Permitted modes of investment.

350(1)

The modes of investing or depositing the money under this Part, shall be such as specified in Schedule XVI.

350(2)

The modes of investing or depositing money under this Part, other than the modes specified in Schedule XVI, shall be specified by the Central Government, by notification.

Explanation

Section Summary:

Section 350 of the new income tax law outlines the permitted modes of investment or deposit for specific purposes under this Part of the law. It mandates that investments or deposits must be made in accordance with the modes specified in Schedule XVI. Additionally, it allows the Central Government to notify other permitted modes of investment or deposit beyond those listed in Schedule XVI.

Key Changes:

1. Introduction of Schedule XVI: This section introduces Schedule XVI as the primary reference for permitted investment or deposit modes. This is a new addition, as prior laws may not have explicitly referenced a specific schedule for such purposes.
2. Central Government's Authority to Notify Additional Modes: The Central Government is empowered to specify additional modes of investment or deposit beyond those listed in Schedule XVI. This provides flexibility to adapt to changing financial or economic conditions.

Practical Implications:

• Taxpayers and Businesses: Taxpayers and businesses must ensure that their investments or deposits comply with the modes specified in Schedule XVI or any additional modes notified by the Central Government. Non-compliance could lead to penalties or disqualification of tax benefits.
• Compliance Processes: Taxpayers must stay updated on notifications issued by the Central Government regarding additional permitted modes of investment or deposit.

Critical Concepts:

• Schedule XVI: A schedule attached to the income tax law that lists the specific modes of investment or deposit permitted under this section. It serves as a definitive guide for compliance.
• Central Government Notification: The Central Government can issue notifications to expand the list of permitted investment or deposit modes, providing flexibility and adaptability to the law.

Compliance Steps:

1. Refer to Schedule XVI: Review Schedule XVI to identify the permitted modes of investment or deposit.
2. Monitor Government Notifications: Stay informed about any notifications issued by the Central Government that specify additional permitted modes.
3. Ensure Compliance: Make investments or deposits only through the modes listed in Schedule XVI or those notified by the Central Government.

Examples:

• Scenario 1: A taxpayer wants to invest in a tax-saving instrument. They refer to Schedule XVI and find that fixed deposits with a nationalized bank are a permitted mode. They proceed to invest accordingly.
• Scenario 2: The Central Government issues a notification allowing investments in a newly introduced government-backed bond. A taxpayer, after verifying the notification, invests in this bond to comply with the law.

This section ensures clarity and flexibility in the modes of investment or deposit, helping taxpayers and businesses comply with the law while adapting to new financial instruments or policies.