Clause (10D) of section 10 of the Act provides for income-tax exemption on the sum received under a life insurance policy, including bonus on such policy. There is a condition that the premium payable for any of the years during the terms of the policy should not exceed ten per cent of the actual capital sum assured.
2. It may be pertinent to note that the legislative intent of providing exemption under clause (10D) of section 10 of the Act has been to further the welfare objective by subsidising the risk premium for an individual’s life and providing benefit to small and genuine cases of life insurance coverage. However, over the years it has been observed that several high net worth individuals are misusing the exemption provided under clause (10D) of section 10 of the Act by investing in policies having large premium contributions (as it is acting as an investment policy) and claiming exemption on the sum received under such life insurance policies.
3. In order to prevent the misuse of exemption under the said clause, Finance Act, 2021, amended clause (10D) of section 10 of the Act to, inter-alia, provide that the sum received under a ULIP (barring the sum received on death of a person), issued on or after the 01.02.2021 shall not be exempt if the amount of premium payable for any of the previous years during the term of such policy exceeds Rs 2,50,000. It was also provided that if premium is payable for more than one ULIPs, issued on or after the 01.02.2021, the exemption under the said clause shall be available only with respect to such policies where the aggregate premium does not exceed Rs 2,50,000 for any of the previous years during the term of any of the policy. Circular no 02 of 2022 dated 19.01.2022 was issued to explain how the exemption is to be calculated when there are more than one policies.
4. After the enactment of the above amendment, while ULIPs having premium payable exceeding Rs 2,50,000/- have been excluded from the purview of clause (10D) of section 10 of the Act, all other kinds of life insurance policies are still eligible for exemption irrespective of the amount of premium payable.
5. In order to curb such misuse, it is proposed to tax income from insurance policies (other than ULIP for which provisions already exists) having premium or aggregate of premium above Rs 5,00,000 in a year. Income is proposed to be exempt if received on the death of the insured person. This income shall be taxable under the head “income from other sources”. Deduction shall be allowed for premium paid, if such premium has not been claimed as deduction earlier. The proposed provision shall apply for policies issued on or after 1st April, 2023. There will not be any change in taxation for polices issued before this date. Hence, it is proposed to amend the Act so as to-
(i) insert a new proviso (sixth proviso) to clause (10D) of the section 10 of the Act to provide that nothing contained in this clause shall apply with respect to any life insurance policy (other than a unit linked insurance policy) issued on or after the 1st April, 2023, if the amount of premium payable for any of the previous year during the term of such policy exceeds five lakh rupees;
(ii) insert a new proviso (seventh proviso) to clause (10D) of section 10 of the Act to provide that if the premium is payable by a person for more than one life insurance policy (other than unit linked insurance policy), issued on or after the 1st April, 2023, the provisions of this clause shall apply only with respect to those life insurance policies (other than unit linked insurance policies), where the aggregate amount of premium does not exceed the amount referred to in the sixth proviso in any of the previous years during the term of any of those policies;
(iii) amend the existing sixth proviso (new proposed eighth proviso) to clause (10D) of section 10 of the Act to provide that the provisions of the fourth, fifth, sixth and seventh provisos shall not apply to any sum received on the death of a person;
(iv) insert clause (xiii) in sub-section (2) of section 56 of the Act to provide where any sum is received (including the amount allocated by way of bonus) at any time during a previous year, under a life insurance policy, which is not exempt under clause (10D) of section 10 of the Act, the sum so received as exceeds the aggregate of the premium paid during the term of such life insurance policy shall be chargeable to income-tax under the head “Income from other sources”. If the premium paid had been claimed as deduction in any other provision of the Act such premium will not be reduced from sum so received. Computation mechanism shall be prescribed. This would not apply to ULIP or Keyman insurance policies whose taxation is governed by other existing provisions of the Act
(v) insert an Explanation to clause (xiii) in sub-section (2) of section 56 of the Act to provide that for the purposes of this clause, “unit linked insurance policy” shall have the same meaning as assigned to it in Explanation 3 to clause (10D) of section 10 of the Act;
(vi) insert sub-clause (xviid) in clause (24) of section 2 of the Act to provide that income shall include any sum referred to in clause (xiii) of sub-section (2) of section 56 of the Act.
6. These amendments will take effect from 1st April, 2024 and will accordingly apply to the assessment year 2024-25 and subsequent assessment years.
[clauses 3, 5 & 32]
Extract of relevant clause of Finance Bill 2023
Clause 3 of the Bill seeks to amend section 2 of the Income-tax Act relating to definitions.
It is proposed to amend clause (19B) of the said section to omit “Additional Commissioner of Income-tax (Appeals)” from the definition.
This amendment will take effect from 1st April, 2023.
Clause (24) of the said section provides definition of income for the purposes of the Act.
It is further proposed to insert a new sub-clause (xviic) in clause (24) of the said section to provide that any sum referred to in clause (xii) of sub-section (2) of section 56 shall also be included within the definition of income.
It is also proposed to insert sub-clause (xviid) in the said clause so as to provide that income shall include any sum referred to in clause (xiii) of sub-section (2) of section 56.
These amendments will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
It is also proposed to insert a new clause (28CA) to provide for definition of “Joint Commissioner (Appeals)” to mean a person appointed to be a Joint Commissioner of Income-tax (Appeals) or an Additional Commissioner of Income-tax (Appeals) under subsection (1) of section 117.
This amendment will take effect from 1st April, 2023.
Clause (42A) of the said section defines “short-term capital asset” and the Explanation 1 of the said clause provides for determining the period for which any capital asset is held by the assessee.
It is proposed to insert a new sub-clause (hi) in clause (i) to the Explanation 1 of the said clause so as to provide that in the case of capital asset, being Electronic Gold Receipt or gold being capital asset, the holding period for the purpose of capital gain shall include the period for which the gold or Electronic Gold Receipt, was held by the assessee prior to conversion into Electronic Gold Receipt or gold, as the case may be.
This amendment will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
Clause 5 of the Bill seeks to amend section 10 of the Income-tax Act relating to incomes not included in total income.
It is proposed to amend the Explanation to clause (4D) of the said section to give reference of the International Financial Services Centres Authority (Fund Management) Regulations, 2022 in the definition of “specified fund”.
This amendment will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
Clause (4E) of the said section provides that any income accrued or arisen to, or received by a non-resident as a result of transfer of non-deliverable forward contracts or offshore derivative instruments or over-the-counter derivatives entered into with an offshore banking unit of an International Financial Services Centre as referred to in sub-section (1A) of section 80LA, which fulfils such conditions as may be prescribed, shall not be included in the total income.
It is further proposed to include distribution of income on offshore derivative instruments also within the ambit of the said clause.
It is also proposed to insert a proviso to provide that the amount of distributed income referred to in the said clause shall include only so much of the amount which is chargeable to tax in the hands of the offshore banking unit under section 115AD.
These amendments will take effect from 1st April, 2024 and, will, accordingly apply in relation to the assessment year 2024-2025 and subsequent assessment years.
Clause (10D) of the said section, inter alia, provides exemption to any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy.
It is also proposed to omit the reference of Explanation to sub-section (2A) of section 88 in the second proviso to clause (10D) of the said section which is consequential due to the omission of section 88.
This amendment will take effect from 1st April, 2023.
It is also proposed to substitute the sixth proviso in the said clause to the effect that nothing contained in this clause shall apply with respect to any life insurance policy other than a unit linked insurance policy, issued on or after 1st April, 2023, if the amount of premium payable for any of the previous year during the term of such policy exceeds five lakh rupees.
The proposed seventh proviso of the said clause provides that if the premium is payable, by a person, for more than one life insurance policy other than unit linked insurance policy, issued on or after 1st April, 2023, the provisions of this clause shall apply only with respect to those life insurance policies other than unit linked insurance policies, where the aggregate amount of premium does not exceed the amount referred to in the sixth proviso in any of the previous years during the term of any of those policies.
The proposed eighth proviso of the said clause provides that the provisions of fourth, fifth, sixth and seventh provisos shall not apply to any sum received on the death of a person.
These amendments will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
It is also proposed to insert a new clause (12C) in the said section so as to provide that any payment from the Agniveer Corpus Fund under the Agnipath Scheme to a person enrolled under the said Scheme, or to his nominee, shall be exempted. It is further proposed to give reference of the definitions for the expressions “Agniveer Corpus Fund” and “Agnipath Scheme” as provided in section 80CCH.
This amendment will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
Clause (22B) of said section, inter alia, provides that any income of a notified news agency set up in India solely for collection and distribution of news shall not be included in total income, provided that the news agency applies its income or accumulates it for application solely for collection and distribution of news and does not distribute its income in any manner to its members. It has also been provided that the provisions of this clause are applicable to a notified news agency for a specified period of time not exceeding three assessment years.
It is also proposed to insert fourth proviso to clause (22B) of said section so as to provide that nothing contained in this clause shall apply to any income of the news agency of the previous year relevant to the assessment year beginning on or after 1st April, 2024.
This amendment will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
Clause (23BBF) of said section provides income tax exemption to any income of the North-Eastern Development Finance Corporation Limited. This exemption has been withdrawn for assessment year beginning on the 1st day of April, 2010 and any subsequent assessment year or years.
It is proposed to omit the said clause with effect from 1st April, 2023.
Clause (23C) of the said section provides exemption to the income of certain entities.
Sub-clauses (iv), (v), (vi) and (via) of clause (23C) of said section provide exemption to the income received by any person on behalf of any fund or trust or institution or university or other educational institutions or hospital or other institutions which may be approved or provisionally approved by the Principal Commissioner or Commissioner.
It is proposed to substitute clause (iv) of the first proviso to clause (23C) to provide that the fund or trust or institution or any university or other educational institution or any hospital or other institution, as is referred to in sub-clauses (iv), (v) , (vi) and (via) of the said clause, which is not covered by clauses (i),(ii) or (iii) of the said proviso, can make an application for approval, where activities of the fund or trust or institution or university or other educational institution or hospital or other medical institution have,––
(A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought;
(B) commenced and no income or part thereof of the said fund or trust or institution or university or other educational institution or hospital or other medical institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, or section 11 or 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities.
It is further proposed to amend clause (ii) of the second proviso to clause (23C) so as to provide that where the application is made under the proposed sub-clause (B) of clause (iv) of the first proviso, the Principal Commissioner or Commissioner shall follow the procedure provided under clause (ii) of the second proviso to clause (23C).
It is also proposed to substitute item (B) of sub-clause (b) of clause (ii) of the second proviso to clause (23C) so as to provide that if the Principal Commissioner or Commissioner is not so satisfied, about the objects and the genuineness of its activities under item (A), and compliance of the requirements under item (B), of sub-clause (a) of clause (ii) of the said proviso, pass an order in writing,––
(I) in a case referred to in clause (ii) or clause (iii) of the first proviso, rejecting such application and also cancelling its approval; or
(II) in a case referred to in the proposed sub-clause (B) of clause (iv) of the first proviso, rejecting such application, after affording it a reasonable opportunity of being heard.
It is also proposed to substitute clause (iii) of the second proviso so as to provide that where the application is made under sub-clause (A) of clause (iv) of the first proviso or the application made under clause (iv) of the first proviso as it stood immediately before its amendment by the Finance Act, 2023, the Principal Commissioner or Commissioner shall pass an order in writing granting approval to it provisionally for a period of three years from the assessment year from which the approval is sought, and send a copy of such order to the fund or trust or institution or university or other educational institution or hospital or other medical institution
These amendments will take effect from 1st October, 2023.
It is also proposed to insert a second proviso to clause (i) of Explanation 2 to the third proviso of clause (23C) so as to provide that the provisions of the first proviso shall apply only if there was no violation of the conditions specified in the twelfth, thirteenth and twenty- first proviso, and those specified in Explanation 2 and Explanation 3, of the said clause, at the time the application was made from the corpus.
It is also proposed to insert a third proviso to clause (i) of Explanation 2 to the third proviso of clause (23C) of the said section so as to provide that the amount invested or deposited back shall not be treated as application for charitable or religious purposes under the first proviso unless such investment or deposit is made within a period of five years from the end of the previous year in which such application was made from corpus.
It is also proposed to insert a fourth proviso to clause (i) of Explanation 2 to the third proviso of clause (23C) so as to provide that nothing contained in the first proviso, shall apply where application from corpus is made on or before 31st March, 2021.
It is also proposed to insert a second proviso to clause (ii) of Explanation 2 to the third proviso of clause (23C) to provide that the provisions of the first proviso shall apply only if there was no violation of the conditions specified in the twelfth, thirteenth and twenty-first provisos and those specified in Explanation 2 and Explanation 3, of the said clause, at the time the application was made from loan or borrowing.
It is also proposed to insert a third proviso to clause (ii) of Explanation 2 to the third proviso of clause (23C) to provide that the amount repaid shall not be treated as application for charitable or religious purposes under the first proviso unless such repayment is made within a period of five years from the end of the previous year in which such application was made from loan or borrowing.
It is also proposed to insert a fourth proviso to clause (ii) of Explanation 2 to the third proviso of clause (23C) to provide that nothing contained in the first proviso, shall apply where the application, from any loan or borrowing is made on or before 31st March, 2021.
These amendments will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
It is also proposed to insert clause (iii) in Explanation 2 to the third proviso of clause (23C) to provide that any amount credited or paid out of the income of any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), other than the amount referred to in the twelfth proviso, to any other fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), or trust or institution registered under section 12AB, as the case may be, shall be treated as application for charitable or religious purposes only to the extent of eighty-five per cent. of such amount credited or paid.
This amendment will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
It is also proposed to amend clause (c) of Explanation 3 to third proviso of clause (23C) to provide that the statement of accumulation shall be furnished at least two months prior to the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year.
This amendment will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
It is also proposed to insert clause (e) to Explanation 2 to the fifteenth proviso of clause (23C) to provide that specified violation shall also include the case where the application referred to in the first proviso is not complete or it contains false or incorrect information.
This amendment will take effect from 1st April, 2023.
It is also proposed to consequentially amend the Explanation to the nineteenth proviso to clause (23C) of the said section so as to give the reference of newly inserted clause (46A) therein.
This amendment will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
It is also proposed to amend the twentieth proviso of clause (23C) to provide that the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall furnish the return of income for the previous year in accordance with the provisions of sub-section (4C) of section 139, within the time allowed under subsection (1) or sub-section (4) of that section.
This amendment will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
Clause (23EB) of the said section provides income tax exemption to any income of the Credit Guarantee Fund Trust for Small Industries for five previous years relevant to the assessment years beginning on the 1st day of April, 2002 and ending on the 31st day of March, 2007.
Clause (26A) of the said section provides income tax exemption to any income accruing or arising to any person from any source in the district of Ladakh or outside India in any previous year relevant to any assessment year commencing before the 1st day of April, 1989, where such person is resident in the said district in that previous year.
Clause (41) of the said section provides income tax exemption to any income arising from transfer of a capital asset, being an asset of an undertaking engaged in the business of generation or transmission or distribution of power where such transfer is effected on or before the 31st day of March, 2006, to the Indian company notified under sub-clause (a) of clause (v) of sub-section (4) of section 80-IA.
It is also proposed to omit the said clauses (23EB), (26A) and (41) of the said section with effect from 1st April, 2023.
It is also proposed to insert a new clause (46A) after clause (46) so as to provide that any income arising to a body or authority or Board or Trust or Commission not being a company, which –
(a) has been established or constituted by or under a Central Act or State Act with one or more of the following purposes, namely:––
(i) dealing with and satisfying the need for housing accommodation;
(ii) planning, development or improvement of cities, towns and villages;
(iii) regulating, or regulating and developing, any activity for the benefit of the general public; or
(iv) regulating any matter, for the benefit of the general public, arising out of the object for which it has been created; and
(b) is notified by the Central Government in the Official Gazette for the purposes of this clause, shall not be included in total income;
Consequentially, it is proposed to amend clause (46) of the said section so as to exclude any income arising to a body or authority or Board or Trust or Commission (by whatever name called) that are covered under clause (46A) of the said section from the provisions of the said clause.
These amendments will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
Clause (49) of the said section provides income tax exemption to any income of the National Financial Holdings Company Limited of any previous year relevant to any assessment year commencing on or before the 1st day of April, 2014.
It is proposed to omit the said clause with effect from 1st April, 2023.
Clause 32 of the Bill seeks to amend section 56 of the Income-tax Act relating to income from other sources.
Sub-section (2) of the said section provides for incomes that are chargeable to income-tax under the head “Income from other sources”.
The provisions of clause (viib) of sub-section (2) of the said section, inter alia, provides that where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income-tax under the head “Income from other sources”.
It is proposed to omit the words “being a resident” from the said clause (viib) so as to cover all the investors within the ambit of the said clause of sub-section (2) of section 56, irrespective of their residency.
It is further proposed to insert a new clause (xii) in the said sub-section (2) to provide that income chargeable to income-tax under the head “income from other sources” shall also include any sum received by a unit holder from a business trust which––
(a) is not in the nature of income referred to in clause (23FC) or clause (23FCA) of section 10; and
(b) is not chargeable to tax under sub-section (2) of section 115UA.
It is also proposed to insert a proviso to the said clause (xii) of the said sub-section (2) to provide that where the sum received by a unit holder from a business trust is for redemption of unit or units held by him, the sum so received shall be reduced by the cost of acquisition of the unit or units to the extent such cost does not exceed the sum received.
It is also proposed to insert clause (xiii) in the said sub-section (2) so as to provide that where any sum is received, including the amount allocated by way of bonus, at any time during a previous year, under a life insurance policy, other than the sum,––
(a) received under a unit linked insurance policy;
(b) being the income referred to in clause (iv),
which is not to be excluded from the total income of the previous year in accordance with the provisions of clause (10D) of section 10, the sum so received as exceeds the aggregate of the premium paid, during the term of such life insurance policy, and not claimed as deduction in any other provision of the Act, computed in the manner as may be provided by rules shall be chargeable to income-tax under the head “Income from other sources”.
It is also proposed to define the expression “unit linked insurance policy” for the purposes of the said clause.
These amendments will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
Extract of Relevant Amendment Proposed by Finance Bill, 2023
3. Amendment of section 2.
In section 2 of the Income-tax Act,––
(a) in clause (19B), the words and brackets “or an Additional Commissioner of Income-tax (Appeals)” shall be omitted;
(b) in clause (24), after sub-clause (xviib), the following sub-clauses shall be inserted with effect from the 1st day of April, 2024, namely:––
“(xviic) any sum referred to in clause (xii) of subsection (2) of section 56;”;
“(xviid) any sum referred to in clause (xiii) of subsection (2) of section 56;”;
(c) after clause (28C), the following clause shall be inserted, namely:––
‘(28CA) “Joint Commissioner (Appeals)” means a person appointed to be a Joint Commissioner of Income-tax (Appeals) or an Additional Commissioner of Income-tax (Appeals) under sub-section (1) of section 117;’;
(d) in clause (42A), in Explanation 1, in clause (i), after sub-clause (hh), the following sub-clause shall be inserted with effect from the 1st day of April, 2024, namely:––
“(hi) in the case of a capital asset, being––
(a) Electronic Gold Receipt issued in respect of gold deposited as referred to in clause (viid) of section 47, there shall be included the period for which such gold was held by the assessee prior to conversion into the Electronic Gold Receipt;
(b) gold released in respect of an Electronic Gold Receipt as referred to in clause (viid) of section 47, there shall be included the period for which such Electronic Gold Receipt was held by the assessee prior to its conversion into gold.”.
5. Amendment of section 10.
In section 10 of the Income-tax Act,––
(a) in clause (4D), in the Explanation, in clause (c), in sub-clause (i), in item (I), after the words and figures “Securities and Exchange Board of India Act, 1992, or”, the words, brackets and figures “regulated under the International Financial Services Centres Authority (Fund Management) Regulations, 2022, made under the” shall be inserted;
(b) for clause (4E), the following shall be substituted with effect from the 1st day of April, 2024,––
“(4E) any income accrued or arisen to, or received by a non-resident as a result of––
(i) transfer of non-deliverable forward contracts or offshore derivative instruments or over-the-counter derivatives; or
(ii) distribution of income on offshore derivative instruments, entered into with an offshore banking unit of an International Financial Services Centre referred to in subsection (1A) of section 80LA, which fulfils such conditions as may be prescribed:
Provided that the amount of distributed income referred to in sub-clause (ii) shall include only so much of the amount which is chargeable to tax in the hands of the offshore banking unit under section 115AD.”;
(c) in clause (10D),––
(i) in the second proviso, the words, brackets, figures and letter “or the Explanation to sub-section (2A) of section 88, as the case may be” shall be omitted;
(ii) for the sixth proviso, the following provisos shall be substituted with effect from the 1st day of April, 2024, namely:––
“Provided also that nothing contained in this clause shall apply with respect to any life insurance policy other than a unit linked insurance policy, issued on or after the 1st day of April, 2023, if the amount of premium payable for any of the previous years during the term of such policy exceeds five lakh rupees:
Provided also that if the premium is payable by a person for more than one life insurance policy other than unit linked insurance policy, issued on or after the 1st day of April, 2023, the provisions of this clause shall apply only with respect to those life insurance policies other than unit linked insurance policies, where the aggregate amount of premium does not exceed the amount referred to in the sixth proviso in any of the previous years during the term of any of those policies:
Provided also that the provisions of the fourth, fifth, sixth and seventh provisos shall not apply to any sum received on the death of a person:”;
(d) after clause (12B), the following shall be inserted, namely:––
‘(12C) any payment from the Agniveer Corpus Fund to a person enrolled under the Agnipath Scheme, or to his nominee.
Explanation.—For the purposes of this clause “Agniveer Corpus Fund” and “Agnipath Scheme” shall have the meanings respectively assigned to them in section 80CCH;’;
(e) in clause (22B), after the third proviso, the following proviso shall be inserted with effect from the 1st day of April, 2024, namely:––
“Provided also that nothing contained in this clause shall apply to any income of the news agency of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2024;”;
(f) clause (23BBF) shall be omitted;
(g) in clause (23C),––
(I) with effect from the 1st day of October, 2023,––
(i) in the first proviso, for clause (iv), the following clause shall be substituted, namely:––
“(iv) in any other case, where activities of the fund or trust or institution or university or other educational institution or hospital or other medical institution have––
(A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought;
(B) commenced and no income or part thereof of the said fund or trust or institution or university or other educational institution or hospital or other medical institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) or section 11 or section 12 for any previous year ending on or before the date of such application, at any time after the commencement of such activities,”;
(ii) in the second proviso,––
(a) in clause (ii),––
(A) in the opening portion, after the word, brackets and figures “clause (iii)”, the words, brackets, letter and figures “or sub-clause (B) of clause (iv)” shall be inserted;
(B) in sub-clause (b), for item (B), the following item shall be substituted, namely:–
“(B) if he is not so satisfied, pass an order in writing,––
(I) in a case referred to in clause (ii) or clause (iii) of the first proviso, rejecting such application and also cancelling its approval;
(II) in a case referred to in sub-clause (B) of clause (iv) of the first proviso, rejecting such application, after affording it a reasonable opportunity of being heard;”;
(b) for clause (iii), the following clause shall be substituted, namely:––
“(iii) where the application is made under sub-clause (A) of clause (iv) of the said proviso or the application made under clause (iv) of the said proviso, as it stood immediately before its amendment by the Finance Act, 2023, pass an order in writing granting approval to it provisionally for a period of three years from the assessment year from which the approval is sought, and send a copy of such order to the fund or trust or institution or university or other educational institution or hospital or other medical institution:”;
(II) in the third proviso,––
(i) in Explanation 2,––
(a) in clause (i),––
(A) in the proviso, the word “and” shall be omitted;
(B) after the proviso, the following provisos shall be inserted, namely:––
“Provided further that the provisions of the first proviso shall apply only if there was no violation of the conditions specified in the twelfth, thirteenth and twenty-first provisos, and those specified in Explanation 2 and Explanation 3, of this clause, at the time the application was made from the corpus:
Provided also that the amount invested or deposited back shall not be treated as application for charitable or religious purposes under the first proviso unless such investment or deposit is made within a period of five years from the end of the previous year in which such application was made from the corpus:
Provided also that nothing contained in the first proviso shall apply where the application from the corpus is made on or before the 31st day of March, 2021;”;
(b) in clause (ii), after the proviso, the following provisos shall be inserted, namely:––
“Provided further that the provisions of the first proviso shall apply only if there was no violation of the conditions specified in the twelfth, thirteenth and twenty-first provisos, and those specified in Explanation 2 and Explanation 3, of this clause at the time the application was made from loan or borrowing:
Provided also that the amount repaid shall not be treated as application for charitable or religious purposes under the first proviso unless such repayment is made within a period of five years from the end of the previous year in which such application was made from loan or borrowing:
Provided also that nothing contained in the first proviso shall apply where the application from any loan or borrowing is made on or before the 31st day of March, 2021; and”;
(c) after clause (ii), the following clause shall be inserted with effect from the 1st day of April, 2024, namely:–
“(iii) any amount credited or paid out of the income of any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), other than the amount referred to in the twelfth proviso, to any other fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), or trust or institution registered under section 12AB, as the case may be, shall be treated as application for charitable or religious purposes only to the extent of eighty-five per cent. of such amount credited or paid.”;
(ii) in Explanation 3, in clause (c), for the words “furnished on or before”, the words “furnished at least two months prior to” shall be substituted;
(III) in the fifteenth proviso, in Explanation 2,––
(A) in clause (d), for the words “attained finality.”, the words “attained finality; or” shall be substituted;
(B) after clause (d), the following clause shall be inserted, namely:––
“(e) the application referred to in the first proviso of this clause is not complete or it contains false or incorrect information.”;
(IV) in the nineteenth proviso, in the Explanation, with effect from the 1st day of April, 2024,––
(a) after the words, brackets and figures “notified under clause (46)”, the word, brackets, figures and letter “or (46A)” shall be inserted;
(b) for the words, brackets and figures “under clause (46)”, the words, brackets, figures and letter “under clause (46) or clause (46A)” shall be substituted;
(V) in the twentieth proviso, for the words “within the time allowed under that section”, the words, brackets and figures “within the time allowed under sub-section (1) or sub-section (4) of that section” shall be substituted;
(h) clause (23EB) shall be omitted;
(i) clause (26A) shall be omitted;
(j) clause (41) shall be omitted;
(k) in clause (46), for the words “, or a class thereof” at both the places where they occur, the words, figures and letter “other than those covered under clause (46A), or a class thereof” shall be substituted with effect from the 1st day of April, 2024;
(l) after clause (46), the following clause shall be inserted with effect from the 1st day of April, 2024, namely:––
“(46A) any income arising to a body or authority or Board or Trust or Commission, not being a company, which —
(a) has been established or constituted by or under a Central Act or State Act with one or more of the following purposes, namely:––
(i) dealing with and satisfying the need for housing accommodation;
(ii)planning, development or improvement of cities, towns and villages;
(iii) regulating, or regulating and developing, any activity for the benefit of the general public; or
(iv) regulating any matter, for the benefit of the general public, arising out of the object for which it has been created; and
(b) is notified by the Central Government in the Official Gazette for the purposes of this clause;”;
(m) clause (49) shall be omitted.
32. Amendment of section 56.
In section 56 of the Income-tax Act, in sub-section (2), with effect from the 1st day of April, 2024,–
(a) in clause (viib), the words “being a resident” shall be omitted;
(b) after clause (xi), the following clauses shall be inserted, namely:–
‘(xii) any sum received by a unit holder from a business trust which–
(a) is not in the nature of income referred to in clause (23FC) or clause (23FCA) of section 10; and
(b) is not chargeable to tax under sub-section (2) of section 115UA:
Provided that where the sum received by a unit holder from a business trust is for redemption of unit or units held by him, the sum so received shall be reduced by the cost of acquisition of the unit or units to the extent such cost does not exceed the sum received;
(xiii) where any sum is received, including the amount allocated by way of bonus, at any time during a previous year, under a life insurance policy, other than the sum,–
(a) received under a unit linked insurance policy;
(b) being the income referred to in clause (iv),
which is not to be excluded from the total income of the previous year in accordance with the provisions of clause (10D) of section 10, the sum so received as exceeds the aggregate of the premium paid, during the term of such life insurance policy, and not claimed as deduction under any other provision of this Act, computed in such manner as may be prescribed.
Explanation.—For the purposes of this clause “unit linked insurance policy” shall have the meaning assigned to it in Explanation 3 to clause (10D) of section 10.’.
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