Central Registry of Securitisation Asset Reconstruction and Security Interest of India

## Report on Notification S.O. 4154(E) Regarding Income Tax Exemption for Central Registry of Securitisation Asset Reconstruction and Security Interest of India **1. Executive Summary:** This report analyzes Notification S.O. 4154(E) issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, dated September 5, 2022. The notification grants income tax exemption under clause 46 of section 10 of the Income-tax Act, 1961 to the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) for specific income streams. The exemption is subject to certain conditions, including restrictions on commercial activities and the requirement to file income tax returns. This notification is applied retrospectively and prospectively, covering financial years 2018-2019 to 2022-2023. **2. Introduction:** This report provides an overview and analysis of Notification S.O. 4154(E) concerning income tax exemptions for CERSAI, as published in the Gazette of India. The analysis is based solely on the text of the notification provided. **3. Policy Overview:** This is a *new* policy granting income tax exemption to CERSAI under specific conditions. * **Core Objective(s):** The objective, as inferred from the text, is to provide income tax exemption to CERSAI on specific income streams, potentially to support its operations and reduce its financial burden, thereby contributing to the effectiveness of the SARFAESI Act. **4. Background and Rationale:** * Since this is a *new* policy granting an exemption, the likely problem the policy addresses is the tax liability faced by CERSAI. Granting the exemption for specified incomes likely intends to provide financial relief and ensure the continued functioning of CERSAI. This implicitly acknowledges the important role CERSAI plays in the securitization and asset reconstruction landscape under the SARFAESI Act. **5. Key Provisions / Changes:** As this is a new policy, the key provisions detail the rules and actions mandated by the entire text: * **Income Tax Exemption:** The notification grants an exemption from income tax under clause 46 of section 10 of the Income-tax Act, 1961 to CERSAI. * **Specified Income:** The exemption applies to the following income streams of CERSAI: * Fee income from Security Interest transactions. * Fee income from transactions on Central KYC (CKYC) Records Registry. * RTI application fee. * Interest income earned on fixed deposits and on a to c above. * **Conditions for Exemption:** The exemption is conditional upon CERSAI: * Not engaging in any commercial activity. * Maintaining unchanged activities and the nature of the specified income throughout the financial years. * Filing return of income in accordance with the provision of clause g of subsection 4C of section 139 of the Incometax Act, 1961. * **Applicability:** The notification is applied retrospectively to financial years 2018-2019, 2019-2020, 2020-2021, and 2021-2022 and is applicable prospectively to the financial year 2022-2023. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders are: * **Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI):** The notification directly affects CERSAI by providing income tax exemptions. * **Financial Institutions:** These institutions engage with CERSAI for securitization and asset reconstruction activities. This potentially indirectly benefits them by strengthening CERSAI's operations. * **Central Board of Direct Taxes (CBDT) and Income Tax Department:** These are responsible for implementing and administering the provisions of the notification. **7. Implementation Aspects (Inferred):** * **Responsible agency:** The Central Board of Direct Taxes (CBDT) is the responsible agency, as indicated by the notification's origin. * **Timelines:** The notification specifies the retrospective and prospective applicability covering FY 2018-2019 to 2022-2023. * **Procedures:** CERSAI must comply with the specified conditions, including not engaging in commercial activities, maintaining unchanged activities and income, and filing income tax returns as required by the Income-tax Act, 1961. **8. Expected Outcomes / Impact of Changes:** The likely intended outcomes based on the policy's provisions include: * **Financial Relief for CERSAI:** The exemption reduces the tax burden on CERSAI, freeing up resources for its core activities. * **Improved Operational Efficiency of CERSAI:** By reducing financial constraints, the notification may enable CERSAI to operate more efficiently and effectively. * **Encouragement of Securitization and Asset Reconstruction:** Indirectly, the strengthened operations of CERSAI could encourage securitization and asset reconstruction activities within the financial sector. * **Compliance and Transparency:** The conditions attached to the exemption ensure compliance with tax regulations and maintain transparency in CERSAI's operations. **9. Conclusion:** Notification S.O. 4154(E) provides a significant income tax exemption to CERSAI, subject to specific conditions. This policy likely aims to support CERSAI's operations, contributing to the effectiveness of the SARFAESI Act and encouraging securitization and asset reconstruction activities. The retrospective and prospective applicability of the notification indicates the government's long-term commitment to supporting the role of CERSAI in the financial sector.

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