Payment to Institute for Social & Economic Change 27th March 2012-03-27 Justification for Not deducting TDS

S Incomes not included in total income. 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included

(23C)any income received by any person on behalf of (i) the Prime Ministers National Relief Fund; or (ii) the Prime Ministers Fund (Promotion of Folk Art); or (iii) the Prime Ministers Aid to Students Fund; 47[or] 48 [( iiia)the National Foundation for Communal Harmony; or] 49 [( iiiab)any university or other educational institution 50 existing 50 solely 50 for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or (iiiac) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or (iiiad) any university or other educational institution 50 existing 50 solely 50 for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed 51; or

Whether prescribed self-declaration under section 197A can be submitted by entities whose income is exempt under section 10

Circular : No. 4/2002, dated 16-7-2002. 1. Subsequent to the amendment to section 197A made by the Finance Act, 2002 whereby a new sub-section (1B) has been inserted with effect from 1st June, 2002, representations have been received seeking clarification whether the prescribed self-declaration under the said section can be submitted by entities exempt from tax under section 10 even if the payments referred to in sub-section (1A) to be made to them exceed the threshold limit not subject to tax.

2. This matter has been examined by the Board. It has been decided that in case of those funds or authorities or Boards or bodies, by whatever name called, whose income is unconditionally exempt under section 10 of the Income-tax Act and who are statutorily

not required to file return of income as per section 139 of the Income-tax Act, there would be no requirement for tax deduction at source since their income is anyway exempt under the Income-tax Act. The institutions whose income is unconditionally exempt under section 10 and who are statutorily not required to file return of income as per the provisions of section 139 are : (i) local authority, as referred to in the Explanation to clause (20); (ii) Regimental Fund or Non-public Fund established by the armed forces of the Union referred to in clause (23AA); (iii) Fund, by whatever name called, set up by the Life Insurance Corporation of India on or after 1st August, 1996, or by any other insurer referred to in clause (23AAB); (iv) Authority (whether known as the Khadi and Village Industries Board or by any other name) referred to in clause (23BB); (v) Body or authority referred to in clause (23BBA); (vi) SAARC Fund for Regional Projects set up by Colombo Declaration referred to in clause (23BBC); (vii) Secretariat of the Asian Organisation of the Supreme Audit Institutions referred to in clause (23BBD) till assessment year 2003-2004; (viii) Insurance Regulatory and Development Authority referred to in clause (23BBE); (ix) Prime Ministers National Relief Fund referred to in sub-clause (i), Prime Ministers Fund (Promotion of Folk Art) referred to in sub-clause (ii), Prime Ministers Aid to Students Fund referred to in sub-clause (iii), National Foundation for Communal Harmony referred to in sub-clause (iiia), any university or other educational institution referred to in sub-clause (iiiab) and any hospital or other institution for the reception and treatment of persons as referred to in sub-clause (iiiac) of clause (23C); (x) Credit Guarantee Fund Trust for Small Scale Industries referred to in clause (23EB) till assessment year 2006-2007; (xi) Provident fund to which the Provident Funds Act, 1925 (19 of 1925) referred to in sub-clause (i), recognised provident fund referred to in sub-clause (ii), approved superannuation funds referred to in sub-clause (iii), approved gratuity fund referred to in sub-clause (iv) and funds referred to in sub-clause (v) of clause (25); (xii) EmployeesState Insurance Fund referred to in clause (25A); (xiii) Corporations referred to in clause (26BB); (xiv) Boards referred to in clause (29A).

Certificate for deduction at lower rate. 197. 11(1) 12 [Subject to rules made under sub-section (2A), 13[where, in the case of any income of any person 14[or sum payable to any person], income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193 , 15[ 194 ,] 194A, 16 [ 194C,] 194D , 16[ 194G ] 17 [, 194H] 18 [, 194-I] 19 [, 194J] 20 [, 194K] 21 [***] 22[, 194LA ] and 195, the Assessing Officer is satisfied] that the total income 23[***] of the recipient justifies the deduction of income-tax 24[***] at any lower rates or no deduction of income-tax 24[***], as the case may be, the 25[Assessing] Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the 25[Assessing] Officer, deduct income-tax 26 [***] at the rates specified in such certificate or deduct no tax, as the case may be. 27 [(2A) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under subsection (1) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith.] (3) 28[***]

[No deduction to be made in certain cases. 30 197A. 31(1) Notwithstanding anything contained in 32[***] section 194 33[***] 34 [or section 194EE], no deduction of tax shall be made under any of the said sections in the case of an individual, who is resident in India, if such individual furnishes to the person responsible for paying any income of the nature referred to in 35[***] section 194 36 [ 37[***] or, as the case may be, section 194EE], a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that 38[the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil.] 39 [(1A) Notwithstanding anything contained in 40[ section 193 or] section 194A or section 194K, no deduction of tax shall be made under 41[any] of the said sections in the case of a person (not being a company or a firm), if such person furnishes to the person responsible for paying any income of the nature referred to in 40[ section 193 or] section 194A or section 194K, as the case may be, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil.] 42 [(1B) The provisions of this section shall not apply where the amount of any income of the nature referred to in sub-section (1) or sub-section (1A), as the case may be, or the aggregate of the amounts of such incomes credited or paid or likely to be credited or paid during the previous year in which such income is to be included exceeds the maximum amount which is not chargeable to income-tax.] 43 [(1C) Notwithstanding anything contained in section 193 or section 194 or section 194A or section 194EE or section 194K or sub-section (1B) of this section, no deduction of tax shall be

made in the case of an individual resident in India, who is of the age of sixty-five years or more at any time during the previous year 44[***], if such individual furnishes to the person responsible for paying any income of the nature referred to in section 193 or section 194 or section 194A or section 194EE or section 194K , as the case may be, a declaration in writing in duplicate in the prescribed form 45 and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil .] 46 [(1D) Notwithstanding anything contained in this section, no deduction of tax shall be made by the Offshore Banking Unit from the interest paid (a ) on deposit made on or after the 1st day of April, 2005, by a non-resident or a person not ordinarily resident in India; or (b ) on borrowing, on or after the 1st day of April, 2005, from a non-resident or a person not ordinarily resident in India. Explanation.For the purposes of this sub-section "Offshore Banking Unit" shall have the same meaning as assigned to it in clause (u) of section 2 of the Special Economic Zones Act, 2005 47.] 48 [(1E) Notwithstanding anything contained in this Chapter, no deduction of tax shall be made from any payment to any person for, or on behalf of, the New Pension System Trust referred to in clause (44) of section 10.] (2) The person responsible for paying any income of the nature referred to in sub-section (1) 49 [or sub-section (1A)] 50[or sub-section (1C)] shall deliver or cause to be delivered to the 51 [Chief Commissioner or Commissioner] one copy of the declaration referred to in sub-section (1) 52[or sub-section (1A)] 53[or sub-section (1C)] on or before the seventh day of the month next following the month in which the declaration is furnished to him.]

ITA No36/Trust/CIT[A]V/2008-09 dt 31/03/2010