Income-tax Act,1961
Act No : 43
Section :
Dividends 5. (plus surcharge, referred in para 3). It is clarified in this regard that where any such income e.g. commission, remuneration, etc., is credited to any account, whether called "Suspense Account" or by any other name, in the books of
194. Dividends 5 6The principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, shall, before making any payment in cash or before issuing any cheque or warrant in respect of any dividend or before making any distribution or payment to a shareholder, 7[who is resident in India,] of any dividend within the meaning of sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) or sub-clause (e) of clause (22) of section 2, deduct from the amount of such dividend, income-tax 8[* * *] at the rates in force: 9[Provided that no such deduction shall be made in the case of a shareholder, being an individual, 10[* * *] of a company in which the public are substantially interested, if- ---------------------------------------------------------------------- 1 Substituted for "one thousand rupees" by the Finance Act, 1989, w.e.f. 1-6-1989. 2 Inserted, ibid. Earlier, the Explanation, as inserted by the Finance Act, 1965, w.e.f. 1-4-1965, was omitted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. 3 The figure "(1)" omitted by the Finance Act, 1992, w.e.f. 1-6- 1992. it was inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10- 1991. 4 Prior to the omission, Explanation 2, as inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991, read as under: "Explanation 2.-For the purposes of this section, the expression "scheduled bank,. shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36." 7 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. 8 The words "and super-tax" omitted by the Finance Act, 1965, w.e.f. 1-4-1965. 9 Substituted by the Finance Act, 1984, w.e.f. 1-6-1984. Earlier, the proviso was inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-10-1977. 10 The words "who is resident in India" omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. ----------------------------------------------------------------------- 1.612 (a) the dividend is paid by such company by an account payee cheque; and (b) the amount of such dividend or, as the case may be, the aggregate of the amounts of such dividend distributed or paid or likely to be distributed or paid during the financial year by the company to the shareholder, does not exceed 1[two thousand five hundred rupees]: 2[Omitted by the Finance Act, 1993, w.e.f 1-6-1993.] 3[194A. Interest other than "Interest on securities"4 5(1) Any person, not being an individual or a Hindu undivided family, who. is responsible for paying to a resident any income by way of interest --------------------------------------------------------------------- 1 Substituted for "one thousand rupees" by the Finance Act, 1987, w.e.f. 1-6-1987. 2 Prior to the omission, the second proviso, as originally enacted and amended by the Finance Act, 1965, w.e.f. 1-4-1965; Finance (No. 2) Act, 1977, w.e.f. 1-10-1977 and the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988, read as under: "Provided further that where in the case of any shareholder, not being a company, the Assessing Officer gives a certificate in writing in the prescribed manner that to the best of his belief the total income of the shareholder will be less than the minimum liable to income-tax, the person responsible for paying any dividend to the shareholder shall, so long as the certificate is in force pay the dividend without any deduction." 3 Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. 1.613 other than income 1[by way of interest on securities], shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: 2[Omitted by the Finance Act, 1992, w.e.f. 1-6-1992.] 3[Explanation.-For the purposes of this section where any income by way of interest as aforesaid is credited to any account whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] 4[Omitted by the Finance Act, 1992, w.e.f. 1-6- 1992.] (3) The provisions of sub-section (1) shall not apply- 5[(i) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-section (1) to the account of, or to, the payee, does not exceed 6[two thousand five hundred rupees]: ----------------------------------------------------------------------- 1 Substituted for 'chargeable under the head "Interest on securities", by the Finance Act, 1988, w.e.f. 1-4-1989. 2 Prior to the omission, the proviso read as under: "Provided that no such deduction shall be made in a case where the person (not being a company or a registered firm) entitled to receive such income furnishes to the person responsible for making the payment- (a) an affidavit, or (b) a statement in writing, declaring that his estimated total income assessable for the assessment year next following the financial year in which the income is credited or paid will be less than the minimum liable to income- tax." 3 Inserted by the Finance Act, 1987, w.e.f. 1-6-1987. 4 Prior to the omission, sub-section (2), as amended by the Finance Act, 1968, w.e.f. 1-4-1968, read as under-. "(2) The statement in writing referred to in subsection (1) shall also contain such other particulars as may be prescribed. be verified in the prescribed manner, be signed in the presence of- (a) a Member of Parliament or a State Legislature; or (b) a Member of a District Council or a Metropolitan Council, a Municipal Corporation or Municipal Committee; or (c) a Gazetted Officer of the Central or a State Government; or (d) an officer of any banking company (including a co- operative bank) of the rank of sub-agent, agent or manager, and bear an attestation by such member or officer to the effect that the person who has signed the statement is known to him." 5 Substituted by the Finance Act, 1975, w.e.f. 1-4-1975. Section 20(2) of the Amendment Act made a special provision in regard to the amendment as under: "(2) Notwithstanding the substitution of clause (i) of sub- section (3) of section 194A of the Income-tax Act by sub-section (1) of this section, nothing in section 201 or section 276B of that Act shall apply to, or in relation to, any failure to deduct incometax under sub-section (1 ) of the said section 194A on any income by way of interest other than income chargeable under the head "Interest on securities" credited or paid on or after the 1st day of April, 1975, but before the 1st day of June, 1975, where the income so credited or paid at any one time does not exceed four hundred rupees." 6 Substituted for "one thousand rupees" by the Finance Act, 1987, w.e.f. 1-6-1987. ---------------------------------------------------------------------- 1.614 1[Provided that in respect of' the income credited or paid in respect of time deposits with a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies(including any bank or banking institution referred to in section51 of that Act) or with a co-operative society engaged in carrying on the business of banking, the provisions of this clause shall have effect as if for the words "two thousand five hundred rupees", the words "ten thousand rupees" had been substituted and the aforesaid amount shall be computed with reference to the income credited or paid by a branch of the banking company or the co-operative society, as the case may be;] (ii) to such income credited or paid before the 1st day of October, 1967; (iii) to such income credited or paid to- (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co- operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank), or (b) any financial corporation established by or under a Central, State or Provincial Act, or (c) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or (d) the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or (e) any company or co-operative society carrying on the business of insurance, or 2(f)such other institution, association or body 3 [or class of institutions, associations or bodies] which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette; 4[(iv) to such income credited or paid by a firm to a partner of the firm; (v) to such income credited or paid by a co-operative society 5[to a member thereof or] to any other co-operative society; 6[(Vi) to such income credited or paid in respect of deposits under any scheme framed by the Central Government and notified' by it in this behalf in the Official Gazette;] ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1995, w.e.f. 1-7-199.5 3 Inserted by the Finance Act, 1968, w.e.f. 1-4-1968. 4 Inserted by the Finance Act, 1968, w.e.f. 1-4-1968. It was omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 but was reintroduced by the Direct Tax Laws (Amendment) Act, 1989, with effect from the same date. 5 Inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971. 6 Inserted by the Finance Act, 1970, w.e.f. 1-4-1970. 1.615 1[(vii) to such income credited or paid in respect of deposits (other than time deposits made on or after the 1st day of July, 1995) with a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act); (viia) to such income credited or paid in respect of,- (a) deposits with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank; (b) deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking;] 2[(viii) to such income credited or paid by the Central Government under any provision of this Act or the Indian Income-tax Act, 1922 (11 of 1922), or the Estate Duty Act, 1953 (34 of 1953), or the Wealth-tax Act, 1957 (27 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or the Super Profits Tax Act, 1963 (14 of 1963), or the Companies (Profits) Surtax Act, 1964 (7 of 1964) or the Interest Tax Act, 1974 (45 of 1974).] ---------------------------------------------------------------------- 1 Substituted by the Finance Act, 1995, w.e.f. 1-7-1995. Prior to the substitution, clause (vii), as substituted for clauses (vii) and (viia) by the Finance Act, 1992, w.e.f. 1-6-1992, read as under: "(vii) to such income credited or paid in respect of deposits with a banking company to which the Banking Regulation Act, 1949, (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act), or with a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank);" Earlier, the above clause (vii) was substituted for clauses (vii) and (viia) by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991, which read as under: "(vii) to such income credited or paid in respect of deposits (other than time deposits) with a banking company to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act); (viia) to such income credited or paid in respect of,- (a)deposits with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank; (b)deposits (other than time deposits) with a co- operative society other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking; Explanation.-For the purposes of clauses (vii) and (viia), "time deposits" means deposits (excluding recurring deposits) repayable on the expiry of fixed periods." Clause (vii), as inserted by the Finance Act, 1970, w.e.f. 1- 4-1970, read as under: "(vii) to such income credited or paid in respect of deposits with a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or with a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank)." 2 Inserted by the Finance Act, 1975, w.e.f. 1-4-1975. ------------------------------------------------------------------------ 1.616 1[Explanation.-For the purposes of clauses (i), (vii) and (viia), "time deposits" means deposits (excluding recurring deposits) repayable on the expiry of fixed periods.] 2[(4) The person responsible for making the payment referred to in sub-section (1) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year.] 3[Omitted by the Finance Act, 1992, w.e.f 1-6-1992.] 1[194B. Winnings from lottery or crossword puzzle2 3 The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle in an amount exceeding 4[five thousand rupees] shall, at the time of payment thereof, deduct income-tax thereon at the rates in force: Provided that no deduction shall be made under this section from any payment made before the 1st day of June, 1972.] 5[194BB. Winnings from horse race6 7 Any person, being a bookmaker or a person to whom a licence has been granted by the Government under any law for the time being in force for horse racing in any race course or for arranging for wagering or betting in any race course, who is responsible for paying to any person any income by way of winnings from any horse race in an amount ------------------------------------------------------------------------ 1 Inserted by the Finance Act, 1972, w.e.f. 1-4-1972. 4 Substituted for "one thousand rupees" by the Finance Act, 1986, w.e.f. 1-6-1986. 5 Inserted by the Finance Act, 1978, w.e.f. 1-4-1978. d 1.618 exceeding 1[two thousand five hundred rupees] shall, at the time of payment thereof, deduct income-tax thereon at the rates in force: Provided that no deduction shall be made under this section from any payment made before the 1st day of June, 1978. 2[3 194C. Payments to contractors and sub-contractors 4 (1) Any person responsible for paying any sum to any resident ---------------------------------------------------------------------- 1 Substituted for "five thousand rupees" by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. Earlier, these words were substituted for "two thousand and five hundred rupees" by the Finance Act, 1986, w.e.f. 1-6-1986. 2 Inserted by the Finance Act, 1972, w.e.f. 1-4-1972. ----------------------------------------------------------------------- 1.619 (hereafter in this section referred to as the contractor) for carrying out any work' (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and- (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; 2[or] 3[(e) any co-operative society;] 4[or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 5 (3 of 1956) 6[; or]] 7[j) any firm,] shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, 8[deduct an amount equal to- (i) one per cent in case of advertising, (ii) in any other case two per cent of such sum as income-tax on income comprised therein.] (2) Any person (being a contractor and not being an individual or a Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub- contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax on income comprised therein. ------------------------------------------------------------------ 2 Inserted by the Finance Act, 1973, w.e.f. 1-4-1973. 3 Inserted by the Finance Act, 1973, w.e.f. 1-4-1973. 4 Inserted by the Finance Act, 1992, w.e.f. 1-6-1992. 6 Substituted for "," by the Finance Act, 1995, w.e.f. 1-7-1995. 7 Inserted, ibid. 8 Substituted for "deduct on amount equal to two per cent of such sum as income-tax on income comprised therein" by the Finance Act, 1995, w.e.f. 1-7-1995. ----------------------------------------------------------------------- 1.620 1[Explanation 1.-For the purposes of sub-section (2), the expression "contractor" shall also include a contractor who is carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the Government of a foreign State or a foreign enterprise or any association or body established outside India.] 2[Explanation 3[II].-For the purposes of this section, where any sum referred to in sub-section (1) or sub-section (2) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] 4[Explanation III.-For the purpose of this section, the expression "work" shall also include- (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods and passengers by any mode of transport other than by railways; (d) catering.] (3) No deduction shall be made under sub-section (1) or sub- section (2) from- (i) any sum credited or paid in pursuance of any contract the consideration for which does not exceed 5[twenty] thousand rupees; or (ii) any sum credited or paid before the 1st day of June, 1972; 6[or] 7[(iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the subcontractor in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the co-operative society.] 8(4) Where the 9[Assessing] Officer is satisfied that the total income of the contractor or the sub-contractor justifies the deduction of incometax at any lower rate or no deduction of income-tax, as the case may be, the 10[Assessing] Officer shall, on an application made by the contractor or the sub-contractor in this behalf, give to him such certificate as may be appropriate. ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1994, w.e.f. 1-6-1994. 2 Inserted by the Finance Act, 1988, w.e.f. 1-6-1988. 3 Inserted by the Finance Act, 1994, w.e.f. 1-6-1994. 4 Inserted by the Finance Act, 1995, w.e.f. 1-7-1995. 5 Substituted for "ten" by the Finance Act, 1995, w.e.f. 1-7-199.5. Earlier, "ten" was substituted for five, by the Finance Act, 1982, w.e.f. 1-6-1982. 6 Inserted by the Finance Act, 1973, w.e.f. 1-4-1973. 9 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 10 Ibid. ------------------------------------------------------------------------ 1.621 (5) Where any such certificate is given, the person responsible for paying the sum referred to in sub-section (1) or sub-section (2) shall, until such certificate is cancelled by the 1[Assessing] Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be] 194D. Insurance commission 2 3 Any person responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: Provided that no deduction shall be made under this section from any such income credited or paid before the 1st day of June, 1973:] ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1973, w.e.f. 1-4-1973. ----------------------------------------------------------------------- 1.623 1[Provided further that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to the payee,does not exceed five thousand rupees.] 2[194E. Payments to non-residents sportsmen or sports associations3 Where any income referred to in section 115BBA is payable to a nonresident sportsman (including an athlete) who is not a citizen of India or a non-resident sports association or institution, the person responsible for making the payment shall, at the time credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent.] 4[194EE. Payments in respect of deposits under National Savings Scheme, etc.5 6 The person responsible for paying to any person any amount referred to in clause (a) of sub-section (2) of section 80CCA shall, at the time of ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1987, w.e.f. 1-6-1987. 2 Inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f., 1-11-1989. Earlier, section 194E, as inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988, was omitted by the Direct Tax Laws (Amendment) Act, 1989, with effect from the same date. 4 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. 1.624 payment thereof, deduct income-tax thereon at the rate of twenty per cent: Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than two thousand five hundred rupees: Provided further that nothing contained in this section shall apply to the payment of the said amount to the heirs of the assessee.] 1[194F. Payments on account of repurchase of units by Mutual Fund or Unit Trust of India 2 The person responsible for paying to any person any amount referred to in sub-section (2) of section 80CCB shall, at the time of payment thereof, deduct income-tax thereon at the rate of twenty per cent.] 3[194G. Commission, etc. on sale of lottery tickets4 5[(1)] Any person who is responsible for paying, on or after the 1st day of October, 1991 to any person, who is or has been stocking, distributing, purchasing or selling lottery tickets, any income by way of commission, remuneration or prize (by whatever name called) on such tickets in an amount exceeding one thousand rupees shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent. 6[(2) Where the Assessing Officer is satisfied that the total income of any person who is or has been stocking, distributing, purchasing or selling lottery tickets justifies the deduction of income-tax at any lower rate or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an application7 made by such person in this behalf, give to him such certificate as may be appropriate. (3)Where any such certificate is given, the person responsible for paying the income referred to in sub-section (1) shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be.] Explanation.-For the purposes of this section, where any income is credited to any account, whether called "Suspense Account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1990, w.e.f. 1-4-1991. 3 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. 5 Inserted by the Finance Act, 1992, w.e.f. 1-6-1992. ---------------------------------------------------------------------- 1.625 purchasing or selling lottery tickets, any income by way of commission, remuneration or prize (by whatever name called), on such tickets in an amount exceeding Rs. 1,000 shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by issue of a cheque or a draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 10
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