Section 89 of the Income-tax Act contains provisions for providing tax relief where salary, etc. is paid in arrears or in advance.

The existing provisions of section 140A, section 143, section 234A, section 234B and section 234C contain provisions relating to computation of tax liability after allowing credit for prepaid taxes and certain admissible reliefs, credits etc. However, the relief under section 89 is not specifically mentioned in these sections, which is resulting into genuine hardship in the case of taxpayers who are eligible for this relief.

In view of the above, it is proposed to amend section 140A, section 143, section 234A, section 234B and section 234C so as to provide that computation of tax liability shall be made after allowing relief under section 89.

These amendments will take effect retrospectively from 1st April, 2007 and will, accordingly, apply in relation to the

assessment year 2007-08 and subsequent assessment years.

[Clauses 42, 43, 52, 53, & 54]

Extract of Clause 42, 43, 52, 53, & 54 of Finance Bill 2019

42. Amendment of section 140A.

In section 140A of the Income-tax Act,––

(i) in sub-section (1), after clause (ii), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2007, namely:––

“(iia) any relief of tax claimed under section 89;”;

(ii) in sub-section (1A), in clause (i), after sub-clause (b), the following sub-clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2007, namely:––

“(ba) any relief of tax claimed under section 89;”;

(iii) in sub-section (1B), in the Explanation, after clause (i), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2007, namely:––

“(ia) any relief of tax claimed under section 89;”.

43. Amendment of section 143.

In section 143 of the Income-tax Act, in sub-section (1), in clause (c), after the words “any 5 advance tax paid,”, the words and figures “any relief allowable under section 89,” shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2007.

52. Amendment of section 234A.

 In section 234A of the Income-tax Act, in sub-section (1), in the long line, after clause (ii), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2007, namely:–-

“(iia) any relief of tax allowed under section 89;”.

53. Amendment of section 234B.

In section 234B of the Income-tax Act, in sub-section (1), in Explanation 1, after clause (i), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2007, namely:––

“(ia) any relief of tax allowed under section 89;”.

54. Amendment of section 234C.

 In section 234C of the Income-tax Act, in sub-section (1), in the Explanation, after clause (i), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2007, namely:––

“(ia) any relief of tax allowed under section 89;”.

Note on Clause 42, 43, 52, 53, & 54 of Finance Bill 2019

Clause 42 of the Bill seeks to amend section 140A of the Income-tax Act relating to self-assessment.

The said section 140A, inter alia, provides for payment of self-assessment tax.

It is proposed to insert a new clause (iia) in sub-section (1) of the said section, so as to provide that “any relief of tax claimed under section 89” shall be taken into account for the purpose determining tax payable under the said sub-section.

It is further proposed to insert a new sub-clause (ba) in clause (i) of sub-section (1A) of the said section so as to provide that “any relief of tax claimed under section 89” shall be taken into account for the purpose of determining interest payable under the said sub-section.

It is also proposed to insert a new clause (ia) in the Explanation to sub-section (1B) of the said section so as to provide that for the purpose of determining “assessed tax” under the said sub-section, “any relief of tax claimed under section 89” shall also be reduced from the tax on total income.

These amendments will take effect retrospectively from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent assessment years.

Clause 43 of the Bill seeks to amend section 143 of the Income-tax Act relating to Assessment.

Sub-section (1) of the said section 143, inter alia, provides for processing of return furnished under section 139 or in response to a notice under sub-section (1) of section 142.

It is proposed to amend clause (c) of sub-section (1) of the said section so as to provide that “any relief of tax allowable under section 89” shall be taken into account, while determining sum payable or refund due to the assessee.

These amendments will take effect retrospectively from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent assessment years.

Clause 52 of the Bill seeks to amend section 234A of the Income-tax Act relating to interest for defaults in furnishing return of income.

The said section 234A, inter alia, provides for charging of interest for defaults in furnishing return of income.

It is proposed to insert a new sub-clause (iia) in sub-clause (b) of sub-section (1) of said section so as to provide that “any relief of tax allowed under section 89” shall also be reduced from the tax on total income for the purpose of charging interest under the said section.

These amendments will take effect retrospectively from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent assessment years.

Clause 53 of the Bill seeks to amend section 234B of the Income-tax Act relating to interest for defaults in payment of advance tax.

The said section 234B, inter alia, provides for charging of interest for defaults in payment of advance tax.

It is proposed to insert a new clause (ia) in Explanation 1 to sub-section (1) of the said section, so as to provide that “any relief of tax allowed under section 89” shall also be reduced from the tax on the total income for the purpose of charging interest under the said section.

These amendments will take effect retrospectively from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent assessment years.

Clause 54 of the Bill seeks to amend section 234C of the Income-tax Act relating to interest for deferment of advance tax.

The said section 234C, inter alia, provides for charging of interest for deferment of advance tax.

It is proposed to insert a new clause (ia) in the Explanation to the said section, so as to provide that “any relief of tax allowed under section 89” shall also be reduced from the tax on the returned income for the purpose of charging interest under the said section.

These amendments will take effect retrospectively from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent assessment years.

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