CBDT amends Rule 21AK which explains Conditions for Section 10(4E) of Income Tax Act, 1961. CBDT vide Notification No. 87/2022-Income Tax | Dated: 1st August, 2022 inserted the word ‘non-deliverable forward contracts’, the words ‘or offshore derivative instruments or over-the-counter derivatives’ in the rules and explained the meaning of Derivative, non-deliverable forward contract, offshore banking unit, offshore derivative instrument, over-the-counter derivatives and permanent establishment for the purpose of Rule 21AK.
Ministry Of Finance
(Department of Revenue)
(Central Board of Direct Taxes)
New Delhi
Notification No. 87/2022-Income Tax | Dated: 1st August, 2022
G.S.R. 610(E).— In exercise of the powers conferred by clause (4E) of section 10 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:─
1. Short title and commencement.—(1) These rules may be called the Income-tax (Twenty Third Amendment) Rules, 2022.
(2) They shall come into force from the date of their publication in the Official Gazette.
2. In the Income-tax Rules, 1962 (hereinafter referred to as the principal rules), in rule 21AK, –
(A) in sub-rule (1), –
(a) in the opening paragraph, after the words “non-deliverable forward contracts”, the words “or offshore derivative instruments or over-the-counter derivatives,” shall be inserted;
(b) in clause (i), after the words “non-deliverable forward contract”, the words “or offshore derivative instrument or over-the-counter derivative” shall be inserted;
(c) in clause (ii), after the word “contract”, the words “, instrument or derivative” shall be inserted;
(B) for the Explanation, following shall be substituted, namely:-
“Explanation.—For the purpose of this rule, the expression,—
(i) “derivative” shall have the same meaning as assigned to it in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956(42 of 1956);
(ii) “a non-deliverable forward contract” shall mean a contract for the difference between an exchange rate agreed before and the actual spot rate at maturity, with the spot rate being taken as the domestic rate or a market determined rate and such contract being settled with a single payment in a foreign currency;
(iii) “offshore banking unit” means a banking branch Unit located in an International Financial Services Centre, as referred to in sub-section (1A) of section 80LA of the Act;
(iv) “offshore derivative instrument” shall have the same meaning as assigned to it in clause (o) of sub-regulation (1) of regulation (2) of the SEBI Foreign Portfolio Investor Regulations, 2019;
(v) “over-the-counter derivatives” shall mean a derivative contract that is not traded on an exchange but instead is privately negotiated between a purchaser and a seller; and
(vi) “permanent establishment” shall have the meaning as assigned to it in clause (iiia) of section 92F of the Act.
[Notification No. 87/2022/ F. No. 370142/36/2022-TPL]
UMME FARDINA ADIL, Under Secy.
(Tax Policy and Legislation Division)
Note : The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub- section (ii), vide notification number S.O. 969(E) dated the 26th March, 1962 and were last amended vide notification number G.S.R. 537(E) dated the 12th July, 2022.
