Haryana Electricity Regulatory Commission

## Report on Notification S.O. 4155(E) Regarding Income Tax Exemption for Haryana Electricity Regulatory Commission **1. Executive Summary:** This report analyzes Notification S.O. 4155(E), issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, effective September 5, 2022. The notification grants an exemption from income tax under clause 46 of section 10 of the Income-tax Act, 1961, to the Haryana Electricity Regulatory Commission (HERC) for specific income sources. The key findings are that this exemption applies to fees received under the Electricity Act, 2003, and interest earned on government grants and loans, subject to certain conditions. This notification is applicable for the financial years 2022-2023 through 2026-2027. **2. Introduction:** The purpose of this report is to provide a detailed overview and analysis of Notification S.O. 4155(E) concerning income tax exemption for the Haryana Electricity Regulatory Commission (HERC), based solely on the information contained within the provided policy text. **3. Policy Overview:** This is a *new policy* establishing an income tax exemption. * **Core Objective(s):** The core objective, as stated in the text, is to notify that the Haryana Electricity Regulatory Commission (HERC) is exempt from income tax under clause 46 of section 10 of the Income-tax Act, 1961, for specific income arising to that Commission. **4. Background and Rationale:** As a *new policy,* this notification likely addresses the need to clarify the tax status of HERC's income. It can be inferred that the government seeks to support the financial stability of the HERC by providing an income tax exemption on fees and interest income, thereby enabling the commission to better fulfill its regulatory duties. This might be to encourage further development and oversight in the electricity sector within Haryana. **5. Key Provisions / Changes:** As this is a new policy, the following are the main components: * **Exemption Granted:** The Haryana Electricity Regulatory Commission (HERC) is granted an exemption from income tax under clause 46 of section 10 of the Income-tax Act, 1961. * **Specified Income:** The exemption applies specifically to: * Fees received under the Electricity Act, 2003. * Interest earned on government grants and loans. * **Conditions for Exemption:** The exemption is subject to the following conditions: * HERC shall not engage in any commercial activity. * HERC’s activities and the nature of the specified income shall remain unchanged throughout the financial years. * HERC shall file a return of income in accordance with the provision of clause g of subsection 4C of section 139 of the Incometax Act, 1961. * **Applicability Period:** The notification is applicable for the financial years 2022-2023, 2023-2024, 2024-2025, 2025-2026, and 2026-2027. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders are: * **Haryana Electricity Regulatory Commission (HERC):** The direct beneficiary of the income tax exemption. * **Ministry of Finance, Department of Revenue, Central Board of Direct Taxes:** The issuing authority and responsible for implementation. * **Haryana Government:** As the state government that established HERC. * **Entities regulated by HERC:** As the financial viability of HERC could indirectly impact its regulatory activities. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Central Board of Direct Taxes (CBDT) under the Ministry of Finance is the responsible agency for implementing this notification. * **Timelines:** The notification is effective from September 5, 2022, and applicable for the financial years 2022-2023 through 2026-2027. * **Procedures:** HERC must file a return of income in accordance with the provision of clause g of subsection 4C of section 139 of the Incometax Act, 1961, to maintain the exemption. **8. Expected Outcomes / Impact of Changes:** The likely intended outcomes of this policy are: * **Financial Relief for HERC:** Reduced tax burden, freeing up resources. * **Enhanced Regulatory Capacity:** Potentially improved ability of HERC to perform its regulatory functions due to improved financial stability. * **Compliance with Tax Regulations:** Ensure that HERC complies with relevant tax regulations by filing returns of income. * **Attractiveness to investment**: The exemption may attract further investment into Haryana's electricity sector, knowing that it is regulated by a financially secure agency. **9. Conclusion:** Notification S.O. 4155(E) provides a significant income tax exemption to the Haryana Electricity Regulatory Commission (HERC) for specific income sources, subject to certain conditions. This policy aims to bolster HERC's financial standing and, indirectly, support the effective regulation of the electricity sector in Haryana. The notification is applicable for the financial years 2022-2023 through 2026-2027, highlighting its short-to-medium term impact.

Key Entities Referenced