Exemption to income of Core Settlement Guarantee Fund (SGF) of the Clearing Corporations

[Admin TMI]

Question - What are proposed in Finance Bill 2015 regarding the income of the Core SGF arising from contribution received and investment made by the fund ?

[Admin TMI]

Exemption to income of Core Settlement Guarantee Fund (SGF) of the Clearing Corporations

Under the provisions of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (SECC) notified by SEBI, the Clearing Corporations are mandated to establish a fund, called Core Settlement Guarantee Fund (Core SGF) for each segment of each recognized stock exchange to guarantee the settlement of trades executed in respective segments of the exchange.

Under the existing provisions, income by way of contributions to the Investor Protection Fund set up by recognised stock exchanges in India, or by commodity exchanges in India or by a depository shall be exempt from taxation.

On similar lines, it is proposed to exempt the income of the Core SGF arising from contribution received and investment made by the fund and from the penalties imposed by the Clearing Corporation subject to similar conditions as provided in case of Investor Protection Fund set up by a recognised stock exchange or a commodity exchange or a depository.

However, where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with the specified person, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is shared.

The specified person for this purpose is defined to mean any recognized clearing corporation which establishes and maintains the Core Settlement Guarantee Fund and the recognised stock exchange being the shareholder of such clearing corporation.

This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

AI Summary

Exemption for Core Settlement Guarantee Fund income proposed, subject to conditions and deemed income on shared amounts. Proposed amendment exempts income of the Core Settlement Guarantee Fund from tax where such income arises from contributions, investments by the fund, and penalties, subject to conditions similar to those for Investor Protection Funds. If amounts not previously charged to tax are later shared with a specified person, the entire shared amount is deemed income of the year it is shared. 'Specified person' covers the clearing corporation maintaining the Core SGF and its shareholder recognized stock exchange. The amendment applies prospectively to the relevant assessment year.