gtag('config', 'UA-154374887-1');

Withdrawal of exemption under clauses (8), (8A), (8B) and (9) of section 10: Budget 2022

withdrawal-of-exemption-under-clauses-8-8a-8b-and-9-section-10-budget-2022

In the effort of the government to phase out the exemptions, Finance Bill, 2022 proposes to amend clauses (8), (8A), (8B) and (9) of section 10 of the Income-tax Act, 1961 (‘Act’) and add a sunset clause to provide that the provisions of these clauses shall not apply to remuneration, fee or income of the previous year relevant to the assessment year beginning on or after April 1, 2023.


Withdrawal of exemption under clauses (8), (8A), (8B) and (9) of section 10 of the Act


Clause (8) of section 10 of the Act provides for exemption to the income of an individual who is assigned duties in India in connection with any co-operative technical assistance programmes and projects. Such co-operative technical assistance programmes and projects are required to be in accordance with an agreement entered by the Central Government and the Government of a foreign state (the terms thereof provide for the exemption given by this clause). 



Exemption is provided to both (i) the remuneration received by the individual from the foreign state for such duties and (ii) any other income accruing or arising outside India (which is not deemed to accrue or arise in India), in respect of which the individual is required to pay any income or social security tax to the Government of the foreign state. 


Clause (8A) of section 10 provides for exemption on the remuneration or fee received by a consultant, directly or indirectly out of the funds made available to an international organisation (agency) under a technical assistance grant agreement between the agency and the Government of a foreign state. The said clause also provides exemption to such consultant in respect of any income accruing or arising outside India (which is not deemed to accrue or arise in India), in respect of which the consultant is required to pay income or social security tax to the Government of the country of his or its origin. 



For the purposes of this clause, if the consultant is an individual he must be a foreign citizen or in case he is an Indian citizen he should be not ordinarily resident in India. In case the consultant is not an individual, such person is required to be non-resident. 


Consultant should be engaged by the agency for rendering technical services in India in connection with any technical assistance programme or project. Such technical assistance programme or projects are required to be in accordance with an agreement entered into by the Central Government and the agency and the agreement relating to the engagement of the consultant is required to be approved by the prescribed authority. 


Clause (8B) of section 10 provides for exemption to an individual who is an employee of the consultant as referred to in clause (8A) of section 10 . Such individuals are those who are assigned duties in India in connection with any technical assistance programme and project. These technical assistance programmes and projects are required to be in accordance with an agreement entered into by the Central Government and the agency.


The exemption is provided to the remuneration received by such individual, directly or indirectly, for such duties from any consultant referred to in clause (8A) of section 10. Exemption is also provided to any income accruing or arising outside India (which is not deemed to accrue or arise in India), in respect of which the individual is required to pay income or social security tax to the country of his origin.


The individual must be the employee of the consultant. He may be a foreign citizen or if he is an Indian citizen, he is not ordinarily resident in India. It is also required that the contract of service of the employee is approved by the prescribed authority before the commencement of his service. 


Clause (9) of section 10  provides for exemption to the income of the family members of any individual or consultant as referred in clause (8), clause (8A) and clause (8B), who accompanies such individual or consultant to India. The exemption is provided to income accruing or arising outside India (which is not deemed to accrue or arise in India), in respect of which such member is required to pay any income or social security tax to the Government of that foreign state or country of origin of such member.


The exemptions as provided under the above-mentioned clauses have outlived their utility in the era of simplification of tax laws and where exemptions and tax incentives are being phased out as a matter of stated policy of the Government. Further, if under a tax treaty, India gets a right to tax a particular income and the other country is expected to then relieve double taxation by exemption or credit method, providing exemption by India amounts to surrender of right of taxation by India in favour of the other country.


Accordingly, it is proposed to amend clauses (8), (8A), (8B) and (9) of section 10 of the Act to provide that the provisions of the said clauses shall not apply to remuneration, fee or income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023.


These amendments will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.


For this purpose, section 10 of the Act is proposed to be amended by Clause 4 of the Finance Bill, 2022 as follows-


Amendment of section 10. 


4. In section 10 of the Income-tax Act,–


(a)...


(i) …


(ii) …


(iii)... 


(iv) in clause (8), after sub-clause (b), the following proviso shall be inserted, namely:–– 


“Provided that nothing contained in this clause shall apply to such remuneration and income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023;”;


(v) in clause (8A), after sub-clause (b) and before the Explanation, the following proviso shall be inserted, namely:–– 


“Provided that nothing contained in this clause shall apply to such remuneration, fee and income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023.”; 


(vi) in clause (8B), after sub-clause (b), the following proviso shall be inserted, namely:–– 


“Provided that nothing contained in this clause shall apply to such remuneration and income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023;”; 


(vii) after clause (9), the following proviso shall be inserted, namely:–– 


“Provided that nothing contained in this clause shall apply to such income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023;”; 


Other related articles on Budget 2022

Finance Minister Presents Finance Bill 2022 after Union Budget 2022 in Loksabha

Download Finance Bill, 2022 (PDF) as introduced in Loksabha

Download Memorandum Explaining the Provisions in the Financial Bill 2022

Income Tax announcements in Budget Speech: Union Budget 2022

New Income Tax Slab Rates after Union Budget 2022

Changes in Personal Taxation by Union Budget 2022

Section 139(8A): Filing of Updated Return - Budget 2022

Corporate Tax Proposals: Union Budget 2022

Changes in TDS and TCS Provisions by Finance Bill, 2022

Tax Exemption on Amount Received for COVID-19: Budget 2022

Health & Education 'cess' Not Deductible as Business Expenditure: Budget 2022

Section 80DD Tax Relief to Persons with Disability: Budget 2022

Conversion of Interest into Debenture Does Not amount to Payment under Section 43B: Budget 2022

Source of Source for Loans and Borrowings Under Section 68: Budget 2022

Amendment to Section 14A to Disallow Expenses if No Exempt Income: Budget 2022

Reduced Alternate Minimum Tax u/s 115JC and Surcharge for Cooperative Societies: Budget 2022

Extension of Sunset Manufacturing Date under section 115BAB

Extension of Sunset Date of Incorporation for Start-ups Section 80-IAC

Withdrawal of Special Tax Rate on Dividend Under Section 115BBD

Drafting Error for Deduction under Section 35 Corrected

Surcharge on Long Term Capital Gains and Income Tax Reduced by Budget 2022

Definition of ‘Slump Sale’ Amended to Cover all Transfers: Budget 2022

Clarification on Transfer of Goodwill on Reduction from Block of Assets

Bonus Stripping under Section 94(8) to Cover Shares and Units

Disallowance of Expenses for Offence under section 37 further Clarified: Budget 2022

Carry forward and Set off of losses for Change in Shareholding due to Strategic Disinvestment under Section 79

Set off of Loss with Undisclosed Income found during Search and Survey: Section 79A

Section 119 amended Empowering CBDT to Issue Orders for Late Fees under section 234F: Budget 2022

Scope of Section 285B widened to cover Specified Activities: Budget 2022

Section 179 Amended to Align with Provisions and to Covers Fees

Withdrawal of exemption under clauses (8), (8A), (8B) and (9) of section 10: Budget 2022



Get all latest content delivered straight to your inbox
Socialize with Us

Post a Comment

0 Comments