Just a moment...

Top
Help
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
Make Most of Text Search
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
❮❮ Hide
Default View
Expand ❯❯
Close ✕
🔎 TMI Notes - Adv. Search
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text
  • Main Text
  • Main Text + AI Text
  • AI Text
Law:
---- All Laws----
  • ---- All Laws----
  • Benami Property
  • Bill
  • Central Excise
  • Companies Law
  • Customs
  • DGFT
  • FEMA
  • GST
  • GST - States
  • IBC
  • Income Tax
  • Indian Laws
  • Money Laundering
  • SEBI
  • SEZ
  • Service Tax
  • VAT / Sales Tax
Types:
---- All Types ----
  • ---- All Types ----
  • Act Rules
  • Case Laws
  • Circulars
  • Manuals
  • News
  • Notifications
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
RelevanceDefaultDate
    Transformations in Tax Deduction and Collection Compliance and Reporting in India : Clause 397(1) of...
    Reform of Tax Deduction and Collection Certificates : Clause 395(4) of Income Tax Bill, 2025 Vs. Sec...
    Step forward in the rationalization and modernization of recovery of tax collection under Tax law in...
    Evolution, Enforcement, and Relief Mechanisms in TDS/TCS Defaults : Clause 398 of Income Tax Bill, 2...
    Centralised and Automated Processing of TDS/TCS Statements : Clause 399 of Income Tax Bill, 2025 Vs....
    The Transformation of TDS/TCS Compliance and Reporting Obligations : Clause 397(3) of the Income Tax...
    Principles of Tax Deduction Credit in Indian Income Tax Law : Clause 390(5)-(6) of Income Tax Bill, ...
    Ensuring Tax Base Integrity in Indian Income Taxation : Clause 396 of the Income Tax Bill, 2025 Vs. ...
    Streamlining TDS Exemptions in India's Income Tax Laws - Clause 393(6) of the Income Tax Bill, 2025 ...
    Lower Deduction Certificates under Indian Tax Law : Commentary on Clause 395(1) of Income Tax Bill, ...
    Analysis of Tax Deduction at Source on Securities Income of FIIs and Specified Funds under Indian Ta...
    Recasting Tax Deduction at Source on Cross-Border Investment Income : Clause 393(2)[Table S. No. 13 ...
    Legal and Practical Implications for TDS on Offshore Fund Investments : Clause 393(2) [Table: S.No. ...
    Modernizing Withholding Tax on Non-Resident Unit Income : Clause 393(2)[Table: S.No. 10] and Clause ...
    Exemption from Tax Deduction at Source for Specified Entities (Government, RBI, Corporation and Mutu...
    Grossing Up Mechanisms in Indian TDS Law : Clause 393(10) of the Income Tax Bill, 2025 Vs. Section 1...
    Changing Landscape of TDS on Payments to Non-Residents in Indian Tax Law : Clause 393(2)[Table: S.No...
    Ensure the tax compliance and transparency regarding the income distributed by partnership firms to ...
    Comprehensive Analysis of TDS on Virtual Digital Assets Transfer : Clause 393(1)[Table: S.No. 8(iv)]...
    Practical implications of TDS on non-monetary or indirect forms of income : Clause 393(1)[Table: S.N...
❯❯
MaximizeMaximizeMaximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

    +

    Are you sure you want to delete "My most important" ?

    NOTE:

    Notes
    Showing Results for :
    Reset Filters
    Results Found:
    Show All SummariesHide All Summaries
    Act RulesBills
    Show AI Summary
    TDCAN requirement modernisation centralises TAN/PAN linkage and reporting, tightening compliance and correction procedures.
    Clause 397 requires persons deducting or collecting tax to apply for and, once allotted, quote a Tax Deduction and Collection Account Number (TDCAN) in all prescribed documents; it consolidates deduction and collection numbers, sets out statutory carve-outs and government-notified exemptions, integrates PAN linkage and consequences for non-furnishing, and centralises payment, reporting and correction mechanisms including procedures for non-resident payments and government offices.
    Act RulesBills
    Show AI Summary
    TDS/TCS certificate obligation requires deductors and collectors to issue prescribed certificates enabling tax credit and digital reporting.
    Clause 395(4) requires every person deducting or collecting tax at source to issue a certificate to the deductee/collectee specifying the amount of tax deducted or collected, the rate, and any other prescribed particulars within a prescribed period; employers who pay tax on behalf of employees must similarly furnish a certificate confirming payment to the Central Government. The clause covers both TDS and TCS, delegates format and timing to subordinate rules, and anticipates digital and harmonized implementation while leaving rectification, duplicate issuance and penalty mechanics to rules.
    Act RulesBills
    Show AI Summary
    Non-exclusivity of source-based tax collection allows authorities to pursue additional recovery methods when payments are provisional.
    Clause 390(4) states that taxes paid by deduction or collection at source, advance payments and specified payments operate in addition to any other mode of tax collection to discharge the liability for income assessed for a tax year, preserving the tax authority's power to pursue alternative recovery measures where such anticipatory payments are provisional, insufficient, or incorrect while allowing credit or refund for any excess.
    Act RulesBills
    Show AI Summary
    TDS/TCS enforcement: deeming of defaulting deductors as assessees in default triggers interest, charge on assets, and conditioned relief.
    Clause 398 deems persons required to deduct or collect tax, including principal officers and specified collectors, to be an assessee in default where tax is not deducted, not collected, or not paid to the government; relief is available if the recipient files a return, includes the relevant sum, pays the tax due and the deductor/collector furnishes a prescribed accountant's certificate. Interest is prescribed for the periods between deductibility, deduction and payment, unpaid tax plus interest is a statutory charge on assets, time limits for default orders are specified, and penalty requires satisfaction of lack of good and sufficient reasons.
    Act RulesBills
    Show AI Summary
    Centralised TDS/TCS processing: automated, time bound framework mandates intimation within a year and covers correction statements.
    Clause 399 creates an automated framework for processing TDS and TCS statements, including correction statements, requiring rectification of arithmetical errors and adjustment of apparent incorrect claims, computation of interest and fee, determination of net payable or refundable amounts after adjusting prior payments, issuance of a formal intimation to the deductor/collector, and grant of any refund due; it also mandates that intimations be sent within a year from the end of the tax year and empowers the Board to make a centralised processing scheme.
    Act RulesBills
    Show AI Summary
    TDS/TCS compliance: expanded reporting and verified statement obligations, including cross-border and below-threshold payment reporting.
    Clause 397(3) requires persons responsible for deduction or collection of tax, and certain employers, to pay amounts to the credit of the Central Government within prescribed time and to submit verified statements in prescribed form and manner; it mandates reporting of payments to non-residents whether or not chargeable, requires special statements for government payments without challans, permits correction statements within six years, obliges reporting of below-threshold interest payments by specified entities, and makes collectors who fail to collect liable to pay the tax.
    Act RulesBills
    Show AI Summary
    Tax credit for source deductions ensures remitted taxes are treated as payment on behalf of the relevant taxpayer and allocated by rule.
    Clause 390(5) treats sums remitted as tax paid on behalf of the person from or in respect of whose income such tax was deducted or collected, and Clause 390(6) empowers the Board to make rules for allocating that credit to such persons or to others and for specifying the tax year for which credit is allowed, extending the scope beyond conventional TDS/TCS to include specified pre-payments and leaving operational detail to subordinate rules.
    Act RulesBills
    Show AI Summary
    Tax deducted is income received: gross receipts included for tax computation with credit for foreign withholding.
    Clause 396 deems amounts deducted under the relevant withholding chapter and income tax deducted abroad (where credit is allowed) to be income received for computing an assessee's taxable income, with specified carve out exceptions; this preserves gross income inclusion while permitting credit for taxes withheld and raises interpretative issues about the chapter's scope, the stated exceptions, cross border withholding and transitional treatment.
    Act RulesBills
    Show AI Summary
    TDS nil-declaration prevents withholding when estimated total income is below taxable threshold, subject to prescribed declaration and reporting.
    Clause 393(6) permits certain recipients to avoid TDS by furnishing a prescribed written declaration that their estimated total income for the year yields nil tax; upon a valid declaration the payer must not deduct tax on specified payments and must forward a copy to tax authorities, subject to the condition that aggregate such incomes do not exceed the basic exemption limit and to general anti evasion consequences for false declarations.
    Act RulesBills
    Show AI Summary
    Lower Deduction Certificates: streamlined TDS/TCS certification requiring AO satisfaction and binding certificate rates.
    Clause 395(1) creates a mechanism for Lower Deduction Certificates allowing taxpayers to apply for lower or nil deduction of tax at source; the Assessing Officer must issue a certificate when satisfied on objective material, the deductor must apply the specified rate until the certificate's validity, and procedural details, scope, validity periods and ancillary measures are to be provided by rules.
    Act RulesBills
    Show AI Summary
    TDS on securities income: clarified withholding rules, treaty relief mechanics, and exemptions for capital gains and exempt fund receipts.
    Clause 393 establishes a tabular TDS regime on income from securities, distinguishing taxable securities income from capital gains and exempt receipts. Clause 393(2) prescribes withholding entries for Foreign Institutional Investors with rates referenced to an interpretative note and a 10% rate for specified funds, subject to documentation for treaty benefits. Clause 393(4) consolidates exemptions by excluding capital gains payable to foreign investors and exempt income of specified funds from TDS, aiming to avoid unnecessary withholding and refund procedures.
    Act RulesBills
    Show AI Summary
    Tax Deduction at Source clarifies withholding obligations on cross border bond and GDR payments to non residents, including DTAA interaction.
    Clause 393(2) Table S. No. 13 and 14 requires withholding on payments to non residents of interest or dividends and long term capital gains from bonds and GDRs referred to in section 209, mandates deduction at the earlier of credit or payment by any person responsible for the payment, prescribes fixed concessional withholding rates, integrates general TDS machinery including declarations and higher deduction for missing PAN, and preserves DTAA relief and exceptions where income is not chargeable.
    Act RulesBills
    Show AI Summary
    TDS on offshore fund income and capital gains: withholding at credit or payment, with higher exit withholding and treaty considerations.
    Clause 393(2) requires any person paying income in respect of specified units or long term capital gains on transfer of such units to deduct tax at source at the prescribed rates at the time of credit or payment, without any monetary threshold; the provision cross refers to definitions in section 208, deems credits to suspense accounts as payment for TDS, and is subject to subsections dealing with exceptions, declarations and specified exclusions, while raising interpretative issues on definitions, treaty interaction, gross up obligations and transitional treatment compared with the prior Section 196B regime.
    Act RulesBills
    Show AI Summary
    Withholding tax on non-resident unit income: consolidation preserves treaty relief and UTI exemption under prescribed conditions.
    Clause 393 consolidates TDS on income in respect of units paid to non-residents: Clause 393(2) requires deduction by any payer on units of specified mutual funds and specified companies paid to non-resident individuals and foreign companies at rates per Note 2 with DTAA benefits subject to prescribed documentation; Clause 393(4) exempts income on Unit Trust of India units payable to NRIs and non-resident HUFs subject to prescribed conditions and FEMA compliance, thereby retaining the legacy UTI carve-out while delegating exemption details to subordinate rules.
    Act RulesBills
    Show AI Summary
    TDS exemption for specified public entities prevents withholding on interest, dividends and other income, simplifying payer compliance.
    Clause 393(5) provides an overriding TDS exemption for payments to the Government, the Reserve Bank of India, statutorily tax exempt corporations established by or under a Central Act, and mutual funds specified in Schedule VII, covering interest, dividends (in respect of securities or shares owned by or in which they have full beneficial interest) and any other income accruing or arising to them, with the non obstante language ensuring the exemption prevails over other withholding obligations.
    Act RulesBills
    Show AI Summary
    Grossing-up requirement preserves tax base where payer bears recipient's tax liability, altering TDS computation and compliance.
    Clause 393(10) mandates a grossing-up requirement where the payer bears the recipient's tax: taxable income must be increased so that, after deduction of tax at the rates provided in the Chapter (including applicable surcharge and cess), the net amount equals the contractual payment. The clause applies to TDS payments under the Chapter except specified salary cases, covers residents and non residents, and requires use of the applicable DTAA rate when beneficial. Key practical issues include computation of add ons, allocation across composite payments, currency fluctuation effects, and contract drafting to evidence net of tax obligations.
    Act RulesBills
    Show AI Summary
    TDS on payments to non-residents: a table-based framework modernizes withholding obligations and aligns rates with treaty benefits.
    Clause 393(2) Table S.No.17 imposes a residuary TDS obligation on interest (excluding specified categories) and any other sum chargeable under the Act, excluding salaries, payable to non-residents or foreign companies; deduction is by "any person" at the earlier of credit or payment at the "rates in force," with treaty rates available subject to procedural compliance, and operates alongside exemptions, lower/nil deduction certificates, suspense-account deeming rules and grossing-up anti-avoidance provisions.
    Act RulesBills
    Show AI Summary
    TDS on partner payments: mandatory withholding on specified firm-to-partner payments with prescribed threshold and compliance duties.
    Mandatory withholding applies to sums in the nature of salary, remuneration, commission, bonus or interest paid or credited (including to the capital account) by a firm to a partner, deductible at ten per cent at the earlier of credit or payment, with a per-partner annual threshold exemption and declaration-based non-deduction mechanisms; the firm bears the deduction obligation and normal TDS procedures apply.
    Act RulesBills
    Show AI Summary
    TDS on virtual digital assets imposes withholding obligations with targeted exemptions for small-value and small-taxpayer transfers.
    The Bill requires withholding on any benefit or perquisite arising from business or profession whether cash or non-cash, obliges the provider to deduct tax and, if consideration is wholly or partly in kind with insufficient cash, to ensure tax payment before release. A parallel VDA withholding regime mandates deduction on transfers of virtual digital assets with specified exemptions for small-value transactions and small taxpayers, similar safeguards for non-cash consideration, and procedural rules addressing timing, aggregation and crediting for compliance.
    Act RulesBills
    Show AI Summary
    TDS on non-monetary benefits: providers must withhold tax on in-kind and indirect business advantages, affecting compliance and valuation.
    Clause 393(1)[Table: S.No. 8(iv)] and section 194R require the provider of any benefit or perquisite arising from business or profession to deduct tax at source on the value or aggregate value of such benefits, covering cash and non-cash advantages, with specified thresholds and exemptions for smaller providers; the Bill consolidates this obligation, clarifies anti-overlap treatment with other TDS provisions, links timing of deduction to credit or payment, and preserves reliance on administrative guidance for valuation and operational issues.

    TMI Notes

    Back

    All TMI Notes

    Showing Results for :
    Reset Filters
      No Records Found

      TMI Notes

      Back

      All TMI Notes

      whatsappJoin Channel
      Showing Results for : Reset Filters

      Computation of capital gains in case of Market Linked Debenture: Clause 76 of the Income Tax Bill, 2025 vs. Section 50AA of the Income Tax Act, 1961

      13 March, 2025

      Contents
      Acts
      Rules & Regulations
      Summary
      Note

      Note

      -

      Bookmark

      Print

      Print

      Clause 76 Special provision for computation of capital gains in case of Market Linked Debenture.

      Income Tax Bill, 2025

      ```html

      Legal Commentary on Clause 76 of the Income Tax Bill, 2025

      Introduction

      Clause 76 of the Income Tax Bill, 2025, introduces special provisions for computing capital gains in the context of Market Linked Debentures (MLDs). This clause is significant as it aims to address the tax treatment of financial instruments that have gained popularity due to their market-linked returns. The provision is set against the backdrop of evolving financial markets and investment strategies, where traditional tax norms may not adequately address the complexities of new financial products. The clause seeks to ensure clarity and consistency in the tax treatment of MLDs, which could have implications for investors, issuers, and regulators.

      Objective and Purpose

      The primary objective of Clause 76 is to provide a clear framework for calculating capital gains on MLDs, which are financial instruments whose returns are linked to market indices or other underlying securities. The clause aims to ensure that gains from these instruments are treated as short-term capital gains, irrespective of the holding period. This reflects a legislative intent to standardize the tax treatment of MLDs, aligning it with policy considerations that seek to prevent tax avoidance and ensure fair taxation of income derived from speculative or short-term investments.

      Detailed Analysis

      Sub-section (1): Overriding Existing Provisions

      Sub-section (1) of Clause 76 overrides existing provisions in section (clause) 2(101) and section (clause) 72, mandating that gains from the transfer, redemption, or maturity of specified capital assets be treated as short-term capital gains. This provision is crucial as it ensures that taxpayers cannot leverage other provisions to claim long-term capital gains treatment, which typically enjoys a lower tax rate.

      Sub-section (2): Definition of Capital Assets

      Sub-section (2) details the types of capital assets covered under this clause, including units of Specified Mutual Funds acquired post-April 1, 2023, and MLDs. It also covers unlisted bonds or debentures maturing or being redeemed after July 23, 2024. This broadens the scope of the clause to include various debt instruments, ensuring comprehensive coverage of financial products that exhibit similar characteristics to MLDs.

      Sub-section (3): Computation Formula

      Sub-section (3) provides a formula for computing short-term capital gains: X = A - B - C, where A is the full value of consideration received, B is the cost of acquisition, and C is the expenditure incurred exclusively for the transaction. This formula is straightforward, aiming to simplify the computation process and reduce ambiguity in determining taxable gains.

      Sub-section (4): Disallowance of Securities Transaction Tax Deduction

      Sub-section (4) explicitly disallows deductions for securities transaction tax (STT) paid under Chapter VII of the Finance (No. 2) Act, 2004. This provision prevents taxpayers from reducing their taxable gains by claiming deductions for STT, aligning with the broader objective of ensuring fair taxation of speculative gains.

      Sub-section (5): Definitions

      Sub-section (5) defines key terms such as "Market Linked Debenture" and "Specified Mutual Fund." The definition of MLDs emphasizes their debt security nature and market-linked returns, while the definition of Specified Mutual Funds focuses on funds investing primarily in debt and money market instruments. These definitions are critical for identifying the financial instruments subject to the clause and ensuring consistent application of the tax provisions.

      Practical Implications

      Clause 76 has significant implications for various stakeholders. For investors, the provision clarifies the tax treatment of gains from MLDs, potentially influencing investment decisions. Issuers of MLDs may need to adjust their offerings to align with the new tax treatment, while tax professionals and advisors will need to update their strategies to account for the changes. Regulators may also experience an impact, as the provision could influence market behavior and the structuring of financial products.

      Comparative Analysis with Section 50AA of the Income Tax Act, 1961

      Introduction to Section 50AA

      Section 50AA of the Income Tax Act, 1961, introduced by the Finance Act, 2023, also addresses the computation of capital gains for MLDs. Similar to Clause 76, it mandates that gains from these instruments be treated as short-term capital gains, irrespective of the holding period. The section reflects a legislative intent to align the tax treatment of MLDs with policy objectives aimed at preventing tax avoidance and ensuring fair taxation.

      Key Differences and Similarities

      Both Clause 76 and Section 50AA aim to standardize the tax treatment of MLDs by treating gains as short-term capital gains. However, there are notable differences in their scope and application. Clause 76 is part of a new legislative framework, potentially reflecting updated policy considerations and a broader scope, while Section 50AA is part of the existing Income Tax Act, 1961.

      Scope of Covered Assets

      Clause 76 explicitly includes unlisted bonds and debentures maturing post-July 2024, expanding its coverage compared to Section 50AA, which focuses on MLDs and Specified Mutual Funds. This difference indicates a broader approach in Clause 76, potentially capturing a wider range of financial products.

      Computation Methodology

      Both provisions employ a similar formula for computing short-term capital gains, emphasizing the full value of consideration, cost of acquisition, and transaction-related expenditure. This consistency ensures a uniform approach to calculating taxable gains, reducing ambiguity and potential disputes.

      Disallowance of STT Deduction

      Both Clause 76 and Section 50AA disallow deductions for STT, reinforcing the policy objective of taxing speculative gains fairly. This alignment indicates a consistent legislative approach to preventing tax avoidance through STT deductions.

      Definitions and Clarifications

      The definitions of MLDs and Specified Mutual Funds in both provisions are similar, emphasizing the debt security nature and market-linked returns of MLDs. This consistency ensures that taxpayers and stakeholders have a clear understanding of the financial instruments subject to the provisions.

      Conclusion

      Clause 76 of the Income Tax Bill, 2025, and Section 50AA of the Income Tax Act, 1961, represent significant legislative efforts to address the tax treatment of MLDs and similar financial instruments. By mandating short-term capital gains treatment, both provisions aim to align the tax treatment with policy objectives of preventing tax avoidance and ensuring fair taxation. The introduction of Clause 76 reflects evolving policy considerations and a broader approach to capturing a wider range of financial products. As financial markets continue to evolve, these provisions provide a framework for consistent and fair taxation of gains from market-linked investments, with potential implications for investors, issuers, and regulators.

      Suggested Alternative Titles

      • Analyzing the Impact of Clause 76 on Market Linked Debentures
      • Clause 76 vs. Section 50AA: A Comparative Tax Analysis
      • Taxation of Market Linked Debentures: Legislative Insights
      • Understanding Capital Gains Computation for Market Linked Debentures

      ```

       


      Full Text:

      Clause 76 Special provision for computation of capital gains in case of Market Linked Debenture.

      Topics

      ActsIncome Tax