INCOME-TAX ACT, 1961 - International Center for …

1 INCOME-TAX ACT, 1961 *[43 OF 1961 ][AS AMENDED BY FINANCE ACT, 2008]An Act to consolidate and amend the law relating toincome-tax and super-taxBE it enacted by Parliament in the Twelfth Year of the Republic ofIndia as follows : CHAPTER IPRELIMINARYS hort title, extent and (1) This Act may be called the INCOME-TAX Act, 1961 .(2) It extends to the whole of India.(3) Save as otherwise provided in this Act, it shall come into force on the 1st dayof April, this Act, unless the context otherwise requires, 3[(1) advance tax means the advance tax payable in accordance with theprovisions of Chapter XVII-C;] applicability of the Act to State of Sikkim, see section 26 of the Finance Act, extension of Act to Continental Shelf of India, see Notification No. GSR 304(E), dated31-3-1983. For details, see Taxmann s Master Guide to INCOME-TAX effective date for the applicability of the Act in the State of Sikkim, see NotificationNo.

2 SO 148(E), dated 23-2-1989. For details, see Taxmann s Master Guide to by the Direct Tax Laws (Amendment) Act, 1987, 1-4-1989.*Amendments made by the Finance Act, 2008 notwithstanding the dates from which theycome into effect, have been printed in italics enclosed with bold square made by the Finance Act, 2007 coming into force from April 1, 2008 have alsobeen printed in italics but enclosed within medium square [5(1A)]6 agricultural income 7 means8 9[(a)any rent10 or revenue derived from land10 which is situated inIndia and is used for agricultural purposes;](b)any income derived from such land10 by (i)agriculture10; or(ii)the performance by a cultivator or receiver of rent-in-kind ofany process ordinarily employed by a cultivator or receiverof rent-in-kind to render the produce raised or received byhim fit to be taken to market10.

3 Or(iii)the sale by a cultivator or receiver of rent-in-kind of theproduce raised or received by him, in respect of which noprocess has been performed other than a process of thenature described in paragraph (ii) of this sub-clause ;(c)any income derived from any building owned and occupied bythe receiver of the rent or revenue of any such land, or occupiedby the cultivator or the receiver of rent-in-kind, of any land withrespect to which, or the produce of which, any process mentionedin paragraphs (ii) and (iii) of sub-clause (b) is carried on :9[Provided that (i)the building is on or in the immediate vicinity of the land, andis a building which the receiver of the rent or revenue or thecultivator, or the receiver of rent-in-kind, by reason of hisconnection with the land, requires as a dwelling house, or asa store-house, or other out-building, and(ii)the land is either assessed to land revenue in India or issubject to a local rate assessed and collected by officers of theGovernment as such or where the land is not so assessed toland revenue or subject to a local rate, it is not situated (A)in any area which is comprised within the jurisdictionof a municipality (whether known as a municipality,municipal corporation, notified area committee, townarea committee, town committee or by any other name)S.]

4 2(1A) ACT, as clause (1A) by the Direct Tax Laws (Amendment) Act, 1987, relevant case laws, see Taxmann s Master Guide to INCOME-TAX rules 7 and 8 for manner of computation of income which is partially agricultural andpartially from business. See also rules 7A & Finance Act, 1973 introduced for the first time a scheme of partially integratedtaxation of non-agricultural income with incomes derived from agriculture for thepurposes of determining the rate of INCOME-TAX that will apply to certain non-corporateassessees. The scheme is since continued by the Annual Finance Acts. The provisionsapplicable for the assessment year 2008-09 are contained in section 2(2)/2(13)(c) and PartIV of the First Schedule to the Finance Act, also Circular No. 310, dated 29-7-1981 and Circular No. 5/2003, dated 22-5-2003.

5 Fordetails, see Taxmann s Master Guide to INCOME-TAX by the Taxation Laws (Amendment) Act, 1970, meaning of the terms/expressions rent , revenue , derived , revenue derived fromland , such land , agriculture and market , see Taxmann s Direct Taxes Manual, Vol. a cantonment board and which has a population ofnot less than ten thousand according to the last preced-ing census of which the relevant figures have beenpublished before the first day of the previous year ; or(B)in any area within such distance, not being more thaneight kilometres, from the local limits of any municipal-ity or cantonment board referred to in item (A), as theCentral Government may, having regard to the extentof, and scope for, urbanisation of that area and otherrelevant considerations, specify in this behalf by notifi-cation in the Official Gazette11.

6 ]12[13[Explanation 1.] For the removal of doubts, it is hereby declaredthat revenue derived from land shall not include and shall be deemednever to have included any income arising from the transfer of anyland referred to in item (a) or item (b) of sub-clause (iii) of clause (14)of this section.]14[Explanation 2. For the removal of doubts, it is hereby declaredthat income derived from any building or land referred to in sub-clause (c) arising from the use of such building or land for any purpose(including letting for residential purpose or for the purpose of anybusiness or profession) other than agriculture falling under sub-clause (a) or sub-clause (b) shall not be agricultural income ;]The following Explanation 3 shall be inserted after Explanation 2in clause (1A) of section 2 by the Finance Act, 2008, 1-4-2009:Explanation 3. For the purposes of this clause, any income derivedfrom saplings or seedlings grown in a nursery shall be deemed to beagricultural income ;15[16[(1B)] amalgamation , in relation to companies, means the merger of oneor more companies with another company or the merger of two ormore companies to form one company (the company or companieswhich so merge being referred to as the amalgamating company orcompanies and the company with which they merge or which isformed as a result of the merger, as the amalgamated company) insuch a manner that (i)all the property of the amalgamating company or companiesimmediately before the amalgamation becomes the property ofthe amalgamated company by virtue of the amalgamation.

7 (ii)all the liabilities of the amalgamating company or companiesimmediately before the amalgamation become the liabilities ofthe amalgamated company by virtue of the amalgamation ; I - PRELIMINARYS. 2(1B) specified urban areas, refer Taxmann s Direct Taxes by the Finance Act, 1989, renumbered as Explanation 1 by the Finance Act, 2000, , by the Finance (No. 2) Act, 1967, as clause (1B) by the Direct Tax Laws (Amendment) Act, 1987, (iii)shareholders holding not less than 17[three-fourths] in value of theshares in the amalgamating company or companies (other thanshares already held therein immediately before the amalga-mation by, or by a nominee for, the amalgamated company or itssubsidiary) become shareholders of the amalgamated companyby virtue of the amalgamation,otherwise than as a result of the acquisition of the property of onecompany by another company pursuant to the purchase of suchproperty by the other company or as a result of the distribution ofsuch property to the other company after the winding up of the first-mentioned company.

8 ]18[(1C) Additional Commissioner means a person appointed to be an Addi-tional Commissioner of INCOME-TAX under sub-section (1) of section117;(1D) Additional Director means a person appointed to be an AdditionalDirector of INCOME-TAX under sub-section (1) of section 117 ;](2) annual value , in relation to any property, means its annual value asdetermined under section 23 ;(3)19[* * *](4) Appellate Tribunal means the Appellate Tribunal constituted undersection 252 ;(5) approved gratuity fund means a gratuity fund which has been andcontinues to be approved by the 20[Chief Commissioner or Commis-sioner] in accordance with the rules contained in Part C of the FourthSchedule ;(6) approved superannuation fund means a superannuation fund orany part of a superannuation fund which has been and continues tobe approved by the 20[Chief Commissioner or Commissioner] inaccordance with the rules contained in Part B of the Fourth Sche-dule;21(7) assessee 22 means a person by whom 23[any tax] or any other sum ofmoney is payable under this Act, and includes (a)every person in respect of whom any proceeding under this Acthas been taken for the assessment of his income 24[or assessmentof fringe benefits] or of the income of any other person in respectof which he is assessable, or of the loss sustained by him or bysuch other person, or of the amount of refund due to him or tosuch other person ;S.

9 2(7) ACT, for nine-tenths by the Finance Act, 1999, (1C) and (1D) inserted by the Finance Act, 2007, (3) omitted by the Direct Tax Laws (Amendment) Act, 1987, for Commissioner , relevant case laws, see Taxmann s Master Guide to INCOME-TAX meaning of the term assessee , see Taxmann s Direct Taxes Manual, Vol. for INCOME-TAX or super-tax by the Finance Act, 1965, by the Finance Act, 2005, 1-4-2006.(b)every person who is deemed to be an assessee under any provi-sion of this Act ;(c)every person who is deemed to be an assessee in default underany provision of this Act ;25[(7A) Assessing Officer means the Assistant Commissioner 26[or DeputyCommissioner] 27[or Assistant Director] 26[or Deputy Director] or theIncome-tax Officer who is vested with the relevant jurisdiction byvirtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the28[Additional Commissioner or] 29[Additional Director or] 30[JointCommissioner or Joint Director] who is directed under clause (b) ofsub-section (4) of that section to exercise or perform all or any of thepowers and functions conferred on, or assigned to, an AssessingOfficer under this Act.]

10 ](8) assessment 31 includes reassessment ;(9) assessment year means the period of twelve months commencingon the 1st day of April every year ;32[(9A) Assistant Commissioner means a person appointed to be an AssistantCommissioner of INCOME-TAX 33[or a Deputy Commissioner ofIncome-tax] under sub-section (1) of section 117 ;]34[(9B) Assistant Director means a person appointed to be an AssistantDirector of INCOME-TAX under sub-section (1) of section 117;](10) average rate of INCOME-TAX means the rate arrived at by dividing theamount of INCOME-TAX calculated on the total income , by such totalincome ;35[(11) block of assets means a group of assets falling within a class of assetscomprising (a)tangible assets, being buildings, machinery, plant or furniture; I - PRELIMINARYS. 2(11) by the Direct Tax Laws (Amendment) Act, 1987, by the Finance (No.)