The Interest-tax Act, 1974

(1) This Act may be called the Interest-tax Act, 1974. (2) It extends to the whole of India.

In this Act, unless the context otherwise requires,-- (1) "assessee" means a person by whom interest-tax or any other sum of money is payable under thisAct and includes-- (a) every person in respect of whom any proceeding under this Act has been taken for theassessment of his chargeable interest or of the amount of refund due to him or of the chargeableinterest of any other person in respect of which he is assessable or of the amount of refund due tosuch other person; (b) every person who is deemed to be an assessee in default under any provision of this Act; (2) "assessment" includes re-assessment; (3) "assessment year" means the period of twelve months commencing on the 1st day of April, everyyear; (4) "Board" means the Central Board of Direct Taxes constituted under the Central Boards ofRevenue Act, 1963 (54 of 1963); (5) "chargeable interest" means the total amount of interest referred to in section 5, computed in themanner laid down in section 6; 1[(5A) "credit institution" means,-- (i) a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies(including any bank or banking institution referred to in section 51 of that Act) 2***; (ii) a public financial institution as defined in section 4A of the Companies Act, 1956 (1 of 1956); (iii) a State financial corporation established under section 3 or section 3A or an institutionnotified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951); and(iv) any other financial company; (5B) "financial company" means a company, other than a company referred to in sub-clause (i), (ii)or (iii) of clause (5A), being-- (i) a hire-purchase finance company, that is to say, a company which carries on, as its principalbusiness, hire-purchase transactions or the financing of such transactions; (ii) an investment company, that is to say, a company which carries on, as its principal business,the acquisition of shares, stock, bonds, debentures, debenture stock or securities issued by theGovernment or a local authority, or other marketable securities of a like nature; (iii) a housing finance company, that is to say, a company which carries on, as its principalbusiness, the business of financing of acquisition or construction of houses, including acquisition ordevelopment of land in connection therewith; (iv) a loan company, that is to say, a company [not being a company referred to in sub-clauses (i)to (iii)] which carries on, as its principal business, the business of providing finance, whether bymaking loans or advances or otherwise; (v) a mutual benefit finance company, that is to say, a company which carries on, as its principalbusiness, the business of acceptance of deposits from its members and which is declared by theCentral Government under section 620A of the Companies Act, 1956 (1 of 1956), to be a Nidhi orMutual Benefit Society; 3*** 4[(va) a residuary non-banking company [other than a financial company referred to insub-clause (i), (ii), (iii), (iv) or (v)] that is to say, a company which receives any deposit under anyscheme or arrangement, by whatever name called, in one lumpsum or in instalments by way ofcontributions or subscriptions or by sale of units or certificates or other instruments or in any othermanner; or] (vi) a miscellaneous finance company, that is to say, a company which carries on exclusively, oralmost exclusively, two or more classes of business referred to in the preceding sub-clauses;] (6) "Income-tax Act" means the Income-tax Act, 1961(43 of 1961); 5(7) '"interest" means interest on loans and advances made in India and includes-- (a) commitment charges on unutilised portion of any credit sanctioned for being availed of inIndia; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include-- (i) interest referred to in sub-section (1B) of section 42 of the Reserve Bank of India Act,1934 (2 of 1934); (ii) discount on treasury bills;] (8) "prescribed" means prescribed by rules made under this Act; 6* * * * *; (10) all other words and expressions used herein but not defined and defined in the Income-tax Actshall have the meanings respectively assigned to them in that Act.

1[(1) The income-tax authorities specified in section 116 of the Income-tax Actshall be the interest-tax authorities for the purposes of this Act. (1A) Every such authority shall exercise the powers and perform the functions of an interest-taxauthority under this Act in respect of any person within his jurisdiction. (1B) The jurisdiction of an interest-tax authority under this Act shall be the same as he has under theIncome-tax Act by virtue of orders or directions issued under section 120 of that Act (including orders ordirections assigning the concurrent jurisdiction) or under any other provision of that Act. (1C) The interest-tax authority having jurisdiction in relation to a credit institution which has noincome assessable to income-tax under the Income-tax Act shall be the interest-tax authority havingjurisdiction in respect of the area in which that institution carries on its business or has its principal placeof business. (1D) Section 118 of the Income-tax Act and any notification issued thereunder shall apply in relationto the control of interest-tax authorities as they apply in relation to the control of the correspondingincome-tax authorities, except to the extent to which the Board may, by notification in the OfficialGazette, otherwise direct in respect of any interest-tax authority.] (2) All officers and persons employed in the execution of this Act shall observe and follow the orders,instructions and directions of the Board: Provided that no such orders, instructions or directions shall be issued-- (a) so as to require any tax authority to make a particular assessment or to dispose of a particularcase in a particular manner; or (b) so as to interfere with the discretion of the Appellate Assistant Commissioner in the exerciseof his appellate functions. (3) Every Income-tax Officer 2[or Assistant Commissioner 3[ or Deputy Commissioner]] employed inthe execution of this Act shall observe and follow the orders, instructions and directions issued for hisguidance by the 4[Director] or by the Commissioner or by the 5[Additional Commissioner of Income-taxor the 6[Joint Commissioner]] within whose jurisdiction he performs his functions.

1[(1)] Subject to the provisions of this Act, there shall be charged on everyscheduled bank for every assessment year commencing on or after the 1st day of April, 1975, a tax (inthis Act referred to as interest-tax) in respect of its chargeable interest of the previous year at the rate ofseven per cent. of such chargeable interest: 2[Provided that the rate at which interest-tax shall be charged in respect of any chargeable interestaccruing or arising after the 31st day of March, 1983 shall be three and a half per cent. of such chargeableinterest.] 3[(2) Notwithstanding anything contained in sub-section (1) but subject to the other provisions of thisAct, there shall be charged on every credit institution for every assessment year commencing on and fromthe 1st day of April, 1992, interest-tax in respect of its chargeable interest of the previous year at the rateof three per cent. of such chargeable interest.] 4[Provided that the rate at which interest-tax shall be charged in respect of any chargeable interestaccruing or arising after the 31st day of March, 1997 shall be two per cent. of such chargeable interest.] 5[(3) Notwithstanding anything contained in sub-sections (1) and (2), no interest-tax shall be chargedin respect of any chargeable interest accruing or arising after the 31st day of March, 2000.]

1[5. Scope of chargeable interest.--Subject to the provisions of this Act, the chargeable interest ofany previous year of a credit institution shall be the total amount of interest (other than interest on loansand advances made to other credit institutions 2[or to any co-operative society engaged in carrying on thebusiness of banking)] accruing or arising to the credit institution in that previous year: Provided that any interest in relation to categories of bad or doubtful debts referred to in section 43Dof the Income-tax Act shall be deemed to accrue or arise to the credit institution in the previous year inwhich it is credited by the credit institution to its profit and loss account for that year or, as the case maybe, in which it is actually received by the credit institution, whichever is earlier.]