Act 011 of 1922 : Income Tax Act, 1922

Section 1. Short title, extent and commencement

1. Short title, extent and commencement.-(1) This Act may be called the Indian Income Tax Act, 1922.

¹[(2) It extends to the whole of India.]

(3) It shall come into force on the first day of April, 1922.

1 Substituted by Act 41 of 1954, Section 2 and Schedule, for the former sub-section.

Section 2. Definitions

2. Definitions.-In this Act, unless there is anything repugnant in the subject or context,-

(1) "agricultural income" means-

(a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land-revenue in ¹[the taxable territories] or subject to a local rate assessed and collected by officers of the Government as such;

(b) any income derived from such land by-

(i) agriculture, or

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

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

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

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

²[(2) "assessee" means a person by whom income-tax or any other sum of money is payable under this Act, and includes every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the loss sustained by him or of the amount of refund due to him;]

(3) "³[Appellate] Assistant Commissioner" means a person appointed to be an ⁴[Appellate] Assistant Commissioner of Income-tax under Section 5;

⁵[* * *]

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

⁶[(4-A) "capital asset" means property of any kind ⁷[* * *] held by an assessee, whether or not connected with his business, profession or vocation, but does not include-

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

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

⁸[(iii) any land from which the income derived is agricultural income;]

⁹[(4-B) "the Central Board of Revenue" means the Central Board of Revenue constituted under the Central Board of Revenue Act, 1924 (4 of 1924);]

(5) "Commissioner" means a person appointed to be a Commissioner of Income-tax under Section 5;

¹⁰[(5-A) "company" means-

(i) any Indian company, or

(ii) any association, whether incorporated or not and whether Indian or non-Indian, which is or was assessable, or was assessed, as a company for the assessment for the year ending on the 31st day of March, 1948, or which is declared by general or special order of the Central Board of Revenue to be a company for the purposes of this Act;]

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

¹²[(6) "Director of Inspection" means a person appointed to be a Director of Inspection under Section 5, and includes a person appointed to be an Additional Director of Inspection, a Deputy Director of Inspection or an Assistant Director of Inspection;]

¹³[(6-A) "dividend" includes-

(a) any distribution by a company of accumulated profits, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company;

(b) any distribution by a company of debentures ¹⁴[debenture-stock or deposit certificates in any form, whether with or without interest,] to the extent to which the company possesses accumulated profits, whether capitalised or not;

¹⁵[(c) any distribution made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not;]

¹⁶[* * *]

(d) any distribution by a company on the reduction of its capital to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not;

¹⁷[(e) any payment by a company, not being a company in which the public are substantially interested within the meaning of Section 23-A, of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder or any payment by any such company on behalf or for the individual benefit of a shareholder, to the extent to which the company in either case possesses accumulated profits;

but "dividend" does not include-

(i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets;

(ii) any advance or loan made to a shareholder by a company in the ordinary course of its business where the lending of money is a substantial part of the business of the company;

(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off.

Explanation.-The expression "accumulated profits", wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948] ¹⁸[and before the 1st day of April, 1956;]

¹⁹[(6-AA) "earned income" means any income of an assessee who is an individual, Hindu undivided family, unregistered firm or other association of persons not being a company, a local authority, a registered firm or a firm ²⁰[assessed] under clause (b) of sub-section (5) of Section 23-

(a) which is chargeable under the head "Salaries"; or

(b) which is chargeable under the head "Profits and gains of business, profession or vocation" where the business, profession or vocation is carried on by the assessee or, in the case of a firm, where the assessee is a partner actively engaged in the conduct of the business, profession or vocation; or

(c) which is chargeable under the head "Other sources" if it is immediately derived from personal exertion or represents a pension or superannuation or other allowance given to the assessee in respect of his past services or the past services of any deceased person;

and includes any such income which, though it is the income of another person, is included in the assessee's income under the provisions of this Act, but does not include any such income which is exempt from tax under sub-section (2) of Section 14 or under a notification issued under Section 60;]

²¹[(6-B) "firm", "partner" and "partnership" have the same meanings respectively as in ²²[the Indian Partnership Act, 1932 (9 of 1932)]: ²³[provided that the expression "partner" includes any person who being a minor has been admitted to the benefits of partnership];]

²⁴[(6-C) "income" includes-

(i) dividend;

(ii) the value of any perquisite or profit in lieu of salary taxable under Section 7;

(iii) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by any other person who has a substantial interest in the company (that is to say, who is concerned in the management of the business of the company, being the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than twenty per cent. of the voting power), and any sum paid by any such company in respect of any obligation which but for such payment would have been payable by the director or other person aforesaid;

(iv) any sum deemed to be profits under the second proviso to clause (vii) of sub-section (2) of Section 10, and any sum deemed to be profits and gains under sub-section (2-A) of that section or under sub-section (5) of Section 12;

(v) any sum deemed to be profits and gains of business, profession or vocation under sub-section (5-A) of Section 10;

(vi) any capital gain chargeable under Section 12-B;

(vii) the profits and gains of any business of insurance carried on by a mutual insurance association or by a co-operative society computed in accordance with Rule 9 in the Schedule;]

²⁵[(6-D) "Inspecting Assistant Commissioner" means a person appointed to be an Inspecting Assistant Commissioner of Income-tax under Section 5;]

²⁶[(6-E) "Inspector of Income-tax" means a person appointed to be an Inspector of Income-tax under Section 5;]

(7) "Income-tax Officer" means a person appointed to be an Income-Tax Officer under Section 5;

²⁷[(7-A) "Indian Company" means a company as defined in the Indian Companies Act, 1913 (7 of 1913), ²⁸and includes a company formed and registered under any law in force in the merged territories or ²⁹[in the territories which, immediately before the 1st November, 1956, were comprised in any Part B State] other than the State of Jammu and Kashmir before the extension thereto of the Indian Companies Act, 1913, and in the case of the State of Jammu and Kashmir, any company formed and registered under any law in force in that State:

Provided that the registered office of the company in all cases is in the taxable territories.]

(8) "Magistrate" means a Presidency Magistrate or a Magistrate of the first class, or a Magistrate of the second class specially empowered by ³⁰[the Central Government] ³¹[or in the State of Jammu and Kashmir, the State Government] to try offences against this Act;

³²[(8-A) "manager" and "managing agent" have the meanings respectively assigned to them in the ³³Indian Companies Act, 1913;]

(9) "person" includes a Hindu undivided family ³⁴[and a local authority];

(10) "prescribed" means prescribed by rules made under this Act;

³⁵[(11) "previous year" means-

(i) in respect of any separate source of income, profits and gains-

(a) the twelve months ending on 31st day of March next preceding the year for which the assessment is to be made, or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then, at the option of the assessee, the year ending on the date to which his accounts have been so made up:

Provided that where in respect of a particular source of income, profits and gains an assessee has once been assessed, or where in respect of a business, profession or vocation newly set up an assessee has exercised the option under sub-clause (c) he shall not, in respect of that source or, as the case may be, business, profession or vocation, exercise the option given by this sub-clause so as to vary the meaning of the expression "previous year" as then applicable to him except with the consent of the Income-tax Officer and upon such conditions as the Income-tax Officer may think fit to impose; or

(b) in the case of any person, business or company or class of person, business or company, such period as may be determined by the Central Board of Revenue or by such authority as the Board may authorise in this behalf; or

(c) where a business, profession or vocation has been newly set up in the financial year preceding the year for which assessment is to be made, the period from the date of the setting up of the business, profession or vocation to the 31st day of March next following or to the last days of the period determined under sub-clause (b), or, if the accounts of the assessee are made up in respect of a period not exceeding twelve months from the date of the setting up of the business, profession or vocation and the case is not one for which a period has been determined under sub-clause (b), then, at the option of the assessee, the period from the date of the setting up of the business, profession or vocation to the date to which his accounts have been so made up:

Provided that when the date to which the accounts have been so made up does not fall between the setting up of the business, profession or vocation and the next following 31st day of March inclusive, it shall be deemed that there is no previous year for the said assessment year and the previous year which would otherwise have been determined according to the option exercised by the assessee shall be deemed to be the previous year for the next succeeding assessment year:

(ii) in respect of the share of the income, profits and gains of a firm where the assessee is a partner in the firm and the firm has been assessed as such, the period as determined for the assessment of the income, profits and gains of the firm;]

(12) "principal officer," used with reference to a local authority or a company or any other public body or ³⁶[any] association, means-

(a) the secretary, treasurer, manager or agent of the authority, company, body or association, or

(b) any person connected with the authority, company, body or association upon whom the Income-tax Officer has served a notice of his intention of treating him as the principal officer thereof;

(13) "public servant" has the same meaning as in the Indian Penal Code (45 of 1860);

³⁷[(14) "registered firm" means a firm registered under the provisions of Section 26-A;]

³⁸[(14-A) "taxable territories" means-

(a) as respects any period before the 15th day of August, 1947, the territories then referred to as British India, but including Berar,

(b) as respects any period after the 14th day of August, 1947, and before the 26th day of January, 1950, the territories for the time being comprised in the Provinces of India, but excluding the merged territory of Cooch-Behar,

(c) as respects any period after the 25th day of January and before the 1st day of April, 1950, the territories comprised in Part A States, but excluding the merged territory of Cooch-Behar, and the territories comprised in Part C States, but excluding the State of Manipur, Tripura and Vindhya Pradesh,

(d) as respects any period after the 31st day of March, 1950, and before the 13th day of April, 1950, the territory of India excluding the State of Jammu and Kashmir and the Patiala and East Punjab States Union, ³⁹[* * *]

(e) as respects any period after the 12th day of April, 1950, the territory of India excluding the State of Jammu and Kashmir,

⁴⁰[(f) as respects any period after the 12th day of April, 1954, the whole of the territory of India:]

Provided that the taxable territories shall be deemed to include-

(a) the merged territories-

(i) as respects any period after the 31st day of March, 1949, for any of the purposes of this Act, and

(ii) as respects any period included in the previous year, for the purpose of making any assessment for the year ending on the 31st day of March, 1950, or for any subsequent year; and

(b) the whole of the territory of India excluding the State of Jammu and Kashmir-

(i) as respects any period, for the purposes of Sections 4-A and 4-B,

(ii) as respects any period after the 31st day of March, 1950, for any of the purposes of this Act, and

(iii) as respects any period included in the previous year for the purpose of making any assessment of the year ending on the 31st day of March, 1951, or for any subsequent year,]

⁴¹[(c) the whole of the territory of India-

(i) as respects any period, for the purposes of Sections 4-A and 4-B;

(ii) as respects any period after the 31st day of March, 1954, for any of the purposes of this Act; and

(iii) as respects any period included in the previous year, for the purpose of making any assessment for the year ending on the 31st day of March, 1955, or for any subsequent year;]

(15) "total income" means total amount of income, profits and gains ⁴²[referred to in sub-section (1) of Section 4] computed in the manner laid down in ⁴³[this Act]; and ⁴⁴["total world income" includes all income, profits and gains wherever accuring or arising except income to which, under the provisions of sub-section (3) of Section 4, this Act ⁴⁵[does not apply and except any capital gain which is not includible in the total income of an assessee];]

(16) "unregistered firm" means a firm which is not a registered firm.

1 Substituted by the A.O. 1950, for "British India".

2 Substituted by Act 25 of 1953, Section 2, for the original clause (w.e.f. 1-4-1952).

3 Inserted by Act 7 of 1939, Section 2.

4 Inserted by Act 7 of 1939, Section 2.

5 Clause (3-A) inserted by G.G.O. 31, dated 10-12-1947 and amended by Act 67 of 1949, Section 8, omitted by the A.O. 1950

6 Inserted by Act 22 of 1947, Section 2.

7 The words "(other than agricultural land)" omitted by Act 44 of 1947, Section 2.

8 Added by Act 44 of 1947, Section 2.

9 Inserted by Act 4 of 1924, Section 4 and Schedule, as clause (4-A) and renumbered by Act 22 of 1947, Section 2 as clause (4-B).

10 Substituted by Act 14 of 1949, Section 8 (w.e.f. 1-4-1949), as clause (6) and renumbered by Act 25 of 1953, Section 2, as clause (5-A).

11 Inserted by Act 15 of 1955, Section 3.

12 Inserted by Act 25 of 1953, Section 2.

13 Inserted by Act 7 of 1939, Section 2.

14 Substituted by Act 15 of 1955, Section 3, for "or debenture stock".

15 Substituted by Act 18 of 1956, Section 3, for the former sub-clause (w.e.f. 1-4-1956).

16 The proviso and the word "and" at the end thereof omitted by Act 15 of 1995, Section 3.

17 Substituted by Act 15 of 1995, Section 3, for the two provisos (w.e.f. 1-4-1955).

18 Inserted by Act 77 of 1956, Section 2 (w.e.f. 1-4-1957).

19 Inserted by Ordinance 9 of 1945, Section 2 (for indefinite period from 28-4-1945).

20 Substituted by Act 18 of 1956, Section 3, for "treated as registered" (w.e.f. 1-4-1956).

21 Inserted by Act 21 of 1930, Section 2 as clause (6-A) and renumbered by Act 7 of 1939, Section 2 as clause (6-B).

22 Substituted by Act 7 of 1939, Section 2, for "the Indian Contract Act, 1872".

23 Inserted by Act 7 of 1939, Section 2.

24 Substituted by Act 15 of 1955, Section 3, for clause (6-C).

25 Inserted by Act 7 of 1939, Section 2.

26 Inserted by Act 25 of 1953, Section 2.

27 Substituted by Act 41 of 1954, Section 2 and Schedule, for clause (7-A).

28 See now the Companies Act, 1956 (1 of 1956).

29 Substituted by the Adaptation of Laws (No. 3) Order, 1956, for "in any Part B State".

30 Substituted by the A.O. 1937, for "the L.G.".

31 Inserted by Act 41 of 1954, Section 2 and Schedule.

32 Inserted by Act 15 of 1955, Section 3, formerly clause (8-A), inserted by Act 67 of 1948, Section 8, was omitted by the A.O. 1950.

33 See now the companies Act, 1956 (1 of 1956).

34 Inserted by Act 7 of 1939, Section 2.

35 Substituted by Act 25 of 1953, Section 2, for clause (ii).

36 Inserted by Act 11 of 1924, Section 2.

37 Substituted by Act 21 of 1930, Section 2, for the former clause.

38 Substituted by Act 25 of 1950, Section 3, for clause (14-A) inserted by the A.O. 1950 (w.e.f. 1-4-1950).

39 The word "and" omitted by Act 41 of 1954, Section 2 and Schedule.

40 Sub-clause (f) inserted by Act 41 of 1954, Section 2 and Schedule.

41 Clause (c) inserted by Act 41 of 1954, Section 2 and Schedule.

42 Substituted by Act 7 of 1939, Section 2, for "from all sources to which this Act applies."

43 Substituted by Act 7 of 1939, Section 2, for "Section 16".

44 Added by Act 7 of 1939, Section 2.

45 Substituted by Act 22 of 1947, Section 2 for "does not apply; and".

Section 3. Charge of income-tax

Chapter 1 - Charge of Income-Tax

3. Charge of income-tax.-Where any ¹[Central Act] enacts that income-tax shall be charged for any year at any rate or rates ²[* * *] tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of ³[the total income] of the previous year of every ⁴[individual, Hindu undivided family, ⁵[company and local authority, and of every firm and other association of persons or the partners of the firm or members of the association individually]].

1 Substituted by the A.O. 1950 for "Act of the Central Legislature".

2 The words "applicable to the total income of an assessee" omitted by Act 7 of 1939, Section 3.

3 Substituted by Act 7 of 1939, Section 3, for "all income, profits and gains".

4 Substituted by Act 11 of 1924, Section 3, for "individual, company, firm and Hindu undivided family" (w.e.f. 1-4-1923).

5 Substituted by Act 7 of 1939, Section 3, for "company, firm and other association of individuals".

Section 4. Application of Act

4. Application of Act.-¹[(1) Subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived which-

(a) are reversed or are deemed to be received in ²[the taxable territories] in such year by or on behalf of such person; or

(b) if such person is resident in ³[the taxable territories] during such year-

(i) accrue or arise or are deemed to accrue or arise to him in ⁴[the taxable territories] during such year, or

(ii) accrue or arise to him without ⁵[the taxable territories] during such year, or

(iii) having accrued or arisen to him without ⁶[the taxable territories] before the beginning of such year and after the 1st day of April, 1933, are brought into or received in ⁷[the taxable territories] by him during such year, or

(c) if such person is not resident in ⁸[the taxable territories] during such year, accrue or arise or are deemed to accrue or arise to him in ⁹[the taxable territories] during such year:

Provided that there shall not be included in any assessment for the year ending on the 31st day of March, 1940, both the amount of the income, profits and gains referred to in sub-clause (ii) of clause (b) and the amount of the income, profits and gains referred to in sub-clause (iii) of clause (b) but only the greater of these two amounts:

Provided further that, in the case of a person not ordinarily resident in ¹⁰[the taxable territories], income, profits and gains which accrue or arise to him without ¹¹[the taxable territories] shall not be so included unless they are derived from a business controlled in or a profession or vocation set up in India or unless they are brought into or received in ¹²[the taxable territories] by him during such year:

¹³[* * *]

¹⁴[Provided further that, in the case of a person who was not resident in the taxable territories in two out of the three years immediately preceding the previous year, so much of the income, profits and gains referred to in sub-clause (iii) of clause (b) as accrued or arose to him without India, shall not be included in his total income chargeable in any year subsequent to the year ending on the 31st day of March, 1951, whether his assessment for that year has or has not been completed before the commencement of the Indian Income-tax (Amendment) Act, 1953:

Provided further that, in the case of a person resident in the taxable territories to whom the preceding proviso or paragraph 8 of the Part B States (Taxation Concessions) Order, 1950, does not apply, so much of the income, profits and gains referred to in sub-clause (iii) of clause (b) as accrued or arose to him without India and were not chargeable under this Act, unless brought into or received in the taxable territories, shall not be included in his total income if-

¹⁵[(i) such income, profits and gains are brought into or received in the taxable territories after the 2nd day of September, 1951, and the amount of income-tax, interest or penalty or other sum, if any, due from such person under this Act on the date of receipt of such income, profits and gains in the taxable territories is paid within three months of the receipt thereof in the taxable territories; and

(ii) in any case where such income, profits and gains are brought into or received in the taxable territories after the 2nd day of September, 1951, and before the 30th day of September, 1954, half of the amount of such income, profits and gains is invested within three months of the receipt thereof in the taxable territories in securities of the Central Government or of a State Government purchased through the Reserve Bank of India and kept with the said Bank for custody for a minimum period of two years.]]

Explanation 1.-Income, profits and gains accruing or arising without ¹⁶[the taxable territories] shall not be deemed to be received in or brought into ¹⁷[the taxable territories] within the meaning of this sub-section by reason only of the fact that they are taken into account in a balance sheet prepared in ¹⁸[the taxable territories].

Explanation 2.-Income which would be chargeable under the head "Salaries" if payable in ¹⁹[the taxable territories] ²⁰[* * *] shall be deemed to accrue or arise in ²¹[the taxable territories] wherever paid if it is earned in ²²[the taxable territories] ²³[but any pension payable outside India to a person residing permanently outside India shall not be deemed to accrue or arise in the taxable territories, if the pension is payable to a person referred to in Article 314 of the Constitution or to a person, who, having been appointed before the 15th August, 1947, to be a Judge of the Federal Court or of a High Court within the meaning of the Government of India Act, 1935, continues to serve on or after the commencement of the Constitution as a Judge in India].

²⁴[Explanation 2-A.-Income which would be chargeable under the head "Salaries" if payable in the taxable territories but which is paid without the taxable territories by the Government to a citizen of India for rendering service without the taxable territories shall be deemed to accrue or arise in the taxable territories.]

Explanation 3.-A dividend paid ²⁵[by an Indian company] without ²⁶[the taxable territories] shall be deemed to be income accruing and arising in ²⁷[the taxable territories] to the extent to which it has been paid out of profits subjected to income-tax in ²⁸[the taxable territories].

²⁹[Explanation 4.-For the purposes of sub-clause (iii) of clause (b) of sub-section (1), income, profits and gains accruing, or arising, in any of the ³⁰[merged territories] ³¹[or any of the Part B States ³²[* * *]] before the beginning of a previous year and after the 1st day of April, 1933, shall be deemed to be brought into, or received in ³³[the taxable territories] during such year if, and only if, they are brought into, or received in, any part of ³⁴[the taxable territories] other than that ³⁵[merged territory] ³⁶[or State] during such year.]

(2) For the purposes of sub-section (1), where a husband is not resident in ³⁷[the taxable territories], remittances received by his wife resident in ³⁸[the taxable territories] out of any part of his income which is not included in his total income shall be deemed to be income accruing in ³⁹[the taxable territories] to the wife].

(3) ⁴⁰[Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them]:-

⁴¹[(i) Subject to the provisions of clause (c) of sub-section (1) of Section 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto:

Provided that such income shall be included in the total income-

⁴²[(a) if it is applied to religious or charitable purposes without the taxable territories, but in the following cases, namely:-

(i) where the property is held under trust or other legal obligation created before the commencement of the Indian Income-tax (Amendment) Act, 1953 (25 of 1953) and the income therefrom is applied to such purposes without the taxable territories; and

(ii) where the property is held under trust or other legal obligation created after such commencement, and the income therefrom is applied without the taxable territories to charitable purposes which tend to promote international welfare in which India is interested,

the Central Board of Revenue may, by general or special order, direct that it shall not be included in the total income;]

(b) in the case of income derived from business carried on on behalf of a religious or charitable institution, unless the income is applied wholly for the purposes of the institution and either-

(i) the business is carried on in the course of the actual carrying out of a primary purpose of the institution, or

(ii) the work in connection with the business is mainly carried on by beneficiaries of the institution;

(c) if it is applied to purposes other than religious or charitable purposes or ceases to be accumulated or set apart for application thereto in which case it shall be deemed to be the income of the year in which it is so applied or ceases to be so accumulated or set apart.]

(ii) Any income of a religious or charitable institution derived from voluntary contributions and applicable solely to religious or charitable purposes.

⁴³[(ii-a) Any income of an association or institution established in India having as its object the control, supervision, regulation or encouragement in India of the games of cricket, hockey, football, tennis or such other games or sports as the Central Government may specify in this behalf from time to time by notification in the Official Gazette:

Provided that-

(i) the association or institution applies its income, or accumulates it for application, solely to the objects for which it is established;

(ii) no part of the income of the association or institution is distributed in any manner to its members except as grants to any association or institution affiliated to it; and

(iii) the association or institution is, for the time being, approved for the purpose of this clause by the Central Government by general or special order.]

(iii) The income of local authorities ⁴⁴[except income from a trade or business carried on by the authority so far as that income is not income arising from the supply of a commodity or service within its own jurisdictional area].

(iv) Interest on securities which are held by, or are the property of, any Provident Fund to which the Provident Funds Act, ⁴⁵[1925] (19 of 1925), applies, ⁴⁶[and any capital gains of the Fund arising from the sale, exchange or transfer of such securities] ⁴⁷[* * *].

⁴⁸[* * *]

⁴⁹[(vi) any special allowance or benefit, not being in the nature of an entertainment allowance or other perquisite within the meaning of sub-section (1) of Section 7, specifically granted to meet expenses wholly and necessarily incurred in the performance of the duties of an office or employment of profit, to the extent to which such expenses are actually incurred for that purpose.

⁵⁰[(vi-a) Subject to such conditions as the Central Government may prescribe,-

(a) passage moneys or the value of any free or concessional passage by or due to any person, not being a citizen of India, from his employer for himself, his wife and children, in connection with his proceeding on home leave out of India; and

(b) the value of any travel concession or assistance by or due to any person, being a citizen of India, from his employer for himself, his wife and children, in connection with his proceeding on leave to his home-town or village in India.]]

(vii) Any receipts ⁵¹[not being capital gains chargeable according to the provisions of Section 12-B and] not being receipts arising from business or the exercise of a profession, vocation or occupation, which are of a casual and non-recurring nature or are not by way of addition to the remuneration of an employee.

(viii) Agricultural income.

⁵²[(ix) Any income received by trustees on behalf of a recognised provident fund as defined in clause (a) of Section 58-A.]

⁵³[(x) Any income received-

(a) by the Ruler of an Indian State as his privy purse under Article 291 of the Constitution;

(b) by any ambassador, high commissioner, envoy, minister, charge d'affaires, commissioner, counsellor or the secretary, adviser or attache of an embassy, high commission, legation or commission of a foreign State as remuneration from such State for service in such capacity;

(c) by a consul de carriere, whether called a consul-general, consul, vice-consul, consular agent, pro-consul or by any other name, of a foreign State as remuneration from such State for service in such capacity;

(d) by a trade commissioner or other official representative in India of the Government of a foreign State (not holding office as such in an honorary capacity) as his remuneration, if the remuneration of the corresponding officials, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country;

(e) by a member of the staff of any of the officials referred to in clause (b) or clause (c) or clause (d) as his remuneration, if the member-

(i) is a subject of the country represented;

(ii) is not engaged in any business, profession, vocation or employment in India otherwise than as a member of such staff; and further, where the individual is a member of the staff of any official referred to in clause (d), if the country represented has made corresponding provisions for similar exemptions in the case of members of the staff of the corresponding officials of the Government.

(x-a) Any allowances or perquisites paid or allowed as such without the taxable territories by the Government to a citizen of India for rendering service without the taxable territories.]

(xi) With effect from the 2nd day of September, 1939, the income chargeable under the head "Salaries" of a Nepalese member of the Nepalese Military Force serving with His Majesty's Forces ⁵⁴[or, after the commencement of the Constitution, with the Armed Forces of the Union], or of any member of an Indian State Force so serving, and any other income accruing or arising without ⁵⁵[the taxable territories] which is received in or brought into ⁵⁶[the taxable territories] by any such member while the Force to which he belongs is serving with his Majesty's Forces ⁵⁷[or, after the commencement of the Constitution, with the Armed Forces of the Union].]

⁵⁸[(xi-a) Any income chargeable under the heads "interest on securities", "Income from Property" and "Income from other sources" of a registered Trade Union within the meaning of the Indian Trade Unions Act, 1926 (16 of 1926), formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen.]

⁵⁹[(xii) Any income chargeable under the head "Income from property" in respect of a building the erection of which is begun and completed between the 1st day of April, 1946 and 31st day of March, ⁶⁰[1956] (both dates inclusive), for a period of two years from the date of such completion.]

⁶¹[(xiii) Any income of a scientific research association which is, for the time being, approved for the purposes of clause (xiii) of sub-section (2) of Section 10 where the income is applied solely to the purposes of that association and accrues or arises after the 31st day of March, 1949.]

⁶²[(xiv) Any income received by an employee of a foreign enterprise, not engaged in any trade or business in the taxable territories, as remuneration for services rendered by him during the course of his stay in the taxable territories, where such stay does not exceed in the aggregate a period of ninety days in any year and where such remuneration is not liable to be deducted from the income, profits and gains chargeable under this Act.

⁶³[(xiv-a) Any income chargeable under the head "Salaries" received by or due to any person, not being a citizen of India, during the financial year in which he arrived in India and the financial year next following as remuneration for services rendered by him as a technician in the employment of Government or of a local authority or of any corporation set up under any special law or in any business carried on in India, in any case where such person was not resident therein in any of the four financial years immediately preceding the financial year in which he arrived in India:

Provided that where, during the financial year of arrival and the next following such person had been in India for a period of, or for periods amounting in all to, three hundred and sixty-five days or more, only so much of the income aforesaid as is received by or due to him for a period of three hundred and sixty-five days in all commencing from the date of his arrival shall not be included in his total income:

⁶⁴[Provided further that in the case of a person referred to in this clause whose contract of service was approved by the Central Government before the commencement of his service, this clause shall have effect as if for the words "during the financial year in which he arrived in India and the financial year next following", the words "during the thirty-six months commencing from the date of his arrival in India" had been substituted and as if the proviso immediately preceding had been omitted:

Provided also that where a person referred to in the proviso immediately preceding continues to remain in employment in India after the expiry of the thirty-six months commencing from the date of his arrival in India, the employer may, notwithstanding anything contained in Section 200 of the Companies Act, 1956 (1 of 1956), pay to the Central Government the tax on the income of such person chargeable under the head ‘Salaries’ for a period not exceeding twenty-four months following the expiry of the said thirty-six months and if the tax is so paid it shall not be included in his total income of the said period.]

⁶⁵[Explanation.-"Technician" means a person having specialised knowledge and experience in constructional or manufacturing operations, or in mining or in the generation or distribution of electricity or any other form of power, who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised.]]

⁶⁶[(xiv-b) Any income chargeable under the head "Salaries" received by or due to a person, not resident in the taxable territories and not being a citizen of India, as remuneration for services rendered in connection with his employment on a foreign ship where his total stay in the taxable territories does not exceed in the aggregate a period of ninety days in the previous year;]

(xv) Any income received as remuneration, whether directly or indirectly, from the Government of a foreign State by any person who is assigned to duties in India in connection with any co-operative technical assistance programmes and projects in accordance with an agreement entered into by the Central Government and the Government of that foreign State (the terms whereof provide for the exemption given by this clause) and any other income of such person or of the members of his family accompanying him to India, which accrues or arises without the taxable territories, and is not deemed to accrue or arise in the taxable territories, upon which such person or the members of his family are required to pay any income or social security tax to the Government of that foreign State.

(xvi) Any income from interest on, or from premium on the redemption of, any bonds issued by the Central Government under a loan agreement between the Central Government and the International Bank for Reconstruction and Development, ⁶⁷[or under a loan agreement between the Central Government and the Development Loan Fund of the United States of America,] or by any industrial undertaking or financial corporation in India under a loan agreement with the said Bank ⁶⁸[or Fund, as the case may be,] which is guaranteed by the Central Government, except where the holder of such bond is a person resident in the taxable territories.

⁶⁹[(xvii) Monthly payments on the 15 Year Annuity Certificates issued by or under the authority of the Central Government or such other annuity certificates issued by or under the authority of that Government as that Government may, by notification in the Official Gazette, specify in this behalf, to the extent to which the amounts of the certificates do not exceed in each case the maximum amount which is permitted to be invested therein;

(xvii-a) Interest on Treasury Savings Deposit Certificates, Post Office Cash Certificates, Post Office National Savings Certificates, National Plan Certificates, 12 year National Plan Savings Certificates and such other certificates issued by the Central Government as that Government may, by notification in the Official Gazette, specify in this behalf, and interest on deposits in Post Office Savings Banks, to the extent to which the amounts of such certificates or deposits do not exceed in each case the maximum amount which is permitted to be invested or deposited therein;]

⁷⁰[(xvii-b)Interest payable-

(i) by Government or a local authority on moneys borrowed by it from sources outside India from any person not resident in India or from any institution established outside India;

(ii) by an industrial undertaking in India on moneys borrowed by it under a loan agreement entered into with any such financial institution in a foreign country as may be approved in this behalf by the Central Government by general or special order;

(iii) by an industrial undertaking in India on any moneys borrowed or debt incurred by it in a foreign country in respect of the purchase outside India of capital plant and machinery in any case where the loan or debt is approved by the Central Government, having regard to its terms generally and in particular, to the terms of its repayment.]

(xviii) Interest on securities held by the Issue Department of the Central Bank of Ceylon constituted under the Ceylon Monetary Law Act, 1949.

(xix) Any daily allowance received by any person, by reason of his membership of the Dominion Legislature or of the Constituent Assembly or of Parliament or of any Provincial or State Legislature or of any Committee thereof.]

⁷¹[(xx) Any income from interest payable without the taxable territories on a loan issued for public subscription before the 1st day of April, 1938, where such interest is payable to a person not resident in the taxable territories, but such income shall not be excepted from being included in his total world income notwithstanding anything in clause (15) of Section 2.]

⁷²[(xxi) Any income of a member of a Scheduled Tribe, as defined in clause (25) of Article 366 of the Constitution, residing in any area specified in Part A or Part B of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution ⁷³[or in the Union Territories of Manipur and Tripura], provided that such member is not in the service of Government.

(xxii) Any payment made, whether in cash or in kind, by the Central Government or any State Government in pursuance of gallantry awards instituted or approved by the Central Government.]

In this sub-section "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility ⁷⁴[, but nothing contained in clause (i), ⁷⁵[* * *] or clause (ii) shall operate to exempt from provisions of this Act that part of the ⁷⁶[income from property held under a trust or other legal obligation for private religious purposes] which does not enure for the benefit of the public].

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Prior to amendment by Act 14 of 1961, Section 4 read as:

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4. Application of Act.-⁷⁷[(1) Subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived which-

(a) are reversed or are deemed to be received in ⁷⁸[the taxable territories] in such year by or on behalf of such person; or

(b) if such person is resident in ⁷⁹[the taxable territories] during such year-

(i) accrue or arise or are deemed to accrue or arise to him in ⁸⁰[the taxable territories] during such year, or

(ii) accrue or arise to him without ⁸¹[the taxable territories] during such year, or

(iii) having accrued or arisen to him without ⁸²[the taxable territories] before the beginning of such year and after the 1st day of April, 1933, are brought into or received in ⁸³[the taxable territories] by him during such year, or

(c) if such person is not resident in ⁸⁴[the taxable territories] during such year, accrue or arise or are deemed to accrue or arise to him in ⁸⁵[the taxable territories] during such year:

Provided that there shall not be included in any assessment for the year ending on the 31st day of March, 1940, both the amount of the income, profits and gains referred to in sub-clause (ii) of clause (b) and the amount of the income, profits and gains referred to in sub-clause (iii) of clause (b) but only the greater of these two amounts:

Provided further that, in the case of a person not ordinarily resident in ⁸⁶[the taxable territories], income, profits and gains which accrue or arise to him without ⁸⁷[the taxable territories] shall not be so included unless they are derived from a business controlled in or a profession or vocation set up in India or unless they are brought into or received in ⁸⁸[the taxable territories] by him during such year:

⁸⁹[* * *]

⁹⁰[Provided further that, in the case of a person who was not resident in the taxable territories in two out of the three years immediately preceding the previous year, so much of the income, profits and gains referred to in sub-clause (iii) of clause (b) as accrued or arose to him without India, shall not be included in his total income chargeable in any year subsequent to the year ending on the 31st day of March, 1951, whether his assessment for that year has or has not been completed before the commencement of the Indian Income-tax (Amendment) Act, 1953:

Provided further that, in the case of a person resident in the taxable territories to whom the preceding proviso or paragraph 8 of the Part B States (Taxation Concessions) Order, 1950, does not apply, so much of the income, profits and gains referred to in sub-clause (iii) of clause (b) as accrued or arose to him without India and were not chargeable under this Act, unless brought into or received in the taxable territories, shall not be included in his total income if-

⁹¹[(i) such income, profits and gains are brought into or received in the taxable territories after the 2nd day of September, 1951, and the amount of income-tax, interest or penalty or other sum, if any, due from such person under this Act on the date of receipt of such income, profits and gains in the taxable territories is paid within three months of the receipt thereof in the taxable territories; and

(ii) in any case where such income, profits and gains are brought into or received in the taxable territories after the 2nd day of September, 1951, and before the 30th day of September, 1954, half of the amount of such income, profits and gains is invested within three months of the receipt thereof in the taxable territories in securities of the Central Government or of a State Government purchased through the Reserve Bank of India and kept with the said Bank for custody for a minimum period of two years.]]

Explanation 1.-Income, profits and gains accruing or arising without ⁹²[the taxable territories] shall not be deemed to be received in or brought into ⁹³[the taxable territories] within the meaning of this sub-section by reason only of the fact that they are taken into account in a balance sheet prepared in ⁹⁴[the taxable territories].

Explanation 2.-Income which would be chargeable under the head "Salaries" if payable in ⁹⁵[the taxable territories] ⁹⁶[* * *] shall be deemed to accrue or arise in ⁹⁷[the taxable territories] wherever paid if it is earned in ⁹⁸[the taxable territories] ⁹⁹[but any pension payable outside India to a person residing permanently outside India shall not be deemed to accrue or arise in the taxable territories, if the pension is payable to a person referred to in Article 314 of the Constitution or to a person, who, having been appointed before the 15th August, 1947, to be a Judge of the Federal Court or of a High Court within the meaning of the Government of India Act, 1935, continues to serve on or after the commencement of the Constitution as a Judge in India].

¹⁰⁰[Explanation 2-A.-Income which would be chargeable under the head "Salaries" if payable in the taxable territories but which is paid without the taxable territories by the Government to a citizen of India for rendering service without the taxable territories shall be deemed to accrue or arise in the taxable territories.]

Explanation 3.-A dividend paid ¹⁰¹[by an Indian company] without ¹⁰²[the taxable territories] shall be deemed to be income accruing and arising in ¹⁰³[the taxable territories] to the extent to which it has been paid out of profits subjected to income-tax in ¹⁰⁴[the taxable territories].

¹⁰⁵[Explanation 4.-For the purposes of sub-clause (iii) of clause (b) of sub-section (1), income, profits and gains accruing, or arising, in any of the ¹⁰⁶[merged territories] ¹⁰⁷[or any of the Part B States ¹⁰⁸[* * *]] before the beginning of a previous year and after the 1st day of April, 1933, shall be deemed to be brought into, or received in ¹⁰⁹[the taxable territories] during such year if, and only if, they are brought into, or received in, any part of ¹¹⁰[the taxable territories] other than that ¹¹¹[merged territory] ¹¹²[or State] during such year.]

(2) For the purposes of sub-section (1), where a husband is not resident in ¹¹³[the taxable territories], remittances received by his wife resident in ¹¹⁴[the taxable territories] out of any part of his income which is not included in his total income shall be deemed to be income accruing in ¹¹⁵[the taxable territories] to the wife].

(3) ¹¹⁶[Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them]:-

¹¹⁷[(i) Subject to the provisions of clause (c) of sub-section (1) of Section 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto:

Provided that such income shall be included in the total income-

¹¹⁸[(a) if it is applied to religious or charitable purposes without the taxable territories, but in the following cases, namely:-