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 characters 0/2000
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.
Relevance Default Date
    Manuals Income Tax
    Can ICDS apply to a person following cash system of accounting and to the person whose books of acco...
    Switching from normal payment of tax composition scheme - Whether the assessee is liable to reverse ...
    Switching from composition scheme to normal scheme of payment of tax - Whether the assessee is eligi...
    Can a registered person, who purchases goods from a composition manufacturer / trader (dealer / supp...
    In case of a person who is/was availing composition scheme u/s 10. What will be the due date of paym...
    What is the due date of payment of Tax under GST? What is the due date for payment of tax (GST) and ...
    Whether a person who is opting for Composition u/s 10 of the GST, is required to pay GST at composit...
    A person who was making inter-state supplies during the previous year but not making inter-state sup...
    How to determine Turnover limit for availing the benefit of composition scheme? Is it required to be...
    What is the validity of composition levy? Whether intimation is required to be submitted each year f...
    Can the option to pay tax under composition levy be exercised at any time of the year?
    Can a person paying tax under composition levy, withdraw voluntarily from the scheme? If so, how?
    Can an Importer of goods or services opt to pay tax under composition scheme under GST?
    Can an exporter of goods opt to pay tax under composition scheme under GST?
    Can a person paying tax under composition scheme under GST make supplies of goods to SEZ?
    Whether a person having turnover much below ₹ 75 Lakhs (Rs. 50 lakhs as the case may be) as on...
    A person availing benefit of composition scheme under GST, want to be a casual dealer in another sta...
    Who are not eligible to opt for composition scheme? Whether certain manufacturers (like Ice cream, P...
    A person availing composition scheme during a financial year crosses the turnover of ₹ 75 Lakh...
    Whether a person supplying goods through Electronic Commerce Operator, is eligible to opt compositio...
❯❯
Maximize Maximize Maximize
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 Summaries Hide All Summaries
Manuals Income Tax
Show AI Summary
ICDS applicability limited to mercantile accounting; excludes cash-accounting and individuals/HUFs not subject to tax audit.
ICDS applies to persons following the mercantile system of accounting and does not apply to those following the cash system. For individuals and HUFs, ICDS is applicable only if they carry on business or profession and their books are required to be audited under the tax audit provisions; it does not apply where there is no business or professional income even if mercantile accounting is followed for other heads.
Manuals GST
Show AI Summary
Reversal of Input Tax Credit on switching to composition scheme; capital goods credit prorated by remaining useful life.
Switching to the composition scheme requires reversal of Input Tax Credit on inputs, inputs in semi finished or finished goods held in stock, and capital goods held in stock as on the day before the option is exercised, by payment from the electronic credit or cash ledger after prescribed reductions. For capital goods, reversal is prorated by remaining useful life using an assumed five year useful life, with the credit attributable to remaining months computed as original credit multiplied by remaining months divided by sixty.
Manuals GST
Show AI Summary
Input tax credit eligibility on switching from composition to normal scheme - capital goods credit reduced over time, subject to time bar.
A taxpayer switching from the composition scheme to the normal scheme may claim Input Tax Credit for inputs, inputs in goods held in stock, and capital goods held immediately before liability to pay tax, but credit for capital goods must be reduced by the prescribed periodic reduction measured from the invoice or receipt date, and no credit may be claimed for supplies after one year from the tax invoice date.
Act Rules GST
Show AI Summary
Input Tax Credit denial: purchases from composition taxpayers are ineligible for ITC under the GST regime.
A composition scheme taxpayer is excluded from the input tax credit chain, cannot issue a tax invoice or collect tax, and must state that no credit is available. Consequently, a registered person purchasing from a composition dealer cannot claim Input Tax Credit because the supplier does not charge GST in a manner that would enable the recipient to treat the payment as tax paid for ITC purposes.
Act Rules GST
Show AI Summary
Composition scheme threshold triggers monthly tax payment and monthly returns requirement for the affected taxpayer.
A taxpayer under the Composition Scheme may pay and file on the quarterly schedule (guidance noting payment on the 18th and quarterly return on the 18th after quarter-end). If the taxpayer crosses the threshold or withdraws from composition, they become a regular taxable person and must pay tax and furnish returns monthly by the 20th of the following month for the remainder of the financial year and subsequent years.
Act Rules GST
Show AI Summary
GST payment due date: monthly filers pay with next-month return; composition filers pay with quarterly return.
Tax under GST must be paid not later than the return's due date. Monthly filers must file GSTR-3 and pay tax by the twentieth day of the month following the tax month. Composition taxpayers under the composition scheme file quarterly in GSTR-4 and must pay tax by the eighteenth day after the quarter ends.
Act Rules GST
Show AI Summary
Composition levy on exempt supplies raises eligibility ambiguity due to turnover inclusion versus ineligibility for non leviable supplies.
The composition levy's tax base, as defined by turnover, expressly includes exempt supplies, indicating that composition tax is payable having regard to exempted goods; however, Section 10(2)(b) disqualifies persons making supplies "not leviable to tax," creating an ambiguity whether exempt supplies (which definitionally includes nil rated and wholly exempt supplies and non taxable supplies) render a person ineligible for composition. Commentators note this tension and call for clarification or amendment to reconcile the turnover inclusion with the eligibility restriction.
Act Rules GST
Show AI Summary
Eligibility for composition scheme may be barred by prior inter state supplies, even if current turnover is below threshold.
A registered person who made inter state supplies during the previous year is ineligible to opt for the composition scheme in the current year, because eligibility under Section 10 is determined with reference to the preceding financial year; thus the absence of inter state supplies must be assessed for the previous year even if turnover remains below the threshold.
Act Rules GST
Show AI Summary
Composition scheme eligibility: turnover in preceding financial year determines entitlement; aggregate turnover is all-India and fresh declaration required.
Eligibility for the composition scheme depends on aggregate turnover in the preceding financial year not exceeding the prescribed threshold; aggregate turnover is computed on an all India basis and includes taxable supplies (excluding inward reverse charge supplies), exempt supplies, exports and inter State supplies by the same PAN, while excluding GST and cess. Eligibility is reassessed each year; a fresh declaration is required to opt into the scheme after becoming eligible.
Act Rules GST
Show AI Summary
Composition scheme validity continues while statutory conditions are met; annual intimation is not required for eligible taxpayers.
The composition levy remains valid so long as statutory eligibility conditions and applicable CGST Rules are complied with; no fresh annual intimation is required if those conditions continue to be met.
Act Rules GST
Show AI Summary
Composition levy option must be elected before the financial year begins; prior electronic intimation required.
The option to pay tax under the composition levy must be exercised by giving electronic intimation in FORM GST CMP-02 prior to the commencement of the relevant financial year under the Central Goods and Services Tax Rules, 2017.
Act Rules GST
Show AI Summary
Composition levy withdrawal: file FORM GST CMP-04 and submit FORM GST ITC-01 detailing stock within the prescribed period.
Withdrawal from the composition scheme is effected by filing a duly signed or verified application in FORM GST CMP-04, and the applicant must electronically furnish FORM GST ITC-01 detailing stock of inputs and inputs contained in semi-finished or finished goods held on the date of withdrawal within thirty days of withdrawal.
Act Rules GST
Show AI Summary
Composition scheme: importers may remain in composition though IGST on imports may not yield input tax credit, service providers excluded.
Importers can opt for the composition scheme where otherwise eligible; there is no categorical bar on importers availing composition levy. IGST is payable on import and such tax may not yield input tax credit for a composition taxpayer. Pure service providers remain ineligible for composition, and importing services for business or captive consumption does not automatically make a person a service provider or disqualify composition eligibility.
Act Rules GST
Show AI Summary
Composition scheme eligibility: exporters cannot use composition tax where their supplies are treated as inter State, barring such option.
Exports are treated as inter State supplies for GST purposes. The composition levy prohibits a taxpayer from making inter State outward supplies of goods while paying tax under the composition scheme. Therefore, an exporter whose transactions are classified as inter State supplies cannot opt to pay tax under the composition scheme in respect of those export supplies.
Act Rules GST
Show AI Summary
Composition scheme: suppliers cannot make inter State outward supplies to SEZ while remaining in the scheme.
Supplies from the domestic tariff area to an SEZ are treated as inter State supplies, and Rule 5/Section 10 conditions for the composition levy prohibit a composition taxpayer from making inter State outward supplies; therefore a person paying tax under the composition scheme cannot make outward supplies of goods to an SEZ while remaining in the scheme.
Act Rules GST
Show AI Summary
Composition scheme eligibility denied where stock on appointed day was purchased inter state, imported, or received from outside State.
Persons below the turnover threshold who hold stock on the appointed day cannot opt for the composition scheme if that stock was purchased inter state, imported, or received from an out of State branch, agent or principal; possession of such goods on the appointed day disqualifies a registered person from the composition levy.
Act Rules GST
Show AI Summary
Composition scheme eligibility barred for casual and non-resident taxable persons; cannot claim composition as casual dealer.
A taxpayer acting as a casual taxable person or a non-resident taxable person is expressly excluded from the composition levy; therefore casual dealers and non-resident taxable persons cannot avail the composition scheme while operating in that capacity.
Act Rules GST
Show AI Summary
Composition scheme ineligibility: manufacturers of ice cream, pan masala and tobacco and certain suppliers cannot opt.
Section 10(2) excludes five categories from the composition scheme: suppliers of services (except restaurant services), suppliers of non taxable goods, inter State suppliers, persons supplying through electronic commerce operators, and manufacturers of notified goods. Rule 5 adds further ineligible classes. A notification further specifies that manufacturers of ice cream, pan masala, and all tobacco and manufactured tobacco substitutes are not eligible for composition levy.
Act Rules GST
Show AI Summary
Composition scheme lapse triggers transition to regular tax liability and requires issuing tax invoices and filing withdrawal notice promptly.
Crossing the aggregate turnover threshold causes the composition option to lapse from the day the threshold is exceeded; the person is liable to pay tax under section 9 from that day and must issue tax invoices for every taxable supply made thereafter. The person must also file an intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days of the occurrence of such event.
Act Rules GST
Show AI Summary
Composition scheme eligibility may be available for suppliers using e-commerce operators while TDS/TCS provisions remain inoperative.
Eligibility for the composition scheme is negated for suppliers making supplies through an electronic commerce operator required to collect tax at source; however, because the TDS/TCS provisions are not yet operative and ECOs are not required to collect tax, suppliers using ECOs may currently opt for the composition scheme until the collection provisions are brought into force, and an administrative clarification from the government is recommended to remove uncertainty.

TMI Notes

Back

All TMI Notes

Showing Results for :
Reset Filters
No Records Found

TMI Notes

Back

All TMI Notes

whatsapp Join Channel
Showing Results for : Reset Filters

Comparison of SCHEDULE VI "INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF CERTAIN ELIGIBLE PERSONS IN INTERNATIONAL FINANCIAL SERVICES CENTRE OR HAVING INCOME THEREFROM" between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

18 September, 2025

Contents
Acts
Rules & Regulations
Summary
Note

Note

-

Bookmark

Print

Print

SCHEDULE VI - INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF CERTAIN ELIGIBLE PERSONS IN INTERNATIONAL FINANCIAL SERVICES CENTRE OR HAVING INCOME THEREFROM

Income-tax Act, 2025

At a Glance

Schedule VI in the Income Tax Bill, 2025 (Old Version). It lists categories of income not to be included in total income of certain eligible persons connected with International Financial Services Centres (IFSCs). It matters to non-residents, IFSC units, specified funds, offshore banking units, portfolio managers and investors in such funds. 

Background & Scope

Statutory hook: Schedule VI is presented "See section 11" and is annexed to the Income Tax Bill, 2025 (Old Version). The Schedule identifies income heads and categories of eligible persons whose specified incomes "shall not be included" in total income, subject to conditions in Column D and definitions in accompanying Notes. The Schedule addresses income relating to transfers on recognised stock exchanges in IFSCs, transfers of securities, income from securitisation trusts, derivative transactions with IFSC participants, royalty/interest on lease of aircraft/ship, portfolio management receipts, capital gains on shares of domestic companies with IFSC units, specified fund returns, dividend receipts from IFSC units engaged in leasing, and interest payable by IFSC units. Definitions and clarificatory notes appear as Note 1 through Note 7 and specify terms such as "convertible foreign exchange," "investment division of offshore banking unit," "manager," "permanent establishment," "securities," "securitisation trust," "specified fund," "sponsor," "trust," and "units." The Schedule incorporates cross-references to other statutes and regulations including the Reserve Bank of India, Securities and Exchange Board of India Regulations, the International Financial Services Centres Authority Acts/Regulations and the Special Economic Zones Act.

Statutory Provision Mode

Text & Scope

Coverage: The Schedule is a table of 12 distinct items describing income types that are excluded from total income of defined eligible persons. Each row sets out (A) a description of income; (B) the eligible person; and (D) conditions for the exclusion. Core items include capital gains on transfers u/s 70(1)(r) on recognised IFSC exchanges (Sl.1), transfers of securities excluding shares of resident companies (Sl.2), income from non-resident issued securities (Sl.3), securitisation trust income (Sl.4), NDFs/ODIs/OTC derivatives transfers or distributions (Sl.5), royalty/interest on aircraft/ship leases (Sl.6), income from portfolios managed in IFSC contexts (Sl.7), capital gains on domestic company equity where the domestic company is an IFSC unit (Sl.8), income from specified funds (Sl.9), capital gains on transfer of shares of Indian resident companies linked to relocation to a resultant fund (Sl.10), dividends received by IFSC units engaged in leasing (Sl.11), and interest payable by IFSC units for borrowings on/after 1 September 2019 (Sl.12).

Interpretation

The Schedule operates as a negative inclusion clause-income of specified description shall not be included in total income when the conditions are satisfied. Legislative intent, as evidenced by cross-references and delegated prescription language, is to create tax neutrality or favourable tax treatment for financial activities routed through IFSCs and for specified funds and their non-resident unit-holders, subject to regulatory/formal conditions to prevent abuse. The repeated use of delegated-law phrasing ("as prescribed") indicates Parliament's intent to allow Central Government/Regulator-level granular conditions and computations to be specified by rules/regulations.

Exceptions/Provisos

Carve-outs: Many exclusions are conditional-e.g., Sl.1 requires consideration in convertible foreign exchange and that exemption be only to extent attributable to units held by non-residents or investment divisions of offshore banking units. Sl.3 requires that the income otherwise does not accrue or arise in India. Sl.6 requires that the paying IFSC unit has commenced operations on or before 31 March 2030. Sl.8 confines the capital gains exclusion to specified 10-year windows from commencement of operations (or from 1 April 2023 where applicable). Sl.10 requires transfer to a resultant fund via relocation and restricts the benefit to the extent attributable to units held by non-residents. Several notes set out detailed definitional provisos; for instance, "specified fund" requires Category III AIF registration or IFSC fund regulation and unit-holding restrictions (allowing a sponsor/manager unit and limited resident holdings up to 5% subject to conditions).

Illustrations

  • Fund A, a trust in an IFSC with all units held by non-residents, sells securities on a recognised IFSC exchange and receives convertible foreign exchange. The capital gains on the transfer may be excluded from total income of the specified fund subject to the computation rules (Not stated in the document: precise computation formula).
  • Non-resident investor receives distribution from an offshore derivative instrument entered into with an offshore banking unit in an IFSC. If the contract is with an offshore banking unit or an FPI unit of IFSC and conditions as prescribed are met, the income may be excluded from the non-resident's total income.
  • A domestic company that is an IFSC unit engaged primarily in aircraft leasing commences operations on 1 April 2024. Capital gains arising on transfer of its equity in a tax year within ten tax years may be excluded for an eligible non-resident or IFSC unit purchaser, subject to the stated conditions.

Interplay

The Schedule expressly references several external statutes and regulatory instruments: the Foreign Exchange Management Act, 1999 (for convertible foreign exchange), SEBI AIF Regulations, 2012, SEBI FPI Regulations, 2019, IFSC Authority (Fund Management) Regulations, 2022, IFSC Authority (Capital Market Intermediaries) Regulations, 2021, Special Economic Zones Act (for definition of Unit), and domestic Income-tax Act sections (section 70(1)(r), section 70(2), section 173(c), section 221(6)(d)). The Schedule anticipates delegated rules for computation and qualification ("as prescribed"), indicating reliance on subsequent notifications/circulars to operationalise conditions and valuation/computation methodologies. Specific cross-references (e.g., to section 147 for IFSC units) are used to tie tax treatment to statutory characterisation of IFSC entities.

Differences Between Documents

  • (Sl. No. 9) - Treatment of income from a specified fund or on transfer of units: Document 1 (Schedule VI of Income-tax Act, 2025) explicitly records the entry in Column D as "Nil." Document 2 (Income Tax Bill, 2025 - Old Version) leaves Column D blank (non-filled).
    • Practical impact: The Act version removes doubt by expressly providing nil conditions for the eligible person, which clarifies that no further conditions are required for that entry; the Bill's version could have generated uncertainty on whether any qualifying conditions applied.
  • Drafting and formulation differences - use of legislative phrasing: Document 1 consistently uses "as may be prescribed" in several conditions (e.g., Sl. No.1(c) "shall be computed in such manner as may be prescribed"), whereas Document 2 often uses the shorter "as prescribed" or "as notified" in similar places.
    • Practical impact: The Act version's "as may be prescribed" is the conventional indicative of delegated legislation; the Bill's shorter phrasing is substantively similar but the Act wording aligns with settled legislative drafting norms and can be interpreted as a clearer delegation to rulemaking authorities.
  • Definitions structure for "specified fund" (Note 1(g)): There are re-arrangements and slight reformulations. Document 2 presents sub-clauses (A) and (B) and then (C) and (D) (with (C) stating location and (D) the unit-holding exceptions). Document 1 embeds the location requirement as part of the initial description ("a fund ... located in International Financial Services Centres") and then sets out regulatory regimes (I) and (II) and other descriptive elements.
    • Practical impact: The Act text (Document 1) is more tightly structured to associate regulatory regime and location in a single sentence which aids interpretation that location in an IFSC is an essential attribute; the Bill's layout might have been read as fragmented and therefore more ambiguous regarding whether regulation or location were independent requirements.
  • Specific phrase differences in examples and notes: e.g., Document 2 uses "monies" in Note to Sl. No. 12 whereas Document 1 uses "moneys" (spelling variation); Document 1 cites the International Financial Services Centres Authority regulations (with years) similarly to Document 2 but sometimes presents the regulatory citation with slightly different punctuation and parenthetical years.
    • Practical impact: These are drafting-level differences with minimal substantive effect but the Act's editorial consistency reduces risk of citation ambiguity.
  • Scope of some clauses (Sl. No. 5 and related notes): Document 1 expressly includes "over-the-counter derivatives" in the heading of clause 5(b) and in certain cross references, and clarifies that qualifying counterparty may be "an offshore banking unit of an International Financial Services Centre as referred to in section 147 or any Foreign Portfolio Investor being a unit of an International Financial Services Centre." Document 2 contains a similar formulation but with slightly different punctuation and omission of the phrase "as referred to in section 147" in one place.
    • Practical impact: Document 1's explicit cross-reference to section 147 and consistent phraseology provides stronger statutory linkage to IFSC units, reducing interpretive friction when applying provisions to offshore banking units and FPIs.
  • Computational/technical wording: Document 1 uses "shall have the meanings respectively assigned to them in the Notes below the said Table" and similar phrasing; Document 2 has near identical phrasing but differs in capitalization and small syntactic points.
    • Practical impact: No substantive difference; primarily editorial and drafting refinement in the Act.

Practical Implications

  • Compliance and risk areas: Taxpayers and fund managers must ensure strict compliance with the unit-holding criteria for "specified funds" (non-resident majority with narrow resident exceptions) and with commencement-of-operations timelines (notably 31 March 2030). Failure to meet conditions will negate the exclusion. Reliance on delegated rules is necessary for computation-non-availability of notified rules would create compliance risk.
  • Record-keeping/evidence: The text implies the need to maintain documentary evidence of (i) convertible foreign exchange receipt, (ii) unit-holding registers showing resident/non-resident status and percentages, (iii) documentation of transfers on recognised IFSC stock exchanges, (iv) contracts with offshore banking units/FPIs for derivative transactions, (v) dates of commencement of operations for IFSC units, and (vi) particulars of relocation transfers between original and resultant funds. The Schedule itself does not prescribe specific documents-administrative rules likely will.

Key Takeaways

  • Schedule VI lists discrete income categories excluded from total income for specified IFSC-related actors, subject to conditions and definitions.
  • The exclusions primarily benefit non-residents, IFSC units, specified funds and their non-resident unit-holders to foster IFSC financial activity.
  • Many exclusions are conditional (convertible foreign exchange, unit-holding restrictions, commencement dates, 10-year windows), making eligibility fact-sensitive.
  • The Schedule relies on external regulations and delegated "prescribed" rules for computation and detailed conditions; absence of those rules may impede operational application.
  • Robust records proving non-resident status of unit-holders, transactional currency, dates of commencement and contractual counterparties will be central to claiming the exclusions.
  • Some drafting ambiguities in the Bill may have been clarified in subsequent Act drafting (e.g., explicit "Nil." for Sl.9 in the Act), underscoring the importance of checking final enacted text and notifications.

Full Text:

SCHEDULE VI - INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF CERTAIN ELIGIBLE PERSONS IN INTERNATIONAL FINANCIAL SERVICES CENTRE OR HAVING INCOME THEREFROM

Topics

Acts Income Tax