Income Tax Act, 2025
Section 4: Ins. by Act 20 of 2015, s. 5 (w.e.f. 12016).
4. Ins. by Act 20 of 2015, s. 5 (w.e.f. 12016).
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(ii) reporting to persons holding the share or interest,
then, the period of twelve months ending with the other day shall be the accounting period of the
company or, as the case may be, the entity:
Provided further that the first accounting period of the company or, as the case may be, the
entity shall begin from the date of its registration or incorporation and end with the 31st day of
March or such other day, as the case may be, following the date of such registration or
incorporation, and the later accounting period shall be the successive periods of twelve months:
Provided also that if the company or the entity ceases to exist before the end of accounting
period, as aforesaid, then, the accounting period shall end immediately before the company or, as
the case may be, the entity, ceases to exist;
(d) “specified date” means the—
(i) date on which the accounting period of the company or, as the case may be, the entity
ends preceding the date of transfer of a share or an interest; or
(ii) date of transfer, if the book value of the assets of the company or, as the case may be,
the entity on the date of transfer exceeds the book value of the assets as on the date referred to
in sub-clause (i), by fifteen per cent.
Explanation 7.—For the purposes of this clause,—
(a) no income shall be deemed to accrue or arise to a non-resident from transfer, outside
India, of any share of, or interest in, a company or an entity, registered or incorporated outside
India, referred to in the Explanation 5,—
(i) if such company or entity directly owns the assets situated in India and the transferor
(whether individually or along with its associated enterprises), at any time in the twelve
months preceding the date of transfer, neither holds the right of management or control in
relation to such company or entity, nor holds voting power or share capital or interest
exceeding five per cent. of the total voting power or total share capital or total interest, as the
case may be, of such company or entity; or
(ii) if such company or entity indirectly owns the assets situated in India and the
transferor (whether individually or along with its associated enterprises), at any time in the
twelve months preceding the date of transfer, neither holds the right of management or
control in relation to such company or entity, nor holds any right in, or in relation to, such
company or entity which would entitle him to the right of management or control in the
company or entity that directly owns the assets situated in India, nor holds such percentage of
voting power or share capital or interest in such company or entity which results in holding of
(either individually or along with associated enterprises) a voting power or share capital or
interest exceeding five per cent. of the total voting power or total share capital or total
interest, as the case may be, of the company or entity that directly owns the assets situated in
India;
(b) in a case where all the assets owned, directly or indirectly, by a company or, as the case
may be, an entity referred to in the Explanation 5, are not located in India, the income of the
non-resident transferor, from transfer outside India of a share of, or interest in, such company or
entity, deemed to accrue or arise in India under this clause, shall be only such part of the income
as is reasonably attributable to assets located in India and determined in such manner as may be
prescribed;
(c) “associated enterprise” shall have the meaning assigned to it in section 92A;]
(ii) income which falls under the head “Salaries”, if it is earned in India.
1[Explanation.—For the removal of doubts, it is hereby declared that the income of the nature
referred to in this clause payable for—
(a) service rendered in India; and
reporting to persons holding the share or interest,
then, the period of twelve months ending with the other day shall be the accounting period of the
company or, as the case may be, the entity:
Provided further that the first accounting period of the company or, as the case may be, the
entity shall begin from the date of its registration or incorporation and end with the 31st day of
March or such other day, as the case may be, following the date of such registration or
incorporation, and the later accounting period shall be the successive periods of twelve months:
Provided also that if the company or the entity ceases to exist before the end of accounting
period, as aforesaid, then, the accounting period shall end immediately before the company or, as
the case may be, the entity, ceases to exist;
“specified date” means the—
date on which the accounting period of the company or, as the case may be, the entity
ends preceding the date of transfer of a share or an interest; or
date of transfer, if the book value of the assets of the company or, as the case may be,
the entity on the date of transfer exceeds the book value of the assets as on the date referred to
in sub-clause
no income shall be deemed to accrue or arise to a non-resident from transfer, outside
India, of any share of, or interest in, a company or an entity, registered or incorporated outside
India, referred to in the Explanation 5,—
if such company or entity directly owns the assets situated in India and the transferor
(whether individually or along with its associated enterprises), at any time in the twelve
months preceding the date of transfer, neither holds the right of management or control in
relation to such company or entity, nor holds voting power or share capital or interest
exceeding five per cent. of the total voting power or total share capital or total interest, as the
case may be, of such company or entity; or
if such company or entity indirectly owns the assets situated in India and the
transferor (whether individually or along with its associated enterprises), at any time in the
twelve months preceding the date of transfer, neither holds the right of management or
control in relation to such company or entity, nor holds any right in, or in relation to, such
company or entity which would entitle him to the right of management or control in the
company or entity that directly owns the assets situated in India, nor holds such percentage of
voting power or share capital or interest in such company or entity which results in holding of
(either individually or along with associated enterprises) a voting power or share capital or
interest exceeding five per cent. of the total voting power or total share capital or total
interest, as the case may be, of the company or entity that directly owns the assets situated in
India;
in a case where all the assets owned, directly or indirectly, by a company or, as the case
may be, an entity referred to in the Explanation 5, are not located in India, the income of the
non-resident transferor, from transfer outside India of a share of, or interest in, such company or
entity, deemed to accrue or arise in India under this clause, shall be only such part of the income
as is reasonably attributable to assets located in India and determined in such manner as may be
prescribed;
“associated enterprise” shall have the meaning assigned to it in section 92A;]
income which falls under the head “Salaries”, if it is earned in India.
1[Explanation.—For the removal of doubts, it is hereby declared that the income of the nature
referred to in this clause payable for—
service rendered in India; and