Rule 5 sets out the procedure for notification of a stock exchange as a recognised stock exchange under section 2(92) of the Act. An application must be submitted to the Member (Income Tax), Central Board of Direct Taxes (CBDT), North Block, New Delhi. The application must include approval granted by the Securities and Exchange Board of India (SEBI) for trading in derivatives, updated rules, bye-laws and trading regulations of the stock exchange, and confirmation that the exchange complies with the conditions specified in Rule 4(b) to 4(f), which relate to client data recording, audit trails, transaction integrity, and reporting requirements. The stock exchange may also provide any additional information it considers relevant.
The Central Government has the authority to seek further information if necessary to decide the application. After examining the submitted documents and any additional information, the Central Government must either notify the stock exchange as a recognised stock exchange or reject the application within six months from the end of the month in which the application is received. Once granted, the notification remains valid until SEBI approval is withdrawn or expires, or until the Central Government rescinds the notification. The rule ensures a formal application process, documentary compliance, and a time-bound decision framework.
Extract of Rule No. 5 of Draft Income-tax Rules, 2026
Rule 5
Procedure for notification of a recognised stock exchange for the purposes of section 2(92) of the Act.
(1) An application for notification of a stock exchange as a recognised stock exchange for the purposes of section 2(92) of the Act may be made to the Member (Income Tax), Central Board of Direct Taxes, North Block, New Delhi – 110001.
(2) The application referred to in sub-rule (1) shall be accompanied with the following documents, namely :-
(a) approval granted by Securities and Exchange Board of India for trading in derivatives;
(b) up-to-date rules, bye-laws and trading regulations of the stock exchange;
(c) confirmation regarding fulfilling the conditions referred to in rule 4(b)] to 4(f)
(d) such other information as the stock exchange may like to place before the Central Government.
(3) The Central Government may call for such other information from the applicant as it deems necessary for taking a decision on the application.
(4) The Central Government, after examining the information furnished by the stock exchange under sub-rule (2) or sub-rule (3), shall notify the stock exchange as a recognised stock exchange for the purposes of section 2(92) of the Act or issue an order rejecting the application before the expiry of six months from the end of the month in which the application is received.
(5) The notification referred to in sub-rule (4) shall be effective until the approval granted by the Securities and Exchange Board of India is withdrawn or expired, or the notification is rescinded by the Central Government.
