Amendment to notifcation no 16 of 2020 bearing number S.O. 986(E), dated 5th March, 2020

## Report on Amendment to Income-tax Act, 1961 Regarding Bullion Depository Receipts **1. Executive Summary:** This report analyzes a notification issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (CBDT), which amends Notification No. 16/2020, dated March 5, 2020, relating to the Income-tax Act, 1961. The amendment introduces provisions concerning "Bullion Depository Receipts with underlying bullion" and clarifies their meaning by referencing a Department of Economic Affairs notification. This amendment likely aims to provide clarity and potentially incentivize investment in bullion through depository receipts, impacting entities dealing with such instruments. **2. Introduction:** This report provides an overview and analysis of Notification No. 89/2022 (F. No. 370142/26/2019-TPL/Part-1), issued on August 3, 2022, which amends an existing notification under the Income-tax Act, 1961. The analysis focuses on the specific changes introduced by this amendment and their potential implications, based solely on the content of the provided notification text. **3. Policy Overview:** * This notification is an **amendment** to the Government of India, Ministry of Finance, Department of Revenue, number 16/2020, dated the 5th March, 2020, published in the Gazette of India, Extraordinary, PartII, Section 3, Subsection ii, vide number S.O. 986(E), dated 5th March, 2020. * **Core Objective(s):** Based on the text, the objective of this amendment is to clarify the tax treatment of "Bullion Depository Receipt with underlying bullion" within the context of section 47 of the Income-tax Act, 1961, by providing a definition. **4. Background and Rationale:** This amendment likely stems from a need to provide specific guidance regarding the treatment of Bullion Depository Receipts under the Income-tax Act. The original notification may have lacked sufficient clarity regarding these instruments, necessitating this amendment to avoid ambiguity and ensure consistent application of the tax law. The reference to the Department of Economic Affairs' definition suggests an inter-departmental effort to align the understanding and treatment of these instruments across different government bodies. **5. Key Provisions / Changes:** This notification introduces the following changes to the original policy: * **Specific Part of Original Policy Changed:** The amendment modifies the first para (by adding clause vi after clause v) and the Explanation (by adding clause c after clause b) of the original Notification No. 16/2020. * **New Rule/Provision:** * Clause vi is added to the first para, stating: "vi Bullion Depository Receipt with underlying bullion". This adds Bullion Depository Receipts with underlying bullion to the instruments mentioned in section 47. * Clause c is added to the Explanation, stating: "c Bullion Depository Receipt with underlying bullionshall have the same meaning as assigned to it in clause iii of Explanation by the Department of Economic Affairs, Ministry of Finance vide its notification number S.O. 2957 E, published in Gazette of India, Extraordinary, vide number, F.No.372020EM dated the 31st August, 2020." This defines "Bullion Depository Receipt with underlying bullion" by referring to a specific notification from the Department of Economic Affairs. * **Difference/Effect of Change:** The amendment clarifies the definition of "Bullion Depository Receipt with underlying bullion" for the purpose of section 47 of the Income-tax Act, 1961. By referencing the Department of Economic Affairs' notification, the amendment ensures a consistent and standardized understanding of this financial instrument. This will affect tax liability for entities dealing with the underlying instruments. **6. Target Audience and Stakeholders:** Based on the text, the target audience and stakeholders directly affected by this amendment include: * Individuals and entities investing in or dealing with Bullion Depository Receipts with underlying bullion. * Financial institutions involved in the issuance, trading, or custody of Bullion Depository Receipts. * Tax advisors and consultants advising clients on investments in bullion. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Central Board of Direct Taxes (CBDT) is the responsible agency for issuing and implementing this amendment. The Department of Economic Affairs is also indirectly involved through the referenced notification. * **Timelines/Procedures:** The notification states that it "shall come into force with effect from the date of its publication in the Official Gazette," which is August 3, 2022. No other specific procedures are detailed in the text, however the tax filings of affected parties will have to take this amendment into account for previous, current and future filings. * The amendment requires stakeholders to refer to Department of Economic Affairs, Ministry of Finance notification number S.O. 2957(E), published in Gazette of India, Extraordinary, vide number, F.No.372020-EM dated the 31st August, 2020, to understand the precise meaning of "Bullion Depository Receipt with underlying bullion". **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of these changes is to: * Provide clarity and reduce ambiguity regarding the tax treatment of Bullion Depository Receipts, ensuring consistent application of the law. * Potentially incentivize investment in bullion through depository receipts by clarifying the tax implications. * Align the understanding and treatment of these instruments across different government departments. **9. Conclusion:** The amendment to the Income-tax Act, 1961, through Notification No. 89/2022, introduces important clarifications regarding the definition and tax treatment of "Bullion Depository Receipt with underlying bullion." This amendment, effective from August 3, 2022, is significant for individuals, entities, and financial institutions involved in bullion investments and requires them to understand the implications of the referenced Department of Economic Affairs notification. This clarification promotes transparency and consistency in the tax treatment of these financial instruments.

Key Entities Referenced