The exemption, notified on Tuesday, used the transition provisions under the new law to continue the tax benefit that was available under the earlier Act.
The tax relief will remain available as long as the fund files its income-tax returns and NCCL continues to be recognised as a clearing corporation by the Securities and Exchange Board of India (Sebi).
Settlement guarantee funds are maintained by clearing corporations as a financial buffer to ensure stock and commodity market trades are completed even if a trading member defaults. Since these funds are created to safeguard the market rather than earn profits, their income has been kept outside the tax net. The latest notification removes uncertainty over the tax treatment of NCCL’s fund following the shift to the new income-tax law. -Our Bureau