Requirement
of tax deduction at source in case of entities whose income is exempted
under Section 10 of the Income-tax Act, 1961-Exemption thereof
CIRCULAR No. 18/2017
F. No. 385/01/2015-IT (B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
North Block, New Delhi
29th May, 2017
Subject:
Requirement
of tax deduction at source in case of entities whose income is exempted
under Section 10 of the Income-tax Act, 1961 - Exemption thereof.
The
Central Board of Direct Taxes (the Board) had earlier issued Circular
No. 4/2002 dated 16.07.2002 and Circular No. 7/2015 dated 23.04.2015
which laid down that in case of such entities, whose income is
unconditionally exempt under Section 10 of the Income-tax Act (the Act)
and who are also statutorily not required to tile return of income as
per Section 139 of the Act, there would be no requirement for tax
deduction at source (TDS) from the payments made to them since their
income is anyway exempted from tax under the Act. The issue of whether
exemption from TDS can be extended to more entities on these principles
and whether the exemption is needed to be withdrawn in respect of some
of the exempted entities was examined by the Board.
2.
Examination of the eligibility of entities for exemption from TDS on the
principle of unconditional exemption and no requirement to file return
revealed that Circulars No. 4/2002 and 7/2015 are required to be updated
to make the following changes:
Entities that meet both the above
mentioned conditions but are not mentioned in the aforesaid Circulars
need to be included in the list of exempted entities.
Entities
that are mentioned in Circular No. 4/2002 but their exemption from
income tax has since been withdrawn need to be removed from the list of
exempted entities.
Entities that are mentioned in Circular No.
4/2002 but because of subsequent amendment they are now required to
mandatorily the their returns of income u/s 139 need to be removed from
the list of exempted entities.
3. In view of the above, a revised
list of entities exempted from TDS has been drawn by adding entities in
the first category listed above to the entities mentioned in Circular
No. 4/2002 and Circular No. 7/2015 and removing entities in second and
third categories from the list of existing entities eligible for
exemption from TDS.
4. Accordingly, it has been decided that in
case of below mentioned funds or authorities or Boards or bodies, by
whatever name called, referred to in section 10 of the Income-tax Act,
whose income is unconditionally exempt under that section and who are
also statutorily not required to tile 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 -
(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) Insurance Regulatory and Development Authority referred to in clause (23BBE):
(viii) Central Electricity Regulatory Commission referred to in clause (23BBG);
(ix) Prasar Bharati referred to in clause (23BBH);
(x)
Prime Minister's National Relief Fund referred to in sub-clause (i),
Prime Minister’s Fund (Promotion of Folk Art) referred to in sub-clause
(it), Prime Minister’s Aid to Students Fund referred to in sub-clause
(iii), National Foundation for Communal Harmony referred to in
sub-clause (ilia), Swachh Bharat Kosh referred to in sub-clause (iiiaa),
Clean Ganga Fund referred to in sub-clause (iiiaaa) of clause (23C);
(xi)
Provident fund to which the Provident Funds Act, 1925 (19 of 1925)
referred to in sub-clause (i), recognized 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) Employees' State Insurance Fund referred to in clause (25A);
(xiii) Agricultural Produce Marketing Committee referred to in clause (26AAB);
(xiv)
Corporation. body, institution or association established for promoting
interests of members of Scheduled Castes or Scheduled Tribes or
backward classes referred to in clause (26B);
(xv) Corporation established for promoting interests of members of a minority community referred to in clause (26BB);
(xvi) Corporation established for welfare and economic upliftment of ex-servicemen referred to in clause (26BBB);
(xvii) New Pension System Trust referred to in clause (44).
4.
This circular supersedes earlier Circulars on this issue e.g. Circular
No. 4/2002 dated 16.07.2002 and Circular No. 7/2015 dated 23.04.2015
with effect from the date of issue of this Circular.
5. Hindi version shall follow.
(Sandeep Singh)
Under Secretary to the Govt. of India
Source:
CBDT Circular
