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Overview on Income Tax (23rd Amendment) Rules, 2020

calendar03 Nov, 2020
timeReading Time: 3 Minutes
Income Tax (23rd Amendment) Rules, 2020

The Central Board of Direct Taxes has the power conferred upon them by Income Tax Act. Section 295(1) of Income Tax Act, 1962 has laid down the rules that CBDT (Central Board of Direct Taxes) can make changes in the rules and provisions of Income Tax Rules, 1962. This new rule is known as Income Tax (23rd Amendment) Rules, 2020 and will be effective from 1st April, 2021

Amendments made in Income Tax (23rd Amendment ) Rules, 2020

The Income Tax (23rd Amendment) Rules, 2020 were made in the Rule 67(2) of Income Tax Rules, 1962 are-

  • In the fifth proviso, the letter ‘A’ shall be substituted for letters ‘AA’;
  • In the eight proviso, the letter ‘A’ shall be substituted for letters ‘AA’;
  • In the eleventh proviso, the letter ‘A’ shall be substituted for letters ‘AA’ occurring at both the places.

Read our article:10 Reasons Why Filing Income Tax Return Is Vital For You

Rule 67 before Income Tax (23rd Amendment) Rules, 2020

Rule 67 talks about Investment of Funds Money and how the amount has to be invested is explained below. Rule 67 is further divided into two sub-rules.

Sub-Rule (1)

Rule 67 (1) talks about all the money contributed in a provident fund whether by the employer or employees after 31st October of FY & it has to be transferred after that particular date from any employees individual account in any recognized provident fund sustained by the former employer. The fund has to be deposited in Savings Bank Account of the Post Office or in a current account or a Savings Bank Account in any scheduled bank, to such extent that the amount are not deposited and should be invested in the manner prescribed in Rule 67 (2).

Sub-Rule (2)

The manners in which the investments of funds money are to be deposited are explained in this clause. Table has been provided for the same.

Serial No. Investment Percentage of Amount to be Invested
1. Government Securities        45-50%
2. Debt Instruments & Related Investment        35-45%
3. Short term Debt Instruments & related investments        Up to 5%
4. Equities & related Investments        5- 15 %
5. Asset Backed, Trust Structured and Miscellaneous Investments        Up to 5%

For the purposes of Rule 67(2), following points should be considered—

  1. Fresh accretions to the funds should be the sum of un-invested funds from the past and reduced by obligatory outgoing during the Financial Year;
  2. Government securities[1]’ should have the meaning provided in Section 2(b) of the Securities Contracts (Regulation) Act, 1956;
  3. ‘Infrastructure’ should be used for the purpose as given in the above Table;
  4. ‘Public Financial Institutions’ should have the meaning provided in Section 2 of the Companies Act, 2013;
  5. ‘Public Sector Company’ should have the meaning provided in Section 2(36A) of the Income tax Act;
  6. ‘Securities’ have the meaning provided in Section 2 of the Securities Contracts (Regulation) Act, 1956.
Note: Rule 67(1) and Rule 67(2) apply to recognized provident funds and not on gratuity funds.

Conclusion

The principal rules regarding the amendments were published in the Gazette of India Extraordinary, Part-II, Section-3 (ii) vide number S.O. 969 (E), dated 26th March, 1962 and the last amendment was done recently on 1st October,2020 vide notification number G.S.R No.610 (E).

According to the Memorandum Vide Notification No. 84 /2020, dated 22 October, 2020, an amendment was made in Rule 67 of the Income tax Rules, 1962. The amendment is known as Income Tax (23rd Amendment) Rules, 2020 and it will be effective from 1st April, 2021 & is applicable for the Assessment Year 2021-22.

Read our article:CBDT Amends the Tax Audit Report Form 3CD, ITR 6, Form No 10-IE and 10-IF

notification_84_2020

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