Amendments in Income Tax Act effected by the Finance Act 2023

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Table of Contents

1. Tax Rates

2. Amendment to Section 2

3. Gift to not Ordinarily Resident [Sec. 9(1)(viii)]

4. Amendment to Section 10(4D)

5. Amendment to Section 10(4E) to Eliminate Double Taxation of Income from Offshore Derivative Instruments

6. Amendment to Section 10(4G)

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1. Tax Rates

Tax rates under the regular tax regime for the assessment years 2023-24 and 2024-25 are given in Annex 1. Tax rates under the alternative tax regime under section 115BA/115BAA/115BAB/115BAC/115BAD/115BAE are given in paras 531 to 559. Alternative tax regime is optional [one has to exercise the option under section 115BA(4)/115BAA(5)/115BAB(7)/115BAC(5)/115BAD(5)/115BAE(5) to avail the benefit of alternative tax regime]. However, in the case of an individual/HUF/AOP/BOI/artificial juridical person, the alternate tax regime is the default tax regime from the assessment year 2024-25 [one has to exercise the option under section 115BAC(6) to avail the benefit of the regular tax regime].

1.1 Income Tax

The following are income-tax rates for the assessment years 2023-24 and 2024-25:

1.1.1 Individual/HUF/AOP/BOI/Artificial Juridical Person

Tax rates pertaining to these assessees are as follows:

Regular Tax Regime: Exemption limit is Rs. 2,50,0001 (it is applicable even in the case of a resident woman). Higher exemption limit is applicable in the case of a senior citizen or super senior citizen.

1. Senior citizen: Senior citizen is a resident individual who is at least 60 years of age at any time during the previous year but less than 80 years on the last day of previous year [assessment year 2023-24 (date of birth: on or after April 2, 1943 but before April 2, 1963) or assessment year 2024-25 (date of birth: on or after April 2, 1944 but before April 2, 1964)].

In the case of a senior citizen, exemption limit is Rs. 3,00,0001. Net income in the range of Rs. 3,00,000 to Rs. 5,00,000 is taxable at the rate of 5 per cent. Between Rs. 5,00,000 and Rs. 10,00,000, the slab rate is 20 per cent and the income exceeding Rs. 10,00,000 is taxable at the rate of 30 per cent. These rates are applicable only in the case of a resident (ordinarily or otherwise) senior citizen. In the case of a non-resident senior citizen, the exemption limit is Rs. 2,50,000 as given below.

2. Super senior citizen: A super senior citizen is a resident individual who is at least 80 years of age at any time during the previous year [assessment year 2023-24 (date of birth: before April 2, 1943) or assessment year 2024-25 (date of birth: before April 2, 1944)].

In the case of super senior citizen, first Rs. 5,00,000 of net income is exempt from tax. Net income in the range of Rs. 5,00,000 to Rs. 10,00,000 is taxable at the rate of 20 per cent. Net income exceeding Rs. 10,00,000 is taxable at the rate of 30 per cent. These rates are applicable only in the case of a resident (ordinarily or otherwise) super senior citizen. In the case of a non-resident, the exemption limit will be Rs. 2,50,000 as given below.

3. Any other individual, any HUF/AOP/BOI – This category includes the following taxpayers –

Any other resident individual [assessment year 2023-24 (date of birth: on or after April 2, 1963) or assessment year 2024-25 (date of birth: on or after April 2, 1964)].
Any non-resident individual irrespective of age.
Any HUF, AOP, BOI, artificial juridical person.

In case of any of these assessees, first Rs. 2,50,0001 of net income is exempt from tax. Net income in the range of Rs. 2,50,000 to Rs. 5,00,000 is taxable at the rate of 5 per cent. On net income between Rs. 5,00,000 and Rs. 10,00,000, the slab rate is 20 per cent and income exceeding Rs. 10,00,000 is taxable at the rate of 30 per cent.

Alternative Tax Regime: An individual/HUF can opt for the alternative tax regime under section 115BAC for the assessment year 2023-24. However, for an individual/HUF/AOP/BOI/artificial juridical person (for the assessment year 2024-25), the alternative tax regime is the default tax regime. One can exercise the option under section 115BAC(6) to avail the benefit of regular tax regime2. Tax rates under the alternative tax regime are as follows:

Section 115BAC(1) – Assessment year 2023-24
Section 115BAC(1A) – Assessment year 2024-25

Total income
Rate of tax
Total income
Rate of tax

Up to Rs. 2,50,000
Nil
Up to Rs. 3,00,000
Nil

From Rs. 2,50,001 to Rs. 5,00,000
5 per cent1
From Rs. 3,00,001 to Rs. 6,00,000
5 per cent3

From Rs. 5,00,001 to Rs. 7,50,000
10 per cent
From Rs. 6,00,001 to Rs. 9,00,000
10 per cent3

From Rs. 7,50,001 to Rs. 10,00,000
15 per cent
From Rs. 9,00,001 to Rs. 12,00,000
15 per cent

From Rs. 10,00,001 to Rs. 12,50,000
20 per cent
From Rs. 12,00,001 to Rs. 15,00,000
20 per cent

From Rs. 12,50,001 to Rs. 15,00,000
25 per cent
Above Rs. 15,00,000
30 per cent

Above Rs. 15,00,000
30 per cent

1.1.2 Firm

There is no change in the tax rate. A partnership firm (including a limited liability partnership firm) is taxable at the rate of 30 per cent.

1.1.3 Company

A domestic company is taxable at the rate of 30 per cent and a non-domestic company is taxable at the rate of 40 per cent. Different rates are, however, applicable in the following cases–

A domestic company (where its total turnover or gross receipt in the previous year 2020-21 does not exceed Rs. 400 crore) is taxable at the rate of 25 per cent (not 30 per cent) for the assessment year 2023-24.
A domestic company (where its total turnover or gross receipt in the previous year 2021-22 does not exceed Rs. 400 crore) will be taxable at the rate of 25 per cent (not 30 per cent) for the assessment year 2024-25.

Alternative tax regime for a domestic company: A domestic company can opt for the alternative tax regime provided under section 115BA or section 115BAA or section 115BAB2.

1.1.4 Co-operative Society and Local Authority

In the case of a co-operative society/local authority, there is no change in the income-tax rates. These rates are given in para 0.1-4, Annex 1.

Alternative tax regime for a resident co-operative society – A resident co-operative society can opt for the alternative tax regime provided under section 115BAD or section 115BAE2.

1.2 Surcharge on Income Tax

Applicable surcharge (as a percentage of income-tax) for the assessment years 2023-24 and 2024-25 is as follows3a –

Net income range
Surcharge as a % of income-tax

Individuals/HUF/AOP/BOI/artificial juridical person
0 – Rs. 50 lakh
Nil

Rs. 50 lakh – Rs. 1 crore
10%

Rs. 1 crore – Rs. 2 crore
15%

Rs. 2 crore – Rs. 5 crore
25%
[see para 1.2.1]

Above Rs. 5 crore
37%
[see para 1.2.2]

Firm/local authority
0 – Rs. 1 crore
Nil

Above Rs. 1 crore
12%

Co-operative society
0 – Rs. 1 crore
Nil
[see para 1.2.3]

Rs. 1 crore – Rs. 10 crore
7%
[see para 1.2.3]

Above Rs. 10 crore
12%
[see para 1.2.3]

Domestic company
0 – Rs. 1 crore
Nil
[see para 1.2.2]

Rs. 1 crore – Rs. 10 crore
7%
[see para 1.2.2]

Above Rs. 10 crore
12%
[see para 1.2.2]

Foreign company
0 – Rs. 1 crore
Nil

Rs. 1 crore – Rs. 10 crore
2%

Above Rs. 10 crore
5%

Note – The above surcharge is subject to a marginal relief.

1.2.1 Surcharge when Individual/HUF/AOP, etc., has Dividend Income or Income Taxable Under Section 111a/112/112a

Surcharge for the assessment years 2023-24 and 2024-253a is as follows –

Different situations
Nature and quantum of income of the assessee (i.e., individual, HUF, AOP, BOI or an artificial juridical person)
Surcharge on amount of income-tax computed on dividend income and income which is taxable under section 111A/112/112A
Surcharge on amount of income-tax computed on other incomes

Situation 1
Total income (including dividend income and income under section 111A/112/112A) does not exceed Rs. 50 lakh
Nil
Nil

Situation 2
Total income (including dividend income and income under section 111A/112/112A) exceeds Rs. 50 lakh but does not exceed Rs. 1 crore
10%
10%

Situation 3
Total income (including dividend income and income under section 111A/112/112A) exceeds Rs. 1 crore but does not exceed Rs. 2 crore
15%
15%

Situation 4
Total income (excluding dividend income and income under section 111A/112/112A) exceeds Rs. 2 crore but does not exceed Rs. 5 crore
15%
25%

Situation 5
Total income (excluding dividend income and income under section 111A/112/112A) exceeds Rs. 5 crore
15%
37%

Situation 6
Total income (including dividend income and income under section 111A/112/112A) exceeds Rs. 2 crore (but it is not covered by Situation 4 and Situation 5)
15%
15%

Where the total income includes any dividend income and/or income chargeable under section 111A/112/112A the rate of surcharge on the amount of income-tax computed on that part of income, shall not exceed 15 per cent. Moreover, in the case of an AOP (consisting of only companies as its members), the rate of surcharge on the amount of income-tax shall not exceed 15 per cent. Further, in the case of an individual/HUF/AOP/BOI/artificial juridical person, surcharge (if tax is payable under the alternative tax regime) cannot exceed 25 per cent for the assessment year 2024-25.

It has been clarified by CBDT that the derivatives (future and options) are not treated as capital assets and the income arising from the transfer of the derivatives is treated as business income and is liable for normal rate of tax (and such case will fall in the 4th column of the above table). However, in the case of Foreign Institutional Investors (FPI), the derivatives are treated as capital assets and the gains arising from the transfer of the same are treated as capital gains and are subject to a special rate of tax as per the provisions of section 115AD. Consequently, surcharge on income-tax payable on gains arising from the transfer of derivatives (future and options) by FPI which are liable to special rate of tax under section 115AD, cannot exceed 15 per cent (it will fall under 3rd column of the aforesaid table).

1.2.2 Surcharge when a Domestic Company Pays Tax Under Section 115BAA or Section 115BAB

In the case of a domestic company which has opted for the alternative tax regime under section 115BAA or 115BAB, surcharge is 10 per cent of income-tax for the assessment years 2023-24 and 2024-25 (regardless of quantum of income)3a.

1.2.3 Surcharge when a Resident Co-operative Society Pays Tax Under Section 115BAD/115BAE

In the case of a resident co-operative society which has opted for the alternative tax regime under section 115BAD or section 115BAE, surcharge is 10 per cent of income-tax for the assessment years 2023-24 and 2024-25 (regardless of quantum of income)3a.

1.3 Health and Education Cess on Income Tax

For the assessment years 2023-24 and 2024-25, health and education cess (HEC) is 4 per cent of income-tax and surcharge3a.

1.4 Minimum Alternate Tax/Alternate Minimum Tax

A corporate-assessee is covered by minimum alternate tax under section 115JB. A non-corporate assessee is covered by alternate minimum tax under section 115JC. However, minimum alternate tax/alternate minimum tax is not applicable if tax is payable under the alternative tax regime under section 115BAA/115BAB/115BAC/115BAD/115BAE.

Tax rateBasic rate for minimum alternate tax is 15 per cent and alternate minimum tax is 18.5 per cent (15 per cent for co-operative society) for the assessment years 2023-24 and 2024-25. If a unit is located in an International Financial Services Centre4 and derives its income solely in convertible foreign exchange, the minimum alternate tax/alternate minimum tax is 9 per cent of book profit.
SurchargeSurcharge3a on minimum alternate tax/alternate minimum tax is as follows –

Adjusted total income/book profit range
Individuals/HUF/AOP/BOI/artificial juridical person
Firm/local authority
Co-operative society
Domestic company
Foreign company

0 – Rs. 50 lakh
Nil
Nil
Nil
Nil
Nil

Rs. 50 lakh – Rs. 1 crore
10%
Nil
Nil
Nil
Nil

Rs. 1 crore – Rs. 2 crore
15%
12%
7%
7%
2%

Rs. 2 crore – Rs. 5 crore
25%
12%
7%
7%
2%

Rs. 5 crore – Rs. 10 crore
37%
12%
7%
7%
2%

Above Rs. 10 crore
37%
12%
12%
12%
5%

Notes –

Surcharge (given above) is subject to a marginal relief.
In the case of an AOP (having only companies as its members), surcharge cannot exceed 15%.

HECHEC is 4 per cent of minimum alternate tax/alternate minimum tax and surcharge.

1.5 Marginal Relief

The provisions pertaining to marginal relief are given below –

Individual/HUF/AOP/artificial juridical person having income above Rs. 50 lakh – In the case of these taxpayers, if income is slightly higher than Rs. 50 lakh, a provision has been made to provide for relief in marginal cases. The said relief is as follows –

If the net income exceeds Rs. 50 lakh, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a net income of Rs. 50 lakh by more than the amount of income that exceeds Rs. 50 lakh.

Individual/HUF/AOP/artificial juridical person having income between Rs. 1 crore and Rs. 2 crore – In the case of these taxpayers, if income exceeds Rs. 1 crore but does not exceed Rs. 2 crore, the applicable surcharge will increase from 10 per cent to 15 per cent. Marginal relief is provided when net income is slightly higher than Rs. 1 crore which is as given below –

If net income of these taxpayers exceeds Rs. 1 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on net income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

Individual/HUF/AOP/artificial juridical person having income between Rs. 2 crore and Rs. 5 crore – In the case of these taxpayers, if income exceeds Rs. 2 crore but does not exceed Rs. 5 crore, the applicable surcharge will increase from 15 per cent to 25 per cent. Marginal relief is provided when net income is slightly higher than Rs. 2 crore which is as given below –

If net income of these taxpayers exceeds Rs. 2 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on net income of Rs. 2 crore by more than the amount of income that exceeds Rs. 2 crore.

Individual/HUF/AOP/artificial juridical person having income exceeding Rs. 5 crore – In the case of these taxpayers, if income is more than Rs. 5 crore, the applicable surcharge will increase from 25 per cent to 37 per cent which is subject to marginal relief as follows –

If net income of these taxpayers exceeds Rs. 5 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on net income of Rs. 5 crore by more than the amount of income that exceeds Rs. 5 crore.

Firms/local authorities having income above Rs. 1 crore – To avoid hardship, in the case of these taxpayers (having income of above Rs. 1 crore), a provision has been made to provide for relief in marginal cases. The said relief is as follows –

If the net income exceeds Rs. 1 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a net income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

Domestic company/foreign company/co-operative society having income above Rs. 1 crore – In the case of a company/co-operative society, surcharge is not applicable if net income does not exceed Rs. 1 crore. If net income exceeds Rs. 1 crore, surcharge is applicable.

To avoid hardship, in the case of a company/co-operative society whose income is slightly higher than Rs. 1 crore, a provision has been made to provide for relief in marginal cases. The said relief is as follows –

If the net income exceeds Rs. 1 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a net income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

Domestic company/foreign company/co-operative society having income above Rs. 10 crore – In the case of a company/co-operative society, if net income is more than Rs. 10 crore, the applicable surcharge will increase from 7 per cent to 12 per cent (in the case of foreign company, it increases from 2 per cent to 5 per cent). Consequently, another marginal relief is provided when net income is slightly higher than Rs. 10 crore which is as given below –

If the net income of a company/co-operative society exceeds Rs. 10 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on net income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore.

1.5.1 Income Range when Marginal Relief is Applicable

Marginal relief will be applicable in case net income falls in the following range –

Regular Tax Regime (Assessment Year 2023-24/2024-25)

Income range to attract marginal relief

Resident senior citizen
Rs. 50 lakh – Rs. 51.9552 lakh

Rs. 100 lakh – Rs. 102.145 lakh

Rs. 200 lakh – Rs. 209.296 lakh

Rs. 500 lakh – Rs. 530.173 lakh

Resident super senior citizen
Rs. 50 lakh – Rs. 51.9402 lakh

Rs. 100 lakh – Rs. 102.1374 lakh

Rs. 200 lakh – Rs. 209.28 lakh

Rs. 500 lakh – Rs. 530.1528 lakh

Any other resident individual, any non-resident individual, any HUF or any AOP/BOI/artificial juridical person
Rs. 50 lakh – Rs. 51.9589 lakh

Rs. 100 lakh – Rs. 102.1469 lakh

Rs. 200 lakh – Rs. 209.30 lakh

Rs. 500 lakh – Rs. 530.1782 lakh

Firm
Rs. 100 lakh – Rs. 105.4216 lakh

Domestic company (tax rate: 25%)
Rs. 100 lakh – Rs. 102.389 lakh

Rs. 1000 lakh – Rs. 1017.3611 lakh

Domestic company (tax rate: 30%)
Rs. 100 lakh – Rs. 103.0927 lakh

Rs. 1000 lakh – Rs. 1022.59030 lakh

Foreign company
Rs. 100 lakh – Rs. 101.3513 lakh

Rs. 1000 lakh – Rs. 1020.6896 lakh

Alternative Tax Regime (Assessment Year 2024-25) –

Individual, HUF, AOP, BOI or artificial juridical person
Rs. 50 lakh – Rs. 51.791 lakh

Rs. 100 lakh – Rs. 102.061 lakh

Rs. 200 lakh – Rs. 209.12 lakh

Note: The above net income ranges will remain valid only if the assessee does not have any income which is chargeable to tax at special rate(s) of tax (e.g., long-term capital gains, short-term capital gains under section 111A, lottery income, etc.).

In the case of alternate minimum tax/minimum alternate tax, the marginal relief will be applicable in case adjusted total income/book profit falls in the following range for the assessment years 2023-24 and 2024-25 –

Income range

Individual/HUF/AOP/BOI/artificial juridical person
Rs. 50 lakh – Rs. 51.16133 lakh

Rs. 100 lakh – Rs. 101.174976 lakh

Rs. 200 lakh – Rs. 204.813 lakh

Rs. 500 lakh – Rs. 514.8684 lakh

Co-operative society/firm/local authority
Rs. 100 lakh – Rs. 102.8002 lakh

Domestic company
Rs. 100 lakh – Rs. 101.2507 lakh

Rs. 1000 lakh – Rs. 1009.0144 lakh

Foreign company
Rs. 100 lakh – Rs. 100.35419 lakh

Rs. 1000 lakh – Rs. 1005.3412 lakh

1.6 Maximum Marginal Tax Rates

Maximum marginal tax rates (at highest level) for the assessment years 2023-24 and 2024-25 are given in the table below –

Individual/HUF/BOI/AOP/artificial juridical person (in any case except the case given below)
42.744%

Individual/HUF/BOI/AOP/artificial juridical person (alternative tax regime/AY 2024-25)
39%

Firm (including limited liability partnership)
34.944%

Co-operative society
34.944%

Domestic company
29.12%, 34.944%

Foreign company
43.68%

1.7 Rates for Tax Deduction/Collection at Source

During the financial year 2023-24, tax will be deducted at source under section 192/194P at the rate given in para 0.1-1, Annex 1. TDS rates for payments other than salary are given in para 0.6 of Annex 1. TCS rates are given in para 0.7 of Annex 1.

1.7.1 Surcharge, Education Cess, etc., in the Case of TDS/TCS

For the financial year 2023-24, these rates are as follows –

TDS/TCS
Nature of payment
Recipient/Collectee
Whether health and education cess @ 4% applicable
Whether surcharge applicable

TDS
Salary (or payment covered by section 194P)
Resident/non-resident
Yes
Yes
Note 1

TDS
Other than above
Resident
No
No

TDS
Other than above
Non-resident/foreign company
Yes3a
Yes3a
Note 2

TCS
Any
Resident
No
No

TCS
Any
Non-resident/foreign company
Yes3a
Yes3a
Note 3

Notes –

If amount subject to TDS exceeds Rs. 50 lakh but does not exceed Rs. 1 crore, surcharge is 10 per cent of TDS. If it exceeds Rs. 1 crore but does not exceed Rs. 2 crore, surcharge is 15 per cent of TDS. If it exceeds Rs. 2 crore but does not exceed Rs. 5 crore, surcharge is 25 per cent of TDS. If it exceeds Rs. 5 crore, surcharge is 37 per cent (25 per cent under alternative tax regime) of TDS.
If the recipient is a non-resident (individual/HUF/AOP/artificial juridical person) and the payment/credit subject to TDS exceeds Rs. 50 lakh but does not exceed Rs. 1 crore, surcharge is 10 per cent of TDS. If it exceeds Rs. 1 crore but does not exceed Rs. 2 crore, surcharge is 15 per cent of TDS. If it exceeds Rs. 2 crore but does not exceed Rs. 5 crore, surcharge is 25 per cent of TDS. If it exceeds Rs. 5 crore, surcharge is 37 per cent (25 per cent under alternative tax regime) of TDS. If the recipient is a non-resident firm and the payment/credit subject to TDS exceeds Rs. 1 crore, surcharge is 12 per cent of TDS. If the recipient is a non-resident co-operative society and the payment subject to TDS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 7 per cent of TDS (it is 12 per cent of TDS if the payment/credit exceeds Rs. 10 crore). If the recipient is a foreign company and the payment subject to TDS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 2 per cent of TDS (it is 5 per cent of TDS if the payment/credit exceeds Rs. 10 crore).
If the purchaser/licensee/lessee is a non-resident (individual/HUF/AOP/artificial juridical person) and the amount subject to TCS exceeds Rs. 50 lakh but does not exceed Rs. 1 crore, surcharge is 10 per cent of TCS. If it exceeds Rs. 1 crore but does not exceed Rs. 2 crore, surcharge is 15 per cent of TCS. If it exceeds Rs. 2 crore but does not exceed Rs. 5 crore, surcharge is 25 per cent of TCS. If it exceeds Rs. 5 crore, surcharge is 37 per cent (25 per cent under alternative tax regime) of TCS. If the purchaser/licensee/lessee is a non-resident firm and the amount subject to TCS exceeds Rs. 1 crore, surcharge is 12 per cent of TCS. If the purchaser/licensee/lessee is a non-resident co-operative society and the amount subject to TCS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 7 per cent of TCS (it is 12 per cent of TCS if the amounts subject to TCS exceeds Rs. 10 crore). If the purchaser/licensee/lessee is a foreign company and the amount subject to TCS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 2 per cent of TCS (it is 5 per cent of TCS if the amounts subject to TCS exceeds Rs. 10 crore).
If deductee/collectee is a non-resident AOP (having only companies as its members), rate of surcharge cannot exceed 15%.

Example 1: X (41 years) is a resident individual. His net income for the assessment year 2023-24 or 2024-25 is Rs. 5,30,00,000 (Situation 1), or Rs. 5,31,00,000 (Situation 2). X does not want to pay tax within the parameters of the alternative tax regime under section 115BAC.

Situation 1

Rs.

Situation 2

Rs.

Income-tax on net income
1,57,12,500
1,57,42,500

Add: Surcharge @ 37%
58,13,625
58,24,725

Income-tax and surcharge under normal computation (a)
2,15,26,125
2,15,67,225

Computation for marginal relief

Step 1 – Income-tax on Rs. 5 crore
1,48,12,500
1,48,12,500

Step 2 – Surcharge on income-tax @ 25% (if income is Rs. 5 crore)
37,03,125
37,03,125

Step 3 – Tax @ 100% of income in excess of Rs. 5 crore
30,00,000
31,00,000

Tax under marginal relief computation (b)
2,15,15,625
2,16,15,625

Normal tax or tax under marginal relief, whichever is lower [(a) or (b), whichever is lower] (c)
2,15,15,625
2,15,67,225

Add: Health and education cess @ 4% of (c)
8,60,625
8,62,689

Tax liability (rounded off)
2,23,76,250
2,24,29,910

Example 2: X Find out the tax liability in the cases given below for the assessment year 2023-24 or 2024-25 [these taxpayers do not want to opt for (or pay tax under) the alternative tax regime under section 115BAC] –

Different taxpayers
Dividend
Capital gain under sections –
Other incomes
Total

111A
112
112A

Rs.
Rs.
Rs.
Rs.
Rs.
Rs.

X (46 years) resident

6,00,000
3,00,000
7,00,000
59,00,000
75,00,000

Y (62 years) resident

8,00,000
2,00,000
14,00,000
1,56,00,000
1,80,00,000

Z (24 years) resident
13,00,000
3,00,000
1,00,000
2,00,000
3,34,00,000
3,53,00,000

A (52 years) resident
49,00,000
1,00,000
2,00,000
8,00,00,000
6,59,00,000
15,11,00,000

B (41 years) resident

1,00,00,000
68,00,000
2,00,000
70,00,000
2,40,00,000

C (40 years) resident

7,00,00,000
1,90,00,000

60,00,000
9,50,00,000

D (32 years) resident

80,000
10,000
5,10,000
48,00,000
54,00,000

E (64 years) non-resident

4,10,000
1,70,000
1,20,000
97,00,000
1,04,00,000

F (28 years) resident

39,00,000
3,00,000
70,000
6,00,000
48,70,000

G (59 years) resident



6,01,00,000
9,00,000
6,10,00,000

Assume that in the aforesaid cases, applicable tax rate under section 112 is 20 per cent.

Tax liability in the case of X – Total income of X (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 50 lakh but does not exceed Rs. 1 crore. It is covered by Situation 2. Applicable surcharge in this case is 10% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A as well as other incomes). Tax liability will be as follows –

Section 111A (IT rate: 15%)
Section 112 (IT rate: 20%)
Section 112A (IT rate: 10% on capital gain exceeding Rs. 1 lakh)
Other incomes
Total

Rs.
Rs.
Rs.
Rs.
Rs.

Income-tax
90,000
60,000
60,000
15,82,500
17,92,500

Surcharge
9,000
6,000
6,000
1,58,250
1,79,250

Income-tax and surcharge
99,000
66,000
66,000
17,40,750
19,71,750

Health and education cess (@ 4% of income-tax and surcharge)
3,960
2,640
2,640
69,630
78,870

Tax liability
1,02,960
68,640
68,640
18,10,380
20,50,620

Tax liability in the case of Y – Total income of Y (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 1 crore but does not exceed Rs. 2 crore. It is covered by Situation 3. Applicable surcharge in this case is 15% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A as well as other incomes). Tax liability will be as follows –

Section 111A (IT rate: 15%)
Section 112 (IT rate: 20%)
Section 112A (IT rate: 10% on capital gain exceeding Rs. 1 lakh)
Other incomes
Total

Rs.
Rs.
Rs.
Rs.
Rs.

Income-tax
 1,20,000
40,000
 1,30,000
44,90,000
47,80,000

Surcharge
18,000
6,000
 19,500
6,73,500
7,17,000

Income-tax and surcharge
1,38,000
46,000
 1,49,500
51,63,500
54,97,000

Health and education cess (@ 4% of income-tax and surcharge)
5,520
1,840
 5,980
 2,06,540
2,19,880

Tax liability
1,43,520
47,840
 1,55,480
53,70,040
57,16,880

Tax liability in the case of Z – Total income of Z (excluding income taxable under sections 111A, 112 and 112A and dividend income) exceeds Rs. 2 crore but does not exceed Rs. 5 crore. It is covered by Situation 4. Applicable surcharge in this case is 15% on income-tax pertaining to income taxable under sections 111A, 112 and 112A and dividend income and 25% on other incomes. Tax liability will be as follows –

Rs.

Dividend income
13,00,000

Short-term capital gain [sec. 111A]
3,00,000

Long-term capital gain [sec. 112]
1,00,000

Long-term capital gain [sec. 112A]
2,00,000

Other income
3,34,00,000

Net income
3,53,00,000

Tax on net income

Short-term capital gain under section 111A (15% of Rs. 3,00,000)
45,000

Long-term capital gain under section 112 (20% of Rs. 1,00,000)
20,000

Long-term capital gain under section 112A (10% of Rs. 1,00,000)
10,000

Other income –

– Normal tax on Rs. 3,47,00,000
(1,02,22,500)

Tax on dividend income (*Rs. 13,00,000 ÷ Rs. 3,47,00,000 × Rs. 1,02,22,500)

3,82,976*

Tax on balance of Rs. 3,34,00,000 (**Rs. 3,34,00,000 ÷ Rs. 3,47,00,000 × Rs. 1,02,22,500)

98,39,524**

Income-tax
1,02,97,500

Add: Surcharge

Surcharge on dividend income (15% of Rs. 3,82,976)
57,446

Surcharge on short-term capital gain (15% of Rs. 45,000)
6,750

Surcharge on long-term capital gain (15% of Rs. 20,000)
3,000

Surcharge on long-term capital gain (15% of Rs. 10,000)
1,500

Surcharge on balance (25% of Rs. 98,39,524)
24,59,881

Total surcharge
25,28,577

Income-tax and surcharge
1,28,26,077

Add: Health and education cess
5,13,043

Tax liability (rounded off)
1,33,39,120

Tax liability in the case of A – Total income of A (excluding dividend income and income taxable under sections 111A, 112 and 112A) exceeds Rs. 5 crore. It is covered by Situation 5. Applicable surcharge in this case is 15% on income-tax pertaining to income taxable under sections 111A, 112 and 112A and dividend income and 37% on other incomes. Tax liability will be as follows –

Rs.

Dividend income
49,00,000

Short-term capital gain [sec. 111A]
1,00,000

Long-term capital gain [sec. 112]
2,00,000

Long-term capital gain [sec. 112A]
8,00,00,000

Other income
6,59,00,000

Net income
15,11,00,000

Tax on net income

Short-term capital gain under section 111A (15% of Rs. 1,00,000)
15,000

Long-term capital gain under section 112 (20% of Rs. 2,00,000)
40,000

Long-term capital gain under section 112A (10% of Rs. 7,99,00,000)
79,90,000

Other income –

– Normal tax on Rs. 7,08,00,000
(2,10,52,500)

Tax on dividend income (*Rs. 49,00,000 ÷ Rs. 7,08,00,000 × Rs. 2,10,52,500)

14,57,023*

Tax on balance of Rs. 3,34,00,000 (**Rs. 6,59,00,000 ÷ Rs. 7,08,00,000 × Rs. 2,10,52,500)

1,95,95,477**

Income-tax
2,90,97,500

Add: Surcharge

Surcharge on dividend income (15% of Rs. 14,57,023)
2,18,553

Surcharge on short-term capital gain (15% of Rs. 15,000)
2,250

Surcharge on long-term capital gain (15% of Rs. 40,000)
6,000

Surcharge on long-term capital gain (15% of Rs. 79,90,000)
11,98,500

Surcharge on balance (37% of Rs. 1,95,95,477)
72,50,326

Total surcharge
86,75,629

Income-tax and surcharge
3,77,73,129

Add: Health and education cess
15,10,925

Tax liability (rounded off)
3,92,84,050

Tax liability in the case of B – Total income of B (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 2 crore. It is not covered by Situation 1, 2 or 3. His total income (excluding income taxable under sections 111A, 112 and 112A) does not exceed Rs. 2 crore. Even Situations 4 and 5 are not applicable. Consequently, it is covered by Situation 6. Applicable surcharge in this case is 15% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A) and 15% on other incomes. Tax liability will be as follows:

Section 111A (IT rate: 15%)
Section 112 (IT rate: 20%)
Section 112A (IT rate: 10% on capital gain exceeding Rs. 1 lakh)
Other incomes
Total

Rs.
Rs.
Rs.
Rs.
Rs.

Income-tax
15,00,000
13,60,000
 10,000
 19,12,500
47,82,500

Surcharge
2,25,000
2,04,000
 1,500
 2,86,875
7,17,375

Income-tax and surcharge
17,25,000
15,64,000
 11,500
 21,99,375
54,99,875

Health and education cess (@ 4% of income-tax and surcharge)
69,000
62,560
 460
 87,975
2,19,995

Tax liability
17,94,000
16,26,560
 11,960
 22,87,350
57,19,870

Tax liability in the case of C – Total income of C (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 5 crore. However, it is not covered by Situations 4 and 5. Consequently, Situation 6 is applicable. Surcharge in this case is 15% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A) and 15% on other incomes. Tax liability will be as follows –

Section 111A (IT rate: 15%)
Section 112 (IT rate: 20%)
Section 112A (IT rate: 10%)
Other incomes
Total

Rs.
Rs.
Rs.
Rs.
Rs.

Income-tax
1,05,00,000
38,00,000
Nil
16,12,500
1,59,12,500

Surcharge
15,75,000
5,70,000
Nil
 2,41,875
 23,86,875

Income-tax and surcharge
1,20,75,000
43,70,000
Nil
18,54,375
1,82,99,375

Health and education cess (@ 4% of income-tax and surcharge)
4,83,000
1,74,800
Nil
 74,175
7,31,975

Tax liability
1,25,58,000
45,44,800
Nil
19,28,550
1,90,31,350

Tax liability in the case of D – Total income of D (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 50 lakh but does not exceed Rs. 1 crore. It is covered by Situation 2. Applicable surcharge in this case is 10% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A as well as other incomes). Tax liability will be as follows –

Section 111A (IT rate: 15%)
Section 112 (IT rate: 20%)
Section 112A (IT rate: 10% on capital gain exceeding Rs. 1 lakh)
Other incomes
Total

Rs.
Rs.
Rs.
Rs.
Rs.

Income-tax
12,000
2,000
 41,000
12,52,500
 13,07,500

Surcharge
1,200
200
 4,100
 1,25,250
 1,30,750

Income-tax and surcharge
13,200
2,200
 45,100
13,77,750
 14,38,250

Health and education cess (@ 4% of income-tax and surcharge)
528
88
 1,804
 55,110
 57,530

Tax liability (rounded off)
13,728
2,288
 46,904
14,32,860
 14,95,780

Tax liability in the case of E – Total income of E (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 1 crore but does not exceed Rs. 2 crore. It is covered by Situation 3. Applicable surcharge in this case is 15% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A as well as other incomes). He is non-resident. His tax liability will be as follows –

Section 111A (IT rate: 15%)
Section 112 (IT rate: 20%)
Section 112A (IT rate: 10% on capital gain exceeding Rs. 1 lakh)
Other incomes
Total

Rs.
Rs.
Rs.
Rs.
Rs.

Income-tax
61,500
34,000
 2,000
27,22,500
 28,20,000

Surcharge
9,225
5,100
 300
 4,08,375
 4,23,000

Income-tax and surcharge
70,725
39,100
 2,300
31,30,875
32,43,000

Health and education cess (@ 4% of income-tax and surcharge)
2,829
1,564
 92
 1,25,235
1,29,720

Tax liability (rounded off)
73,554
40,664
 2,392
32,56,110
33,72,720

Tax liability in the case of F – Total income of F (including income taxable under sections 111A, 112 and 112A) does not exceed Rs. 50 lakh. It is covered by Situation 1. Surcharge is not applicable in this case and tax liability will be as follows –

Section 111A (IT rate: 15%)
Section 112 (IT rate: 20%)
Section 112A (IT rate: 10% on capital gain exceeding Rs. 1 lakh)
Other incomes
Total

Rs.
Rs.
Rs.
Rs.
Rs.

Income-tax
5,85,000
60,000
Nil
 32,500
 6,77,500

Surcharge
Nil
Nil
Nil
Nil
Nil

Income-tax and surcharge
5,85,000
60,000
Nil
 32,500
6,77,500

Health and education cess (@ 4% of income-tax and surcharge)
23,400
2,400
Nil
 1,300
 27,100

Tax liability
6,08,400
62,400
Nil
 33,800
 7,04,600

Tax liability in the case of G Total income of G (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 5 crore. However, it is not covered by Situations 4 and 5. Consequently, Situation 6 is applicable. Surcharge in this case is 15% (on income-tax pertaining to section 112A as well as other incomes). Tax liability will be as follows –

Section 111A (IT rate: 15%)
Section 112A (IT rate: 10% on capital gain exceeding Rs. 1 lakh)
Other incomes
Total

Rs.
Rs.
Rs.
Rs.

Income-tax

60,00,000
92,500
60,92,500

Surcharge

9,00,000
13,875
9,13,875

Income-tax and surcharge

69,00,000
1,06,375
70,06,375

Health and education cess (@ 4% of income-tax and surcharge)

2,76,000
4,255
2,80,255

Tax liability

71,76,000
1,10,630
72,86,630

Example 3: X (40 years) and Y (64 years) are resident individuals and report the following income pertaining to the assessment year 2023-24 or 2024-25 (these taxpayers do not want to pay tax under the alternative tax regime under section 115BAC) –

X
Y

Rs.
Rs.

Short-term capital gain under section 111A
1,00,000
16,00,000

Long-term capital gain under section 112A
5,00,000
14,00,000

Long-term capital gain under section 112 on transfer of plot of land
4,00,000
8,00,000

Short-term capital gain on transfer of gold
8,00,000
21,00,000

Other incomes (after claiming deduction under Chapter VI-A)
4,98,00,000
5,11,00,000

Total
5,16,00,000
5,70,00,000

 

X
Y

Rs.
Rs.

Total income
5,16,00,000
5,70,00,000

Tax under normal provisions

Under section 111A [15% of Rs. 1,00,000, 15% of Rs. 16,00,000]
15,000
2,40,000

Under section 112A [10% of Rs. 4,00,000, 10% of Rs. 13,00,000]
40,000
1,30,000

Under section 112 [20% of Rs. 4,00,000, 20% of Rs. 8,00,000]
80,000
1,60,000

Tax on balance [X (normal tax on the aggregate of Rs. 8,00,000 + Rs. 4,98,00,000), Y (normal tax on the aggregate of Rs. 21,00,000 + Rs. 5,11,00,000)]
1,49,92,500
1,57,70,000

Income-tax
1,51,27,500
1,63,00,000

Add: Surcharge [as Situation 5 is applicable, surcharge is 15% of income-tax on income taxable under sections 111A, 112 and 112A + 37% on income-tax on other incomes]
55,67,475
59,14,400

Tax and surcharge under normal provisions (a)
2,06,94,975
2,22,14,400

X
Y

Income
Tax
Income
Tax

Rs.
Rs.
Rs.
Rs.

Tax under marginal relief

 

Step 1 – Income-tax if income is Rs. 5,00,00,000 (as given below) –

Short-term capital gain under section 111A
1,00,000
15,000
16,00,000
2,40,000

Long-term capital gain under section 112A
5,00,000
40,000
14,00,000
1,30,000

Long-term capital gain under section 112 on transfer of plot of land
4,00,000
80,000
8,00,000
1,60,000

Other incomes (after claiming deduction under Chapter VI-A)
4,90,00,000
1,45,12,500
4,62,00,000
1,36,70,000

Total
5,00,00,000
1,46,47,500
5,00,00,000
1,42,00,000

 

Step 2 – Surcharge if income is Rs. 5,00,00,000 [as Situation 4 is applicable, surcharge is 15% of income-tax on income taxable under sections 111A, 112 and 112A + 25% on income-tax on other incomes]

 

 

36,48,375

 

34,97,000

Step 3 – Tax on 100% of income in excess of Rs. 5,00,00,000
16,00,000
16,00,000
70,00,000
70,00,000

Tax under marginal relief computation (b)

1,98,95,875

2,46,97,000

Computation of tax liability

Normal tax or marginal tax, whichever is lower [(a) or (b), whichever is less]

1,98,95,875

2,22,14,400

Add: Health and education cess @ 4%

7,95,835

8,88,576

Tax liability (rounded off)

2,06,91,710

2,31,02,980

Example 4: X Ltd. is a domestic company. Its turnover during the previous year 2021-22 was Rs. 398 crore. Net income of the company for the assessment year 2024-25 is Rs. 10.15 crore (Situation 1), or Rs. 10.20 crore (Situation 2). Minimum alternate tax is not applicable as book profit is Rs. 21,00,000. X Ltd. has not opted for the alternative tax regime under section 115BAA or section 115BAB.

Situation 1

Rs.

Situation 2

Rs.

Income-tax on net income @ 25%
2,53,75,000
2,55,00,000

Add: Surcharge @ 12%
30,45,000
30,60,000

Income-tax and surcharge under normal computation (a)
2,84,20,000
2,85,60,000

Computation for marginal relief

Step 1 – Income-tax and surcharge if income is Rs. 10 crore (i.e., income-tax @ 25% and surcharge @ 7%)
2,67,50,000
2,67,50,000

Step 2 – Tax @ 100% of income in excess of Rs. 10 crore
15,00,000
20,00,000

Tax under marginal relief computation (b)
2,82,50,000
2,87,50,000

Normal tax or tax under marginal relief, whichever is lower [(a) or (b), whichever is lower] (c)
2,82,50,000
2,85,60,000

Add: Health and education cess @ 4%
11,30,000
11,42,400

Tax liability
2,93,80,000
2,97,02,400

Example 5: X Ltd. is a domestic company. The company has a manufacturing unit situated in Maharashtra. Turnover of the company in the previous year 2021-22 exceeded Rs. 400 crore. Income of the company for the assessment year 2024-25 is as follows (X Ltd. has not opted for the alternative tax regime under section 115BA or section 115BAA or section 115BAB) –

Situation 1
Situation 2

Rs.
Rs.

Income from manufacturing (computed under the Income-tax Act)
1,04,00,000
1,01,00,000

Book profit
10,08,00,000
10,10,00,000

 

Net income
1,04,00,000
1,01,00,000

Income-tax
31,20,000
30,30,000

Add: Surcharge @ 7%
2,18,400
2,12,100

Income-tax and surcharge (a)
33,38,400
32,42,100

Computation for marginal relief

Step 1 – Income-tax if income is Rs. 1 crore
30,00,000
30,00,000

Step 2 – Tax @ 100% of income in excess of Rs. 1 crore
4,00,000
1,00,000

Tax under marginal relief computation (b)
34,00,000
31,00,000

Normal tax or tax under marginal relief, whichever is lower [(a) or (b), whichever is lower] (c)
33,38,400
31,00,000

Minimum alternate tax (under normal provisions)

Tax on book profit of Rs. 10,08,00,000/Rs. 10,10,00,000 @ 15%
1,51,20,000
1,51,50,000

Add: Surcharge @ 12%
18,14,400
18,18,000

Tax on book profit and surcharge (d)
1,69,34,400
1,69,68,000

Minimum alternate tax (under marginal relief)

Tax on book profit if book profit is Rs. 10,00,00,000 [book profit @ 15% and surcharge @ 7%]
1,60,50,000
1,60,50,000

Add: 100% of book profit in excess of Rs. 1,00,00,000
8,00,000
10,00,000

Total (e)
1,68,50,000
1,70,50,000

Minimum alternate tax (including surcharge) after marginal relief [(d) or (e), whichever is lower] (f)
1,68,50,000
1,69,68,000

Normal tax or minimum alternate tax, whichever is higher [(c) or (f), whichever is higher]
1,68,50,000
1,69,68,000

Add: Health and education cess
6,74,000
6,78,720

Tax liability of the company (g)
1,75,24,000
1,76,46,720

Less: Tax liability, if minimum alternate tax is ignored [(c) + HEC] (h)
34,71,936
32,24,000

Tax credit available under section 115JAA(2A)
1,40,52,064
1,44,22,720

2. Amendment to Section 2

The following amendments have been made to the provisions of section 2.

Deputy Commissioner (Appeals) – Section 2(19B) has been amended (with effect from April 1, 2023) to omit “Additional Commissioner of Income-tax (Appeals)” from the definition of “Deputy Commissioner (Appeals)”.
Definition of “income” under section 2(24) Section 2(24) has been amended (with effect from the assessment year 2024-25) to include the following within the definition of “income” –

Sum received by a unitholder from a business trust – Sub-clause (xviic) has been inserted in section 2(24) to provide that sum received by a unitholder from a business trust [referred to in section 56(2)(xii)] shall also be included in the definition of income.
Sum received under a life insurance policy – Sub-clause (xviid) has been inserted in section 2(24) to provide that income shall include any sum received under a life insurance policy referred to in section 56(2)(xiii).

Definition of Joint Commissioner (Appeals) – Clause (28CA) has been inserted in section 2 (with effect from April 1, 2023) to provide for definition of “Joint Commissioner (Appeals)” to mean a person appointed to be a Joint Commissioner of Income-tax (Appeals) or an Additional Commissioner of Income-tax (Appeals) under section 117(1).
Short-term capital asset – Section 2(42A) defines “short-term capital asset” and the Explanation 1 of the said section provides for determining the period for which any capital asset is held by an assessee.

Explanation 1 has been amended (with effect from the assessment year 2024-25) to provide that in the case of Electronic Gold Receipt or gold (being capital asset), the holding period for the purpose of capital gain shall include the period for which the gold or Electronic Gold Receipt, was held by the assessee prior to conversion into Electronic Gold Receipt or gold, as the case may be.

3. Gift to not Ordinarily Resident [Sec. 9(1)(viii)]

Section 9 specifies those incomes which are deemed to accrue or arise in India regardless of their actual place of accrual. The Finance (No. 2) Act, 2019 inserted clause (viii) to section 9(1) to provide that the any sum of money exceeding Rs. 50,000 received by a non-resident without consideration from a resident person (on or after July 5, 2019) shall be income deemed to accrue or arise in India. The amendment was made to check tax avoidance, as certain instances were observed where gifts were being made by persons residents in India to non-residents and were claimed to be non-taxable in India by such non-residents.

Gift received by a resident but not ordinarily resident – A resident but not ordinarily resident individual/HUF is chargeable to tax in India on income received (or deemed to be received) in India or income which accrues or arises (or is deemed to accrue or arise) in India. Besides, such individual/HUF is also chargeable to tax in India in respect of business income (which arises from a business controlled from India) or professional income (which arises from a profession set up in India) even if place of accrual/receipt is outside India. Gift of money (exceeding Rs. 50,000) received by such assessee outside India from a person resident in India, is not taxable even after the amendment made by the Finance (No. 2) Act, 2019.
Amendment – Section 9(1)(viii) has been amended (with effect from the assessment year 2024-25) to extend this deeming provision to sum of money (exceeding Rs. 50,000) received by a not ordinarily resident without consideration from a person resident in India. After this amendment, gift of money (exceeding Rs. 50,000 in a financial year) by a person resident in India to an individual/HUF (who is resident but not ordinarily resident in India) will be taxable in India if such gift is made on or after April 1, 2023. However, section 9(1)(viii) does not cover gift of any other property (movable or immovable). Consequently, the following are not covered by the deeming provisions of section 9(1)(viii) even if transferor is a person resident in India –

Transfer of immovable property without consideration to a non-resident/not ordinarily resident.

Transfer of immovable property for inadequate consideration to a non-resident/not ordinarily resident.

Transfer of movable property without consideration to a non-resident/not ordinarily resident.

Transfer of movable property for inadequate consideration to a non-resident/not ordinarily resident.

4. Amendment to Section 10(4D)

International Financial Services Centre Authority (Fund Management) Regulations, 2022 has come into force from May 19, 2022. To bring the reference of the said regulation, the definition of “specified fund” under section 10(4D) has been modified to include the reference of IFSCA (Fund Management) Regulations, 2022, with effect from the assessment year 2023-24.

5. Amendment to Section 10(4E) to Eliminate Double Taxation of Income from Offshore Derivative Instruments

Income of a non-resident is not taxable under section 10(4E) –

if it arises on transfer of offshore derivative instruments (ODI), and
such transaction is entered into with an offshore banking unit of an International Financial Services Centre (IFSC).

Under the ODI contract, the IFSC Banking Unit (IBU) makes the investments in permissible Indian securities. Income generated by the IBU on such investments is chargeable to tax as capital gains (i.e., referred to in section 111A/112/112A), interest and/or dividend within the parameters of section 115AD. After the payment of tax, the IBU passes such income to the holders of ODI. Presently, under section 10(4E) exemption is available only on the income generated on the transfer of ODIs and not on the distribution of income to the non-resident holders of ODI. Consequently, distributed income is taxed twice in India (i.e., first when received by the IBU and second, when the same income is distributed to non-resident holders of ODI.

Amendment – Section 10(4E) has been amended (with effect from the assessment year 2024-25) to remove the double taxation. After the amendment, exemption will also be available to any income distributed on the offshore derivative instruments, entered into with an offshore banking unit of an International Financial Services Centre. Exemption will, however, be limited to that amount which has been charged to tax in the hands of IFSC Banking unit under section 115AD. Mode of computation of exemption income will be prescribed by the Board.

6. Amendment to Section 10(4G)

Clause (4G) was inserted by the Finance Act, 2022 (with effect from the assessment year 2023-24) to provide exemption to any income received by a non-resident from portfolio of securities or financial products or funds, managed or administered by any portfolio manager on behalf of such non-resident. This exemption is available only if income arises in an account maintained with an Offshore Banking Unit in any International Financial Services Centre. However, the exemption is limited to the extent such income accrues or arises outside India and is not deemed to accrue or arise in India.

Rebate under section 87A is available in the case of a resident individual if his/her taxable income does not exceed Rs. 5,00,000. The rebate has been discussed in para 270.
Rebate under section 87A is available in the case of a resident individual if his/her taxable income does not exceed Rs. 5,00,000. The rebate has been discussed in para 270.
These provisions are given in paras 531 to 559.
Rebate under section 87A is available in the case of a resident individual if his/her taxable income does not exceed Rs. 7,00,000. Rebate under section 87A is subject to marginal relief from the assessment year 2024-25. If net income exceeds Rs. 7,00,000 but does not exceed Rs. 7,27,770, income-tax on such income cannot exceed the amount by which the net income exceeds Rs. 7,00,000.

3a. Where the total income of a “specified fund” [as referred to section 10(4D)] includes any income in respect of securities [as given under section 115AD(1)(a)], the rate of surcharge/health and education cess is nil (for the assessment year 2024-25).

3a. Where the total income of a “specified fund” [as referred to section 10(4D)] includes any income in respect of securities [as given under section 115AD(1)(a)], the rate of surcharge/health and education cess is nil (for the assessment year 2024-25).

“International Financial Services Centre” means an International Financial Services Centre which is set-up in a special economic zone and approved by the Central Government under section 18(1) of Special Economic Zones Act, 2005.

3a. Where the total income of a “specified fund” [as referred to section 10(4D)] includes any income in respect of securities [as given under section 115AD(1)(a)], the rate of surcharge/health and education cess is nil (for the assessment year 2024-25).

3a. Where the total income of a “specified fund” [as referred to section 10(4D)] includes any income in respect of securities [as given under section 115AD(1)(a)], the rate of surcharge/health and education cess is nil (for the assessment year 2024-25).

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