Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Dated: 5th December, 2019

PRESS RELEASE

CBDT issues draft notification seeking inputs for framing of rules with respect to Fund Manager Regime under Section 9A of the I.T. Act, 1961

          Section 9A of the Income-tax Act, 1961 (the Act) provides for a special taxation regime in respect of certain offshore funds in the context of their fund managers being located in India. It is provided that in case of an eligible investment fund, the fund management activity carried out through an eligible fund manager acting on behalf of such fund shall not constitute business connection in India of the said fund. Further, it is provided that an eligible investment fund shall not be said to be resident in India merely because the eligible fund manager undertaking fund management activities on its behalf is located in India subject to the conditions mentioned in sub-section (3) of section 9A, one of which [clause (m) of said sub-section] provides that the remuneration paid by the fund to an eligible fund manager in respect of fund management activity undertaken by him on its behalf is not less than the arm's length price of the said activity.

            Accordingly, Income-tax Rules, 1962 (the Rules) were amended by way of insertion of rules 10V to 10VB and Forms 3CEJ and 3CEK vide notification No 14/2016 with SO 1101 (E) dated 15.03.2016. Rule 10V was further amended vide notification No 106/2016 with SO 3498(E) dated 21.11.2016.

            Sub-rule (5) to (10) of rule 10V of the Rules contains the provisions relating to determination of the arm's length price in respect of any remuneration paid by the eligible investment fund to an eligible fund manager as referred to in clause (m) of sub-section (5) of section 9A.

            Finance (No 2) Act, 2019 with effect from 1st April, 2019, inter alia, amended clause (m) of sub-section (5) of section 9A so as to provide that the remuneration paid by the fund to an eligible fund manager in respect of fund management activity undertaken by him on its behalf is not less than the amount calculated in such manner as may be prescribed.

            Accordingly, the manner for calculation of the amount, compared to which the remuneration paid to the eligible fund manager should not be less, is required to be prescribed.

            The draft notification proposing the above amendments has been uploaded on www.incometaxindia.gov.in for inputs from stakeholders and general public. The inputs on the draft rules may be sent electronically at the email address, ustpl1@nic.in, latest by 19th December, 2019.

 

(Surabhi Ahluwalia)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT.

 

Ministry of Finance

Cabinet approves launch of Bharat Bond Exchange Traded Fund

Fund to provide additional money for CPSUs, CPSEs & other Government organizations

Dated: 04 DEC 2019

The Cabinet Committee on Economic Affairs, chaired by Prime Minister Shri Narendra Modi has given its approval for creation and launch of Bharat Bond Exchange Traded Fund (ETF) to create an additional source of funding for Central Public Sector Undertakings (CPSUs) Central Public Sector Enterprises (CPSEs), Central Public Financial Institutions (CPFIs) and other Government organizations.  Bharat Bond ETF would be the first corporate Bond ETF in the country. 

Features of Bharat Bond ETF:

ETF will be a basket of bonds issued by CPSE/CPSU/CPFI/any other Government organization Bonds (Initially, all AAA rated bonds)

•       Tradable on exchange

•       Small unit size Rs 1,000    

•       Transparent NAV (Periodic live NAV during the day)

•       Transparent Portfolio (Daily disclosure on website)

•       Low cost (0.0005%)

 

Bharat Bond ETF Structure:

•     Each ETF will have a fixed maturity date

•     The ETF will track the underlying Index on risk replication basis, i.e. matching Credit Quality and Average Maturity of the Index

•     Will invest in a portfolio of bonds of CPSE, CPSU, CPFI or any other Government organizations that matures on or before the maturity date of the ETF

•    As of now, it will have 2 maturity series - 3 and 10 years. Each series will have a separate index of the same maturity series.

 

Index Methodology:

•      Index will be constructed by an independent index provider – National Sock Exchange

•      Different indices tracking specific maturity years - 3 and 10 years

 

Benefits of Bharat Bond ETF to investors:

•      Bond ETF will provide safety (underlying bonds are issued by CPSEs and other Government owned entities), liquidity (tradability on exchange) and predictable tax efficient returns (target maturity structure).

•      It will also provide access to retail investors to invest in bonds with smaller amount (as low as Rs. 1,000) thereby providing easy and low-cost access to bond markets.

•      This will increase participation of retail investors who are currently not participating in bond markets due to liquidity and accessibility constraints.

•      Tax efficiency compared to Bonds as coupons from the Bonds are taxed at marginal rates. Bond ETFs are taxed with the benefit of indexation which significantly reduces the tax on capital gains for investor.

 

Bharat Bond ETF Benefits for CPSEs:

•        Bond ETF would offer CPSEs, CPSUs, CPFIs and other Government organizations an additional source of meeting their borrowing requirements apart from bank financing.

•        It will expand their investor base through retail and HNI participation which can increase demand for their bonds. With increase in demand for their bonds, these issuers may be able to borrow at reduced cost thereby reducing their cost of borrowing over a period of time.

•        Further, Bond ETF trading on the exchange will help in better price discovery of the underlying bonds.

•        Since a broad debt calendar to assess the borrowing needs of the CPSEs would be prepared and approved each year, it would inculcate borrowing discipline in the CPSEs at least to the extent of this investment.

Developmental impact on Bond Markets:

•        Target Maturity Bond ETF is expected to create a yield curve and a ladder of Bond ETFs with different maturities across calendar years.

•        ETF is expected to create new eco-system - Market Makers, index providers and awareness amongst investors - for launching new Bond ETFs in India.

•        This is expected to eventually increase the size of bond ETFs in India leading to achieving key objectives at a larger scale - deepening bond markets, enhancing retail participation and reducing borrowing costs.

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VRK/SC/PK/SH

(Release ID: 1594816) 

 

Click here to read and download HC Judgment copy reported in [TS-5849-HC-2019(Kerala)-O]

 

Click here to read and download ITAT order reported in [TS-8212-ITAT-2019(Ahmedabad)-O]

 

Government of India
Ministry of Finance

Dated: 22 NOV 2019

CBDT Chairman inaugurates Web Portal for exchange of information on Income Tax Website

Shri P.C. Mody, Chairman, Central Board of Direct Taxes (CBDT), inaugurated the Web Portal for Exchange of Information on Income Tax Website here today.

The Web Portal consolidates all the relevant Automatic Exchange of Information (AEOI) related information at one place for convenient access by financial institutions, Departmental officers as well as public at large.

India is committed to exchange financial account information automatically from 2017 under the Common Reporting Standard (CRS) on Automatic Exchange of Information (AEOI). Information is reported annually by financial institutions which are then exchanged by India under the standard.

The Web Portal would be a repository of policy and technical circulars/guidance/notifications issued by the CBDT, and provide links to relevant circulars/guidance issued by the regulatory authorities in India and other international bodies. The portal would not only be useful for the domestic financial institutions but will also help the foreign tax authorities and financial institutions to get information about the Indian laws, rules and procedures related to AEOI under CRS.

To implement the AEOI standard, necessary domestic legal framework was put in place in 2015.  A comprehensive Guidance Note was released on 31st August 2015 to provide guidance to the financial institutions, sectoral regulators and officers of the Income Tax Department for ensuring compliance with the reporting requirements under the Income-tax Act and Rules. The sectoral regulators have also issued necessary notifications and circulars for compliance by the financial institutions. Stakeholder consultations are also carried out by CBDT to educate financial institutions about their reporting obligations. In its persistent endeavour to reach out to the financial institutions and account holders, CBDT has created an Exchange of Information portal on the Income-tax Department website for dissemination of information to all stakeholders.

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RM/DKS/KMN