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Home Acts & Rules Bill Bills FINANCE (No. 2) BILL, 2019 Chapters List Chapter III DIRECT TAXES - Income-tax This

Clause 10 - Amendment of section 40. - FINANCE (No. 2) BILL, 2019

FINANCE (No. 2) BILL, 2019
Chapter III
DIRECT TAXES - Income-tax
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Amendment of section 40.

10. In section 40 of the Income-tax Act, in clause (a), with effect from the 1st day of April, 2020,––

(a) in sub-clause (i), after the proviso, the following proviso shall be inserted, namely:––

“Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purposes of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee referred to in the said proviso;”;

(b) in sub-clause (ia), in the second proviso, the word “resident” shall be omitted.

 



 

Notes on Clauses:

Clause 10 of the Bill seeks to amend section 40 of the Income tax Act relating to amounts not deductible.

Sub-clause (i) of clause (a) of the said section provides that where, in case of any assessee, tax is to be deducted at source under Chapter XVII-B on payment of any amount in the nature of interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under the Income-tax Act, which is payable outside India, or in India to a non-resident, not being a company or to a foreign company, and where such tax has not been deducted or, after deduction, has not been paid on or before the due date for filing the return of income, the amount of such sum shall not be allowed as a deduction.

The proviso to the said sub-clause specifies that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.

It is proposed to insert a second proviso to the said sub-clause so as to provide that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purposes of the said sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee referred to in the first proviso to sub-section (1) of section 201.

It is further proposed to make a similar consequential amendment in the second proviso to sub-clause (ia) of clause (a) of section 40 to omit the word “resident”.

These amendments will take effect from 1st April, 2020, and will, accordingly, apply to the assessment year 2020-2021 and subsequent assessment years.

 
 
 
 

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