ASSESSMENT OF TRUSTS AND INSTITUTIONS, POLITICAL

PARTIES AND OTHER SPECIAL ENTITIES

Central Government expanded the list of “permissible
mode of investments or deposits” notified for the
purposes of section 11(5)
[Notification No. 103/2023 dated 18.12.2023]

Section 11(5) prescribes the modes such as deposits with Post Office Savings Banks,
investment in Central or State Government securities, investments in units of UTI,
investment or deposit in any public sector company etc. or any other forms or modes
of investment or deposit prescribed under Rule 17C.

The Central Government has, vide this notification, expanded the list of permissible
modes of investments or deposits under Rule 17C by inserting w.e.f. 18.12.2023
clause (x) to include investment by way of acquiring units of POWERGRID Infrastructure
Investment Trust.

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 Clarification with respect to donations given to other
trusts or institutions, where only 85% of the donated
amount is considered as an application of funds, while
the remaining 15% does not qualify as an application
[Circular No. 3/2024 dated 06.03.2024]

The Finance Act, 2023 has inserted clause (iii) in Explanation 2 to third proviso to
section 10(23C) or clause (iii) of the Explanation 4 to section 11(1) to provide that any
amount credited or paid out of current income of any fund or trust or institution or
any university or other educational institution or any hospital or other medical
institution under section 10(23C)(iv)/(v)/(vi)/(via) [referred as “First Regime”] or any
trust or institution registered under section 12AA or 12AB [referred as “Second
Regime”], as the case may be, to any other any fund or trust or institution or any
university or other educational institution or any hospital or other medical institution
referred under section 10(23C)(iv)/(v)/(vi)/(via) or to any other 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 85% of such amount credited or
paid while the remaining 15% does not qualify as an application.

Representations have been received raising the concern that whether the balance 15%
of donation to other trust/institution would be taxable or is eligible for 15%
accumulation since the funds would not be available having been already disbursed.

Accordingly, CBDT has, vide this Circular, reiterated that eligible donations made by a
trust/institution to another trust/institution under any of the two regimes shall be
treated as application for charitable or religious purposes only to the extent of 85% of
such donations. It means that when a trust/institution in either regime donates Rs.
100 to another trust/institution in either regime, it will be considered to have applied
85% (Rs. 85) for the purpose of charitable or religious activity.

It is clarified that 15% (Rs. 15) of such donations by the donor trust/institution shall
not be required to be invested in specified modes under section 11(5) as the entire
amount of Rs. 100 has been donated to the other trust/institution and is accordingly
eligible for exemption under the first or second regime.

This is illustrated by the following example where Trust 1, Trust 2 and Trust 3 are
trusts or institutions under any of the two regimes. Further, Trust 1 is making eligible
donation to Trust 2 and Trust 2 is further making eligible donation to Trust 3.
S. No Particulars Trust 1 Trust 2 Trust 3
1. Income (A) 300 100 100
2. Income which is required to be 255 85 85
applied (B = 85% of A)
3. Application of income
4. Donation to other trusts under 100 100 Nil
the first or second regime (C)
5. Amount to be considered as 85 85
application of income against
the donations at row no. 3 [as
per clause (iii) of the
Explanation 2 to third proviso
to section I0(23C) or clause (iii)
of the Explanation 4 to section
11(1) (D = 85% of C)
6. Balance income for application 200 Nil 100
(E = A - C)
7. Application other than SI. No. 4 170 Nil 85
(F = 85% of E)
8. Remaining income which may 30 Nil 15
be accumulated without Form
No. I0/ 9A (G = 15% of E)
9. Funds required to be invested 30 Nil 15
in section 11(5) modes (H = G)
10. Exemption of income 300 100 100
(I = C + F + G)

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 Extension of due date for filing of Form No. 10A/10AB
[Circular No. 7/2024 dated 25.04.2024]

Form 10A is to be filed for re-approval/re-registration of the trust or institution or fund

which were already approved under section 10(23C)(iv)/(v)/(vi)/(iva) or registered
under erstwhile section 12A/12AA or in case of provisional approval/registration, as
the case may be. In other cases, such as renewal of approval/registration, final
approval/registration, Form 10AB is to be filed under First Regime or under Second
Regime, as the case may be.

Application in Form 10A for

- Re-approval of the trust or institution under clause (i) of the first proviso to
section 10(23C) or
- Re-registration of the trust or institution under section 12A(1)(ac)(i)

was to be made on or before 30.06.2021. This date was extended upto 30.09.2023
vide Circular No. 6/2023, dated 24.05.2023.

Moreover, Form 10AB for

- final approval of the trust or institution under clause (iii) of the first proviso to
section 10(23C) or
- final registration of the trust or institution under section 12A(1)(ac)(iii)

where such trust or institution was provisionally approved or provisionally registered

is to be filed at least six months prior to the expiry of the period of the provisional
approval or registration or within six months of commencement of its activities. Where
such time limit expires before 30.9.2023, the extended time limit upto 30.9.2023
would apply vide Circular No. 6/2023 dated 24.5.2023.

Representations have been received in the CBDT with a request to condone the delay
in filing Form No. 10A/10AB, as the same could not be filed within the last extended
date, i.e., 30.09.2023.

Accordingly, the CBDT has, vide this Circular, extended the said dates for filing Form
10A/10AB upto 30.6.2024
 DEDUCTION, COLLECTION AND RECOVERY OF TAX
Interest on deposit with post office under a scheme eligible for non-deduction
of tax at source under section 194A notified by the Central Government

[Notification No. 27/2023 dated 16.05.2023]

Section 194A provides for deduction of tax @10% by any person (other than an
individual or a HUF whose total sales, gross receipts or turnover from the business or
profession carried on by him/it does not exceed Rs. 1 crore in case of business and
Rs. 50 lakhs in case of profession during the immediately preceding financial year) on
interest, other than “interest on securities” credited or paid to residents.

No deduction of tax under section 194A would be made, inter alia, if the aggregate
amount of interest paid or credited by post office during the financial year does not
exceed Rs. 40,000/ Rs. 50,000 (in case of a senior citizen), on any deposit made with
it under any scheme framed and notified by the Central Government.

Accordingly, the Central Government has, vide this notification, specified the Scheme
“Mahila Samman Savings Certificate, 2023”.

“Mahila Samman Savings Certificate, 2023” is a one-time scheme available for two
years i.e., from 1st April, 2023 to 31st March, 2025. It offers a maximum deposit
facility of upto Rs. 2 lakh in the name of women or a girl for 2 years at a fixed interest
rate of 7.5% p.a., compounded quarterly.

Consequently, no tax under section 194A would be deductible by the post office on
interest paid or credited under this scheme since the amount of interest would not
exceed Rs. 40,000.

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 No deduction of tax at source under section 194 on
dividend paid by any unit of an IFSC, primarily engaged in
the business of leasing of an aircraft to a company, being
a Unit of an IFSC primarily engaged in the business of
leasing of an aircraft
[Notification No. 52/2023 dated 20.07.2023]

Section 194 requires deducting tax at source @10% by the principal officer of a
domestic company on dividend distributed or paid by it to its resident shareholders.

As per section 197A(1F), no deduction of tax would be made or deduction of tax would
be made at such lower rate, from such payment to such person or class of persons,
including institution, association or body or class of institutions or associations or
bodies notified by the Central Government in this behalf.

In exercise of the power provided under section 197A(1F), the Central Government
has, vide this notification, notified that w.e.f. 1st September, 2023, no tax is required
to be deducted under section 194 from dividend paid by any unit of an IFSC, primarily
engaged in the business of leasing of an aircraft (payer) to a company, being a Unit of
an IFSC primarily engaged in the business of leasing of an aircraft (payee) subject to
the following:

(1) The payee has to furnish and verified a statement-cum-declaration to the payer
giving details of previous year relevant to the assessment year in which the
dividend income eligible for exemption under section 10(34B) is payable.

(2) The payer would not deduct tax on payment made or credited to the recipient of
such dividend (payee) after the date of receipt of copy of statement-cum-
declaration from payee and furnish the particulars of all the payments made to the
recipient of such dividend on which tax has not been deducted in the statement of
deduction of tax under section 200(3) read with the Rule 31A.
 No deduction of tax at source under section 194-I on
lease rent or supplemental lease rent made by a person
to a person being a Unit of an IFSC for lease of a ship
[Notification No. 57/2023 dated 01.08.2023]

Section 194-I requires to deduct tax at source by any person other than individual of
HUF whose total sales, gross receipts or turnover from the business or profession
carried on by him does not exceed Rs. 1 crore in case of business and Rs. 50 lakhs in
case of profession during the immediately preceding financial year, on rent paid or
credited to residents.

As per section 197A(1F), no deduction of tax would be made or deduction of tax would
be made at such lower rate, from such payment to such person or class of persons,
including institution, association or body or class of institutions or associations or
bodies notified by the Central Government in this behalf.

In exercise of the power provided under section 197A(1F), the Central Government
has, vide this notification, notified that w.e.f. 1st September, 2023, no tax is required
to be deducted under section 194-I from lease rent or supplemental lease rent made
by a lessee to a lessor, being a Unit of an IFSC for lease of a ship subject to the
following:

(1) The lessor has to furnish and verified a statement-cum-declaration to the lessee
giving details of previous year relevant to the ten consecutive assessment years for
which the lessor opts for claiming deduction under section 80LA(1A)/(2).

(2) The lessee would not deduct tax on payment made or credited to lessor after the
date of receipt of copy of statement-cum-declaration from the lessor and also
furnish the particulars of all the payments made to lessor on which tax has not
been deducted in the statement of deduction of tax under section 200(3) read with
the Rule 31A.

The above relaxation is available to the lessor only during the said previous years
relevant to the ten consecutive assessment years as declared by the lessor for which
deduction under section 80LA is being opted. The lessee is liable to deduct tax on
payment of lease rent for any other year.

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 Guidelines under section 194-O (4)

[Circular No. 20/2023 dated 28.12.2023]

Section 194-O requires to deduct tax at source by an e-commerce operator @1% of the
gross amount of sales or services or both, where sale of goods or provision of services
of an e-commerce participant is facilitated by it through its digital or electronic facility
or platform.

Section 194-O(4) empowers the CBDT, with the approval of the Central Government,
to issue guidelines for the purpose of removing difficulties that arise in giving effect
to the provisions of this section.

Accordingly, the CBDT has, with the approval of the Central Government, vide this
circular, issued the following guidelines.

(i) Who should deduct tax at source where there are multiple e-commerce
operators (ECO) involved in a transaction?

There may be a platform or network (e.g. the Open Network for Digital Commerce)
on which multiple e-commerce operators are participating in a single transaction.
For example, there could be a buyer side ECO involved in buyer side functions and
a seller side ECO involved in seller side functions. In this case there may be two
situations:
 Situation 1: Where multiple ECOs are involved in a single transaction of sale of
goods or provision of services through ECO platform or network and where the
seller-side ECO is not the actual seller of the goods or services:

On the buying side, a buyer-side ECO could be providing an interface to the buyer
and on the selling side, a seller-side ECO could be providing an interface to the
seller.

Movement of Goods/Services

Buyer Buyer side ECO Seller-side ECO Seller

(E-commerce (E-commerce
Participant) Participant)
TDS is to be deducted
by this ECO

Consideration

In this situation, the compliance under section 194-O is to be done by the sellerside
ECO who finally makes the payment or the deemed payment to the seller for goods
sold or services provided.

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Situation 2: Where multiple ECOs are involved in a single transaction of sale of goods
or provision of services through ECO platform or network and where the seller-side
ECO is the actual seller of the goods or services.

On the buying side, an ECO could be providing an interface to the buyer and on the
selling side, the seller itself is an ECO and is directly interacting with an ECO.

Movement of Goods/Services

Buyer ECO - 1 ECO – 2 (making Seller

(E-commerce payment to Seller) (also an ECO)
Participant)

TDS is to be deducted
by ECO 2

Consideration

In this situation, since on the selling side, the seller itself is an ECO and is directly
interacting with an ECO, the compliance under section 194-O is to be done by the ECO
which finally makes the payment or the deemed payment to the seller for goods or
services sold.

Note - In both the above situations, the tax shall be deducted on the "gross amount"
of such sale of goods or provision of services and shall be deducted by seller-side
ECO/ECO-2, as the case may be, at the time of credit to the account of a seller (being
e-commerce participant) or at the time of the payment or the deemed payment
thereof to such seller by any mode, whichever is earlier.
(ii)E-commerce operators may be levying convenience fees or charging
commission for each transaction and seller might levy logistics & delivery fees
for the transaction. Payments may also be made to the platform or network
(e.g. ONDC) provider for facilitating the transaction. Would these form part of
the “gross amount" for the purposes of TDS under section 194-O of the Act?

In e-commerce, it is common for an order to be shipped to the buyer from the

seller. It is therefore common for the sellers to charge the buyer additionally for
shipping in the form of logistics/delivery/shipping/ packaging fees.

Further, the buyer-side ECO and seller-side ECO may charge a commission to the
seller to enable the online transaction, and the seller may choose to recoup all or
part of that amount from the buyer.

Example 1: A Buyer purchases goods worth Rs. 100 from Seller and opts for home
delivery. The Seller charges the Buyer an additional Rs. 5 as packing fees, Rs. 10
as shipping fees, and Rs. 3 as a convenience charge (to recoup the fees charged by
the seller-side ECO, which includes Rs. 1 charged by the Buyer-side ECO and Rs. 2
charged by the Seller-side ECO itself). So, the seller will issue an invoice for Rs. 118
(i.e. Rs. 100 + 5 + 10 + 2 + 1) to the buyer. The shipping fees, packaging fees and
convenience fees are separately charged to the buyer to provide services in relation
to the main supply. In such a case, TDS is to be deducted by the seller-side ECO
under section 194-O on Rs. 118 since this is the gross amount of sales.

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 Movement of Goods/Services

Buyer (E- Buyer side Seller-side Seller (E-commerce

commerce ECO ECO Participant)
Participant) Receives Rs. Receives Rs. Sells goods worth
Buys Rs. 100 118 Retains 117 Retains Rs. 100 to the Buyer
worth of with itself Rs. 2 as fees and charges
goods Rs. 1 as fees Pays Rs.115 additional:
(Home Pays Rs. 117 to Seller (i) Rs. 5 packing
delivery) and to Seller-side fees
pays with all ECO (ii) Rs. 10 shipping
fees: Rs. 118 fees
(iii) Rs. 3
convenience fees
Total amount: Rs.
118 charges to
buyer Receives Rs.
115 from Seller-side
ECO Deduct TDS on
Rs. 118
Consideration

It is thus clarified that TDS shall be deducted by the seller-side ECO on the gross
amount of sales of goods (Rs. 118) or provision of services at the time of payment
(including deemed payment) or credit.

As per section 194-O(3), a transaction on which tax has been deducted by an ECO
under section 194-O(1), such transaction shall not be liable to TDS under any other
provision of Chapter XVII-B. Accordingly, this exclusion will also apply to the amount
received by ECO for provision of services which are in connection with the main
transaction of sale of goods or provision of service or both referred to in section 194-
O(1). However, section 194S(4) overrides section 194-O and states that if tax is
deducted under section 194-S, no tax is deductible under section 194-O.

In this example, fees charged by the seller-side ECO (Rs. 3 charged to the seller) and
buyer-side ECO (Rs. 1 charged to the seller-side ECO) for services provided would
ordinarily have been subjected to TDS under section 194H and the seller and seller-
side ECO respectively would have had to deduct tax and file TDS return with respect
to the fees paid.
However, as tax has been deducted under section 194-O(1) on the gross amount of
sales of Rs. 118, this amount (which includes buyer-side ECO fee of Rs. 1 and seller-
side ECO fee of Rs. 2 charged to the end customer) will not be subject to TDS under
any other provision. However, this is subject to provisions of section 194S(4).

Payments may also be made to the platform or network (e.g. ONDC) provider for
facilitating the transaction. These would form part of the “gross amount" for the
purposes of TDS under section 194-O if they are included in the payment for the
transaction. If these payments are being paid on a lump-sum basis and are not linked
to a specific transaction, then these need not be included in the "gross amount".

Example 2:

Money Flow

Rs. 100 Rs. 95 Rs. 85

Buyer Buyer-side ECO Seller-side ECO Seller

Buyer-side ECO retains Seller-side ECO retains

Rs. 5 as commission. Rs. 10 as commission.

Invoices the seller-side Invoices the seller-side

ECO for Rs. 5. ECO for Rs. 15.

Invoicing Flow

The Seller's label-price for a product is Rs. 85, the seller-side ECO's fee (for listing the
Seller catalogue and facilitating the transaction) is Rs. 10, and the Buyer side ECO's fee
(to provide an interface to enable the Buyer to discover the seller/product and to
enable them to place an order) is Rs. 5. The Seller charges the Buyer a total of Rs. 100
(Rs. 85 + Rs. 10 + Rs. 5) and issues an invoice for Rs. 100 (gross amount) as shown in
the above diagram.

The TDS under section 194-O has to be calculated on Rs. 100 (gross invoice value)
@1% by the seller ECO. The buyer ECO's fees (Rs. 5) charged to seller-side ECO and
seller ECO's fees (Rs. 15) charged to the Seller will not be subject to further TDS under
section 194H.

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(iii) How will GST, various state levies and taxes other than GST such as VAT/
Sales tax/ Excise duty / CST be treated when calculating gross amount of
sales of goods or provision of services as per the provisions of section 194-
O?
Condition Amount on which tax is to be
deducted u/s 194-O
Where tax is deducted at the time of Tax has to be deducted under section
credit of amount in the account of the 194-O on the amount credited without
seller and the component of including such GST/ various state
GST/various state levies and taxes levies and taxes.
comprised in the amount payable to
the seller is indicated separately
Where tax is deducted on payment Tax has to be deducted on the whole
basis because payment is earlier than amount (since it is not possible to
the credit identify the payment with GST/various
state levies and taxes component to be
invoiced in the future)

(iv) How will adjustment for purchase-returns take place?

Tax is required to be deducted under section 194-O at the time of payment or
credit, whichever is earlier. Thus, before purchase-return happens, the tax must
have already been deducted under section 194-O on that purchase. In such case –

(1) Where the money is refunded against purchase returns

Tax deducted, if any, may be adjusted against the next transaction by the
deductor with the same deductee in the same financial year. Further, the tax
deducted and deposited will be allowed as credit to the seller.

(2) Where goods are replaced by the seller against the purchase return

No adjustment is required as in that case the transaction on which tax was

deducted under section 194-O has been completed with goods replaced.

(v) How will discounts given by seller as an e-commerce participant or by any of

the multiple e-commerce operators be treated while calculating "gross
amount"?
(1) Treatment of discounts offered by the actual seller

Where the discount is given by the seller itself, the seller would reduce the
price of the products sold or services provided.
 For example, if the label-price of a product is Rs. 100, and the seller offers a
discount of Rs. 10, Rs. 90 will be receivable from the buyer. In this case, the
seller will invoice the buyer for Rs. 90, and hence the TDS has to be calculated
on Rs. 90.

(2) Treatment of discounts offered by the buyer ECO or Seller ECO

Where discount is given by the buyer ECO/seller ECO, usually the seller
receives full consideration for the product, however part of it is received from
the buyer and the balance is discharged to the seller by the buyer ECO/seller
ECO, as the case may be.

Movement of Goods/Services

Buyer (E- Buyer side Seller-side Seller (E-commerce

commerce ECO ECO Participant)
Participant) Gives Pays Rs. 100 Sells for Rs. 100
Pays Rs. 90 discount of to Seller Receives Rs. 100
to Buyer-side Rs. 10 to
ECO buyer Pays
Rs. 100 to
seller-side
ECO

Consideration

In the above diagram, if the price quoted by the seller is Rs. 100, and the buyer ECO
gives a discount of Rs. 10, Rs. 90 (i.e. 100 - 10) will be collected from the buyer and
remitted to the seller, and the buyer ECO will pay the remaining Rs. 10 to the seller via
the seller ECO. The invoice on the buyer will be raised for Rs. 100 and tax will therefore
be deducted by the seller-side ECO on Rs. 100, which is the gross amount of sales.

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 ASSESSMENT PROCEDURE

Rule 114B, 114BA and 114BB relating to PAN amended

[Notification No. 88/2023 dated 10.10.2023]

Amendments in Rule 114B:

As per section 139A(5) quoting of PAN is mandatory, inter alia, in all documents
pertaining to such transactions entered into by him, as may be prescribed by the CBDT
in the interests of revenue. In this connection, CBDT has prescribed the transactions
vide Rule 114B.

However, as per second proviso to Rule 114B, the requirement of mandatorily quoting
of PAN is relaxed where a person does not have a PAN and makes a declaration in
Form No.60 giving therein the particulars of such transaction.

The CBDT has, vide this notification, amended the second proviso to Rule 114B to
withdraw such relaxation for a company or a firm. Therefore, w.e.f. 10.10.2023,
second proviso to Rule 114B provides that any person, not being a company or a firm,
who does not have a PAN and who enters into any transaction specified in Rule 114B,
has to make a declaration in Form No.60 giving therein the particulars of such
transaction.

However, a foreign company who does not have any income chargeable to tax in India
and does not have a PAN and enters into the following transactions, in an IFSC banking
unit, has to make a declaration in Form No. 60.

Nature of transaction Value of transaction

Opening an account [other than a time deposit and a All such transactions
Basic Savings Bank Deposit Account] with a banking
company or a cooperative bank to which the Banking
Regulation Act, 1949 applies (including any bank or
banking institution referred to in section 51 of that Act).
A time deposit with, - Amount exceeding Rs.
(i) a banking company or a cooperative bank to which the 50,000 or aggregating to
Banking Regulation Act, 1949 applies (including any bank more than Rs. 5 lakh
or banking institution referred to in section 51 of that Act); during a financial year.
(ii) a Post Office;
(iii) a Nidhi referred to in section 406 of the Companies Act,
2013; or
(iv) a non-banking financial company which holds a certificate
of registration under section 45-IA of the Reserve Bank of
India Act, 1934, to hold or accept deposit from public.
Meaning of IFSC banking unit – A financial institution defined under section 3(1)(c)
of the IFSC Authority Act, 2019, that is licensed or permitted by the IFSC to undertake
permissible activities under the IFSC Authority (Banking) Regulations, 2020.

Amendments in Rule 114BA and Rule 114BB:

As per section 139A(1)(vii) read with Rule 114BA, every person, who has not been
allotted a PAN, has to apply for PAN if he intends to enter into any of the following
transactions:

(i) Deposit cash in his one or more accounts with a banking company, co-operative
bank or post office, if the aggregate amount of cash deposit in such accounts
during a financial year is Rs. 20 lakh or more
(ii) Withdraw cash from his one or more accounts with a banking company, co-
operative bank or post office, if the aggregate amount of cash withdrawal from
such accounts during a financial year is Rs. 20 lakh or more
(iii) Open a current account or cash credit account with a banking company or a
co-operative bank, or a Post Office

Similar transactions are prescribed for the purpose of quoting PAN or Aadhar Number
in the document pertaining to such transactions under section 139A(6A) read with
Rule 114BB.

The CBDT has, vide this notification, amended Rule 114BA and 114BB, w.e.f.
10.10.2023, to provide that a person is not required to apply for PAN or quote PAN,
in a case –

(a) where the person, making the deposit or withdrawal of an amount otherwise than
by way of cash as per (i) or (ii) above, or opening a current account not being a cash
credit account as per (iii) above, is a non-resident (not being a company) or a foreign
company;

(b) the transaction is entered into with an IFSC banking unit; and

(c) such non-resident (not being a company) or the foreign company does not have any
income chargeable to tax in India.

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 Substitution of Rule 14B specifying guidelines for the
purposes of determining expenses for audit or inventory
valuation under section 142(2A)
[Notification No. 82/2023 dated 27.09.2023]

As per proviso to section 142(2D), where the direction for special audit or inventory
valuation under section 142(2A) is issued by the Assessing Officer, the expenses of,
and incidental to, such special audit or inventory valuation, including remuneration of
the Accountant or Cost Accountant, shall be determined by the Principal Chief
Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in
accordance with the prescribed guidelines. The expenses so determined shall be paid
by the Central Government.

Accordingly, the CBDT has, vide this notification, substituted Rule 14B prescribing the
guidelines for the purposes of determining expenses for audit or inventory valuation
under section 142(2A).

Every Chief Commissioner would maintain a panel of

- accountants, out of persons referred to in Explanation to section 288(2), and

- cost accountants, out of the persons referred to in Explanation to section 142
for the purposes of section 142(2A).

The expenses of, and incidental to, audit or inventory valuation (including the
remuneration of the Accountant, Cost Accountant, qualified assistants, semi-qualified
and other assistants who may be engaged by such Accountant or Cost Accountant)
should not be

- less than Rs. 3,750 and

- not more than Rs. 7,500

for every hour of the period as specified by the Assessing Officer under section
142(2C). Such period shall be specified in terms of the number of hours required for
completing the report.
 Circular No. 3/2023 dated 28.03.2023 has been partially
modified to provide relief to tax deductors and tax
collectors for the failure to deduct or collect tax at a
higher rate, which applies as a consequence of failing to
link Aadhaar with PAN, resulting in the PAN becoming
inoperative
[Circular No. 6/2024 dated 23.04.2024]

Rule 114AAA(3) details the consequences of PAN becoming inoperative. These

consequences include no tax refunds, no interest on refunds, and higher rates for TDS
(under section 206AA) and TCS (under section 206CC). As per Rule 114AAA(4), these
consequences would be effective for the period commencing from the date specified
by the Board till the date it becomes operative.

Accordingly, the CBDT had, vide Circular No. 3/2023 dated 28.03.2023, specified that
the consequences mentioned in Rule 114AAA(3) will be effective from 1.7.2023
continue till the PAN becomes operative.

Several grievances have been received from the taxpayers, reported receiving notices
for short-deduction or collection of TDS/TCS while carrying out the transactions where
the PANs of the deductees/collectees were inoperative. In such cases, as the
deduction/collection has not been made at a higher rate, demands have been raised
by the Department against the deductors/collectors while processing of TDS/TCS
statements under section 200A or under section 206CB, as the case maybe.

To address these grievances, the CBDT has partially modified Circular No. 3/2023.
Accordingly, the CBDT has, vide this Circular, specified that for the transactions
entered into upto 31.03.2024 and in cases where the PAN becomes operative (as a
result of linkage with Aadhaar) on or before 31.05.2024, deductor/collector is not
liable to deduct/collect tax at source at higher rate under section 206AA/ 206CC.

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 CAPITAL GAINS
Central Government expanded the list of “specified
securities” notified for the purposes of section 47(viiab)
[Notification No. 71/2023, dated 12-09-2023]

Section 47(viiab) provides that any transfer of a capital asset, being bond or Global
Depository Receipt referred to in section 115AC(1) or rupee denominated bond of an
Indian company or a derivative or any other security as may be notified by the Central
Government, made by a non-resident on a recognised stock exchange located in any
International Financial Services Centre (IFSC) would not be considered as transfer for
attracting capital gains tax, where the consideration for such transfer is paid or
payable in foreign currency.

Accordingly, the Central Government has, vide this notification, notified the following
securities –

(i) unit of investment trust, being REITs or an InvITs;

(ii) unit of a scheme (a scheme of a fund management entity launched under IFSC
Authority (Fund Management) Regulations, 2022);

(iii) unit of a Exchange Traded Fund launched under IFSC Authority (Fund Management)
Regulations, 2022

in addition to the securities notified earlier vide Notification No. 16/2020 dated
05.03.2020 and Notification No. 89/2022 dated 03.08.2022, which are listed on a
recognised stock exchange located in any IFSC in accordance with the regulations
made by the SEBI under the SEBI Act 1992 or the IFSC Authority under the IFSC
Authority Act 2019, as the case may be.
 TAX AUDIT AND ETHICAL COMPLIANCES
Amendment in particulars of Form 3CD
[Notification No. 27/2024 dated 05.03.2024 and Notification No. 34/2024 dated
19.03.2024]

Section 44AB prescribes the cases where an assessee is required to get his books of
account audited and require furnishing of report by a chartered accountant. For this
purpose, the CBDT has prescribed under Rule 6G, Forms 3CA/3CB/3CD containing
forms of audit report and particulars to be furnished therewith.

The CBDT has, vide these notifications, amended Form 3CD w.e.f. 05.03.2024 to align
the Form with the amendments made by the Finance Acts. Clauses are mentioned in
Column (1) with corresponding particulars with amendment indicated in bold & italics
in Column (2) along with remarks in Column (3) of the below table:

Clause Particulars with amendment in bold Remarks

& italics
(1) (2) (3)
Part A
8a Whether the assessee has opted for Concessional tax regime
taxation u/s 115BA/ 115BAA/ under section 115BAE has
115BAB/ 115BAC/ 115BAD/115BAE? been introduced by the
Finance Act, 2023 for newly
manufacturing co-operative
society fulfilling specified
conditions. Consequently,
section 115BAE has been
inserted in clause 8a and
clause 32 (discussed later).
Part B
12 Whether the profit or loss account Section 44ADA was not
includes any profits and gains expressly mentioned in Form
assessable on presumptive basis, if No. 3CD. However, it is now
yes, indicate the amount and the included.
relevant sections [44AD, 44ADA,
44AE, 44AF, 44B, 44BB, 44BBA, 44BBB,
Chapter XII-G (provisions relating to
shipping business), First Schedule
(Insurance business) or any other
relevant section].

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18 Particulars of depreciation allowable As per the second proviso to
as per the Income-tax Act, 1961 in section 115BAC(3), where
respect of each asset or block of individual/ HUF/ AoP/
assets, as the case may be, in the BoI/Artificial Juridical Person
following form: has not opted out of the
(ca) Adjustment made to the written aforesaid section and the
down value under the second income-tax on his/its total
proviso to section 115BAC (3) income is computed under
aforesaid section and there is
a depreciation allowance in
respect of a block of asset
from an earlier assessment
year attributable to additional
depreciation u/s 32(1)(iia),
which has not been given full
effect prior to A.Y. 2024-25
and which is not allowed to be
set-off in the A.Y.2024-25 due
to section 115BAC,
corresponding adjustment
shall be made to the WDV of
such block of assets as on
1.4.2023 in the prescribed
manner i.e., the WDV as on
1.4.2023 will be increased by
the unabsorbed additional
depreciation not allowed to be
set-off.
Adjustment to written down
value in relation to
depreciation allowance as
provided under the second
proviso to section 115BAC (3)
required to be disclosed in
Form 3CD.
19 Amounts admissible under sections: Disclosure of details of
33AB, 33ABA, 35(1)(i), 35(1)(ii), amounts debited to Profit and
35(1)(iia), 35(1)(iii), 35(1)(iv), 35(2AA), Loss Account and amount
35(2AB), 35ABA, 35ABB, 35AD, admissible under section
35CCA, 35CCC, 35CCD, 35D, 35DD, 35ABA relating to
35DDA, 35E and any other relevant amortization of expenditure
section for obtaining right to use
spectrum for
telecommunication services is
inserted in Clause 19.
 21 (a) Please furnish the details of Explanation 1 to section 37(1)
amounts debited to profit and loss provides that any expenditure
account, being in the nature of capital, incurred by the assessee for
personal, advertisement expenditure, any purpose which is an
expenditure incurred at clubs, offence or is prohibited by law
expenditure for any purpose which shall not be allowed as a
is an offence or is prohibited by law deduction or allowance.
or expenditure by way of penalty or Explanation 3 to section 37
fine for violation of any law (enacted was inserted vide the Finance
in India or outside India), Act, 2022 to clarify that the
expenditure incurred to compound expression “expenditure
an offence under any law for the incurred by an assessee for
time being in force, in India or any purpose which is an
outside India, expenditure incurred offence or which is prohibited
to provide any benefit or perquisite, by law” would include and
in whatever form, to a person, would be deemed to have
whether or not carrying on a always included the
business or exercising a profession, expenditure incurred by an
and acceptance of such benefit or assessee, -
perquisite by such person is in (i) for any purpose which is an
violation of any law or rule or offence under any law for
regulation or guideline, as the case the time being in force, in
may be, for the time being in force, India or outside India or
governing the conduct of such which is prohibited by any
person. law for the time being in
force, in India or outside
India; or
(ii) to provide any benefit or
perquisite, in whatever
form, to a person, whether
or not carrying on a
business or exercising a
profession, and
acceptance of such benefit
or perquisite by such
person is in violation of
any law or rule or
regulation or guidelines, as
the case may be, for the
time being in force,
governing the conduct of
such person; or
(iii) to compound an offence
under any law for the time
being in force, in India or
outside India.

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 To align the reporting
requirement with Explanation
3 to section 37, this clause has
been amended.
22 Amount of interest inadmissible under Section 43B(h) has been
section 23 of the Micro, Small and inserted by the Finance Act,
Medium Enterprises Development Act, 2023 to provide that any sum
2006 or any other amount not payable by the assessee to a
allowable under section 43B(h) micro or small enterprise
beyond the time limit
specified in section 15 of the
Micro, Small and Medium
Enterprises Development Act,
2006 shall be allowed as
deduction only on actual
payment.
Accordingly, Clause 22 is
amended to report the amount
not allowable in the relevant
previous year due to the
applicability of section 43B(h).
32 Details of brought forward loss or Concessional tax regime
depreciation allowance to the extent under section 115BAE has
available containing information been introduced by the
relating to assessment year, nature of Finance Act, 2023 for newly
loss/allowance (in Rs.), amount as manufacturing co-operative
returned (in Rs.)* all losses/allowances society fulfilling specified
not allowed under section 115BAA/ conditions. Consequently,
115BAC/ 115BAD/ 115BAE, amount section 115BAE has been
as assessed (give reference to relevant inserted in clause 8a
order) and remarks. (discussed earlier) and clause
* If the assessed depreciation is less 32.
and no appeal pending than take
assessed.
 NON-RESIDENT TAXATION
Activity notified by the Central Government for exemption
under section 10(4G) with regards to income received by
a non-resident in an account maintained with an Offshore
Banking Unit in any IFSC
[Notification No. 04/2024 dated 04.01.2024]

Section 10(4G) provides for an exemption in respect of any income received by a non-
resident from

- portfolio of securities or financial products or funds, managed or administered

by any portfolio manager on behalf of such non-resident, or
- such activity carried out by such person as may be notified by the Central
Government,

in an account maintained with an Offshore Banking Unit in any IFSC, as referred to in

section 80LA(1A), to the extent such income accrues or arises outside India and is not
deemed to accrue or arise in India.

Accordingly, the Central Government has, vide this notification, notified that the
income received by a non-resident from the activity of investment in a financial
product by the non-resident, in accordance with a contract between such non-
resident and a capital market intermediary, being a Unit of an IFSC would be
exempt. The income from such investment should be received in the account of the
non-resident maintained with an Offshore Banking Unit of such IFSC, as referred to in
section 80LA(1A).

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Meaning of certain terms:

S. No. Term Meaning

(i) Financial It means
product (i) securities;
(ii) contracts of insurance;
(iii) deposits;
(iv) credit arrangements;
(v) foreign currency contracts other than contracts to
exchange one currency for another that are to be settled
immediately; and
(vi) any other product or instrument that may be notified by
the Central Government from time to time.
(ii) Capital It means an intermediary* and is registered with the IFSC
market Authority under IFSCA (Capital Market Intermediaries)
intermediary Regulations, 2021.
__________________________

*Referred to in regulation 3 of IFSCA (Capital Market Intermediaries) Regulations, 2021