Executive Summary:
This notification, issued by the Central Board of Direct Taxes, recognizes Ms. National Stock Exchange of India Limited, Mumbai, as a recognized association under the Income-tax Act, 1961 for derivative trading. This recognition is effective from the date of publication in the official gazette and is subject to specific conditions. The notification remains valid until the Securities and Exchange Board of India (SEBI) approval is withdrawn, expires, or the notification is rescinded by the Central Government.
Key Points / Main Content:
Recognition and Scope:
* Ms. National Stock Exchange of India Limited (NSE) is recognized as an association under Section 43 of the Income-tax Act, 1961, for trading in derivatives.
Conditions for Recognition:
* NSE must have the approval of the Forward Markets Commission (now merged with SEBI) and function according to SEBI's guidelines.
* Client particulars, including unique client identity number and PAN, must be recorded and stored in NSE's databases.
* A complete audit trail of all derivative market transactions must be maintained for seven years.
* Derivative market transactions, once registered, must not be erased.
* Modifications to registered transactions are allowed only for genuine errors, with data on all modified transactions maintained.
Reporting Requirements:
* NSE must submit a monthly statement in Form No. 3BC regarding modified transactions to the Director General of Incometax Intelligence and Criminal Investigation, New Delhi, within fifteen days of the end of each month.
Validity:
* The notification is valid until SEBI approval is withdrawn or expires, or the Central Government rescinds the notification.
Impact Analysis:
Central Board of Direct Taxes:
* Impact: Responsible for issuing and potentially rescinding the notification.
* Action Required: Ensure compliance with subrule 5 of rule 6DDD of the Income Tax Rules,1962 regarding rescinding the notification.
Ms. National Stock Exchange of India Limited (NSE):
* Impact: Granted recognition as an association for derivative trading, subject to conditions.
* Action Required: Comply with all stipulated conditions, including obtaining SEBI approval, maintaining transaction records, and submitting monthly statements.
Director General of Incometax Intelligence and Criminal Investigation, New Delhi:
* Impact: Receives monthly statements from NSE regarding modified derivative transactions.
* Action Required: Review and process the monthly statements received from NSE.
Tax Payers/Clients trading in Derivatives via NSE:
* Impact: Can be assured that the exchange is following a process that is compliant with regulations, as per the requirements of the Income Tax Act.
* Action Required: Provide all requested details to the exchange to ensure compliance with the Income Tax Act.
Securities and Exchange Board of India (SEBI):
* Impact: The validity of this notification relies on their approval.
* Action Required: Uphold the current approval granted or communicate any intention to withdraw or expire it.
Key Entities Referenced
Income-tax Act, 1961: A law cited as the basis for the powers exercised in the notification.
Incometax Rules, 1962: Rules related to the Income-tax Act, 1961, specifically Rule 6DDD.
Central Board of Direct Taxes: The issuing authority of the notification, under the Ministry of Finance, Department of Revenue.
National Stock Exchange of India Limited, Mumbai: Designated as a recognized association under the Income-tax Act for trading in derivatives.
Forward Markets Commission: An organization established under the Forward Contracts Regulation Act, 1952, later merged with SEBI.
Forward Contracts Regulation Act, 1952: A law under which the Forward Markets Commission was established.
Securities and Exchange Board of India: The regulatory body with which the Forward Markets Commission was merged.
Director General of Incometax Intelligence and Criminal Investigation, New Delhi: The recipient of a monthly statement (Form No. 3BC) related to derivative market transactions.
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6137 GI/2019 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)]
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2. यह अिधसूचना तब तक लागू रहगे ी जब तक भारतीय (ितभूित एवं िविनमय बोडE ’ारा (दान (cid:1)कया गया
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पहले हो।
[अिधसूचना सं. 100/2019/फा. सं.225/252/2019-आईटीए-II]
राजाराजेUव री आर, अवर सिचव
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 27th November, 2019
S.O. 4282(E).—In exercise of the powers conferred by clause (iii) in the Explanation of clause (e) of the proviso
to sub-section (5) of Section 43 of the Income-tax Act, 1961 (43 of 1961) read with sub-rule (4) of Rule 6DDD of the
Income-tax Rules, 1962, the Central Government hereby notifies M/s National Stock Exchange of India Limited,
Mumbai (PAN: AAACN1797L) as a ‘recognised association’ for the purpose of said clause with effect from the date
of publication of this notification in the official gazette subject to fulfilment of following conditions in respect of trading
in derivatives, namely;
(i) The Exchange shall have the approval of the Forward Markets Commission established under the
Forward Contracts (Regulation) Act, 1952 (74 of 1952) (merged with Securities and Exchange Board of
India vide Gazette Notification No.S.O.2630(E) dated 24.09.2015) in respect of trading in derivatives and
shall function in accordance with the guidelines or conditions laid down by it;
(ii) It shall ensure that the particulars of the client (including unique client identity number and PAN) are
duly recorded and stored in its databases;
(iii) It shall maintain a complete audit trail of all transactions (in respect of derivative market) for a period
of seven years on its system;
(iv) It shall ensure that transactions (in respect of derivative market) once registered in the system are not
erased;
(v) It shall ensure that the transactions (in respect of derivative market) once registered in the system are
modified only in cases of genuine error and maintain data regarding all transactions (in respect of derivative
market) registered in the system which have been modified and submit a monthly statement in Form¹Hkkx IIµ[k.M 3(ii)] Hkkjr dk jkti=k % vlk/kj.k 3
No. 3BC to the Director General of Income-tax (Intelligence and Criminal Investigation), New Delhi within
fifteen days from the last day of each month to which such statement relates.
2. This notification shall remain in force until the approval granted by the Securities and Exchange Board of
India is withdrawn or expires; or this notification is rescinded by the Central Government as provided in sub-rule(5) of
rule 6DDD of the Income Tax Rules,1962, whichever is earlier.
[ Notification No. 100/2019 /F. No. 225/252/2019-ITA-II]
RAJARAJESWARI R., Under Secy.
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.