Income-tax (Seventeenth Amendment), Rules, 2022

The Central Board of Direct Tax (CBDT) vide Notification No. 64/2022 dated 16.06.2022 has issued the Income-tax (Seventeenth Amendment), Rules, 2022. New rules shall come into force from the date of their publication in the Official Gazette. The present article briefs the rule in detail. Tax-Free Incomes in India

Synopsis of Income-tax (Seventeenth Amendment), Rules, 2022

Income-tax (Seventeenth Amendment), Rules amends Rule 21AI, Rule 21AJ, Rule 21AJA, Rule 21AJAA and inserted Rule 21AIA in the Income-tax Rules, 1962 to claim exemption by a ‘specified fund’ under section 10(4D) of the Income-tax Act, 1961.
This new rule has also amended and substituted the existing Form No. 10-IG for reporting the exempt income under section 10(4D) by a ‘specified fund’.

Amendment in rule 21AI - Computation of exempt income of the specified fund for section 10 (4D)

In Rule 21AI, which specifies Computation of exempt income of the restricted fund for clause (4D) of section 10, sub-rule 2A has been inserted, namely: “The income attributable to units held by non-resident (not being the permanent establishment of a nonresident in India) in a specified fund shall not be exempt under clause (4D) of section 10 of the Act unless the specified fund complies with sub-rule (2).” Rule 21AI states that the specified fund shall furnish an annual statement of exempt income in Form No. 10IG electronically under the digital signature on or before the due date for the Computation of exempt income of the specified fund for the purposes of clause (4D) of section 10. As per the Income-tax (Seventeenth Amendment), Rules, 2022, the income attributable to units held by non-residents in a specified fund shall be exempt under section 10 (4D) only on the submission of Form No. 10IG.

Insertion of New Rule 21AIA - Other conditions required to be fulfilled by a specified fund referred to in clause of section 10(4D)

The unit holder of the specified fund, other than the sponsor or manager of such fund, who becomes a resident under clause (1) or clause (1A) of section 6 of the Income Tax Act during any previous year subsequent to the previous year in which such unit or units were issued, shall cease to be a unit holder of such specified fund within a period of three months from the end of the previous year in which he becomes a resident; The amendment provides that a specified fund referred to in section 10 of the Act shall maintain the following documents in respect of its unit holders,—

Name of the unit holder
Tax identification number of the unit holder in the country of residence at the time the units were issued
Permanent account number, if available
Total number of units held
The total value of units held
Whether the unit holder is a sponsor or a manager
The previous year in which the unit holder became a resident
Date of exit from the specified fund

The specified fund shall certify that it has fulfilled the conditions under sub-rule (1) and furnish information in respect of units held by residents in the annual statement of exempt income in Form No. 10-IG. The income attributable to units held by a non-resident (not being the permanent establishment of a nonresident in India) in a specified fund shall not be exempt under clause (4D) of section 10 unless the specified furnishes the Form No. 10-IG.

Insertion of sub-rule 3A in rule 21AJ

The income of a specified fund referred to in clause (a) and clause (b) of sub-section (1) of section 115AD, attributable to the units held by a non-resident shall not be eligible for tax rates specified in section 115AD unless it furnishes the annual statement of income eligible for concessional taxation in Form No. 10-IH.

Insertion of sub-rule 3A in rule 21AJA

The income of a specified fund attributable to an eligible investment division shall not be exempt under clause (4D) of section 10 unless it furnishes the annual statement of exempt income in Form No. 10-IK and the report of audit in Form 10-IL in

Insertion of sub-rule 2A in rule 21AJAA

The income of an eligible investment division referred to in clause (a) and clause (b) of sub-section (1) of section 115AD shall not be eligible for tax rates specified under section 115AD unless the eligible investment division furnishes an annual statement of income, eligible for taxation under sub-section (1B) of section 115AD of the Act, in Form No. 10-IK. Income Tax (1st Amendment) Rules, 2022