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Income Tax 7th Amendment Rules 2020

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 7th 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: