Amended and updated notes on section 180A of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to Consideration for know-how.
Chapter XV (Sections 159 to 180A) of the Income Tax Act 1961 deals with the provisions related to liability in special cases. Section 180A of IT Act 1961 provides for consideration for know-how.
Recently, we have discussed in detail section 180 (Royalties or copyright fees for literary or artistic work) of IT Act 1961. Today, we learn the provisions of section 180A of Income-tax Act 1961. The amended provision of section 180A is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 180A of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962 as provided by Ministry of Law and Justice, Government of India.
Section-180A: Consideration for know-how
Where the time taken by an individual, who is resident in India, for developing any know-how is more than twelve months, he may elect that the gross amount of any lump sum consideration received or receivable by him during the previous year relevant to the assessment year commencing on the 1st day of April, 2000 or earlier assessment years for allowing use of such know-how shall be treated for the purposes of charging income-tax for that year and for each of the two immediately preceding previous years as if one-third thereof were included in his income chargeable to tax for each of those years respectively and if he so elects, notwithstanding anything contained in any other provision of this Act,—
- (a) such gross amount shall be so treated, and
- (b) the assessments for each of the two preceding previous years shall, if made, be accordingly rectified under section 154, the period of four years specified in sub-section (7) of that section being reckoned from the end of the financial year in which the assessment relating to the previous year in which the amount was received or receivable by such individual is made.
Explanation: For the purposes of this section, the expression “know-how” has the meaning assigned to it in section 35AB.