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Taxation Revisionary Series

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CA Intermediate

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May, 2024
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Lecture 7 – Income from Other Sources
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CA Nishant Kumar
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Income Tax Revision Schedule

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Date Day Topic

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01-02-2024 Thursday L1 - Basics of Taxation and General Tax Rates
03-02-2024 Saturday L2 - Residence and Scope of Total Income
06-02-2024 Tuesday L3 - Income from Salaries

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08-02-2024 Thursday L4 - Income from House Property

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10-02-2024 Saturday L5 - Profits and Gains from Business or Profession
13-02-2024 Tuesday L6 - Capital Gains
15-02-2024 Thursday L7 - Income from Other Sources

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17-02-2024 Saturday L8 - Clubbing of Income
20-02-2024 Tuesday
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L9 - Set Off; Carry Forward of Losses
22-02-2024 Thursday L10 - Deductions from Gross Total Income
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24-02-2024 Saturday L11 - Return Filing and Self Assessment
27-02-2024 Tuesday L12 - TDS, TCS, Advance Tax
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29-02-2024 Thursday L13 - Income Tax Liability - Computation and Optimization

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GST Revision Schedule

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Date Day Topic

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02-03-2024 Saturday L1 - Supply Under GST
05-03-2024 Tuesday L2 - Charge Under GST; Composition Levy
07-03-2024 Thursday L3 - Place of Supply

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09-03-2024 Saturday L4 - Exemptions from GST

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12-03-2024 Tuesday L5 - Time of Supply
14-03-2024 Thursday L6 - Value of Supply

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16-03-2024 Saturday L7 - Input Tax Credit
19-03-2024 Tuesday L8 - Registration Under GST
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21-03-2024 Thursday L7 - Tax Invoice; Credit and Debit Notes; E-Way Bill
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23-03-2024 Saturday L8 - Accounts and Records; TDS & TCS
26-03-2024 Tuesday L9 - Payment of Tax
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28-03-2024 Thursday L10 - Returns Under GST

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 Chapter 7 – Income from Other Sources
Income Chargeable Under the Head “Income from Other Sources”
[Section 56]: Some examples
Section Income

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56(2)(i) Dividend Income
56(2)(ib) Casual Income (winnings from lotteries, crossword puzzles, races including horse races,
card games and other games, gambling, betting etc.)
56(2)(viib) Consideration received in excess of FMV of shares of a closely held company, where
such shares are issued at a premium
56(2)(viii) Interest received on compensation/enhanced compensation deemed to be income in

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the year of receipt
56(2)(ix) Advance forfeited due to failure of negotiations for transfer of a capital asset
56(2)(x) Sum of money or property received by any person

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56(2)(xi) Compensation or any other payment received in connection with termination of his
employment
56(2)(xii) Sum received, including the amount allocated by way of bonus, under an LIP other than
under a ULIP and keyman insurance policy, which is not exempt under section 10(10D)

Dividend Income [Section 56(2)(i)]

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Dividend income is taxable under the head “Income from Other Sources”.
Deemed According to section 2(22), the following receipts are deemed to be dividend:
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Dividend
2(22)(a) Distribution of accumulated profits, entailing the release of company’s
assets
2(22)(b) Distribution of debentures, deposit certificates to shareholders and
bonus shares to preference shareholders
2(22)(c) Distribution on liquidation
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2(22)(d) Distribution on reduction of capital

2(22)(e) Advance or loan by a closely held company to its shareholder
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Taxability
Rate It is taxed at Normal Rates of Tax

CA NISHANT KUMAR 1
 Deductions If any loan is taken for investment in shares to earn dividends, interest
Allowed paid on such loan is allowed as deduction upto 20% of Grossed Up Value.
TDS Implications
By TDS is NOT required to be deducted by the company at the time of
Companies payment of dividend if:
on Dividend • Payment is made to an individual shareholder;
• Dividend is paid by the company in any mode other than cash;
and

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• Aggregate dividend paid/payable by the company to the
shareholder in the financial year ≤ ₹ 5,000.
By Mutual The mutual fund is liable to deduct tax at source if the aggregate income
Funds payable by the person responsible for paying to the unit holder >
₹ 5,000.

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Taxation of Certain Incomes
Income Winnings from lotteries, Unexplained cash Net winnings from

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crossword puzzles, races credits/ investments/ online games
including horse races, card money, bullion, jewellery
games and other games, etc./ expenditure, etc.
gambling, betting etc. (other
than winning from any online
game)
Section 115BB 115BBE 115BBJ
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Tax Rate 30% of such winnings (further 60% of such income plus 30% of net winnings
increased by surcharge, if surcharge @25% of tax from online game
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applicable, and health and (Effective rate of tax is (further increased by

education cess @ 4%) 78%, including health and surcharge, if applicable,
education cess @ 4%) and health and
education cess @ 4%)
Other ➢ No expenditure or allowance can be allowed from such income.
Conditions ➢ Deduction under Chapter VI-A is not allowable from such income.
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➢ Adjustment of unexhausted basic exemption limit is also not permitted

against such income.
➢ Set-off of losses is not permissible against such income.
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TDS 30%, if aggregate amount > 30%, without any

₹10,000 (u/s 194BB) threshold (u/s 194BA)
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CA NISHANT KUMAR 2
 Consideration Received in Excess of FMV of Shares of a Closely Held
Company, Where Such Shares are Issued at a Premium [Section
56(2)(viib)]
If a closely held company (private ltd.) issues shares in excess of their face value (at premium) to a
resident or a non-resident person, then the following is chargeable to tax under the head Income from
Other Sources:

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𝐼𝑠𝑠𝑢𝑒 𝑃𝑟𝑖𝑐𝑒 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠 – 𝐹𝑎𝑖𝑟 𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠

Face FMV Issue Applicability of Section 56(2)(viib)

Value Price
100 120 130 Income u/s 56(2)(viib) = ₹ 130 – ₹ 120 = ₹10

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100 120 110 Income u/s 56(2)(viib) = NIL
100 90 98 Income u/s 56(2)(viib) = NIL
100 90 110 Income u/s 56(2)(viib) = ₹ 110 – ₹ 90 = ₹20

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Interest Received on Compensation/Enhanced Compensation [Section
56(2)(viii)]
• This is deemed to be the income of the year of receipt.
• It is taxable under the head Income from Other Sources.
• A flat deduction of 50% is allowed u/s 57.
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Advance Forfeited Due to Failure of Negotiations for Transfer of a
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Capital Asset [Section 56(2)(ix)]

Any advance money received and forfeited by any person due to the failure of negotiations for transfer
of a capital asset on or after 01-04-2014 is taxed under the head Income from Other Sources in the
year of receipt.
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Sum of Money or Property Received by Any Person [Section 56(2)(x)]

Nature of Asset Taxable Value
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1 Money The whole amount if the same exceeds ₹50,000.

2 Moveable Property • Without consideration: The aggregate fair market value of the
property, if it exceeds ₹50,000.
• Inadequate consideration: The difference between the aggregate
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fair market value and the consideration, if such difference exceeds

₹50,000.
Note: Property means Shares, Securities, Jewelry, Drawings, Paintings,
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Sculpture, Archaeological Collections, Any other work of art, Bullion

[SSJDPSAOB]
3 Immovable • Without consideration: The stamp value of the property, if it
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Property exceeds ₹50,000.

• Inadequate consideration: The difference between the stamp
duty value and the consideration, if:
o SDV – Consideration > ₹50,000 AND
o SDV > 110% of Consideration

CA NISHANT KUMAR 3
 Cost of Acquisition for the Receiver of Gift
Particulars Cost of Acquisition Date of Acquisition
Tax Paid Under IFOS SDV Date of Receiving the Gift
Tax Not Paid Under IFOS Cost to Previous Owner Date of Acquisition of the Previous Owner
However, any sum of money or value of property received in the following circumstances would
be outside the ambit of section 56(2)(x):
➢ from any relative; or

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➢
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on the occasion of the marriage of the individual; or
under a will or by way of inheritance; or
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➢ in contemplation of death of the payer or donor, as the case may be; or
➢ from any local authority as defined in the Explanation to section 10(20); or
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➢ from any fund or foundation or university or other educational institution or hospital or

other medical institution or any trust or institution referred to in section 10(23C); or
➢ from or by any trust or institution registered under section 12A or section 12AA or section
12AB; or
However, where sum of money or property has been received by specified persons under
section 13(3), this relaxation is not available and section 56(2)(x) would be applicable.
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➢ by any fund or trust or institution or any university or other educational institution or any
hospital or other medical institution referred to in Section 10(23C)(iv)/(v)/ (vi)/(via); or
➢
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by way of transaction not regarded as transfer under specified clauses of section 47; or
➢ from an individual by a trust created or established solely for the benefit of relative of the
individual; or
➢ by an individual, from any person, in respect of any expenditure actually incurred by him
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on his medical treatment or treatment of any member of his family, for any illness related
to COVID-19 subject to conditions notified by the Central Government; or
➢ by a member of the family of a deceased person from the employer of the deceased
person (without any limit); or from any other person or persons to the extent that such
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sum or aggregate of such sums ≤ ₹10 lakhs, where the cause of death of such person is
illness related to COVID-19 and the payment is received within 12 months from the date
of death of such person; and subject to such other conditions notified by the Central
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Government; or
➢ from such class of persons and subject to such conditions, as may be prescribed.

CA NISHANT KUMAR 4
 Sum Received, Including the Amount Allocated by Way of Bonus, Under
a Life Insurance Policy (LIP) Other Than Under a ULIP And Keyman
Insurance Policy, Which is Not Exempt u/s 10(10D)

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IS
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Refer Guidance Note at the end of the document.

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CA NISHANT KUMAR 5
 Deductions Allowable [Section 57]
S. Particulars Deduction
No.
1. In case of dividend or income in Interest expenditure to earn such income. However,
respect of units of mutual fund or such interest expenses cannot exceed 20% of such
income in respect of units from a income included in total income, without deduction
specified company under this section.

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2. In case of interest on Securities Any reasonable sum paid by way of commission or
remuneration to a banker or any other person.
3. Income consists of recovery from Amount of contribution remitted before the due
employees as contribution to any PF, date under the respective Acts, in accordance with
superannuation fund etc. the provisions of section 36(1)(va)
4. Income from letting on hire of Current repairs to the machinery, plant, furniture or

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machinery, plant and furniture, with or building, insurance premium, depreciation/
without building unabsorbed depreciation
5. Family Pension Sum equal to

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• 33 1/3% of such income or
• ₹15,000,
whichever is less
6. Interest on compensation/ enhanced 50% of such interest income
compensation received

Deductions Not Allowable [Section 58]

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S. Particulars
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No.
1. Any personal expense of the assessee
2. Any interest chargeable to tax under the Act which is payable outside India on which tax has
not been paid or deducted at source.
3. Any payment chargeable to tax under the head “Salaries”, if it is payable outside India unless
tax has been paid thereon or deducted at source.
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4. Any expenditure in respect of which a payment is made to a related person, to the extent the
same is considered excessive or unreasonable by the Assessing Officer, having regard to the
FMV.
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5. Any expenditure in respect of which a payment or aggregate payments exceeding ₹10,000 is

made to a person in a day otherwise than by account payee cheque or draft or ECS through
bank account or through such other prescribed electronic mode such as credit card, debit
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card, net banking, IMPS, UPI, RTGS, NEFT, and BHIM Aadhar Pay.
6. Any expenditure or allowance in connection with income by way of earnings from lotteries,
cross word puzzles, races including horse races, card games and other games of any sort or
from gambling or betting of any form or nature.
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7. 30% of expenditure in respect of sum which is payable to a resident on which tax is deductible
at source, if such tax has not been deducted or after deduction has not been paid on or before
the due date of return specified in section 139(1)
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Important Questions: Questions 1, 2, 5, 6, 8, 9, 11, 13, 16, 19, 21, 22, 23, 25, 26

CA NISHANT KUMAR 6
 Statutory Update for May, 2024 Examination

The June, 2023 edition of the Study Material, based on the provisions of income-tax law as amended by the
Finance Act, 2023 and notifications/circulars issued upto 30th April, 2023 is relevant for May, 2024
Examination. The relevant assessment year for May, 2024 examination is A.Y.2024-25. The significant
notifications/circulars issued between 1.5.2023 and 31.10.2023, which are also relevant for May, 2024
examination, have been summarised hereunder –

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Chapter Chapter Name Details of Notifications/Circulars
No.
3 Unit 1: Salaries Determination of value of rent free accommodation [Notification No.
65/2023 dated 18.8.2023 and Notification No. 72/2023 dated 29.08.2023]

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Unit 3: Profits and Time limit prescribed for furnishing statement of expenditure eligible for
gains of business or amortisation under section 35D [Notification No. 54/2023 dated
profession 01.8.2023]

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Unit 4: Income from Guidelines u/s 10(10D) of the Income-tax Act, 1961 [Circular No.
Other Sources 15/2023 dated 16.08.2023]
Manner of computation of taxable income from LIP under section
56(2)(xiii) [Notification No. 61/2023 dated 16.08.2023]
7 Advance Tax, Tax Interest on deposit with post office under a scheme eligible for non-
Deduction at Source deduction of tax at source under section 194A notified by the Central
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and Tax Collection Government [Notification No. 27/2023 dated 16.05.2023]
at Source Guidelines to remove difficulties arising in implementation of the
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provisions of section 194BA [Circular No. 5/2023 dated 22.5.2023]

Guidelines to remove difficulty in implementation of changes relating to
Tax Collection at Source (TCS) on Liberalised Remittance Scheme
(LRS) and on purchase of overseas tour program package [Circular No.
10/2023 dated 30.06.2023]
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8 Provisions for filing Rule 114B, 114BA and 114BB relating to PAN amended [Notification
Return of Income No. 88/2023 dated 10.10.2023]
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and Self
Assessment

The above notifications and circulars are discussed hereunder:

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Chapter 3 - Unit 1: Salaries

Determination of value of rent free accommodation [Notification No. 65/2023 dated 18.8.2023
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and Notification No. 72/2023 dated 29.08.2023]

Section 17(2) contains an inclusive definition of “perquisite”. Sub-clause (i) and (ii) provides that value of
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rent-free accommodation or value of accommodation provided to employee at a concessional rate by his

employer computed in prescribed manner would be taxable in the hands of employees under the head
“Salaries”.
Accommodation would be deemed to have been provided at a concessional rate, if the value of
accommodation computed in the prescribed manner exceeds the rent recoverable from, or payable by, the
assessee.

© The Institute of Chartered Accountants of India

 Accordingly, w.e.f. 1.9.2023, the CBDT has, vide these notifications, substituted Rule 3(1) to specify the
manner for determining value of residential accommodation provided by the employer during the previous
year –
[Link]. Circumstances In case of unfurnished In case of furnished
accommodation accommodation
(1) (2) (3) (4)

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1. Where the accommodation is • License fee determined by The value of perquisite as
provided by the Central the Central Government or determined under column
Government or any State any State Government in (3) should be increased by
Government to the employees respect of accommodation
(i) If furniture is owned
either holding office or post in in accordance with the
by employer:

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connection with the affairs of rules framed by such
the Union or of such State. Government 10% per annum of the
cost of furniture
as reduced by
(including television

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• the rent actually paid by the sets, radio sets,
employee. refrigerators, other
household appliances,
air-conditioning plant or
equipment)
(ii) If such furniture is
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hired from a third
party:
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• the actual hire

charges payable for
the same
as reduced by
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• any charges paid or

payable for the
same by the
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employee during the

previous year.
2. Where the accommodation is
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provided by any other

employer
(a) where the accommodation (i) 10% of salary in cities having The value of perquisite as
is owned by the employer population > 40 lakhs as determined under column
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per 2011 census; (3) should be increased by

(ii) 7.5% of salary in cities (i) If furniture is owned
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having population > 15 by employer:

lakhs ≤ 40 lakhs as per
10% per annum of the
2011 census; cost of furniture
(iii) 5% of salary in other areas, (including television
sets, radio sets,
in respect of the period during refrigerators, other

© The Institute of Chartered Accountants of India

 which the said accommodation household appliances,
was occupied by the employee air-conditioning plant or
during the previous year equipment or other
similar appliances or
as reduced by
gadgets)
the rent, if any, actually paid by
(ii) If such furniture is
the employee.
hired from a third

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party:
• the actual hire
charges payable for
the same
as reduced by

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• any charges paid or
payable for the

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same by the
employee during the
previous year.
(b) where the accommodation • Actual amount of lease The value of perquisite as
is taken on lease or rent by the rental paid or payable by determined under column
employer the employer or (3) should be increased by
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• 10% of salary, (i) If furniture is owned
by employer:
whichever is lower,
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10% per annum of the

as reduced by
cost of furniture
• the rent, if any, actually (including television
paid by the employee. sets, radio sets,
refrigerators, other
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household appliances,
air-conditioning plant or
equipment or other
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similar appliances or
gadgets)
(ii) If such furniture is
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hired from a third

party:
• the actual hire
charges payable for
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the same
as reduced by
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• any charges paid or

payable for the
same by the
employee during the
previous year.

© The Institute of Chartered Accountants of India

 3. Where the accommodation is Not applicable • 24% of salary paid or
provided in a hotel by the payable for the
employer, being Central or previous year or
State Government or any other
• the actual charges paid
employer
or payable to such
hotel,

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whichever is lower, for
the period during which
such accommodation is
provided

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as reduced by
• the rent, if any, actually
paid or payable by the

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employee.
However, where the
employee is provided such
accommodation for a
period not exceeding in
aggregate 15 days on his
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transfer from one place to
another, there would be no
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perquisite.

Notes:
(1) Accommodation provided on account of transfer from one place to another: If an employee is
provided with accommodation, on account of his transfer from one place to another, at the new place
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of posting while retaining the accommodation at the other place, the value of perquisite shall be
determined with reference to only one such accommodation which has the lower perquisite value, as
calculated above, for a period not exceeding 90 days and thereafter, the value of perquisite shall be
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charged for both such accommodations.

(2) Value of perquisite to be restricted to CII: Where the accommodation is owned or taken on lease
or rent by the employer and the same accommodation is continued to be provided to the same
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employee for more than one previous year, the value of perquisite as calculated in 2. above shall not
exceed the amount so calculated for the first previous year, as multiplied by the amount which is a
ratio of the CII for the previous year for which the value is calculated and the CII for the previous
year in which the accommodation was initially provided to the employee.
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(3) Employee serving on deputation: Where the accommodation is provided by the Central
Government or any State Government to an employee who is serving on deputation with any body or
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undertaking under the control of such Government,-

(i) the employer of such an employee shall be deemed to be that body or undertaking where the
employee is serving on deputation; and
(ii) the value of perquisite of such an accommodation shall be the amount calculated in
accordance with 2.(a) of the above table, as if the accommodation is owned by the employer.

© The Institute of Chartered Accountants of India

 (4) “First previous year” means the P.Y. 2023-24 or the previous year in which the accommodation was
provided to the employee, whichever is later.
Chapter 3 - Unit 3: Profits and gains of business or profession

Time limit prescribed for furnishing statement of expenditure eligible for amortisation under
section 35D [Notification No. 54/2023 dated 01.8.2023]
Section 35D provides for the amortisation of preliminary expenses incurred by an Indian company or a

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person other than a company, resident in India for the establishment of business concerns or the expansion
of the business of existing concerns.
As per the proviso to section 35D(2)(a), the assessee has to furnish a statement containing the particulars
of expenditure in connection with -
(a) the preparation of feasibility report

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(b) the preparation of project report
(c) conducting market survey or any other survey necessary for the business of the assessee

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(d) engineering services relating to the assessee’s business.
eligible for amortisation within prescribed period to the prescribed income tax authority in the prescribed
form and manner.
Accordingly, the CBDT has, vide this notification, inserted Rule 6ABBB to prescribe that the statement
containing particulars of above specified expenditure is required to be furnished one month prior to the due
date for furnishing the return of income as specified under section 139(1).
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Chapter 3 - Unit 4: Income from Other Sources
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Guidelines u/s 10(10D) of the Income-tax Act, 1961 [Circular No. 15/2023 dated 16.08.2023]
Section 10(10D) provides for exemption of the sum received under a life insurance policy, including the sum
allocated by way of bonus on such policy subject to the condition that the annual premium does not exceed
10% of actual capital sum assured.
W.e.f. A.Y. 2024-25, section 10(10D) amended by the Finance Act, 2023 to provide that -
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(I) In case where an assessee has a single life insurance policy (other than ULIP) issued on or
after 1.4.2023 - Exemption u/s 10(10D) would not be available with respect to any life insurance
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policy (other than ULIP) issued on or after 1.4.2023, if the amount of premium payable exceeds `
5,00,000 for any of the previous years during the term of such life insurance policy.
(II) In case where an assessee has multiple life insurance policies (other than ULIPs) issued on or
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after 1.4.2023 - In a case where premium is payable by a person for more than one life insurance
policies (other than ULIPs) issued on or after 1.4.2023 and the aggregate of premium payable on
such life insurance policies exceed ` 5,00,000 for any of the previous years during the term of any
such LIP(s), exemption u/s 10(10D) would be available in respect of any of those LIPs, at the option
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of the assessee, whose aggregate premium payable does not exceed ` 5,00,000 for any of the
previous years during their term. However, to get exemption u/s 10(10D), the condition of annual
premium not exceeding 10% of the actual capital sum assured also needs to be satisfied.
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(III) Exemption in case of death of a person - In case any sum is received on the death of a person,
exemption u/s 10(10D) would be available irrespective of the annual premium payable of the LIP.
Guidelines issued by the CBDT: In case any difficulty arises in giving effect to the provisions of this
clause, the CBDT may issue guidelines for the purpose of removing the difficulty with the previous approval
of the Central Government.

© The Institute of Chartered Accountants of India

 Accordingly, the CBDT has, with the approval of the Central Government, vide this circular, issued the
following guidelines in respect of LIPs (other than ULIPs)–
Situation 1: No sum of any nature including bonus (such sum hereinafter referred as “consideration”) is
received by the assessee on any LIPs which are issued on or after 1.4.2023 (such LIPs hereinafter referred
as “eligible LIPs”) during any previous year preceding the current previous year (being the P.Y. in which
consideration is received and its taxability is being examined) or consideration has been received on such
eligible LIPs in an earlier previous year but has not been claimed exempt. In such a situation, the

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exemption u/s 10(10D) would be determined as under:
I. Where the assessee has received consideration, during the current P.Y., under one eligible LIP only
Circumstance Eligibility for exemption u/s 10(10D)
If the amount of premium payable on such eligible LIP Such consideration would be eligible for
does not exceed ` 5,00,000 for any of the PYs during exemption u/s 10(10D).

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the term of such eligible LIP and annual premium does [Refer Example 1 and 2 given below]
not exceed 10% of actual capital sum assured
If the amount of premium payable on such eligible LIP > Such consideration would not be

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` 5,00,000 for any of the PYs during the term of such eligible for exemption u/s 10(10D).
eligible LIP [Refer Example 3 given below]

Example 1:
LIP A
Date of issue 1.4.2013
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Annual premium 6,00,000
Sum assured 60,00,000
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Consideration received as on 01.11.2023 on maturity 70,00,000

Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y.2023-24.

Eligibility for exemption u/s 10(10D) - The consideration received under LIP “A” would be exempt
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u/s 10(10D) in A.Y. 2024-25 since annual premium does not exceed 10% of the actual capital sum
assured. Moreover, as the policy has been issued before 1.4.2023, limit of ` 5,00,000 of amount of
premium payable is not applicable, since it is not an eligible ULIP.
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Example 2:
LIP A
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Date of issue 1.4.2023

Annual premium 5,00,000
Sum assured 50,00,000
Consideration received as on 01.11.2033 on maturity 52,00,000
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Note – The assessee did not receive any consideration under any other eligible LIPs in earlier P.Y.
preceding the P.Y.2033-34.
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Eligibility for exemption u/s 10(10D) - The consideration received would be exempt u/s 10(10D) in
A.Y. 2034-35, since the annual premium payable on the policy does not exceed ` 5,00,000 and also
does not exceed 10% of actual capital sum assured.
Example 3:
LIP A

© The Institute of Chartered Accountants of India

 Date of issue 1.4.2023
Annual premium 6,00,000
Sum assured 60,00,000
Consideration received as on 01.11.2033 on maturity 70,00,000
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y.2033-34.

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Eligibility for exemption u/s 10(10D) - The consideration received would not be exempt u/s 10(10D)
in A.Y. 2034-35 since the annual premium payable on the eligible LIP exceeds ` 5,00,000.
II. Where the assessee has received consideration, during the current P.Y., under more than one
eligible LIP

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Circumstance Eligibility for exemption u/s 10(10D)
If the aggregate of the amount of Such consideration would be eligible for exemption
premium payable on such eligible LIPs under u/s 10(10D).

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does not exceed ` 5,00,000 for any of [Refer Example 4 given below]
the PYs during the term of such
eligible LIPs and the annual premium ≤
10% of actual capital sum assured
If the aggregate of the amount of Consideration in respect of any of those eligible LIPs
premium payable on such eligible LIPs whose aggregate amount of premium payable does not
> ` 5,00,000 for any of the PYs during exceed ` 5,00,000 for any of the PYs during their term
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the term of such eligible LIP would be eligible for exemption u/s 10(10D), provided their
annual premium ≤ 10% of actual capital sum assured.
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[Refer Examples 5, 6 and 7 given below]

Example 4:
LIP A B
Date of issue 1.4.2023 1.4.2023
H

Annual premium 3,00,000 2,00,000

Sum assured 30,00,000 20,00,000
Consideration received as on 01.11.2033 on maturity 32,00,000 21,00,000
IS

Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y.2033-34.
Eligibility for exemption u/s 10(10D) – In this case, the aggregate of the annual premium payable
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for LIP “A” and LIP “B” does not exceed ` 5,00,000 during the term of these policies.
Further, annual premium payable in respect of LIP “A” and LIP “B” does not exceed 10% of actual
capital sum assured. Therefore, the consideration received under LIP “A” and “B” would be exempt
u/s 10(10D) in A.Y. 2034-35
A

Example 5:
C

LIP A B
Date of issue 1.4.2023 1.4.2023
Annual premium 4,50,000 5,50,000
Sum assured 45,00,000 55,00,000
Consideration received as on 01.11.2033 on maturity 52,00,000 60,00,000

© The Institute of Chartered Accountants of India

 Note – The assessee did not receive any consideration under any other eligible LIPs in earlier P.Y.
preceding the P.Y.2033-34.

Eligibility for exemption u/s 10(10D) – In this case, the aggregate of the annual premium payable
for LIP “A” and LIP “B” exceeds ` 5,00,000 during the term of these policies.
However, the consideration received under LIP “A” would be exempt u/s 10(10D) in A.Y. 2034 -35,
since its annual premium payable does not exceed ` 5,00,000 for any previous year during the term
of the policy and also does not exceed 10% of actual capital sum assured.

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Consequently, the consideration received under LIP “B” alone would not be exempt u/s 10(10D) in
A.Y. 2034-35.
Example 6:
LIP A B C

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Date of issue 1.4.2023 1.4.2023 1.4.2023
Annual premium 1,00,000 3,50,000 6,00,000

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Sum assured 10,00,000 35,00,000 60,00,000
Consideration received as on 01.11.2033 on maturity 12,00,000 40,00,000 70,00,000
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y.2033-34.

Eligibility for exemption u/s 10(10D) - The aggregate of annual premium payable for LIP “A”, LIP
“B” and LIP “C” exceeds ` 5,00,000 during the term of these policies.
T
However, the consideration received under LIPs “A” and “B” would be exempt u/s 10(10D) in A.Y.
AN

2034-35, since aggregate of annual premium payable for these two policies does not exceed
` 5,00,000 for any previous year during the term of these two policies and annual premium payable
in respect of these policies does not exceed 10% of actual capital sum assured.
Consequently, the consideration received under LIP “C” alone would not be exempt u/s 10(10D) in
A.Y. 2034-35.
H

Example 7:
LIP X A B C
IS

Date of issue 1.4.2022 1.4.2023 1.4.2023 1.4.2023

Annual premium 5,50,000 1,00,000 3,50,000 6,00,000
Sum assured 55,00,000 10,00,000 35,00,000 60,00,000
N

Consideration received as on 01.11.2032 on 62,00,000

maturity
Consideration received as on 01.11.2033 on 12,00,000 40,00,000 70,00,000
maturity
A

Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y.2033-34, except LIP X in P.Y. 2032-33.
C

Eligibility for exemption u/s 10(10D) - The consideration received under LIP “X” would be exempt
u/s 10(10D) in A.Y. 2032-33, since annual premium does not exceed 10% of the actual capital sum
assured. Moreover, as the policy has been issued before 1.4.2023, limit of ` 5,00,000 on amount of
premium payable is not applicable, since LIP “X” is not an eligible LIP.
The aggregate of annual premium payable for LIP “A”, LIP “B” and LIP “C” (being LIPs issued on or
after 1.4.2023) exceeds ` 5,00,000 during the term of these policies.

© The Institute of Chartered Accountants of India

 However, the consideration received under LIPs “A” and “B” would be exempt u/s 10(10D) in A.Y.
2034-35, since aggregate of annual premium payable for these two policies does not exceed
` 5,00,000 for any previous year during the term of these two policies and annual premi um payable
in respect of these policies does not exceed 10% of actual capital sum assured.
Consequently, the consideration received under LIP “C” alone would not be exempt u/s 10(10D) in
A.Y. 2034-35.
Situation 2: Consideration has been received by the assessee under any one or more eligible LIPs (i.e.,

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issued on or after 1.4.2023) during any P.Y. preceding the current P.Y. and it has been claimed to be
exempt u/s 10(10D). Such eligible LIPs are referred as “Earlier Exempt Eligible LIPs (EEE LIPs)” in this
paragraph and corresponding examples and reference to eligible LIPs shall not include EEE LIPs. The
exemption u/s 10(10D) would be determined as under:
I. Where the assessee has received consideration, during the current P.Y., under one eligible

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LIP only

Circumstance Eligibility for exemption u/s

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10(10D)
If aggregate amount of premium payable on such eligible LIP Consideration under such eligible
and EEE LIPs does not exceed ` 5,00,000 for any of the PYs LIP would be eligible for
during the term of such eligible LIP and annual premium in exemption u/s 10(10D).
respect of eligible LIP does not exceed 10% of actual capital
sum assured.
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If aggregate amount of premium payable on such eligible LIP Consideration under such eligible
and EEE LIPs > ` 5,00,000 for any of the PYs during the term LIP would not be eligible for
of such eligible LIP exemption u/s 10(10D).
AN

II. Where the assessee has received consideration, during the current P.Y., under more than one
eligible LIP
Circumstance Eligibility for exemption u/s 10(10D)
If aggregate of the amount of premium payable Consideration received would be eligible for
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on such eligible LIPs and EEE LIPs does not exemption under u/s 10(10D).
exceed ` 5,00,000 for any of the PYs during the
term of such eligible LIPs and annual premium
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in respect of eligible LIPs also does not exceed

10% of actual capital sum assured.
If aggregate of the amount of premium payable Consideration in respect of any of those eligible
on such eligible LIPs and EEE LIPs > LIPs (whose aggregate amount of premium
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` 5,00,000 for any of the PYs during the term of along with the aggregate amount of premium of
such eligible LIPs EEE LIPs does not exceed ` 5,00,000 for any of
the PYs during their term) would be eligible for
exemption u/s 10(10D).
A

[Refer Examples 8, 9 and 10 given below]

Example 8:
C

LIP X A B C
Date of issue 1.4.2023 1.4.2024 1.4.2024 1.4.2024
Annual premium 4,50,000 1,00,000 1,50,000 6,00,000
Sum assured 45,00,000 10,00,000 15,00,000 60,00,000
Consideration received as on 01.11.2033 on 50,00,000

© The Institute of Chartered Accountants of India

 maturity
Consideration received as on 01.11.2034 on 12,00,000 18,00,000 70,00,000
maturity
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y.2034-35, except LIP X in P.Y. 2033-34.
Eligibility for exemption u/s 10(10D) - The consideration under LIP “X” would be exempt u/s
10(10D) in P.Y. 2033-34, since the annual premium does not exceed ` 5,00,000 and also does not

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exceed 10% of actual capital sum assured.
In this case, the aggregate of the annual premium payable for LIP “A”, LIP “B” and LIP “C” along with
the premium for LIP “X” exceeds ` 5,00,000 during the term of these policies.
The aggregate of the annual premium payable for LIP “A” and the premium for LIP “X” also exceeds
` 5,00,000 during the term of these policies.

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Consequently, the consideration received under LIP “A”, LIP “B” and LIP “C” would not be exempt
u/s 10(10D) in A.Y. 2035-36.

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Example 9:
LIP X A B C
Date of issue 1.4.2023 1.4.2024 1.4.2024 1.4.2024
Annual premium 2,50,000 2,00,000 2,50,000 6,00,000
Sum assured 25,00,000 20,00,000 25,00,000 60,00,000
Consideration received as on 01.11.2033 on 30,00,000
T
maturity
Consideration received as on 01.11.2034 on 24,00,000 38,00,000 70,00,000
AN

maturity
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y.2034-35, except LIP X in P.Y. 2033-34.
Eligibility for exemption u/s 10(10D) - The consideration under LIP “X” would be exempt u/s
10(10D) in P.Y. 2033-34, since the annual premium does not exceed ` 5,00,000 and also does not
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exceed 10% of actual capital sum assured.

In this case, the aggregate of the annual premium payable for LIP “A”, LIP “B” and LIP “C” along with
IS

the premium for LIP “X” exceeds ` 5,00,000 during the term of these policies.
However, the consideration received under LIPs “A” or “B” (any one) can be claimed as exempt u/s
10(10D) in A.Y. 2035-36.
N

If the consideration received under LIP “A” is claimed to be exempt as aggregate of the annual
premium payable for LIP “X” and “A” did not exceed ` 5,00,000 for any of the PYs., the consideration
received under LIP “B” would not be exempt.
If the consideration received under LIP “B” is claimed to be exempt as aggregate of the annual
A

premium payable for LIP “X” and “B” did not exceed ` 5,00,000 for any of the PYs., the consideration
received under LIP “A” would not be exempt. Exemption for consideration received under LIP “ B” is
preferred as it is more beneficial to the assessee.
C

Alternative treatment: If the consideration under LIP “X” was not claimed to be exempt u/s 10(10D)
in A.Y. 2034-35 by the assessee, then, the consideration received under LIP “A” and LIP “B” would
be exempt u/s 10(10D) in A.Y. 2035-36 since the aggregate of the annual premium payable for the
LIPs “A” and “B” together did not exceed ` 5,00,000 for any of the previous years during the term of
these two policies. However, the most beneficial treatment is to claim LIP “X” and “B” as exempt.

© The Institute of Chartered Accountants of India

 It may be noted that in every case, the consideration received for LIP “C” would not be exempt u/s
10(10D).
Example 10:
LIP X Y A B C
Date of issue 1.4.2023 1.4.2023 1.4.2024 1.4.2024 1.4.2024
Annual premium 2,00,000 2,00,000 2,00,000 3,00,000 6,00,000

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Sum assured 20,00,000 20,00,000 20,00,000 30,00,000 60,00,000
Consideration received on 12,00,000
surrender as on 1.7.2033
Consideration received as on 24,00,000
01.11.2034 on maturity

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Consideration received as on 24,00,000 36,00,000 70,00,000
01.11.2035 on maturity
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier

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P.Y. preceding the P.Y.2035-36, except LIP “X” and “Y”.

Eligibility for exemption u/s 10(10D) - The consideration under LIP “X” would be exempt u/s
10(10D) in A.Y.2034-35, since the annual premium does not exceed ` 5,00,000 and also does not
exceed 10% of actual capital sum assured.
The consideration received under LIP “Y” would be exempt u/s 10(10D) in A.Y. 2035 -36, since the
T
aggregate of annual premium payable for LIP “X” and “Y” does not exceed ` 5,00,000 and annual
premium payable for LIP “Y” does not exceed 10% of actual capital sum assured.
AN

The consideration received under LIPs “A”, ULIP “B” and ULIP “C” would not be exempt u/s 10(10D)
in A.Y. 2036-37, since aggregate of annual premium payable for these three policies and LIP “X” and
“Y” exceeds ` 5,00,000.
Alternative treatment: If the consideration on surrender under LIP “X” was not claimed to be
exempt u/s 10(10D) in A.Y. 2034-35 by the assessee, then the consideration received under LIP “Y”
H

would be exempt and the consideration received under LIP “A” or LIP “B” (any one) can be exempt
u/s 10(10D) in A.Y. 2036-37. If the consideration received under LIP “A” is claimed to be exempt, as
aggregate of the annual premium payable for LIP “Y” and “A” did not exceed ` 5,00,000 for any of
IS

the PYs., the consideration received under LIP “B” would not be exempt.
If the consideration received under LIP “B” is claimed to be exempt as aggregate of the annual
premium payable for LIP “Y” and “B” did not exceed ` 5,00,000 for any of the PYs., the consideration
N

received under LIP “A” would not be exempt. Exemption for consideration received under LIP “B” is
preferred as it is more beneficial to the assessee.
If the consideration on surrender of LIP “X” and on maturity of LIP “Y” were not claimed to be exempt
under section 10(10D) in A.Y.2034-35 and A.Y.2035-36, respectively, then consideration received
A

under both LIP “A” and LIP “B” would be exempt in A.Y.2036-37 (being LIPs issued on or after
1.4.2023, whose aggregate consideration does not exceed ` 5,00,000).
C

It may be noted that, in every case, consideration received under LIP “C” would not be exempt under
section 10(10D).
Clarification on GST Component: It is also clarified by the CBDT that the premium payable/ aggregate
premium payable for a life insurance policy/policies, other than a ULIP, issued on or after 1.4.2023, for any
previous year, would be exclusive of the amount of GST payable on such premium.

© The Institute of Chartered Accountants of India

 Clarification on premium of Term life insurance policy: It is further clarified by the CBDT that the limit of
` 5,00,000 of amount of premium payable would not be applicable in case of a term life insurance policy i.e.
where sum under a life insurance policy is only paid to the nominee in case of the death of the person
insured during the term of the policy and no amount is paid to anyone if the insured person survives the
policy tenure.
Hence, any sum received under a term insurance policy shall continue to be exempt under section 10(10D),
irrespective of the amount of the premium payable in respect of such policy. Further the premium paid f or
such policies would not be counted for checking the limit of ` 5,00,000 of amount of premium payable.

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Manner of computation of taxable income from LIP under section 56(2)(xiii) [Notification No. 61/2023
dated 16.08.2023]
Where any sum is received (including the amount allocated by way of bonus) at any time during a previous
year, under a life insurance policy, other than the sum

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(i) received under a ULIP
(ii) received under a Keyman insurance policy

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which is not exempt under section 10(10D), the sum so received as exceeds the aggregate of the premium
paid during the term of such life insurance policy, and not claimed as deduction under any other provision
of the Act, computed in the prescribed manner, would be chargeable to tax under the head “Income from
other sources” under section 56(2)(xiii).
Accordingly, the CBDT has, vide this notification, inserted Rule 11UACA to compute the income chargeable
to tax under section 56(2)(xiii). Where any person receives at any time during any previous year any sum
T
under such LIP, then, the income chargeable to tax under section 56(2)(xiii) during the previous year in
which such sum is received has to be computed in the following manner –
AN

Situation Income chargeable to tax during the previous year

in which such sum is received
(i) where the sum is received for the first A-B, where
time under the LIP during the previous A = the sum or aggregate of sum received under the
year (first previous year) LIP during the first previous year; and
H

B = the aggregate of the premium paid during the term

of the LIP till the date of receipt of the sum in the first
previous year that has not been claimed as deduction
IS

under any other provision of the Act.

(ii) where the sum is received under the LIP C-D, where
during the previous year subsequent to C = the sum or aggregate of sum received under the
the first previous year (subsequent LIP during the subsequent previous year; and
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previous year D = the aggregate of the premium paid during the term
of the LIP till the date of receipt of the sum in the
subsequent previous year not being premium which –
(a) has been claimed as deduction under any other
A

provision of the Act; or

(b) is included in “B” or “D” in any of the previous
C

year(s).

“Sum received under a LIP” means any amount, by whatever name called, received under such policy
which is not exempt under section 10(10D), other than the sum –
(a) received under a ULIP; or
(b) received under a Keyman insurance policy

© The Institute of Chartered Accountants of India

 Chapter 7 – Advance Tax, Tax Deduction at Source and Tax Collection at Source

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]

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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
` 1 crore in case of business and ` 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 ` 40,000/ ` 50,000 (in case of a senior

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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”.

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“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 ` 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 ` 40,000.
T
Guidelines to remove difficulties arising in implementation of the provisions of section 194BA
[Circular No. 5/2023 dated 22.5.2023]
AN

New section 194BA has been inserted by the Finance Act, 2023 requiring to deduct tax at source by any
person responsible for paying to any person (whether resident or non-resident) any income by way of
winnings from any online game during the financial year on the net winnings in his user account, computed
in the manner as may be prescribed, at the end of the financial year at the rates in force i.e., 30%.
Such net winnings from online games during the previous year would be chargeable to tax @30% under
H

section 115BBJ. The tax would be calculated on net winnings from such online games computed in the
prescribed manner.
If any difficulty arises in giving effect to the provisions of section 194BA, the CBDT may, with the previous
IS

approval of the Central Government, issue guidelines for the purposes of r emoving the difficulty.
Accordingly, the CBDT has, vide this circular, issued the following guidelines:
Question 1: There are a large number of gamers who play with very insignificant amount and
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withdraw also very small amount. Deducting tax at source under section 194BA for each
insignificant withdrawal would increase compliance for tax deductor. Can there be relaxation to
ease compliance?
Answer: Tax may not be deducted on withdrawal on satisfaction of all of the following conditions, namely: -
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(i) net winnings comprised in the amount withdrawn does not exceed ` 100 in a month;
(ii) tax not deducted on account of this concession is deducted at a time when the net winnings
C

comprised in withdrawal exceeds ` 100 in the same month or subsequent month or if there is no
such withdrawal, at the end of the financial year; and
(iii) the deductor undertakes responsibility of paying the difference if the balance in the user account at
the time of tax deduction under section 194BA is not sufficient to discharge the tax deduction
liability.

© The Institute of Chartered Accountants of India

 Question 2: When the net winnings is in kind how will tax deduction under section 194BA operate?
Answer: At the outset, it may be clarified that where money in user account is used to buy an item in kind
and given to user then it is net winnings in cash only and the deductor is required to deduct tax at source
under section 194BA accordingly.

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However, there could be a situation where the winning of the game is a prize in kind. In that situation
provision of section 194BA(2) will operate.
According to this where the net winnings are wholly in kind or partly in cash, and partly in kind but the part
in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the net winnings. In
these situations, the person responsible for paying, shall, before releasing the winnings, ensure that tax has
been paid in respect of the net winnings. In the above situation, the deductor will release the net winnings

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in kind after the deductee provides proof of payment of such tax (e.g., Challan details etc.).
In the alternative, as an option to remove difficulty if any, the deductor may deduct the tax under section
194BA and pay to the Government.

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Question 3: How will the valuation of winnings in kind required to be carried out?
Answer: The valuation would be based on fair market value of the winnings in kind except in following cases:-
(i) The online game intermediary has purchased the winnings before providing it to the user. In that
case the purchase price shall be the value for winnings.
(ii) The online game intermediary manufactures such items given as winnings. In that case, the price
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that it charges to its customers for such items shall be the value for such winnings.
It is further clarified that GST will not be included for the purposes of valuation of winnings for TDS
AN

under section 194BA.

Guidelines to remove difficulty in implementation of changes relating to Tax Collection at
Source (TCS) on Liberalised Remittance Scheme (LRS) and on purchase of overseas tour
program package [Circular No. 10/2023 dated 30.06.2023]
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Section 206C(1G) provides for tax collection at source on foreign remittance through the Liberalised
Remittance Scheme (LRS) and sale of overseas tour program package. Section 206C(1G) has been
amended by the Finance Act, 2023 and the changes were to take effect from 1.7.2023. Vide press release
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dated 28.6.2023, Ministry of Finance has further amended the provisions of section 206C(1G) and defer the
amendments made by the Finance Act, 2023 till 30.9.2023. Accordingly, the rate of TCS in case of
collection by an authorized dealer/ seller of an overseas tour programme package is as follow s:
S. No. Particulars Rate of TCS
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Before 1.10.2023 On or after 1.10.2023

(i) Remittances for the purpose of education No TCS upto ` 7 lakhs
[other than (ii) below] or medical treatment; 5% of the amt or agg. of amts in excess of ` 7
A

lakh
(ii) Remittances out of loan obtained from any No TCS upto ` 7 lakhs
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financial institution as referred under section 0.5% of the amt or agg. of amts in excess of ` 7
80E, for the purpose of pursuing any education lakh
(iii) Remittances for purposes other than No TCS upto ` 7 lakhs No TCS upto
mentioned in (i) to (ii) 5% on the amount or ` 7 lakhs
aggregate of amounts 20% on the amount or
in excess of ` 7 lakhs aggregate of amounts
in excess of ` 7 lakhs

© The Institute of Chartered Accountants of India

 (iv) Overseas Tour Program Package 5% without any 5% upto ` 7 lakhs and
threshold limit 20% above ` 7 lakhs

In case any difficulty arises to give effect to, inter alia, the provisions of section 206C(1G), the CBDT is
empowered to issue guidelines, with the approval of the Central Government, for the pur pose of removing
the difficulty.
In exercise of the power to issue guidelines, the CBDT has, with the approval of Central Government, vide

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this circular, issued the following guidelines for removing certain difficulties-
Question 1: Whether payment through overseas credit card would be counted in LRS?
Answer: No TCS shall be applicable on expenditure through international credit card while being overseas
till further order.
Question 2: Whether the threshold of ` 7 lakh, for TCS to become applicable on LRS, applies

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separately for various purposes like education, health treatment and others? For example, if
remittance of ` 7 lakh under LRS is made in a financial year for education purpose and other
remittances in the same financial year of ` 7 lakh is made for medical treatment and ` 7 lakh for

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other purposes, whether the exemption limit of ` 7 lakh shall be given to each of the three
separately?
Answer: lt is clarified that the threshold of ` 7 lakh for LRS is combined threshold for applicability of the
TCS on LRS irrespective of the purpose of the remittance.
Thus, in the given example, upto ` 7 lakh remittance under LRS during a financial year shall not be liable
T
for TCS. However, subsequent ` 14 lakh remittance under LRS shall be liable for TCS in accordance with
the TCS rates applicable for such remittance.
AN

ln the example, if the remittances under LRS are made in the current financial year at different point of time,
TCS rates for the remaining ` 14 lakh remittances under LRS would depend on the time of remittance as
TCS rates changes from 1 st October 2023.
TCS rates would be applicable as under:-
Remittances Rate of TCS
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First ` 7 lakh remittance under LRS during the No TCS

financial year 2023-24 for education purpose (or
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for that matter any purpose)

Remittances beyond ` 7 lakh under LRS during TCS at 5% (irrespective of the purpose unless it is for
the financial year 2023-24, if on or before 30th education purpose financed by loan from a financial
September 2023 institution when the rate is 0.5%)
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Remittances beyond ` 7 lakh under LRS during TCS at 0.5% (if it is for education purpose financed
the financial year 2023-24, if on or after 1st by loan from a financial institution), 5% (if it is for
October 2023. education or medical treatment) and 20% (if it is for
other purposes)
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Question 3: Since there are different TCS rates on LRS for the first six months and next six months
C

of the financial year 2023-24, whether the threshold of ` 7 lakh, for the TCS to become applicable on
LRS, applies separately for each six months?
Answer: No. The threshold of ` 7 lakh, for the TCS to become applicable on LRS, applies for the full
financial year. lf this threshold has already been exhausted; all subsequent remittances under LRS, whether
in the first half or in the second half, would be liable for TCS at applicable rate.

Question 4: Whether the threshold of ` 7 lakh, for TCS to become applicable on LRS, applies

© The Institute of Chartered Accountants of India

 separately for each remittance through different authorised dealers? lf not, how will authorised
dealer know about the earlier remittances by that remitter through some other authorised dealer?

Answer: lt is clarified that the threshold of ` 7 lakh for LRS is qua remitter and not qua authorised dealer.

Since the facility to provide real time update of remittance under LRS by rem itter is still under development
by the RBl, it is clarified that the details of earlier remittances under LRS by the remitter during the financial
year may be taken by the authorised dealer through an undertaking at the time of remittance. lf the

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authorised dealer correctly collects the tax at source based on information given in this undertaking, he will
not be treated as "assessee in default". However, for any false information in the undertaking, appropriate
action may be taken against the remitter under the Act.

It is further clarified that same methodology of taking undertaking from the buyer of overseas tour program

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package may be followed by the seller of such package.

Question 5: There is threshold of ` 7 lakh for remittance under LRS for TCS to become applicable

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while there is another threshold of ` 7 lakh for purchase of overseas tour program package where
reduced rate of 5% of TCS applies. Whether these two thresholds apply independently?

Answer: Yes, these two thresholds apply independently. For LRS, the threshold of ` 7 lakh applies to make
TCS applicable. For purchase of overseas tour program package, the threshold of ` 7 lakh applies to
determine the applicable TCS rate as 5% or 20%.
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Question 6: A resident individual spends ` 3 lakh for purchase of overseas tour program package
from a foreign tour operator and remits money which is classified under LRS. There is no other
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remittance under LRS or purchase of overseas tour program during the financial year. Whether TCS
is applicable?

Answer: ln case of purchase of overseas tour program package which is classified under LRS, TCS
provision for purchase of overseas tour program package shall apply and not TCS provisions for remittance
under LRS.
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Since for purchase of overseas tour program package, the threshold of ` 7 lakh for applicability of TCS
does not apply, TCS is applicable and tax is required to be collected by the seller. ln this case the tax shall
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be required to be collected at 5% since the total amount spent on purchase of overseas tour program
package during the financial year is less than ` 7 lakh. The TCS should be made by the seller.
Question 7: There are different rates for remittance under LRS for medical treatment/education
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purposes and for other purposes. What is the scope of remittance under LRS for medical
treatment/education purposes?
Answer: As per the clarification by the RBl, remittance for the purposes of medical treatment shall
include,-
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(i) remittance for purchase of tickets of the person to be treated medically overseas (and his attendant)
for commuting between lndia and the overseas destination;
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(ii) his medical expense; and

(iii) other day to day expenses required for such purpose.
Education
Remittance for purpose of education shall include,-

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 (i) remittance for purchase of tickets of the person undertaking study overseas for commuting between
lndia and the overseas destination;
(ii) the tuition and other fees to be paid to educational institute; and
(iii) other day to day expenses required for undertaking such study.
Question 8: Whether purchase of international travel ticket or hotel accommodation on standalone
basis is purchase of overseas tour program package?

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Answer: The term 'overseas tour program package' is defined as to mean any tour package which offers
visit to a country or countries or territory or territories outside lndia and includes expenses for travel or hotel
stay or boarding or lodging or any other expenditure of similar nature or in relation thereto.
It is clarified that purchase of only international travel ticket or purchase of only hotel accommodation, by
in itself is not covered within the definition of 'overseas tour program package'. To qualify as 'overseas tour

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program package', the package should include at least two of the followings:-
(i) international travel ticket,

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(ii) hotel accommodation (with or without food)/boarding/lodging,
(iii) any other expenditure of similar nature or in relation thereto.
Chapter 8: Provisions for filing Return of Income and Self Assessment
Rule 114B, 114BA and 114BB relating to PAN amended [Notification No. 88/2023 dated 10.10.2023]
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Amendments in Rule 114B:
As per section 139A(5) quoting of PAN is mandatory, inter alia, in all documents pertaining to such transactions
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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.
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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
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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.
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Nature of transaction Value of transaction

Opening an account [other than a time deposit and a Basic Savings Bank Deposit All such transactions
Account] with a banking company or a co-operative bank to which the Banking
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Regulation Act, 1949 applies (including any bank or banking institution referred to in
section 51 of that Act).
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A time deposit with, - Amount exceeding

(i) a banking company or a cooperative bank to which the Banking Regulation ` 50,000 or
Act, 1949 applies (including any bank or banking institution referred to in aggregating to more
section 51 of that Act); than ` 5 lakh during a
financial year.
(ii) a Post Office;
(iii) a Nidhi referred to in section 406 of the Companies Act, 2013; or

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 (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.

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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 ` 20 lakh or more

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(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 ` 20
lakh or more

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(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
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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
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per (i) or (ii) above, or opening a current account not being a cash credit account as per (iii) a bove,
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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