CBDT vide Notification No. 138/2021 dated 27.12.2021 in G.S.R. 883(E) through Income-tax (34th Amendment) Rules, 2021 amended the Income-tax Rules, 1962 and notified Rule 2DD to compute the exempt income of the specified fund for the purposes of clause (23FF) of section 10. The Board has also notified Form 10-II to claim the exemption under this Rule. Further, CA Certificate in Form 10-IJ is also required to be furnished.
Clause (23FF) was inserted in section 10 by the Finance Act, 2021 in order to exempt any income of the nature of capital gains, arising or received by a non-resident, which is on account of transfer of share of a company resident in India by the resultant fund and such shares were transferred from the original fund to the resultant fund in relocation, if capital gains on such shares were not chargeable to tax had that relocation not taken place.
Read the full text of Notification No. 138/2021 dated 27.12.2021 on Computing Exempt Income of Specified Funds u/s 10(23FF)
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 27th December, 2021
G.S.R. 883(E).—In exercise of the powers conferred by clause (23FF) of section 10 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:─
1. Short title and commencement.- (1) These rules may be called the Income-tax (34th Amendment) Rules, 2021.
(2) They shall come into force from the date of publication in the Official Gazette.
“2DD. Computation of exempt income of specified fund for the purposes of clause (23FF) of section 10.-(1) For the purpose of clause (23FF) of section 10, income of the nature of capital gains, arising or received by a specified fund, which is attributable to units held by non-resident (not being a permanent establishment of a non-resident in India) in such specified fund shall be computed as under:-
(i) where the specified fund files Form No. 10-II in accordance with sub-rule (2), the Income exempt under clause (23FF) of section 10= [A*B/C], where,
A = income of the nature of capital gains, arising or received by a specified fund, which is on account of transfer of shares of a company resident in India, by the specified fund and where such shares were received by the specified fund, being resultant fund, in relocation from the original fund, or from its wholly owned special purpose vehicle, and where such capital gains would not be chargeable to tax if the relocation had not taken place;
B = aggregate of daily „assets under management‟ of the specified fund which are held by non-resident unit holders (not being the permanent establishment of a non-resident in India), from the date of acquisition of the share of a company resident in India by the specified fund to the date of transfer of such share.
C = aggregate of daily total „assets under management‟ of the specified fund, from the date of acquisition of the share of a company resident in India by the specified fund to the date of transfer of such share.
(ii) where no Form No.10-II is filed by the specified fund, the exempt income shall be NIL.
(2) The specified fund shall furnish an annual statement of exempt income in Form No.10-II electronically under digital signature on or before the due date, which is duly verified in the manner indicated therein.
(3) It shall get the annual statement, referred to in sub-rule (2), certified by an accountant before the specified date and such accountant shall furnish by that date the certificate in Form No. 10-IJ electronically under digital signature, which is duly verified in the manner indicated therein.
(4) The Principal Director General of Income-tax (Systems) or the Director General of Income tax (Systems), as the case may be, shall specify the procedure for filing of the Form Nos. 10-II and 10-IJ and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the statements so furnished under this rule.
Explanation:- For the purposes of this rule, the expressions,-
(a) “assets under management” means the closing balance of the value of assets or investments of the specified fund as on a particular date;
(b) “due date” shall have the meaning assigned to it in the Explanation 2 below sub-section (1) of section 139;
(c) “original fund” , “relocation” and "resultant fund" shall have the meanings respectively assigned to them in the Explanation to clause (viiac) and clause (viiad) of section 47;
(d) “permanent establishment” shall have the meaning assigned to it in clause (iiia) of section 92F;
(e) "securities" shall have the meaning assigned to it in clause (bb) of the Explanation to clause (4D) of section 10;
(f) “specified date” in relation to the certification of the annual statement in Form 10-II, means the date one month prior to the due date;
(g) "specified fund" shall have the meaning assigned to it in sub-clause (i) of clause (c) of the Explanation to clause (4D) of section 10; and
(h) “unit” shall have the meaning assigned to it clause (f) of the Explanation to clause (4D) of section 10.”.
3. In the principal rules, in Appendix II, after Form 10-IH, the following Forms shall be inserted, namely:-
“Form No. 10-II
Statement of exempt income under clause (23FF) of section 10 of the Income-tax Act, 1961
[See sub-rule (2) of rule 2DD]
Form No. 10-IJ
Certificate to be issued by accountant under clause (23FF) of section 10 of the Income-tax Act, 1961
[See sub-rule (3) of rule 2DD]
I/We____________________________________ have examined the books of account, if any, and other documents, including the annual statement in Form No.10-II, showing the particulars of income of the nature of capital gains, arising or received by __________________________ (name of the specified fund), on account of transfer of share of a company resident in India, by the specified fund to the extent attributable to units held by non-resident (not being a permanent establishment of a non-resident in India) which is exempt under clause (23FF) of section 10 of the Act and the total income exempt under the said clause for the previous year ending _________________,
2. I/We declare that the above particulars are true and correct to the best of my/our knowledge and belief.
__________________________________
Place _________________ (Signature with name of the accountant)
Date __________________
Instructions: 1 Where the specified fund has floated multiple schemes, the specified fund shall separately furnish the annual statement of exempt income in Form No. 10-II for each scheme; and
2. All amounts to be mentioned in Indian rupees.”.
[Notification No. 138/2021/ F. No. 370142/58/2021-TPL(Part-II)]
UMME FARDINA ADIL, Under Secy.
Note : The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii), vide notification number S.O. 969(E) dated the 26th March, 1962 and were last amended vide notification number G.S.R. 851(E) dated 10th December, 2021.
Download CBDT Notification No. 138/2021 dated 27.12.2021 on Computing Exempt Income of Specified Funds u/s 10(23FF) in pdf format
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