant or su
pervising activities connected with su ch designing, erection or com m issioning.
Explan ation .For the pu rposes of this su b-clau se, techn icia n m eans a person
having specialised knowledge and experience in
(i) constru ctional or m anu factu r ing operations, or in m ining or in the
generation of electricity or any other form of power, or
(ii) agricu ltu re, anim a l hu sbandr y, dairy farm ing, deep sea fishing or ship
bu ild ing, or
(iii) su ch other field as the Central Governm ent m ay, having regard to the
availability of Indians having specialised knowledge and experience therein,
the needs of the cou ntry and other relevant circu m stances, by notification
in the Official Gazette, specify,
who is em ployed in India in a capacity in which su ch specialised knowledge and
experience are actu ally u tilised ;
4. Prior to its om ission, su b-clau se (ix), as inserted by the Finance Act, 1964, w.e.f. 1-4-1964,
read as u nder :
(ix ) any incom e chargeable u nder the head Salaries received by or du e to him du r
ing the thirty-six m onths com m encing from the date of his arrival in India for
service rendered as a professor or other teacher in a University or other edu
cational institu tion, and where any su ch individu al continu es to rem ain in em
ploym ent in India after the expiry of the thirty-six m onths aforesaid and the tax
on his incom e chargeable u nder the head Salaries is paid by the University or
other edu cational institu tion concerned to the Central Governm ent, the tax so
paid for a period not exceeding twenty-fou r m onths following the expiry of the
th ir ty-six m onths aforesaid, provided in either case the following conditions are
fu lfilled, nam ely :
1 .47 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
S. 10(6A)
(x) 5[Om itted by th e Fin an ce (No. 2) Act, 1998, w .e.f. 1-4-1999;]

6
[(xi) the rem u neration

Governm ent of a
connection with his
in any u ndertaking
received by him as an em ployee of the

foreign State du r ing his stay in India in
training in any establishm ent or office of, or
owned by,
(i) the Governm ent ; or

(ii) any com pany in which the entire paid-u p share capital is held
by the Central Governm ent, or any State Governm ent or
Governm ents, or partly by the Central Governm ent and
partly by one or m ore State Governm ents ; or
(iii) any com pany which is a su bsidiary of a com pany
referred to in item (ii) ; or
(iv) ) any corporation established by or u nder a Central, State
or Provincial Act ; or
(v) ) any society registered u nder the Societies Registration
Act, 1860 (14 of 1860), or u nder any other corresponding
law for the tim e being in force and wholly financed by the
Central Governm ent, or any State Governm ent or State
Govern- m ents, or partly by the Central Governm ent and
partly by one or m ore State Governm ents ;]
7
[(6A) where in the case of a foreign com pany deriving incom e by way
of royalty or fees for technical services received from Governm ent
or an Indian concern in pu rsu ance of an agreem ent m ade by
the foreign com pany with Governm ent or the Indian concern after
(i) su ch individu al was not resident in any of the fou r financial years im m
ediately preceding the financial year in which he arrived in India ; and
(ii) his contract of service is approved by the Central Governm ent
(a) on or before the 1st day of October, 1964, in the case of a professor or
other teacher whose service com m enced before the 1st day of April,
1964 ;
(b) ) before the com m encem ent of his service or within one year of su
ch com m encem ent, in any other case ;
5. Prior to its om ission, su b-clau se (x), as inserted by the Finance Act, 1964, w.e.f. 1-4-1964,
read as u nder :
(x ) any su m du e to or received by him , du r ing the twenty-fou r m onths com m
encing from the date of his arrival in India, for u ndertaking any research work
in India, provided the following conditions are fu lfilled, nam ely :
(a) the research work is u ndertaken in connection with a research schem e
approved in this behalf by the Central Governm ent on or before the 1st day
of October of the relevant assessm ent year ; and
(b) ) su ch su m is payable or paid directly or indirectly by the Governm ent of
a foreign State or any institu tion or association or other body
established ou tside India ;
S. 10(6BB)
1 .48
I.T. ACT, 1961
the 31st day of March, 1976 8 [bu t before the 1st day of Ju ne, 2002]
9
[and,
(a) where the agreem ent relates to a m atter inclu ded in the indu
strial policy, for the tim e being in force, of the Governm ent of
India, su ch agreem ent is in accordance with that policy ; and
(b) in any other case, the agreem ent is approved by the Central
Governm ent,
the tax on su ch incom e is payable, u nder the term s of the agreem
ent, by Governm ent or the Indian concern to the Central Governm
ent, the tax so paid].
Explan ation .For the pu rposes of this clau se
10
[and clau se (6B)],
(a) fees for technical services shall have the sam e m eaning as in
Explan ation 2 to clau se (vii) of su b-section (1) of section 9 ;
(b) foreign com panyshallhave the sam e m eaning as in section 80B ;
(c) roya lty shall have the sam e m eaning as in Explan ation 2
to clau se (vi) of su b-section (1) of section 9;]
10
12
[(6B) where in the case of a non-resident (not being a com pany) or of a

foreign com pany deriving incom e (not being salary, royalty or fees for
technical services) from Governm ent or an Indian concern in pu r su ance of an agreem ent entered into 11 [before the 1st day of Ju ne,
2002] by the Central Governm ent with the Governm ent of a foreign
State or an international organisation, the tax on su ch incom e is
payable by Governm ent or the Indian concern to the Central Governm ent u nder the term s of that agreem ent or any other related
agree- m ent approved 11 [before that date] by the Central Governm
ent, the tax so paid ;]
[(6BB) where in the case of the Governm ent of a foreign State or a foreign
enterprise deriving incom e from an Indian com pany engaged in the
bu siness of operation of aircraft, as a consideration of acqu ir ing an
aircraft or an aircraft engine (other than paym ent for providing
spares, facilities or services in connection with the operation of leased
aircraft) on lease u nder 13 [an agreem ent entered into after the 31st
day of March, 1997 bu t before the 1st day of April, 1999, or entered

9. Su bstitu ted for and approved by the Central Governm ent, the tax on su ch incom e is
payable, u nder the term s of su ch agreem ent, by Governm ent or the Indian concern to
the Central Governm ent, the tax so paid by the Finance Act, 1992, w.e.f. 1-6-1992.
11. Inserted by the Finance Act, 2002, w.e.f. 1-42003. 12. Inserted by the Finance Act, 1997, w.e.f.
1-4-1998.
13. Su bstitu ted for an agreem ent entered after the 31st day of March, 1997 (bu t before
the 1st day of April, 1999) and approved by the Central Governm ent in this behalf by
the Finance (No. 2) Act, 2004, w.e.f. 1-4-2006. Words 30th day of Septem ber, 2005 su
bstitu ted for 31st day of March, 2005 by the Finance Act, 2005, w.e.f. 1-4-2006.
Earlier the bracketed words were am ended by the Finance Act, 1999, w.e.f. 1-4-2000.
1 .49
S. 10(8A)
into after the 14[31st day of March, 15[2007]] and approved by the
Central Governm ent in this behalf] and the tax on su ch incom e is
payable by su ch Indian com pany u nder the term s of that agreem
ent to the Central Governm ent, the tax so paid.
Explan ation .For the pu rposes of this clau se, the expression
foreign enterprise m eans a person who is a non -resident;]
16
[(6C) any incom e arising to su ch foreign com pany, as the Central Governm ent m ay, by notification 17 in the Official Gazette, specify in this
behalf, by way of 18 [royalty o r ] fees for technical services received in
pu rsu ance of an agreem ent entered into with that Governm ent for
providing services in or ou tside India in projects connected with
secu r ity of India ;]
(7) any allowances or perqu isites paid or allowed as su ch ou tside India
by the Governm ent to a citizen of India for rendering service ou
tside India ;
(8) in the case of an individu al who is assigned to du ties in India in
connection with any co-operative technical assistance program m
es and projects in accordance with an agreem ent entered into
by the Central Governm ent and the Governm ent of a foreign
State (th e ter m s w h er eof pr ovid e for th e exem ption given b
y th is clau se)
(a) the rem u neration received by him directly or indirectly from the
Governm ent of that foreign State for su ch du ties, and
(b) any other incom e of su ch individu al which accru es or arises
ou tside India, and is not deem ed to accru e or arise in India,
in respect of which su ch individu al is requ ired to pay any
incom e or social secu r ity tax to the Governm ent of that foreign
State ;
19
[(8A) in the case of a consu ltant

(a) any rem u neration or fee received by him or it, directly or
indirectly, ou t of the fu nds m ade available to an international
organisation [hereafter referred to in this clau se and clau se (8B)
as the agency] u nder a technical assistance grant agreem ent
between the agency and the Governm ent of a foreign State ; and
(b) any other incom e which accru es or arises to him or it ou tside
India, and is not deem ed to accru e or arise in India, in respect of
which su ch consu ltant is requ ired to pay any incom e or
social secu r ity tax to the Governm ent of the cou ntry of his or
its origin.
14. Su bstitu ted for 30th day of Septem ber, 2005 by the Taxation Laws (Am endm ent)
Act, 2005, w.e.f. 1-4-2006.
15. Su bstitu ted for 2006 by the Finance Act, 2006, w.e.f. 1-4-2007.
17. For notified com panies, see Taxm ann s Master Gu ide to Incom e-tax
Act. 18. Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
S. 10(9)
I.T. ACT, 1961
1 .50
Explan ation .In this clau se, consu ltant m eans

(i) any individu al, who is either not a citizen of India or, being a
citizen of India, is not ordinarily resident in India ; or
(ii) any other person, being a non-resident,
engaged by the agency for rendering technical services in India in
connection with any technical assistance program m e or project,
provided the following conditions are fu lfilled, nam ely :
(1) the technical assistance is in accordance with an agreem ent
entered into by the Central Governm ent and the agency ; and
(2) the agreem ent relating to the engagem ent of the consu ltant is
approved by the prescribed au thority 20 for the pu rposes of this
clau se ;
(8B) in the case of an individu al who is assigned to du ties in India in
connection with any technical assistance program m e and project in
accordance with an agreem ent entered into by the Central Governm ent and the agency
(a) the rem u neration received by him , directly or indirectly, for su
ch du ties from any consu ltant referred to in clau se (8A) ; and
(b) any other incom e of su ch individu al which accru es or arises
ou tside India, and is not deem ed to accru e or arise in India,
in respect of which su ch individu al is requ ired to pay any incom
e or social secu r ity tax to the cou ntry of his origin, provided
the following conditions are fu lfilled, nam ely :
(i) the individu al is an em ployee of the consu ltant referred
to in clau se (8A) and is either not a citizen of India or,
being a citizen of India, is not ordinarily resident in India ;
and
(ii) the contract of service of su ch individu al is approved by the
prescribed au thority 20 before the com m encem ent of his
service ;]
(9) the incom e of any m em ber of the fam ily of any su ch individu al as is
referred to in clau se (8) 21[or clau se (8A) or, as the case m ay be, clau
se (8B)] accom panying him to India, which accru es or arises ou
tside India, and is not deem ed to accru e or arise in India, in respect of
which su ch m em ber is requ ired to pay any incom e or social secu r
ity tax to the Governm ent of that foreign State 21 [or, as the case m
ay be, cou ntry of origin of su ch m em ber];
20. Th e pr escr ib ed a u th or ity u n d er r u le 16B is Ad d it ion a l Secr eta r y, Depa r tm en t

of Econom ic Affairs in Ministry of Finance, Governm ent of India in concu r rence with
Mem ber (Incom e-tax), CBDT.

Income Tax Act 1961

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Income Tax Act 1961

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INCOME-TAX ACT, 1961*

[AS AMENDED BY FINANCE ACT, 2008]

An Act to con solidate an d am en d th e law relatin g

(1) This Act m ay be called the Incom e-tax Act, 1961.

It extends to the whole of India.

In this Act, u nless the context otherwise requ ires,

I.T. ACT, 1961

a gricu ltu ral incom e7 m eans 8

or a cantonm ent board and which has a popu la tion of

I.T. ACT, 1961

(7) a ssessee22 m eans a person by whom 23 [any tax] or any other su m

(b) every person who is deem ed to be an assessee u nder any

[(9A) Assistan t Com m issionerm eans a person appointed to be an Assistant

[(9B) Assistan t Director m eans a person appointed to be an Assistant

I.T. ACT, 1961

Boa rd m eans the 36 [Central Board of Direct Taxes constitu ted

(14) capital asset m eans property 4 1 of any kind held by an assessee,

[(ii) person al effects 43, th at is to say, m ovable property (in cludin g

(c) draw in gs; (d

[(iii) agricu ltu ral land

in India, not being land situ ate

(a) in any area which is com prised within the ju r isdiction of a

I.T. ACT, 1961

The following clause (15) shall be substituted for clause (15) of

[(15A ) Chief Com m issioner m eans a person appointed to be a

(i) any Indian com pany, or

Indian Incom e-tax Act, 1922 (11 of 1922), or which is or was

I.T. ACT, 1961

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

[(19A ) Depu ty Com m issioner m eans a person appointed to be a Depu

I.T. ACT, 1961

so m u ch of the am ou nts of general or m u ltipu rpose

[(19C) Depu ty Director m eans a person appointed to be a Depu ty

d irector, m anager and m anaging a gen t, in relation to a com

[(21) Director General or Director m eans a person appointed to be a

d ividend 89 inclu des

(a) any distribu tion 89 by a com pany of accu m u lated

I.T. ACT, 1961

in which su ch shareholder is a m em ber or a partner and in which

[Explan ation 3.For the pu rposes of this clau se,

(a) con cern m eans a Hindu u ndivided fam ily, or a firm or an

[ [(22B)] fair m arket valu e, in relation to a capital asset, m eans

firm , par tner and par tnership have the m eanings

I.T. ACT, 1961

[(23B) fr inge benefits m eans any fr inge benefits referred to in

(24) incom e10 inclu des 10

Explan ation .For th e pu r poses of th is su b -cla u se, tr u

[(va) any su m chargeable to incom e-tax u nder clau se (iiia) of section

[(vb) any su m chargeable to incom e-tax u nder clau se (iiib) of section

[(vc) any su m chargeable to incom e-tax u nder clau se (iiic) of section

[(ve) any su m chargeable to incom e-tax u nder clau se (v ) of section

I.T. ACT, 1961

[Explan ation .For the pu rposes of this su b-clau se,

[(x) any su m received by the assessee from his em ployees as

[clau se (va)] of section 28;]

[(xiii) any su m referred to in clau se (v ) of su b-section (2) of section 56;]

[(xiv ) any su m referred to in clau se (vi) of su b-section (2) of section 56;]

[(xii) any su m referred to in

Inserted by the Finance Act, 2006, w.e.f. 1-4-2007.

[(25A ) Ind ia m eans the territory of India as referred to in article 1 of the

I.T. ACT, 1961

bu siness referred to in su b-section (4) of section 80-IA or su b-section

(28D) Join t Director m eans a person appointed to be a Joint Director of