Income Tax Act, 2025
Section 2: Ins. by s. 4, ibid. (w.e.f. 12019).
2. Ins. by s. 4, ibid. (w.e.f. 12019).
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Explanation 3.—Where a business is carried on in India through a person referred to in clause (a)
or clause (b) or clause (c) of Explanation 2, only so much of income as is attributable to the
operations carried out in India shall be deemed to accrue or arise in India.]
1[Explanation 4.—For the removal of doubts, it is hereby clarified that the expression “through”
shall mean and include and shall be deemed to have always meant and included “by means of”, “in
consequence of” or “by reason of”.
Explanation 5.—For the removal of doubts, it is hereby clarified that an asset or a capital asset
being any share or interest in a company or entity registered or incorporated outside India shall be
deemed to be and shall always be deemed to have been situated in India, if the share or interest
derives, directly or indirectly, its value substantially from the assets located in India:]
2[Provided that nothing contained in this Explanation shall apply to an asset or capital asset, which is
held by a non-resident by way of investment, directly or indirectly, in a Foreign Institutional Investor as
referred to in clause (a) of the Explanation to section 115AD for an assessment year commencing on or
after the 1st day of April, 2012 but before the 1st day of April, 2015:]
3[Provided further that nothing contained in this Explanation shall apply to an asset or capital asset,
which is held by a non-resident by way of investment, directly or indirectly, in Category-I or Category-II
foreign portfolio investor under the Securities and Exchange Board of India (Foreign Portfolio Investors)
Regulations, 2014, made under the Securities and Exchange Board of India Act, 1992.]
4[Explanation 6.—For the purposes of this clause, it is hereby declared that—
(a) the share or interest, referred to in Explanation 5, shall be deemed to derive its value
substantially from the assets (whether tangible or intangible) located in India, if, on the specified
date, the value of such assets—
(i) exceeds the amount of ten crore rupees; and
(ii) represents at least fifty per cent. of the value of all the assets owned by the company
or entity, as the case may be;
(b) the value of an asset shall be the fair market value as on the specified date, of such asset
without reduction of liabilities, if any, in respect of the asset, determined in such manner as may
be prescribed;
(c) “accounting period” means each period of twelve months ending with the 31st day of
March:
Provided that where a company or an entity, referred to in Explanation 5, regularly adopts a
period of twelve months ending on a day other than the 31st day of March for the purpose of—
(i) complying with the provisions of the tax laws of the territory, of which it is a
resident, for tax purposes; or
or clause
or clause
of Explanation 2, only so much of income as is attributable to the
operations carried out in India shall be deemed to accrue or arise in India.]
1[Explanation 4.—For the removal of doubts, it is hereby clarified that the expression “through”
shall mean and include and shall be deemed to have always meant and included “by means of”, “in
consequence of” or “by reason of”.
Explanation 5.—For the removal of doubts, it is hereby clarified that an asset or a capital asset
being any share or interest in a company or entity registered or incorporated outside India shall be
deemed to be and shall always be deemed to have been situated in India, if the share or interest
derives, directly or indirectly, its value substantially from the assets located in India:]
2[Provided that nothing contained in this Explanation shall apply to an asset or capital asset, which is
held by a non-resident by way of investment, directly or indirectly, in a Foreign Institutional Investor as
referred to in clause
of the Explanation to section 115AD for an assessment year commencing on or
after the 1st day of April, 2012 but before the 1st day of April, 2015:]
3[Provided further that nothing contained in this Explanation shall apply to an asset or capital asset,
which is held by a non-resident by way of investment, directly or indirectly, in Category-I or Category-II
foreign portfolio investor under the Securities and Exchange Board of India (Foreign Portfolio Investors)
Regulations, 2014, made under the Securities and Exchange Board of India Act, 1992.]
4[Explanation 6.—For the purposes of this clause, it is hereby declared that—
the share or interest, referred to in Explanation 5, shall be deemed to derive its value
substantially from the assets (whether tangible or intangible) located in India, if, on the specified
date, the value of such assets—
exceeds the amount of ten crore rupees; and
represents at least fifty per cent. of the value of all the assets owned by the company
or entity, as the case may be;
the value of an asset shall be the fair market value as on the specified date, of such asset
without reduction of liabilities, if any, in respect of the asset, determined in such manner as may
be prescribed;
“accounting period” means each period of twelve months ending with the 31st day of
March:
Provided that where a company or an entity, referred to in Explanation 5, regularly adopts a
period of twelve months ending on a day other than the 31st day of March for the purpose of—
complying with the provisions of the tax laws of the territory, of which it is a
resident, for tax purposes; or