1183. Whether prescribed self-declaration under section 197A can be submitted by entities whose income is exempt under section 10
Circular No. 4/2002 was issued by the Central Board of Direct Taxes on 16 July 2002. Its subject is 1183. Whether prescribed self-declaration under section 197A can be submitted by entities whose income is exempt under section 10.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Says that no tax need be deducted at all from payments to a fund, authority, Board or body whose income is unconditionally exempt under section 10 and which is statutorily not required to file a return under section 139, because its income is exempt in any event. The circular then lists those institutions: a local authority within the Explanation to clause (20); a Regimental Fund or Non-public Fund of the armed forces under clause (23AA); a fund set up by the Life Insurance Corporation on or after 1 August 1996 or by any other insurer under clause (23AAB); a Khadi and Village Industries Board or like authority under clause (23BB); a body or authority under clause (23BBA); the SAARC Fund for Regional Projects under clause (23BBC); the Secretariat of the Asian Organisation of the Supreme Audit Institutions under clause (23BBD) till assessment year 2003-04; the Insurance Regulatory and Development Authority under clause (23BBE); the Prime Minister's National Relief Fund, the Prime Minister's Fund (Promotion of Folk Art), the Prime Minister's Aid to Students Fund, the National Foundation for Communal Harmony, a university or other educational institution under sub-clause (iiiab) and a hospital or other institution under sub-clause (iiiac) of clause (23C); the Credit Guarantee Fund Trust for Small Scale Industries under clause (23EB) till assessment year 2006-07; provident funds under the Provident Funds Act, 1925, recognised provident funds, approved superannuation funds, approved gratuity funds and funds under sub-clause (v) of clause (25); the Employees' State Insurance Fund under clause (25A); corporations under clause (26BB); and Boards under clause (29A).
After the Finance Act, 2002 inserted section 197A(1B) with effect from 1 June 2002, representations asked whether entities exempt under section 10 could still give the prescribed self-declaration where the payments to them under section 197A(1A) exceeded the threshold not liable to tax.
1183. Whether prescribed self-declaration under section 197A can be submitted by entities whose income is exempt under section 10
1. Subsequent to the amendment to section 197A made by the Finance Act, 2002 whereby a new sub-section (1B) has been inserted with effect from 1st June, 2002, representations have been received seeking clarification whether the prescribed self-declaration under the said section can be submitted by entities exempt from tax under section 10 even if the payments referred to in sub-section (1A) to be made to them exceed the threshold limit not subject to tax.
2. This matter has been examined by the Board. It has been decided that in case of those funds or authorities or Boards or bodies, by whatever name called, whose income is unconditionally exempt under section 10 of the Income-tax Act and who are statutorily not required to file return of income as per section 139 of the Income-tax Act, there would be no requirement for tax deduction at source since their income is anyway exempt under the Income-tax Act. The institutions whose income is unconditionally exempt under section 10 and who are statutorily not required to file return of income as per the provisions of section 139 are :
(i) "local authority", as referred to in the Explanation to clause (20);
(ii) Regimental Fund or Non-public Fund established by the armed forces of the Union referred to in clause (23AA);
(iii) Fund, by whatever name called, set up by the Life Insurance Corporation of India on or after 1st August, 1996, or by any other insurer referred to in clause (23AAB);
(iv) Authority (whether known as the Khadi and Village Industries Board or by any other name) referred to in clause (23BB);
(v) Body or authority referred to in clause (23BBA);
(vi) SAARC Fund for Regional Projects set up by Colombo Declaration referred to in clause (23BBC);
(vii) Secretariat of the Asian Organisation of the Supreme Audit Institutions referred to in clause (23BBD) till assessment year 2003-2004;
(viii)Insurance Regulatory and Development Authority referred to in clause (23BBE);
(ix) Prime Minister’s National Relief Fund referred to in sub-clause (i), Prime Minister’s Fund (Promotion of Folk Art) referred to in sub-clause (ii), Prime Minister’s Aid to Students Fund referred to in sub-clause (iii), National Foundation for Communal Harmony referred to in sub-clause (iiia), any university or other educational institution referred to in sub-clause (iiiab) and any hospital or other institution for the reception and treatment of persons as referred to in sub-clause (iiiac) of clause (23C);
(x) Credit Guarantee Fund Trust for Small Scale Industries referred to in clause (23EB) till assessment year 2006-2007;
(xi) Provident fund to which the Provident Funds Act, 1925 (19 of 1925) referred to in sub-clause (i), recognised provident fund referred to in sub-clause (ii), approved superannuation funds referred to in sub-clause (iii), approved gratuity fund referred to in sub-clause (iv) and funds referred to in sub-clause (v) of clause (25);
(xii) Employees’ State Insurance Fund referred to in clause (25A);
(xiii)Corporations referred to in clause (26BB);
(xiv) Boards referred to in clause (29A).
Circular : No. 4/2002, dated 16-7-2002.
A bank's refusal to pay interest gross to a provident fund or a statutory board, or an order under section 201 for not deducting from such a payee.
Source: the Income Tax Department’s own published text — its page for this instrument.