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 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 received 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 2[the taxable territories] during such year,—

(i) accrue or arise or are deemed to accrue or arise to him in 2[the taxable territories] during such year, or

(ii) accrue or arise to him without 2[the taxable territories] during such year, or

(iii) having accrued or arisen to him without 2[the taxable territories] before the beginning of such year and after the 1st day of April, 1933, are brought into or received in 2[the taxable territories] by him during such year, or

(c) if such person is not resident in 2[the taxable territories] during such year, accrue or arise or are deemed to accrue or arise to him in 2[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 3[the taxable territories], income, profits and gains which accrue or arise to him without 3[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 3[the taxable territories] by him during such year:

4* * * * *

5[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—

6[(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 7[the taxable territories] shall not be deemed to be received in or brought into 7[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 7[the taxable territories].

Explanation 2.—Income which would be chargeable under the head "Salaries" if payable in 7[the taxable territories] 8* * shall be deemed to accrue or arise in 7[the taxable territories] wherever paid if it is earned in 7[the taxable territories], 9[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].

10[Explanation 2A.—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 11[by an Indian company] without 12[the taxable territories] shall be deemed to be income accruing and arising in 12[the taxable territories] to the extent to which it has been paid out of profits subjected to income-tax in 12[the taxable territories].

13[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 the14[merged territories] 15[or any of the Part B States 16* *] 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, 12[the taxable territories] during such year if, and only if, they are brought into, or received in, any part of 12[the taxable territories] other than that 14[merged territory] 15[or State] during such year.]

(2) For the purposes of sub-section (1), where a husband is not resident in 12[the taxable territories], remittances received by his wife resident in 12[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 12[the taxable territories] to the wife.]

(3) 17[Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them:]

18[(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—

19[(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 (XXV 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.

20[(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 21[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, 22[1925 (XIX of 1925)], applies, 23* * 24[and any capital gains of the Fund arising from the sale, exchange or transfer of such securities].

(v25* * * * *

1[(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.]

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

(a) passage moneys or the value of any free or concessional passage received 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 received 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 3[not being capital gains chargeable according to the provisions of section 12B 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.

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

5[(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 carri$eGre, 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.]

6[(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.]

7a[(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, 8[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 9[the taxable territories] which is received in or brought into 9[the taxable territories] by any such member while the Force to which he belongs is serving with His Majesty's Forces 8[or, after the commencement of the Constitution, with the Armed Forces of the Union].]

10[(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 (XVI of 1926), formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen.]

11[(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 the 31st day of March, 12[1956] (both dates inclusive), for a period of two years from the date of such completion.]

13[(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.]

14[(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.

15[(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 year 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:

16[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 (I 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.]

17[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.]]

18[(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 19[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 19[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.

20[(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.]

21[(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.]

22[(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.]

23[(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 24[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, 25[but nothing contained in clause (i)1* * or clause (ii) shall operate to exempt from the provisions of this Act that part of the 2[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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