Section 506 Furnishing of information or documents by an Indian concern in certain cases

Income-tax Act, 2025

At a Glance

The document considered is Clause 506 of the Income Tax Bill, 2025 - Old Version, titled "Furnishing of information or documents by an Indian concern in certain cases." It requires an Indian concern to furnish prescribed information or documents to a prescribed income-tax authority where shares or interests in a foreign company/entity derive substantial value from assets located in India and are held through the Indian concern. The provision affects Indian concerns, foreign entities with India-located assets, and the income-tax department. Effective date: Not stated in the document.

Background & Scope

Statutory hooks: Clause 506 of the Income Tax Bill, 2025 - Old Version and the cross-reference to section 9(9)(a) (as stated in the clause). The clause addresses information obligations of an "Indian concern" where a non-resident company or entity's share or interest derives substantial value from India-located assets and where such assets are held, directly or indirectly, through an Indian concern. Definitions: the clause uses the terms "Indian concern," "company or entity registered or incorporated outside India," "value substantially from the assets located in India," and refers to a threshold in section 9(9)(a). The clause provides no explicit definitions for "Indian concern," "prescribed," "prescribed income-tax authority," "prescribed period," or the particular documents or information; such particulars are to be provided by prescription. If a detail is missing, Not stated in the document.

Statutory Provision Mode

Text & Scope

Clause 506 imposes an information-furnishing obligation on an Indian concern where two conditions coexist:

• Condition (a): any share or interest in a foreign company or entity "derives, directly or indirectly, its value substantially from the assets located in India," as referenced to section 9(9)(a) (cross-reference in the clause).
• Condition (b): such foreign company/entity "holds, directly or indirectly, such assets in India through, or in, an Indian concern."

Where both conditions are satisfied, the Indian concern "shall, for the determination of any income accruing or arising in India under the said clause, furnish within such period, the information or documents in such manner, as prescribed, to the prescribed income-tax authority." The clause therefore applies when a nexus exists between value of foreign interests and India assets, coupled with a holding structure involving an Indian concern.

Interpretation

Legislative intent indicated by the text: the clause is designed to enable the tax authority to determine income accruing or arising in India by compelling domestic intermediaries (Indian concerns) to provide relevant data about foreign entities whose economic value derives substantially from India. The cross-reference to section 9(9)(a) indicates the clause is linked to the provision that identifies when value derives substantially from India-located assets (the text does not reproduce section 9(9)(a) itself). The obligation is procedural and targeted at information collection to facilitate substantive assessment under the income-tax framework. Not stated in the document whether penalties or consequences for non-compliance are provided elsewhere.

Exceptions/Provisos

Not stated in the document: any exceptions, carve-outs, thresholds, exemptions, protective provisions, or provisos governing when an Indian concern is not obliged to furnish information. Not stated whether professional privilege, confidentiality, or international information-sharing constraints apply. The clause contains no explicit provisos.

Illustrations

• Example 1: An Indian concern holds assets in India, and a foreign entity's shares substantially derive value from those India assets; the Indian concern must furnish prescribed information to the prescribed authority within the prescribed period. (All specifics of the information, the time limit, and the authority are Not stated in the document.)
• Example 2: A foreign company indirectly holds India-located immovable property via an Indian concern; if the company's shares derive substantial value from that property (as per section 9(9)(a)), the Indian concern is required to supply documents to enable determination of income accruing in India. (Details on scope of documents: Not stated in the document.)

Interplay

Interaction with other provisions: the clause expressly cross-refers to section 9(9)(a) (as drafted in the Bill). The clause is procedural and intended to operate in aid of the substantive provisions governing income arising in India. Not stated in the document: any linkage to rules, notifications, or penalties; Not stated whether information provided would be used for assessment, reassessment, transfer pricing, GAAR, or treaty relief procedures. The clause contemplates subordinate legislation ("as prescribed") for period, manner and authority, so the implementing rules and notifications will be critical to operationalise the obligation.

Comparison of Provisions - Differences and Practical Impact

Two textual sources were provided: Section 506 of the Income-tax Act, 2025 (Document 1) and Clause 506 of the Income Tax Bill, 2025 - Old Version (Document 2). The principal differences and practical impacts are:

• Cross-reference: Document 2 cites section 9(9)(a) whereas Document 1 cites section 9(10)(a).
  • Practical impact: The change in cross-reference suggests a substantive amendment or renumbering of the provision that identifies the relevant rule on attribution of value to India-located assets. The exact legal consequence depends on the content of the referenced subsection; therefore, whether the scope of cases covered expands, narrows or remains the same cannot be determined from the clause alone. Not stated in the document which is correct or whether this is merely a renumbering.
• Prescription language and sequencing: Document 2 reads "furnish within such period, the information or documents in such manner, as prescribed, to the prescribed income-tax authority." Document 1 reads "furnish within prescribed period to the prescribed income-tax authority the information or documents in such manner, as may be prescribed."
  • Practical impact: Both texts leave the details to subordinate rules, but Document 1's phrasing ("as may be prescribed") is marginally more conventional administrative phrasing. The difference is stylistic unless regulations specify differing time frames or procedural modalities. Not stated in the document whether any substantive procedural differences are intended.
• Minor punctuation and wording changes: Document 2 inserts additional commas and different order ("for the determination of any income accruing or arising in India under the said clause") versus Document 1's "for the purposes of determination of any income accruing or arising in India under the said section."
  • Practical impact: No evident change in substantive obligation; both require furnishing for determining income accruing or arising in India. The change from "section" to "clause" signals a drafting shift between bill-stage language and enacted statute drafting conventions. Not stated in the document whether this affects interpretation.

Practical Implications

• Compliance and risk areas: Indian concerns that act as holding vehicles, subsidiaries, agents, trustees or conduits for foreign entities should anticipate a statutory duty to produce specified records when the foreign entity's shares derive substantial value from India-located assets. Failure to comply may expose the Indian concern to enforcement measures (Not stated in the document whether penalties are provided).
• Record-keeping/evidence: because the clause leaves the scope and manner to prescription, Indian concerns should preserve corporate documents, shareholding records, agreements, asset registers, trust/deed documentation and any valuations or contractual arrangements reflecting the relation between foreign interests and India assets. The clause itself does not enumerate required documents; thus, stakeholders should monitor the subordinate rules when issued. (If a detail is missing: Not stated in the document.)

Key Takeaways

• Clause 506 imposes an information-furnishing obligation on Indian concerns where foreign shares/interests derive substantial value from India-located assets and are held through the Indian concern.
• The clause is procedural in nature; specific details (prescribed period, manner, authority, and precise documents) are deferred to subordinate prescription. Not stated in the document.
• There is a cross-reference to section 9(9)(a) in the Bill version, implying reliance on that provision to delineate when value is deemed to derive from India. The enacted text elsewhere may use a different numbering (e.g., section 9(10)(a) in another source), and the practical scope depends on that substantive cross-reference. Not stated which is definitive.
• No exceptions, penalties, or procedural safeguards are set out in the clause itself. Not stated in the document.
• Indian concerns engaged in multi-jurisdictional structures should track the rules to be prescribed and preserve relevant records to comply promptly when the authority demands information.

Full Text:

Section 506 Furnishing of information or documents by an Indian concern in certain cases