DIRECT TAXES MANUAL

1. THE INCOME-TAX ACT, 2025

(As amended by the Finance Act, 2026)

Statement of Objects and Reasons

CHAPTER I

PRELIMINARY

Section No.

1.Short title, extent and commencement

2.Definitions

3.Definition of “tax year”

CHAPTER II

BASIS OF CHARGE

4.Charge of income-tax

5.Scope of total income

6.Residence in India

7.Income deemed to be received and dividend deemed to be income in a tax year

8.Income on receipt of capital asset or stock-in-trade by specified person from specified entity

9.Income deemed to accrue or arise in India

10.Apportionment of income between spouses governed by Portuguese Civil Code

CHAPTER III

INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME

A.—Incomes not to be included in total income

11.Incomes not included in total income

B.—Incomes not to be included in total income of political parties and electoral tr

12.Incomes not included in total income of political parties and electoral trusts

CHAPTER IV

COMPUTATION OF TOTAL INCOME

A.—Heads of income

13.Heads of income

14.Income not forming part of total income and expenditure in relation to such income

B.—Salaries

15.Salaries

16.Income from salary

17.Perquisite

18.Profits in lieu of salary

19.Deductions from salaries

C.—Income from house property

Section No.

20.Income from house property

21.Determination of annual value

22.Deductions from income from house property

23.Arrears of rent and unrealised rent received subsequently

24.Property owned by co-owners

25.Interpretation

D.—Profits and gains of business or profession

26.Income under head “Profits and gains of business or profession”

27.Manner of computing profits and gains of business or profession

28.Rent, rates, taxes, repairs and insurance

29.Deductions related to employee welfare

30.Deduction on certain premium

31.Deduction for bad debt and provision for bad and doubtful debt

32.Other deductions

33.Deduction for depreciation

34.General conditions for allowable deductions

35.Amounts not deductible in certain circumstances

36.Expenses or payments not deductible in certain circumstances

37.Certain deductions allowed on actual payment basis only

38.Certain sums deemed as profits and gains of business or profession

39.Computation of actual cost

40.Special provision for computation of cost of acquisition of certain assets

41.Written down value of depreciable asset

42.Capitalising impact of foreign exchange fluctuation

43.Taxation of foreign exchange fluctuation

44.Amortisation of certain preliminary expenses

45.Expenditure on scientific research

46.Capital expenditure of specified business

47.Expenditure on agricultural extension project and skill development project

48.Tea development account, coffee development account and rubber development account

49.Site Restoration Fund

50.Special provision in case of trade, profession or similar association

51.Amortisation of expenditure for prospecting certain minerals

52.Amortisation of expenditure for telecommunications services, amalgamation, demerger, scheme of voluntary retirement, etc.

53.Full value of consideration for transfer of assets other than capital assets in certain cases

54.Business of prospecting for mineral oils

55.Insurance business

56.Special provision in case of interest income of specified financial institutions

57.Revenue recognition for construction and service contracts

58.Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents

59.Computation of royalty and fee for technical services in hands of non-residents

60.Deduction of head office expenditure in case of non-residents

Section No.

61.Special provision for computation of income on presumptive basis in respect of certain business activities of certain non-residents.

62.Maintenance of books of account

63.Tax audit

64.Special provision for computing deductions in case of business reorganisation of co-operative banks

65.Interpretation for purposes of section 64

66 Interpretation

E.—Capital gains

67.Capital gains

68.Capital gains on distribution of assets by companies in liquidation

69.Capital gains on purchase by company of its own shares or other specified securities

70.Transactions not regarded as transfer

71.Withdrawal of exemption in certain cases

72.Mode of computation of capital gains

73.Cost with reference to certain modes of acquisition

74.Special provision for computation of capital gains in case of depreciable assets

75.Special provision for cost of acquisition in case of depreciable asset

76.Special provision for computation of capital gains in case of Market Linked Debenture

77.Special provision for computation of capital gains in case of slump sale

78.Special provision for full value of consideration in certain cases

79.Special provision for full value of consideration for transfer of share other than quoted share

80.Fair market value deemed to be full value of consideration in certain case

81.Advance money received

82.Profit on sale of property used for residence

83.Capital gains on transfer of land used for agricultural purposes not to be charged in certain cases

84.Capital gains on compulsory acquisition of lands and buildings not to be charged in certain cases

85.Capital gains not to be charged on investment in certain bonds

86.Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house

87.Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area

88.Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone

89.Extension of time for acquiring new asset or depositing or investing amount of capital gains

90.Meaning of “adjusted”, “cost of improvement” and “cost of acquisition”

91.Reference to Valuation Officer

F.—Income from other sources

92.Income from other sources

93.Deductions

94.Amounts not deductible

95.Profits chargeable to tax