Income Tax Act, 2025
Section 1: Ins. by Act 7 of 2017, s. 43 (w.e.f. 12018).
1. Ins. by Act 7 of 2017, s. 43 (w.e.f. 12018).
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(2) For the purposes of sub-section (1), the excess interest shall mean an amount of total interest paid
or payable in excess of thirty per cent. of earnings before interest, taxes, depreciation and amortisation of
the borrower in the previous year or interest paid or payable to associated enterprises for that previous
year, whichever is less.
(3) Nothing contained in sub-section (1) shall apply to an Indian company or a permanent
establishment of a foreign company which is engaged in the business of banking or insurance.
(4) Where for any assessment year, the interest expenditure is not wholly deducted against income
under the head “Profits and gains of business or profession”, so much of the interest expenditure as has
not been so deducted, shall be carried forward to the following assessment year or assessment years, and
it shall be allowed as a deduction against the profits and gains, if any, of any business or profession
carried on by it and assessable for that assessment year to the extent of maximum allowable interest
expenditure in accordance with sub-section (2):
Provided that no interest expenditure shall be carried forward under this sub-section for more than
eight assessment years immediately succeeding the assessment year for which the excess interest
expenditure was first computed.
(5) For the purposes of this section, the expressions––
(i) “associated enterprise” shall have the meaning assigned to it in sub-section (1) and sub-section
(2) of section 92A;
(ii) “debt” means any loan, financial instrument, finance lease, financial derivative, or any
arrangement that gives rise to interest, discounts or other finance charges that are deductible in the
computation of income chargeable under the head “Profits and gains of business or profession”;
(iii) “permanent establishment” includes a fixed place of business through which the business of
the enterprise is wholly or partly carried on.’.]
1[CHAPTER XA
GENERAL ANTI-AVOIDANCE RULE
95. Applicability of GeneralAnti-Avoidance Rule.—2[(1)] Notwithstanding anything contained in
the Act, an arrangement entered into by an assessee may be declared to be an impermissible avoidance
arrangement and the consequence in relation to tax arising therefrom may be determined subject to the
provisions of this Chapter.
3[(2) This Chapter shall apply in respect of any assessment year beginning on or after the 1st day of
April, 2018.]
Explanation.—For the removal of doubts, it is hereby declared that the provisions of this Chapter
may be applied to any step in, or a part of, the arrangement as they are applicable to the arrangement.
96. Impermissible avoidance arrangement.—(1) An impermissible avoidance arrangement means
an arrangement, the main purpose of which is to obtain a tax benefit, and it—
(a) creates rights, or obligations, which are not ordinarily created between persons dealing at
arm’s length;
(b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act;
(c) lacks commercial substance or is deemed to lack commercial substance under section 97, in
whole or in part; or
1. Ins. by Act 17 of 2013, s. 26 (w.e.f. 12016). Earlier inserted by Act 23 of 2012, s. 41 (w.e.f. 12014)
2. Section 95 renumbered as sub-section (1) thereof by Act 20 of 2015, s. 26 (w.e.f. 12015).
For the purposes of sub-section
Nothing contained in sub-section
shall apply to an Indian company or a permanent
establishment of a foreign company which is engaged in the business of banking or insurance.
Where for any assessment year, the interest expenditure is not wholly deducted against income
under the head “Profits and gains of business or profession”, so much of the interest expenditure as has
not been so deducted, shall be carried forward to the following assessment year or assessment years, and
it shall be allowed as a deduction against the profits and gains, if any, of any business or profession
carried on by it and assessable for that assessment year to the extent of maximum allowable interest
expenditure in accordance with sub-section
For the purposes of this section, the expressions––
“associated enterprise” shall have the meaning assigned to it in sub-section
and sub-section
of section 92A;
“debt” means any loan, financial instrument, finance lease, financial derivative, or any
arrangement that gives rise to interest, discounts or other finance charges that are deductible in the
computation of income chargeable under the head “Profits and gains of business or profession”;
“permanent establishment” includes a fixed place of business through which the business of
the enterprise is wholly or partly carried on.’.]
1[CHAPTER XA
GENERAL ANTI-AVOIDANCE RULE
95. Applicability of GeneralAnti-Avoidance Rule.—2[
This Chapter shall apply in respect of any assessment year beginning on or after the 1st day of
April, 2018.]
Explanation.—For the removal of doubts, it is hereby declared that the provisions of this Chapter
may be applied to any step in, or a part of, the arrangement as they are applicable to the arrangement.
96. Impermissible avoidance arrangement.—
An impermissible avoidance arrangement means
an arrangement, the main purpose of which is to obtain a tax benefit, and it—
creates rights, or obligations, which are not ordinarily created between persons dealing at
arm’s length;
results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act;
lacks commercial substance or is deemed to lack commercial substance under section 97, in
whole or in part; or
1. Ins. by Act 17 of 2013, s. 26 (w.e.f. 12016). Earlier inserted by Act 23 of 2012, s. 41 (w.e.f. 12014)
2. Section 95 renumbered as sub-section
thereof by Act 20 of 2015, s. 26 (w.e.f. 12015).