Chapter VIII Special Provisions Relating To Tax On Distributed Income

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The Tax PublishersSection C PART C TAX ON DISTRIBUTED INCOME CHAPTER VIII SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME 110. Tax on income distributed by mutual fund or life insurer (1) Every mutual fund shall be liable to pay tax on any amount of income distributed or paid to the unit holders of equity oriented fund. (2) Every life insurer shall be liable to pay tax on any amount of income, computed in the manner prescribed, distributed or paid to the policy holders of an approved equity oriented life insurance scheme. (3) The tax on the distributed income shall be charged at the rate specified in Paragraph C of the Second Schedule, on the amount referred to in sub-sections (1) and (2). (4) The mutual fund or the life insurer or the person responsible for making payment of the distributed income on its behalf, as the case may be, shall be liable to pay tax to the credit of the Central Government within a period of fourteen days from the date of distribution or payment of such income, whichever is earlier. (5) No deduction under any other provision of this Code shall be allowed to the mutual fund or, as the case may be, the life insurer in respect of the distributed income charged to tax or the tax thereon. (6) The tax on distributed income so paid by the mutual fund or, as the case may be, the life insurer shall be treated as the final payment of tax in respect of income distributed or paid and no further credit shall be claimed by the mutual fund or the life insurer or by any other person in respect of the tax so paid. (7) If the mutual fund or the life insurer or the person responsible for making payment of the distributed income on its behalf, as the case may be, does not pay the tax in accordance with the provisions of this section, then, it or he shall be deemed to be an assessee in default in respect of the tax payable by it or him and the provisions of this Code relating to the collection and recovery of tax shall apply. (8) If the mutual fund or the life insurer or the person responsible for making payment of distributed income on its behalf, as the case may be, fails to pay the whole or any part of the tax on distributed income referred to in sub-section (3), within the time allowed under sub-section (4), then it or he shall be liable to pay simple interest at the rate of one per cent. for every month on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid. (9) In this section,-- (a) 'equity oriented fund' means a fund where more than sixty-five per cent. of total proceeds of such fund are invested by way of equity shares in domestic companies; (b) 'approved equity oriented life insurance scheme' means-- (i) a life insurance scheme where more than sixty-five per cent. of the total premia received under such scheme are invested by way of equity shares in domestic companies; and (ii) such scheme is approved by the Board in accordance with such guidelines as may be prescribed; (c) the percentage of equity share holding of the mutual fund or the life insurance scheme, as the case may be, shall be computed with reference to the annual average of the monthly averages of the opening and closing figures. FROM NOTES ON CLAUSES Clause 110 is the only clause of Part C and Chapter VIII of the Bill and deals with tax on distributed income of mutual funds and insurance company. The said clause provides that every mutual fund shall be liable to pay tax on any amount of income distributed or paid to the unit holders of an equity oriented fund and every life insurer shall be liable to pay tax on any amount of income distributed or paid to the policy holders of an approved equity oriented life insurance scheme. The tax shall be charged on the distributed income at the rate specified in Paragraph C of the Second Schedule. The said clause also provides that the tax on distributed income shall be paid to the credit of the Central Government within fourteen days from the date of distribution or payment of such income, whichever is earlier. The clause further provides that the tax paid by the mutual fund or the life insurer on distributed income shall be treated as the final payment of tax in respect of such income and no further credit shall be claimed by either of them or by any other person in respect of the tax so paid. Besides, no deduction under any other provision of this Code shall be allowed to the mutual fund or the life insurer in respect of the distributed income charged to tax or the tax paid. The said clause also provides that if the mutual fund or the life insurer or the person who is responsible for making payment of distributed income on its behalf fails to pay the whole or any part of the tax on distributed income within a period of fourteen days, then, it or he shall be deemed to be an assessee in default and shall also be liable to pay simple interest at the rate of one per cent. for every month on the amount of such tax for the period of default. The terms 'equity oriented fund' and 'approved equity oriented life insurance scheme' have also been defined in the said clause. FROM MEMORANDUM REGARDING DELEGATED LEGISLATION Clause 110 of the Bill provides that every life insurer shall be liable to pay tax on any amount of income, computed in the manner prescribed, distributed or paid to the policy holders of an approved equity oriented life insurance scheme. Accordingly, it is proposed to empower the Central Government to make rules in this regard for the purposes of this clause. Clause 110 of the Bill further to provide that in this clause 'approved equity oriented life insurance scheme' means-- (i) a life insurance scheme where more than sixty-five per cent. of the total premia received under such scheme are invested by way of equity shares in domestic companies; and (ii) such scheme is approved by the Board in accordance with such guidelines as may be prescribed. Accordingly, it is proposed to empower the Board to frame the guideline in this regard for the purposes of this clause. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersSection C
PART C
TAX ON DISTRIBUTED INCOME
CHAPTER VIII
SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME

110. Tax on income distributed by mutual fund or life insurer

(1) Every mutual fund shall be liable to pay tax on any amount of income distributed or paid to the unit holders of equity oriented fund.

(2) Every life insurer shall be liable to pay tax on any amount of income, computed in the manner prescribed, distributed or paid to the policy holders of an approved equity oriented life insurance scheme.

(3) The tax on the distributed income shall be charged at the rate specified in Paragraph C of the Second Schedule, on the amount referred to in sub-sections (1) and (2).

(4) The mutual fund or the life insurer or the person responsible for making payment of the distributed income on its behalf, as the case may be, shall be liable to pay tax to the credit of the Central Government within a period of fourteen days from the date of distribution or payment of such income, whichever is earlier.

(5) No deduction under any other provision of this Code shall be allowed to the mutual fund or, as the case may be, the life insurer in respect of the distributed income charged to tax or the tax thereon.

(6) The tax on distributed income so paid by the mutual fund or, as the case may be, the life insurer shall be treated as the final payment of tax in respect of income distributed or paid and no further credit shall be claimed by the mutual fund or the life insurer or by any other person in respect of the tax so paid.

(7) If the mutual fund or the life insurer or the person responsible for making payment of the distributed income on its behalf, as the case may be, does not pay the tax in accordance with the provisions of this section, then, it or he shall be deemed to be an assessee in default in respect of the tax payable by it or him and the provisions of this Code relating to the collection and recovery of tax shall apply.

(8) If the mutual fund or the life insurer or the person responsible for making payment of distributed income on its behalf, as the case may be, fails to pay the whole or any part of the tax on distributed income referred to in sub-section (3), within the time allowed under sub-section (4), then it or he shall be liable to pay simple interest at the rate of one per cent. for every month on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid.

(9) In this section,--

(a) 'equity oriented fund' means a fund where more than sixty-five per cent. of total proceeds of such fund are invested by way of equity shares in domestic companies;

(b) 'approved equity oriented life insurance scheme' means--

(i) a life insurance scheme where more than sixty-five per cent. of the total premia received under such scheme are invested by way of equity shares in domestic companies; and

(ii) such scheme is approved by the Board in accordance with such guidelines as may be prescribed;

(c) the percentage of equity share holding of the mutual fund or the life insurance scheme, as the case may be, shall be computed with reference to the annual average of the monthly averages of the opening and closing figures.

FROM NOTES ON CLAUSES

Clause 110 is the only clause of Part C and Chapter VIII of the Bill and deals with tax on distributed income of mutual funds and insurance company. The said clause provides that every mutual fund shall be liable to pay tax on any amount of income distributed or paid to the unit holders of an equity oriented fund and every life insurer shall be liable to pay tax on any amount of income distributed or paid to the policy holders of an approved equity oriented life insurance scheme. The tax shall be charged on the distributed income at the rate specified in Paragraph C of the Second Schedule.

The said clause also provides that the tax on distributed income shall be paid to the credit of the Central Government within fourteen days from the date of distribution or payment of such income, whichever is earlier.

The clause further provides that the tax paid by the mutual fund or the life insurer on distributed income shall be treated as the final payment of tax in respect of such income and no further credit shall be claimed by either of them or by any other person in respect of the tax so paid. Besides, no deduction under any other provision of this Code shall be allowed to the mutual fund or the life insurer in respect of the distributed income charged to tax or the tax paid.

The said clause also provides that if the mutual fund or the life insurer or the person who is responsible for making payment of distributed income on its behalf fails to pay the whole or any part of the tax on distributed income within a period of fourteen days, then, it or he shall be deemed to be an assessee in default and shall also be liable to pay simple interest at the rate of one per cent. for every month on the amount of such tax for the period of default.

The terms 'equity oriented fund' and 'approved equity oriented life insurance scheme' have also been defined in the said clause.

FROM MEMORANDUM REGARDING DELEGATED LEGISLATION

Clause 110 of the Bill provides that every life insurer shall be liable to pay tax on any amount of income, computed in the manner prescribed, distributed or paid to the policy holders of an approved equity oriented life insurance scheme.

Accordingly, it is proposed to empower the Central Government to make rules in this regard for the purposes of this clause.

Clause 110 of the Bill further to provide that in this clause 'approved equity oriented life insurance scheme' means--

(i) a life insurance scheme where more than sixty-five per cent. of the total premia received under such scheme are invested by way of equity shares in domestic companies; and

(ii) such scheme is approved by the Board in accordance with such guidelines as may be prescribed.

Accordingly, it is proposed to empower the Board to frame the guideline in this regard for the purposes of this clause.