## Policy Analysis Report: Income-tax Notification S.O. 1672(E)
**1. Executive Summary:**
This report analyzes Notification S.O. 1672(E) issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes on April 22, 2021. This notification specifies the Canada Pension Plan Investment Board (CPPIB) as a “specified person” under Section 10(23FE) of the Income-tax Act, 1961, enabling CPPIB to potentially avail tax exemptions on eligible investments made in India. The key findings detail the conditions that CPPIB must fulfill to maintain eligibility for the tax exemption, focused on compliance with Indian tax laws and restrictions on the nature of its Indian investments.
**2. Introduction:**
The purpose of this report is to provide a detailed analysis of Notification S.O. 1672(E), based solely on the information provided in the official text. This report aims to inform the affected industry about the specifics of this notification and its potential implications.
**3. Policy Overview:**
This is a *new policy specification* under existing provisions of the Income-tax Act, 1961.
* **Core Objective(s):** Based on the text, the core objective of this notification is to designate the Canada Pension Plan Investment Board (CPPIB) as a "specified person" for the purposes of Section 10(23FE) of the Income-tax Act, 1961. This designation makes the CPPIB eligible for tax exemptions on certain investments made in India. The notification also aims to ensure that the investments made by CPPIB adhere to specific conditions to maintain this tax-exempt status.
**4. Background and Rationale:**
As this is a new specification under existing provisions, the policy likely addresses the government's aim to attract foreign investment into India, specifically from pension funds. By granting "specified person" status and potential tax exemptions to entities like CPPIB, the government encourages investment while setting conditions to ensure transparency, compliance with Indian laws, and alignment with the intended purpose of Section 10(23FE). The conditions attached likely aim to prevent misuse of the exemption and ensure the investments benefit India.
**5. Key Provisions / Changes:**
This notification establishes the following key provisions for CPPIB to be considered a “specified person” and to maintain eligibility for tax exemptions under Section 10(23FE):
* **Designation:** The Canada Pension Plan Investment Board is designated as the "specified person".
* **Investment Period:** Eligible investments must be made on or after the date of publication of the notification (April 22, 2021) but on or before March 31, 2024.
* **Return Filing:** CPPIB must file income tax returns for all relevant previous years within the period from when the investment was made until it is liquidated, adhering to the due dates specified under Section 139(1) of the Act.
* **Certificate of Compliance:** CPPIB must furnish Form No. 10BBC, certified by an accountant as defined in Section 288(2) of the Act, confirming compliance with Section 10(23FE) during the financial year. Compliance should be as per the provisions of clause vi of rule 2DB of the Incometax Rules, 1962.
* **Investment Details Reporting:** CPPIB must report details of each investment made in India within one month from the end of the quarter using Form No. 10BBB, as per the provisions of clause v of rule 2DB of the Incometax Rules, 1962.
* **Segmented Accounting:** CPPIB must maintain separate accounts for income and expenditure related to investments qualifying for the Section 10(23FE) exemption.
* **Regulatory Compliance:** CPPIB must continue to be regulated under the laws of the Government of Canada.
* **Purpose of Funds:** CPPIB must administer or invest assets to meet statutory obligations and defined contributions for retirement, social security, employment, disability, death benefits, or similar compensation for participants or beneficiaries of relevant funds or plans.
* **Restriction on Benefit to Private Persons:** The earnings and assets of CPPIB should be used only for statutory obligations and defined contributions to beneficiaries. No portion of earnings or assets should benefit any other private person, except for payments to creditors or depositors for loans taken for purposes other than investment in India as defined in subclause b of clause ii of Explanation 2 to clause 23FE of section 10 of the Act.
* **Restriction on Borrowings:** CPPIB shall not have any loans or borrowings directly or indirectly for the purpose of making investment in India, as defined in subclause b of clause ii of Explanation 2 to clause 23FE of section 10 of the Act.
* **Restriction on Day-to-Day Operations:** CPPIB cannot participate in the day-to-day operations of the investee, as defined in clause i of Explanation 2 to clause 23FE of section 10 of the Act. Monitoring investments, including the right to appoint directors or executive directors, is not considered participation in day-to-day operations.
* **Violation Clause:** Violation of the stipulated conditions in Section 23FE and this notification will render CPPIB ineligible for the tax exemption.
**6. Target Audience and Stakeholders:**
Based on the text, the primary target audience is the Canada Pension Plan Investment Board (CPPIB). Other stakeholders include:
* The Central Board of Direct Taxes (CBDT).
* Accountants who will be providing certificates in Form No. 10BBC.
* The Indian companies receiving investments from CPPIB ("investees").
* Government of Canada
**7. Implementation Aspects (Inferred):**
* **Responsible Agency:** The Central Board of Direct Taxes (CBDT) is the responsible agency for implementing and monitoring compliance with this notification.
* **Timelines:**
* Investments must be made between April 22, 2021, and March 31, 2024.
* Return of income must be filed according to Section 139(1) of the Act.
* Form No. 10BBB must be submitted within one month from the end of each quarter.
* **Procedures:** CPPIB will need to establish procedures for:
* Tracking and reporting investments.
* Maintaining segmented accounts.
* Ensuring compliance with all conditions specified in the notification and Section 23FE.
**8. Expected Outcomes / Impact of Changes:**
The intended outcome of this notification is to encourage investment from the Canada Pension Plan Investment Board into India by providing potential tax exemptions. The conditions attached are meant to ensure transparency, compliance, and that the investments are used for their intended purpose, benefiting the retirement and social security of individuals rather than private gain. The restrictions on day-to-day involvement and borrowings are likely intended to prevent undue influence or financial risk associated with the investments.
**9. Conclusion:**
Notification S.O. 1672(E) is a significant step in potentially attracting investment from the Canada Pension Plan Investment Board into India. By designating CPPIB as a "specified person" under Section 10(23FE) and detailing the specific conditions for maintaining this status, the notification provides both an incentive and a framework for responsible and compliant investment. Adherence to the outlined requirements is crucial for CPPIB to benefit from the tax exemptions and contribute to the Indian economy.
Key Entities Referenced
New Delhi: Location of Central Board of Direct Taxes, likely referring to New Delhi, Delhi, India.
Ministry of Finance: The Indian government ministry responsible for financial matters.
Department of Revenue: A department within the Ministry of Finance.
Central Board of Direct Taxes: An organization under the Department of Revenue responsible for direct tax administration.
Incometax Act, 1961: Indian legislation related to income tax. Specifically section 10 and clause 23FE are referenced.
Canada Pension Plan Investment Board: A specified pension fund, also referred to as 'the assessee', making eligible investments in India.
India: The country where the Canada Pension Plan Investment Board is making eligible investments.
Government of Canada: The governing body under whose laws the Canada Pension Plan Investment Board is regulated.
Incometax Rules, 1962: Rules pertaining to the Incometax Act, 1961. Specifically rule 2DB is referenced.
Javed Akhtar: Director, Tax Policy and Legislation Division
Mayapuri, New Delhi: Location of Dte. of Printing at Government of India Press.
Delhi: Location of Controller of Publications.
रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99
सी.जी.-डी.एल.-अ.-22042021-226721
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CG-DL-E-22042021-226721
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असाधारण
EXTRAORDINARY
भाग II—खण् ड 3—उप-खण्ड (ii)
PART II—Section 3—Sub-section (ii)
प्राजधकार स ेप्रकाजित
PUBLISHED BY AUTHORITY
स.ं 1554] नई दिल्ली, बृहस्ट्प जतिार, अप्रलै 22, 2021/ििै ाख 2, 1943
No. 1554] NEW DELHI, THURSDAY, APRIL 22, 2021/VAISAKHA 2, 1943
जित्त मंत्रालय
(रािस्ट्ि जिभाग)
(केंद्रीय प्रत्यक्ष कर बोडड)
नई दिल् ली, 22 अप्रलै , 2021
(आय-कर)
का.आ. 1672 (अ).—केंद्रीय सरकार, आय-कर अजधजनयम, 1961 (1961 का 43) (जिसे इसमें इसके पश्चात ्
“अजधजनयम” कहा गया ह)ै के खंड (23चङ) के स्ट्पष्टीकरण 1 के खंड (ग) के उपखंड (iv) द्वारा प्रित्त िजियों का प्रयोग करत े
हुए, पेंिन जनजध अर्ाडत,् कनाडा पिें न योिना जिजनधान बोड,ड (जिसे इसम ें इसके पश्चात ् “जनधाडररती” कहा गया ह)ै को,
उि खडं के प्रयोिनों के जलए रािपत्र म ें इस अजधसूचना के प्रकािन की तारीख को या उसके पश्चात ् ककंत ु 31 माच,ड 2024
को या उससे पूिड भारत म ें उसके द्वारा दकए गए पात्र जिजनधान (जिसे इसम ें इसके पश्चात ् “उि जिजनधान” कहा गया ह)ै के
संबंध म,ें जनम्नजलजखत ितों को पूरा करने के अधीन रहते हुए, जिजनर्िष्टड व्यजि के रूप म ेंजिजनर्िष्टड करती ह,ै अर्ाडत ् :--
(i) जनधाडररती, उस तारीख स े प्रारंभ होने िाली अिजध, जिसम ें उि जिजनधान दकया गया ह,ै और उस तारीख को,
जिसको ऐसा जिजनधान पररसमाप्त दकया गया ह,ै समाप्त होने िाली अिजध के अंतगडत आने िाले सभी सुसंगत
पूिडिती िर्षों के जलए अजधजनयम की धारा 139 की उपधारा (1) के अधीन आय की जििरणी प्रस्ट्तुत करन े की
जिजनर्िष्टड िये तारीख को या उससे पूिड आय की जििरणी फाइल करेगा ।
2361 GI/2021 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)]
(ii) जनधाडररती ऐसी जििरणी के सार् जित्त िर्षड के िौरान, अजधजनयम की धारा 10 के खंड (23चङ) के उपबंधों की
अनुपालना के संबंध म ें आय-कर जनयम, 1962 के जनयम 2घख के खंड (vi) के उपबंधों के अनुसार धारा 288 की
उपधारा (2) के नीच े स्ट्पष्टीकरण म ें यर्ा पररभाजर्षत दकसी लेखपाल स े प्ररूप स.ं 10 खखग म ें एक प्रमाणपत्र
प्रस्ट्तुत करेगा ।
(iii) जनधाडररती भारत म ें जतमाही के िौरान उसके द्वारा दकए गए प्रत्येक जिजनधान के संबंध म ें ब्यौरों की सूचना
जतमाही के िौरान जतमाही के अंत स े एक मास के भीतर आय-कर जनयम, 1962 के जनयम 2घख के खडं (v) के
उपबंधों के अनुसार प्ररूप स.ं 10 खखख म ें िेगा;
(iv) जनधाडररती, ऐसे जिजनधानों के संबंध म,ें िो अजधजनयम की धारा 10 के खडं (23चङ) के अधीन छूट के जलए अर्हतड
ह,ैं के संबंध म ेंआय और व्यय का खंडिार लेखा बनाए रखेगा ।
(v) जनधाडररती कनाडा सरकार की जिजध के अधीन जिजनयजमत होता रहगे ा ।
(vi) जनधाडररती, यर्ाजस्ट् र्जत, ऐसी जनजधयों या योिनाओं के भागीिारों या जहताजधकाररयों के जलए सेिाजनिृजत् त,
सामाजिक सुरक्षा, रोिगार, दिव्यांग्ता, मरणोत् तर प्रसुजिधाए ं या कोई समरूप प्रजतकर का उपबंध करन े के जलए
स्ट् र्ाजपत एक या अजधक जनजधयों या योिनाओं की काननू ी बाध्य ताओं और पररभाजर्षत अजभिायों को परू ा करने के
जलए आजस्ट् तयों के प्रिासन या जिजनधान के जलए उत् तरिायी होगा;
(vii) जनधाडररती के उपािडनों और आजस्ट्तयों का उपयोग केिल काननू ी बाध्यताओं को और खडं (vi) में जनर्िष्टड जनजधयों
या योिनाओं के सहभाजगयों या फायिाग्राजहयों के जलए पररभाजर्षत अजभिायों को पूरा करन े के जलए दकया िाए
तर्ा पेंिन जनजध के उपािडनों या आजस्ट्तयों का कोई भाग दकसी अन्य प्राइिेट व्यजि के दकसी फायिा को भारत म ें
जिजनधान करन े के प्रयोिन स े जभन्न प्रयोिनों के जलए जलए गए ऋण या उधार [अजधजनयम की धारा 10 के खडं
23 चङ के स्ट्पष्टीकरण 2 के खडं (ii) के उपखंड (ख) म ें यर्ापररभाजर्षत] के जलए लेनिारों या जनक्षेपकताडओं को
दकए गए दकसी संिाय को िर्ितड करते हुए लागू नहीं होता ह;ै
(viii) जनधाडररती के पास भारत म ें जिजनधान करने के प्रयोिनों के जलए, प्रत्यक्षत: या अप्रत्यक्षत: कोई ऋण या उधार
[अजधजनयम की धारा 10 के खंड (23चङ) के स्ट्पष्टीकरण-2 के खंड (ii) के उपखंड (ख) म ें यर्ापररभाजर्षत] नहीं
होगा;
(ix) जनधाडररती जिजनधान प्राप्तकताड [अजधजनयम की धारा 10 खंड 23चङ) के स्ट्पष्टीकरण-2 के खंड (i) म ें
यर्ापररभाजर्षत] के दिन प्रजतदिन की संदियाओं म ें भाग नहीं लेगा परं तु जिजनधान प्राप्तकता ड के पास जिजनधान की
संरक्षा करन े के जलए मॉनीटरी तंत्र को, जिसम ें जनिेिकों या कायडपालक जनििे क को जनयिु करने के अजधकार
सजममजलत ह,ै जिजनधान प्राप्तकताड के दिन प्रजतदिन की संदियाओं म ेंभाग लेना नहीं समझा िाएगा ।
2. अजधजनयम की धारा 10 के खंड (23चङ) और इस अजधसचू ना म ें यर्ा उजल्लजखत ितों म ें स े दकसी भी ितड का उल्लंघन
जनधाडररती को कर छूट के जलए अपात्र ठहराएगा ।
3. यह अजधसूचना रािपत्र म ेंउसके प्रकािन की तारीख स े प्रिृत्त होगी ।
[अजधसूचना सं. 34/2021/फा. स.ं 370142/39/2020-टीपीएल]
िािेि अख्तर, जनिेिक (कर नीजत और जिधान प्रभाग)[भाग II—खण् ड 3(ii)] भारत का रािपत्र : असाधारण 3
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
New Delhi, the 22nd April, 2021
(INCOME-TAX)
S.O. 1672(E).—In exercise of powers conferred by sub-clause (iv) of clause (c) of the Explanation 1 to
clause (23FE) of section 10 of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the “Act”), the Central
Government hereby specifies the pension fund, namely, the Canada Pension Plan Investment Board, (hereinafter
referred to as “the assessee”) as the specified person for the purposes of the said clause in respect of the eligible
investment made by it in India on or after the date of publication of this notification in the Official Gazette but on or
before the 31st day of March, 2024 (hereinafter referred to as “said investments”) subject to the fulfilment of the
following conditions, namely:-
(i) the assessee shall file return of income, for all the relevant previous years falling within the period
beginning from the date in which the said investment has been made and ending on the date on which such
investment is liquidated, on or before the due date specified for furnishing the return of income under sub-
section (1) of section 139 of the Act;
(ii) the assessee shall furnish along with such return a certificate in Form No. 10BBC in respect of compliance
to the provisions of clause (23FE) of section 10 of the Act, during the financial year, from an accountant
as defined in the Explanation below sub-section (2) of section 288 of the Act, and as per the provisions of
clause (vi) of rule 2DB of the Income-tax Rules, 1962;
(iii) the assessee shall intimate the details in respect of each investment made by it in India during the quarter
within one month from the end of the quarter in Form No. 10BBB, as per the provisions of clause (v) of
rule 2DB;
(iv) the assessee shall maintain a segmented account of income and expenditure in respect of such investment
which qualifies for exemption under clause (23FE) of section 10 of the Act;
(v) the assessee shall continue to be regulated under the law of the Government of Canada;
(vi) the assessee shall be responsible for administering or investing the assets for meeting the statutory
obligations and defined contributions of one or more funds or plans established for providing retirement,
social security, employment, disability, death benefits or any similar compensation to the participants or
beneficiaries of such funds or plans, as the case may be;
(vii) the earnings and assets of the assessee should be used only for meeting statutory obligations and defined
contributions for participants or beneficiaries of funds or plans referred to in clause (vi) and no portion of
the earnings or assets of the pension fund inures any benefit to any other private person; barring any
payment made to creditors or depositors for loan or borrowing [as defined in sub-clause (b) of clause (ii)
of Explanation 2 to clause (23FE) of section 10 of the Act] taken for the purposes other than for making
investment in India;
(viii) the assessee shall not have any loans or borrowings [as defined in sub-clause (b) of clause (ii) of
Explanation 2 to clause (23FE) of section 10 of the Act], directly or indirectly, for the purposes of making
investment in India; and
(ix) the assessee shall not participate in the day to day operations of investee [as defined in clause (i) of
Explanation 2 to clause (23FE) of section 10 of the Act] but the monitoring mechanism to protect the
investment with the investee including the right to appoint directors or executive director shall not be
considered as participation in the day to day operations of the investee.
2. Violation of any of the conditions as stipulated in the said clause (23FE) of section 10 of the Act and this
notification shall render the assessee ineligible for the tax exemption.
3. This notification shall come into force from the date of its publication in the Official Gazette.
[Notification No. 34/2021/F. No. 370142/39/2020-TPL]
JAVED AKHTAR, Director (Tax Policy and Legislation Division)
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.