 bill no 129 of 1987 the finance (amendment) bill, 1987 a bill to amend the finance act, 1987be it enacted by parliament in the thirty-eighth year of the republic of india as follows:-8nd commeneement 1 (1) thi~ act may be called the finance (amendment) act, 1987 short title (2) sub-clause cii) of clause (b) of section 3 and clause (c) of see-s tion 4 shall be deemed to have come into force on the 19th day of september, 1987 and the remaining provisions of this act shall come into force at once 2 in section 2 of the finance act, 1987 (hereinafter referred to as the principal act) ,-amendment of section 2 10 (a) after sub-section (4), the following sub-section shall be inserted, namely:-"(4a) in cases in which tax has to be deducted under section 194c of the income-tax act, the deduction shall be made at thf': rates specified in that section and shall be increased by a is surcharge for purposes of the union calculat~d at th~ rate o~ five per cent of such deduction"; (b) in sub-section (5), after the proviso, the following proviso shall be inserted, namely:-'provided further that in respect of any income chargeable to tax under section u5b of the income-tax act, the "advande tax" computed under the flrst proviso shall be increased by a 5 surcharge for purposes of the u~ion calculated at the rate of five per cent of such "advance tax"'  3 in the first schedule to the principal act,-(a) in part ii, the following shall be added at the end, namely:-- 10 amend· ment ot the finrt sche-, dule,  "surcharge on income-taxthe amount of income-tax computed in accordance with the provisions of sub-item (a) of item 1 and sub-item (a) of item 2 of this part shall be increased by a surchareoe for purposes of the union calculated at the rate of five per cent of such 1 s income-tax "; (b) in part 111,-(i) in the opening portion, after the words "in that chapter or section", the words, figures and letter 'or surcharge on such "advance tax" in respect of any income chargeable to tax under 20 section u5b' shall be inserted; (ii) the following shall be added at the end, namely:- '''surcharge on income-taxthe amount of income4ax computed in accordance with the provisions of paragraphs a, b, c, d and item 1 2~ of paragraph e of this part shall, in -the case of ev~y person having a total income exceeding fifty thousand rupees, be increased by a surcharge for purposes of the uhion calculated at the rate of five per cent of such income-tax: provided that no such surcharge shall be payable by 30 a non"'fesident i, - '4 notwithstanding anything contained ,in the income-tax act, 1961,-43 ~ 1961 payment of sut-chafge  (a) the surcharge payable under sub-section (4a) of section 2 of, and part ii of the first schedule to, the principal act, as amended by this act, shall be deductible only in' respect of payments made 3s after the ,date on which this act receives the assent of the president; (b) the surcharge payable un~r the second proviso to sub-section (5) of section 2 of the principal act, in respect of the instalments of the "advance tax" paid or payable on the 15th day of september, 1987 and the 15th day ofde~mber, 1987 shall be payable on or 4q before the 24th day 9f december, 1987i (c) the surcharge payable under part m of the first 8ehed·ule to the principal act, as amended by this act; in respect of the' instalments of the "advance tax" paid or payable· on the 15th· day· of june, 1987 and the 15th day of september, 1987 shall be payable on or ~fore the 30th day of september, 1987 ord g of 1987 5 (1) the finance (amendment) ordinance, 1987 is hereby re-repeal pealed and savine (2) notwithstanding such repeal, anything done-or any action taken unde,o the principal act, as amended by the said ordinance, shall be 10,deemed to have been done or taken under the principal act, as amended by this act  statement of objects and reasonsin order to raise resources for providing relief to drought ai!ected farmers and persons in rural areas, the government decided to levy a surcharge of five per cent on certain taxpayers since parliament was not in session and it was necessary to take immediate action to raise the additional resources, an ordinance called the finance (amendment) ordinance, 1987 was promulgated by the president on the 19th september, 1987 2 by this ordinance, part iii of the first schedule to the finance act, 1987 has been amended to provide that in the case of every person, having a total income exceeding fifty thousand rupees, who is liable to pay advance tax or whose income is chargeable to tax under the head "salaries", the amount of income-tax computed in accordance with the provisiom of part iii of the first schedule, shall be increased by a surcharge for purposes of the union calculated at the rate of five per cent of such income-tax the ordinance also provided that in respect of instalments of advance tax which were paid or payable on the 15th day of june, 1987 and the 15th day of september, 1987, the surcharge for purposes of the union was to be paid on or before the 30th day of september, 1987 3 the bill primarily seeks to replace the aforesaid ordinance in addition, the bill proposes for the sake of uniformity to carry out following further amendments in the finance act, 1987, namely:-(i) considering the facts that the income of non-residents accruing in india is chargeable to tax at different rates, the smallness of revenue involved and the operation of tax treaties with other countries, it has been decided not to levy the surcharge on income of non-residents and foreign companies; (ii) by amending also part ii of the first schedule to the finance act, 1987 and section 2 of that act, it is proposed to provide that surcharge shall be payable on the amount of tax deducted at source from payments like dividends, lotteries, etc, made after the proposed legislation is passed; (iii) by amending section 2 of the finance act, it is proposed to secure that surcharge shall be payable on the amount of incometax on profits and gains of life insurance business under section u5b new delhi; the 30th november, 1987 narayan dati' tiwari ~  president's recommendation under articles 117 and 274 of the constitution of india[copy of letf,er no f 149iui87-tpl, dated the 1st december, 1987 from 8hri b k gadhvi, minister of sta~ in the department of expenditure in the ministry of finance to the secretary-general, lok sabha] the president, having been informed of the subject matter of the propo¥d bill to amend the finance act, 1987, recommends under clause (1) of article 117 and clause (1) of article 274 of the constitution of india, introduction of the above bill in lok sabha  mem07undum explaining the modifications contained in the bill to replace the finance (amendment) ordinance, 1987the finance (amendment) bill, 1987, which sjeeks to repeal and replace the finance (amendment) ordinance, 1987, proposes ·to make the following modifications in the provisions contained in the said ordinance: -(il) sub-clause (2) of clause 1 seeks to provide that the ~nd­ment to part in of the first schedule to th~ finance act, 1987 relating to levy of surcharge in case of every person having a total income exceeding fifty thousand rupees [vide clause 3 (b) (ii)] and the amendment relating to payment of surcharge in respect of advance tax payable on the 15th day of june, 1967 and the 15th day of ~ptember, 1987 by the 30th day of september, 1987 [vide clause 4 (c) l' shall be deemed to have come into force on the 19th day of september, 1987 and the remaining provisions of the bill shall come into force at once ie the da~ of assent of the president; (i~) clause 2 seeks to amend section 2 of the finance act, 1987 so as to provide for the levy of surcharge at thje tate of five per cent on income-tax deducted on payments made to contractors and sub-contractors under section 194c of the income-tax act and en advance tax computed on t~ income chargeable to tax under section u5b of the income-tax act; (iii) sub-clause (a) of clau~ 3 seeks to amend part ii of the first schedule to the finance act, 1987 to provide for the fuvy of surcharge for purposes of the union calculated at the rate of five per cent of the amount of inco~tax computed in accordance with the provisions of sub-item (a) of item 1 in relation to persons (other than companies) who are resident in india, and sub-item (a) of item 2 in relation to domestic companies; (w) sub-clause (b) of clause 3 seeks to amend part ill of the first schedule to the finance act, 1987 to-~ (\1) make certain verbal changes in ~ opening portion of that part so as to cover surcharge on advance tax in respect of any income chargeable to tax under section u5b of the incom  tax act [t>ide item (i) of sub-clause (b)]j (b) modify the provision inserted in part m by section 2 of the finance (amendment) ordinance, 1987 to the e1!ect that no surcharge shall be ·payable by companies othjer than domestic companies or by non-residentsj (v) clause 4 seeks to provide that the surcharae payable undet 8u~on (4a) of section 2 of, and part ii of the first schedule to, the finance act, 1987, as amended by this legislation, shall be deductible only in respect of payments made after the date on which this le~~ation receives the assent of the president it further provides" that the surcharge, payable under sub-section (5) of seetion 2 of the finance act, 1987, as amended by this legislation, in respect of the instalments, of advance tax paid or payable onor before the imh day of december, 1987 shall be payable on or ,fore the 24th day of december, 1987 '  ~ - - - - -  chapr8r nrates of income-tax -   21,(1)  -  -  -  - •• incometax (5) subject to the provisions ofsub-~ion (6), ,in cases in which income-tax has to be calculated under the first proviso to sub-section (5) of section 132 of the income-tax act or charged under sub-section (4) of section 172 or"suboseetion '(2) of ~ion 174 or section 175 or sub-section (2) of section 176 of the said act or deducted under section 192 of the said act from income chargeable under:'tke·h,ead 'lselaries" or;dedue~ under sub-section (9) of section 80e of tbe£8id act1rom  any paymen~ referred to in the said sub-section (9) or in which the "advance tax'· payable under chapter xvri-c of the said act'has to be cronputed, at the rate or rates in force such income-tax or, as the ca~may be, "advance tax" shall be so calculated, charged, ,~ted or ~uted at the rate or rates specified in part iii of the first schedule: ' provided that in cases to which the provisions of chapter "xii or chapter xii-a or sub-section(1a) ot-seetion 161 or seetion'~l64j or section 164a or section 167a of the income-tax act apply, "advance tax" shall be computed with reference to the ra~ imposed by·'this"'w})lsection or the rates as specified in that chapter or section, as ~ case may be  - - - - - •  part ii - rates for deduction of ta" at sourc!: ln certain 'casesin every case in which under the provisions of sections 193, 194, 194a, 19413, 194bb, 194d and 195 of the income-tax act, tax is to be deducted at  the rate~ in force, deduction shall be made from the income subject to deduction at the following r~te!l:-rate of income-tax --------------------------------------------------~-----------1 i n the case of a parson other than a oompany-(ti) where the person is resident in india-(i) on income by way of interest other 10 per cent than "interest on securities" (if) on income by way of winnings from lotteries and crossword puzzles 40 percent  ((ii) on income by way of winnings 40 per cent  from horse races ,~ 10 per cent " (iv)  on income by way of insurance  commission (v) on income by way of imerest pay-10 per cent able on r:" (a) any security, other than a tax-free sccjlrlty, of the central or a slate government; (b) any debentures or other securities for money issued by or on behalf of any local authority or a corporation established by a central, state or provincial act; (c) any debentures issued by a company where such debentures are listed on a recosnised stock exchange in india in accordance with the securities contracts (relulation) act, 19s6 and any rules made thereunder ; (vi) on any other income (eltcludins 20 per cent; interest payable on a tax-free secutlty) (b) where the person is not resident in india-(i) in the case of a non-resident indian-(a) on investment income long-term capital gains and 20 per cent; (b) on income by way of interest 15 per cent; payable on a tax-fr~ &ec\jrily rate of income-tax  ---------------_--------------------------------------------------(c) on the whole of other income income-tax at 30 per cent of the amount of the income or income-tax in respect of the income at the rates preacribed in sub-par~aph i of paraaraph a of part m of this schedule if luch income had been the total income whichever is' higher; (ii) in the case of my other person-(a) on income by way of interest 15 per cent ; payable on a tax free security (b) on the whole of the other income-tax at 30 per cent of the amount income of the income or income-tax in respect or'the income at the rates prescribec:t in sub-parall'aph j of paragraph a of part m of this schedule, if such income had been the total income, whichever is higher 2 in the case of a company-(0) where the <:ompany is a domestic company-(i) on income by way 'of interest 20 per cent ; other than "interest on securities" 215 per cent; (ii) on any other income (cxcjudinj interest payable on tax-free security) (b) where the company iii oot a domestic c:ompany-(i) on irv;omc by way of dividenta pay-25 per ceot; able by any domestic company (i/) on income by way of interest pay-25 per cent; able by government or an jndian concern on moneys barrowed or debt incurred by government or the indian concern in fordlll currency (iii) on income by way of rcyalty pay-30 per cent; able by government or an indian concern in pursuance of an agreement made by it with the government or the indian eoncern after the 3ist day of march, 1976, where luch royalty is in consideration for the trll1s-fer of all or any rights (includina the btanting of a licence) in respect of copytl8ht in any book on a subject referred to' in the proviso to sub-section (/4) ofsectlon 1 ua oftbc income-tax act, to the indian concern (iv) on income by way of royalty [not bolng royally of the nature "fetrad to in lub-item ~b) (iii) payable by oovernmont or an indian concern in pursuan~ of an qrcement made by it with the oovernment or the indian concern and which has been apptoved by the central ovottrdmentr (a) where the ~t is made 30 pelt ciiim: after the 31st day of march 1961 but before the lat day of april, 1976 (b) where the ~ ia jo,  ii after the 311t day ei march 1976 (11) on income by way of fees for technicallerviocs parable by government or an indian concern in pursuance of an qre&-ment made by it with the government or the indian concern and which has been approved by the central government-(a) where the qreement is made so per cent; after the 29th day of february 1964 but before the lstday of april, 1976 (b) where the agreement is made 30 percent; after the 31st -day (1" march 1976 (1ii) on income by w~y of interest· 44 per cent; payable on a tax-free security - (liii) on any other income 6s per cent; explanatwn-for the purposes of this part, "investment income", "long-term capital gains" and "non-resident· indian" shall have thie meanings assign~d to them in chapter xii-a of the income-tax act"  part iti rates for calculating or charging income-tax in certain cases,deducting income-tax from income chargeable under the head "salaries" or any payment referred to in sub-section (9) of section 80e and computing "advance tax" in cases in which income-tax has to be calculated under the first proviso to sub-se<:tion (5) of section 132 of the income-tax act or charged under sub-section (4) of section 172 or sub-section (2) of section 174 or section 175 or sub-section (2) of section 176 of the said act or deducted under section 192 of the said act from income chargeable under the head "salaries" or deducted under sub-s~tion (9) of section 80e of the said act from any payment referred to in the said sub-section (9) or in which the "advance tax" payable under chapter xvii -c of the said act has to be computed, at the rate or rates in force, such income-tax or, as the case may be, "advan~ tax" [not being "advance tax" in respect of any income chargeable to tax under chapter xii or chapter xii-a or sub-section (ia) of section 161 or seetlon 1m or section 164a or section 167a of the income-tax act at the rates as specified in that chapter or section], shall be so calculated, charged deducted or computed at the following rate or rates:- ,paragraph a sub-paragraph i in the case of every individual or hindu undivided family or unregistered finn or other association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in subclause (vii) of clause (31) of section 2 of the income-tax act, not being a case to which sub-paragraph ii of this paragraph or any other paragraph of this part applies,-:-rate8 of income-tax nil; (1) where the total income does not excoed ri 18,000 (2) where the total income exceeds rs 18,000 but does not exceed re 25000 (3) where the total income exceeds rs 25000 but does not exceed rs 50000 25 per cent of the amount by which the total income exceeds rs ]8000; ri ] ,750 plus 30 per cent of the amount by which the total income exceed, rs 25000; (4) where the total income exceeds lls so,ooo but ri 9,250 pia 40 per cent of the amount by does not exceed rii1,oo,ooo which the totallnc:ome exceeds ri so,ooo [(5) where the total income exceeds ri, 1,00,000 ri 29150 p/uj so per cent of the amount by which the total income exceeds ri 1,00,000 sub-paragraph ii in the case of every hindu undivided family which at any time during the previous year has at least one member whose total income of th¢ previous year relevant to the assessment year commencing on the 1st day of april, 1988 exceeds bs 18,000,- rates ~ incom~-tax(1) where the total income does not exceed !ls ~ilj 12,000 (2) where the total income exceeds rs 12,000 but 25 pel cent of the amount by which the does not cxoced !ls, 20,000 total income exceeds rli 12,000 ; () where the total income exceeds rli 20,000 but rs 2,000 plw 30 per cent of the amount does not ezceed !ls 40,000 by which the total income exceeds ri 2o,oooj (4) where the total income exceeds!ls 40,000 but rs 8,000 plus 40 per cent of the amount by , does not exceeds !ls 60,000 which the total income exceeds !ls 40,000; (5) where the total income exceeds !ls 60,000 but rs16,000 plus so per cent of the amount by does not exceed rs 1,00,000 which the total income exceeds !ls 60,000; (6) where the total income exceeds rsl,oo,ooo rs 36,000 plus 55 per cent of the amount by which the total income exceeds rs 1,00,000  pamgraph bin the case of every co-operative society,- rates of income-tar(i) where the told income does not exceed !ls 10000 15 percent of the totalincoldcj (2) whese the total income exceeds rs 10,000 but !ls 1,500 plus 25 per cent of the amount by do~s nl> exceed rs20,ooo· which the total income exceeds rb 10,000 (3) where the total income exceeds rs 20,000 rs 4,000 pills 40 per cent of the amount bj which the total income exceeds rb 20,00  paragraph c sub-paragraph iin the case of every registered firm, not being a case to which subparagraph ii of this paragraph applies,- rates of income-tax(1) where the total income does not exceed nill; rsi0,ooo i (2) where the total income exceeds rs 10,000 but does not exceed !ls 25,000 5 percent of the amount by which the total income exceeds !ls 10000: (3) where the total income exceeds rs 15,000 but does not, exceed lu 50,000 rs; 750 pia 7 per cent of the 'amount by which the total income exceeds rb 25,000; (4) where the total income exceeds ri 50,000 but rs 2,soop/mr is percent oftbe amount by does not exceed!ls 1,00,000 which the total income exceeds rs 50,000; (m ftere the tota;1 income cxooedsrsl,oo,ooo rsl0,ooo ,,, 24 petoellt otthe amount'" which the total income cxccci1s lb j ,00,000 sub-pllragrctph ii in the case of every registered !firm whase total income includes income derived from a profession carried on by it and the income so !ilcludtd is not less· than ftftyoone per cent of such total income,-rates elf income-tcl1: (1) where the total income docs not excaod nil; rsl0,000 (2) where the total income exceeds ri 10,000 but 4 per cent of the amount by which the docs not exceed rs 25,000 iotal income exceeds ri 10,000; (3) where the total income excccdll rs 25,000 but rs 600 plus 7 per ccnt of the amount by docs not exceed rs 50,000 which the total income exceeds rs 25,000; (4) when: the total income exceeds rs 50,000 but rs 2,3s0 plll8 13 per cent of tho amount docs not exceed rs 1,00,000 by which the total income exceeds rs5o,ooo (5) where the total income exceeds rs 1,00,000 rs 3,850 pills 22 per cent of the amount by which the total income exceeds rsl,oo,ooq explanation-for the purposes of this paragraph, "registered finn" includes an unregistered firm assessed as a registered firm under clause (b) of section 183 of the income-tax act  paragraph din the oase of every local authority,-rates elf income-tax oa the whole of the total income 50 per cent  paragraph ein the case of a coinl'any-rate! elf i1lc~tu'% i in the caae of a domestic company,-(i) where the company is a company in so per cent of the total income; which the public are substantially interested (2) where the company is not a company in which the public are substantially interested-(i) in the case of a tradilll company or 60 per ccnt of the total income; an investment company (ii) in any case other '5 per cent of the total income n in the case of a company other than a domestic company,-(i) on so much of the total income as consists of-(0) royalties receive4 from government or an indian concern in pursuance of an agreement made by it with the government or the indian concern after the 31st day of march, 1961 but before the 1st day of april, 1976, or (b) feea for rendering techn i cal services received (tom ooverntnent tjt an indian eooccrn in pursuance ofu qreement made by it  lth the oovdnftlc!at or the indian eo11cetn after the 29th day of february, 1964 but before the lst day of april, 1976, ud where 1\jdl ~t bu in either so pel' ee6t gale, been appto'yeci by the central government (i{) on the bajancc if any of tbe total in-65 per cent come  a billto amend the finance act, 1987 ,   (shri narayan datt tiwari, minister of finance) 