CBDT Notifies new mode of Investment in a Company where NPCI holds 51% shares by a Trust

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CBDT has issued a Notification No. 15/2020 dated 05.03.2020 to amend Rule 17C of the Income Tax rules, 1962 to prescribe the form and mode of investment by a Charitable Trust or an Institution for the purpose of section 11(5) of the Income Tax Act, 1961.

Section 11 of the Income Tax Act, 1961 provides that any income, profits and gains derived from property held under trust wholly for religious and charitable purposes shall not be included in the total income of the trust or institution to the extent such income is applied or accumulated for application to such purposes.

Where 85 % of the income is not applied to charitable or religious purposes, the charitable trust or institution may accumulate or set apart either the whole or part of its income for future application for such purposes. Further, one can even accumulate or set aside 85% of the income, not applied for the specified purpose for its application in India.

Such income so accumulated, or set apart, is not included in the total income of the trust in the year of receipt of income.

The provisions related to charitable trusts are contained in Chapter III of the Income Tax Act, 1961 which contains sections 11, 12, 12A, 12AA (now also 12AB after amendment by Finance Bill, 2020)  and 13.

Section 11(2) requires that the money so accumulated or set apart is required to be invested or deposited in the forms or modes specified in section 11(5).

Section 11(5) provides the following forms or modes for investing funds of charitable and religious trusts and institutions -
1. Investment in Government Saving Certificates and any other Securities or Certificates issued by the Central Government under its Small Saving Scheme.
2. Deposits with Post Office Savings Banks.
3. Deposits with Scheduled Banks or Co-operative Banks
4. Investments in the units of Unit Trust of India.
5. Investments in Central or State Government Securities.
6. Investments in debentures issued by or on behalf of any company or corporation. However, both the principal and interest thereon must have been guaranteed by the Central or the State Government.
7. Investment or deposits in any public sector company.
8. Investment in bonds of approved public companies whose principal object is to provide long term finance for construction or purchase of houses in India for residential purposes.
9. Investment in immovable property.
10. Deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for urban infrastructure in India.
11. Deposits with the Industrial Development Bank of India.
12. Any other form or mode of investment or deposit as may be prescribed. [This is the clause (xii) of section 11(5)]

Rule 17C of Income Tax Rules, 1962 provides the prescribed form or mode of investment or deposit for the purpose of Section 11(5).

In this context, CBDT has issued a Notification No. 15/2020 dated 05.03.2020 to amend Rule 17C to include investment made by a person, authorised under section 4 of the Payment and Settlement Systems Act, 2007, in the equity share capital or bonds or debentures of a company-
(A)which is engaged in operations of retail payments system or digital payments settlement or similar activities in India and abroad and is approved by the Reserve Bank of India for this purpose; and
(B)in which at least fifty-one per cent of equity shares are held by National Payments Corporation of India.
as a prescribed mode of investment by a Charitable Trust or Institution.



Read the full text of the Notification.

MINISTRY OF FINANCE
(Department of Revenue)
[CENTRAL BOARD OF DIRECT TAXES]
NOTIFICATION
New Delhi, the 5th March, 2020

INCOME-TAX

G.S.R. 159(E).–In exercise of the powers conferred by clause (xii) of sub-section (5) of section 11 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: -

Short title and commencement
1. (1) These rules may be called the Income-tax (7th Amendment) Rules, 2020.
    (2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Income-tax Rules, 1962, in rule 17C, after clause (v), the following clause shall be inserted, namely: —
"(va) investment made by a person, authorised under section 4 of the Payment and Settlement Systems Act, 2007, in the equity share capital or bonds or debentures of a company —
(A) which is engaged in operations of retail payments system or digital payments settlement or similar activities in India and abroad and is approved by the Reserve Bank of India for this purpose; and
(B) in which at least fifty-one per cent of equity shares are held by National Payments Corporation of India."
[Notification No. 15/2020/ F.No. 370142/5/2020-TPL]

NEHA SAHAY, Under Secy. (Tax Policy and Legislation Division

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