Circular No. 7/2008

What this is

Circular No. 7/2008 was issued by the Central Board of Direct Taxes on 1 August 2008. Its subject is Order under section 119(1) of the Income-tax Act, 1961 regarding exemption from the TDS provisions under section 197 read in conjunction with section 10(26BBB) of Income-tax Act, 1961.

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.

What it does

Directs, under section 119(1), that corporations set up by a Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen, whose income is exempt under section 10(26BBB), are not to suffer tax deduction or collection at source on their receipts. The exemption runs on the payments they receive; it does not touch what they themselves must deduct. Paragraph 2 makes that express: the corporation must still deduct tax on all contractual payments it makes to other parties, including sub-contractors. The order states it is valid for three years from the date of issue.

Why it was issued

Bodies whose whole income was already exempt under section 10(26BBB) were nonetheless having tax withheld at source on their receipts and had to seek certificates under section 197 to stop it. The Board used its section 119(1) power to grant a blanket exemption instead of case-by-case relief.

Who it reaches

• Statutory ex-servicemen welfare corporations exempt under section 10(26BBB)
• Persons making payments to such corporations who would otherwise deduct at source
• Assessing Officers handling section 197 applications from these bodies
• Chief Commissioners, who were to report back to the Board

The provisions it speaks to

The instrument, as the Board published it

Order under section 119(1) of the Income-tax Act, 1961 regarding exemption from the TDS provisions under section 197 read in conjunction with section 10(26BBB) of Income-tax Act, 1961
CIRCULAR NO. 7/2008, DATED 1-8-2008

In exercise of the powers conferred under sub-section (1) of section 119 of Income-tax Act, 1961, Central Board of Direct Taxes hereby directs that corporations which are established by a Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen and whose income qualifies for exemption from income-tax under section 10(26BBB) of the Income-tax Act, 1961, are hereby given exemption from Tax Deduction/Collection at Source on their receipts.
2. This exemption shall not absolve such organisation from their statutory obligation of deducting TDS on all contractual payments made by them to other parties including sub-contractors etc.
3. This exemption shall be valid for 3 years from the date of issue of this order.
4. After the end of 3 years, all the Chief Commissioners of Income-tax will send their feedback to the CBDT on the benefits and, or shortcomings observed in the working so as to enable a review and further decision by the Board in the matter.

What to watch

• The order fixes its own outer limit: three years from 1 August 2008, a period that has since run out, and paragraph 4 contemplated a Board review after that.
• The relief is one-way — the corporation is still a deductor on its own outgoings, and a TDS default by it is not covered.
• It rides entirely on the payee qualifying under section 10(26BBB); a body outside that clause gets nothing from this order.
• The text does not prescribe any certificate or intimation the payer should hold, so payers were left to satisfy themselves of the payee's status.

Where you meet it

In a section 197 or 197A file, or when a payer to such a corporation is asked in a TDS survey why it did not deduct on those payments.

What it names

It mentions. Circular No. 7/2008

On the same provision

• Notification No. 116/2026 [F. No.195/13/2025-ITA-I] / SO 4706(E) : Notification in the case of Maharashtra Electricity Regulatory Commission — [भाग II—खण् ड 3(ii)] भारत का रािपत्र : असाधारण 3 25 August 2026
• Notification No. 112/2026 [F. No. 300196/6/2026-ITA-I] / SO 4458(E) : Notification in the case of District Legal Service Authority, Panchkula — Ministry of Finance 11 August 2026
• Notification No. 109/2026 [F. No. 300196/39/2025-ITA-I] / SO 4321(E) : Notification section 536 (1) of the Income Tax Act, 2025 (30 of 2025) in the case of Odisha Joint Entrance Examination Committee — [भाग II—खण् ड 3(ii)] भारत का रािपत्र : असाधारण 3 4 August 2026
• Notification No. 107/2026 [F. No. 300196/65/2018-ITA-I] / SO 4319(E) : Notification section 536 (1) of the Income Tax Act, 2025 (30 of 2025) in the case of Noida Special Economic Zone Authority — [भाग II—खण् ड 3(ii)] भारत का रािपत्र : असाधारण 3 4 August 2026
• Notification No. 106/2026 [F. No. 300196/65/2018-ITA-I] / SO 4318(E) : Notification section 536 (1) of the Income Tax Act, 2025 (30 of 2025) in the case of Noida Special Economic Zone Authority — [भाग II—खण् ड 3(ii)] भारत का रािपत्र : असाधारण 3 4 August 2026
• Notification No. 104/2026 [F.No.300196/1/2026-ITA-I] / SO 4308(E) : Notification section 536 (1) of the Income Tax Act, 2025 (30 of 2025) in the case of District Legal Service Authority, Charkhi Dadri — Ministry of Finance 3 August 2026

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