Section 9 of the Act relates to Income deemed to accrue or arise in India. Under the Act, non –residents are taxable in India in respect of income that accrues or arises in India or is received in India or is deemed to accrue or arise in India or is deemed to be received in India. Under the existing provisions of the Act, a gift of money or property is taxed in the hands of donee, except for certain exemptions provided in clause (x) of sub-section (2) of section 56. It has been reported that gifts are made by persons being residents in India to persons outside India and are claimed to be non-taxable in India as the income does not accrue or arise in India. To ensure that such gifts made by residents to persons outside India are subject to tax, it is proposed to provide that income of the nature referred to in sub-clause (xviia) of clause (24) of section 2, arising from any sum of money paid, or any property situate in India transferred, on or after 5th July, 2019 by a person resident in India to a person outside India shall be deemed to accrue or arise in India. However, the existing provision for exempting gifts as provided in proviso to clause (x) of sub-section (2) of section 56 will continue to apply for such gifts deemed to accrue or arise in India. In a treaty situation, the relevant article of applicable DTAA shall continue to apply for such gifts as well.

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.

[Clause 4]

Extract of Clause 4 of Finance Bill 2019

4. Amendment of section 9.

In section 9 of the Income-tax Act, in sub-section (1), after clause (vii), the following clause shall be inserted with effect from the 1st day of April, 2020, namely:––

“(viii) income of the nature referred to in sub-clause (xviia) of clause (24) of section 2, arising from any sum of money paid, or any property situate in India transferred, on or after the 5th day of July, 2019 by a person resident in India to a person outside India.”.

Note on Clause 4 of Finance Bill 2019

Clause 4 of the Bill seeks to amend section 9 of the Income-tax Act relating to income deemed to accrue or arise in India.

Sub-section (1) of the said section provides for the incomes which shall be deemed to accrue or arise in India.

It is proposed to insert a new clause (viii) to said sub-section so as to provide that certain income, being any sum of money paid or any property situate in India transferred on or after the 5th day of July, 2019 by a person resident in India to a person outside India, shall be deemed to accrue or arise in India.

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.

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