Resident Benefits allowable

A resident person is chargeable to tax in respect of his global income. If Income-tax Act enlarges the scope of taxable income of a resident person, it extends certain benefits and privileges to a resident person as well, inter-alia, an option to compute income on presumptive basis, deductions under Chapter VI-A, exemption from TDS and so forth. This document gives a brief introduction to those provisions which provide certain benefits to a resident person, including an Indian Company.

Benefits available to Resident Persons and Indian Companies*

[AY 2018-19]

S.No. Section Particulars Limit of exemption Available to
A. Business or Profession
1. 35D Amortization of certain preliminary expenses (Subject to maximum of 5% of cost of the project or capital employed, whichever is more) Incurred before commencement of business or after commencement of business in connection with extension of an undertaking (Subject to certain conditions and nature of expenditures) Qualifying preliminary expenditure is allowable in each of 5 successive years beginning with the previous year in which the extension of undertaking is completed or the new unit commences production or operation. Indian Company
2. 35D Amortization of certain preliminary expenses (Subject to maximum of 5% of cost of the project) Incurred before commencement of business or after commencement of business in connection with extension of an undertaking (Subject to certain conditions and nature of expenditures) Qualifying preliminary expenditure is allowable in each of 5 successive years beginning with the previous year in which the extension of undertaking is completed or the new unit commences production or operation. Resident Non-corporate assessees
3. 35DD Amortization of expenditure incurred in connection with amalgamation or demerger on or after 01.04.1999

(Subject to certain conditions)

Allowed as deduction in 5 successive years in equal installments, beginning with the previous year in which such amalgamation or demerger takes place. Indian Company
4. 35E Deduction for qualifying expenditure incurred wholly and exclusively on prospecting, for certain minerals or development of a mine, etc. (Subject to certain conditions) Qualifying expenditure is allowed as deduction in equal installments over a period of 10 years. Indian Company and Resident Non-Corporate Assessees engaged in prospecting for minerals, etc.
5. 44AD Computation of income from eligible business on presumptive basis under Section 44AD (Subject to certain conditions). Presumptive income of eligible business shall be 8 % of gross receipt or total turnover (if turnover or gross receipt of eligible business does not exceed Rs. 2 crore).

Note: Presumptive income shall be calculated at rate of 6% in respect of total turnover or gross receipts which is received by an account payee cheque or draft or use of electronic clearing system.

Resident Individual, Resident HUF or Resident Partnership Firm (Other than LLP)
6. 115BA Concessional rate of tax for domestic company if –

(i) Such company has been set-up and registered on or after March 1, 2016; and

(ii) It is engaged in business of manufacturing or production of any article or thing

(Subject to certain other conditions)

Income shall, at the option of such company, be computed at concessional tax rate of 25%. Indian Company
7. 115BBF Concessional rate of tax on royalty income in respect of a patent developed and registered in India.

(Subject to certain conditions)

Royalty shall be taxable at the rate of 10 per cent. Any person resident in India
8 115BBG Income from transfer of carbon credits 10% of such income Any person
B. Capital Gain
1. 47(iv) Transfer of capital asset by a parent company to its wholly owned Indian subsidiary company shall not be treated as ‘transfer’. No capital gains shall arise in the hands of holding company due to transfer of capital assets. Transferee should be an Indian Company
2. 47(v) Transfer of capital asset by a wholly owned subsidiary company to its Indian holding company shall not be treated as ‘transfer’ (Subject to certain conditions). No capital gains shall arise in the hands of subsidiary company due to transfer of capital assets. Transferee should be an Indian Company
3. 47(vi) Transfer of capital asset in a scheme of amalgamation by amalgamating company to Indian amalgamated company shall not be treated as ‘transfer’. No capital gains shall arise in the hands of amalgamating company due to transfer of capital assets. Transferee should be an Indian Company
4. 47(vib) Transfer of capital asset in a scheme of merger by demerged company to Indian resulting company shall not be treated as ‘transfer’ (Subject to certain conditions). No capital gains shall arise in the hands of demerged company due to transfer of capital assets. Transferee should be an Indian Company
5. 47(vii) Allotment of shares of Indian amalgamated company to the shareholders in the amalgamating company in lieu of their amalgamation shall not be treated as ‘transfer’ (Subject to certain conditions). No capital gains shall arise in the hands of shareholders in the amalgamating company due to such amalgamation. Amalgamated company should be an Indian Company
6. 47(viic) Redemption of Sovereign Gold Bonds issued by RBI under Sovereign Gold Bond Scheme, 2015. It shall not be treated as transfer. Resident individual
6A 47(xa) Conversion of preference shares into equity shares of a company It shall not be treated as transfer Any person
7. 111A Adjustment of unutilized portion of maximum exemption limit from short-term capital arising from transfer of equity shares or units of equity oriented funds or unit of a business trust and tax on balance short-term capital gains at 15% If total income as reduced by such short-term capital gains is below maximum exemption limit (short-fall), such short-term capital gains shall be reduced by such short-fall and tax on the balance of such capital gains shall be computed at 15%. Resident Individual and HUF
8. 112 Adjustment of unutilized portion of maximum exemption limit from long-term capital and tax on balance long-term capital gains at 20% If total income as reduced by such long-term capital gains is below maximum exemption limit (short-fall), such long-term capital gains shall be reduced by such short-fall and tax on balance of such capital gains shall be computed at 20%. Resident Individual and HUF
9. 115ACA Concessional rate of tax on long-term capital gains arising from transfer of GDRSs issued by a listed Indian company, engaged in specified knowledge based industry or service, to its employees in accordance with notified ESOP Scheme. Provided such GDRs are purchased in foreign currency (Subject to certain conditions) Such long-term capital gains shall be taxable at 10% without allowing benefits of first and second proviso to Section 48 Resident Individual – Employee
C. Other Sources
1. 115ACA Concessional rate of tax on dividends on GDRSs issued by a listed Indian company, engaged in specified knowledge based industry or service, to its employees in accordance with notified ESOP Scheme. Provided such GDRs are purchased in foreign currency (Subject to certain conditions) Such dividend shall be taxable at 10% Resident Individual – Employee
2. 115BBD Concessional rate of tax on dividends declared, distributed or paid by a specified foreign company. The benefits shall be allowed only if Indian company holds 26% or more in nominal value of equity share capital of a foreign company 15% of such dividend Indian Company
D. Deductions
1. 80C Only resident individuals can Investment in Public provident Fund scheme, 1968 either in his own name or in the name of minor of whom he is a guardian. Maximum deposit in PPF Rs. 1,50,000 Resident Individual
2. 80C Investment in Senior Citizens Savings Scheme 2004 for 5 year Max. deduction Rs. 1,50,000 Resident individual who is 60 years of age or by a resident individual who is 55-60 years of age and retired under VRS
3. 80CCG Amount invested by specified resident individuals, whose gross total income does not exceed Rs. 12 lakhs, in listed shares or listed units in accordance with notified scheme for a lock-in period of 3 years (Subject to certain conditions).

No deduction is allowed from Assessment Year 2018-19

Deduction of 50 % of total investment subject to maximum of Rs. 25,000 in 3 consecutive assessment years, beginning with the assessment year relevant to the previous year in which the listed shares or list units of equity oriented funds are first acquired Specified Resident Individual (New retail investors)
4. 80DD Deduction allowed to resident Individual and HUF for:

a) Any expenditure incurred for the medical treatment (including nursing), training and rehabilitation of a dependent, being a person with disability

b) Any amount paid or deposited under an approved scheme framed in this behalf by the LIC or any other insurer or the Administrator or the specified company for the maintenance of a dependent, being a person with disability

(Subject to certain conditions).

Rs. 75,000 (Rs. 1,25,000 in case of severe disability) Resident Individual and HUF
5. 80DDB Expenses actually paid by resident individual and HUF for medical treatment of specified diseases and ailments of:

a) In case of Individual: Assessee himself or wholly dependent spouse, children, parents, brothers and sisters

b) In case of HUF: Any member of the family who is wholly dependent upon the family

(Subject to certain conditions).

Up to Rs. 40,000 (Rs. 60,000 in case of senior citizen and Rs. 80,000 in case of very senior citizen) Resident Individual/ HUF
6. 80GGB Sum contributed to political party or electoral trust is allowed as deduction (Subject to certain conditions) 100% of amount contributed (excluding contribution in cash) is allowed as deduction Indian company
9. 80JJAA Deduction of additional employee cost in respect of employment of new employees.

Additional employee cost means total emoluments paid or payable to additional employees employed during the previous year.

(Subject to certain other condition)

Deduction of 30% of additional employee cost.

Deduction shall be allowed for first three Assessment Years including the Assessment Year relevant to previous year in which such employment is provided.

Assessee who is liable to tax audit under Section 44AB
10. 80QQB Royalty income of resident individual – authors of certain specified category of books other than text books Least of the following shall be exempt from tax:

a) In case of Lump sum payment – Amount of royalty income subject to maximum of Rs. 3,00,000

b) In other cases – amount of such income subject to maximum of 15% of value of books sold during the previous year.

Resident Individual Author
11. 80RRB Royalty in respect of patents registered on or after 01.04.2003 (Subject to certain conditions) 100% of royalty subject to maximum of Rs. 3,00,000 Resident Individual
12. 80U A resident individual who, at any time during the previous year, is certified by the medical authority to be a person with disability [as defined under Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995] Rs. 75,000 (Rs. 1,25,000 in case of severe disability) Resident Individual
13. 80-IA Indian Company developing, maintaining and operating any infrastructure facility shall be entitled to claim deduction (Subject to certain conditions). 100% of profit for 10 consecutive AY falling within a period of 15 AY beginning with the AY in which assessee begins operating and maintaining infrastructure facility.

No deduction shall be allowed to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017.

Indian Company
14. 80-IA Indian Company formed before 30-11-2005 with majority equity participation by public sector companies to reconstruct or revive a power generating plant shall be entitled to claim deduction. Provided it begins to generate or transmit or distribute power before 31-03-2011 (Subject to certain conditions). 100% of profit for 10 consecutive AY falling within a period of 15 AY beginning with the AY in which assessee begins operating and maintaining infrastructure facility. Indian Company
15. 80-IB Indian Company with scientific and industrial research and development as its main object and approved by prescribed authority shall be entitled to claim deductions (Subject to certain conditions). a) 100% of profit for 5 years from the AY in which it is approved by prescribed authority (if approved before 01-04-1999)

b) 100% of profit for 10 years from the AY in which it is approved by prescribed authority (if approved after 31-03-2000 but before 01-04-2007)

Indian Company
16. 80-IAC Profit and gains derived by an eligible start-up from specified business on or after 1-4-2017(subject to certain conditions) 100% of profit for 3 consecutive assessment years out of 7 years beginning from the year in which the eligible start-up is incorporated Company and LLP
E. TDS
1. 193 No TDS from interest paid on debentures issued by a company in which public are substantially interested. Provided interest is paid by account payee cheque to resident individual or HUF If amount paid or payable during the financial year does not exceed Rs. 5,000 Resident individual and HUF
2. 193 No TDS from interest on 8% Saving (Taxable) Bonds 2003 paid to a resident persons If amount paid or payable during the financial year does not exceed Rs. 10,000 Resident persons
3. 193 No TDS from interest on 6.5% Gold Bonds, 1977, or 7% Gold Bonds, 1980 If a declaration is made that the nominal value of such bonds did not exceed Rs. 10,000 at any time during the previous year Resident Individual
3A 193 No TDS from interest paid on 4.25% National Defence Bonds, 1972, 4.25% National Defence Loan, 1968, or 4.75% National Defence Loan, 1972 No TDS from interest Resident Individual
3B 193 No TDS from payment of certain interest No TDS from payment of interest on following securities:

(a)  National Development Bonds;

(b)  7 Year National Savings Certifications (IV Issue);

(c)  Debentures issued by notified persons;

(d)  Any security of Central or State Government;

(e)  Any listed security issued by a company and held in DEMAT form;

(f)  Securities beneficially owned by LIC, GIC, specified companies or any other insurer.

Resident Persons
4. 194 No TDS from dividend paid by account payee cheque to resident persons. If amount paid or payable during the financial year does not exceed Rs. 2,500 Resident person
5. 194A No TDS from interest (other than on interest on securities) paid by a banking company or co-operative bank on time deposits

Note:

With effect from 01.06.2015, tax shall be deducted from interest credited or paid by a co-operative bank to its member. However, interest paid or credited by a co-operative society to its member or to any other co-operative society shall not be subject to TDS.

If amount paid or payable during the financial year does not exceed Rs. 10,000

Note:

a) With effect from 01.06.2015, time deposit shall also include recurring deposit. Therefore, tax shall be deducted from payment of interest on recurring deposit if it exceeds the threshold limit of Rs. 10,000.

b) The threshold limit of Rs. 10,000 shall be computed with reference to the income credited or paid by a banking company or co-operative society (and not by individual branch thereof) which has adopted core banking solutions (‘CBS’).

Resident persons
6. 194A No TDS from interest on deposit with a post office under Senior Citizens Saving Scheme Rules, 2004 If amount paid or payable during the financial year does not exceed Rs. 10,000 Resident persons
7. 194A No TDS from interest other than on securities (in any other case) If amount paid or payable during the financial year does not exceed Rs. 5,000 Resident persons
8. 194A No TDS from interest on compensation awarded by Motor Accident Claims Tribunal If amount paid during the financial year does not exceed Rs. 50,000

Note:

With effect from 01.06.2015, no tax shall be deducted at the time of credit of interest on compensation awarded by the Motor Accidents Claims Tribunal.

Resident persons
9. 194A No TDS from interest on zero coupon bonds issued by Infrastructure Capital Co., Infrastructure Capital Fund, Public Sector Co. or Scheduled bank If Zero Coupon Bonds are issued on or after 01-06-2005 by specified entities Resident persons
10. 194A Interest paid under any provision of Income-tax Act, 1961 or Wealth-tax Act, 1957 Entire interest is paid under the prescribed Acts Resident persons
11. 194A Interest paid in respect of deposits under any notified scheme or Post Office deposits, Kisan Vikas Patra, NSC VIII Issue, Indira Vikas Patra, etc. If interest is earned on the prescribed deposits Resident persons
12. 194C No TDS from sum paid or payable to contractor (Subject to certain conditions) a) If sum paid or payable to a contractor in a single payment does not exceed Rs. 30,000

b) If sum paid or payable to contractor in aggregate does not exceed Rs. 1,00,000 during the financial year

Resident Contractor
13. 194C No TDS from sum paid or payable to transport operator who is in the business of plying, hiring or leasing goods carriage If transporter owns 10 or less goods carriages at any time during the financial year and he furnishes a declaration with his PAN to person responsible for making payment (applicable with effect from 01.06.2015). Resident transport operator
16. 194C No TDS from payment made by an Individual or HUF to a resident contractor for exclusively personal purposes If payment is made for personal purpose of Individual or HUF Resident Contractor
17. 197A(1) No deduction of tax shall be made under Sections 194 and 194EE, if resident individual furnishes to the payer a written declaration in prescribed form that tax on his estimated total income of the previous year will be nil. No tax shall be deducted from specified payments if the sum paid does not exceed the maximum amount which is not chargeable to tax Resident Individual
18. 197A(1C) No deduction of tax shall be made under Section 192A, Sections 193, 194, 194A, Section 194DA, 194-I,  194EE and 194K if resident senior citizen furnishes to the payer a written declaration in prescribed form that tax on his estimated total income of the previous year will be nil. No tax shall be deducted from specified payments Resident Individual – Senior Citizen and Super Senior Citizen
19. 194LA No TDS from payment of compensation on compulsory acquisition of immovable property (other than Agricultural Land) If amount paid or payable during the financial year does not exceed Rs. 2.5 Lakhs Resident persons
20. 194D No TDS from insurance commission paid or payable during the financial year If amount paid or payable during the financial year does not exceed Rs. 15,000 Resident persons
20A. 194DA No TDS from sum payable under a life insurance policy (including bonus) to a resident person (w.e.f. 01-10-2014) If amount paid or payable during financial year does not exceed Rs. 1 Lakh Resident persons
21. 194H No TDS from payment of commission or brokerage If amount paid or payable during the financial year does not exceed Rs. 15,000. Further no tax to be deducted from commission payable by BSNL/MTNL to their PCO Franchisees. Resident persons
22. 194J No TDS from payment of professional fees, technical fees, royalty and directors’ remuneration If amount paid or payable during the financial year does not exceed Rs. 30,000 Resident persons
23. 194-I No TDS from payment of rent in respect of land &building, furniture or fittings or plant and machinery If amount paid or payable during the financial year does not exceed Rs. 1,80,000

With effect from 01.06.2015, no tax shall be deducted where income by way of rent is credited or paid to a real estate investment trust in respect of any real estate asset [as referred to in section 10(23FCA)] owned directly by such trust.

Resident persons
24. 194-IA No TDS from payment of consideration for purchase of an immovable property (other than agriculture land) If amount paid or payable during the financial year does not exceed Rs. 50 Lakhs Resident Transferor
24A 194-IB No TDS from payment of rent in respect of any land or building.

Note:

Other than the rent covered by section 194-I

If amount of rent does not exceeds Rs. 50,000 for a month or part of a month during the financial year Resident Individual or HUF
25. 201 Payer shall not be deemed to be an assessee-in-default on failure to deduct or collect taxes from payment made to a resident payee (Subject to certain conditions). If payee includes such income in its return of income, pays taxes thereon and submits a certificate to the payer in Form 26A/27BA to this effect from a Chartered Accountant. Payment to resident persons
F. Advance Tax
1. 207(2) Exemption from payment of advance tax by a resident senior citizen or resident super senior citizen not having any income from business or profession

(who is at least 60 Years of age at any time during the previous year)

Not liable to pay advance tax Resident Senior Citizen and Resident Super Senior Citizen
G. Exemptions
1. Maximum amount of income which is not chargeable to Income-tax in the hands of a resident senior citizen

(who is at least 60 Years of age at any time during the previous year but less than 80 Years of age on the last day of the previous year)

Rs. 3,00,000 Resident Senior Citizen
2. Maximum amount of income which is not chargeable to Income-tax in the hands of a resident super senior citizen

(who is at least 80 Years of age at any time during the previous year)

Rs. 5,00,000 Resident Super Senior Citizen
3. 87A Rebate to resident individual whose total income does not exceed Rs. 3,50,000 Rebate shall be limited to tax payable or Rs. 2,500, whichever is less Resident Individual
H. Tonnage Taxation
1. 115V to115VZC

(Tonnage Taxation)

Qualifying Company may opt for computation of income from business of operating qualifying ship on presumptive basis.

* A company is a ‘Qualifying Company’ if:

a) It is an Indian Company;

b) The place of effective management of it is in India;

c) It owns at least one qualifying ship; and

d) The main object of it is to carry on business of operating ships.

The income from operating ships shall be computed on basis of tonnage of each qualifying ship. Indian Company

* Public Sector Companies, Banking Companies and Insurance Companies have not been considered in the document.

[As amended by Finance Act, 2017]

Source- Income Tax India Website

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2 responses to “Income Tax Benefits to Residents & Indian Companies”

  1. Jay Sharma says:

    under heading B- Capital Gain & Serial Number 6A, there would be clause (xb) inserted by Finance Act, 2017 instead of clause (xa) of section 47.

  2. sudarshana says:

    Under D (2) Deductions the limit qualifying for deductions is Rs.1,50,000/= and not 15,00,000/= as given in the article. Investment by Sr. Citizens in Sr. citizens deposit scheme 2004.

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