Dated 24 1 2014 circular 3/2014 dated 24 1 2014
Circular 3/2014, dated 24-1-2014 was issued by the Central Board of Direct Taxes on 24 January 2014. Its subject is Dated 24 1 2014 circular 3/2014 dated 24 1 2014.
These are the Board’s explanatory notes to a Finance Act. They are the department’s account of what the amendments were meant to do, and they are cited constantly — but the words of the Act govern where the two part.
The Board's explanatory notes on the amendments made by the Finance Act, 2013, a 56-page commentary opening with the amendments-at-a-glance table that keys each section to the paragraph explaining it. The ground covered, on that table, includes the rate structure, the changed definition of capital asset, changes in section 10 covering keyman insurance policies, the Investor Protection Fund of depositories, pass-through status for certain Alternative Investment Funds, income received in India in Indian currency by a foreign company and National Financial Holdings Company Limited, the new investment allowance in section 32AC for acquisition and installation of new plant or machinery by a manufacturing company, bad debts of banks under section 36, disallowance of fees and charges levied on State Government undertakings under section 40, the new section 43CA bringing stamp duty value into business income on transfer of immovable property held as stock, the taxation of immovable property received for inadequate consideration under section 56, changes in sections 80C, 80CCG, 80D and 80G, the new section 80EE for interest on a housing loan sanctioned in financial year 2013-14, the bar on cash contributions under sections 80GGB and 80GGC, the extended sunset for the power sector in section 80-IA, section 80JJAA, the new section 87A rebate of Rs. 2,000 for individuals with total income up to Rs. 5 lakh, the tax residency certificate provisions in sections 90 and 90A, the replacement of the General Anti-Avoidance Rule with a new Chapter X-A and a new section 144BA, the rate on royalty and fees for technical services in section 115A, section 115BBD, the removal of the cascading effect of dividend distribution tax, the new Chapter XII-DA on buy-back of unlisted shares, section 115R, the new Chapter XII-EA on securitisation trusts, application of seized assets under section 132B, treating a return filed without self-assessment tax as defective, special audit under section 142(2A), the limitation provisions in sections 153 and 153B, the meaning of tax due in sections 167C and 179, the new section 194-IA on tax deduction on transfer of immovable property other than agricultural land, the new section 194LD, section 204, relief from section 206AA for certain non-resident bondholders, and tax collection at source on cash sale of coins and small articles.
The Board's practice of explaining, after each Finance Act, what the amendments do and from when they take effect.
CIRCULAR NO.03/2014
F. No. 142/24/2013-TPL
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
*******
Dated, the 24th January, 2014
EXPLANATORY NOTES TO
THE PROVISIONS OF THE
FINANCE ACT, 2013
Page 2 of 56
CIRCULAR
INCOME-TAX ACT
Finance Act, 2013 ─ Explanatory Notes to the Provisions of the Finance Act,
2013
CIRCULAR NO. 03/2014, DATED 24th JANUARY, 2014
AMENDMENTS AT A GLANCE
Section/Schedule Particulars/Paragraph number
Finance Act, 2013
First Schedule Rate Structure, 3.1 - 3.4
Income-tax Act, 1961
2 Change in the definition of capital asset, 4.1-4.5
10 Change in the definition of keyman insurance policy, 5.1 –
5.5; exemption to income of investor Protection Fund of
depositors, 6.1-6.3 ; pass through status to certain
Alternative Investment Funds, 7.1 – 7.4; exemption of
income received in India in Indian currency by a foreign
company, 8.1 – 8.4; exemption to National Financial
Holdings Company Limited, 9.1 – 9.3.
Insertion of new
section 32AC
Incentive for acquisition and installation of new plant or
machinery by manufacturing company, 10.1-10.4.
36 Clarification for amount to be eligible for deduction as
bad debts in case of banks, 11.1 - 11.8.
40 Disallowance of certain fee, charge, etc. in case of State
Government Undertakings, 12.1 - 12.3.
Insertion of new
section 43CA
Computation of income under the head ―profits and
gains of business or profession‖ for transfer of immovable
property in certain cases, 13.1 – 13.4.
Page 3 of 56
56 Taxability of immovable property received for inadequate
consideration, 14.1 – 14.4.
80C Raising of limit of percentage of eligible premium for life
insurance policies of persons with disability or disease, 15.1
– 15.6.
80CCG Expanding the scope and deduction and its eligibility
under the section, 16.1 - 16.5.
80D Deduction for contribution to Health Schemes similar to
Central Government Health Scheme (CGHS), 17.1 -17.3.
Insertion of new
section 80EE
Deduction in respect of interest on loan sanctioned during
financial year 2013-14 for acquiring residential house
property, 18.1 – 18.4.
80G One hundred per cent deduction for donation to National
Children's Fund, 19.1- 19.4.
80GGB & 80GGC Contribution not to be in cash for deduction under section
80GGB & 80GGC, 20.1 – 20.3.
80-IA Extension of the sunset date under the section for the
power sector, 21.1 – 21.3.
80JJAA Deduction for additional wages in certain cases, 22.1 –
22.6.
87 and Insertion
of new section
87A
Rebate of 2000 for individuals having total income up to
Rs. 5 lakh, 23.1 – 23.4.
90 and 90A Tax Residency Certificate, 24.1-24.5.
Omission of
Chapter X-A
relating to
general AntiGeneral Anti Avoidance Rule (GAAR), 25.1-25.5.
Page 4 of 56
Avoidance Rule
and Insertion of
new Chapter XA, omission of
section 144BA
and insertion of
new section
144BA,
amendment of
sections 144C,
153D, 245N, 245R,
246A, 253 and
295
115A Taxation of income by way of Royalty or fees for technical
services, 26.1 - 26.4.
115BBD Lower rate of tax on dividends received from foreign
companies, 27.1 – 27.3.
115-O Removal of the cascading effect of Dividend Distribution
Tax (DDT), 28.1 – 28.5.
Insertion of new
Chapter XII-DA
Additional income-tax on distributed income by company
for buy-back of unlisted shares, 29.1 – 29.4.
115R Rationalisation of tax on distributed income by the Mutual
Funds, 30.1 – 30.5.
Insertion of new
Chapter XII-EA
Taxation of securitisation trusts, 31.1 - 31.4.
132B Application of seized assets, 32.1 – 32.3.
138 Replacement of terms ―Foreign Exchange Regulation
Act, 1947‖ and Foreign Exchange Regulation Act, 1973‖
with ―Foreign Exchange Management Act, 1999‖, 33.1 –
33.4.
Page 5 of 56
139 Return of income filed without payment of self-assessment
tax to be treated as defective return, 34.1- 34.3.
142 Direction of special audit under sub-section (2A) of the
section, 35.1 – 35.3.
153 and 153B Exclusion of time I computing the period of limitation for
completion of assessments and reassessments, 36.1 – 36.6;
time limit for completion of assessment or reassessment
where reference is made to the transfer pricing officer,
37.1 – 37.6.
167C and 179 Clarification of the phrase ―tax due‖ for the purposes of
recovery in certain cases, 38.1 – 38.3.
Insertion of new
section 194-IA
Tax Deduction at Source (TDS) on transfer of certain
immovable properties (other than agricultural land), 39.1-
39.6.
Insertion of new
section 194LD,
amendment of
sections 115AD,
195 and 196D
Income by way of interest on certain bonds and
Government securities, 40.1 – 40.2.
204 Meaning of person ―responsible for paying‖ under
Chapter XVII, 41.1 – 41.4.
206AA Exemption from requirement of furnishing PAN under
section 206AA to certain non-resident bond holder, 42.1 -
42.3.
206C Removal of exemption from levy of Tax Collection at
Source (TCS) to cash sale of any coin or any other article
weighing 10 grams or less, 43.1 – 43.2.
252 Appointment of President of the Appellate Tribunal, 44.1 –
44.4.
Page 6 of 56
Substitution of
new section for
section 271FA
Penalty under section 271FA for non-filing of Annual
Information Return, 45.1 – 45.5.
Fourth Schedule Extension of time for approval, 46.1 – 46.5.
Wealth-tax Act, 1957
2 Change in the definition of capital asset, ; exemption from
wealth tax to agricultural land situated in urban area, 47.1
– 47.3.
Insertions of new
sections 14A and
14B and
amendment of
section 46
Enabling provisions for facilitating electronic filing of
annexure-less return of net wealth, 48.1 - 48.4.
Finance (No.2) Act, 2004
Section 98 of the
Finance (No.2)
Act, 2004
Rationalisation of securities transaction tax rates, 49.1 –
49.3.
Chapter VII, Finance Act, 2013
Chapter VII of
the Finance Act,
2013 and
amendment in
sections 36 and
43 of the Incometax Act, 1961
Commodities Transaction Tax, 50.1 – 50.6.2.
1. Introduction
1.1 The Finance Act, 2013 (hereafter referred to as the Act) as passed by the
Parliament, received the assent of the President on the 10th day of May, 2013
Page 7 of 56
and has been enacted as Act No. 17 of 2013. This circular explains the
substance of the provisions of the Act relating to direct taxes.
2. Changes made by the Act
2.1 The Act has-
(i) specified the rates of income-tax for the assessment year 2013-14 and the
rates of income-tax on the basis of which tax has to be deducted at source
and advance tax has to be paid during financial year 2013-14.
(ii) amended sections 2,10, 36,40, 43, 56, 80C, 80CCG, 80D, 80G, 80GGB,
80GGC, 80-IA, 80JJAA, 87, 90, 90A, 115A, 115AD, 115BBD, 115-O, 115R, 132B,
138, 139, 142, 144C, 153, 153B, 153D, 167C, 179, 195, 196D, 204, 206AA, 206C,
245N, 245R, 246A, 252, 253, 271FA, 295 in the Income-tax Act, 1961;
(iii) omitted Chapter X-A and Section 144BA of the Income tax Act, 1961;
(iv) inserted new sections 32AC, 43CA, 80EE, 87A, 194-IA and 194LD in the
Income-tax Act, 1961;
(v) inserted Chapter X-A consisting of sections 95 - 102, Chapter XII-DA
consisting of sections 115QA – 115QC and Chapter XII-EA consisting of
sections 115TA – 115TC, section-144BA and section-194LD in the Income-tax
Act, 1961;
(vi) amended rule 3 of Part A of the Fourth Schedule to the Income-tax Act,
1961;
(vii) amended sections 2 and 46 of the Wealth-tax Act, 1957;
(viii) inserted sections 14A and 14B in the Wealth-tax Act, 1957
(ix) amended section 98 of the Finance (No.2) Act, 2004;
(x) introduced Commodity Transaction Tax through Chapter VII.
3. Rate structure
3.1 Rates of income-tax in respect of incomes liable to tax for the assessment
year 2013-14
3.1.1 In respect of income of all categories of assessees liable to tax for the
assessment year 2013-14, the rates of income-tax have been specified in Part
I of the First Schedule to the Act. These rates are the same as those laid down
in Part III of the First Schedule to the Finance Act, 2012 for the purposes of
computation of ―advance tax‖, deduction of tax at source from ―Salaries‖
Page 8 of 56
and charging of tax payable in certain cases during the financial year 2012-
13.
The major features of the rates specified in the said Part I are as follows:
3.1.2 Individual, Hindu undivided family, association of persons, body of
individuals or artificial juridical person. –
Paragraph A of Part I of the First Schedule specifies the rates of income-tax in
the case of every individual, Hindu undivided family, association of persons,
body of individuals or artificial juridical person (other than a co-operative
society, firm, local authority and company) as under:-
Income
chargeable
to tax
Rate of income-tax
Individual(other than
senior and very
senior citizen
resident in India),
HUF, association of
persons, body of
individuals and
artificial juridical
person
Individual,
resident in
India, who is of
the age of
sixty years or
more but less
than eighty
years (senior
citizen)
Individual,
resident in India,
who is of the age
of eighty years or
more (very senior
citizen)
Up to Rs.
2,00,000 Nil
NIL
Nil
Rs. 2,00,001
- Rs.
2,50,000
10%
Rs. 2,50,001
- Rs.
5,00,000
10%
Rs. 5,00,001
- Rs.
10,00,000
20% 20% 20%
Page 9 of 56
Exceeding
Rs. 10,00,000 30% 30% 30%
In the case of every individual, Hindu undivided family, association of persons
or body of individuals, no surcharge is levied.
The Education Cess on income-tax shall continue to be levied at the rate of
two per cent on the amount of tax computed in all cases. For instance, if the
income-tax computed is Rs. 1,00,000 then the education cess of two per cent
is to be computed on Rs. 1,00,000 which works out to Rs. 2,000. In addition,
the amount of tax computed shall also be increased by an additional cess
called Secondary and Higher Education Cess on income-tax at the rate of
one per cent of such income-tax. Thus, where the amount of tax computed is
Rs. 1,00,000, the Education Cess of two per cent is Rs. 2,000, the said
Secondary and Higher Education Cess will be computed on Rs. 1,00,000
which works out to be Rs. 1,000. The total cess in this case will amount to Rs.
3,000 (i.e., Rs. 2,000 + Rs. 1,000). No marginal relief shall be available in
respect of such Cess.
3.1.3 Co-Operative Societies –
In the case of every co-operative society, the rates of income-tax have
been specified in Paragraph B of Part I of the First Schedule to the Act. The
rates are as follows:-
Income chargeable to tax Rate
Up to Rs. 10,000 10%
Rs. 10,001 -Rs. 20,000 20%
Exceeding Rs. 20,000 30%
No surcharge shall be levied.
Education Cess on income-tax and Secondary and Higher Education Cess on
income-tax shall be levied at the rate of two per cent and one per cent
respectively of the amount of tax computed.
Page 10 of 56
3.1.4 Firms –
In the case of every firm, the rate of income-tax of thirty per cent has been
specified in Paragraph C of Part I of the First Schedule to the Act. No
surcharge shall be levied in the case of a firm.
Education Cess on Income-tax shall continue to be levied at the rate of two
per cent on the amount of tax computed. In addition, such amount of tax
shall be further increased by an additional surcharge called Secondary and
Higher Education Cess on income-tax computed at the rate of one per cent
on the amount of tax, in all cases.
3.1.5 Local Authorities –In the case of every local authority, the rate of
income-tax has been specified at thirty per cent in Paragraph D of Part I of
the First Schedule to the Act. No surcharge shall be levied. However,
Education Cess, and Secondary and Higher Education Cess on income-tax
shall be levied at the rate of two per cent and one per cent respectively of
the amount of tax computed.
3.1.6 Companies –
In the case of a company, the rate of income-tax has been specified in
Paragraph E of Part I of the First Schedule to the Act.
In case of a domestic company, the rate of income-tax is thirty per cent of
the total income. The tax computed shall be enhanced by a surcharge of
five per cent of such income tax only where the domestic company has total
income exceeding one crore rupees.
In the case of a company other than a domestic company, royalties
received from Government or Indian concern under an approved
agreement made after 31-3-1961, but before 1-4-1976 shall be taxed at fifty
per cent. Similarly, in the case of fees for technical services received by such
company from Government or Indian concern under an approved
agreement made after 29-2-1964, but before 1-4-1976, shall be taxed at fifty
per cent. On the balance of the total income of such company, the tax rate
shall be forty per cent. The tax computed shall be enhanced by a surcharge
of two per cent only in the cases where such company has total income
exceeding one crore rupees.
However, marginal relief shall be allowed in the case of every company to
ensure that the additional amount of income-tax payable, including
surcharge, on the excess of income over one crore rupees is limited to the
amount by which the income is more than one crore rupees. Also, in the case
of every company having total income chargeable to tax under section
115JB of the Income-tax Act, 1961 and where such income exceeds one
crore rupees, marginal relief shall be provided.
Education Cess on income-tax shall continue to be levied at the rate of two
per cent on the amount of tax computed, inclusive of surcharge in the case
of every company. Also, such amount of tax and surcharge shall be further
increased by an additional surcharge called Secondary and Higher
Education Cess on income-tax at the rate of one per cent of the amount of
tax computed, inclusive of surcharge. No marginal relief shall be available in
respect of Education Cess and Secondary and Higher Education Cess.
3.2 Rates for deduction of income-tax at source from certain incomes during
the financial year 2013-14.
3.2.1 In every case in which tax is to be deducted at the rates in force under
the provisions of sections 193, 194, 194A, 194B, 194BB, 194D and 195 of the
Income-tax Act, the rates for deduction of income-tax at source during the
financial year 2013-14 have been specified in Part II of the First Schedule to
the Act. The rates for deduction of income-tax at source during the financial
year 2013 -14 will continue to be the same as those specified in Part II of the
First Schedule to the Finance Act, 2012 except that in case of certain
payments made to a non-resident (other than a company) or a foreign
company, in the nature of income by way of royalty or fees for technical
services, the rate shall be twenty-five percent. of such income instead of ten
percent.
3.2.2 Surcharge –
The tax deducted at source in the following cases shall be increased by a
surcharge for purposes of the Union indicated below:-
(i) In case of every non-resident person not being a company, the rate of
surcharge is ten percent of tax where the income or aggregate of such
income paid or likely to be paid and subject to the deduction exceeds one
crore rupees.
(ii) In case of payments made to foreign companies, the rate of surcharge
is two per cent of such income tax where the income or the aggregate of
such incomes paid or likely to be paid and subject to the deduction exceeds
one crore rupees but does not exceed ten crore rupees. In case where such
income or the aggregate of such incomes paid or likely to be paid to a
foreign company and subject to the deduction exceeds ten crore rupees,
the rate of surcharge is five percent.
(iii) No surcharge on tax deducted at source shall be levied in the case of
an individual, Hindu undivided family, association of persons, body of
individuals, artificial juridical person, co-operative society, local authority, firm
being a resident or a domestic company.
3.2.3 Education Cess –
Education Cess on income-tax shall continue to be levied for the purposes of
the Union at the rate of two per cent of income-tax and surcharge, if any, in
the cases of persons not resident in India including companies other than
domestic company. For instance, if income tax on a foreign company is Rs. 1,
20,00,000 and the surcharge at the rate of two per cent. is Rs. 2,40,000, then
the education cess of two per cent is to be computed on Rs. 1,22,40,000
which works out to Rs. 2,44,800.
In addition, the amount of tax deducted and surcharge shall be further
increased by an additional surcharge called Secondary and Higher
Education Cess on income-tax at the rate of one per cent in all such cases.
Thus in the earlier illustration, where the amount of tax deducted is Rs.
1,20,00,000, the surcharge is Rs. 2,40,000, , the said Secondary and Higher
Education Cess will be computed at the rate of one percent on Rs.
1,22,40,000 which works out to be Rs. 1,22,400. The total cess in this case will,
therefore, amount to Rs. 3,67,200 (i.e., Rs. 2,44,800 + Rs. 1,22,400).
3.3 Rates for deduction of income-tax at source from "Salaries", computation
of "advance tax" and charging of income-tax in special cases during the
financial year 2013-14.
3.3.1 The rates for deducting income-tax at source from Salaries and
computing advance tax during the financial year 2013-14 have been
specified in Part III of the First Schedule to the Act. These rates are also
applicable for charging income-tax during the financial year 2013-14 on
current incomes in cases where accelerated assessments have to be made,
e.g., provisional assessment of shipping profits arising in India to non-residents,
assessment of persons leaving India for good during that financial year,
assessment of persons who are likely to transfer property to avoid tax,
assessment of bodies formed for short duration, etc. The rates are as follows:-
3.3.2 Individual, Hindu undivided family, association of persons, body of
individuals or artificial juridical person –
Paragraph A of Part III of the First Schedule specifies the rates of income-tax in
the case of every individual, Hindu undivided family, association of persons,
body of individuals or artificial juridical person (other than a co-operative
society, firm, local authority and company). The basic exemption limit, the
rates of tax and slabs of income for various categories remain the same as in
financial year 2012-13. The rates of tax during the financial year 2013-14 are
as follows:-
Income chargeable
to tax Rate of income- tax
Individual
(other than
senior and very
senior citizen
resident in
India), HUF,
association of
persons, body
of individuals
and artificial
juridical person.
Individual,
resident in India
who is of the
age of sixty
years or more
but less than
eighty years.
(senior citizen)
Individual
resident in
India, who is of
the age of
eighty years or
more. (very
senior citizen)
Up to Rs. 2 ,00,000 Nil
Nil
Nil
Rs. 2,00,001 -Rs.
2,50,000
10%
Rs. 2,50,001 -Rs.
5,00,000
10%
Rs. 5,00,001 -Rs.
10,00,000
20% 20% 20%
Exceeding Rs.
10,00,000
30% 30% 30%
The amount of income-tax so computed shall be increased by a surcharge at
the rate of ten percent. of such income-tax in case of a person having a total
income exceeding one crore rupees.
However, the total amount payable as income-tax and surcharge on total
income exceeding one crore rupees shall not exceed the total amount
payable as income-tax on a total income of one crore rupees by more than
the amount of income that exceeds one crore rupees.
The Education Cess on income-tax shall continue to be levied at the rate of
two per cent on the amount of tax computed inclusive of surcharge. In
addition, the amount of tax computed shall be further increased by an
additional surcharge called Secondary and Higher Education Cess on
income-tax at the rate of one per cent of such income-tax inclusive of
surcharge. No marginal relief shall be available in respect of Education Cess
and Secondary and Higher Education Cess.
3.3.3 Co-operative Societies
In the case of every co-operative society, the rates of income-tax have been
specified in Paragraph B of Part III of the First Schedule to the Act. The rates
are as followsIncome chargeable to tax Rate
Up to Rs. 10,000 10%
Rs. 10,001 -Rs. 20,000 20%
Exceeding Rs. 20,000 30%
The amount of income-tax so computed shall be increased by a surcharge at
the rate of ten percent. of such income-tax in case of a co-operative society
having a total income exceeding one crore rupees.
However, the total amount payable as income-tax and surcharge on total
income exceeding one crore rupees shall not exceed the total amount
payable as income-tax on a total income of one crore rupees by more than
the amount of income that exceeds one crore rupees.
Education Cess on income-tax and Secondary and Higher Education Cess on
income-tax shall be levied at the rate of two per cent and one per cent
respectively of the amount of income-tax computed inclusive of surcharge.
No marginal relief shall be available in respect of Education Cess and
Secondary and Higher Education Cess.
3.3.4 Firms –
In the case of every firm, the rate of income-tax of thirty per cent has been
specified in Paragraph C of Part III of the First Schedule to the Act.
Page 15 of 56
The amount of income-tax so computed shall be increased by a surcharge at
the rate of ten percent. of such income-tax in case of a firm having a total
income exceeding one crore rupees.
However, the total amount payable as income-tax and surcharge on total
income exceeding one crore rupees shall not exceed the total amount
payable as income-tax on a total income of one crore rupees by more than
the amount of income that exceeds one crore rupees.
The Education Cess on income-tax shall continue to be levied at the rate of
two per cent on the amount of tax computed inclusive of surcharge. In
addition, the amount of tax computed shall be further increased by an
additional surcharge called Secondary and Higher Education Cess on
income-tax at the rate of one per cent of such income-tax inclusive of
surcharge. No marginal relief shall be available in respect of Education Cess
and Secondary and Higher Education Cess.
3.3.5 Local AuthoritiesIn the case of every local authority, the rate of income-tax has been
specified at thirty per cent in Paragraph D of Part III of the First Schedule to
the Act.
The amount of income-tax so computed shall be increased by a surcharge at
the rate of ten percent. of such income-tax in case of a local authority
having a total income exceeding one crore rupees.
However, the total amount payable as income-tax and surcharge on total
income exceeding one crore rupees shall not exceed the total amount
payable as income-tax on a total income of one crore rupees by more than
the amount of income that exceeds one crore rupees.
Education Cess on Income-tax and Secondary and Higher Education Cess on
income-tax shall be levied at the rate of two per cent and one per cent
respectively of the amount of income tax and surcharge. No marginal relief
shall be available in respect of Education Cess and Secondary and Higher
Education Cess.
3.3.6 CompaniesIn the case of a company, the rate of income-tax has been specified in
Paragraph E of Part III of the First Schedule to the Act.
In case of a domestic company, the rate of income-tax is thirty per cent of
the total income. The tax computed shall be enhanced by a surcharge of
five per cent where such domestic company has total income exceeding
one crore rupees but not exceeding ten crore rupees. Surcharge at the rate
of ten per cent shall be levied if the total income of the company exceeds
ten crore rupees.
In the case of a company other than a domestic company, royalties
received from Government or Indian concern under an approved
agreement made after 31-3-1961, but before 1-4-1976 shall be taxed at fifty
per cent. Similarly, in the case of fees for technical services received by such
company from Government or Indian concern under an approved
agreement made after 29-2-1964 but before 1-4-1976, shall be taxed at fifty
per cent. On the balance of the total income of such company, the tax rate
shall be forty per cent. The tax computed shall be enhanced by a surcharge
of two per cent only where such company has total income exceeding one
crore rupees but does not exceed ten crore rupees. Surcharge at the rate of
five per cent shall be levied if the total income of the company other than
domestic company exceeds ten crore rupees.
However, marginal relief shall be allowed in the case of every company to
ensure that (i) the additional amount of income-tax payable, including
surcharge, on the excess of income over one crore rupees is limited to the
amount by which the income is more than one crore rupees, (ii) the total
amount payable as income-tax and surcharge on total income exceeding
ten crore rupees shall not exceed the total amount payable as income-tax
and surcharge on a total income of ten crore rupees, by more than the
amount of income that exceeds ten crore rupees.
Education Cess on Income-tax and Secondary and Higher Education Cess on
income-tax shall be levied at the rate of two per cent and one per cent
respectively of the amount of income-tax computed including surcharge. No
marginal relief shall be available in respect of Education Cess and Secondary
and Higher Education Cess.
3.4 Surcharge on Additional Income-taxWhere additional income-tax has to
be paid under section 115-O or section 115-QA or sub-section (2) of section
115R or section 115TA of the Income-tax Act, that is to say, on distribution of
dividend by domestic companies or distribution of income by a company on
buy-back of shares from shareholders or on distribution of income by a
mutual fund to its unit holders or on distribution of income by a securitization
trust to its investors, the additional tax so payable shall be increased by a
surcharge of ten percent of such tax.
Page 17 of 56
4. Amendment in the definition of Capital Asset
4.1 The provisions contained in clause (14) of section 2 of the Income-tax Act,
1961, before amendment by the Act, define the term ―capital asset‖ as
property of any kind held by an assessee, whether or not connected with his
business or profession. Certain categories of properties including agricultural
land have been excluded from this definition. Sub-clause (iii) of clause (14) of
section 2 provides that (a) agricultural land situated in any area within the
jurisdiction of a municipality or cantonment board having population of not
less than ten thousand according to last preceding census, or (b) agricultural
land situated in any area within such distance not exceeding eight kilometers
from the local limits of any municipality or cantonment board as notified by
the Central Government having regard to the extent and scope of
urbanization and other relevant factors, forms part of capital asset.
4.2 Item (b) of sub-clause (iii) of clause (14) of section 2 has been amended
so as to provide that the land situated in any area within the distance,
measured aerially (shortest aerial distance), (I) not being more than two
kilometers, from the local limits of any municipality or cantonment board
referred to in item (a) and which has a population of more than ten
thousand but not exceeding one lakh; or (II) not being more than six
kilometers, from the local limits of any municipality or cantonment board
referred to in item (a) and which has a population of more than one lakh but
not exceeding ten lakh; or (III) not being more than eight kilometers, from the
local limits of any municipality or cantonment board referred to in item (a)
and which has a population of more than ten lakh, shall form part of capital
asset.
4.3 The expression ―population‖ has also been defined to mean population
according to the last preceding census of which the relevant figures have
been published before the first day of the previous year.
4.4 Similar amendments are also carried out in clause (IA) of section 2 of the
Income-tax Act, 1961 relating to the definition of ―agricultural income‖ and in
respect of the definition of ―urban land‖ in the Wealth-tax Act, 1957.
4.5 Applicability - These amendments take effect from 1st April, 2014 and
accordingly, apply in relation to Assessment year 2014-15 and subsequent
assessment years.
In an assessment or appeal for assessment year 2014-15 turning on when an amendment took effect, and in section 194-IA or section 43CA disputes on property transactions of that period.
Rules it names. Rule 3 of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
It mentions. Circular No. 03/2014
Source: the Income Tax Department’s own published text — its page for this instrument.