Charge of tax.

107

Income referred to in sections 102, 103, 104, 105 and 106 shall be charged to tax as per the provisions of section 195.

Explanation

Section Summary:

Section 107 of the new income tax law specifies that income falling under Sections 102, 103, 104, 105, and 106 will be taxed according to the provisions outlined in Section 195. This section essentially links the taxation of specific types of income to the rules and procedures defined in Section 195.

Key Changes:

• Linkage to Section 195: Previously, the taxation of income under Sections 102-106 may have been governed by different provisions or lacked explicit reference to Section 195. The new law now explicitly ties these sections to Section 195 for clarity and consistency.
• Streamlined Taxation Process: By referencing Section 195, the law ensures a uniform approach to taxing the income types covered under Sections 102-106.

Practical Implications:

• Taxpayers: Individuals or entities earning income under Sections 102-106 must now ensure compliance with the procedures and rates specified in Section 195. This may involve additional reporting or withholding requirements.
• Businesses: Companies making payments that fall under Sections 102-106 (e.g., certain types of interest, royalties, or fees) must adhere to the tax deduction at source (TDS) rules under Section 195.
• Compliance Processes: Taxpayers and businesses must review Section 195 to understand the applicable tax rates, exemptions, and procedural requirements for income covered under Sections 102-106.

Critical Concepts:

• Section 195: This section deals with tax deduction at source (TDS) on payments made to non-residents or foreign entities. It outlines the rates, exemptions, and procedures for deducting tax at the time of payment.
• Sections 102-106: These sections likely cover specific types of income, such as interest, royalties, technical fees, or other payments, which are now explicitly linked to Section 195 for taxation purposes.

Compliance Steps:

1. Identify Applicable Income: Determine if the income earned or paid falls under Sections 102-106.
2. Refer to Section 195: Review the tax rates, exemptions, and procedural requirements under Section 195.
3. Withhold Tax (if applicable): If making payments to non-residents or foreign entities, ensure proper TDS is deducted as per Section 195.
4. File Required Returns: Report the income and TDS details in the appropriate tax returns.

Examples:

• Scenario 1: A company in India pays royalty fees to a foreign entity for using patented technology. Under Section 107, this royalty income (covered under Section 103) must be taxed as per Section 195. The company must deduct TDS at the rate specified in Section 195 and remit it to the government.
• Scenario 2: An individual earns interest income from a foreign bank account. If this income falls under Section 102, it will be taxed according to Section 195, and the individual must report it in their tax return.

By linking Sections 102-106 to Section 195, the law simplifies the taxation process for specific income types and ensures consistency in application.