Income Tax Act

Official PDF pages 36–40

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from such transaction or transactions during the tax year exceeds such
amount as may be prescribed; or
( ii )   systematic and continuous soliciting of business activities or engaging
in interaction with such number of users in India, as may be prescribed,
irrespective of whether the agreement for such transactions or activities is entered
in India, or the non-resident has a residence or place of business in India, or the
non-resident renders any services in India;
( e ) the provisions of clause ( d ) shall not apply to the transactions or activities which
are confined to the purchase of goods in India for the purpose of export;
( f ) in this section, only the income which is reasonably attributable to—
( i )   operations carried out in India, when all operations of the business are
not carried out in India;
( ii )   transactions or activities referred to in clause ( d ),
shall be deemed to accrue or arise in India from any business connection;
( g ) the income attributable to operations of any business or significant economic
presence in this section shall also include income from—
( i )   such advertisement which targets a customer who resides in India or
a customer who accesses the advertisement through internet protocol
address located in India;
( ii )   sale of data collected from a person who resides in India or from a person
who uses internet protocol address located in India; and
( iii )   sale of goods or services using data collected from a person who resides
in India or from a person who uses internet protocol address located in
India.
(10) In sub-section (2),—
( a )   an asset or a capital asset, being any share of, or interest in, a company
or entity registered or incorporated outside India shall be deemed to be
situated in India, if the share or interest derives, directly or indirectly,
its value substantially from the assets (whether tangible or intangible)
located in India;
( b )   the share or interest, referred to in clause ( a ), shall be deemed to derive
its value substantially from the assets (whether tangible or intangible)
located in India, if on the specified date, the value of such assets,—
( i )   exceeds the amount of ten crore rupees; and
( ii )   represents at least 50% of the value of all the assets owned by the
company or entity, as the case may be;
( c )   the value of an asset shall be the fair market value on the specified date of
such asset without reduction of liabilities, if any, in respect of the asset,
determined in the manner, as may be prescribed;
( d )   the expression “specified date” in clause ( c ) means—

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( i )   the date on which the accounting period of the company or, as the
case may be, the entity ends preceding the date of transfer of a
share or an interest; or
( ii )   the date of transfer, if the book value of the assets of the company
or, as the case may be, the entity on the date of transfer exceeds the
book value of the assets as on the date referred to in sub-clause ( i ),
by 15%;
( e )   the expression “accounting period” in clause ( d ) means—
( i )   each period of twelve months ending with the 31st March;
( ii )   each period of twelve months ending with a date other than the
31st March, in a case where a company or an entity, referred to in
clause ( a ), regularly adopts a period of twelve months ending on a
day other than the 31st March for—
( A )   complying with the provisions of the tax laws of the territory,
of which it is a resident, for tax purposes; or
( B )   reporting to persons holding the share or interest;
( iii )   the period beginning with the date of registration or incorporation
of a company or entity and ending with the 31st March or such
other day referred to in sub-clause ( ii ), in a case where a company
or entity comes into existence and the later accounting period shall
be the successive periods of twelve months; or
( iv )   the period beginning with the 1st April or such other day as
applicable in sub-clause ( ii ) and ending with the date immediately
preceding the date on which the company or entity ceases to exist,
in a case where the company or the entity ceases to exist before the
end of the accounting period;
( f )   in case of assets mentioned in clause ( a ), if—
( i )   there is a transfer outside India of any share of, or interest in, a
company or an entity registered or incorporated outside India by
a non-resident transferor; and
( ii )   all the assets owned, directly or indirectly, by that company or entity
are not located in India,
then, the income referred to in sub-section (2) shall be only such part of
the income as is reasonably attributable to assets located in India and
determined in the manner, as may be prescribed;
( g )   the income referred to in sub-section (2) shall not include income from
transfer, outside India, of any share of, or interest in, a company or an
entity registered or incorporated outside India,—
( i )   if such share of, or interest in, a company or an entity registered
or incorporated outside India is held by a non-resident by way of
investment, directly or indirectly,—
( A )   in Category I or Category II foreign portfolio investor under
the Securities and Exchange Board of India (Foreign Portfolio

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Investors) Regulations, 2014, prior to their repeal, made under
the Securities and Exchange Board of India Act, 1992 (15 of
1992);
( B )   in Category I foreign portfolio investor under the Securities
and Exchange Board of India (Foreign Portfolio Investors)
Regulations, 2019, made under the Securities and Exchange
Board of India Act, 1992 (15 of 1992);
( ii )   if such company or entity directly owns the assets situated in
India and the transferor (whether individually or along with its
associated enterprises), at any time in the twelve months preceding
the date of transfer,—
( A )   does not hold the right of management or control in relation
to such company or the entity; and
( B )   does not hold voting power or share capital or interest
exceeding 5% of the total voting power or total share capital
or total interest, as the case may be, of such company or
entity; or
( iii )   if such company or entity indirectly owns the assets situated in
India and the transferor (whether individually or along with its
associated enterprises), at any time in the twelve months preceding
the date of transfer,—
( A )   does not hold the right of management or control in relation
to such company or the entity;
( B )   does not hold any right in, or in relation to, such company
or entity which would entitle it to the right of   management
or control in the company or entity which directly owns the
assets situated in India; and
( C )   does not hold such percentage of voting power or share capital
or interest in such company or entity which results in holding
of (either individually or along with associated   enterprises)
a voting power or share capital or interest exceeding 5% of
the total voting power or total share capital or total interest,
as the case may be, of the company or entity, which directly
owns the assets situated in India;
( iv )   in this clause, “associated enterprises” shall have the meaning
assigned to it in section 162.
(11) In sub-sections (5), (6) and (7), income of a non-resident shall be deemed to
accrue or arise in India and shall be included in his total income, whether or not,—
( a )   the non-resident has a residence or place of business or business con -
nection in India; or
( b )   the non-resident has rendered services in India.
(12) ( a ) In this section, the fund management activity carried out by an eligible
investment fund through an eligible fund manager acting on behalf of such fund,
shall not constitute business connection in India of that fund;

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( b ) the eligible investment fund mentioned in clause ( a ) shall not be said to be resident
in India under section 6 merely because the eligible fund manager, undertaking fund
management activities on its behalf, is situated in India;
( c ) nothing contained in this section shall apply to exclude any income from the
total income of the eligible investment fund, which would have been so included
irrespective of whether the activity of the eligible fund manager constituted the
business connection in India of such fund or not;
( d ) nothing contained in this section shall have any effect on the scope of total
income or determination of total income in the case of the eligible fund manager;
( e ) the conditions for being an eligible investment fund or an eligible fund manager,
or furnishing of requisite statements shall be as per the provisions of Schedule I;
( f ) the Central Government may, by notification, specify that any one or more of
the conditions as referred to in clause ( e ) shall not apply, or shall apply, with such
modifications, as specified, in case of an eligible investment fund and its eligible
fund manager, if—
( i )   the eligible fund manager is located in an International Financial Ser -
vices Centre; and
( ii )   has commenced its operations on or before the 31st March, 2030.
(13) For the purposes of this section, the expression “through” shall mean and
include “by means of”, “in consequence of” or “by reason of”.
Apportionment of income between spouses governed by Portuguese Civil
Code.
10.   If a husband and wife are governed by the community of property system
(known as “COMMUNIAO DOS BENS” under the Portuguese Civil Code of
1860) in force in the State of Goa and the Union Territories of Dadra and Nagar
Haveli and Daman and Diu, then—
( a )   their income under any head of income shall not be assessed together as
that of such community of property (whether treated as an association
of persons or a body of individuals);
( b )   the income mentioned in clause ( a ) under each head of income other
than “Salaries” shall be divided equally between the husband and the
wife;
( c )   the income so divided shall be included separately in the total income
of the husband and the wife respectively, and the remaining provisions
of this Act shall apply accordingly; and
( d )   where either the husband or the wife, has any income under the head
“Salaries”, that income shall be included in the total income of the spouse
who has actually earned it.

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CHAPTER III
INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
A.—Incomes not to be included in total income
Incomes not included in total income.
11.   (1) In computing the total income of any person for a tax year under this Act,
any income enumerated in Schedules II, III, IV, V and VI shall not be included,
subject to fulfilment of conditions specified therein.
(2) Wherever the conditions referred to in the Schedules referred in sub-section (1)
are not satisfied in any tax year in respect of any income enumerated in the said
Schedules, such income shall be charged to tax under this Act on the total income
for that tax year.
(3) The persons enumerated in Schedule VII shall, subject to fulfilment of the
conditions specified therein, not be chargeable to tax under this Act on the total
income for a tax year.
(4) Wherever the conditions referred to in Schedule VII are not satisfied in respect
of the persons enumerated in the said Schedule in any tax year, the income of such
person shall be charged to tax under the provisions of this Act for that tax year.
(5) The Central Government may make rules or issue notifications for the purposes
of this section as specified in Schedules II, III, IV, V, VI and VII.
B.—Incomes not to be included in total income
of political parties and electoral trusts
Incomes not included in total income of political parties and electoral trusts.
12.   (1) In computing the total income of any political party or an electoral trust
for a tax year under this Act, any income enumerated in Schedule VIII shall not
be included, subject to fulfilment of conditions specified therein.
(2) Wherever the conditions referred to in Schedule VIII are not satisfied in any tax
year in respect of any income enumerated in the said Schedule, such income shall
be charged to tax under this Act for that tax year.
(3) The Central Government may make rules or issue notifications for the purposes
of this section as specified in Schedule VIII.
CHAPTER IV
COMPUTATION OF TOTAL INCOME
A.—Heads of income
Heads of income.
13.   Save as otherwise provided in this Act, all incomes shall, for the purposes
of charge of income-tax and computation of total income, be classified under
the following heads of income:—