Finance Act, 2007 - Explanatory Notes on provisions relating to Direct Taxes

Direct tax amendments expand definitions, clarify deemed source income, and revise rates, exemptions and compliance rules.

The Finance Act, 2007 enacts broad amendments to direct tax law: it prescribes income tax and withholding rates with surcharge and cess mechanics; expands the definitions of Assessing Officer and India; inserts an Explanation to treat certain income as deemed to accrue in India irrespective of territorial nexus; widens capital asset scope to include works of art; creates new targeted exemptions and sectoral deductions; confines SEZ benefits to new units; revises deduction and valuation rules (notably for research, health premiums, co operative banks and ESOPs/FBT); strengthens anti evasion, audit and penalty provisions in search matters; and reforms procedural, transfer pricing and settlement time limits with specified applicability dates.