Section 343 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.
Sub-section (1) creates a category called deemed accumulated income. Regular income, as reduced by income applied under section 341 and income accumulated or set apart under section 342, is deemed accumulated income to the extent of 15% of regular income; and where such deemed accumulated income is invested or deposited, it must be invested or deposited in one of the modes permitted under section 350.
Sub-section (2) keeps the two categories apart: deemed accumulated income under this section is not to be considered accumulated income for the purposes of section 342.
An entity is allowed to hold back a slice of its regular income without going through the accumulation route in section 342, and the section defines that slice and caps it at 15% of regular income. Sub-section (2) prevents the slice being counted twice.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Extent of deemed accumulated income | 15% of regular income | Applied to regular income as reduced by application of income under section 341 and income accumulated or set apart under section 342 | Sub-section (1) |
The 15% is measured on regular income, but what becomes deemed accumulated income is only what is left after section 341 application and section 342 accumulation — so it is capped at 15% of regular income and can be less. If the amount is invested or deposited at all, it must go into a mode permitted under section 350. Under sub-section (2) it cannot be treated as accumulated income for section 342, so the conditions attaching to a section 342 accumulation do not attach here.
An entity has regular income of Rs. 1 crore for a tax year, applies Rs. 80 lakh under section 341 and accumulates Rs. 5 lakh under section 342. Fifteen per cent of regular income is Rs. 15 lakh, and Rs. 15 lakh remains after the application and accumulation, so Rs. 15 lakh is deemed accumulated income. If it is invested or deposited, it must be in a mode permitted under section 350, and under sub-section (2) it does not count as accumulated income for section 342.
You meet it in the income and application working an entity files for the year, where the 15% retention is shown separately from a section 342 accumulation, and in any query on whether the retained amount is held in a section 350 mode.
to the extent of 15% of regular income, shall be considered as deemed accumulated income
The deemed accumulated income under this section shall not be considered as accumulated income for the purposes of section 342.