Income Tax 7th Amendment Rules 2020

The CBDT (Central Board of Direct Taxes) has further amended the Income Tax Act 1962 in a notification dated 5th March 2020 to be called as Income Tax 7

th Amendment Rules 2020. This is released in Gazette as per the requirement of Government of India and this article will provide details on the same.

Gist of the Income Tax 7th Amendment Rules 2020

The amendment has added a new mode of investment to the list of investments allowed for a charitable or religious trust or institution under Income Tax Rules. From now, religious or charitable institutions can also invest in a company involved with digital payment settlement or retail payment system either in India or outside India, provided the company has obtained the approval of RBI. Also, a minimum 51% of equity shares of such a company need to be held by the

National Payments Corporation of India. This change has been made by adding a new clause (va) after clause (v) in the Rule 17C of the Income Tax Rules 1962.

Existing Rule 17C of the Income Tax Rules 1962

The existing Rule 17C of the Income Tax Rules 1962 lays down the conditions for any other form or modes of investments or deposits that can be made by a charitable/religious trust/institution: (i) Investment in any mutual funds scheme (as referred clause (23D), section 10, Income-tax Act 1961) (ii) Deposit Transfer to the Public Account of India (iii) Deposits made for the purpose of housing accommodation and also to plan, develop or improve cities, towns and villages. (iv) Acquiring equity shares of a depository (v) Investment made by recognized stock exchange(investor) in the equity share capital of a company

that is predominantly associated with the securities market or deals with securities
that facilitates trade on another stock exchange in accordance with the directions or guidelines issued under the SEBI
at least 51% of equity shares are held by the investor and rest by the members of the investor

(vi) Acquiring equity shares of an incubated company by an incubator (vii) Acquire shares of NSDC (National Skill Development Corporation, a non-profit limited company) (viii) Investing in debt instruments that are issued by any RBI registered Infrastructure Finance Company (ix) Investing in "Stock Certificate” (defined in clause (c), para 2 of Sovereign Gold Bonds Scheme) Please click on the

official link on Rule 17C of Income Tax Rules 1962 for reference

Amendment made in Income Tax 7th Amendment Rules 2020

In the amendment, in Rule 17C which is for any other modes or forms of investment/deposits by a

charitable/religious trust/institution, after clause (v), a new mode of investment has been inserted as clause (va) with the following details: (va) The investment made by a person in equity shares, debentures or bonds of a company that

which is mainly involved with RBI approved retail payments system or digital payments settlement or comparable activities in India and abroad.
in which a minimum 51% of equity shares are held by National Payments Corporation of India.
- note in the above clause (va), the person making the investment should be authorised under section 4 of the Payments and Settlements Act 2007

The Gazette notification of the IT Amendment rules can be accessed below:

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Frequently Asked Questions

Common questions about Income Tax 7th Amendment Rules 2020 for Investments.

The Income Tax 7th Amendment Rules 2020 is a notification issued by the Central Board of Direct Taxes (CBDT) on 5th March 2020, further amending the Income Tax Act, 1962. It introduces a new mode of investment for charitable or religious trusts or institutions.

The amendment allows charitable or religious trusts or institutions to invest in a company involved with digital payment settlement or retail payment system either in India or outside India, provided the company has obtained the approval of the Reserve Bank of India (RBI) and at least 51% of its equity shares are held by the National Payments Corporation of India.

The amendment aims to provide an additional avenue for charitable or religious trusts or institutions to invest their funds. It recognizes the growing importance of digital payment systems and allows these organizations to support companies operating in this sector, subject to certain conditions.

The main conditions are: (1) the company must be involved with digital payment settlement or retail payment system, (2) it must have obtained approval from the RBI, and (3) at least 51% of its equity shares must be held by the National Payments Corporation of India.

The amendment adds a new clause (va) after clause (v) in Rule 17C of the Income Tax Rules, 1962, which outlines the permissible modes of investment for charitable or religious trusts or institutions. It expands the list of investment options available to these organizations.

Some other investment options under Rule 17C include mutual funds, deposits in public accounts, housing and urban development projects, equity shares of depositories and stock exchanges, incubated companies, National Skill Development Corporation, and infrastructure finance companies.

No, the amendment does not specify any restrictions on the type of charitable or religious trust or institution that can invest in a digital payment company, as long as they meet the conditions outlined in the new clause (va) of Rule 17C.

Yes, the amendment specifies that the trust or institution making the investment should be authorized under Section 4 of the Payments and Settlement Systems Act, 2007.

The article provides a link to the PDF of the Gazette notification of the Income Tax 7th Amendment Rules, 2020, which can be accessed for the official details and language of the amendment.

No, the article does not mention any other changes or amendments to the Income Tax Rules or Act apart from the addition of the new clause (va) in Rule 17C, allowing investment in digital payment companies by charitable or religious trusts or institutions.