Section 10(17A) of the Income-tax Act, 1961 - Awards - Awards Instituted/approved by the Central/state Government under Clause (17A) for the Purpose of Exemption of Payment Made in Pursuance Thereof - Clarification on Taxability of Awards for Sportsmen
Circular No. 2/2014 was issued by the Central Board of Direct Taxes on 20 January 2014. Its subject is Section 10(17A) of the Income-tax Act, 1961 - Awards - Awards Instituted/approved by the Central/state Government under Clause (17A) for the Purpose of Exemption of Payment Made in Pursuance Thereof - Clarification on Taxability of Awards for Sportsmen.
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.
Withdraws the shelter that non-professional sportsmen had under Circular No. 447 dated 22 January 1986, which had treated awards received by a non-professional sportsman as a gift or personal testimonial and so not taxable. The Board records that with the amendment of the definition of income in section 2(24) by sub-clauses (xiii), (xiv) and (xv) and the insertion of clauses (v), (vi) and (vii) in section 56(2), gifts became taxable in the recipient's hands with effect from 1 April 2005, and that Circular No. 447 is to be treated as overridden by those provisions from that date. Exemption is now to be claimed only under section 10(17A), for awards instituted or approved by the Central or a State Government and for rewards for approved purposes.
The 1986 circular was written for a regime in which gifts were not taxable in the recipient's hands, and the Board issued this to record that the change in law had overtaken it.
SECTION 10(17A) OF THE INCOME-TAX ACT, 1961 - AWARDS - AWARDS INSTITUTED/APPROVED BY THE CENTRAL/STATE GOVERNMENT UNDER CLAUSE (17A) FOR THE PURPOSE OF EXEMPTION OF PAYMENT MADE IN PURSUANCE THEREOF - CLARIFICATION ON TAXABILITY OF AWARDS FOR SPORTSMEN
CIRCULAR NO. 2/2014 [F.NO.199/01/2014-ITA.I],
The Central Board of Direct Taxes had issued Circular No. 447 (hereinafter called "the Circular") on 22nd January, 1986 clarifying that awards received by a sportsman, who is not a professional, will not be liable to tax in his hands as the award will be in the nature of a gift and/or personal testimonial.
2. The said Circular was applicable in a tax regime when gift was not taxable in the hands of the recipient and with the fundamental change in the manner of treatment of gift by amending the definition of income under sub-section (24) of section 2 by introduction of sub-clauses (xiii), (xiv) and (xv) therein and insertion of clauses (v), (vi) and (vii) in sub-section (2) of section 56 of the Income-tax Act, 1961 ('Act'), the gifts became taxable in the hands of recipient w.e.f. 1-4-2005. The said Circular No. 447 had therefore become inapplicable with the change in law and is to be treated as overridden by the aforesaid statutory provisions w.e.f. 1-4-2005.
3. Further, in terms of provisions of clause (17A) of section 10, Central Government approves awards instituted by Central Government, State Government or other bodies as also the purposes for rewards instituted by Central Government or State Government from time to time. Tax exemption can be sought by eligible persons in respect of awards or rewards covered by such approvals.
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You meet it where a sportsman receives State or private award money and the Assessing Officer brings it to tax under section 56(2), the answer turning on whether the award is approved for section 10(17A).
It mentions. Circular No. 2/2014
Source: the Income Tax Department’s own published text — its page for this instrument.
