Conditions for Pension Funds to be Identified as “Specified Person”

The Income Tax Department has published a notification regarding the amendment in the Income Tax Rules, 1962 on 14th August, 2020 in pursuance of powers conferred by sub-clause (iii) of clause (c) of Explanation to the clause (23FE) of section 10 read with section 295 of the Income-tax Act.

By this notification, Rule 2DB has been added to provide for the conditions to be satisfied by a pension fund to qualify as a “specified person” under Section 10 (23FE).

The conditions set out by Rule 2DB with respect to pension funds are as follows:

  1. It must be regulated under the law of a foreign country including the laws made by any of its political constituents being a province, state or local body, under which it is created or established.
  2. It is 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.
  3. The earnings and assets of the pension fund are used only for meeting statutory obligations and defined contributions for participants or beneficiaries of funds and no portion of the earnings or assets of the pension fund inures any benefit to any other private person.
  4. It does not undertake any commercial activity whether within or outside India.
  5. It shall intimate the details in respect of each investment made by it in India during the quarter within 1 month from the end of the quarter in Form No. 10BBB.
  6. It shall file return of income on or before the due date specified under sub-section (1) of section 139 and furnish along with such return a certificate in Form No. 10BBC during the financial year, from an accountant as defined in the Explanation below sub-section (2) of section 288.

Further, pursuant to the Notification, Rule 2DC has been inserted which provides that the pension fund shall, for the purposes of being notified under the sub-clause (iv) of clause (c) of Explanation Section 10 (23FE), make an application in Form No. 10BBA along with the documents as set out in in Rule 2DC.

Form No. 10BBA and Form No. 10BBB are set out in the notification.

The notification can be found here.

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