FINANCE ACT, 2021
[Act No. 13 of 2021]
[28th March, 2021]
An Act to give effect to the financial proposals of the Central Government for the financial year 2021-2022.
Be it enacted by Parliament in the Seventy-second Year of the Republic of India as follows:--
(1) This Act may be called the Finance Act, 2021.
(2) Save as otherwise provided in this Act,--
(a) sections 2 to 88 shall come into force on the 1st day of April, 2021;
(b) sections 108 to 123 shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
(1) Subject to the provisions of sub-sections (2) and (3), for the assessment year commencing on the 1st day of April, 2021, income-tax shall be charged at the rates specified in Part I of the First Schedule and such tax shall be increased by a surcharge, for the purposes of the Union, calculated in each case in the manner provided therein.
(2) In the cases to which Paragraph A of Part I of the First Schedule applies, where the assessee has, in the previous year, any net agricultural income exceeding five thousand rupees, in addition to total income, and the total income exceeds two lakh fifty thousand rupees, then,--
(a) the net agricultural income shall be taken into account, in the manner provided in clause (b) [that is to say, as if the net agricultural income were comprised in the total income after the first two lakh fift
In Section 2 of the Income-tax Act,--
(i) in clause (11), in sub-clause (b), after the words "or commercial rights of similar nature,", the words "not being goodwill of a business or profession," shall be inserted;
(ii) in clause (14), after sub-clause (b), the following sub-clause shall be inserted, namely:--
"(c) any unit linked insurance policy to which exemption under clause (10D) of section 10 does not apply on account of the applicability of the fourth and fifth proviso thereof;";
(iii) in clause (19AA), after Explanation 5, the following Explanation shall be inserted, namely:--
"Explanation 6.--For the purposes of this clause, the reconstruction or splitting up of a public sector company
In section 9A of the Income-tax Act, after sub-section (8), the following sub-section shall be inserted with effect from the 1st day of April, 2022, namely:--
"(8A) The Central Government may, by notification in the Official Gazette, specify that any one or more of the conditions specified in clauses (a) to (m) of sub-section (3) or clauses (a) to (d) of sub-section (4) shall not apply or shall apply with such modifications, as may be specified in such notification, in case of an eligible investment fund and its eligible fund manager, if such fund manager is located in an International Financial Services Centre, as defined in clause (a) of the Explanation to section 80LA, and has commenced its operations on or before the 31st day of March, 2024.".
After section 9A of the Income-tax Act, the following section shall be inserted, namely:--
'9B. Income on receipt of capital asset or stock in trade by specified person from specified entity.-
(1) Where a specified person receives during the previous year any capital asset or stock in trade or both from a specified entity in connection with the dissolution or reconstitution of such specified entity, then the specified entity shall be deemed to have transferred such capital asset or stock in trade or both, as the case may be, to the specified person in the year in which such capital asset or stock in trade or both are received by the specified person.
(2) Any profits and gains arising from such deemed transfer of capital asset or stock in trade or both, as the case may be, by the spec
In section 10 of the Income-tax Act,--
(a) with effect from the 1st day of April, 2022,--
(i) in clause (4D),--
(I) after the words "attributable to units held by non-resident (not being the permanent establishment of a non-resident in India)", the words "or is attributable to the investment division of offshore banking unit, as the case may be," shall be inserted;
(II) in the Explanation,--
(A) after clause (a), the following clause shall be inserted, namely:--
'(aa) "investment division of offshore banking unit" means an investment division of a banking unit of a non-resident located in an International Financial Services Centre, as referred to in s
In section 11 of the Income-tax Act, with effect from the 1st day of April, 2022,--
(a) in sub-section (1),--
(i) in clause (d), for the word "institution", the words, brackets and figures "institution, subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified in sub-section (5) maintained specifically for such corpus" shall be substituted;
(ii) after Explanation 3, the following Explanations shall be inserted, namely:--
"Explanation 4.--For the purposes of determining the amount of application under clause (a) or clause (b),--
(i) application for charitable or religious purposes from the corpus as referred to in clause (d
In Section 32 of the Income-tax Act, in sub-section (1),--
(a) in clause (ii), after the words, figures and letters, "after the 1st day of April, 1998,", the words "not being goodwill of a business or profession," shall be inserted;
(b) in Explanation 3, in clause (b), after the words "or commercial rights of similar nature", the words, "not being goodwill of a business or profession" shall be inserted.
In Section 36 of the Income-tax Act, in sub-section (1), in clause (va), the Explanation shall be numbered as Explanation 1 thereof and after Explanation 1 as so numbered, the following Explanation shall be inserted, namely:--
'Explanation 2.--For the removal of doubts, it is hereby clarified that the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under this clause;'.
In Section 43 of the Income-tax Act, in clause (6), in sub-clause (c), in item (ii), for the words, brackets and figure "as further adjusted by the increase or the reduction referred to in item (i)", the following words, brackets, figures and letters shall be substituted, namely:--
"as further adjusted by,--
(A) the increase or the reduction referred to in item (i), not being increase on account of acquisition of goodwill of a business or profession;
(B) the reduction by an amount which is equal to the actual cost of the goodwill falling within that block as decreased by--
(a) the amount of depreciation actually allowed to the assessee under this Act or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922)for s
In Section 43B of the Income-tax Act, after Explanation 4, the following Explanation shall be inserted, namely:--
"Explanation 5.--For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies.".
In Section 43CA of the Income-tax Act,--
(a) in sub-section (1), after the proviso, the following proviso shall be inserted, namely:--
'Provided further that in case of transfer of an asset, being a residential unit, the provisions of this proviso shall have the effect as if for the words "one hundred and ten per cent.", the words "one hundred and twenty per cent." had been substituted, if the following conditions are satisfied, namely:--
(i) the transfer of such residential unit takes place during the period beginning from the 12th day of November, 2020 and ending on the 30th day of June, 2021;
(ii) such transfer is by way of first time allotment of the residential unit to any person; and
(iii)
In Section 44AB of the Income-tax Act, in clause (a),--
(i) in the proviso, in long line, for the words "five crore rupees", the words "ten crore rupees" shall be substituted;
(ii) after the proviso, the following proviso shall be inserted, namely:--
"Provided further that for the purposes of this clause, the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash.".
In Section 44ADA of the Income-tax Act, in sub-section (1), for the words "in the case of an assessee, being a resident in India, who", the words, brackets, letter and figures "in case of an assessee, being an individual or a partnership firm other than a limited liability partnership as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), who is a resident in India, and" shall be substituted.
In Section 44DB of the Income-tax Act,--
(a) in sub-section (3), after the words "successor co-operative bank", the words "or to the converted banking company" shall be inserted;
(b) in sub-section (4), after the words "a successor co-operative bank" and the words "the successor co-operative bank", the words "or to a converted banking company" and the words "or to the converted banking company" shall, respectively, be inserted;
(c) in sub-section (5),--
(i) after clause (c), the following clause shall be inserted, namely:--
'(ca) "banking company" shall have the meaning assigned to it in clause (c) of section 5 of Banking Regulation Act, 1949 (10 of 1949);';
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In Section 45 of the Income-tax Act,--
(a) after sub-section (1A), the following sub-section shall be inserted, namely:--
'(1B) Notwithstanding anything contained in sub-section (1), where any person receives at any time during any previous year any amount under a unit linked insurance policy, to which exemption under clause (10D) of section 10 does not apply on account of the applicability of the fourth and fifth proviso thereof, including the amount allocated by way of bonus on such policy, then, any profits or gains arising from receipt of such amount by such person shall be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of such person of the previous year in which such amount was received and the income taxable shall be calculated in such manner as may be prescribed.';
In Section 47 of the Income-tax Act,--
(a) in clause (vica), after the words "successor co-operative bank", the words "or to the converted banking company" shall be inserted;
(b) in clause (vicb),--
(i) after the words "successor co-operative bank", the words "or to the converted banking company" shall be inserted;
(ii) in the Explanation, for the words 'expressions "business reorganisation", "predecessor co-operative bank" and', the words 'expressions "business reorganisation", "converted banking company", "predecessor co-operative bank" and' shall be substituted;
(c) after clause (viiab), the following clauses shall be inserted with effect from the 1st day of April, 2022, namely:--
&n
In Section 48 of the Income-tax Act, after clause (ii) the following clause shall be inserted, namely:--
"(iii) in case of value of any money or capital asset received by a specified person from a specified entity referred to in sub-section (4) of section 45, the amount chargeable to income-tax as income of such specified entity under that sub-section which is attributable to the capital asset being transferred by the specified entity, calculated in the prescribed manner:".
In Section 49 of the Income-tax Act, in sub-section (1), in clause (iii), in sub-clause (e), after the words, brackets, figures and letters "clause (vicc) or", the words, brackets, figures and letters "clause (viiac) or clause (viiad) or clause (viiae) or clause (viiaf) or" shall be inserted with effect from the 1st day of April, 2022.
In Section 50 of the Income-tax Act, in clause (2), the following proviso shall be inserted, namely:--
"Provided that in a case where goodwill of a business or profession forms part of a block of asset for the assessment year beginning on the 1st day of April, 2020 and depreciation thereon has been obtained by the assessee under the Act, the written down value of that block of asset and short term capital gain, if any, shall be determined in such manner as may be prescribed.".
In Section 50B of the Income-tax Act,--
(a) for sub-section (2), the following sub-section shall be substituted, namely:--
'(2) In relation to capital assets being an undertaking or division transferred by way of such slump sale,--
(i) the "net worth" of the undertaking or the division, as the case may be, shall be deemed to be the cost of acquisition and the cost of improvement for the purposes of sections 48 and 49 and no regard shall be given to the provisions contained in the second proviso to section 48;
(ii) Fair market value of the capital assets as on the date of transfer, calculated in the prescribed manner, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital a
In Section 54GB of the Income-tax Act, in sub-section (5), in the proviso, for the figures "2021", the figures "2022" shall be substituted.
In Section 55 of the Income-tax Act, in sub-section (2), for clause (a), the following clause shall be substituted, namely:--
"(a) in relation to a capital asset, being goodwill of a business or profession, or a trade mark or brand name associated with a business or profession, or a right to manufacture, produce or process any article or thing, or right to carry on any business or profession, or tenancy rights, or stage carriage permits, or loom hours,--
(i) in the case of acquisition of such asset by the assessee by purchase from a previous owner, means the amount of the purchase price; and
(ii) in the case falling under sub-clauses (i) to (iv) of sub-section (1) of section 49 and where such asset was acquired by the previous owner (as defined in that section) by purchase, means the
In Section 56 of the Income-tax Act, in sub-section (2), in clause (x),--
(a) in sub-clause (b), in item (B), after the third proviso, the following proviso shall be inserted, namely:--
"Provided also that in case of property being referred to in the second proviso to sub-section (1) of section 43CA, the provisions of sub-item (ii) of item (B) shall have effect as if for the words "ten per cent.", the words "twenty per cent." had been substituted;";
(b) in the proviso, in clause (IX) after the word, brackets and figures "clause (vii)", the words, brackets, figures and letters "or clause (viiac) or clause (viiad) or clause (viiae) or clause (viiaf)" shall be inserted with effect from the 1st day of April, 2022.
In Section 72A of the Income-tax Act, in sub-section (1),--
(i) for clause (c), the following clauses shall be substituted, namely:--
"(c) one or more public sector company or companies with one or more public sector company or companies; or
(d) an erstwhile public sector company with one or more company or companies, if the share purchase agreement entered into under strategic disinvestment restricted immediate amalgamation of the said public sector company and the amalgamation is carried out within five year from the end of the previous year in which the restriction on amalgamation in the share purchase agreement ends,";
(ii) after the long line, the following shall be inserted, namely:--
'Pro
In Section 79 of the Income-tax Act, in sub-section (2), after clause (d), the following clause shall be inserted with effect from the 1st day of April, 2022, namely:--
"(e) to a company to the extent that a change in the shareholding has taken place during the previous year on account of relocation referred to in the Explanation to clauses (viiac) and (viiad) of section 47.".
In Section 80EEA of the Income-tax Act, in sub-section (3), in clause (i), for the figures "2021", the figures "2022" shall be substituted with effect from the 1st day of April, 2022.
In Section 80-IAC of the Income-tax Act, in the Explanation, in clause (ii), in sub-clause (a), for the figures "2021", the figures "2022" shall be substituted.
In Section 80-IBA of the Income-tax Act, with effect from the 1st day of April, 2022,--
(a) after sub-section (1), the following sub-section shall be inserted, namely:--
"(1A) Where the gross total income of an assessee includes any profits and gains derived from the business of developing and building rental housing project, there shall be allowed a deduction of an amount equal to hundred per cent. of the profits and gains derived from such business.";
(b) in sub-section (2), in clause (a), for the figures "2021", the figures "2022" shall be substituted;
(c) in sub-section (6), after clause (d), the following clause shall be inserted, namely:--
'(da) "rental housing project" means a project whi
In Section 80LA of the Income-tax Act, with effect from the 1st day of April, 2022,--
(i) in sub-section (1A), for the words "any other relevant laws was obtained", the words "permission or registration under the International Financial Services Centre Authority Act, 2019 (50 of 2019) was obtained" shall be substituted;
(ii) in sub-section (2), after clause (c), the following clause shall be inserted, namely:--
'(d) arising from the transfer of an asset, being an aircraft, which was leased by a unit referred to in clause (c) to a person, subject to the condition that the unit has commenced operation on or before the 31st day of March, 2024.
Explanation.--For the purposes of this clause, "aircraft" shall have the meaning assigned to it in t
After Section 89 of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2022, namely:--
'89A. Relief from taxation in income from retirement benefit account maintained in a notified country.-
Where a specified person has income accrued in a specified account, such income shall be taxed in such manner and in such year as may be prescribed.
Explanation.--For the purposes of this section,--
(a) "notified country" means a country as may be notified by the Central Government in the Official Gazette for the purposes of this section;
(b) "specified account" means an account maintained in a notified country by the specified person in respect of his retireme
In Section 112A of the Income-tax Act, in the Explanation, in clause (a),--
(i) in the opening portion, after the word and figures "section 10", the words, brackets, figures and letter "or under a scheme of an insurance company comprising unit linked insurance policies to which exemption under clause (10D) of the said section does not apply on account of the applicability of the fourth and fifth proviso thereof" shall be inserted;
(ii) after the proviso, the following proviso shall be inserted, namely:--
"Provided further that in case of a scheme of an insurance company comprising unit linked insurance policies to which exemption under clause (10D) of section 10 does not apply on account of the applicability of the fourth and fifth provisos thereof, the minimum requirement of ninety
In Section 115ACA of the Income-tax Act, in the Explanation, with effect from the 1st day of April, 2022--
(i) in clause (a),--
(a) in the opening portion, after the words "the Overseas Depository Bank outside India", the words "or in an International Financial Services Centre" shall be inserted;
(b) after sub-clause (ii), the following sub-clause shall be inserted, namely:--
"(iii) ordinary shares of issuing company, being a company incorporated outside India, if such depository receipt or certificate is listed and traded on any International Financial Services Centre;";
(ii) after clause (c), the following clause shall be inserted, namely:--
'(ca) "
In section 115AD of the Income-tax Act, with effect from the 1st day of April, 2022,--
(i) after sub-section (1A), the following sub-section shall be inserted, namely:--
"(1B) Notwithstanding anything contained in sub-section (1), where the specified fund is investment division of an offshore banking unit, the provisions of this section shall apply to the extent of income that is attributable to the investment division of such banking units, referred to in sub-clause (ii) of clause (c) to the Explanation to clause (4D) of section 10, as a Category-I portfolio investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), calculated in such manner as may be prescribed.";
In Section 115JB of the Income-tax Act, in sub-section (2),--
(a) in Explanation 1,--
(i) in clause (fb), in sub-clause (B), for the words "interest, royalty", the words "interest, dividend, royalty" shall be substituted;
(ii) in the long line, in clause (iid), in sub-clause (B), for the words "interest, royalty", the words "interest, dividend, royalty" shall be substituted;
(b) after sub-section (2C), the following sub-section shall be inserted, namely:--
"(2D) In the case of an assessee being a company, where there is an increase in book profit of the previous year due to income of past year or years included in the book profit on account of an advance pricing agreement entered into by the ass
In Section 115UB of the Income-tax Act, in Explanation 1, in clause (a), for the figures "1992", the figures and words "1992 or under the International Financial Services Centres Authority Act, 2019 (50 of 2019)" shall be substituted with effect from the 1st day of April, 2022.
In Section 139 of the Income-tax Act,--
(a) in sub-section (1), in Explanation 2,--
(i) in clause (a), in sub-clause (iii), after the words "any other law for the time being in force", the words, figure and letter "or the spouse of such partner if the provisions of section 5A applies to such spouse" shall be inserted;
(ii) in clause (aa), after the words "an assessee", the words, "including the partners of the firm or the spouse of such partner (if the provisions of section 5A applies to such spouse) being such assessee," shall be inserted;
(b) in sub-section (4), for the words "return for any previous year at any time before", the words "return for any previous year at any time before three months prior to" shall be substituted;
In Section 142 of the Income-tax Act, in sub-section (1), in clause (i), after the existing proviso, the following proviso shall be inserted, namely:--
"Provided further that a notice under this sub-section for the purposes of this clause may also be served by the prescribed income-tax authority,".
In Section 143 of the Income-tax Act,--
(a) in sub-section (1),--
(i) in the second proviso, for the words "one year", the words "nine months" shall be substituted;
(ii) in clause (a),--
(I) in sub-clause (iv), for the words "disallowance of expenditure indicated", the words "disallowance of expenditure or increase in income indicated" shall be substituted;
(II) in sub-clause (v), for the words, figures and letters "sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if", the words, figures and letters 'section 10AA or under any of the provisions of Chapter VI-A under the heading "C.-Deductions in respect of certain incomes", if' shall be substituted;
&
For Section 147 of the Income-tax Act, the following section shall be substituted, namely:--
"147. Income escaping assessment.-
If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).
Explanation.--For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his
For Section 148 of the Income-tax Act, the following section shall be substituted, namely:--
"148. Issue of notice where income has escaped assessment.-
Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this A
After section 148 of the Income-tax Act, the following section shall be inserted, namely:--
"148A. Conducting inquiry, providing opportunity before issue of notice under section 148.-
The Assessing Officer shall, before issuing any notice under section 148,--
(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such no
For Section 149 of the Income-tax Act, the following section shall be substituted, namely:--
'149. Time limit for notice
(1) No notice under section 148 shall be issued for the relevant assessment year,--
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:
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For Section 151 of the Income-tax Act, the following section shall be substituted, namely:--
"151. Sanction for issue of notice.-
Specified authority for the purposes of section 148 and section 148A shall be,--
(i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;
(ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.".
In Section 151A of the Income-tax Act, in sub-section (1), in the opening portion, after the words and figures "issuance of notice under section 148", the words, figures and letter "or conducting of enquiries or issuance of show-cause notice or passing of order under section 148A" shall be inserted.
In Section 153 of the Income-tax Act,--
(i) in sub-section (1), after the second proviso, the following proviso shall be inserted, namely:--
'Provided also that in respect of an order of assessment relating to the assessment year commencing on or after the 1st day of April, 2021, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "nine months" had been substituted.';
(ii) in Explanation 1,--
(a) in clause (viii), for the words "Authority for Advance Rulings", the words "Authority for Advance Rulings or before the Board for Advance Rulings" shall be substituted;
(b) in clause (ix), for the words "Authority for Advance Rulings", the words "Auth
In Section 153A of the Income-tax Act, in sub-section (1), in the opening portion, after the words, figures and letters "after the 31st day of May, 2003", the words, figures and letters "but on or before the 31st day of March, 2021" shall be inserted.
In section 153B of the Income-tax Act, in the Explanation,--
(a) in clause (vi), for the words "Authority for Advance Rulings", the words "Authority for Advance Rulings or before the Board for Advance Rulings" shall be substituted;
(b) in clause (vii), for the words "Authority for Advance Rulings", the words "Authority for Advance Rulings or before the Board for Advance Rulings" shall be substituted;
(c) after the third proviso, the following proviso shall be inserted and shall be deemed to have been inserted with effect from the 1st day of February, 2021, namely:--
"Provided also that where the assessee exercises the option to withdraw the application under sub-section (1) of section 245M, the period of limitation available under this sec
In Section 153C of the Income-tax Act, after sub-section (2), the following sub-section shall be inserted, namely:--
"(3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021.".
In Section 194 of the Income-tax Act, in the second proviso, after clause (c), the following clauses shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2020, namely:--
'(d) a "business trust", as defined in clause (13A) of section 2, by a special purpose vehicle referred to in the Explanation to clause (23FC) of section 10;
(e) any other person as may be notified by the Central Government in the Official Gazette in this behalf.'.
In Section 194A of the Income-tax Act, in sub-section (3), in clause (x), after the words "infrastructure capital fund or", the words "infrastructure debt fund or" shall be inserted.
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