1182. Effect of non obstante clause in the section - Whether sections 193, 194 and 194A continue to be in force and facility provided in the section is in addition to facility under the said sections
1. The Finance Act, 1982 has inserted a new section 197A with effect from June 1, 1982. The section enables an individual who is resident in India and whose estimated total income of the previous year is less than the minimum liable to income-tax to receive interest on securities, dividends and other interest without deduction of tax at source under sections 193, 194 and 194A of the Act on furnishing a declaration, in duplicate, in the prescribed form and verified in the prescribed manner. Rule 29C and Form Nos. 15F, 15G and 15H have been inserted in the Income-tax Rules, 1962 by the Income-tax (Fifth Amendment) Rules, 1982 prescribing the forms for the purposes of section 197A and laying down the procedure for furnishing the declaration form.
2. The facility of claiming payments of interest on securities, dividends, etc., under section 197A is available only in the case of individuals who are resident in India within the meaning of section 6 of the Act. Accordingly, it is not permissible for Hindu undivided families and other categories of taxpayers to claim payments of interest on securities, dividends, etc., without deduction of tax at source on furnishing the declaration in Form No. 15F, 15G or 15H.
3. The declaration in Form No. 15F, Form No. 15G or, as the case may be, Form No. 15H is to be furnished by the declarant to the person responsible for paying any income of the nature referred to in section 193 or section 194 or, as the case may be, section 194A of the Act. As defined in section 204 of the Act, the expression “person responsible for paying” for the purposes of the aforesaid sections means (a) in the case of payments of income chargeable under the head “Interest on securities” (other than payments made by or on behalf of the Central Government or the Government of a State), the local authority, corporation or company, including the principal officer thereof; and (b) in the case of credit or payment of any other sum chargeable under the Income-tax Act, the payer himself, or if the payer is company, the company itself including principal officer thereof. Section 2(35) of the Act defines “principal officer” with reference to a local authority, a company, any other public body; or any association of persons ora) the secretary, treasurer, manager or agent of the authority, company, organization or body; or (b) any person connected with the management or administration of the local authority, company, association or
4. The effect of non obstante clause in section 197A is that it supersedes the provisions of sections 193, 194 and 194A only insofar as these cast a legal obligation on the person responsible for paying the income of the nature referred to in the said sections to deduct tax at source. Thus, the provisions of sections 193, 194 and 194A, which provide a facility for receiving the income referred to therein without deduction of tax at source, continue to be in force and the facility provided in the new section 197A is in addition to the facility provided under the existing provisions in sections 193, 194 and 194A.
5. The declaration in Form No. 15F, 15G or 15H as explained above is to be furnished to the person responsible for paying the income which is sought to be received without deduction of tax at source. As the declarant has to state that his estimated total income of the previous year in which the income of the nature referred to in section 193, 194 or 194A is to be included in computing his total income is below the exemption limit, it will be sufficient if only one declaration is made in respect of the income each year before each person responsible for making the payment. Hence, where payments are to be made by the same person more than once in a year, the declaration in the relevant form may be furnished before the first payment in a year becomes due. It may also be noted that in the declaration in Form No. 15F, 15G or 15H particulars of only such securities, shares or, as the case may be, other deposits are to be furnished the income from which is payable by the person to whom the declaration is furnished. For example, in the declaration in Form No. 15G furnished to company ‘A’ it is not necessary for the declarant to give particulars of the shares held by him in other companies.
Circular : No. 351 [F.No. 142(32)/82-TPL], dated 26-11-1982.
1. Subsequent to the amendment to section 197A made by the Finance Act, 2002 whereby a new sub-section (1B) has been inserted with effect from 1st June, 2002, representations have been received seeking clarification whether the prescribed self-declaration under the said section can be submitted by entities exempt from tax under section 10 even if the payments referred to in sub-section (1A) to be made to them exceed the threshold limit not subject to tax.
2. This matter has been examined by the Board. It has been decided that in case of those funds or authorities or Boards or bodies, by whatever name called, whose income is unconditionally exempt under section 10 of the Income-tax Act and who are statutorily not required to file return of income as per section 139 of the Income-tax Act, there would be no requirement for tax deduction at source since their income is anyway exempt under the Income-tax Act. The institutions whose income is unconditionally exempt under section 10 and who are statutorily not required to file return of income as per the provisions of section 139 are :
(i) “local authority”, as referred to in the Explanation to clause (20);
(ii) Regimental Fund or Non-public Fund established by the armed forces of the Union referred to in clause (23AA);
(iii) Fund, by whatever name called, set up by the Life Insurance Corporation of India on or after 1st August, 1996, or by any other insurer referred to in clause (23AAB);
(iv) Authority (whether known as the Khadi and Village Industries Board or by any other name) referred to in clause (23BB);
(v) Body or authority referred to in clause (23BBA);
(vi) SAARC Fund for Regional Projects set up by Colombo Declaration referred to in clause (23BBC);
(vii) Secretariat of the Asian Organisation of the Supreme Audit Institutions referred to in clause (23BBD) till assessment year 2003-2004;
(viii) Insurance Regulatory and Development Authority referred to in clause (23BBE);
(ix) Prime Minister’s National Relief Fund referred to in sub-clause (i), Prime Minister’s Fund (Promotion of Folk Art) referred to in sub-clause (ii), Prime Minister’s Aid to Students Fund referred to in sub-clause (iii), National Foundation for Communal Harmony referred to in sub-clause (iiia), any university or other educational institution referred to in sub-clause (iiiab) and any hospital or other institution for the reception and treatment of persons as referred to in sub-clause (iiiac) of clause (23C);
(x) Credit Guarantee Fund Trust for Small Scale Industries referred to in clause (23EB) till assessment year 2006-2007;
(xi) Provident fund to which the Provident Funds Act, 1925 (19 of 1925) referred to in sub-clause (i), recognised provident fund referred to in sub-clause (ii), approved superannuation funds referred to in sub-clause (iii), approved gratuity fund referred to in sub-clause (iv) and funds referred to in sub-clause (v) of clause (25);
(xii) Employees’ State Insurance Fund referred to in clause (25A);
(xiii) Corporations referred to in clause (26BB);
(xiv) Boards referred to in clause (29A).
Circular : No. 4/2002, dated 16-7-2002.