Section 94A of Income Tax Act 1961: Special Measures for Notified Jurisdictional Areas
Section 94A created special anti-avoidance and information-compliance rules for transactions with persons located in a country or territory notified because of inadequate exchange of tax information.
What is a notified jurisdictional area?
Under Section 94A(1), the Central Government could notify a country or territory outside India where there was a lack of effective exchange of information. Section 176(1) of the Income-tax Act, 2025 continues the same basic mechanism: the Central Government may specify such a jurisdiction by notification where effective exchange of information is lacking.
How Section 94A operated
| Provision | Effect |
|---|---|
| Section 94A(1) | Enabled the Central Government to specify a foreign country or territory as a notified jurisdictional area. |
| Section 94A(2) | Deemed parties to covered transactions to be associated enterprises and treated specified transactions as international transactions for transfer-pricing purposes. |
| Section 94A(3) | Restricted deductions for payments and expenditure connected with a notified jurisdictional area unless prescribed authorisation, records and information requirements were met. |
| Section 94A(4) | Allowed a sum received or credited from a person in such an area to be treated as income where the source was not satisfactorily explained. |
| Section 94A(5) | Required TDS at the highest of the rate in force, the rate under the relevant provision, or 30%. |
| Section 94A(6) | Defined a person located in the notified jurisdictional area and adopted the Section 92F meanings of permanent establishment and transaction. |
Transfer-pricing consequences
Where one party to a transaction was a person located in a notified jurisdictional area, Section 94A(2) deemed all parties to be associated enterprises within Section 92A. Covered dealings were deemed international transactions within Section 92B, bringing the specified transfer-pricing provisions into operation.
Under the current Act, Section 176 carries forward this structure using the renumbered transfer-pricing provisions of the Income-tax Act, 2025.
Deduction for payments and expenditure
Section 94A(3)(a) denied deduction for a payment to a financial institution located in a notified jurisdictional area unless the assessee furnished the prescribed authorisation permitting the tax authorities to seek relevant information from that institution. Section 94A(3)(b) imposed additional documentation and information requirements for other expenditure or allowances, including depreciation, arising from transactions with persons in such areas.
Form 10FC under the old law and Form 61 under the current rules
Under the Income-tax Rules, 1962, the authorisation connected with Section 94A was Form No. 10FC under Rule 21AC. Under the Income-tax Rules, 2026, the corresponding authorisation is Form No. 61 under Rule 125, linked to Section 176 of the Income-tax Act, 2025.
Unexplained source of money
Section 94A(4) applied where an assessee received or credited a sum from a person located in a notified jurisdictional area. If the assessee did not explain the source of the sum in the hands of that person or the beneficial owner, or if the Assessing Officer found the explanation unsatisfactory, the amount could be deemed income of the assessee for the relevant previous year. Section 176(4) of the current Act retains this concept using the expression "tax year".
Higher TDS rate
Section 94A(5) required tax to be deducted on a covered payment to a person located in a notified jurisdictional area at the highest of:
- the rate or rates in force;
- the rate specified in the relevant provision of the Act; or
- 30%.
Section 176(5) of the Income-tax Act, 2025 continues the same 30% minimum comparison mechanism for covered payments.
Who was treated as a person located in a notified jurisdictional area?
Section 94A(6) included a resident of the notified area, a non-individual established there, and a permanent establishment in that area of a person otherwise outside the first two categories. The current Section 176 contains corresponding definitions and cross-references the current transfer-pricing definitions.
Cyprus and Section 94A
Cyprus had been notified as a notified jurisdictional area in 2013. The notification was later rescinded, and CBDT clarified in Circular No. 15 of 2017 that the removal operated retrospectively from 1 November 2013. Accordingly, an old reference suggesting that Cyprus presently remains an NJA would be misleading.
Section 94A and Section 176: practical transition
The Income-tax Act, 1961 has been repealed by the Income-tax Act, 2025, which operates from 1 April 2026. The transition provisions preserve the operation of the old law for relevant earlier periods and proceedings. For a current transaction, readers should therefore begin with Section 176 of the 2025 Act and the Income-tax Rules, 2026; for an earlier-year matter, the applicable saved provisions of the 1961 Act may still require examination.
Official resources
For current law and forms, use the Income Tax Department's official material:
- Income-tax Act, 2025, Rules 2026 and comparison utilities
- CBDT material on withdrawal of Cyprus NJA notification
- Forms under the Income-tax Rules, 2026
Former Section 94A text: key statutory points
Sub-section (1): Power to notify a country or territory because of lack of effective exchange of information.
Sub-section (2): Deemed associated-enterprise and international-transaction treatment, with specified transfer-pricing provisions applying.
Sub-section (3): Deduction restrictions unless prescribed authorisation, documents and information are furnished or maintained.
Sub-section (4): Deemed-income consequence where the source of a sum received or credited from a person in an NJA is not satisfactorily explained.
Sub-section (5): TDS at the highest applicable statutory rate, rate in force, or 30%.
Sub-section (6): Definitions for persons located in an NJA, permanent establishment and transaction.