Regional Air Connectivity Fund Trust

## Report on Notification Regarding Regional Air Connectivity Fund Trust **1. Executive Summary:** This report analyzes a notification (S.O. 73(E)) issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, concerning the Regional Air Connectivity Fund Trust (RACFT). The notification, effective from specific dates, grants income tax exemption under section 10(46) of the Income-tax Act, 1961, to the RACFT for specific income sources. The key finding is that this notification aims to facilitate the financial operation of the RACFT by exempting its income derived from government grants, airline levies, forfeiture of airline guarantees, and related interest, subject to certain conditions. **2. Introduction:** This report provides an informative analysis of Notification No. 12022F. No. 300196282019ITAI, issued by the Ministry of Finance, concerning the Regional Air Connectivity Fund Trust. The analysis is based solely on the information provided within the notification text. **3. Policy Overview:** * This is a new policy declaration pertaining to the tax treatment of a specific trust. * **Core Objective(s):** The core objective is to provide income tax exemption under Section 10(46) of the Income-tax Act, 1961 to the Regional Air Connectivity Fund Trust for specific sources of income, contingent upon the fulfillment of certain conditions. **4. Background and Rationale:** * **Rationale:** The policy addresses the need to support the financial viability of the Regional Air Connectivity Fund Trust. By granting income tax exemption to its core funding sources (grants, levies, forfeitures, and interest), the government likely intends to maximize the funds available for the RACFT's core purpose (inferred to be related to improving regional air connectivity). The policy acknowledges that this fund relies on government support and contributions from airlines. **5. Key Provisions / Changes:** This is a new policy specifying tax exemptions. The key provisions are: * **Income Tax Exemption:** The notification grants income tax exemption to the RACFT under Section 10(46) of the Income-tax Act, 1961. * **Specific Income Sources Exempted:** The exemption applies specifically to: * Grants from Government * Receipt of levy from Airlines * Forfeiture of bank guarantee due to nonfulfillment of obligation by Airlines * Interest income earned on the above * **Conditions for Exemption:** The exemption is conditional upon the RACFT: * Not engaging in any commercial activity * Maintaining consistent activities and income nature throughout the financial years. * Filing income tax returns according to Section 139(4C)(g) of the Income-tax Act, 1961. * **Effective Period:** The notification is deemed to have been applied for the period from 01.06.2020 to 31.03.2021 and shall apply with respect to the financial years 2021-2022, 2022-2023, 2023-2024 and 2024-2025. **6. Target Audience and Stakeholders:** * **Directly Affected:** The Regional Air Connectivity Fund Trust (RACFT) is the primary directly affected entity. Airlines that contribute levies and provide bank guarantees are also directly affected, as the policy impacts the tax treatment of funds flowing through the RACFT. * **Other Stakeholders:** Indirectly, the beneficiaries of enhanced regional air connectivity (e.g., travelers, businesses in regional areas) are stakeholders. **7. Implementation Aspects (Inferred):** * **Responsible Agency:** The Central Board of Direct Taxes (CBDT), under the Ministry of Finance, is the responsible agency for issuing and overseeing this notification. The Regional Air Connectivity Fund Trust is responsible for adhering to the conditions stipulated in the notification to maintain its tax-exempt status. * **Timelines/Procedures:** The notification specifies the financial years to which the exemption applies (2020-2021 retroactively, and 2021-2022 through 2024-2025). The RACFT is required to file income tax returns as per the specified section of the Income-tax Act. **8. Expected Outcomes / Impact of Changes:** * The likely intended outcome is to improve the financial health of the Regional Air Connectivity Fund Trust by reducing its tax burden. This, in turn, should enable the RACFT to allocate more resources to its core objective, presumably related to enhancing regional air connectivity. The impact on airlines will be a slight benefit due to clarity on the tax treatment of the levy funds, although they still need to pay the levy. **9. Conclusion:** The Notification S.O. 73(E) provides a significant income tax exemption to the Regional Air Connectivity Fund Trust, covering its key funding sources. By ensuring that the RACFT's income is tax-exempt, the government aims to strengthen the fund's financial position and facilitate its ability to support and improve regional air connectivity within the specified timeframes. The policy is of particular significance to the RACFT and airlines contributing to the fund.

Key Entities Referenced