Circular C1 of 2020

F. No. 370142/13/2020-TPL
Government of India
Ministry of Finance
Department of Rcvenue
Central Board of Direct Taxes

New Delhi , April 13 ,2020

Clarification in respect of option under section IISBAC of the Income-tax Act, 1961

Section IISBAC of the Income-tax Act, 1961 (the Act), inserted by the Finance Act, 2020 wef the assessment year 202 1-22, infer alia, providcs that a person, being an individual or a Hindu undivided family having income other than income from business or profession”, may exercise option in respect of a previous year to be taxed under the said section IISBAC
alongwith his return of income to be furnished under sub-section (I) of section 139 of the Act for each year. The concessional rate providcd under section IISBAC of the Aet is subject to the condition that the total income shall be computed without specified exemption or deduction, setoff
of loss and additional depreciation.

2.

Representations expressing eoncern regarding tax to be deducted at souree (TDS) has been received stating that as the option is required to be exercised at the time of filing of return, the deductor, being an employer, would not know if the person, being an employee, would opt for taxation under section IISBAC of the Act or not. llcnce, there is laek of clarity regarding whether the provisions of section IlSBAC of the Act are to be considered at the time of deducting tax.

3. In order to avoid the genuine hardship in such cases, the Board, in exercise of powers conferred under section 119 of the Act, hereby clarifies that an employee, having income other than the income under the head “profit and gains of business or profession” and intending to opt
for the concessional rate under section 1iSBAC of the Act, may intimate the deductor, being his employer, of such intention for each previous year and upon such intimation, the deductor shall compute his total income, and make TDS thereon in accordance with the provisions of section
IISBAC of the Act. If such intimation is not madc by the employee, the employer shall make TDS without considering the provision of section 11SBAC of the Act.

4. It is also clarified that the intimation so made to the deductor shall be only for the purposes of TDS during the previous year and cannot be modified during that year. However, the intimation would not amount to exercising option in terms of sub-section (S) of section J ISBAC of the Act and the person shall be required to do so alongwith the return to be furnished
   under sub-section (J) of section 139 of the Act for that previous year. Thus, option at the time of filing of return of income under sub-section (J) of section J 39 of the Act could be different from
   the intimation made by such employee to the employer for that previous year.

5. Further, in case of a person who has income under the head “profit and gains of business or profession” also, the option for taxation under section J J SBAC of the Act once exercised for a previous year at the time of filing of return of income under sub-section () of section 139 of the Act cannot be changed for subsequent previous years except in certain circumstances.

Accordingly, the above clarification would apply to such person with a modification that the intimation to the employer in his case for subsequent previous years must not deviate from the option under section IISBAC of the Act once exercised in a previous year.

(Niraj Kumar)
Deputy Secretary (TPL)-I

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