Page 49 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes Consequently, Explanation 4 of the section has been inserted to clarify that the expression
“through” shall mean and include and shall be deemed to have always meant and included
“by means of”, “in consequence of” or “by reason of”.
Further, Explanation 5 has been inserted to clarify that an asset or a capital asset being any
share or interest in a company or entity registered or incorporated outside India shall be
deemed to be and shall always be deemed to have been situated in India, if the share or
interest derives, directly or indirectly, its value substantially from the assets located in
India.
(i) Income, which falls under the head “Salaries”, if it is earned in India. Any income under
the head “Salaries” payable for rest period or leave period which is preceded and succeeded
by services rendered in India, and forms part of the service contract of employment, shall
be regarded as income earned in India.
(ii) Income from ‘Salaries’ which is payable by the Government to a citizen of India for
services rendered outside India. However, allowances and perquisites paid outside India
by the Government are exempt.
(iii) Dividend paid by an Indian company outside India.
(iv) Interest
(v) Royalty

(vi) Fees for technical services
The above mentioned categories of different of income which are deemed to accrue or arise in
India are further explained in the subsequent section. Thus the categorisation of income which
is deemed to accrue or arise in India can be summarised as below:
Nature of income Whether income is deemed to
accrue or arise in India
Income from business connection in India Yes
Income from any property, asset or source of income in India Yes
Capital gain on transfer of a capital asset situated in India Yes
Income from salary if service is rendered in India Yes
Income from salary (not being perquisite/allowance) if service is Yes
rendered outside India (provided the employer is Government of
India and the employee is a citizen of India)
Income from salary if service is rendered outside India (not being a No
case stated above)
Dividend paid by the Indian company Yes

Nature of Income From whom Income Payer’s Source of Income Yes
is Received
Interest Government of India Any Yes
Interest A person resident in Borrowed capital is used by the payer for No
India carrying on business/profession outside
India or earning any income outside India
Interest A person resident in Borrowed capital is used by the payer for Yes
India any other purpose
Interest A person non- Borrowed capital is used by the payer for Yes
resident in India carrying on business/profession in India
Interest A person non- Borrowed capital is used by the payer for No
resident in India any other purpose
Contd...

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