Union Budget 2023-24 + FINANCE Bill, 2023

D. Widening and Deepening of Tax Base/ Anti Avoidance

Extending deeming provision under section 9 to gift to not-ordinarily resident

Under the Act, income which, inter-alia, is deemed to accrue or arise in India during a year is chargeable to tax. Sub-section (1) of section 9 of the Act is a deeming provision providing the types of income deemed to accrue or arise in India.

2. Finance (No. 2) Act, 2019 inserted clause (viiii) to sub-section (1) of section 9 of the Act to provide that the any sum of money exceeding fifty thousand rupees, received by a non-resident without consideration from a person resident in India, on or after the 5th day of July, 2019, shall be income deemed to accrue or arise in India. Sum of money is referred to in sub-clause (xviia) of clause (24) of section 2 of the Act.

3. The above amendment was introduced as an anti-abuse provision, as certain instances were observed where gifts were being made by persons residents in India to non-residents and were claimed to be non-taxable in India by such non-residents.

4. It has come to notice that certain persons being not ordinarily residents are receiving the gifts from persons resident in India and not paying tax on it.

5. In view of the above, it is proposed to amend clause (viii) of sub-section (1) of section 9 of the Act so as to extend this deeming provision to sum of money exceeding fifty thousand rupees, received by a not ordinarily resident, without consideration from a person resident in India.

6. This amendment will take effect from 1st April, 2024 and will accordingly apply to assessment year 2024-25 and subsequent assessment years.

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Full Text:

Union Budget 2023-24 + FINANCE Bill, 2023

Deeming provision for gifts extended to not ordinarily residents, bringing certain inbound gifts within the Indian tax net. Clause (viii) of sub section (1) of section 9 is proposed to be amended to extend the deeming rule so that sums received without consideration by a not ordinarily resident from a person resident in India are treated as income deemed to accrue or arise in India; the change is intended as an anti abuse measure to capture gifts not presently within the scope of the existing deeming provision and will apply prospectively to specified assessment years.