Stock exchanges must meet specific conditions under section 43(5) of Income Tax Rules for SEBI recognition in derivatives trading.

A stock exchange must meet specific conditions to be recognized under clause (d) of the proviso to clause (5) of section 43 of the Income Tax Rules, 1962. It must have approval from the Securities and Exchange Board of India (SEBI) for trading in derivatives and comply with SEBI guidelines. The exchange must record and store client details, including unique client identity numbers and PANs, and maintain a seven-year audit trail of all transactions. Transactions should not be erased and can only be modified for genuine errors, with modifications reported monthly to the Director General of Income-tax (Intelligence).

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