Regulatory Referencer Archives

Regulatory Referencer

I. DIRECT TAX : SPOTLIGHT

1. Referencing by Document Identification Number – Reg – Circular No. 4/2026 dated 31 March 2026

Section 292B and 292BA of Income-tax Act, 1961 and Section 522 of the Income-tax Act 2025, provide that any document issued by Income tax Authority shall be referenced by the computer generated Document Identification number (DIN). The circular provides as under:

a) DIN may be mentioned within the communication itself, attached separately, or included in electronic correspondence such as emails.

b) There is no requirement for the same to be printed on every page, provided the communication is clearly referenced.

The Circular further provides that in certain circumstances, the document may not be referenced by DIN in specific situations and all such communications shall require post-facto approval, within a period of 15 days of the date of issue of such communication.

2. Procedure, formats and standards for generation and allotment of Unique Identification Number (UIN) in respect of Form No. 121 and quarterly furnishing of Part B thereof by the payer – Notification No. 01/CPC(TDS) /2026 dated 28 March 2026.

Section 393(6) of the Income-tax Act, 2025 provides for no deduction of tax in certain cases wherein declaration in Part A of Form No. 121 is furnished by the payee to the payer as per Rule 211 of the Income-tax Rules, 2026.

The payer shall allot a 26-character UIN to each declaration (Part A of Form No. 121) received by him during the tax year. The circular provides for the Procedure, formats and standards for generation and allotment of UIN.

3. CBDT amends India- Brazil DTAA – Notification No.39/2026 dated 30 March 2026

The notification gives effect to the 2022 Amending Protocol to the India–Brazil DTAA, which entered into force on 18 October 2025 and applies in India from FY 2026–27 onwards.

4. ITR Forms 1-7, including ITR V and ITR U(updated return) have been notified by the CBDT, for the financial year 2025-26 – Notification No. 45 to 52 of 2026 dated 30 March 2026.

5. Clarificationthat investments made before April 1, 2017, are fully grandfathered and exempt from GAAR scrutiny – Notification No. 55/2026 dated 31 March 2026.

6. PAN CR-01 and PAN CR-02 prescribed for correction of PAN data for individuals and non-individuals along with guidelines

7. All the provisions of Memorandum of Understanding for Assistance in Collection of taxes, of the Convention between the Government of the Republic of India and the Government of Japan for the avoidance of double taxation and the prevention of fiscal evasion are notified. – Notification No. 56 dated 2 April 2026

II. IFSCA UPDATE FOR MAY 2026 EDITION

1. IFSCA grants Qualifying Central Counterparty (QCCP) status to IIBX

India International Bullion Exchange (IFSC) Limited (‘IIBX’) functions both as a Bullion Exchange and a Bullion Clearing Corporation. The Bullion Clearing Corporation of IIBX has qualified as a Qualifying Central Counterparty (‘QCCP’) as it is regulated by IFSCA, SCRA and complies with global standards, particularly the Principles for Financial Market Infrastructures (PFMIs). The QCCP status confirms that its clearing operations meet international benchmarks for risk management and financial integrity.

Further, IIBX has been designated as a Market Infrastructure Institution (MII) due to its systemic importance in GIFT IFSC and is subject to strict regulatory oversight and supervision within the PFMI framework. In view of the above, IIBX is accorded the status of QCCP.

[Press release, dated 25th March 2026]

2. IFSC Authority removes 7-day comment timeline requirement from KMP circular for FMEs

IFSCA had issued a circular “Appointment and Change of Key Managerial Personnel (‘KMP’) by a Fund Management Entity (‘FME’)” dated February 20, 2025 which specifies the manner and procedure to be followed by a FME for effecting the appointment of or change to their KMPs. Paragraph 4 of this Circular which provided for communication of comments by the Authority within a specified timeline of 7 working days form the date of filing of intimation by the FME has now been removed. All other provisions and conditions specified in the 2025 Circular shall remain the same.

[Circular No. IFSCA/13/2026-Capital Markets/1, dated 1st April 2026]

3. IFSCA mandates certification courses

IFSCA has specified a mandatory certification course titled “Regulatory Framework for Fund Management in IFSC: AIFs and Retail Schemes” for employees of Fund Management Entities (FMEs) offered by the Institute of Company Secretaries of India. All Key Managerial Personnel (KMPs) and employees engaged in core fund management activities are required to successfully complete this certification on or before 30 September 2026, with responsibility for compliance resting on the FME and persons in control. Additionally, FMEs must ensure continuous adherence to eligibility criteria for KMPs under applicable regulations.

The IFSCA has also mandated a certification requirement for employees of Capital Market Intermediaries (CMIs) in IFSC. The Authority has specified the course titled “Regulatory Framework for Capital Market Intermediaries in IFSC” offered by the Institute of Company Secretaries of India. All Key Managerial Personnel (KMPs) and employees engaged in core business activities are required to successfully complete this certification on or before 30 September 2026, with the responsibility for compliance resting on the CMI and persons in control.

[Circular No. IFSCA/13/2026-Capital Markets/1, dated 1st April 2026 & Circular F. No. IFSCA-PLNP/80/2024 Capital Markets, dated 2nd April 2026]

4. IFSCA establishes regulatory framework for registration, regulation and supervision of Pension Funds in IFSC

The IFSC Authority has notified the IFSCA (Pension Fund) Regulations, 2026, establishing a regulatory framework for registration, regulation and supervision of Pension Funds in IFSC. The regulations aim to provide a robust framework for long-term retirement savings, promote a secure and transparent environment for subscribers, protect their interests and maintain the integrity of the pension ecosystem. The framework overrides existing PFRDA regulations within the IFSC, eliminating dual-regulatory burden. The Regulations cover eligibility requirements for the Pension Funds; scheme designs; withdrawal and portability pathways; permissible investments with defined limits over a broad range of asset classes; and risk management & governance requirements; compliance and enforcement.

[F. No. IFSCA/GN/2026/007, dated 30th March 2026]

5. IFSCA bars fund management entities from assigning multiple service roles to fiduciaries in the same scheme

The IFSCA (Fund Management) Regulations, 2025, requires Fund Management Entities (FMEs) to appoint fiduciaries such as trustees (in case of trusts), directors (in case of companies), or designated partners (in case of LLPs), who are obligated to act in the best interest of investors and adhere to high standards of due diligence, care, and independent judgment as per the prescribed Code of Conduct. To strengthen governance and avoid conflicts of interest, IFSCA has clarified that an FME shall not appoint a fiduciary entity to also provide services such as fund administration, valuation, audit, or lending /financing to the same scheme, whether directly or through its associates. For existing schemes already filed or taken on record, FMEs are required to comply with this requirement by 30th September 2026.

[Circular No. IFSCA-IF-10PR/7/2024-Capital Markets/10042026, dated 10th April 2026]

6. IFSCA requires prior approval for Payment Service Providers (PSPs) joining Rupee Drawing Agreement (RDA) as non-resident Exchange Houses

IFSCA has issued a clarification regarding participation in Rupee Drawing Arrangements (RDA) by Payment Service Providers (PSPs). IFSCA has now clarified that prior approval is mandatory for PSPs intending to participate in RDA as non-resident Exchange Houses, in line with the RBI Master Direction on “Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses” (2016). Further, PSPs must submit, along with their approval request, a comprehensive framework demonstrating compliance with the IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022 and any other applicable similar laws.

[Circular No. IFSCA-FMPP0BR/3/ 2023-Banking 2026-27/01, dated 10th April 2026]

III. FEMA

1. Govt notifies uniform Rs.2–10 crore adjudication limit for Additional & Joint Directors under FEMA

The Central Government has amended the notification prescribing jurisdiction of adjudicating authorities under the FEMA. This amendment revises the monetary limits for adjudication of Additional Directors and Joint Directors Enforcement. Previously, Additional Directors handled cases involving amount between Rs.5 crores and Rs.10 crores, while Joint Directors handled cases involving amount between Rs.2 crores and Rs.5 crores. The revised notification merges the scope by prescribing that both categories will now handle cases involving amounts exceeding Rs.2 crores but not exceeding Rs.10 crores.

[Notification No. 1397(E) [F. NO. K-11022/80/2011-AD.ED], dated 18th March 2026]

2. RBI directs ADs to maintain NOP-INR within USD 100 million in the offshore deliverable market

Master Direction on ‘Risk Management and Inter-Bank Dealings’ empowers RBI to prescribe limits on open positions in Rupee for exchange rate management. RBI has issued a circular whereby Authorised Dealers are now required to ensure that Net Open Positions in INR (NOP-INR) positions in the onshore deliverable market are maintained within USD 100 million at the end of each business day. ADs shall ensure compliance at the earliest but not later than 10th April 2026. This is a measure to curb volatility in the Rupee considering ongoing geopolitical issues.

[A.P. (DIR series 2025-26) Circular No. 24, dated 27th March 2026]

3. RBI revises ECB reporting framework and clarifies LSF computation

ECB transactions are required to be reported through Authorised Dealer (AD) Category I banks in prescribed forms, and delays attract Late Submission Fee (LSF). RBI has issued circular to remove ambiguities in classification of returns and streamline LSF computation. Key Highlights from the circular are given as follows:

a. Form ECB-1 and Revised ECB-1 to be treated as non-flow returns, and LSF to be computed accordingly. Non-flow returns are filed once per transaction/event, not periodically.

b. LSF is per return. Each delayed filing of Form ECB-2 to be treated as a separate instance, attracting LSF independently.

c. AD Category I banks shall submit ECB returns to RBI within 7 calendar days of receipt from borrowers.

d. LSF is payable via NEFT/RTGS to RBI Regional Office after receipt of acknowledgment email from RBI. AD banks to ensure and monitor payment of LSF by borrowers.

These amendments are applicable from 1st April 2026.

[A.P. (DIR series 2025-26) Circular No. 25, dated 30th March 2026]

4. RBI standardises guarantee reporting under FEMA; clarifies LSF computation for delays in reporting

RBI has issued circular with regard to obligation on a person to report a guarantee in terms of Regulation 7 FEM (Guarantees) Regulations, 2026 [FEMA 8 (R)] and Master Direction on ‘Reporting under Foreign Exchange Management Act, 1999’. The main points are:

a. Reporting is to be done using files provided on the RBI website (List of Returns Submitted to RBI) for submissions to the authorised dealer bank:

Form GRN Issue – for reporting issuance of guarantee;

Form GRN Modification – for reporting changes in terms such as amount, tenure or pre-closure; and

Form GRN Invocation – for reporting invocation of guarantee.

b. Each guarantee to be assigned a Unique Guarantee Transaction Number (GTN) by AD Bank before submission of the return to RBI.

c. For any delay, LSF will be calculated on amount of liability created towards surety on invocation for Form GRN Invocation only. For Form GRN Issue and Form GRN Modification, LSF to be considered on amount as ‘nil’ since these returns do not capture flows.

The above will come into effect from 1st April 2026.

[A. P. (DIR series 2026-27) Circular No. 1, dated 1st April 2026]

5. RBI permits INR exchange for residents and non-residents at forex counters in airport departure areas beyond immigration

The RBI has decided to allow residents and non-residents to exchange Indian Rupee notes at foreign exchange counters at the departure halls in the international airports established in the Duty-Free Area or Security Hold Area beyond the Immigration or Customs desk. The Master Direction on Money Changing Activities is being amended accordingly.

[A.P. (DIR series 2026-27) Circular No. 4, dated 2nd April 2026]

6. RBI amends Master Direction on non-resident investment in debt instruments, consolidates existing instructions

Over the years, the Reserve Bank has issued directions relating to investments in debt instruments by Non-Resident Indians (NRIs) and offering of debt instruments acquired in terms of FEMA 396 as collateral to recognized Stock Exchanges in India for transactions in exchange traded derivative contracts. These instructions have now been consolidated in the Master Direction on ‘Non-resident Investment in Debt Instruments’, 2025 which earlier covered various related Regulations under FEMA. Annex-1 of the Master Direction provides the list of circulars consolidated while Annex-4 lists the amendments made to the Master Direction over time.

[A.P. (DIR Series) Circular No. 6, dated 10th April 2026]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX : SPOTLIGHT

1. Income tax Rules 2026 notified. They will come into effect from 1 April 2026. – Notification No.22/2026 dated 20 March 2026

II. FEMA

1. RBI modifies the ECB forms in line with the revised ECB Framework under FEM (Borrowing & Lending) Regulations

The RBI, on 9th February 2026 issued new Borrowing and Lending regulations, revising External Commercial Borrowing (ECB) framework. The old ECB forms have been revised in line with the new ECB framework. Part V – Annex I and Annex II have been substituted with Form ECB I/Revised Form ECB I and Form ECB 2 respectively.

[AP (DIR Series 2025-26) Circular No. 23,dated 18th February 2026]

2. RBI introduces ‘Currency Declaration Form’ under FEM (Export and Import of Currency) Regulations, 2015

The RBI has amended Regulation 6 of FEM (Export and Import of currency) Regulations, 2015 by introducing a ‘Currency Declaration Form’. The following points are to be noted with respect to the form:

a. The form needs to be filled in by passengers where the aggregate value of foreign exchange brought in, in the form of currency notes, bank notes, or travellers’ cheque exceeds USD 10,000 or its equivalent, or where the value of foreign currency notes exceeds USD 5,000 or its equivalent.

b. This form needs to be produced to a bank authorised to deal in foreign exchange or a money changer at the time of conversion or reconversion.

c. In case visitors to India do not wish to encash all the foreign exchange declared, they should retain this form for producing the same to Customs at the time of their departure. This is to enable them to take with them the unutilised balance.

[Notification No. FEMA 6(R)/2026-RB, dated 23rd February 2026]

3. Govt. amends FDI Policy on ‘Investments from Countries sharing land border with India’

In April 2020, Press Note 3 (2020) was introduced to prevent opportunistic takeovers of Indian companies by certain neighbouring countries during Covid-19 pandemic. Government approval was made mandatory for any investment by an investing entity incorporated in a country sharing a land border with India (LBC), or where the beneficial owner of such an investment was a citizen of, or situated in, such LBC.

The Union Cabinet has recently approved changes in these provisions relating to investments from LBCs. The amendments in Para 3.1.1. of the FDI policy have brought much needed clarity. The existing policy has been amended as follows:

a. An entity or citizen of an LBC, or where the beneficial owner of an investment into India is a citizen of such country, can invest only under Government route. This restriction also applies to any transfer of ownership, directly or indirectly, in an existing or future FDI in an entity in India.

b. Beneficial owner (BO) shall have the same meaning as defined under section 2(1)(fa) of Prevention of Money laundering Act, 2002 and shall be determined as per Rule 9(3) of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. Further, it is provided that determination of BO shall be applied at the Investor entity level.

c. The above criteria shall be applied in substance. Hence, where a citizen or an entity of an LBC has the ability to directly or indirectly, individually or cumulatively, independently or collectively, whether acting together or otherwise, hold rights/entitlements which:

a. exceed the prescribed threshold in an investor entity outside the LBC; or

b. enable such citizens or entities to exercise control over such investor entity; or

c. enable them to exercise ultimate effective control over the Indian entity in any manner; the beneficial ownership of such an investment shall be deemed to be from an LBC.

d. Effectively, investors with non-controlling BO from an LBC of up to 10% shall be permitted under automatic route, subject to applicable sectoral caps, entry route and attendant conditions. However, such investments shall be subject to reporting of relevant information or details by the investee entity to DPIIT.

e. Further, direct investment from LBCs will still require Government approval. Such applications in following sectors must now be processed and decided within 60 days:

i. Manufacturing of Capital Goods

ii. Electronic Capital Goods

iii. Electronic Components

iv. Polysilicon manufacturing

v. Ingot and wafer manufacturing

In these cases, the majority shareholding and control of the Investee entity will be with resident Indian citizen(s) and/or resident Indian entity(ies) owned and controlled by resident Indian citizen(s), at all times.

f. The present Rule also covers beneficial owners “situated in” LBC. Thus, even an NRI situated in an LBC could not make a direct investment into an Indian entity without prior Government approval. One important change that Press Note 2 of 2026 brings about is that the Government Route is now applicable only to citizens of these countries or entities incorporated or registered in such countries. Thus, a citizen of countries other than LBCs can invest in Indian entities without prior approval from the Government, even though they may be present in an LBC.

The above amendments will take effect from the date of notification to the NDI Rules.

[Press Release, dated 10th March 2026, Press Note No. (2026 Series), dated 15th March 2026]

III. IFSCA

1.IFSCA specifies a fee structure for entities undertaking or intending to undertake permissible activities in IFSC

The IFSCA has issued a circular prescribing a fee structure for entities undertaking permissible activities in IFSCs and for persons seeking guidance under Informal Guidance Scheme, 2024. The circular applies to applicants seeking license, registration, recognition, or authorisation as well as existing regulated entities. The different categories of fees include application fees, license or registration fees, recurring fees (flat and conditional based on turnover), activity based fees, processing fees, interest on delayed payments, charges for delayed reporting, fees for informal guidance, etc.

The circular also prescribes penalties for delays, including 0.75% monthly interest on unpaid fees and USD 100 per month for delayed regulatory reporting. The circular will apply from FY 2026-27. This circular supersedes previously issued circulars related to fee structured from the date of commencement of this circular i.e. 1st April 2026.

[Circular No. IFSCA-DTFA/1/2026, dated 2nd March 2026 Circular No. IFSCA-DTFA/2/2026, dated 13th March 2026]

2. IFSCA launches a scheme titled “Support for Alternative Trade Instruments under Export Promotion Mission”

IFSCA has launched a scheme titled “Support for Alternative Trade Instruments under Export Promotion Mission (EPM) – NIRYAT PROTSAHAN”. The Scheme aims to improve access to export finance for Micro, Small, and Medium Enterprises (MSMEs) involved in international value chains by providing support for alternative trade finance instruments with a focus on export factoring.

Eligible financial institutions shall ensure compliance with all operational requirements, including submission of claims, reporting obligations, and timelines.

[Circular No. IFSCA-FCR0ITFSR/3/2025 – Banking, dated 19th March 2026]

3. IFSCA issues new measures to ensure operational substance in Capital Market Intermediaries operating in GIFT IFSC

The IFSCA has issued measures to ensure substance in Capital Market Intermediaries (CMIs) in GIFT IFSC. As part of these measures, IFSCA has been conducting multiple rounds of market intelligence visits. The visits were made to registered office premises of CMIs to verify the presence of substance, including the presence of the Principal Officer and Compliance Officer, as well as the adequacy of infrastructure, in accordance with the provisions of the IFSCA Capital Market Intermediaries Regulations, 2025.

The supervisors made the following key observations:

a. Some CMIs were found to be closed or unattended during business hours.

b. Neither the Principal officer, nor the Compliance Officer, nor authorised personnel were present in some CMIs.

c. The designated Principal and Compliance officers lacked adequate awareness of regulatory framework applicable to CMIs in some cases.

d. Necessary infrastructure was lacking to effectively carry out business activities in a few CMIs.

e. In some CMIs, certain practices were carried out using remote access software like Anydesk, Ultraviewer, etc. Further, the Compliance Officer was also handling the trading desk, which is a conflict of interest.

Based on these observations, IFSCA has initiated appropriate regulatory action against the concerned CMIs in accordance with applicable regulatory framework. All CMIs are advised to ensure substance, including strict adherence to provisions of IFSCA CMIs Regulations, 2025.

[Press Release, dated 19th March 2026]

BCAJ Admin

Regulatory Referencer

I. FEMA

1. RBI notifies FEM (Guarantees) Regulations, 2026; mandates quarterly reporting of guarantees in Form GRN

The RBI issued FEM (Guarantees) Regulations, 2026 superseding the regulations of 2000. It regulates guarantees involving residents and non-residents under FEMA. The following regulations are provided:

a. Prohibition of Indian residents from being parties to guarantees involving non-residents, except as permitted.

b. Exemptions where guarantees provided by overseas or IFSC branches of Authorised dealer banks; certain irrevocable payment commitments and guarantees issued under overseas investment regulations.

c. Permission to Indian resident to act as a Surety or principal debtor.

d. Permission to Indian residents to obtain guarantees as creditors.

e. Reporting requirements – Form GRN introduced.

f. Like other regulations, a late submission fee is prescribed for late reporting and enforcing compliance.

[Notification No. FEMA 8(R)/2026-RB, dated 6th January 2026]

2. RBI issues new FEMA regulations on export and import of goods and services, effective October 1, 2026

RBI has notified FEM (Export and Import of Goods and Services) Regulations, 2026 superseding Export Regulations of 2015 and consolidating frameworks for both Import and Export. These regulations will be effective from 1st October 2026.

Subsequently, it has also issued Master Directions with instructions contained therein for export and import effective from the same date. The RBI has directed Authorised Dealers (ADs) to ensure adherence to rules, regulations, directions and Foreign Trade Policy and the ADs shall send all references to RBI through PRAVAAH portal and inform any doubtful transactions to Directorate of Enforcement (DoE). They may bring the contents of the circular to the notice of their customers/ constituents concerned.

Key changes that are going to take place are as follows:

a. Export Proceeds realisation – Earlier, the period was either 9 or 12 months. Proposed uniform period will be 15 months and 18 months for INR invoiced trade. If the export proceeds are unrealised beyond one year or the extended period, then the subsequent exports will be permitted only against full advance payment or irrevocable Letter of Credit.

b. Declaration of Export Value and Reporting – A single unified reporting in ‘Export Declaration Form’ (EDF) which will include reporting for software as well, unlike SOFTEX in the existing reporting framework. EDF will have to filed within 30 days from the month end of raising the invoice. It may cover all the exports for that month.

c. Set off of export receivables against import payables – Earlier, it was permitted in restrictive manner and subject to various conditions. As per the proposed regulations/directions, powers lie with the AD Bank to permit set-off with the same buyer or supplier or their overseas group or associate companies within the prescribed time.

d. Project Exports – Repealing the earlier Memorandum of Instructions on Project and Service exports (PEM) Rule, the new regulations combine these retaining the same definition as per foreign trade Policy (FTP). These transactions must be supported by contracts and verification by AD Banks before permitting receipts/payments.

e. Merchanting Trade Transactions (MTT) – The framework is simplified and AD Bank has been empowered to set internal guidelines. The period between outward and inward remittance or vice versa should not exceed six months. AD Bank must ensure Export data processing and monitoring system (EDPMS) and Import data processing and monitoring system (IDPMS).

f. INR trade settlement – Earlier it was allowed through a series of circulars introducing Vostro Mechanism. Now, Rupee settlement is formally integrated in these regulations.

[Notification No. FEMA 23(R)/2026-RB, dated 13th January 2026]

[AP (DIR Series 2025-26) Circular No. 20, dated 16th January 2026]

3. RBI recognises FEDAI as a Self-Regulatory Organisation for Authorised Dealers

FEDAI submitted application under the Omnibus Framework for recognition of Self-Regulatory Organisations (SROs) to be recognised as an SRO. RBI, after examining and since FEDAI is functioning akin to an SRO, decided to recognise it as an SRO for all the Authorised Dealers. One year’s time has been given to FEDAI to bring in line its functioning and governance framework with that of Omnibus SRO Framework.

[Press Release No. 2025-2026/1926, dated 14th January 2026]

4. RBI amends Borrowing and Lending Regulations, revising ECB framework and end-use restrictions for borrowed funds.

RBI had released draft Borrowing and Lending Regulations pertaining to External Commercial Borrowing (ECB) for public feedback on 3rd October 2025. Now it has notified the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, amending the existing framework under FEMA. The amendments have rationalised the ECB framework by expanding the definitions of eligible borrowers, review of end-user restrictions and simplification of reporting requirements. Following are the key aspects of the amended regulation:

a. Eligible borrowers include:

i. A person resident in India (other than Individual) incorporated or registered under a Centre or State Act, subject to permissions under governing legislations. This will now include an LLP too.

ii. Entities under restructuring or corporate insolvency resolution process (CIRP) if expressly allowed under approved resolution plan.

iii. Borrowers facing investigation, adjudication or appeal by law enforcement agency for any contraventions without prejudice to the outcome. Such borrowers must disclose all pending proceedings in Form ECB-1 or Revised Form ECB-1 (for existing ECB).

b. Eligible borrowers include:

i. Any person resident outside India ( including individuals) can now lend under ECB.

c. Maturity Period:

i. A minimum average maturity period (MAMP) of three years shall exist bringing in uniformity over various end-use purposes.

ii. Manufacturing borrowers may raise ECB with MAMP between one year and three years, provided the ECB amount does not exceed USD 150 million.

d. Currency of Borrowing:

i. Borrowing may be in Foreign currency (FCY) or Indian Rupees (INR).

ii. These maybe inter-changed.

iii. The change of currency shall be at the exchange rate prevailing on the date of the agreement for such change or at the rate which does not result in a higher lia1bility arrived by using exchange rate as on agreement date.

e. Cost of Borrowing:

i. It shall be in line with the prevailing market conditions – all in cost ceilings dropped.

ii. For ECBs with MAMPs less than three years, it shall comply with all-in cost ceiling specified for Trade Credit

iii. ECBs from related parties must be on Arm’s Length Basis.

f. Restrictions on the End-use of ECB money –

End-use restrictions are same as sectors restricted for FDI under NDI Rules, 2019. Real Estate Businesses and exceptions thereto are enumerated clearly.

[Notification No. FEMA 3(R)(5)/2026-RB, dated 9th February 2026]

II. IFSCA

1. IFSCA approves targeted regulatory relaxations across funds, intermediaries, GICs and BATF services

The 26th meeting of IFSCA was held on 22nd December 2025. The purpose of the meeting was to provide wide range of regulatory reforms to enhance ease of doing business while also saving investor interests. Important changes include the following amendments to Fund Management Regulations:

a. Relaxation of eligibility criteria for key managerial personnel (KMP)

b. One-time extension is dispensed with and allowing multiple extensions of six months for Private Placement Memoranda (PPM)

c. Provide one time revival window for three months made available to the schemes where PPMs have expired

d. Grant a twenty-four-month migration window to appoint IFSC-based custodians

e. Approval of IFSCA (Global In-House Centres) Regulations, 2025

f. Introduction of investor protection measures for under-capitalised open-ended schemes

g. Removal of minimum office space requirements for BATF service providers

h. Rationalisation of Capital Market Intermediaries (CMIs) eligibility

i. Umbrella registration options for CMIs

j. Amendment to IFSCA (Registration of Business) Regulations, 2021 by changing the definition of “Lloyd’s Service Company. Now, it includes service companies promoted by the group entities of Managing Agents of Members of Lloyd’s.

The notifications for all the above are to be released in the due course on the IFSCA website.

[Press Release, dated 23rd December 2025]

2. IFSCA notifies Global In-House Centres Regulations to operationalise GICs as financial service

The IFSCA has issued IFSCA (Global In-House Centres) Regulations, 2025 in replacement of IFSCA (GICs) Regulations, 2020. These regulations are aimed to position the IFSCs as Global hubs for high-value financial and related services. It further aims to generate skilled employment, on-shore India-centric financial services presently undertaken offshore. The regulations define eligible Financial Institution Groups, permissible operating models, registration procedures through a Single Window IT system, conditions for grant and validity of registration. However, the framework restricts services largely to non-resident group entities, caps India-related revenue at 10% and prohibits mere transfer of existing India contracts. Further, it also introduces “fit and proper” norms, mandates full time principal and compliance officers based in IFSCs, prescribes foreign currency operations and reporting.

It requires that existing GICs to make the transition to the 2025 regulations within 90 days from the date of commencement of these regulations i.e. 24th December 2025.

[Notification No. IFSCA/GN/2025/012, dated 24th December 2025]

3. IFSCA issues clarifications on computation of liquid net worth under IFSCA (Capital Market Intermediaries) Regulations, 2025

Reference is drawn to IFSCA (CMIs) Regulations, 2025 wherein the following changes are made in the definition of Net Worth:

a. Base minimum Capital and interest free deposits maintained by the registered broker dealers and registered clearing members with the RSEs and clearing corporations respectively

b. Margins maintained by registered broker dealers or clearing members in relation to their trading activities in IFSC or Global Access

c. Liabilities are not considered as part of “Net worth” provided in the CMI Regulations

[Circular No. IFSCA-PLNP/80/2024– Capital Markets, dated 30th December 2025]

4. IFSCA specifies operating leases, including hybrid leases, of oilfield equipment as a ‘financial product’

The IFSCA has specified that any Operating Lease in respect of ‘Oilfield Equipment’, including any hybrid of operating and financial lease, shall be a financial product. For this notification, “oilfield equipment” shall mean goods used in connection with an oilfield. The oilfield shall have the same meaning as assigned under Section 3(e) of Oilfields (Regulation and Development) Act, 1948.

[Notification No. IFSCA/GN/2026/001, dated 5th January 2026]

5. IFSCA prescribes additional disclosures and process for scheme filings under Third-Party Fund Management

IFSCA has clarified that Registered FMEs authorised for Third-Party Fund Management must file scheme applications using the format/documents prescribed under the IFSCA “Ease of doing business, Filing of Schemes or funds…” circular dated 05.04.2024, and additionally submit third-party fund manager details: (i) legal name, registered office and proof of home-jurisdiction regulatory registration/licence, (ii) a UBO “look-through” chart, and (iii) profiles of board/designated partners and KMPs.

[Circular No. IFSCA/AIF/218/2025-Capital Markets, dated 16th January 2026]

6. IFSCA grants a one-time three-month window to extend the validity of expired or expiring PPMs for eligible schemes

Attention is drawn to regulations relating to Placement memorandum (PPM) under IFSCA (Fund Management) Regulations, 2025. The PPMs of a Venture Capital Scheme and Restricted Scheme shall be valid for twelve months from the date of communication. After receiving representations from requesting a flexibility regarding flexibility of PPMs, the IFSCA has provided a one-time window of three months from the date of issuance of this circular. Hence the one-time window will be valid till 27th April 2026.

Similarly, an extension is provided for PPMs for scheme that have not commenced investments. The Fund Management Entities (FMEs) will have to re-file the PPM within three months from issuance of this circular (till 27th April 2026). An important point to be noted here is that there must not be any material change in the PPM with respect to key aspects, including name, investment objective and strategy, structure, etc. Such application shall be accompanied by 50% of the filing applicable for filing new application. Similar extensions are provided for Open-ended schemes.

[Circular No. IFSCA-IF-10PR/1/2023-Capital Markets, dated 27th January 2026]

7. IFSCA introduces website requirement for Finance Companies and Units in GIFT IFSC

IFSCA mandates Finance Companies (FCs) regulated under IFSCA (Finance Company) Regulations, 2021 to maintain a dedicated website or web page. Such website should display the following information about FCs:

a. Brief overview of GIFT IFSC ecosystem,

b. Certificate of Registration clearly reflecting the Registration number and permitted activities

c. A list of products and services offered, with detailed description of each such offering

d. Grievance redressal procedure and contact details of the Grievance redressal officer

e. Name, designation and contact details of key managerial personnel in IFSC (such as Head of FC/FU, CEO, CFO, Compliance officer, Principal officer, as applicable)

[Circular No. IFSCA-FCR/4/2026-Banking, dated 3rd February 2026]

8. IFSCA, India & FCA, UK sign Exchange of Letters to boost regulatory cooperation in identified areas of mutual interest

The IFSCA, India and Financial Conduct Authority of UK have signed an Exchange of Letter (EoL) to formalise regulatory co-operation in identified areas of mutual interest. It was signed on 11th February 2026. The objective is to facilitate sharing of information on developments in regulation for financial products, financial services, financial institutions, developments in regulatory and supervisory frameworks and initiatives, including sharing of best practices.

[Press Release, dated 11th February 2026]

9. IFSCA approves draft Pension Fund Regulations, 2026 to establish framework for retirement savings in IFSC

The IFSCA has issued IFSCA (Pension Fund) Regulations, 2026 on 9th February 2026. The key features of the Draft Regulations are as follows:

a. Pension Product for any Individual above the age of 18 years

b. Participation is entirely voluntary. Investment options include Active Choice (for determining asset allocation) and Auto Choice (for automatic adjustment of allocation based on age)

c. 10% will be allocated towards Health Benefit Option

d. Flexible withdrawal and Exit Framework give options to the individuals the manner in which they want to withdraw.

e. These regulations provide for mandatory registration of Pension Fund Managers (PFMs), Board oversight and framework with three-lines-of-defence model

f. PFMs have the flexibility to invest across equities (domestic and foreign, fixed income assets and other permissible assets.

[Press Release, dated 12th February 2026]

10. IFSCA issues FAQs on IFSCA (Global In-House Centres) Regulations, 2025

The IFSCA has issued Frequently Asked Questions (FAQs) on the IFSCA (Global In-House Centres) Regulations, 2025. The FAQs cover matters relating to applications, legal forms and registration, permissible services and service recipients, operating models of a GIC Unit, compliance requirements and restrictions, third-party service providers, and miscellaneous areas.

[FAQs, dated 17th February 2026]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX: SPOTLIGHT

1. Capital Gains Account (Second Amendment) Scheme 2025 – Notification No. 161/2025 and 162/2025 dated 19 November 2025

II. FEMA

1. RBI modifies FEMA compounding directions and updates bank account details for receiving fees and compounding amounts

The RBI has decided to change the details of accounts where compounding application fee and compounding amount will be received. This is to streamline these receipts. Accordingly, Annexure I of the Master Direction has been modified.

[AP (DIR Series) Circular No. 15/2025-26,dated 24th November, 2025]

2. RBI bars Pakistani/Bangladeshi citizens from carrying Indian notes to/from Nepal & Bhutan under revised FEMA norms

The Foreign Exchange Management (Export and Import of Currency) Regulations, 2015 has been amended. After the amendment, regulation 8 adds the phrase ‘not being citizen of Pakistan or Bangladesh’, thus barring these citizens from taking out of India or bringing into India Indian currency through Nepal or Bhutan.

[Notification No. FEMA 6(R)/(4)/2025-RB,dated 28th November 2025]

3. RBI permits AD Category-II banks/entities & FFMCs to submit ‘LRS daily return’ directly on CIMS portal w.e.f. January 1, 2026

As of now, Authorised Dealer (AD) Category-I Banks are required to submit data related to transactions under the Liberalised Remittance Scheme on Centralised Information Management System (CIMS) by the next working day. This is done for their own data as also the data of AD Category-II banks/entities and FFMCs attached to them or maintaining an account with them in their ‘LRS daily return’.

From 1st January, 2026, AD Category-II Bank and Full-fledged money changers (FFMC) will directly file the details of LRS transactions undertaken by them in the ‘LRS daily return’ on CIMS. With this, it will enable AD Category-II banks and FFMCs to check cumulative amount remitted by a resident individual (PAN-wise) before facilitating their next requested LRS transaction. Accordingly, they may discontinue submitting LRS transactions through AD Category-I Banks.

[AP (DIR Series) Circular No. 17, dated 3rd December, 2025]

4. RBI proposes to mandate Authorised Dealers to disclose transaction costs for foreign exchange contracts to retail users

The RBI has released Draft circular on mandatory Disclosure of transaction cost for foreign exchange transactions. Public comments are invited until 9th January, 2026. The new draft proposes disclosure requirements related to transactions costs – remittance fees, foreign exchange rate, currency conversion charges, etc. – in relation to foreign exchange cash, foreign exchange tom and foreign exchange spot contracts offered to retail users. Comments can be sent to postal and email addresses provided in the Release.

[Press Release No. 2025-26/1666, dated 9th December 2025]

III. IFSCA

1. IFSCA mandates display of key global access risks, including market, currency and custody risks, at every login by their clients

Under clause 39 of the “Regulatory Framework for Global Access in IFSC” circular dated 12th August 2025 issued under the IFSCA (Capital Market Intermediaries) Regulations, 2025, Global Access Providers (GAPs) and Introducing Brokers (IBs) are required to have a system to ensure that key risks and disclaimers relating to global access are displayed at every login by their clients. The Authority specifies risks and disclaimers in Annexure 1 of the circular to be displayed by GAPs and IBs at every login by the clients. This compliance shall be fulfilled by 31st December 2025.

[Circular No. IFSCA/DSI/12/2025-Capital Market, dated 26th November 2025]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX: SPOTLIGHT

1. Extension of timelines for filing of various reports of audit and Income Tax Returns (ITRs) for the Assessment Year 2025-26 – Circular No. 15/2025 dated 29 October 2025

The due date for furnishing Income Tax Return for Assessment Year 2025-26 for the assessee referred to in Clause (a) of Explanation 2 to Section 139(1) is extended from 31 October 2025 to 10 December 2025. Consequently, the specified date for furnishing of report of audit as specified under clause (ii) of Explanation to section 44AB of the Act for Assessment Year 2025-26 stands extended to 10 November 2025.

2. CBDT notified Agreement and Protocol between the Republic of India and the State of Qatar for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
income – Notification No. 154/2025 dated 24 October 2025

The agreement was signed in New Delhi on 18 February 2025 and entered into force on 10 September 2025. Its provisions will take effect in India and Qatar for income arising on or after the first day of the fiscal year immediately following its entry into force.

3. CBDT clarifies approved tolerance range for the variation between the calculated ALP and the actual transaction price for international or specified domestic transactions. – Notification No. 157/2025 dated 6 November 2025

If the variation does not exceed one percent of the actual price for wholesale trading, or three percent in all other cases, the actual transaction price will be deemed to be the ALP.

4. CBDT has notified the Protocol amending the Agreement and the Protocol between the Government of the Republic of India and the Government of the Kingdom of Belgium for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. – Notification No. 160/2025 dated 10 November 2025

II. IFSCA

1. IFSCA amends Listing Regulations to extend validity of financial information in offer documents to 180 days

IFSCA has amended the existing IFSCA (Listing) Regulations, 2024 with modifications in certain regulatory timelines and penalty provisions for entities listed in an IFSC. Following are the amendments:

a. Regulation 16(8) – The financial information in the offer document shall not be older than ‘One hundred and Eighty’ days. Earlier, the no. of days were ‘One hundred and Thirty-Five’ days.

b. Regulations 25(2), 52(3) and 65 – No. of days for allotment of specified securities and payment of refunds have been increased to ‘Eight’ days from ‘Five’ days from the date of closing of the issue.

c. Regulations 96(2) and 107(2) now mandate that a Listed Entity must disclose its first half-yearly financial statements to stock exchanges within forty-five days from the end of first half-year, following board approval.

[Notification No. IFSCA/GN/2025/011, dated 13th October 2025]

2. IFSCA issues Stewardship Code framework for fund management entities and institutional investors in IFSC

IFSCA has with reference to Fund Management Regulations, 2024, issued Framework on Stewardship code in IFSC. The Code aims at guiding the regulated entities (Fund Management Entities) to align their practices with global standards for long-term value creation. The regulated entities may adopt the Stewardship Code as provided in Annexure-A, or as published by:

a. Financial sector regulator in their home jurisdiction

b. Financial sector regulator in India like SEBI, IRDAI and PFRDA

c. Statutory professional body like ICSI

The code shall substantially reflect the core principles under this code. Upon adoption of such Stewardship Code, the Regulated Entities must ensure regular and transparent reporting in accordance with the same on their website, and the same must be reported to the Authority.

[Notification No. IFSCA-AIF/132/2024 – Capital Markets, dated 23rd October 2025]

3. IFSCA seeks public input on new pension fund regulations to boost GIFT-IFSC as global hub

Upon recommendations by IFSCA, the government of India (GOI) has notified the ‘schemes operated by a Pension Fund’ as ‘financial product’. IFSCA has now introduced a consultation paper on the proposed IFSCA (Pension Fund), Regulations, 2025 for launch of Pension schemes from IFSC. The consultation paper is aimed at developing robust inclusive and forward-looking forex pension framework. It would also cater to the needs of 15 million NRIs, 19 million PIOs and foreign expatriates.

The proposed regulations include voluntary participation of subscribers in pension scheme, flexibility to determine the frequency and amount of contributions, variety of investment options and integrated pension plan with medical policies.

IFSCA invites comments and suggestions from stakeholders, market participants and general public. The feedback maybe submitted to IFSCA on or before 25th November, 2025.

[Press Release, dated 4th November, 2025]

4. IFSCA mandates AML / CFT certification for Designated Directors and Principal Officers

IFSCA has mandated that all Designated Directors and Principal Officers under the IFSCA [Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT) and KYC] Guidelines shall undergo the “NISM-IFSCA-01” certification course on AML/CFT.

[Notification No. IFSCA-DAC/8/2024-AMLCFT, dated 17th November 2025]

II. FEMA

1. RBI extends the time period for realisation & repatriation of full export value of goods/software/services from 9 to 15 months

The Reserve Bank of India (RBI) has issued FEM (Export of Goods & Services) (Second Amendments) Regulations, 2025 amending the FEM (Export of Goods & Services) Regulations, 2015. Following changes have been made:

a. Regulation 9 – The period of realisation and repatriation of export proceeds has been increased to ‘fifteen months’ from ‘nine months’.

b. Regulation 15 – The period for submission of various export-related documents has been increased to ‘three years’ from ‘one year’.

Essentially, exporters have been provided with a longer compliance window.

[Notification No. FEMA 23(R)/(7)/(2025-RB), dated 13th November, 2025]

2. RBI issued Trade Relief Measures Directions

2.1 The RBI recently issued the RBI (Trade Relief Measures) Directions, 2025 to ease the debt servicing challenges faced by exporters affected by global trade disruptions. These directions are applicable to Banks, NBFCS, Financial Institutions and Credit information companies. It extends relief measures to borrowers who –

a. are engaged in exports relating to specified impacted sectors; and

b. had an outstanding export credit facility from Regulated Entities (REs) as of 31st August 2025; and

c. the accounts with all REs were classified as ‘Standard’ as on 31st August 2025.

2.2 The REs shall frame a policy and can provide following relaxations:

a. Grant a moratorium on payment of all instalments, principal and interest, falling due between 1st September and 31st December 2025.

b. Defer recovery of interest for working capital facilities during above-mentioned period.

c. Recalculate the ‘drawing power’ in working capital facilities either by reducing the margins or basis reassessment, during the above period.

d. Enhancement in maximum credit period from one year to 450 days for pre-shipment and post-shipment export credit disbursed till March 31, 2026.

e. Allow liquidation of packing credit facilities availed by exporters on or before August 31, 2025, where dispatch of goods could not take place, from any legitimate alternate sources of such goods or substitution of contracts with the proceeds of another export order.

Apart from the above, there are relaxations provided by way of Asset Classification & Provisioning by REs and certain Disclosure Requirements for REs.

[DOR.STR.REC.60/21.04.048/2025-26 dated 14th November 2025]

BCAJ Admin

Regulatory Referencer

I. FEMA

1. RBI extends time for foreign exchange outlay in Merchanting Trade Transactions from four to six months

The Reserve Bank of India (RBI) has revised the guidelines relating to Merchanting Trade Transactions (MTT). On review, it has been decided to extend the permissible time period for outlay of foreign exchange from four months to six months. All other provisions of Circular dated January 23, 2020 remain unchanged.

[A.P. (DIR Series) Circular No. 11, dated 1st October 2025]

2. Amendment to Foreign Exchange Management (Debt Instruments) Regulations 2019

The RBI has amended the Debt Instruments regulations expanding and clarifying the scope of investment for persons resident outside India (PROI) holding rupee accounts under Deposit Regulations. Sub-para (E) of Para 1 of Schedule I has been amended, allowing them to purchase or sell dated Government securities, treasury bills, non-convertible debentures/bonds and commercial papers issued by Indian companies subject to conditions laid by RBI.

Further, Para 2(4A) of Schedule I has been replaced to specify that consideration for such purchases must be paid exclusively from the funds held in the investor’s rupee account maintained under Regulation 7(1) of Deposit Regulations.

[Notification No. FEMA.396(4)/2025-RB, dated 29th September 2025]

3. RBI allows PROIs holding Special Rupee Vostro Accounts to invest surplus balances in NCDs and commercial papers

As per existing norms, persons resident outside India (PROIs) are permitted to invest their rupee surplus balance in Central Government Securities (including Treasury bills). It has been decided to permit investment of these balances in non-convertible debentures/ bonds and commercial papers issued by an Indian company.

[A.P. (DIR Series 2025-26) Circular No. 13, dated 3rd October 2025]

4. RBI eases EDPMS/IDPMS closure norms for small export & import bills up to ₹10 lakhs, with declaration-based process

The RBI has come up with easy EDPMS/IDPMS closure norms for small export and import bills up to ₹10 lakhs. The AD bank shall follow the below mentioned directions for the same:

a. Such entries shall be reconciled and closed based on a declaration provided by the concerned exporter that the amount has been realised or by the importer that the amount has been paid.

b. Any reduction in declared value or invoice value of the shipping bills / bills of entry shall also be accepted, based on the declaration by the concerned exporter or importer.

c. The declarations referred above may also be received on a quarterly basis from the exporters and importers in a consolidated manner (by combining several bills in one declaration) for bulk reconciliation and closing of EDPMS/IDPMS entries.

[A.P. (DIR Series) Circular No.12, dated 1st October 2025]

5. RBI proposes simplified regulations for External Commercial Borrowings

In order to rationalise regulations pertaining to External Commercial Borrowings (ECBs) under FEM (Borrowing and Lending) Regulations, 2018, RBI has issued Draft Amendment to Borrowing and Lending Regulations, 2018. Salient features of the regulations are:

a. The borrowing limits are proposed to be linked to a borrower’s financial strength and ECB are proposed to be raised at market determined interest rates.

b. The end-use restrictions and Minimum Average Maturity requirements are proposed to be simplified.

c. The borrower and lender base eligible for ECB transactions is proposed to be expanded to enhance opportunities of credit flow.

d. Reporting requirements are being simplified to ease compliance obligations.

The draft is available on the RBI website for public comments and feedback till 24th October 2025. One may follow the following link:

https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4736

[Press Release 2025-2026/1235, dated 3rd October 2025]

6. RBI proposes to rationalise norms for establishing a branch or office in India

The RBI has issued Draft FEM (Establishment in India of a branch or office) Regulations, 2025. On a review, it has been decided to amend the extant regulations [FEM (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any other place of business) Regulations, 2016] along the following lines:

a. The eligibility criteria for establishment of a place of business in India, are proposed to be relaxed.

b. The draft proposals offer greater operational freedom by shifting from prescriptive to a principle-based framework, which is expected to result in greater operational freedom.

c. The process for closure of non-compliant and inactive branch/office, are proposed to be simplified.

The draft is available on the RBI website for public comments and feedback till 24th October 2025. One may follow the following link:

https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4735

[Press Release: 2025-2026/1232, dated 3rd October 2025]

7. RBI relaxes repatriation norms for exporters maintaining foreign currency accounts held in IFSCs

RBI has notified Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) (Seventh Amendment) Regulations, 2025. Now, the foreign currency accounts permitted to be opened ‘outside India/abroad’ can also be opened in IFSC. Further, the RBI has revised the repatriation timeline for funds held by exporters in foreign currency accounts maintained outside India. Exporters with accounts maintained at banks in IFSCs can retain funds for up to 3 months (instead of previous 1 month) from the date of receipt. For accounts in other jurisdictions, the existing 1-month limit remains unchanged.

[Notification No. FEMA 10(R)(7)/2025-RB, dated 6th October 2025]

8. RBI permits AD banks to lend in INR to residents of Bhutan, Nepal and Sri Lanka for cross-border trade transactions

The RBI has notified the Foreign Exchange Management (Borrowing and Lending) (Amendment) Regulations, 2025. An amendment has been made to Regulation 7 relating to ‘Lending in Indian Rupees by a Person Resident in India’. A new clause has been inserted which states that an AD bank may lend in Indian Rupees to a person resident outside India being a resident in Bhutan, Nepal, or Sri Lanka, including a bank in these jurisdictions, for cross-border trade transactions.

[Notification No. FEMA 10(R)(7)/2025-RB, dated 6th October 2025]

2. IFSCA

9. Extension of deadline for implementing revised norms for principal officer and compliance officer for capital market intermediaries and Extension of deadline for compliance with revised Net worth requirements

IFSCA had issued Regulations on Capital Market Intermediaries on 16th April 2025. The deadline to meet the below mentioned compliances was 1st October 2025. Pursuant to representations received from market participants, the deadline for both the following compliance activities has been extended till 31st December 2025:

a. Appointment of Principal officer and compliance officer

b. Compliance with revised minimum net worth requirements

[Notification No. IFSCA-PLNP/80/2024, dated 4th September 2025]

[Notification No. IFSCA-PLNP/80/2024, dated 12th September 2025]

10. IFSCA amends Regulatory Framework for Global Access in the IFSC

IFSCA issued Regulatory Framework for Global Access in the IFSC on 12th August 2025. Representations have been made for permitting services offered by Payment service providers for facilitating movement of funds for global access activities in IFSC. Accordingly, it is decided that Global Access providers and Introducing Brokers will have an option to either open bank account(s) with a licensed IFSC Banking Units or open account(s) with a PSP authorised under IFSCA (Payment Services) Regulations, 2024. This would enhance efficiency and competitiveness in cross-border payments in a regulated manner.

[Notification No. IFSCA-PLNP/80/2024, dated 12th September 2025]

11. IFSCA notifies Payments Regulatory Board Regulations, 2025 for oversight of payment and settlement systems in IFSCs

The IFSCA has established a governance framework for a new board responsible for payment systems. These regulations define the composition, eligibility criteria, tenure, and code of conduct for board members. The board will meet twice a year and can delegate power to ensure efficient operations. This notification repeals previous regulations from 2024, with the new rules taking effect upon official publication.

[Notification No. IFSCA/GN/2025/008, dated 12th September, 2025]

12. IFSC Authority prescribes norms for appointment, reappointment, and review of Public Interest Directors in MIIs

IFSCA has issued a circular specifying the governance framework for Market Infrastructure Institutions (MIIs) in IFSCs under the IFSCA (MII) Regulations, 2021. It lays down eligibility, appointment, and reappointment procedures for Public Interest Directors (PIDs), mandates performance review policies, and provides for their knowledge upgradation.

[Notification No. IFSCA/CMD-DMIIT/PID-MII/2025-26/001, dated 13th October 2025]

13. IFSC Authority amends definition of ‘Board’ under Payment and Settlement Systems Regulations, 2024

The IFSC Authority has notified the International Financial Services Centres Authority (Payment and Settlement Systems) (Amendment) Regulations, 2025. The amendment revises Regulation 3(1)(d) of the 2024 Regulations, redefining ‘Board’ to mean the Payments Regulatory Board constituted under sub-section (2) of section 3 of the Act.

[Notification No. IFSCA/GN/2025/010, dated 13th October 2025]

BCAJ Admin

Regulatory Referencer

DIRECT TAX : SPOTLIGHT

1. Extension of due date for filing of ITRs for the Assessment Year 2025-26 – Circular No. 12/2025 dated 15 September 2025

Due date for furnishing the Income Tax Return for Assessment Year 2025-26 in the case of assessees referred in clause (c) of Explanation 2 to sub-section (1) of section 139 i.e whose accounts are not subject to audit extended from 15 September 2025 (as per circular No.06/2025 dated 27 May 2025) to 16 September 2025.

2. Order under section 119 of the Income-tax Act, 1961 for waiver of interest payable under section 220(2) due to late payment of demand, in certain cases – Circular No. 13/2025 dated 19 September 2025

In several cases, income tax returns were processed and rebate under section 87A was granted on income chargeable at special rates. The rebate was withdrawn by carrying out rectification, which led to additional demands being raised. The circular provides that interest payable under section 220(2) shall be waived in cases where such demands are paid on or before 31 December 2025. However, if demand is not paid on or before 31 December 2025, the interest shall be charged under section 220(2) of the Act from the day immediately following the end of the period mentioned in section 220(1) of the Act

3. Extension of timelines for filing of various reports of audit for Financial Year 2024-25 (relevant to Assessment Year 2025-26) by auditable assesses- Circular No. 14/2025 dated 25 September 2025

The due date for furnishing of the report of audit under any provision of the Income-tax Act, for the Previous Year 2024-25 (Assessment Year 2025-26), in the case of assessees referred to in clause (a) of Explanation 2 to section 139(1) of the Act is extended from 30 September 2025 to 31 October 2025.

BCAJ Admin

Regulatory Referencer

DIRECT TAX: SPOTLIGHT

1. Partial Modification of Circular No. 3 of 2023 dated 28.03.2023 regarding consequences of PAN becoming inoperative as per Rule 114AAA of the Income-tax Rules, 1962 – Circular No. 9/2025 dated 21 July 2025.

CBDT vide Circular No. 03 of 2023 had specified that the consequences of PAN becoming inoperative as per Rule 114AAA of the Income-tax Rules, 1962 shall take effect from 1^st July, 2023 and continue till the PAN becomes operative.

To address the grievances faced by deductor/collector of tax, CBDT has specified that there shall be no liability on the deductor/collector to deduct/collect the tax under section 206AA/206CC of the Act, in the following cases:

i. Where the amount is paid or credited from 1.04.2024 to 31.07.2025 and the PAN is made operative (as a result of linkage with Aadhaar) on or before 30.09.2025.

ii. Where the amount is paid or credited on or after 1.8.2025 and the PAN is made operative (as a result of linkage with Aadhaar) within two months from the end of the month in which the amount is paid or credited.

2. Relaxation of time limit for processing of returns of income filed electronically which were incorrectly invalidated by CPC – Circular No. 10/2025 dated 28 July 2025

CBDT provided that returns of income filed electronically upto 31.03.2024 which have been erroneously invalidated by CPC shall now be processed. The intimation under sub-section (1) of section 143 of the Act in respect of processing of such returns shall be sent to the assessees concerned by 31.03.2026.

FEMA

1. RBI allows AD banks to open ‘Special Rupee Vostro Accounts’ without prior approval for cross-border trade settlements

RBI had put in place an additional arrangement for invoicing, payment and settlement of exports/imports in INR. However, under this arrangement, AD banks had to take prior approval of RBI to open Special Rupee Vostro Accounts (SRVAs) of correspondent banks. In a welcome move, AD banks can now open SRVAs without seeking prior approval from RBI. This would quicken the process for opening SRVAs.

[A.P. (DIR Series 2025-26) Circular No. 8, dated 5^th August 2025]

2. RBI issues Draft regulations of Forex Guarantees for feedback

RBI has issued Draft FEM (Guarantees) Regulations, 2025. These regulations, once notified, will supersede Notification No. FEMA 8/2000-RB dated 3^rd May 2000. This will impact all Indian residents involved in foreign exchange guarantees. Following are the underlying motivation for the proposed regulations:

a. The regulations are now principle-based. In general guarantees involving cross border transactions will be under automatic route, provided that the underlying transaction, and the transactions resulting from invocation of guarantee, are not in contravention of FEMA, 1999;

b. The universe of guarantees enabled under automatic route is being expanded, and therefore comprehensive reporting of all guarantees, issued and invoked, is proposed to be introduced.

Comments/feedback on the draft regulations may be submitted through the RBI website link under the ‘Connect 2 Regulate’ Section available on the RBI’s website i.e. https://www.rbi.org.in/scripts/Bs_Connect2Regulate.aspx or may be forwarded via email i.e. guaranteefeedback@rbi.org.in by September 4, 2025, with the subject line “Feedback on draft guarantee regulations under FEMA, 1999”.

[Press Release: 2025-2026/916, dated 14^th August 2025]

BCAJ Admin

Regulatory Referencer

DIRECT TAX: SPOTLIGHT

1. Clarification regarding CBDT’s Circular No. 5/2025 dated 28.03.2025 for waiver on levy of interest under section 201(1A)(ii) / 206C(7) of the Income-tax Act, 1961 – Circular No. 8/2025 dated 1 July 2025

As prescribed in circular No. 5, the CCIT, DGIT or PrCCIT has power to reduce or waive interest charged under section 201(1A)(ii) / 206C(7) of the Act. The following clarifications are issued:

a) CCIT/ DGIT/ Pr.CCIT is empowered to pass order for waiver after the date of issue of Circular No. 5/2025 i.e. 28 March 2025

b) Applications for the waiver of interest can be entertained within one year from the end of the financial year for which the interest is charged.

c) Waiver applications can be entertained for interest under section 201(1A)(ii) / 206C(7) of the Act charged even before the issuance of the said Circular, subject to (b) above.

2. Cost Inflation Index for F.Y. 2025-26 is 376 – Notification No. 70/2025 dated 1 July 2025

FEMA

1. RBI allows advance remittance up to USD 50M for vessel imports without BG or unconditional, irrevocable SBLC

To enhance ease of doing business, it is decided to allow importers to make advance remittance up to USD 50 million. This is for imports of shipping vessel, without Bank guarantee, or an unconditional and irrevocable Letter of credit, subject to conditions in MD-Imports. However, this circular does not provide relaxations for obtaining approvals or permissions.
[A.P. (DIR Series 2025-26) Circular No. 7, dated 13^th June 2025]

2. RBI eases export norms; exempts offshore vessels like tugs, dredgers from export declaration if re-imported into India

Regulation 4 of the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 is amended. Tugs or Tug boats, Dredgers and Vessels used for providing off-shore support services are now exempt from furnishing export declaration, subject to re-import.

[Notification No. FEMA 23(R)/(6)/2025-RB, dated 24^th June 2025]

IFSCA

1. IFSCA expands permissible uses of FCA funds by resident individuals in IFSC

IFSCA has amended the existing directions concerning the operation of Foreign Currency Accounts (FCAs) held by Resident Indians (RIs) under LRS. As per the amendment, RIs must submit a declaration that the amount spent from FCA for availing financial services or financial products is for the purpose declared or is for a purpose permitted under LRS.

[Circular No. IFSCA-FMPP0BR/1/2021–Banking-Part(1)/3, dated 23^rd June 2025]

2. IFSCA prescribes submission process for changes in operations, management, or registration of REs by Finance Cos

With a view to facilitating uniformity and ease of doing business for Regulated Entities (REs), the authority has issued a Guidance Note. It aims to streamline the process of change requests made by the REs. Various Divisions of IFSCA have been specified for different Change Requests. All the Finance Companies and Finance Units shall adhere to these Guidelines to ensure compliance.

[Circular No. IFSCA-FCR0FCR/5/2025-Banking/01, dated 1^st July 2025]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX : SPOTLIGHT

1. Valid returns of income filed electronically on or before 31 March 2024 pursuant to condonation of delay u/s 119(2)(b) of the Act by the competent authority, for which date of sending intimation under sub-section (1) of section 143 of the Act has lapsed, shall be processed by 31 March 2026 – Circular No. 7/2025 dated 25 June 2025

2. Form ITR-U amended – Income-tax (Nineteenth Amendment) Rules, 2025 – Notification No. 49/2025 dated 19 May 2025

3. Protocol amending the Agreement between the Republic of India and the Sultanate of Oman for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, was signed at Muscat on 27 January, 2025. Central Government notifies that all the provisions of said Agreement and Protocol, as annexed hereto, shall be given effect to in the Union of India from 25 June 2025 – Notification No. 69/2025 dated 25 June 2025.

II. FEMA

1. RBI grants grace period for Investment Vehicles to file Form InVI for partly paid units without LSF

The Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 requires Investment Vehicles (IVs), which have issued units to persons resident outside India, to file Form InVI within 30 days from the date of issue of such units. A relaxation has now been provided whereby IVs which have issued partly paid units before 23^rd May 2025 (date of issuance of the circular), shall report such issuances of partly paid units within 180 days from 23^rd May 2025. No late submission fees will be levied for reporting within this period. However, partly paid units issued after 23^rd May 2025 shall be reported within 30 days itself.

[A.P. (DIR Series 2025-26) Circular No. 6, dated 23^rd May 2025]

2. Govt. amends NDI Rules – Indian Cos. may issue bonus shares in FDI-prohibited sectors if foreign shareholding doesn’t change

Earlier, the Department for Promotion of Industry and Internal Trade (DPIIT), vide Press Note No. 2 dated April 7, 2025, clarified that an Indian company engaged in an FDI-prohibited sector may issue bonus shares to its pre-existing non-resident shareholders provided that the shareholding pattern of non-resident shareholders does not change after the issuance of such bonus shares. The Central Government has now amended the NDI Rules, 2019 by introducing Rule 7(2) to notify this clarification.

[Notification No. S.O. 2549(E) dated 11^th June 2025]

3. RBI allows advance remittance up to USD 50M for vessel imports without BG or unconditional, irrevocable SBLC

RBI has decided to permit importers to make advance remittance up to USD 50 million for import of shipping vessels without requiring a bank guarantee (BG) or an unconditional, irrevocable standby letter of credit (SBLC). This relaxation is subject to conditions under Para C.1.3.3 of the Master Direction on Import of Goods and Services (MD-Imports), dated January 1, 2016.

[AP (DIR Series 2025-26) Circular No. 7 dated 13^th June 2025]

III. IFSCA

1. IFSCA issues framework to facilitate Co-investment by Venture Capital Scheme and Restricted Scheme

Regulations 29(1) and 41(1) of IFSCA’s Fund Management Regulations enable a Venture Capital Scheme and Restricted Scheme to co-invest in permissible investments through SPV; and for such SPV to undertake leverage as disclosed in the placement memorandum. It has now issued by way of a Framework a ‘Special Scheme’ to provide mechanism and manner for facilitating this co-investment and then for such Special Scheme to undertake leverage.

[Circular No. IFSCA-AIF/6/2025-Capital Markets, dated 21^st May 2025]

2. IFSCA extends the timeline for appointment of Custodian under Fund Management Regulations, 2025

As per Regulation 132 of IFSCA (Fund Management) Regulations, 2025, an FME is required to appoint an independent custodian for Retail schemes, Open ended restricted schemes and all other schemes managing AUM above USD 70 million. The custodian appointed shall be based in IFSC unless local jurisdiction requires otherwise. For schemes where custodian was not based in IFSC before FM Regulations came into effect, a transition period of 12 months was provided to comply with the regulations. This period has now been further extended by 6 months. FMEs shall make necessary arrangements to ensure compliance with the above regulation.

[Circular No. IFSCA-IF-10PR/7/2024-Capital Markets, dated 24^th May 2025]

3. IFSCA mandates prior approval for PSPs in overseas payment systems tied to IFSC transactions

IFSCA has laid down certain policies for Payment Service Providers (PSPs) participating in international payment systems including seeking prior approval before participating or becoming members of international payment systems with regard to cross-border transactions. Further, international payment systems that permit PSPs to make or receive payments among themselves or among other financial institutions in IFSC, thereby affecting domestic (within IFSC) transactions, will require authorisation under the Payment and Settlement Systems Act, 2007 (“PSS Act”). PSPs can only then participate or be members of such international payment systems for making or receiving payments with other PSPs or to or from other financial institutions in IFSC. IFSCA has directed each PSP to review its participation in light of these policies and intimate about its compliance to the Department of Banking Supervision within 30 days from the date of this circular as also share with the IFSCA a list of all the international payment systems in which the PSP was participant.

[Circular IFSCA-FMPP0BR/3/2023-Banking dated 6^th June 2025]

BCAJ Admin

Regulatory Referencer

DIRECT TAX : SPOTLIGHT

1. Amendment in Form No. 27EQ to report collection of tax at source on sale of notified luxury items- Income-tax (Eleventh Amendment) Rules, 2025 – Notification No. 35/2025 dated 22^nd April, 2025

2. CBDT notified ten goods for collection of tax at source, when the sale value exceeds ten lakh rupees – Notification No. 36/2025 dated 22^nd April, 2025

3. Any expenditure incurred to settle proceedings initiated in relation to contravention or defaults under the following laws shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure – Notification No. 38/2025 dated 23^rd April, 2025

(a) the Securities and Exchange Board of India Act, 1992 (15 of 1992); (b) the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(d) the Competition Act, 2002 (12 of 2003)

4. CBDT notifies ITR-1 (Sahaj) & ITR-4 (Sugam) for AY 2025-26 – Income-tax (twelfth Amendment) Rules, 2025 – Notification No. 40/2025 dated 29^th April, 2025.

ITR-1 or ITR-4 can be filed with Long term capital gains taxable under section 112A (up to ₹1.25 lakh with no brought forward/ carry forward loss)
Changes made to capture details of deductions claimed under various sections.
Section under which TDS is deducted will be captured in Schedule-TDS.

5. Form ITR-3 amended- Income-tax (Thirteenth Amendment) Rules, 2025 – Notification No. 41/2025 dated 30^th April, 2025

6. Form ITR-5 amended – Income-tax (Thirteenth Amendment) Rules, 2025 – Notification No. 42/2025 dated 1^st May, 2025

7. Form ITR-2 amended – Income-tax (Fifteenth Amendment) Rules, 2025 – Notification No. 43/2025 dated 3^rd May, 2025

8. Form ITR-6 amended – Income-tax (Sixteenth Amendment) Rules, 2025 – Notification No. 44/2025 dated 6^th May, 2025

9. Form ITR-V amended – Income-tax (Seventeenth Amendment) Rules, 2025 – Notification No. 45/2025 dated 7^th May, 2025

10. Form ITR-7 amended – Income-tax (Eighteenth Amendment) Rules, 2025 – Notification No. 46/2025 dated 9^th May, 2025

11. In view of the extensive changes introduced in the notified ITR forms and considering the time required for system readiness and rollout of ITR utilities, CBDT has extended the due date for filing of ITRs for A.Y. 2025-26 which were due for filing on 31^st July, 2025, to 15^th September, 2025 – Press release dated 27^th May, 2025

II. FEMA

1. RBI released draft import-export regulations and directions on 4^th April, 2025

RBI had issued draft Regulations and draft Directions to the Authorised Dealers on Export and Import of Goods and Services, vide Press Release dated July 02, 2024 and kept it open for public feedback. Based on the feedback received and after consultations with various stakeholders, the draft Regulations and Directions have been further revised. RBI has now released these revised draft Regulations and Directions under FEMA. Comments and feedback were invited till 30^th April 2025. BCAS has submitted its representation on the draft regulations which is available on the BCAS website. Presently no timeline has been provided by when RBI will issue final import-export regulations and directions.

[Press Release no. 2025-26/41, dated 4^th April 2025]

2. RBI allows repatriation of full export value from ‘Bharat Mart’ UAE within 9 months of sale from warehouse

‘Bharat Mart’, is a multi-modal logistics network-based marketplace in United Arab Emirates (UAE). It provides Indian traders, exporters and manufacturers access to markets in UAE and worldwide. The following relaxations have been provided:

i) Exporters to realise and repatriate full export value within nine months from date of sale of goods from the warehouse.

ii) AD banks, after verifying the reasonableness, may allow the following without any pre-conditions:

a. Opening / hiring warehouse in ‘Bharat Mart’ by Indian exporter with valid Importer Exporter Code (IEC)

b. Remittances by Indian exporter for initial as well as recurring expenses for setup and continuing business operations of its offices.

[A.P. (DIR Series 2025-26) Circular No. 3, dated 23^rd April 2025]

3. FPIs now permitted to invest in corporate debt securities via general route without short-term investment and concentration limits: RBI.

The RBI has amended Master Directions on ‘Non-Resident Investment in Debt Instruments, 2025’ dated 7th January, 2025. Till now investment by FPIs in corporate debt securities through the general route were subject to the short-term investment limit and concentration limits. To provide greater ease of investment to FPIs, the RBI has decided to withdraw the requirement for compliance with these limits. The Master Directions have also been suitably modified.

[Circular FMRD.FMD.No.01/14.01.006/2025-26 dated 8^th May 2025]

4. IFSCA removes net worth requirement for all ‘Customers’ on ‘India International Bullion Exchange’

The net worth requirement for all class of customers participating in the bullion market is dispensed with. This comes in order to broaden participation and on receiving representation from India International Bullion Exchange (IFSC) Ltd. However, net worth requirement under IFSCA for Qualified Suppliers and Qualified jewellers continue to apply.

[Circular No. IFSCA-DMC/3/2023-Dept. of Metals and Commodities,dated 29^th April 2025]

BCAJ Admin

Regulatory Referencer

DIRECT TAX : SPOTLIGHT

1. Order under section 119 of the Income-tax Act, 1961 for waiver regarding levy of interest under section 201(1A)(ii)/ 206C(7) of the Act, in specific cases – Circular No. 5/2025 dated 28^th March, 2025

While making payments of TDS and TCS to the credit of the Central Government as per section 200 and 206C of the Act, the taxpayers have encountered technical glitches. Due to such glitches, the amount is credited to the Central Government after the due date. The CCIT, DGIP or PrCCIT may reduce or waive interest charged under section 201(1A)(ii) / 206C(7) of the Act in the class of cases where-

1) the payment is initiated by the taxpayers / deductors /collectors and the amounts are debited from their bank accounts on or before the due date, and

2) the tax could not be credited to the Central Government, before due date because of technical problems, beyond the control of the taxpayer / deductor / collector.

2. Income-tax (Sixth Amendment) Rules – Notification No. 21/2025 dated 25^th March, 2025

a) Amendment to Rule 10TD(3B) – Safe Harbour Rules to apply to Assessment year 2026-27

b) Amendment to Rule 10TE(2) – specific safe harbour benefits apply to one assessment year only

c) Safe harbour margins for multiple international transactions have been revised

3. Amendment to clauses of Form 3CD – Income-tax (Eighth Amendment) Rules – Notification No. 23/2025 dated 28^th March, 2025

4. Rule 114 is amended to provide that every person who has been allotted permanent account number on the basis of Enrolment ID of Aadhaar application form filed prior to the 1^st day of October, 2024, shall intimate his Aadhaar number to prescribed tax authorities on or before the 31^st day of December, 2025 or such date as may be specified by the Central Board of Direct Taxes in this behalf. –

Income tax (ninth Amendment) Rules, 2025 – Notification No. 25/2025 and No. 26/2025 dated 3^rd April, 2025

5. No TDS is required to be deducted under section 194EE on withdrawals made by an individual from NSS accounts on or after 4^th April 2025. – Notification No. 27/2025 dated 4^th April, 2025

6. Insertion of Rule 12AE and Form ITR B – Income-tax (Tenth Amendment) Rules – Notification No. 30/2025 dated 7^th April, 2025

The return of income required to be furnished by any person under section 158BC(1)(a) relating to any search initiated under section 132 or requisition made under section 132A on or after the 1^st September, 2024 shall be in Form ITR-B.

7. 30^th April, 2025 shall be the last date, to file declaration under Vivad se Vishwas Scheme, 2024 Notification No. 32/2025 dated 8^th April, 2025

FEMA

1. RBI issues new Master Direction on “Compounding of FEMA contraventions”, updates it again in a couple of days

RBI had revamped the framework for compounding of contraventions in September 2024. A Master Direction on Compounding has now been issued on 22^nd April 2025. While the Master Direction compiles the Instructions and underlying Notifications / Circulars, there have been important amendments made too on 22^nd April 2025. The provision of linking of compounding amount to earlier compounding applications has now been removed. Further, while intimating the online payment of compounding application fees, certain additional details are now required to be mentioned in the email. These are – mobile number; Office of RBI to which payment is made; and the Mode of submission of application – Physical or through PRAVAAH Portal.

There has been a further amendment made to the Compounding Matrix on 24^th April 2025. A cap of ₹12 lakhs per contravention of each rule/ regulation has been prescribed for compounding penalty considering the nature of contravention, exceptional circumstances and in wider public interest – as per the satisfaction of the Compounding Authority. An important point to note here is that this cap is applicable only to residual cases in Row 5 of the compounding matrix and not the other contraventions specified in Rows 1 to 4 of the matrix.

[A.P. (DIR Series) Circular. No 02/2025-26 dated 22^nd April, 2025]

[A.P. (DIR Series) Circular. No 04/2025-26 dated 24^th April, 2025]

2. RBI keeps FPI investment limits in G-Secs, SGSs, and corporate bonds unchanged for FY 2025-26.

The limits for Foreign Portfolio Investment remain unchanged for 2025-26 at six per cent for Government Securities (G-Secs), two per cent for State Government Securities (SGSs) and fifteen per cent for corporate bonds. All investments by eligible investors in the ‘specified securities’ shall be reckoned under Fully Accessible Route (FAR). The aggregate limit of the notional amount of Credit Default Swaps sold by FPIs shall be five per cent of the outstanding stock of corporate bonds.

[A.P. (DIR Series 2025-26) Circular No. 1, dated 3^rd April 2025]

3. Bonus shares can be issued in FDI-prohibited sectors if pre-existing foreign shareholding doesn’t change: Government clarifies.

A clarification is inserted under Para 1 of Annexure 3 to the FDI Policy. It states that an Indian Company engaged in a sector/activity prohibited for FDI, is permitted to issue bonus shares to its pre-existing non-resident shareholder(s) if the shareholding pattern of the pre-existing non-resident shareholder(s) does not change on account of the issuance of bonus shares. This clarification will be effective from the date of amendment in the applicable FEMA Notification which is pending.

[Press Note No. 2 (2025 SERIES)]
[DPIIT F.NO. P-15022/1/2025-FDI POLICY], dated 7^th April 2025]

4. IFSCA amends ‘Framework for Ship Leasing’; permits lessors to open SNRR accounts with authorised dealers outside IFSC.

“Currency for conduct of business” provisions of the “Framework for Ship Leasing” have been amended. Lessors are now permitted to raise invoice in any foreign currency specified in IFSCA (Banking Regulations), 2020. The lessor can open an SNRR account with an authorised dealer, even outside IFSC.

Further Clause 2 of circular on “Additional requirements for carrying out the permissible activities by Finance Company as a lessor under ‘Framework for Ship leasing’” is also amended. The restricted activities – transfer of ownership or leasehold right of a ship or ocean vessel, from a resident to an entity set up in IFSC, for the purpose of providing services solely to resident – shall not be undertaken in any single financial year. Further, this restriction shall not apply when a new ship or ocean vessel is acquired from a shipyard in India.

[Circular F. No. 496/IFSCA/FC/SLF/2025-26/01, dated 7^th April 2025]

5. Requirement for meetings of Governing body of IFSC Banking Units relaxed: IFSCA.

The IFSCA has relaxed the requirement for meetings of the governing body of IFSC Banking Units (IBUs). The governing body must now meet at least once in each quarter of a financial year, and there is flexibility to hold additional meetings as needed. This replaces the earlier mandate of meeting at least once each quarter as well as six times in a financial year.

[Circular F. No. IFSCA-FMPP0BR/8/2025-Banking/001, dated 8^th April 2025]

6. RBI issues draft unified export-import norms, seeks public input by 30^th April 2025.

RBI had earlier released draft regulations and directions on Export and Import of Goods in Services in July 2024 and invited public feedback and comments on the same. Based on the feedback received, the RBI has made further changes. These drafts are open for public comments till 30^th April 2025.

[Press Release No. 2025-26/41, dated 4^th April 2025]

7. IFSCA notifies ‘Capital Market Intermediaries Regulations’ outlining framework for registration of intermediaries operating in IFSCs.

The IFSC Authority has replaced the IFSCA (Capital Market Intermediaries) Regulations, 2021 with IFSCA (Capital Market Intermediaries) Regulations, 2025. These regulations lay down the regulatory framework for registration, regulation, and supervision of capital market intermediaries operating in IFSCs in India. Further, the regulations cover norms relating to registration of capital market intermediaries, application procedures, net worth requirements, and the appointment of principal officer, compliance officer, and other human resources.

[Notification No. IFSCA/GN/2025/003, dated 17^th April 2025]

8. IFSC Authority notifies KYC Registration Agency Regulations, 2025

IFSCA has notified the IFSC (KYC Registration Agency) Regulations, 2025. These regulations cover provisions related to the application for the grant of a certificate of registration, the legal form of the applicant, net worth requirements, and the appointment of a Principal Officer, Compliance Officer, and other human resources. Further, regulations cover norms related to registration requirements, code of conduct, maintenance of books of account, and functions of KRA & Regulated Entity.

[Notification No. IFSCA/GN/2025/004, dated 17^th April 2025]

BCAJ Admin

Regulatory Referencer

DIRECT TAX: SPOTLIGHT

Due date for filing of Form No. 56F required to be filed under section 10AA(8) for Assessment year 2024-25 extended to 31^st March, 2025 — Circular No. 2/2025 dated 18^th February, 2025
Income tax deduction from Salaries during the financial year 2024-25 under section 192 of the Act — Circular No. 3/2025 dated 20^th February, 2025
Frequently Asked Questions (FAQs) on Guidelines issued for Compounding of Offences under the Income-Tax Act, 1961 dated 17^th October, 2024 — Circular No. 4/2025 dated 17^th March, 2025
Ten Year Zero-Coupon Bond of Power Finance Corporation Ltd. notified for the purpose of section 2(48) — Notification No. 19/2025 dated 11^th March, 2025

FEMA:

1. IFSCA replaces Fund Management Regulations of 2022 with IFSCA (Fund Management) Regulations, 2025.

IFSCA, along with the Fund Management Advisory Committee (FMAC) of IFSCA, senior industry leaders and through public consultations, has reviewed and replaced Fund Management Regulations of 2022 in order to enhance the ease of doing business and to develop the GIFT IFSC as a hub for International financial activities. Key reforms have been made in following areas:

i. Non-Retail Schemes (Venture Capital Schemes and Restricted Schemes)

ii. Manpower requirements for FMEs

iii. Registered FME (Retail) and Retail Schemes

iv. Portfolio Management Services

v. Other Key matters

Significant relaxations have been made including by way of reduction in minimum corpus; carve-outs from the regulatory requirements for fund of funds schemes; dispensation of prior approval for appointment of KMPs; streamlining and broadening the requirements regarding educational qualification and work experience of the KMPs; clarifications on several requirements; and reduction in compliance burden among several other measures. It will be worthwhile to read the new Fund Management provisions in detail for those interested in Fund Management activities in IFSCA.

[International Financial Services Centres Authority (Fund Management) Regulations, 2025 Notification No. IFSCA/GN/2025/002 and Press Release dated 19^th February, 2025]

2. IFSCA sets procedure for ‘Fund Management Entity’ (FME) to appoint or change KMPs post-registration

The IFSC Authority has prescribed the manner and procedure to be followed by a Fund Management Entity for effecting the appointment of or change to the Key Managerial Personnels (KMPs) subsequent to the grant of registration by the Authority to the FME. The FME shall file an intimation to the Authority regarding the proposal to appoint or change a KMP in the prescribed format. This circular shall come into force with immediate effect.

[International Financial Services Centres Authority (Fund Management) Regulations, 2025 Press Release No. IFSCA-IF-10PR/1/2023-Capital Markets/6, dated 20^th February, 2025]

3. IFSCA amends Aircraft Lease (“AL”) framework — restricts IFSC Lessors from leasing solely to Indian residents

Clause O.2 of AL Framework is replaced with O.2

“Transactions with person(s) resident in India”. As per this circular, lessor shall not purchase, lease or otherwise acquire the assets covered under this framework, where post-acquisition the asset will be operated or used solely by persons resident in India or to provide services to persons resident in India. The amendments to AL Framework shall come into force with immediate effect.

[Circular No. F. No. 172/IFSCA/Finance Company Regulations/2024-25/02 dated 26-2-2025]

4. IFSCA issue guidelines on ‘Cyber Security and Cyber Resilience’ for Regulated Entities in IFSCs

IFSCA has issued guidelines on ‘Cyber Security and Cyber Resilience’ for Regulated Entities in IFSCs. The guidelines intend to lay down IFSCA’s broad expectations from its Regulated Entities (REs). For these guidelines, REs must include any entity which is licensed, recognised, registered or authorised by IFSCA. The key components of the guidelines are categorised into (a) Governance, (b) Cyber security and cyber resilience framework, (c) Third party risk management, (d) Communication and (e) Audit.

[International Financial Services Centres Authority Circular No. IFSCA-CSDOMSC/13/2025-DCS, dated 10^th March, 2025]

5. RBI permits settlement of Indo-Maldives trade in INR and MVR, alongside the existing ACU mechanism

In the wake of signing of Memorandum of Understanding (MoU) between RBI and Maldives Monetary Authority in November 2024, the Reserve Bank of India (RBI) has now allowed bilateral trade transactions between India and Maldives to be settled in Indian Rupees (INR) and Maldivian Rufiyaa (MVR) in addition to the existing Asian Clearing Union (ACU) mechanism. These instructions shall come into force with immediate effect.

[Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023 A.P. (DIR Series) Circular No. 22 under FEMA, 1999, dated 17^th March, 2025]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX: SPOTLIGHT

1. Guidance for application of the Principal Purpose Test (PPT) under India’s Double Taxation Avoidance Agreements — Circular No. 1/2025 dated 21st January, 2025

2. Rule 114DA(1) amended to substitute Form No. 49C and to provide that the said Form be filed within eight months from the end of the financial year — Income-tax (Fourth Amendment) Rules, 2025- Notification No. 14/ 2025 dated 7th February, 2025

II. FEMA READY RECKONER

RBI amends receipt and payment norms for trade transactions between two ACU residents:

The RBI has amended FEMA Notification No. 14(R), the Manner of Receipt and Payment Regulations. It has been now been provided that payment from a resident in the territory of one participant country to a resident in the territory of another participant country for a trade transaction should be through the ACU mechanism, or as per the directions issued by RBI to Authorised Dealers. Here, participant country means Member countries of ACU other than Nepal and Bhutan. Thus, the requirement is now restricted only to residents of these countries and not to suppliers located in these countries. Proviso meant for suppliers to India who are residents of countries other than countries that are participants of ACU has been consequently removed. For all other trade transactions between these countries, the payment can be in INR or any foreign currency.

[NOTIFICATION NO. FEMA 14(R)(1)/2025-RB, dated 4th February, 2025]

RBI announces steps to encourage the use of Indian Rupee and local currencies for settlement of cross-border transactions

The RBI has been focusing on Internationalisation of Indian Rupee since some time. In this process, it keeps amending FEMA notifications. Amendments have been made in FEMA Notification 5(R) — Deposit Regulations, FEMA Notification 10(R) — Foreign Currency Accounts by a person resident in India Regulations and FEMA Notification 395 — Mode of Payment and Reporting of Non-Debt Instruments Regulations. The main amendments are as follows:

i. The Overseas branches of AD banks will be able to open INR accounts for a person resident outside India for settlement of all permissible current account and capital account transactions with a person resident in India.

ii. Persons resident outside India will be able to settle bona fide transactions with other persons resident outside India using the balances in their repatriable INR accounts such as Special Non-resident Rupee (SNRR) account and Special Rupee Vostro Account (SRVA).

iii. Persons resident outside India will be able to use their balances held in repatriable INR accounts for foreign investment, including FDI, in non-debt instruments.

iv. Indian exporters will be able to open accounts in any foreign currency overseas for settlement of trade transactions, including receiving export proceeds and using these proceeds to pay for imports.

[Foreign Exchange Management (Deposit) (Fifth Amendment) Regulations, 2025 — Notification No. FEMA 5(R)(5)/2025-RB, dated 14th January, 2025]

[Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) (Fifth Amendment) Regulations, 2025 — Notification No. FEMA 10(R)(5)/2025-RB dated 14th January, 2025]

[Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Third Amendment) Regulations, 2025 — Notification No. FEMA 395(3)/2025-RB, dated14th January, 2025]

RBI updates FEMA Master Directions on Foreign Investment, Export of Goods & Services, and Deposits

Over the last few months, the RBI and GOI have amended several FEMA rules and notifications. The changes have now been incorporated in the respective Master Directions. The RBI has issued Updated Master Directions on “Deposits and Accounts”, “Export of Goods and Services”, and “Foreign Investment in India”. There are several clarifications provided in the Master Direction on Foreign Investment in India, some of which are listed below:

Indian companies which are Foreign Owned and Controlled (referred to as FOCCs) are permitted to make further investment in an Indian company only as per the FDI provisions. In spirit, these are considered as non-residents and hence they need to comply with FDI provisions to make further investment in India. While all restrictions followed for FOCCs, it was not clear whether certain reliefs which were provided to non-residents for making FDI were available to FOCCs are not. It is not clarified that the reliefs provided to non-residents under NDI Rules while making FDI — like permissibility of swap, deferred consideration, etc. — are also available to FOCCs.
With respect to Indian residents who migrate abroad and become non-residents — it has been clarified that the investments will be held by them on a non-repatriable basis.
Further, it has been clarified where a non-resident acquires equity instruments by way of transmission on the death of an Indian resident, shall be considered as a non-repatriable investment.
The definition of control has been streamlined throughout all provisions.

[Master Direction — Deposits and Accounts; Export of Goods and Services; Foreign Investment in India]

IFSCA notifies IFSCA (Bullion Market) Regulations, 2025 to provide a framework for recognition of bullion exchanges & clearing corporations

The IFSC Authority (IFSCA) has notified IFSCA (Bullion Market) Regulations, 2025 to provide a framework for recognition of bullion exchanges & clearing corporations, and registration of bullion depositories & vault managers. It specifies provisions related to an application for recognition of bullion exchange, conditions for grant of recognition, period of recognition, renewal & withdrawal of recognition. Also, it prescribes the operational framework of bullion exchange and the general obligations of bullion clearing corporations.

[IFSCA Notification F. No. IFSCA/GN/2025/001]

BCAJ Admin

Regulatory Referencer

DIRECT TAX : SPOTLIGHT

Extension of due date for determining the amount payable under under column (3) of the Table in section 90 of the Direct Tax Vivad Se Vishwas Scheme, 2024 from 31^stDecember, 2024, to 31^st January, 2025 – Circular No. 20/2024 dated 30^thDecember, 2024.
Extension of due date for furnishing belated/revised return of income for the Assessment Year 2024-25 by resident individuals from 31^st December, 2024 to 15^th January, 2025 – Circular No. 21/2024 dated 31st December, 2024.
No deduction of tax shall be made under the provisions of section 194Q of the said Act by a buyer, in respect of purchase of goods from a Unit of International Financial Services Centre, being a seller, subject to fulfillment of certain conditions – Notification No. 3/ 2025 dated 2^nd January, 2025.
Unit of International Financial Services Centre shall not be considered as buyer for the purposes of section 206C(1H) in respect of purchase of goods from a seller, subject to fulfillment of certain conditions – Notification No. 6/ 2025 dated 6^th January, 2025.

II. FEMA READY RECKONER

Master Direction issued for investment in Debt Instruments by Non-residents:

The Reserve Bank of India has issued Master Direction on Non-resident Investment in Debt Instruments in India. While it does not consolidate all existing provisions for debt investment by non-residents, it provides additional guidance on the channels for such investment like eligibility of investors to invest in various types of debt instruments; the limits & conditions; exit provisions, etc.

[FMRD.FMD.No.10/14.01.006/2024-25 dated 7^th January, 2025]

RBI mandates banks to report OTC transactions in gold derivatives:

The RBI has mandated banks to report ‘over-the-counter’ transactions in gold derivatives undertaken by them and their customers from 1^st February, 2025. The reporting of the transactions undertaken by the bank or their customers should be done before 12:00 noon of the following business day.

[Circular No. FMRD.FMD.NO.08/02.03.185/2024-25 dated 27^th December, 2024]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX : SPOTLIGHT

1. Extension of due date for furnishing return of income in the case of an assessee who is required to furnish a report referred to in section 92E for the A Y 2024-25 from 30^th November, 2024 to 15^th December, 2024 – Circular No. 18/2024 dated 30^th November, 2024

2. Guidance Note 2/2024 on provisions of the Direct Tax Vivad se Vishwas Scheme, 2024 – Circular No. 19/2024 dated 16^th December, 2024

3. Safe Harbour Rules prescribed for a foreign company engaged in diamond mining and selling of raw diamonds and insertion of Form 3CEFC- Income-tax (Tenth Amendment) Rules, 2024- Notification No. 124/ 2024 dated 29^th November, 2024

II. FEMA READY RECKONER

Central Govt. notifies pension fund schemes as ‘financial products’ under IFSCA Act, 2019:

The International Financial Services Centres Authority has notified the ‘schemes operated by a pension fund’ as a ‘financial product’ for the purposes of the International Financial Services Centres Authority Act, 2019. This has been made effective from the date of publication of the notification.

{NOTIFICATION NO. S.O. 5241(E)[F. NO. 3/15/2022-EM-PART (1)], dated 5^th December, 2024}

IFSCA renews recognition of ‘India International Bullion Exchange’ as Bullion Exchange & Clearing Corp till 8^th December, 2025:

The IFSCA has renewed the recognition of India International Bullion Exchange IFSC Limited, Gujarat, as Bullion Exchange and Bullion Clearing Corporation for one year, commencing on the 9^th day of December 2024 and ending on 8^th day of December 2025 in respect of bullion contracts.

[NOTIFICATION NO. IFSCA-PMTS/9/2023-PRECIOUS METALS, dated 5^th December, 2024]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX: SPOTLIGHT

1. Extension of due date for filing return of income for the Assessment Year 2024–25 – Circular No. 13/2024 dated 26th October 2024

CBDT has extended the due date for filing the tax returns for Assessment year 2024-25, which was 31st October, 2024, to 15th November, 2024.

2. Condonation of delay under section 119(2)(b) of the Act for returns of income claiming deduction under section 8OP of the Act for Assessment Year 2023-24 – Circular No. 14/2024 dated 30th October, 2024.

CBDT had received applications from co-operative societies seeking condonation of delay for filing returns of income, citing delays in getting accounts audited under respective State Laws.

CBDT had issued a circular No. 13/2023 dated 26th July, 2023 to provide for a condonation process for tax returns filed of A.Y. 2022–23 to avoid genuine hardship to co-op societies claiming deduction under section 80P of the Act. CBDT has extended the applicability of the said circular for A.Y. 2023–24.

3. Fixing monetary limits for the income-tax authorities for reduction or waiver of interest paid or payable under section 220(2) of the Act – Circular No. 15/2024 dated 4th November, 2024

If a taxpayer fails to pay the amount specified in the notice of demand issued under section 156 of the Act, he is liable to pay interest under section 220(2) of the Act. CBDT has authorised various Income tax authorities to exercise power to waive or reduce interest subject to fulfillment of various conditions.

4. Condonation of delay under section 119(2)(b) of the Act, 1961 in filing of Form No. 9 A/10/ 10B /10BB for Assessment Year 2018–19 and subsequent assessment years – Circular No. 16/2024 dated 18th November, 2024
CBDT has authorised various Income tax authorities to exercise power to condone the delay in filing Form No. 9 A/10/ 10B /10BB subject to fulfillment of various conditions.

5. Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Form No. 10-IC or Form No. 10-ID for Assessment Years 2020–21, 2021–22 and 2022–23- Circular No. 17/2024 dated 18th November 2024.

CBDT has authorised various Income tax authorities to exercise power to condone the delay in filing Form No. 10 IC/10ID subject to fulfillment of various conditions.

6. Establishing of tolerance range for transfer pricing of Assessment Year 2024–25 – Notification No. 116/2024 dated 18th October, 2024.

The tolerance range is relevant for international or specified domestic transactions. Pricing within the tolerance range is be deemed to be compliant with arm’s length standards.

The tolerance range is set at 1 per cent for transactions classified as “wholesale trading” and 3 per cent for all other transactions for A.Y. 2024–25. Certain conditions to be fulfilled to qualify a transaction as “wholesale trading,”

7. Forms 42, 43 and 44 to be furnished electronically and to be verified in a manner prescribed in Rule 131. – Notification No. 6/2024 dated 19th November, 2024.

II. COMPANIES ACT, 2013

1. Amendments to Adjudication of Penalties Rules; The MCA has notified the Companies (Adjudication of Penalties) Rules, 2014. An amendment has been made to the Rule relating to the Adjudication Platform. A new proviso has been inserted to Rule 3A(1), which states that the proceedings pending before the Adjudicating Officer or Regional Director on the date of such commencement must continue as per the provisions of these rules existing prior to such commencement. These norms are effective from 9th October, 2024. [Notification No. G.S.R 630(E); Dated 9th October, 2024]

III. SEBI

2. SEBI relaxes Listed Entities from dispatching hard copies of Annual Report for AGMs held till 30th September, 2025: Earlier, MCA vide Circular dated 19th September, 2024, had extended the relaxation from sending of physical copies of financial statements (including Board’s report, Auditor’s report etc.) to shareholders for the AGMs conducted till 30th September, 2025. Therefore, to bring it in line with MCA Circular, SEBI has decided to extend the relaxation to listed entities from sending a hard copy of the annual report for the AGMs conducted till 30th September, 2025. [Circular No. SEBI/HO/CFD/CFD-POD-2/P/CIR/2024/133, dated 3rd October, 2024]

SEBI extends timeline for Social Enterprises to make annual disclosures on Social Stock Exchange (SSE) up to 31st January, 2025: Earlier, SEBI, vide circular dated 27th May, 2024, had prescribed the timeline for submission of annual disclosures and annual impact reports by Social Enterprises on the Social Stock Exchange for FY 2023–24. Social Enterprises that have registered or raised funds via SSE were required to submit a report by 31st October, 2024, as per the relevant rules of the SEBI (LODR) Regulations, 2015. SEBI has now extended this timeline to 31st January, 2025. [Circular No. SEBI/HO/CFD/POD-1/P/CIR/2024/134, dated 7th October, 2024]

SEBI directs AIFs and their managers to exercise specific due diligence w.r.t investors and investments of AIF: SEBI has directed Alternative Investment Funds (AIFs) and their managers to exercise specific due diligence with respect to investors and investments to prevent circumvention of various laws and ensure compliance with regulatory frameworks. Under this, AIFs designated as Qualified Institutional Buyers (QIBs) or Qualified Buyers (QBs) must ensure that investors who are not eligible for QIB or QB status on their own do not avail of the respective benefits through the AIF. [Circular No. SEBI/HO/AFD/AFD-POD-1/P/CIR/2024/135, dated 8th October, 2024]

3. Unlisted subsidiaries of listed entities must identify ‘related party’ and ‘related party transaction’ as per LODR norms: A listed company sought SEBI’s informal guidance on whether unlisted subsidiaries must identify related parties as per Reg. 2(1) (zb) or other laws. SEBI has clarified that unlisted subsidiaries of listed entities must identify ‘related parties’ and ‘related party transactions’ as per LODR Regulations. Further, under Reg. 2(1)(zc), transactions between a subsidiary and its related party, or the holding listed entity’s related party, are considered ‘related party transactions’ under LODR Regulations. [Advisory dated 11th October, 2024].

4. SEBI extends timeline for compliance with provisions relating to direct pay-out of securities to client’s demat account: Earlier, SEBI, vide circular dated 5th June, 2024, mandated the pay-out of securities directly to the client’s demat account. The circular was to come into effect from 14th October, 2024. In order to ensure the smooth implementation of the pay-out of securities directly to the client’s demat account without any disruption to market players and investors, SEBI has now extended the timeline for implementation of the circular. The circular shall come into effect from 11th November, 2024. [Circular No. SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/136; Dated 10th October, 2024]

5. All Market Infrastructure Institutions must disclose their shareholding pattern as per LODR Regulations: In order to ensure ease of compliance and effective monitoring of the provisions related to minimum public shareholding, other shareholding limits and fit and proper criteria, SEBI has decided that all Market Infrastructure Institutions (MIIs) shall disclose their shareholding pattern as per the requirements and formats specified for listed companies under LODR Regulations. Further, every MII shall appoint a ‘Designated Depository (DD)’ for the purpose of monitoring their shareholding limits. [Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/139, dated 14th October, 2024]

6. SEBI introduces Liquidity Window to boost early redemption of debt securities: SEBI has introduced a Liquidity Window facility for debt securities, allowing issuers to offer put options for investor redemption prior to the maturity date. This framework, governed by Regulation 15 of the SEBI (NCS) Regulations, 2021, aims to enhance liquidity in the corporate bond market, especially for retail investors. The Liquidity Window facility can be provided only for prospective issuances of debt securities through public issue process or on a private placement basis. [Circular No. SEBI/HO/DDHS/DDHS-PoD-1/P/CIR/2024/141, dated 16th October, 2024]

7. SEBI allows 3-in-1 trading accounts for public issue of debt and other securities in addition to existing modes: SEBI has clarified that investors can continue using 3-in-1 accounts to apply online for public issues of debt securities, non-convertible redeemable preference shares, municipal debt securities and securitised debt instruments. This is in addition to the existing modes of making an application in the public issue of securities. A 3-in-1 trading account combines a savings account, a Demat account, and a trading account into a single integrated solution. [Circular No. SEBI/HO/DDHS/DDHS-POD-1/P/CIR/2024/142, dated 18th October, 2024]

8. Research reports by Research Analysts (RAs) are not advertisements unless promoting RA services: The SEBI, after receiving various queries with respect to applicability of provisions of advertisement code on a Research Report issued by an RA, has clarified that Research Report and research recommendations of an RA will not be considered advertisement unless anything contained in the research report is in the nature of promotion of products or services offered by an RA. [Circular No. SEBI/HO/MIRSD/MIRSD-POD1/P/CIR/2024/146, dated 24th October, 2024]

9. Stock brokers can upload the same mobile no. /email address for more than one client belonging to one family: Earlier, SEBI issued guidelines regarding SMS and email alerts to investors by stock exchanges. It states that stock brokers must ensure that a separate mobile number / email address is uploaded for each client. SEBI has now clarified that the stock broker may, at a client’s request, upload the same mobile number/email address for more than one client, provided the client belongs to one family or such client is an authorised person of an HUF, partnership, or trust. [Circular No. SEBI/HO/MIRSD/MIRSD-POD1/P/CIR/2024/XXX, dated 28th October, 2024]

IV. FEMA READY RECKONER

IFSC Authority notifies Code of Conduct for ‘recognised market infrastructure institution’: The International Financial Services Centres Authority has amended the International Financial Services Centres Authority (Market Infrastructure Institutions) Regulations, 2021 to notify the Code of Conduct for a ‘recognised market infrastructure institution’. There are detailed guidelines for governing board, directors, committee members and key management personnel – their compensation, the committees, the segregation of functions along with provisions on several other aspects. [Notification No. IFSCA/GN/2024/011 dated 29th October, 2024]

RBI includes 10-year Sovereign Green Bonds as eligible for non-resident investment under Fully Accessible Route: Certain specified categories of Central Government securities were opened fully for non-resident investors without any restrictions under the Fully Accessible Route introduced vide A.P. (DIR Series) Circular No. 25 dated 30th March, 2020. It has now been decided to also designate Sovereign Green Bonds of 10-year tenor issued by the Government in the second half of the fiscal year 2024–25 as ‘specified securities’ under the Fully Accessible Route. [Circular NO. FMRD.FMD.NO.06/14.01.006/2024-25 dated 7th November, 2024].

RBI amends FEMA Notification 10(R) to align it with the updated definition of ‘startup’: The Reserve Bank of India has notified Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) (Fourth Amendment) Regulations, 2024. The amended norms replace the definition of the startup with the revised definition of startups, which was issued by the Department for Promotion of Industry and Internal Trade in 2019. [FEM (Foreign Currency Accounts by a Person Resident in India) (Fourth Amendment) Regulations, 2024 dated 19th October, 2024]

RBI introduces Operational framework for classification of FPI to FDI: The investment made by a foreign portfolio investor along with its investor group (hereinafter referred to as ‘FPI’) shall be less than 10 per cent of the total paid-up equity capital on a fully diluted basis. FPIs investing in breach of the prescribed limit shall have the option of divesting their holdings or reclassifying such holdings as FDI. In this regard, an operational framework for such reclassification of foreign portfolio investment by FPI to FDI has been introduced by the RBI. [A.P. (DIR Series) Circular No. 19, dated 11th November, 2024]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX : SPOTLIGHT

1. Extension of time lines for filing of various reports of audit for the Assessment Year 2024-25 – Circular No. 10/2024 dated 29^th September, 2024

CBDT has extended the date of furnishing of report of audit under any provision of the Act for the Previous Year 2023-24, which was 30^th September, 2024 to 7th October, 2024.

2. Order authorizing Income-tax authorities to admit an application or claim for refund and carry forward of loss and set off thereof under section 119(2)(b) of the Income-tax Act — Circular No. 11/2024 dated 1 October 2024

The circular provides detailed guidelines, authorizing different authorities to accept or reject such claims based on monetary limits involved.

3. Guidance Note 1/2024 on provisions of the Direct Tax Vivad se Vishwas Scheme, 2024 — Circular No. 12/2024 dated 15^th October, 2024

CBDT has issued FAQ to clarify various issues relating to Vivad se Vishwas Scheme, 2024.

4. Vivad se Vishwas Rules, 2024 notified – Notification No. 104/2024 dated 20^th September, 2024

5. Procedure for making declaration and furnishing undertaking in Form-1 under Rule 4 of The Direct Tax Vivad Se Vishwas Rules, 2024. — Notification No. 4/2024 dated 30 September 2024

6. Rule 21AA, Rule 26B, Form 16 and Form 24Q amended. Form 12BAA introduced – Income-tax (Eighth Amendment) Rules, 2024 — Notification No. 112/ 2024 dated 15^th October, 2024

Rule 26B now permits assessees to provide details of income from sources other than salaries and any tax deducted or collected at source during the financial year using a newly introduced Form No. 12BAA. Form No. 16 and Form No. 24Q have been updated to include adjustments for tax deducted or collected as per Form No. 12BAA.

II. COMPANIES ACT, 2013

1.Merger rules amended; norms prescribed for cross-border deals between foreign holding company and Indian WOS: Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2024 are amended. A new sub-rule has been inserted into Rule 25A, regarding merger or amalgamation of a foreign company with an Indian company and vice versa. Where transferor foreign company incorporated outside India, is a holding company, and transferee Indian company, is a wholly-owned subsidiary company incorporated in India, enter into a merger or amalgamation, both companies must obtain prior approval of the RBI [Notification No. G.S.R 555(E), dated 9^th September, 2024]

2. MCA includes legal heir certificate as proof to register transmission of securities up to ₹5,00,000: MCA has notified the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2024. An amendment has been made to Schedule II. As per amended norms, a legal heir certificate issued by a revenue authority, not below the rank of Tahsildar, having jurisdiction is included as an additional document to register transmission of securities valued up to ₹5,00,000 per issuer company. These rules shall be effective from 9^th September, 2024. [Notification No. G.S.R 552(E), dated 9^th September, 2024]

3. Companies can hold AGMs through VC/OAVM till 30^th September 2025; In continuation to this General Circulars dated 5^th May, 2020, 5^th May, 2022, 28^th December, 2022 and 25^th September, 2023, after due examination, MCA has now decided to allow companies whose AGMs are due in the Year 2024 or 2025, to conduct their AGMs through VC or OAVM on or before 30th September, 2025. Also, Ministry clarified that General Circular shall not be construed as conferring any extension of statutory time for holding of AGMs by the companies under the Companies Act, 2013. [General Circular No. 09/2024, dated 19^th September, 2024]

4. MCA amends Prospectus and Allotment Rules; MCA has notified the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2024. An amendment has been made to Rule 9B(2), which states that a private company, which is not a small company as of the financial year ending on or after 31^st March , 2023, must dematerialise its securities within 18 months of closure of the financial year A new proviso has been inserted to Rule 9B(2), stating that a producer company must comply with dematerialisation provisions within a period of 5 years from closure of such financial year. [Notification No. G.S.R 583(E), dated 20^th September, 2024]

5. Due date for filing Form CSR-2 for FY 2023–24 is 31^st December, 2024 post filing of Form AOC-4: MCA has amended the Companies (Accounts) Rules, 2014. A proviso has been inserted after the third proviso to Rule 12(IB), providing that for the financial year 2023–2024, companies are required to file Form CSR-2 separately by 31^st December, 2024. This filing must follow the submission of Form AOC-4, Form AOC-4-NBFC (Ind AS), or Form AOC-4 XBRL as applicable, based on the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015, as the case may be. [Notification No. G.S.R. 587(E), dated 24^th September, 2024]

III. SEBI

6. SEBI allows securities funded by cash collateral to be considered as maintenance margin for Margin Trading Facility: SEBI has allowed securities funded by cash collateral to be considered as maintenance margin for Margin Trading Facility (MTF) to promote ease of doing business. This move helps to ease the burden of providing additional collateral towards the maintenance margin for the margin trading facility. This change comes after SEBI received requests from market participants through the Industry Standards Forum to relax margin trading requirements. The circular shall come into effect from 1^st October, 2024. [Circular No. SEBI/HO/MRD/MRD-POD-2/P/CIR/2024/118, dated 11^th September, 2024].

7. SEBI speeds up bonus-issue process; As apart of its continuing endeavour to streamline the process of issuing bonus equity shares, SEBI has decided to reduce the time taken for the credit of bonus shares and the trading of such shares from the record date of the bonus issue. The issuer, while fixing and intimating the record date (T day) to the stock exchange, shall also take on record the deemed date of allotment on the next working day after the record date. Further, shares will now be available for trading on a T+2 day. [Circular No. CIR/CFD/POD/2024/122, dated 16^th September, 2024]

8. SEBI amends NCS norms, reduces draft offer document review period to 5 days: SEBI has notified the SEBI (Issue and Listing of Non-Convertible Securities) (Second Amendment) Regulations, 2024. An amendment has been made to Regulation 27 relating to ‘filing of draft offer document’. As per the amended norms, the draft offer document filed with stock exchange must now be made public by posting on the website of stock exchanges for seeking public comments for a period of 5 working days from date of filing draft offer document. Earlier, the period was 7 working days. [Notification No. SEBI/LAD-NRO/GN/2024/205, dated 17^th September, 2024].

9. SEBI modifies framework for valuation of investment portfolio of AIFs: SEBI has modified the framework for the valuation of investment portfolios of Alternative Investment Funds (AIFs). Under this framework, securities other than unlisted, non-traded, or thinly traded securities will now be valued in accordance with mutual fund Regulations. This change comes after SEBI received feedback from the AIF industry, which highlighted issues with certain aspects of the valuation framework for AIFs. The circular shall be effective immediately. [Circular No. SEBI/HO/AFD/POD-1/P/CIR/2024/123, dated 19^th September, 2024].

IV. FEMA

RBI mandates AD Banks to exercise diligence for overseas guarantees availed by residents

The RBI has issued a circular directing AD Category-I banks may ensure that guarantee contracts advised by them to, or on behalf of, their resident constituents are in accordance with the FEMA regulations. This is on account of RBI coming across instances of guarantees, including Standby Letters of Credit [SBLCs] and/or performance guarantees, which are issued by persons resident outside India, favouring persons resident in India, which are not permitted as per the present FEMA regulations. [A.P. (DIR SERIES 2024-25) Circular No. 18, dated 4^th October, 2024]

IFSCA amends IFSC Insurance Office Regulations

IFSCA has notified the Investment by International Financial Services Centre Insurance Office (Amendment) Regulations, 2024. Regulation 5(9) has been amended and new regulations 9A and 9B have been inserted. Regulation 9A relates to investment that can be made by an IFSC Insurance Office (IIO) for funds of certain Unit Linked Insurance Products. Regulation 9B regulates IIO’s investment in Domestic Tariff Area of its retained premiums and states that ‘Admissible pattern of investment’, which also provides for a Matrix, needs to be adhered to. [Notification No. IFSCA/GN/2024/008 dated 14^th October, 2024].

IFSCA notifies ‘Payment and Settlement Systems Regulations’

The IFSCA has notified the IFSCA (Payment and Settlement Systems) Regulations, 2024. The regulations lay down the process of application for authorisation; grant of authorisation certificate; etc. It also provides for compliance with prescribed and to be prescribed Principles and Standards; as also for submission of returns and documents; etc; for every person carrying on a Payment System in IFSC. [Notification No. IFSCA/GN/2024/009 dated 14^th October, 2024]

IFSCA amends Re-Insurance Business Regulations

The IFSCA has amended the IFSCA (Registration of Insurance Business) Regulations, 2021 and omitted certain forms in the First and Fourth Schedule and replaced with Forms as would be as prescribed by the IFSCA. Further, the applicant under Regulation 10 must now opt for category as per Regulation 5(2)(A) of the IRDAI (Re-insurance) Regulations, 2018. [Notification no. IFSCA/GN/2024/010 dated 14^th October, 2024]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX: SPOTLIGHT

1. CBDT issues circular revising the monetary threshold for filing of appeals — Circular No. 09/2024 dated
17th September, 2024

Circular 5 of 2024 dated 15th March, 2024 had prescribed monetary limits for filing income tax appeals by the Income tax department. The limits are revised to ₹5 crore, ₹2 crore, and ₹60 lakhs respectively for filing appeals before the Supreme Court, High Court, and Income Tax Appellate tribunal respectively. CBDT has further clarified that the Department should not file an appeal merely because the tax effect exceeds the monetary limit but filing of an appeal should be decided based on the merits of each case.

II. COMPANIES ACT, 2013

1. C-PACE to facilitate voluntary LLP closures under new rules effective 27th August, 2024: The Hon’ble Finance Minister, in her budget speech, announced that the services of the Centre for Processing Accelerated Corporate Exit (C-PACE) would be extended to facilitate the voluntary closure of LLPs. Accordingly, the Ministry of Corporate Affairs (MCA) has notified the Limited Liability Partnership (Amendment) Rules, 2024. Under these amended rules, the application for voluntary closure of LLPs will now be approved by C-PACE instead of the ROC effective from the 27th August, 2024, [MCA Notification G.S.R. 475(E), dated 5th August, 2024]

2. Foreign Companies must now file Form FC-1 with CRC within 30 days of setting up business in India: MCA has notified the Companies (Registration of Foreign Companies) (Amendment) Rules, 2024. Pursuant to the amendment to Rule 3(3), a foreign company must now file Form FC-1 with the Registrar, Central Registration Centre (CRC), within thirty days of establishing its place of business in India. Further, documents for registration by a foreign company must also be delivered in Form FC-1 to the Registrar, Central Registration Centre. These rules are effective from 9th September, 2024. [Notification No. G.S.R 491(E), dated 12th August, 2024]

3. MCA introduces ‘Ind AS 117’ on Insurance Contracts: MCA has notified Companies (Indian Accounting Standards) Amendment Rules, 2024. As per the amended norms, a new Ind AS 117 relating to ‘Insurance Contracts’ has been inserted. Ind AS 117 establishes principles for recognizing, measuring, presenting, and disclosing insurance contracts. The objective is to ensure that an entity provides relevant information that faithfully represents those contracts. An entity is expected to apply Ind AS 117 to insurance, reinsurance, and investment contracts. [Notification No. G.S.R 492(E), Dated 12th August, 2024]

III. SEBI

1. SEBI launches chatbot “SEVA” for investors: SEBI has launched its Virtual Assistant (SEVA) – an Artificial Intelligence (AI) based conversation platform for investors. The Beta version of the chatbot includes features like citations for generated responses, speech-to-text and text-to-speech functionality for accessibility, etc. The chatbot is presently enabled to answer questions regarding general information on the securities market, grievance redressal process, etc. The beta version is available on SEBI’s investor website and the SAARTHI mobile app. [PR NO. 14/2024, dated 29th July, 2024]

2. Stock exchanges and clearing corporations must now disclose shareholding patterns in the format as per LODR norms: SEBI has notified an amendment to the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018. As per the amended norms, stock exchanges and clearing corporations are now required to disclose their shareholding pattern on their respective websites every quarter as per the requirements and format specified for listed companies under LODR Regulations. [Notification No. SEBI/LAD-NRO/GN/2024/196, dated 29th July, 2024]

3. AMCs must have surveillance, controls, and escalation processes to detect and prevent potential market abuse: Earlier, SEBI carried out a public consultation on the proposal of putting in place a structured institutional mechanism at the end of AMCs, which can proactively identify and deter instances of such market abuse. Accordingly, the SEBI (Mutual Funds) Regulations, 1996 was amended. Now, SEBI has directed that this mechanism shall consist of enhanced surveillance systems, internal control procedures, & escalation processes to effectively identify, monitor & address misconduct. [Circular No. SEBI/HO/IMD/IMD-POD-1/P/CIR/2024/107, dated 5th August, 2024]

4. SEBI issues guidelines for borrowings by Category I and Category II Alternative Investment Funds: SEBI has issued guidelines for borrowing by Category I and II Alternative Investment Funds (AIFs). As per the new norms, Category I and II AIFs are allowed to borrow to meet a temporary shortfall in the amount called from investors for making investments in investee companies (‘drawdown amount’). Further, all Category I and II AIFs must maintain a 30-day cooling-off period between two periods of borrowing as permissible under AIF Regulations. The circular shall be effective immediately. [Circular No. SEBI/HO/AFD/AFD-POD-1/P/CIR/2024/112, dated 19th August, 2024]

5. Research Analysts must be entitled to charge fees for providing research services to Clients: SEBI has notified an amendment to the SEBI (Research Analysts) Regulations, 2014. As per the newly inserted norms, a Research Analyst must be entitled to charge fees for providing research services from a client, including an accredited investor, in the manner specified by the Board. These amended norms shall come into force from the date of their publication in the Official Gazette i.e., 19th August, 2024. [Notification No. SEBI/LAD-NRO/GN/2024/199, dated 19th August, 2024]

IV. FEMA:

1. Important amendments in Non-debt Instruments Rules:

NDI Rules under FEMA have been liberalised and the following are the amendments in brief. A swap of shares leading to an ODI transaction as well as an FDI transaction is called an “ODI-FDI swap” in general parlance. While Overseas Direct Investment (ODI) has been permitted through the swap of shares of any entity vide the new Overseas Investment regime notified in August 2022, FDI through the swap of shares of a foreign entity was still under the Approval route. Hence, the FDI leg of an ODI-FDI swap required prior approval. The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 have been amended to permit FDI through the swap of shares. This has enabled full ODI-FDI swap under the automatic route. This has eased out several transactions and arrangements.

The other amendments in NDI Rules include an updation in the definition of control and start-up; clarity in the calculation of indirect foreign investment by excluding the investment made on a non-repatriation basis from the same; increase in limit on foreign portfolio investment under the automatic route from 49 per cent to the respective sectoral cap prescribed; and liberalization of norms for FDI in White Label ATM operations. Please refer to the NDI Rules for complete information.

[Foreign Exchange Management (Non-Debt Instruments) (Fourth Amendment) Rules,
2024 – Notification S.O. 3492(E) [F. NO. 1/8/2024-EM], dated 16th August, 2024]

2. Scheme notified for trading and settlement of Sovereign Green Bonds in IFSC

The FEM (Debt Regulations), 2019 were amended in August 2024 permitting persons resident outside India to purchase or sell Sovereign Green Bonds issued by the Government of India in IFSC. Now, the scheme for trading and settlement of sovereign green bonds in IFSC has been notified by the IFSCA. The operational guidelines for participation in the Scheme by entities in the IFSC shall be further issued by the IFSC Authority.

[Circular No. CO.FMRD.FMIA.NO.S242/11-01-051/2024–25, dated 29th August, 2024]

3. Listing Regulations notified in IFSC:

The IFSCA (Listing) Regulations, 2024 have been notified for IPOs, debt securities, and secondary listings in IFSC exchanges. There have already been amendments in the Companies Act and FEMA enabling provisions for Indian companies to list in IFSC exchanges. These regulations provide a comprehensive framework for the same.

[International Financial Services Centres Authority (Listing) Regulations, 2024 – Notification No. IFSCA/GN/2024/006, dated 20th August, 2024]

4. Discontinuation of monthly LRS returns to be submitted by Banks

AD Category-I banks were required to furnish information on the number of applications received and the total amount remitted under LRS on a monthly basis in the Centralised Information Management System (CIMS). This requirement has been discontinued from the reporting month of September 2024. The banks will be required to upload only transaction-wise information under LRS daily return at the close of business of the next working day. The Master Direction — Reporting under the Foreign Exchange Management Act, 1999 has also been updated to reflect this change.

[A.P. (DIR SERIES 2024–25) Circular No. 16, dated 6th September, 2024]

5. New rules notified for compounding under FEMA:

The Central Government has notified Foreign Exchange (Compounding Proceedings) Rules, 2024 in supersession of the Foreign Exchange (Compounding Proceedings) Rules, 2000. There has been an increase in the amount of fees to be paid while submitting the compounding application from INR 5,000 to 10,000 and the pecuniary limits with respect to which the powers have been delegated to the officers to compound the contravention. The non-compoundable offenses have been specifically listed and multiple forms which were required to be submitted along with the compounding application have been merged into a single form.

[Foreign Exchange (Compounding Proceedings) Rules, 2024 — Notification No. G.S.R. 566(E) [F. NO. 1/10/2023-EM], dated 12th September, 2024]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX: Spot light

1. Non-applicability of higher rate of TDSITCS as per provisions of section 206AAI and 206CC of the Incometax Act, 1961, in the event of death of deductee / collectee efore linkage of PAN and Aadhaar – Circular No. 08/2024 dated 5th August, 2024

CBDT had provided time up to 31st May, 2024 for linkage of PAN and Aadhaar for the transactions entered into up to 31st March, 2024 so as to avoid higher deduction /collection of tax under section 206AA/206CC of the Act.

CBDT has now provided that in cases where higher rate of TDS/TCS was attracted under section 206AA/206CC of the Act pertaining to the transactions entered into up to 31st March, 2024 and in case of demise of the deductee / collectee on or before 31st May, 2024 i.e. before the linkage of PAN and Aadhaar could have been done, there shall be no liability on the deductor/collector to deduct /collect the tax under section 206AA/206CC, as the case may be. The deduction / collection as mandated in other provisions of Chapter XVII-B or Chapter XVII-BB of the Act, shall, however, be applicable.

II. COMPANIES ACT, 2013

1. MCA extends the time for filing of Web-Form PAS-7 without additional fees up to 5th August, 2024: As per the Companies (Prospectus and Allotment of Securities) Rules, 2014, every public company which had issued share warrants before commencement of Companies Act 2013 and not converted into shares is required to inform the ROC about details of share warrants in Form PAS-7. Web-Form PAS-7 is now deployed on MCA 21 Portal on V3. The said form can be filed without payment of additional fees up to 5th August, 2024 [General Circular No. 5/2024, dated 6th July, 2024]

2. MCA revises MSME Form-1 with enhanced disclosures for reporting payments pending over 45 days to micro / small enterprises: MCA has notified Specified Companies (Furnishing information about payment to micro and small enterprise suppliers) Amendment Order, 2024. Now, only those specified companies with payments pending to any micro or small enterprises for more than 45 days from the date of acceptance / date of deemed acceptance of goods or services must furnish information in MSME Form-1. [Notification No. S.O. 2751(E), dated 15th July, 2024]

3. MCA allows directors to update mobile numbers and email IDs anytime during the Financial Year on payment of a fee: The MCA has notified an amendment to Rule relating to Directors’ KYC. Now if an individual intends to update his personal mobile number or email address again at any time during the financial year in addition to the other updations allowed, he shall update the same by submitting an e-form DIR-3KYC on the payment of fees of ₹500. [Notification No 8/4/2018-CL-I, dated 16th July ,2024]

4. MCA notifies e-Form MGT-6 for MCA V3 Portal: The MCA has notified amendment in Companies (Management and Administration) Rules, 2014. Now, the Form MGT-6 has been substituted with the new format for MCA V3 Portal. New feature of PAN validation of shareholders and beneficial owners has been introduced. [Notification No. G.S.R. 403, dated 15th July, 2024]

5. MCA notifies e-Form BEN-2 for MCA V3 Portal: MCA has notified an amendment to the Companies (Significant Beneficial Owners) Rules, 2018. Form BEN-2 has been substituted with the new format for the MCA V3 Portal. The new format allows users to fill out a form to change an existing Significant Beneficial Ownership or update the particulars of existing Significant Beneficial Ownership under Section 90 of the Companies Act. [Notification G.S.R. No. 404, dated 15th July, 2024]

6. Companies must now remit amounts to the IEPF Authority online within 30 days of the due date: The MCA has notified the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2024. As per the amended norms, companies must remit any amount required to be credited to the Investor Education and Protection Fund (IEPF) online to the Authority within 30 days from the date it becomes due. [Notification G.S.R. No. 414(E), dated 16th July, 2024]

7. MCA merges Form IEPF-3 with IEPF-4 and Form IEPF-7 with IEPF-1: The MCA has merged Form IEPF-3 with Form IEPF-4 and Form IEPF-7 with IEPF-1 in MCA Version 3. The revised forms will be made STP (straight-through process). Further, various amounts that need to be transferred to the IEPF Authority as due on shares transferred by companies can now be paid online [General Circular No. 07/2024, dated 17th July, 2024]

8. MCA waives of additional fees on filing of IEPF e-forms due to migration to MCA V3 portal: In view of the transition of forms from MCA 21 V2 to MCA 21 V3, the MCA has waived additional fees on the filing of various IEPF e-forms (IEPF -1, IEPF-1A, IEPF-2, IEPF-4) and e-verification of claims filed in e-form IEPF-5 till 16th August, 2024. Similarly, a one-time relaxation for filing e-verification has also been provided till the said date. [General Circular No. 06/2024, dated 16th July, 2024]

III. SEBI

1. SEBI raises ‘Basic Services Demat Account’ limit from ₹2 lakh to ₹10 lakh: Earlier, SEBI provided a “Basic Services Demat Account” (BSDA) facility for eligible individuals. Individuals can opt for BSDA subject to a condition that the value of securities held in demat account shall not exceed ₹2 lakh. SEBI has now raised this limit to ₹10 lakh. BSDA is a special category of demat account that can be opened/held only by individual investors subject to certain conditions. [Circular No. SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/91, dated 28th June, 2024]

2. SEBI amends Stock Brokers Regulations: SEBI has notified an amendment to SEBI (Stock Brokers) Regulations, 1992. Accordingly, KMP and senior management of stock broker must put in place adequate systems for surveillance of trading activities & internal control systems to ensure compliance with all the regulatory norms for the detection, prevention & reporting of potential fraud or market abuse. [Notification No. SEBI/LA D-NRO/GN/2024/186, dated 27th June, 2024]

3. SEBI mandates email as default mode for dispatching CAS and holding statements by Depositories, MF-RTAs, and DPs: Considering the increasing reach of digital technology and to streamline the regulatory guidelines on mode of dispatch of account statements, SEBI has now decided that email shall be default mode of dispatch for Consolidated Account Statement (CAS) by Depositories, Mutual Fund – Registrar and Transfer Agents (MF-RTAs) and holding statement by Depositories Participant (DP). [Circular No. SEBI/HO/MRD-POD2/CIR/P/2024/93, dated 1st July, 2024]

4. SEBI reduces face value for private placement of debt securities / non-convertible preference shares to ₹10,000: SEBI has reduced the face value for issuing debt security or non-convertible redeemable preference shares on a private placement basis from ₹1 lakh to ₹10,000, subject to certain conditions. [Circular No. SEBI/HO/DDHS/DDHS-POD-1/P/CIR/2024/94, dated 3rd July, 2024]

5. L isted entities to publish a window advertisement in newspapers referring QR code & website link for Financial Results: SEBI has notified the SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2024. Now listed entities are required to publish only a window advertisement in the newspapers that refers to a Quick Response Code and the link to listed entity’s website and stock exchanges, where such results are available and capable of being accessed by investors subject to certain conditions. [Notification No. F. NO. SEBI/LA D-NRO/GN/2024/189; dated 8th July, 2024]

6. SEBI amends REITs and InvITs Regulations; SEBI has notified SEBI (InvITs) (Second Amendment) Regulations and SEBI (REITs) (Second Amendment) Regulation, 2024. A framework for ‘unit-based employee benefit scheme’ has been inserted. As per the new framework, the unit-based employee benefit scheme must be in the nature of the employee unit option scheme. Also, SEBI has inserted a definition of “employee unit option scheme’ which refers to a scheme under which a manager grants unit options to its employees via employee benefit trust. [Notification No. SEBI/LA D-NRO/GN/2024/192 & 193, dated 9th July, 2024]

7. Insider trading restrictions for Mutual Fund units to be enforced from 1st November, 2024: SEBI has notified 1st November, 2024, as the effective date for the enforcement of norms relating to restrictions on communication about and trading by insiders in the units of mutual funds. Now an insider cannot trade in the units of a mutual fund scheme when in possession of UPSI, which may have a material impact on the net asset value of a scheme or on the interest of the unit holders of the scheme. [Notification No. SEBI/LA D-NRO/ GN/2024/195, dated 25th July, 2024]

IV. FEMA

1. RBI issues master direction on Overseas Investment

RBI had issued a new Overseas Investment Regime in August 2022 with Overseas Investment Rules and Overseas Investment Regulations. Further, RBI had also issued the Overseas Investment Directions as operational directions for AD Banks. RBI has now issued the Master Direction on Overseas Investment (OI). This Master Direction compiles the August 2022 Directions and the amendment in these directions made in June 2024. Like the earlier Directions, these are addressed to the AD Banks as instructions to be followed with a view to implement the aforesaid OI Rules and OI Regulations. It should be noted that unlike other Master Directions, this Master Direction only compiles the OI Directions and amendments thereto. It does not cover the OI Rules and OI Regulations and thus does not act as a stand-alone comprehensive document. Those referring to this Master Direction should refer to the OI Rules and OI Regulations too for a complete understanding of all the applicable provisions.

[FED Master Direction No. 15/2024-25 issued on 24th July, 2024]

2. RBI restricts FPIs from investing in new 14-year and 30-year G-Secs under Fully Accessible Route

Earlier, RBI vide circular dated 30th March, 2020, introduced the ‘Fully Accessible Route’ (FAR), where certain specified categories of Central Government securities (G-Secs) were opened fully for non-resident investors without any restrictions, apart from being available to domestic investors. RBI has now excluded the government securities of 14-year and 30-year tenors from the FAR for investment by foreign portfolio investors (FPIs). Existing stocks of these Government Securities shall continue to be available under the FAR for investments by non-residents in the secondary market. Further, investments by FPIs in new Government Securities of these tenors will be as per investment limits prescribed under Directions to Schedule 1 to the Foreign Exchange Management (Debt Instruments) Regulations, 2019 as also the ‘Voluntary Retention Route’ (VRR) for FPIs.

[Circular No. RBI/2024-25/56 FMRD. FMID. MO. 03/14.01.006/2024-25 dated 29th July, 2024]

3. RBI allows non-residents to trade Sovereign Green Bonds in IFSC

RBI has notified an amendment to Schedule 1 of FEM (Debt Instruments) Regulations, 2019. Now, persons resident outside India can purchase / sell Sovereign Green Bonds issued by the Government of India by maintaining a securities account with a depository in IFSC in India. The amount of purchase consideration must be paid out of inward remittance from abroad via banking channels or out of funds held in a foreign currency account maintained in accordance with the regulations issued by the RBI and / or the IFSCA.

[Foreign Exchange Management (Debt Instruments) (Third Amendment) Regulations, 2024, Notification No. FEMA.396(3)/2024-RB]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX: SPOTLIGHT

1. Forms 3CN, 3CS, 3CEC, 3CEFB, 59 and 59A shall be furnished electronically – Notification No. 01/2024-25 dated 24th June, 2024

II. COMPANIES ACT, 2013

No News to report

III. SEBI

1. “Saarthi 2.0” app with tools, calculators, and modules, offering financial insights to investors launched: SEBI has launched “Saarthi 2.0” mobile app, enhancing its user-friendly interface and providing comprehensive financial tools. The app includes financial calculators, modules on KYC procedures, mutual funds, ETFs, and the stock exchange, as well as investor grievance mechanisms and the Online Dispute Resolution platform. It aims to empower investors, especially young ones, with unbiased and essential insights into the securities market, adapting to evolving market conditions. [Press Release No. N.10/2024, dated 3rd June, 2024]

2. Master Circular for ‘Bankers to an Issue registered with SEBI: SEBI has issued an updated master circular for ‘Bankers to an Issue registered with SEBI’. This circular compiles all existing circulars issued till date. This is done in order to enable the stakeholders to have an access to all the applicable circulars/directions at one place. [Circular No. SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/72, dated 30th May, 2024]

3. FPI norms amended: SEBI has notified SEBI (Foreign Portfolio Investors) (Amendment) Regulations, 2024. It states that a foreign portfolio investor (FPI) must pay the registration fees as provided in Part A of Second Schedule for every block of 3 years before the beginning of such a block. However, registration fees shall be considered paid if FPI pays fee along with late fee within 30 days from expiry of preceding block. [Notification No. SEBI/LAD-NRO/GN/2024/183, DATED 31st May, 2024]

4. FPI Master Circular modification: SEBI has modified the Foreign Portfolio Investors (FPI) Master Circular. The amended norms provide flexibility to foreign portfolio investors (FPIs) in dealing with their securities after their registration expires. Similar changes have been carried out in the Foreign Portfolio Investors (FPI) Master Circular. [Circular No. SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/76 AND 77, dated 5th June, 2024]

5. SEBI mandates direct pay-out of securities by clearing corporation to demat accounts of clients: At present, securities received in payout are pooled by the broker before being credited to the respective client demat accounts. However, the direct payout to client accounts was already made available on a voluntary basis as per the circular dated 1st February, 2001. It has now been decided that the process of direct securities payout to client accounts will become mandatory. The provisions of this circular will come into effect on 14th October, 2024. [Circular No. SEBI/HO/MIRSD/MIRSD-POD1/P/CIR/2024/75, dated 5th June, 2024]

6. SEBI notifies framework of ‘Financial Disincentives for Surveillance Related Lapses’: The SEBI has notified a framework for Surveillance Related Lapses at Market Infrastructure Institutions (MIIs). This shall be applicable to lapses emanating from non-adherence to the requisite surveillance activities / decisions. [Circular No. SEBI/HO/ISD/ISD-POD-1/P/CIR/2024/73, dated 6th June, 2024]

7. Guidelines on ‘Anti-Money Laundering Standards and Combating Financing of Terrorism’ for intermediaries: SEBI has issued guidelines on ‘Anti-Money Laundering Standards and Combating Financing of Terrorism’ for intermediaries. The guidelines set out the essential principles for combating Money Laundering (ML) and Terrorist Financing (TF) and provide detailed procedures and obligations for all registered intermediaries to follow and comply with. Also, intermediaries may require clients to specify additional disclosures to address concerns about ML and suspicious transactions undertaken by clients. [Master Circular No. SEBI/HO/MIRSD/MIRSDSECFATF/P/CIR/2024/78, dated 6th June, 2024]

8. ‘Master Circular on KYC norms’ for KRAs Integration with Central KYC Records Registry: SEBI has notified amendment in ‘Master Circular on KYC Norms’ with respect to Uploading of KYC information by KYC Registration Agencies (KRAs) to Central KYC Records Registry (CKYCRR). Now, KRAs shall ensure that existing KYC records of legal entities and of individual clients are uploaded on to CKYCRR within a period of 6 months from 1st August, 2024 ill 1st February 2025. Also, KRAs shall integrate with CKYCRR and start uploading KYC records by 1st August, 2024. [Circular No. SEBI/HO/MIRSD/SECFATF/P/CIR/2024/79, dated 6th June, 2024]

9. Updated Master Circular on ‘Portfolio Managers’: SEBI has issued an updated master circular on ‘Portfolio Managers’. This will facilitate access to all the applicable requirements at one place, all the circulars issued till 31st March, 2024. [Circular No SEBI/HO/IMD/IMD-POD-1/P/CIR/2024/80, dated 7th June, 2024]

10. Demat and Mutual Fund accounts won’t be frozen over non-submission of nomination: Earlier, SEBI extended the deadline for submitting the ‘choice of nomination’ for Demat accounts and mutual fund folios to 30th June, 2024. Now, SEBI has clarified that non-submission will not result in freezing these accounts. Further, security holders with physical securities will receive payments and services even without submitting the nomination. Also, existing investors are encouraged to submit nominations to ensure smooth transmission of securities and prevent unclaimed assets. [Circular No. SEBI/HO/MIRSD/POD-1/P/CIR/2024/81, dated 10thJune, 2024]

11. Introduction of a ‘special call auction mechanism’ for price discovery of scrips of listed investment companies: SEBI has introduced a ‘special call auction mechanism for effective price discovery of scrips of listed investment companies (ICs) and investment holding companies (IHCs). SEBI directs that ICs or IHCs must be identified based on uniform industry classifications provided by stock exchanges. Further, scrips of ICs or IHCs must have been listed and available for trading for a period of at least 1 year. The first special call auction must be conducted by stock exchanges in the month of October 2024. [Circular No. SEBI/HO/MRD/MRD-POD-3/P/CIR/2024/86; dated 20th June, 2024]

12. Updated ‘Master Circular for Electronic Gold Receipts (EGRs)’: Now, in order to enable the stakeholders to have access to all the provisions mentioned in the earlier issued circulars at one place, SEBI has issued an updated master circular incorporating all subsequent circulars issued on EGRs till 31st May, 2024. [Master Circular No. SEBI/HO/MRD/MRD-POD-1/P/CIR/2024/87, dated 24th June, 2024]

13. Updated ‘Master Circular for Mutual Funds’: SEBI has been issuing various circulars from time to time to effectively regulate the Mutual Fund Industry. Now, in order to enable the stakeholders to have an access to all the regulatory requirements at one place, SEBI has issued an updated master circular incorporating all subsequent circulars issued till date. The master circular supersedes the master circular for mutual funds dated 19th May, 2023. [Master Circular No. SEBI/HO/IMD/IMD-POD-1/P/CIR/2024/90, dated 27th June, 2024]

IV. FEMA

I. Draft Import and Export Regulations issued for public response:

The Notifications dealing with Import and Export are in force since RBI has decided to rationalise regulations that cover export and import transactions. The proposed regulations are intended to promote ease of doing business, especially for small exporters and importers. They are also intended to empower Authorised Dealer banks to provide quicker and more efficient service to their foreign exchange customers. The draft regulations under FEMA and draft directions meant for Authorised Dealer banks are available online on RBI’s website for public response. Comments / feedback on the draft proposals (regulations as well as directions) may be forwarded by 1st September, 2024. Readers are welcome to share their feedback with BCAS which will compile and share response to RBI.

[Press Release: 2024-2025/615 dated 2nd July, 2024]

II. Limits applicable on remittances allowed with online filing of Form A2 now removed:

RBI has allowed online filing of Form A2 for remittances for transactions with an upper limit of USD 25,000 for individuals and USD 100,000 for corporates. RBI has now decided to allow remittance through online filing of Form A2 without any limit.

[A.P. (DIR SERIES 2024-25) CIRCULAR NO. 12, DATED 3rd July, 2024]

III. Form A2 applicable for all cross-border remittances:

For any current account transaction up to USD 25,000 Authorised Dealers are permitted to release foreign exchange on the basis of a simple letter containing basic information. No other documents were required including Form A2. However, RBI has now decided that Authorised Dealers shall obtain Form A2 in physical or digital form for all cross-border remittances irrespective of the value of transaction.

[A.P. (DIR SERIES 2024-25) CIRCULAR NO. 13, DATED 3rd July, 2024]

IV. IFSCA designates 4 additional currencies as ‘specified foreign currencies’:

IFSCA has notified IFSCA (Banking) (Amendment) Regulations, 2024. An amendment has been made to the First Schedule relating to ‘specified foreign currencies’. The IFSCA has designated four additional currencies as ‘specified foreign currencies’ under First Schedule. These currencies include Swedish Krone (SEK), New Zealand Dollar (NZD), Danish Krone (DKK) and Norwegian Krone (NOK).

[Notification IFSCA/GN/2024/004 dated 4th July, 2024]

V. RBI expands the scope of Foreign Currency Account held by Residents in IFSC:

At present, remittances under LRS to IFSCs can be made by Residents only for:

a. Making investments in IFSCs in securities except those issued by entities/ companies resident in India (outside IFSC); and

b. Payment of fees for education to foreign universities or foreign institutions in IFSCs for pursuing gazetted courses.

For these permissible purposes, resident individuals can open Foreign Currency Account (FCA) in IFSCs.

On a review, RBI has decided that Authorised Persons may facilitate remittances for all permissible purposes under LRS to IFSCs for:

a. Availing financial services or financial products as per the International Financial Services Centres Authority Act, 2019 within IFSCs; and

b. All current or capital account transactions, in any other foreign jurisdiction (other than IFSCs) through an FCA held in IFSCs.

This brings FCA in IFSC at part with FCA in any other foreign jurisdiction for remittances of all current and capital account transactions covered under the LRS.

[A.P. (DIR SERIES 2024-25) CIRCULAR NO. 15, DATED 10th July, 2024]

VI. Extension in deadline for filing of FLA returns to 31st July 2024:

The deadline for filing the Annual Foreign Liabilities and Assets (FLA) Return for Financial year (FY) 2023-24 was 15th July, 2024. However, there were technical glitches on RBI’s Foreign Liabilities and Assets Information Reporting (FLAIR) portal where the return is to be uploaded. Therefore, RBI has extended the due date to 31st July, 2024.

[Announcement on RBI’s FLAIR System]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX: SPOTLIGHT – JUNE 2024 ISSUE

1. CBDT notified 363 as Cost Inflation Index for FY 2024–25 – Notification No. 44/2024, dated 24^th May, 2024

2. RBI is excluded from the definition of “specified person” for the purposes of Section 206AB and Section 206CCA – Notifications No. 45/2024 and 46/2024, dated 27^th May, 2024

II. COMPANIES ACT, 2013

1. MCA relaxes additional fees on filing of certain LLP Forms up to 1^st July, 2024: In view of the transition of MCA-21 from version 2 to version 3 and to promote compliance on the part of reporting LLPs, MCA has granted relaxation in filing of LLP forms. Accordingly, LLPs may now file Form LLP BEN-2 and LLP Form No. 4D, without payment of any further additional fees up to 1^st July, 2024. Form LLP BEN-2 is filed with the ROC regarding declaration u/s 90 of Companies Act, 2013. LLP Form No. 4D is filed with the ROC regarding declaration of beneficial interest in contributions received by LLP. [General Circular No. 03/2024, dated 7^th May, 2024]

III. SEBI

1. Nomination for Mutual Funds shall be optional for jointly held Mutual Fund folios: Earlier, SEBI vide Master Circular for Mutual Funds dated 19^th May, 2023 prescribed the requirement for nomination / opting out of nomination for all existing individual unit holders holding Mutual Fund units either solely or jointly by 30^th June, 2024. SEBI has now modified this requirement in a Master Circular regarding nomination for Mutual Fund unit holders. SEBI has clarified that the requirement of nomination for Mutual Funds shall be optional for jointly held Mutual Fund folios. [Circular No. SEBI/HO/IMD/IMD-POD-1/P/CIR/2024/29, Dated 30^th April, 2024]

2. Appointment of a dedicated fund manager for commodity-based funds shall be optional: SEBI has modified Clause 3.3.11 of the Master Circular for Mutual Funds dated 19^th May, 2023 regarding the appointment of a dedicated fund manager. SEBI has clarified that appointment of a dedicated fund manager shall be optional for commodity-based funds such as Gold ETFs, Silver ETFs and other funds participating in the commodities market. However, the person appointed as a fund manager for such funds must have adequate experience in managing investments in the commodities market. [Circular No. SEBI/HO/IMD/IMD-POD-2/P/CIR/2024/30; Dated 30^th April, 2024]

3. SEBI releases framework for administration and supervision of Research Analysts and Investment Advisers: Earlier, SEBI notified that a recognised stock exchange may undertake activities of administration and supervision over specified intermediaries. Accordingly, stock exchanges can be recognised as Research Analyst Administration & Supervisory Body (RAASB) and Investment Adviser Administration & Supervisory Body (IAASB) for administration & supervision of RAs and IAs. SEBI has now released a framework for the administration & supervision of Research Analysts and Investment Advisers. [Circular No. SEBI/HO/MIRSD/MIRSD-SEC-3/P/CIR/2024/34, dated 2^nd May, 2024]

4. SEBI mandates person or entity involved in distribution of portfolio management services to get registered with APMI: In order to facilitate collective oversight of PMS distributors at the industry level, SEBI has decided that any person or entity involved in the distribution of portfolio management services must obtain registration with APMI. This move is aimed at promoting ease of doing business initiatives for portfolio managers. Further, portfolio managers must ensure that registration is obtained in accordance with the criteria laid down by APMI. The circular shall be effective from 1^st January, 2025. [Circular No. SEBI/HO/IMD/IMD-POD-1/P/CIR/2024/32, dated 2^nd May, 2024]

5. Portfolio Manager now requires new client’s separate signature on fee annexure with handwritten confirmation: SEBI has notified amendments to facilitate ease in the digital onboarding process for clients and enhance transparency for Portfolio Managers. Now, while onboarding a client, Portfolio Managers must ensure that the client has understood the fee and charge structure. Further, for physical & digital onboarding, a new client must provide a separate signature on the fee annexure, with acknowledgement either by handwritten note or by electronically typing or using a finger or stylus pen. [Circular No. SEBI/HO/IMD/IMD-POD-1/P/CIR/2024/35, dated 2^nd May, 2024]

6. SEBI issues updated master circular on “Alternative Investment Funds”: SEBI has issued an updated master circular on “Alternative Investment Funds” (AIFs). The master circular consolidates all existing circulars issued by SEBI till date. [Circular No. SEBI/HO/AFD-1/AFD-1-POD/P/CIR/2024/39, dated 7^th May, 2024].

7. SEBI prescribes timeline for payment of annual charge by Depositories: SEBI has notified amendment in Regulation 9, i.e., Payment of annual charge of SEBI (Depositories and Participants) Regulations, 2018. Now, a depository shall make payment of annual charge within 15 days from the end of each month a percentage of the annual custody charges received by it from the issuers during the month. Earlier, no such timeline was prescribed. [Notification No. SEBI/LAD-NRO/GN/2024/173, dated 10^th May, 2024]

8. At least one KMP among associated persons functioning as AIF manager must obtain certification from NISM: SEBI has notified an amendment to Regulation 3 of the SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 2007. It states that at least one key managerial personnel (KMP), amongst the associated persons functioning in the key investment team of the Manager of an AIF, must obtain certification from the National Institute of Securities Market (NISM) by passing the NISM Series-XIX-C: Alternative Investment Fund Managers Certification Examination issued by NISM. [Notification No. SEBI/LAD-NRO/GN/2024/176, dated 10^th May, 2024]

9. SEBI issues updated master circular on “REITs and InvITs”: SEBI has issued an updated master circular on “Real Estate Investment Trusts” (REITs) and “Infrastructure Investment Trusts” (InvITs). This is done to enable stakeholders to have access to all applicable circulars at one place. This master circular consolidates all existing circulars issued till 15th May, 2024. [Circular No. SEBI/HO/DDHS-POD-2/P/CIR/2024/43 & 44, dated 15th May, 2024]

10. SEBI issues updated master circular consolidating all existing circulars on “Debenture Trustees”: SEBI has issued an updated master circular on “Debenture Trustees” (DTs). This circular is a compilation of all the existing circulars issued till date. This is done to enable the Debenture Trustees and other market stakeholders to access all the applicable circulars at one place. Further, Debenture Trustees are directed to comply with the conditions laid down in this circular. Also, BODs of Debenture Trustee must be responsible for ensuring compliance with these provisions. [Circular No. SEBI/HO/DDHS-POD3/P/CIR/2023/46, dated 16^th May, 2024]

11. SEBI issues updated master circular on “Credit Rating Agencies”: SEBI has issued an updated master circular on “Credit Rating Agencies” (CRAs). This circular is a compilation of all the existing circulars issued till date. This is done to enable the industry and other users to access all the applicable circulars / directions at one place. The circular covers norms such as registration requirements, rating operations, reporting and disclosures, internal audits for CRAs and miscellaneous guidelines. [Circular No. SEBI/HO/DDHS-POD3/P/CIR/2023/47, dated 16^th May, 2024]

12. Unverified media reports to be excluded from purview of “generally available information” under Insider norms: SEBI has notified the SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2024. An amendment has been made to Regulation 2(1)(e). The definition of “generally available information” has been broadened. The term “generally available information” means information that is accessible to the public on a non-discriminatory basis and shall not include unverified events or information reported in print or electronic media. The amended norms are effective from 17^th May, 2024. [Notification No. SEBI/LAD-NRO/GN/2024/181, dated 17^th May, 2024]

13 SEBI allows non-individual public shareholders holding 5 per cent of post-issue capital to meet minimum promoters’ contribution: SEBI has notified the SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2024. Regulation 14 relating to minimum promoters’ contribution has been amended. It states that if promoters’ post-issue shareholding is less than 20 per cent, any non-individual public shareholder holding at least 5 per cent of the post-issue capital or any entity forming part of promoter group (other than promoters) may also contribute to meet the shortfall in minimum promoters’ contribution. [Notification No. SEBI/LAD-NRO/GN/2024/178, dated 17^th May, 2024]

14. Company’s share price impact due to material price movement excluded from volume-weighted average price under buyback norms: SEBI has notified the SEBI (Buy-Back of Securities) (Amendment) Regulations, 2024. Regulation 19 has been amended. As per the amended norms, the effect on the price of the company’s equity shares due to material price movements and confirmation of reported events or information may be excluded when determining the volume-weighted average market price. The amended norms are effective from 17^th May, 2024. [Notification No. SEBI/LAD-NRO/GN/2024/180, dated 17^th May, 2024]

15. SEBI notifies Industry Standards on verification of market rumours: The Industry Standards Forum (ISF) comprising representatives from three industry associations, viz., ASSOCHAM, CII and FICCI, has formulated industry standards, in consultation with SEBI. The purpose is to effectively implement the requirement to verify market rumours under Regulation 30(11) of SEBI (LODR) Regulations, 2015. The industry associations which are part of ISF (ASSOCHAM, FICCI, and CII) and the stock exchanges shall publish the industry standards note on their websites. [Circular No. SEBI/HO/CFD/CFD-POD-2/P/CIR/2024/52, dated 21^st May, 2024]

16. SEBI issues updated Master Circular for Research Analysts: SEBI, from time to time, has been issuing various circulars / directions to Research Analysts (RAs). In order to enable users to have access to the applicable circulars at one place, this master circular consolidating all the existing circulars on Research Analyst has been issued. The provisions of circulars issued until 15^th May, 2024 have been incorporated in this master circular. [Circular No. SEBI/HO/MIRSD/MIRSD-POD-1/P/CIR/2024/49, dated 21^st May, 2024]

17. SEBI issues updated Master Circular for Stock Brokers: SEBI, from time to time, has been issuing various circulars / directions to Stock Brokers (SBs). In order to enable users to have access to the provisions of applicable circulars at one place, SEBI has issued master circular dated 17^th May, 2023 in respect of Stock Brokers, which is superseded by the instant master circular. [Master Circular No. SEBI/HO/MIRSD/MIRSD-POD-1/P/CIR/2024/53, dated 22^nd May, 2024]

IV. FEMA

I. Regularisation permitted through compounding for partly paid units issued by AIFs before amendment allowing such issuance:

Investment funds were not permitted to issue partly paid units to non-residents. In March 2024, the FEM (Non-Debt Instruments) (Second Amendment) Rules, 2024 were notified permitting investment funds to issue partly paid units to non-residents. Under FEMA, a contravention needs to be first regularised before it can be compounded. In order to simplify the regularisation of cases where partly paid units had been issued by AIFs when it was not permitted, regularisation has been permitted through compounding. In essence, where AIFs had issued partly paid units to non-residents at the time it was not permitted, there is no separate regularisation required; the Fund can directly apply for compounding. The AD Banks have been directed to ensure that necessary administrative action, including the reporting of such issuances by Alternative Investment Funds to the Reserve Bank, through Foreign Investment Reporting and Management System (FIRMS) Portal and issuing of conditional acknowledgements for such reporting, is completed.

[A.P. (DIR Series 2024-25) Circular No. 7, dated 21^st May, 2024]

II. Launch of PRAVAAH portal:

The RBI launched PRAVAAH portal. PRAVAAH is a secure and centralised web-based portal for any individual or entity to seek authorisation, license or regulatory approval. At present, 60 application forms covering different regulatory and supervisory departments of RBI have been made available on the portal. Even compounding applications can be submitted on the portal though no changes are yet made in the Compounding Proceedings Rules. This also includes a general purpose form for applicants to submit their requests which are not included in any other application form. The application can be submitted online; it can be tracked and monitored; response to RBI’s queries can be provided online and the decision of RBI can be received on the portal.

[RBI Press Release: 2024-2025/393 dated 28^th May, 2024]

III. IFSCA notifies regulations for Book-Keeping, Accounting, Taxation and Financial Crime Compliance Services:

The IFSCA has notified a comprehensive framework for providers of Book-keeping, Accounting, Taxation and Financial Crime Compliance Services. Detailed guidelines have been prescribed for registration application, requirements for “Fit & Proper” criteria and Key Management Personnel, and other conditions.

[Notification No. IFSCA/GN/2024/003, Dated 4^th June, 2024]

IV. RBI expands the scope of Overseas Portfolio Investment (OPI):

Two-fold expansion has been made pertaining to Overseas Portfolio Investment (OPI) by residents. Residents could make OPI in units issued by an overseas Investment fund provided it (the Fund) was duly regulated by the regulator for the financial sector in the host jurisdiction. This created practical issues due to diverse regulatory frameworks governing investment funds across various jurisdictions. The main hurdle was that many countries regulate the Investment Manager and not the Investment Fund. Para 1(ix)(e) of FEM (Overseas Investment) Directions, 2022 required that the Investment Fund should be regulated. An explanation has been inserted to this provision whereby “investment fund overseas, duly regulated” would also include funds whose activities are regulated by financial sector regulator of host country or jurisdiction through a fund manager.

Secondly, such OPI was allowed only in “units” of investment fund. This has now been expanded to permit any other instrument issued by investment funds; not only “units”.

[A.P. (DIR Series 2024-25) Circular No. 7, dated 7^th June, 2024]

V. Facility to AD Banks for opening additional current account for settlement of export transactions now extended for settlement of import transactions as well:

AD Category-I banks who maintain Special Rupee Vostro Account vide A.P. (DIR Series) Circular No. 10, dated 11^th July, 2022 on International Trade Settlement in Indian Rupees (INR) were earlier permitted to open an additional special current account for its constituents, exclusively for settlement of export transactions. Now, this facility has been extended for import transactions as well.

[RBI FED Circular No. 11, Dated 11^th June, 2024]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX: SPOTLIGHT

1. Extension of due date for filing of Form No. 10A/I0AB under the Income-tax Act — Circular No. 7/2024 dated
25th April, 2024

The due date for filing Form 10 and 10AB was extended in terms of circulars issued from time to time. The date is now further extended up to 30th June 2024 in cases listed in the circular.

2. CBDT vide Notification No. S.O. 2103(E) dated 24th May, 2024 declared the Cost Inflation Index of the Financial Year 2024–2025 as “363”.

II. SEBI

1. SEBI launches ‘SCORES 2.0’, a new version of the SEBI Complaint Redressal System: SEBI with an objective to make the redressal process more efficient, has introduced SCORES 2.0, a new version of SEBI Complaint Redress System. It is expected that this measure would lead to auto-routing and auto-escalation, monitoring by ‘Designated Bodies’ and reduction of timelines. Investors can lodge complaints only through the new version from 1st April, 2024. In the old SCORES, investors would not be able to lodge new complaints. However, they can check the status of their complaints already lodged and pending in old SCORES. [Press release No. 06/2024, dated 1st April, 2024]

2. SEBI allows reporting entities to use e-KYC Aadhaar Authentication services of UIDAI in the Securities Market as ‘sub-KUA’: Earlier, MoF vide notification dated 20th February, 2024 allowed 24 reporting entities to perform Aadhaar authentication services under the Aadhaar Act, 2016. These entities are now allowed to perform authentication services of UIDAI in the securities market as sub-KUA. The KUAs shall facilitate the onboarding of these entities as sub-KUAs to provide the services of Aadhaar authentication with respect to KYC. [Circular No. SEBI/HO/MIRSD/SECFATF/P/CIR/2024/21, dated 5th April, 2024]

3. SEBI introduces a standard reporting format of ‘Private Placement Memorandum audit report’ for AIFs: SEBI has introduced a standard reporting format for Alternative Investment Funds (AIF) in the Private Placement Memorandum (PPM) audit report. This is to ensure uniform compliance standards and facilitate ease of compliance. The reporting format has been prepared in consultation with the pilot Standard Setting Forum for AIFs (SFA). It shall be hosted on the websites of the AIF Associations. [Circular No. SEBI/HO/AFD/SEC-1/P/CIR/2024/22, dated 18th April, 2024]

SEBI relaxes the requirement of publishing ‘fit and proper’ text on contract notes to enhance ease of doing business: SEBI received representations from market participants via the Industry Standards Forum (ISF) to relax the requirement under the Master Circular dated 16th October 2023, of publishing text related to ‘fit and proper’ on contract notes. SEBI has now waived the requirement of publishing ‘fit and proper’ text on contract notes as a step to enhance the ease of doing business. Only a reference to applicable regulations about ‘fit and proper’ must be made part of the contract note. [Circular No. SEBI/HO/MRD/MRD-POD-2/P/CIR/2024/25, dated 24th April, 2024].

4. SEBI amends Alternative Investment Funds Regulations, 2012; introduces a new regulation for ‘dissolution period’: SEBI has notified the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2024. As per the amended norms, a new regulation 29B relating to the dissolution period has been inserted. It states that a scheme of an Alternative Investment Fund may enter into a dissolution period in the manner and subject to the conditions specified by the Board. Further, SEBI has introduced definitions of ‘dissolution period’ and ‘encumbrance’ under Regulation 2 of existing regulations. [Notification No. SEBI/LAD-NRO/GN/2024/168, dated 25th April, 2024]

5. SEBI allows AIFs to create encumbrances on their equity holdings in investee companies engaged in the infrastructure sector: SEBI has allowed Category I and Category II AIFs to create encumbrances on their holdings of equity in investee companies, engaged in the business of development, operation or management of projects in any of the infrastructure sub-sectors listed in the harmonised Master List of Infrastructure issued by the Central Government. This move aims to provide ease of doing business and flexibility to Category I and II AIFs to create encumbrances to facilitate debt raising by such investee companies. [Circular No. SEBI/HO/AFD/POD1/CIR/2024/027, dated 26th April, 2024].

6. SEBI allows recognised stock exchanges to carry out administration and supervision over specified intermediaries: SEBI has notified the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2024. A new regulation 38A has been inserted into the existing regulations. This regulation states that the activities of administration and supervision over specified intermediaries may be carried out by a recognised stock exchange with the approval of the Board on such terms and conditions as may be specified. [Notification No. SEBI/LAD-NRO/GN/2024/171, dated 26th April, 2024]

7. Investment Advisers/Research Analysts applying for registration shall be listed with a recognised body corporate: SEBI has amended the Research Analysts and Investment Advisers Regulations. As per the amended norms, SEBI may recognize a body or body corporate for administration and supervision of research analysts and investment advisers on such terms and conditions as may be specified by SEBI. Further, registration with this body corporate will be required as one of the qualifications for obtaining a registration certificate for Investment Advisers and Research Analysts. [Notification No. SEBI/LAD-NRO/GN/2024/169 & 170, dated 26th April, 2024]

8. SEBI allows one-time flexibility to AIF schemes whose liquidation period expired to deal with unliquidated investments: Earlier, SEBI notified SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2024, to provide flexibility to AIFs and investors to deal with unliquidated investments of their schemes. SEBI has now allowed one-time flexibility to AIF schemes whose liquidation period has expired to deal with unliquidated investments. Thus, AIF schemes, whose liquidation period has expired or shall expire on or before 24th July, 2024 shall be granted a fresh liquidation period till 24th April, 2025. [Circular No. SEBI/HO/AFD/POD-I/P/CIR/2024/026, dated 26th April, 2024]

III. FEMA

1. Corresponding FEMA amendment on liberalisation of FDI in Space sector:

In March 2024, the FDI policy on the Space sector was eased by bringing specified sub-sectors under the Automatic Route, which was earlier under the Government approval route only. The corresponding amendment under FEMA has now been made in Schedule I of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 by prescribing liberalized thresholds in specified sub-sectors or activities. The investee entity shall be subject to sectoral guidelines as issued by the Department of Space from time to time. Specific sectoral categorizations and definitions are provided in the notification.

[FEM (Non-Debt Instruments) (Third Amendment) Rules, 2024.

Notification S.O. 1722(E) [F. NO. 1/5/EM/2019], dated 16th April, 2024]

2. Funds raised on overseas listing by Indian companies permitted to be held abroad in foreign currency:

Recently, Indian companies have been permitted to list their equity shares on International Exchanges. FEMA Notification 10(R) – FEM (Foreign Currency Accounts By A Person Resident In India) Regulations, 2015, has been amended to permit Indian companies to hold funds raised through direct listing of equity shares on International Exchanges in foreign currency accounts with a bank outside India.

[FEM (Foreign Currency Accounts by a Person Resident In India) (Amendment) Regulations, 2024. Notification No. FEMA. 10R(3)/2024-RB, dated 19th April, 2024]

3. RBI raises caution against unauthorised entities providing forex facilities to residents:

RBI has raised caution against unauthorised entities offering foreign exchange (forex) trading facilities to Indian residents with promises of disproportionate/exorbitant returns. Such entities take recourse to engaging local agents who open accounts at different bank branches for collecting money towards margins, investment, charges, etc. These accounts are opened in the name of individuals, proprietary concerns, trading firms, etc., and the transactions in such accounts are not found to be commensurate with the stated purpose for opening the account in several cases. RBI has also observed that these entities are providing options to residents to remit/deposit funds in Rupees for undertaking unauthorised forex transactions using domestic payment systems like online transfers, payment gateways, etc. RBI has brought FEMA provisions and other directions issued by them to the attention of the Authorised Dealer Banks and advised them to be more vigilant and exercise greater caution in this regard. Further, RBI has mandated such AD Cat-I banks to report an account being used to facilitate unauthorised forex trading to the Directorate of Enforcement, Government of India.

[A.P. (DIR Series 2024-25) Circular No. 2, dated 24th April, 2024]

4. Specified non-bank entities permitted by IFSCA to issue derivative instruments in GIFT-IFSC with Indian securities as underlying:

Presently, the Authority permitted IFSC Banking Units, registered with SEBI as FPIs to issue Derivative Instruments. IFSCA has now allowed IFSCA-registered non-bank entities, registered with SEBI as Foreign Portfolio Investors (FPIs), to issue Derivative Instruments with Indian securities as underlying, in GIFT-IFSC.

[Circular: IFSCA/CMD-DMIIT/NBE-DI/2024-25/001 dated 2nd May, 2024]

5. Non-residents are permitted to open interest-bearing accounts for posting and collecting margins in India for permitted derivative contracts:

RBI has notified the FEM (Deposit) (Fourth Amendment) Regulations, 2024. Sub-regulation (6) has been inserted into Regulation 7. As per the amended norms, an authorised dealer in India may allow a person resident outside India to open, hold and maintain an interest-bearing account in Indian Rupees and/or foreign currency for posting and collecting margins in India for permitted derivative contracts entered into by such person as
per FEM (Margin for Derivative Contracts) Regulations, 2020.

[Foreign Exchange Management (Deposit) (Fourth Amendment) Regulations, 2024, Notification No. F. No. FEMA 5(R)/(4)/2024-RB dated 6th May, 2024]

6. NRIs and OCIs permitted to invest in India through IFSC-based FPIs:

At present, Regulation 4(b) of SEBI’s FPI Regulations states that the FPI applicant cannot be a Non-resident Indian (NRI) or Overseas Citizen of India (OCI). Further, Regulation 4(c) restricts investment by NRIs and OCIs in an FPI to a maximum of 50 per cent of the total contribution in the corpus of the applicant along with other applicable conditions. SEBI had issued a Consultation Paper on permitting increased participation of NRIs and OCIs into SEBI-registered FPIs based out of IFSCs in India and regulated by the IFSCA.

Following these discussions, the SEBI Board, in its meeting held on April 30, 2024, has now permitted increased participation by NRIs and OCIs in Indian securities through FPIs based in IFSC under two alternative routes:

a. Under Route 1, NRI/OCI/Resident Individual (RI) investors may contribute up to 100% in the corpus of IFSC-based FPIs where such FPIs will be, inter alia, required to submit copies of PAN (or other suitable documents in the absence of the same), of all their NRI/OCI/RI individual constituents, along with their economic interests in the FPI, to the DDP. The modalities for this alternative shall be specified by SEBI.

b. Under Route 2, NRI/OCI/RI investors may contribute up to 100% in the corpus of IFSC-based FPIs, but without the FPI required to submit the documents mentioned in Route 1. However, there is a list of several conditions to be met in this route pertaining to the independence of the entity taking investment decisions, non-permissibility of segregated portfolios, the minimum number of investors prescribed, the maximum share of the corpus prescribed, etc.

[SEBI Press Release No. 08/2024 dated 30th April 2024; & IFSCA Circular F. No. IFSCA-IF-10PR/2/2024-Capital Markets dated 2nd May, 2024]

7. RBI issues Master Direction on ‘Margining for Non-Centrally Cleared OTC Derivatives’:

The draft Directions prescribing guidelines for the exchange of initial margin for Non-Centrally Cleared OTC Derivatives were issued on June 16, 2022. Based on the feedback received from the market participants, RBI has now issued the Master Direction on ‘Margining for Non-Centrally Cleared OTC Derivatives’. Non-centrally cleared derivatives (NCCDs) mean derivative contracts whose settlement is not guaranteed by a central counterparty. A Central counterparty is an entity that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the performance of open contracts.

[RBI/FMRD/2024-25/117.

FMRD.DIRD.01/14.01.023/2024-25

dated 8th May, 2024]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX: SPOTLIGHT

1. Time limit for verification of return of income after uploading – reg. – Notification No. 2/ 2024 dated 31^st March, 2024.

CBDT has clarified that:

(i) Where the return of income is uploaded and e-verification or ITR-V is submitted within 30 days of uploading, in such cases, the date of uploading the return of income shall be considered as the date of furnishing the return of income.

(ii) Where the return of income is uploaded but e-verification or ITR-V is submitted after 30 days of uploading, in such cases, the date of e-verification / ITR-V submission shall be treated as the date of furnishing the return of income and all consequences of late filing of return under the Act shall follow, as applicable.

(iii) The date on which the duly verified ITR-V is received at CPC shall be considered for the purpose of determination of the 30 days’ period from the date of uploading of return of income.

(iv) Where the return of income is not verified within 30 days from the date of uploading or till the due date for furnishing the return of income as per the Income-tax Act, 1961 — whichever is later — such return shall be treated as invalid due to non-verification.

II. COMPANIES ACT, 2013

NO NEWS TO REPORT

III. SEBI

1. List of Goods for purpose of commodity derivatives u/s 2(bc) of SCRA, 1956: The Government, in consultation with SEBI, has notified the goods specified in the Schedule as commodity derivatives under section 2(bc) of SCRA, 1956. The specified goods are (a) cereals and pulses, (b) oil seeds, oil cakes and oils, (c) spices, (d) fruits & vegetables, (e) metals, (f) precious metals, (g) gems & stones, (h) forestry, (i) fibers, (j) energy, (k) chemicals, (l) sweeteners, (m) plantations, (o) dairy and poultry, (p) dry fruits, (q) activities, services, rights, interest & events, (r) others. [Notification No. S.O. 1002(E), dated 1^st March, 2024]

2. SEBI broadens the list of goods for purpose of commodity derivatives u/s 2(bc) of SCRA, 1956: Earlier, the Government, notified the list of goods specified in the Schedule as commodity derivatives under section 2(bc) of the SCRA, 1956. Now, SEBI has broadened the list of goods for the purpose of commodity derivatives. SEBI has expanded the list of goods from 91 to 104, introducing 13 new goods and alloys for 5 metals. The diverse list includes apples, cashews, garlic, skimmed milk powder, white butter, etc. The circular shall be effective from the date of issuance. [Circular No. SEBI/HO/MRD/MRD-POD-1/P/CIR/2024/13, dated 5^th March, 2024]

3. SEBI amends REITs Regulations, 2014; introduces a new chapter on ‘Small and Medium REITs’: SEBI has notified SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2024. A new chapter VIB, i.e., Small and Medium REITs, has been inserted to existing regulations. The term “Small and Medium REIT” (SM REIT) refers to an REIT that pools money from investors under one or more schemes as per regulation 26P(2). The regulation specifies the eligibility criteria for making an offer of units of scheme for SM REITs. Further, SEBI has broadened the definition of REIT under regulation 2(zm). [Notification No. SEBI/LAD-NRO/GN/2024/166, dated 8^th March, 2024]

4. SEBI expands framework of ‘Qualified Stock Brokers’ to strengthen investors trust in securities market: Earlier, SEBI specified four parameters for designating a stockbroker as a ‘Qualified Stock Broker’ (QSB) on an annual basis. Now, SEBI has expanded framework of QSBs to include more stock brokers. Accordingly, SBI has revised a list of QSBs by adding more parameters. The additional parameters include compliance score of stock broker, grievance redressal score of stockbroker and proprietary trading volumes of stockbroker. Also, procedure for identifying stock broker as QSB has been revised. [Circular No. SEBI/HO/MIRSD/MIRSD-POD-1/P/CIR/2024/14, dated 11^th March, 2024]

5. SEBI revises the date for filing of formats for Mutual Fund scheme offer documents: Earlier, SEBI vide circular dated 1^st November, 2023 redesigned the format for Mutual Fund scheme offer documents. In the revised format, SEBI mandated AMCs to disclose risk-o-meter of the Benchmark on the Front page of an IPO application form, Scheme Information Documents (SID) and Key Information Memorandum (KIM); and in Common application form. The updated format needs to be implemented from 1^st April, 2024. Pursuant to a request submitted by AMFI, SEBI has now revised the date to 1^st June, 2024. [Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2024/000015, dated 12^th March, 2024]

6. SEBI repeals norms regarding ‘procedure dealing with cases involving offer / allotment of securities up to 200 investors’: SEBI has repealed the circulars outlining the procedure for cases where securities are issued before 1^st April, 2024, involving the offer / allotment of securities to more than 49 but up to 200 investors in a financial year. The same shall stand rescinded for six months from the date of issue of the circular. Further, all cases involving an offer or allotment of securities to more than the permissible number of investors must be dealt with in line with provisions contained under extant applicable laws. [Circular No. SEBI/HO/CFD/POD-1/P/CIR/2024/ 016, dated 13^th March, 2024]

7. SEBI allows reporting entities to use e-KYC Aadhaar Authentication services of UIDAI in Securities Market as ‘sub-KUA’: Earlier, SEBI had allowed certain reporting entities to perform Aadhaar authentication services under the Aadhaar Act, 2016. The permission was granted only for Aadhaar authentication as required u/s 11A of the Money Laundering Act, 2002. These entities are now allowed to perform authentication services of UIDAI in the securities market as sub-KUA. The KUAs shall facilitate the on boarding of these entities as sub-KUAs to provide the services of Aadhaar authentication with respect to KYC. [Circular No. SEBI/HO/MIRSD/SECFATF/P/CIR/2024/17, dated 19^th March, 2024]

8. SEBI puts in place safeguards to address concerns of investors transferring securities in a dematerialised mode: SEBI has issued safeguards to address concerns of the investors arising out of the transfer of securities from the Beneficial Owner (BO) account. These aim to strengthen measures to prevent fraud and misappropriation of inoperative demat accounts. It states that depositories must give more emphasis on investor education, particularly with regard to careful preservation of Delivery Instruction Slip (DIS) by the BOs. Further, DPs must not accept pre-signed DIS with blank columns from the BOs. [Circular No. SEBI/HO/MRD/MRD-POD-2/P/CIR/2024/18, dated 20^th March, 2024]

9. FPI with more than 50 per cent of their Indian equity AUM in a corporate group aren’t required to make additional disclosures: Earlier, SEBI vide circular dated 24^th August, 2023 mandated additional disclosures for FPIs that fulfil objective criteria. Further, FPIs satisfying the criteria were exempted from additional disclosure requirements, subject to certain conditions. SEBI has now amended this circular. An FPI with more than 50 per cent of its Indian equity AUM in a corporate group shall not be required to make additional disclosures subject to compliance with certain conditions. The circular shall come into effect immediately. [Circular No. SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/19, dated 20^th March, 2024]

10. SEBI introduces the beta version of T+0 rolling settlement cycle on an optional basis: Earlier, SEBI vide circular dated 7^th September, 2021 allowed for the introduction of a T+1 rolling settlement cycle. SEBI has now introduced the beta version of a T+0 rolling settlement cycle on an optional basis, in addition to the existing T+1 settlement cycle in the equity cash market. All investors are eligible to participate in the segment for the T+0 settlement cycle if they can meet the timelines, process and risk requirements as prescribed by the Market Infrastructure Institutions (MIIs). [Circular No. SEBI/HO/MRD/MRD-POD-3/P/CIR/2024/20, dated 21^st March, 2024]

IV. FEMA

1. IFSCA broadens the definition of “escrow service”: IFSCA has broadened the definition of “escrow service” to mean a service provided by a payment service provider, under an agreement, whereby money is held by such payment service provider in an escrow account with an IFSC Banking Unit (IBU) or an IFSC Banking Company (IBC) for and on behalf of one or more parties that are in the process of completing a transaction. [International Financial Services Centres Authority (Payment Services) (Amendment) Regulations, 2024 Notification No. IFSCA/GN/2024/002, dated 2^nd April, 2024]

2. RBI proposes to allow investment in ‘Sovereign Green Bonds’ by eligible foreign investors in IFSC: At present, FPIs are permitted to invest in Sovereign Green Bonds (SGBs) under the different routes available for investment by FPIs in government securities. With a view to facilitating wider non-resident participation in SGBs, RBI has proposed to permit eligible foreign investors in the IFSC to also invest in such bonds. A scheme for investment and trading in SGBs by eligible foreign investors in IFSC is being notified separately in consultation with the Government and the IFSC Authority. [Press Release No. 2024-25/43, dated 5^th April, 2024]

3. RBI’s clarification on Exchange Traded Currency Derivatives: RBI’s A.P. (DIR Series) Circular No. 13, dated 5^th January, 2024 sets out the Master Direction and reiterates the regulatory framework for participation in ETCDs involving the INR. There were concerns that ETCD contracts entered into without the purpose of hedging a contracted exposure now stand disallowed. RBI has clarified that ETCD contracts are permitted only for the purpose of hedging of exposure to foreign exchange rate risks and an earlier circular exempting documentary evidence for positions taken up to USD 10 million per exchange did not provide any exemption from the requirement of having the exposure. The consolidated Master Direction was to come into effect from 5^th April, 2024 but has been postponed now to 3^rd May, 2024. [RBI Press Release No. 32/2024-25, dated 4^th April, 2024]

Updated up to 15^th April, 2024.

BCAJ Admin

Regulatory Referencer

I. COMPANIES ACT, 2013

1. Adoption of a centralised approach for processing all e-forms filed by companies: MCA has notified that effective 6^th February, 2024, the Central Processing Centre (CPC) shall process and dispose of e-forms filed by the companies. This is aimed at freeing up capacity at the offices of Regional Directors and Registrar of Companies to deal with enforcement matters. Further, it has been clarified that the jurisdictional Registrars shall continue to have jurisdiction over the companies whose e-forms are processed by the CPC in respect of all other provisions of the Companies Act, 2013. [Notification No. S.O. 446(E), dated 2^nd February, 2024]

2. Guidelines on the appointment of Independent Directors and Board evaluation process: The Confederation of Indian Industry (CII) has issued Guidelines on the Appointment of Independent Directors and the Process of Board Evaluation. The Guidelines are divided into two parts with ‘Part A’ focusing on Appointment of Independent Directors & Succession Planning and ‘Part B’ on the Process of Board Evaluation. [Guidelines dated 6^th February, 2024]

3. Revised Secretarial Standards on ‘Meeting of Board of Directors’ and ‘General Meetings’: The ICSI has notified revision in SS-1 i.e., Secretarial Standard on Meeting of Board of Directors, and SS-2 i.e., Secretarial Standards on General Meeting. The revised Secretarial Standards align with recent amendments to the Companies Act, 2013 post publishing of second versions of SS-1 & SS-2. The revised SS- 1 and SS-2 will be effective from 1^st April, 2024

4. Extension of the deadline for filing Form BEN-2 & Form 4D for LLPs without additional fees until 15th May, 2024: MCA vide notifications dated 9^th November, 2023 and 27^th October, 2023 had prescribed E-form LLP BEN-2 and E-form LLP Form no. 4D. In view of the transition of MCA-21 from V2 to V3 and to promote compliance on the part of reporting LLPs, the MCA has decided to allow LLPs to file Form LLP BEN-2 and LLP Form No. 4D, without payment of any additional fees, up to 15^th May, 2024. The two forms shall be made available in version 3 for filing purposes from 15^th April, 2024. [General Circular No. 01/2024, dated 7^th February, 2024]

5. Norms regarding processing of forms by Central Processing Centre: MCA has notified an amendment to the Companies (Registration Offices and Fees) Amendment Rules, 2014. A new rule 10A has been inserted to the existing rules. The rule specifies the list of e-forms, applications and documents on which the Central Processing Centre (CPC) shall exercise jurisdiction. Further, the timeline for processing of application has also been specified. The provisions shall be effective from 16^th February, 2024. [Notification No. G.S.R 107(E), dated 14^th February, 2024]

6. Operationalisation of Central Processing Centre (CPC) for Corporate Filings to Promote Ease of Doing Business: MCA has operationalised the Central Processing Centre (CPC) for centralised processing of corporate filings without requiring any physical interaction with the stakeholders to promote ease of doing business. The Ministry said 12 forms have begun to be processed at CPC from 16^th February, 2024 which will be followed by other forms from 1^st April, 2024 onward. [MCA Press release, dated 16^th February, 2024]

7. Deployment of the ‘Change Request Form’ on MCA-21 for the convenience of users of MCA-21 services: MCA has provided for deployment and usage of the ‘Change Request Form’ (CRF) on MCA-21. Stakeholders are informed that CRF has been made available on the V3 portal for convenience of users of MCA-21 services. This web-based Form is to be used only under exceptional circumstances, for making a request to ROC, for purposes which cannot be catered through any existing form or services or functionality available either at Front Office level (users of MCA-21 services) or Back Office level (RoCs). [General Circular No. 02/2024; dated 19^th February, 2024]

II. SEBI

8. Guidelines for returning of draft offer document and its resubmission: SEBI has observed that at times, draft offer documents filed with the Board for public issue / rights issue are found lacking in compliance with respect to Schedule VI of ICDR Regulations. Such documents require revisions/changes and thus lead to a longer processing time. Now, for consistency in the disclosures & timely processing, SEBI has decided to issue ‘Guidelines for returning of draft offer document and its resubmission’. This Circular shall come into force with immediate effect. [Circular No. SEBI/HO/CFD/POD-1/P/CIR/2024/009, dated 6^th February, 2024]

9. SEBI cautions investors to avoid transactions with unregistered entities: SEBI has issued a caution against unregistered entities falsely claiming registration, showcasing fake certificates, and promising high returns. SEBI urged investors to verify the registration statusand exercise due diligence to avoid potential fraud risks. In this regard, SEBI has also advised investors to (a) verify before investing (b) Beware of promises ofhigh returns (c) Verify enforcement action by SEBI (d)Be well informed. [SEBI Press release No. 2/2024, dated 13^th February, 2024]

10. SEBI directs intermediaries to centralise FATCA and CRS certifications at KYC Registration Agencies: To promote ease of doing business and compliance reporting, SEBI suggests measures for the centralisation of certifications under the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) at KYC Registration Agencies. As per the new norms, SEBI has directed the intermediaries, who are reporting to financial institutions (RFI), to upload the FATCA and CRS certifications obtained from the clients onto the system of KRAs with effect from 1^st July, 2024. [Circular No. SEBI/HO/MIRSD/SECFATF/P/CIR/2024/12, dated 20^th February, 2024]

11. SEBI cautions investors against fraudulent trading schemes claiming to be offered to Indian residents by FPIs: SEBI has cautioned investors against fraudulent trading schemes claiming to be offered to Indian residents by Foreign Portfolio Investors (FPIs). In this regard, SEBI clarified that FPI investment route is unavailable to resident Indians, with limited exceptions. Further, there is no provision for an “Institutional Account” in trading, and direct access to the equities market requires investors to have a trading and demat account with a SEBI-registered broker/trading member and DP respectively. [Press release No. 04/2024, dated 26^th February, 2024]

DIRECT TAX: SPOTLIGHT

1. Ex-post facto extension of due date for filing Form No. 26QE which was required to be filed during the period 1^st July 2022 to 28^th February, 2023 (pertaining to F.Y. 2022-23) – Circular No. 4 of 2024 dated 7^th March, 2024.

As provided in Section 194S, any person who pays to a resident any sum by way of consideration for the transfer of a virtual digital asset is required to deduct tax @ 1 per cent of such sum. Further, he is required to report such deductions in a challan-cum statement electronically in Form No. 26QE within thirty days from the end of the month in which such deduction is made.

Persons who deducted tax under section 194S of the Act during the period from 1^st July, 2022 to 31^st January, 2023, could not file Form No. 26QE and pay corresponding TDS on or before the due date, due to unavailability of Form No. 26QE. Further, the persons who deducted tax under section 194S during the period from 1^st February, 2023 to 28^th February, 2023 had insufficient time to file Form No. 26QE and pay corresponding TDS thereon.

CBDT has ex-Post Facto extended the due date forfiling of Form 26QE to 30^th May, 2023 in those cases where the tax was deducted by a person under section 194S of the Act during the period from 1^st July, 2022 to 28^th February, 2023.

Fee levied under section 234E and / or interest charged under section 201(1A)(ii) of the Act in such cases for the period up to 30^th May, 2023, shall be waived.

2. Govt. notifies reduced tax rates on royalty andFTS with Spain by invoking Most Favoured Nation (MFN) clause – Notification No. 33/ 2024 dated 19^th March, 2024.

Protocol of India-Spain DTAA has a MFN clause. Since India agreed to lower tax rates on royalties and technical service fees in its 1996 Convention with Germany, the same lower rates apply to this Convention with Spain. Accordingly, the Central Government has amended the rate given in Article 13 of the India-Spain DTAA. The rate is reduced to 10 per cent. The amended Article 13(2) of the India-Spain DTAA is effective from Assessment Year 2024-25.

3. Form ITR-V and Form ITR — Acknowledgement notified for A.Y. 2024-25 — Income-tax (Fifth Amendment) Rules, 2024 – Notification No. 37/ 2024 dated 27^th March, 2024.

III. FEMA

1. Definition of unit in FEM (Non-debt Instruments) Rules, 2019 expanded to include partly paid units

The Central Government has notified the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2024. An amendment has been made to Rule 2(aq), which defines the term ‘unit’ as the beneficial interest of an investor in an investment vehicle. The amendment has inserted an explanation to the clause. It states that ‘unit’ shall include a unit that has been partly paid up as permitted under regulations framed by SEBI in consultation with the Government of India. This is an enabling provision to allow investment by non-residents in partly paid units, as allowed by SEBI, in consultation with the Government of India.

[Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2024 dated 14^th March, 2024]

2. Units set up in IFSC in ship leasing activity not required to maintain a separate office

The Govt. has notified the Special Economic Zones (Second Amendment) Rules, 2024. An amendment has been made to Rule 21B of the existing rules. As per the amended norms, the term ‘aircraft leasing’ has been replaced with ‘aircraft or ship leasing’. Accordingly, units set up in IFSC are authorised to undertake aircraft or ship leasing activity and are not mandatorily required to maintain a separate office.

[Special Economic Zones (Second Amendment) Rules, 2024 dated 14^th March, 2024]

3. FDI norms liberalised to allow FDI in space sector under Automatic route

Under the extant policy, FDI was permitted in establishment and operation of Satellites through the Government approval route only. The FDI policy on the Space sector has now been eased by prescribing liberalised thresholds in various sub-sectors or activities under the Automatic Route. The entry route for the various activities under the amended policy are as follows:

i. Up to 74 per cent under Automatic route:Satellites-Manufacturing & Operation, Satellite Data Products and Ground Segment & User Segment.Beyond 74 per cent these activities are under government route.

ii. Up to 49 per cent under Automatic route: Launch Vehicles and associated systems or subsystems, Creation of Spaceports for launching and receiving Spacecraft. Beyond 49 per cent these activities are under government route.

iii. Up to 100 per cent under Automatic route: Manufacturing of components and systems / sub-systems for satellites, ground segment and user segment.

While the amendment has been made to the FDI Policy, a corresponding amendment under FEMA is pending. This decision will take effect from the date Foreign Exchange Management (Non-debt Instruments) Rules, 2019 are amended.

[Press Note No. 1 (2024 series), dated 4^th March, 2024]

4. Amendments in SEZ Act, 2005 and SEZ Rules, 2006

Amendments have been made in the SEZ Act, 2005 and SEZ Rules, 2006 to streamline the process of applications by proposed IFSC units as follows:

i. The SEZ approval application made by proposedIFSC units will be handled by an officer nominated by the IFSCA designated as “Administrator (IFSCA)”. Such officer shall be the Chairperson of Unit Approval Committee of IFSCA.

ii. Form F has been replaced by a consolidated Form FA which should be filed by the proposed IFSC unit for SEZ approval to Administrator (IFSCA).

[Finance Ministry Notification No. S. O. 940(E) dated 28^th February, 2024]

5. Amendment in Banking Regulation Act, 1949

The Banking Regulation Act has been amended so that the restrictions on loans and advances would not apply to the IFSC Banking unit of a Foreign Bank.

[Finance Ministry Notification No. S. O. 942(E) dated 28^th February, 2024]

BCAJ Admin

Regulatory Referencer

I. COMPANIES ACT, 2013

1. Notification of norms regarding the listing of equity shares in IFSC by public companies: MCA has notified the Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024. These rules shall apply to unlisted public companies or listed public companies, which issue their securities for listing on permitted stock exchanges in permissible jurisdictions (i.e., IFSC). Permitted exchanges mean India International Exchange and NSE International Exchange. Further, MCA has specified certain companies which shall not be eligible under these rules like Nidhi companies or companies limited by Guarantee. [Notification No. G.S.R. 61(E), dated 24th January, 2024]

II. SEBI

2. AIF norms related to demat holding and appointment of custodian modified: SEBI has modified the Alternative Investment Norms. An amendment has been made in Regulations 15 & 20. A new clause has been added in Regulation 15 which provides the list of situations where an AIF can hold the investment in a non-dematerialised form. This includes investments in instruments and liquidation schemes of AIFs that are not eligible for demat. Further, the norms related to the appointment of custodians have also been modified. [Notification No. SEBI/LAD-NRO/GN/2024/163, dated 5th January, 2024]

3. AIF norms modified to align the same with amended PMLA rules: The Government has amended the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 whereby the threshold limit for determining the beneficial ownership has been revised. Accordingly, the respective changes have been made in the master circular on AIFs. Further, in case an investor who has already been on-boarded to the AIF scheme, doesn’t meet the revised condition, the manager of AIF shall not draw down any further capital contribution until the investor meets the condition. [Circular No. SEBI/HO/AFD/POD1/CIR/2024/2, dated 11th January, 2024]

4. Proposal to float the framework for voluntary freezing/blocking the online access of the trading account: It was noticed that many investors raised issues of suspicious activities in their trading accounts. Therefore, SEBI decided to float the framework for Trading Members to provide the facility of voluntary freezing/blocking the online access of the trading account to their clients on account of suspicious activities on or before 1st April, 2024. It is to be noted that a similar facility of voluntary blocking/ freezing of demat accounts is already available for investors. [Circular No. SEBI/HO/MIRSD/POD-1/P/CIR/2024/4, dated 12th January, 2024]

5. Detailed guidelines regarding holding of investment in demat and appointment of a custodian by an AIF, issued: Earlier, SEBI had notified certain amendments to the AIF regulations. In this regard, the SEBI further specifies that any investment made by an AIF on or after 1st October, 2024 shall be held in demat form only, irrespective of whether an investment is made directly in the investee company or is acquired from another entity. Further, the norms regarding the appointment of a custodian have also been specified. [Circular No. SEBI/HO/AFD/POD/CIR/2024/5, dated 12th January, 2024]

6. Promoters can offer shares to employees in an ‘Offer for Sale ‘through the Stock Exchange Mechanism: As per the extant procedure, an offer for sale (OFS) to employees of the eligible company is happening outside the stock exchange (SE) mechanism. SEBI observed that said procedure is time-consuming & involves additional costs, therefore, it has now decided that the promoters can also offer the shares to employees in OFS through the SE Mechanism. The procedure for OFS to employees through the SE Mechanism is an additional option to the existing procedure of OFS to employees [Circular No. SEBI/HO/MRD/MRD-POD-3/P/CIR/2024/6, dated 23rd January, 2024]

7. Regulatory reporting by Designated Depository Participants (DDPs) and Custodians through SI Portal: The SEBI has reviewed various reports submitted by DDPs and Custodians in order to have uniform compliance standards. Subsequent to the review, SEBI has decided that the reports shall now be submitted on the SEBI Intermediary Portal (SI Portal) by DDPs and Custodians. Such reports include Annual audit reports on internal controls of DDPs, Annual review reports of the systems, procedures & controls of the Custodian, etc. This circular shall be effective from the month ending February 2024. [Circular No. SEBI/HO/AFD/ AFD-SEC-2/P/CIR/2024/8, dated 25th January, 2024]

8. Extension of timeline for complying with provisions relating to verification of market rumours by listed entities: As per Regulation 30(11) of LODR norms, the top 100 listed entities and thereafter, the top 250 listed entities by Market-Cap are required to verify/confirm/deny or clarify market rumours from the date specified by SEBI. In September 2023, SEBI, through a Circular specified 1st February, 2024 as the effective date for the top 100 listed entities and 1st August, 2024 as the effective date for the next top 250 entities. Now, the dates have been extended to 1st June, 2024 for the top 100 listed entities and 1st December, 2024 for the next top 250 listed entities. [Circular No. SEBI/HO/CFD/CFD-POD-2/P/CIR/2024/7, dated 25th January, 2024]

9. Short-selling by all investors: The Securities and Exchange Board of India has issued a circular which allows investors across all categories short-selling, but naked short-selling will not be permitted. Further, all stocks that trade in the futures and options segment are eligible for short-selling. “Short selling” means selling a stock that the seller does not own at the time of trade. Further, institutional investors will not be allowed to do day trading. [SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/1, dated 5th January, 2024]

DIRECT TAX: SPOTLIGHT

1. Circular explaining the provisions of the Finance Act, 2023. [Circular No. 1 of 2024 dated 23rd January, 2024]

2. CBDT allows trusts / institutions to file audit report in correct Form 10B/10BB Form till 31st March, 2024: Form No. lOB/Form No. lOBB, being Audit report for Trusts were notified vide Notification No.7 of 2023 dated 21st February, 2023, and are applicable for assessment year 2023–24 and subsequent assessment years. Non-furnishing of audit report in the prescribed form 10B/10BB results in denial of exemption u/s 11 or 10(23C) as it is one of the conditions which is required to be satisfied for claim of exemption. It has come to the attention of the CBDT that in a number of cases trusts / institutions have furnished audit report in Form No. lOB, where Form No. 10BB was required to be furnished for the A.Y. 2023–24 and vice versa. CBDT has allowed those trusts / institutions which have furnished audit report on or before 31st October, 2023, in Form No. lOB where Form No. 10BB was applicable and vice-versa, to furnish the audit report in the applicable Form No. lOB/10BB for the assessment year 2023–24, on or before 31st March, 2024. [Circular No. 2 of 2024 dated 5th March, 2024]

3. Clarification on exemption eligibility of inter trust donations: Eligible donations made by a trust / institution to another trust / institution are treated as application for charitable or religious purposes only to the extent of 85 per cent of such donations. Concerns were raised about whether 15 per cent out of amount donated to other trust / institution would be taxable or would be eligible for 15 per cent accumulation since the funds would not be available for investment or application due to prior disbursement. CBDT has clarified that 15 per cent of such donations by the donor trust / institution shall not be required to be invested in specified modes under section 11(5) as the entire amount has been donated to the other trust / institution and is accordingly eligible for exemption. CBDT explained the operation of the exemption provision under different scenarios with a numerical illustration. [Circular No. 3 of 2024 dated 6th March, 2024]

4. Form ITR-6 notified for A.Y. 2024–25 — Income-tax (First Amendment) Rules, 2024. [Notification No. 16/ 2024 dated 24th January, 2024]

5. Central Government has notified that all the provisions of the Agreement between the Government of Republic of India and Government of Samoa for exchange of information with respect to taxes shall be given effect to in the Union of India. [Notification No. 21/ 2024 dated 7th February, 2024]

6. Form ITR-7 notified for A.Y. 2024–25 — Income-tax (Third Amendment) Rules, 2024. [Notification No. 24/ 2024 dated 1st March, 2024]

7. Income tax department has identified certain mismatches between the information received from third parties on interest and dividend income and income tax return filed. In order to reconcile the mismatch, on-screen functionality is made available in the compliance portal of the e-filing website. At present, information relating to mismatches for F.Y. 2021–22 and 2022–23 is displayed on the compliance portal. The on-screen functionality is self-contained and allows the tax payer to reconcile the mismatch on portal itself by furnishing their response. The tax payer who is unable to reconcile the mismatch may consider the option to file updated return. [Press release on Implementation of e-verification scheme, 2021, dated 26th February, 2024]

III. FEMA AND IFSCA REGULATIONS

1. Direct Listing of Equity Shares of Indian Companies on International Exchanges is now allowed

The FEMA Non-debt Instruments (NDI) Rules, 2019 have been amended to introduce the scheme for allowing direct listing of equity shares of companies incorporated in India on International Exchanges. This was in the pipeline for a few years. The enabling provisions under the Companies Act, 2013 were inserted in 2020 which came into effect from 30th October, 2023. Now, the scheme has been notified under the NDI Rules of FEMA as well to finally permit overseas listing. Simultaneously, the MCA has also notified the rules for the same. One special feature is that unlisted public companies which meet certain conditions are also allowed to list their equity shares on overseas exchanges. It should be noted that in this first phase, direct listing has been enabled at the GIFT-IFSC exchanges which will later be extended to overseas exchanges.

[Foreign Exchange Management (Non-debt Instruments) Amendment Rules, 2024 issued by Ministry of Finance dated 24th January, 2024]

[Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024 issued by Ministry of Corporate Affairs dated 24th January, 2024]

2. IFSCA notifies Regulations for Persons providing Payment Services

The IFSCA has notified the IFSCA (Payment Services) Regulations, 2024. These regulations provide a framework for all persons who seek to provide payment services in or from IFSC. It includes detailed guidelines regarding the conditions and requirements for such persons like the procedure for approval, legal form of entity, minimum net worth requirements, special categories of Payment Service providers & rules therefore, documentation & reporting requirements, etc.

[International Financial Services Centres Authority (Payment Services) Regulations, 2024 Notification No. IFSCA/GN/2024/001, dated 29th January, 2024]

BCAJ Admin

Regulatory Referencer

I. SEBI

1. Extension of the deadline for implementation of new SCORES norms to April 2024: Earlier, SEBI had notified norms for the redressal of investor grievances through the SEBI Complaint Redressal (SCORES) Platform and linking it to the Online Dispute Resolution platform. As per the said circular, the new norms were to be implemented from 4th December, 2023. However, SEBI has now extended the date of implementation to 1st April, 2024. [Notification No. SEBI/HO/OIAE/IGRD/CIR/P/2023/18, dated 1st December, 2023]

2. Revised framework for computation of Net Distributable Cash Flow by REITs and INVITs: In order to promote ease of doing business, SEBI has decided to standardise the framework for the calculation of available Net Distributable Cash Flows (NDCF). Accordingly, the revised framework for computation of NDCF by REITs, INVITs, and its Holding companies / SPVs shall be as per the computation formula provided in the circulars. Further, any restricted cash should not be considered for NDCF computation by the SPV, REITs or InvITs. The revised framework shall be applicable from 1st April, 2024. [Circular No. SEBI/HO/DDHS/DDHS-POD/P/CIR/2023/184 & 185, dated 6th December, 2023]

3. Procedures for dematerialisation / crediting of units by AIFs when investors have not provided dematerialisation account details: SEBI had earlier mandated AIFs to dematerialise units within a specified timeframe. SEBI has now provided guidelines for dematerialising / crediting units in cases where investors haven’t provided demat account details. As per the said circular, the AIF managers shall continue to reach out to existing investors to obtain demat account information. Additionally, provisions for a separate demat account named “Aggregate Escrow Demat Account” have also been introduced. [Circular No. SEBI/HO/AFD/POD1/CIR/2023/186, dated 11th December, 2023]

4. Revision of framework requiring Stock Brokers / Clearing Members to upstream clients’ funds to Clearing Corporations: Earlier, SEBI issued a framework requiring Stock Brokers (SBs) / Clearing Members (CMs) to upstream (i.e., placed with) clients’ funds to Clearing Corporations (CCs). Later, representations have been received citing difficulties in implementation. Now, SEBI has issued a revised framework for the same. The bank instruments provided by clients as collateral cannot be upstreamed to CCs, and they shall be ineligible to be accepted as collateral in any segment of the securities market. [Circular No. SEBI/HO/MIRSD/MIRSD-POD-1/P/CIR/2023/187, dated 12th December, 2023]

5. Accreditation Agencies, which are also KRAs, can now access KYC docs of applicants available with them: Earlier, SEBI vide circular dated 26th August, 2021, issued a framework for accreditation of investors by Accreditation Agencies. Now, SEBI has decided to simplify the requirements for grant of accreditation to investors. Accreditation Agencies, which are also KYC Registration Agencies (KRAs), may access Know Your Customer (KYC) documents of applicants available with them in the capacity of KRA and may also access the same from the database of other KRAs, for the purpose of accreditation. [Circular No. SEBI/HO/AFD/POD1/CIR/2023/ 189, dated 18th December, 2023]

6. Amendment of guidelines for online resolution of disputes in the Indian securities market: Earlier, the SEBI vide circular dated 11th August, 2023, had consolidated the norms relating to the guidelines for online resolution of disputes in the Indian securities market. Pursuant to feedback received for providing clarity on certain aspects, SEBI has notified various additions and amendments. It has been now decided that the seat and venue of mediation, conciliation and / or arbitration shall be in India and can be conducted online. Further, various other changes were notified too. [Circular No. SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2023/191, dated 20th December, 2023]

7. Trading Members (TMs) allowed to settle client accounts on Fridays and / or Saturdays, offering flexibility and easing operations: SEBI has decided to accept the recommendation of the Broker’s Industry Standards Forum (ISF) to settle the running account of clients on Friday and / or Saturday, which streamlines the process of settlement and ensures ease of doing business for various stakeholders viz., stock brokers and banks, while at the same time safeguarding the interests of the investors by ensuring error-free settlement. Accordingly, SEBI has made key changes in the Master Circular Dated 17th May, 2023. [Circular No. SEBI/HO/MIRSD/MIRSD-POD1/P/CIR/2023/197, dated 28th December, 2023]

8. Extension of timeline for nomination in demat accounts and mutual funds to 30th June, 2024: Earlier, SEBI had extended the deadline for submitting the ‘choice of nomination’ for demat accounts and mutual fund folios to 31st December, 2023. However, in response to representations from market participants and in an effort to enhance compliance ease and investor convenience, the deadline for submitting the ‘choice of nomination’ for demat accounts and mutual fund folios has been further extended to 30th June, 2024. [Circular No. SEBI/HO/MIRSD/POD-1/P/CIR/2023/193, dated 27th December, 2023]

II. DIRECT TAX: SPOTLIGHT

1. Guidelines under 194O(4) of the Income-tax Act,1961 —

Circular No. 20 of 2023 dated

28th December, 2023:

In continuation to circular no. 17 of 2020 dated 29th September, 2020, and circular no. 20 of 2021 dated 25th November, 2021, CBDT has issued further guidelines to remove the difficulties in implementation of section 194O.

2. Form ITR-1 SAHAJ and Form ITR-4 SUGAM notified for A.Y. 2024–25 — Income-tax (Thirtieth Amendment) Rules, 2023 — NotificatIoN No. 105/ 2023 dated 22nd December, 2023.

III. FEMA AND IFSCA REGULATIONS

1. FEMA Notification on “Manner of Receipt and Payment” revised:

FEMA Notification No. 14(R)/2016-RB dated 2nd May, 2016, on “Manner of Receipt and Payment” has been replaced and superseded by FEMA Notification 14(R)/2023-RB dated 21st December, 2023. It seems to be an attempt to bring simplification and clarity in line with the internationalisation of the Rupee. It has been clarified that trade transactions can now be in Indian Rupees or any foreign currency. Provisions regarding special cases have been removed considering INR payments and receipts are now allowed. It should be noted that the new notification uses the term “foreign currency” in place of “freely convertible foreign currency”. [Notification No. FEMA 14(R)/2023-RB dated 21st December, 2023]

2. Overhaul of Master Direction on Risk Management and Inter-Bank Dealings:

The present framework for hedging of foreign exchange risks was after a comprehensive review and public consultation undertaken in 2020. RBI has further reviewed them now based on feedback received from market participants and experience gained since the revised framework came into force. A new Master Direction on “Risk Management and Inter-Bank Dealings” has been issued and will come into effect on 5th April, 2024. The regulatory framework governing the hedging of foreign exchange risks has been made more comprehensive by consolidating the directions in respect of all types of transactions — over-the-counter (OTC) and exchange traded. Further, the Directions contained in the Currency Futures (Reserve Bank) Directions, 2008, and Exchange Traded Currency Options (Reserve Bank) Directions, 2010, are also now incorporated in the same Master Direction. [A.P. (DIR Series) Circular No. 13 dated 5th January, 2024]

3. Taxation, Accounting, Book-Keeping and Financial Crime Compliance Services Notified as ‘Financial Services’ under the IFSCA:

The Finance Ministry has expanded the kind of services that Units in an International Finance Services Centre can be provided by notifying book-keeping services, accounting services, taxation services and financial crime compliance services as ‘financial services’ under the IFSC Authority Act, 2019. Such financial services shall be offered by units in an IFSC only to non-residents (as per FEMA) whose businesses are not set up either by splitting up or reconstructing or reorganising businesses already in existence in India. Such Units shall also not offer services by either transferring or receiving existing contracts or work arrangements from their Indian group entities. Financial crime compliance services shall include services rendered in relation to compliances of Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT) measures and Financial Action Task Force (FATF) recommendations, and other related activities. [Notification No. S.O. 291(E) dated 18th January, 2024]

BCAJ Admin

Regulatory Referencer

I. COMPANIES ACT, 2013

1. Specified public companies may issue securities for listing on permitted exchanges in permissible foreign jurisdictions: MCA has notified 30th October, 2023 as the effective date for enforcement of section 5 of Companies (Amendment) Act, 2020. Section 5 of Companies (Amendment) Act deals with provisions related to public offers and private placement. New sub-sections have been inserted which states that a specified class of public companies may issue such class of securities for the purpose of listing on permitted stock exchanges in permissible foreign jurisdictions or other jurisdictions as may be prescribed. [Notification No. S.O. 4744(E), dated 30th October, 2023]

2. MCA notifies LLP (Significant Beneficial Owners) Rules, 2023: The MCA has notified LLP (Significant Beneficial Owners) Rules, 2023. The provisions of these rules shall apply to all the LLPs. As per the newly notified rules, every reporting LLP shall take steps to find out if there is any individual who is a significant beneficial owner, in relation to that LLP, and if so, identify him and cause such individual to make a declaration in Form No. LLP BEN-I. Existing SBOs shall file a declaration within 90 days from the commencement of these rules. [Notification dated 9th November, 2023]

II. SEBI

3. SEBI redesigns format for Mutual Fund scheme offer documents: In order to enhance the ease of preparation of the Scheme Information Document (SID) by mutual funds and increase its readability for investors, SEBI undertook an exercise to revamp the format of SID. In the revised format, SEBI has mandated AMCs to disclose the risk-o-meter of the Benchmark on the Front page of the initial offering application form, Scheme Information Documents (SID), and Key Information Memorandum (KIM); in the Common application form. The updated format is to be implemented w.e.f. 1st April, 2024.
[Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2023/000175, dated 1st November, 2023]

4. SEBI introduces a procedural framework for dealing with unclaimed amounts lying with InvITs, REITs & specified entities: SEBI with an objective to make the process of claiming unclaimed funds by investors uniform, has specified a procedural framework for dealing with unclaimed amounts lying with InvITs, REITs and entities having listed non-convertible securities. Further, the norms w.r.t the manner of claiming such unclaimed amounts by investors have also been prescribed. The circular shall be effective from 1st March, 2024.
[Circular No. SEBI/HO/DDHS/DDHS-RAC-1/P/CIR/2023/178, dated 8th November, 2023]

5. SEBI mandates brokers to inform the most important terms and conditions to clients: SEBI with an objective to bring into focus the critical aspects of the broker-client relationship and for ease of understanding of the clients, mandates brokers to inform a standard Most Important Terms and Conditions (MITC) to the clients. Further, this MITC shall be acknowledged by the client. Further, the detailed norms for implementation of MITC shall be published latest by 1st January, 2024, by the Brokers’ Industry Standards Forum (ISF) in consultation with SEBI. [Notification No. SEBI/HO/MIRSD/MIRSD-POD-1/P/CIR/2023/180, dated13th November, 2023]

6. SEBI sets aside the norms w.r.t freezing of folios without PAN, KYC details and nomination: Earlier, the SEBI notified the norms w.r.t furnishing PAN, KYC details and nomination. Under the extant norms, if PAN, nomination, and other details were not submitted by holders of physical securities by 1st October, 2023, the folios shall be frozen by the RTA and shall also be referred by the RTA / company to the administering authority under the Benami Act/ PMLA. Now SEBI has decided to take away this to mitigate unintended challenges on account of freezing of folios. [Circular No. SEBI/HO/MIRSD/POD-1/P/CIR/2023/181, dated17th November, 2023]

III. FEMA AND IFSCA REGULATIONS

1. Permission to International Branch Campuses and Offshore Educational Centres at GIFT-IFSC to avail infrastructure services from Academic Infrastructure Service Providers: The IFSC (Setting up and Operation of International Branch Campuses and Offshore Education Centres) Regulations, 2022 enable globally reputed foreign universities or foreign educational institutions to set up International Branch Campuses (IBC) or Offshore Educational Centres (OEC) in IFSC. Based on requests from stakeholders, a circular has been issued allowing IBCs and OECs to avail of infrastructure and other support services from Academic Infrastructure Service Providers (AISP). The circular prescribes several conditions with respect to the type of infrastructure and support services that are permissible; eligibility conditions for the AISP; and obligations of the IBCs/OECs. [Circular eF.No.IFSCA-BDev./FU/1/2023-BD dated 14th December, 2023]

BCAJ Admin

Regulatory Referencer

I. COMPANIES ACT, 2013

1. MCA Advisory to the stakeholders: The stakeholders are informed that the processing of application forms for the purpose of name reservation and incorporation at the Central Reservation Centre (CRC) is faceless and randomised. The applications if sent for resubmissions are normally not processed by the same official who has processed the application in the first instance. It is further advised that the stakeholders may inform the Ministry in case of any malpractice or irregularity on the part of any official / officer at CRC or any professional with supporting evidence at CVO-MCA@GOV.IN for taking action in accordance with the CVC guidelines. [Update on MCA website, dated 12th October, 2023]

2. ICAI issues advisory to its members to ensure due compliance with Significant Beneficial Ownership (SBO) norms:Corporate Laws & Corporate Governance Committee of ICAI has issued an important announcement addressing the sensitization of companies to comply with the provisions related to Significant Beneficial Ownership (SBO) u/s 90 of the Companies Act, 2013 read with relevant Rules. This announcement is in reference to the initiative of the MCA to create awareness among companies regarding their obligations related to SBO. [Announcement dated 18th October, 2023]

3. MCA mandates Private Companies except Small Companies to issue securities only in Demat form within 18 months from 31st March, 2023: MCA has notified the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023. As per the amended norms, every private company except small companies must issue the securities only in dematerialised form within 18 months from the closure of the Financial Year ended 31st March, 2023. Further, the company must facilitate the dematerialisation of all its securities in accordance with the provisions of the Depositories Act. These provisions shall not apply to Government Companies. [Notification No. G.S.R 802(E), dated 27th October, 2023]

4. Every company must designate a person for furnishing information to ROC w.r.t beneficial interest in shares of company: MCA has notified the Companies (Management and Administration) Second Amendment Rules, 2023. As per the amended norms, every company must designate a person who shall be responsible for furnishing information and extending cooperation in providing information to the Registrar or any other authorised officer regarding beneficial interest in shares of the company. Further, a company may designate a company secretary (CS), a KMP or every director, if there is no CS or KMP. [Notification No. G.S.R 801(E), dated 27th October, 2023]

5. MCA amends LLP norms; mandates declaration of beneficial interest and keeping of register for partners: MCA has notified LLP (Third Amendment) Rules, 2023. As per the amended rules, a person whose name is entered in the register of partners of LLP but doesn’t hold any beneficial interest in contribution must file a declaration to that effect in Form 4B within 30 days from the date on which his name is entered in the register. Further, every LLP must maintain a register of its partners in Form 4A from the date of its incorporation. The register must be kept at the registered office of LLP. [Notification No. G.S.R. 803(E), dated 27th October, 2023]

II. SEBI

6. SEBI extends timeline for mandatory verification of market rumours by specified listed entities: SEBI has extended the timeline for mandatory verification of market rumours by listed entities. As per proviso to Regulation 30(11) of SEBI (LODR) Regulations, 2015, the top 100 listed entities by market capitalization must verify, confirm, deny or clarify market rumours from 1st October, 2023. This has now been extended to 1st February, 2024. Similarly, the top 250 listed entities were required to mandatorily verify, confirm, deny or clarify market rumours w.e.f. 1st April, 2024 which now stands extended to 1st August, 2024. [Circular No. SEBI/HO/CFD/CFD-POD-1/P/CIR/2023/162, dated 30th September, 2023]

7. SEBI introduces a centralized mechanism for reporting the demise of investors through KRAs: SEBI has introduced a centralized mechanism for reporting and verifying the demise of an investor through KYC Registration Agency (KRAs) to smoothen the transmission process in the securities market. Further, upon receipt of intimation about the demise of an investor, the concerned intermediary must obtain a death certificate along with the PAN from the notifier. Also, after verification, the intermediary must submit a KYC modification request to KRA. The circular shall be effective from 1st January, 2024.[Circular No. SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/0000000163, dated 3rd October, 2023]

8. SEBI relaxes listed entities from dispatching hard copies of annual report till 30th September, 2024 pursuant to MCA extension: Earlier, the MCA vide Circular dated 25th September, 2023, extended the relaxation from dispatching of physical copies of the financial statements (including Board’s report, Auditor’s report or other documents required to be attached therewith) up to 30th September, 2024. Therefore, SEBI in order to bring it in line with MCA, has decided to extend relaxation to listed entities also. Listed entities are now granted relaxation from sending a hard copy of the annual report to Non-Convertible Securities holders up to 30th September, 2024. [Circular No. SEBI/HO/DDHS/P/CIR/2023/0164, dated 6th October, 2023]

9. SEBI extends the relaxation from sending proxy forms for general meetings held via e-mode till 30th September, 2024: Earlier, SEBI vide circular dated 11th July, 2023, relaxed the listed entities from complying with regulation 36(1)(b) of LODR i.e., sending hard copies of annual reports, and regulation 44(4) i.e., sending of proxy forms to holders of securities, for the general meetings (conducted in electronic mode) till 30th September, 2023. Now, the SEBI has extended these relaxations till 30th September, 2024. [Circular No. SEBI/HO/CFD/CFD-POD-2/P/CIR/2023/167, dated 7th October, 2023]

10. SEBI redefines ‘Large Corporates’ (LCs); relaxes borrowing norms for LCs through issuance of debt securities: SEBI has relaxed borrowing norms for large corporates (LCs) through issuance of debt securities. Now, an entity with outstanding long-term borrowings of Rs.1000 crore or above would be classified as LC. Also, SEBI has introduced incentives for LCs in case of surplus in requisite borrowings and moderated disincentives if they fail to meet at least 25 per cent of their incremental borrowings. Earlier, LCs were defined as those with outstanding long-term borrowings of at least R100 crore or above. [Circular No. SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2023/172, dated 19th October, 2023]

11. MCA takes away RD’s power to levy additional costs to order confirming the shifting of RO from one state to another: The MCA has notified an amendment to Rule 30 of the Companies (Incorporation) Rules, 2014. As per the amended norms, no additional costs can be included in the Central Government’s order confirming the alteration of registered office from one state to another. Further, a new proviso has been inserted into Rule 30(9), which states that shifting of the registered office may be allowed where the resolution plan has been approved and no appeal against the resolution plan is pending. [Notification No. G.S.R. 790(E), dated 20th October, 2023]

12. Unclaimed amounts transferred to IEPF under LODR shall not bear any interest:SEBI has notified amendments to Regulation 61A of LODR Regulations which prescribe provisions for dealing with unclaimed non-convertible securities and benefits accrued thereon a new proviso has been inserted which states that the amount transferred to the IPEF shall not bear any interest. Further, the unclaimed amount of a person that has been transferred to IPEF can be claimed in the manner specified by the Board. [Notification No. SEBI/LAD-NRO/GN/2023/158, dated 20th October, 2023]

13. SEBI amends InvIT & REIT Regulations, 2014: SEBI has notified amendment to Regulation 18 of InvIT & REIT Regulations, 2014 which prescribes provisions for Investment conditions, dividend policy and distribution policy. A new proviso has been inserted which states that the amount transferred to the IPEF shall not bear any interest. Further, the unclaimed or unpaid amount of a person that has been transferred to IEPF can be claimed in the manner specified by the Board. [Notification No. SEBI/LAD-NRO/GN/2023/159, dated 20th October, 2023]

III. DIRECT TAX: SPOTLIGHT

1. Insertion of Rule 21AHA and Form 10IFA – CBDT notifies Form 10-IFA for opting for tax regime u/s 115BAE by co-operative society — Income-tax (Twenty-Third Amendment) Rules, 2023 — Notification No. 83/2023, dated 30th September, 2023:

The Finance Act introduced a new tax regime under section 115BAE for the resident co-operative societies engaged in manufacturing or producing an article or thing. The CBDT has notified Form 10-IFA for exercising the option of section 115BAE. This form is to be furnished electronically on or before the due date for furnishing the return of Income.

2. Clarification regarding providing details of persons who have made a ‘substantial contribution to the trust or institution — Circular No. 17/2023, dated 9th October, 2023:

In Form 10B and 10BB, details of persons makingsubstantial contributions may be given with respect tothose persons whose total contribution during theprevious year exceeds fifty thousand rupees and details of relatives of such a person and details of concerns in which such person has a substantial interest may be provided only if available.

3. Extension of time limit for filing Form 56F for Assessment Year 2023-24 — Circular No. 18/2023, dated 20th October, 2023:

The CBDT has extended the due date for furnishing Form 56F for claiming the benefit of section 10AA for A.Y. 2023-24 to 31st December, 2023.

4. Condonation of delay in filing of Form No. 10-IC for Assessment Year 2021-22 — Circular No. 19/2023, dated 23rd October, 2023:

The delay in filing of Form No. 10-IC for A.Y. 2021-22 is condoned in cases where the following conditions are satisfied:

i) The return of income for A.Y. 2021-22 has been filed on or before the due date specified under section 139(1) of the Act;

ii) The assessee company has opted for taxation u/s 115BAA of the Act in ITR-6; and

iii) Form 10-IC is filed electronically on or before 31st January, 2024, or three months from the end of the month in which this Circular is issued, whichever is later.

5. Insertion of Rule 16D and Form 56F for claiming deduction under section 10AA – Income-tax (Twenty-Sixth Amendment) Rules, 2023 — Notification No. 91/ 2023, dated 19th October, 2023.

6. Agreement between the Government of the Republic of India and the Government of Saint Vincent and the Grenadines for the Exchange of Information and Assistance in collection with respect to taxes, was signed at Kingstown, Saint Vincent and the Grenadines on19thMay, 2022. Agreement entered into force on14th February, 2023. All the provisions of the said Agreement as annexed in the notification shall be given effect to in the Union of India — Notification No. 96/ 2023, dated 1st November, 2023.

IV. FEMA AND IFSCA REGULATIONS

1. RBI allows PROIs to purchase / sell dated Government Securities/Treasury Bills:

RBI has amended the Foreign Exchange Management (Debt Instruments) Regulations. Persons resident outside India that maintain a rupee account in terms of regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016 may purchase or sell dated Government Securities / treasury bills, as perterms and conditions specified by the ReserveBank. Please refer to the Notification for otherconditions.

[Notification No. FEMA.396(2)/2023-RB, dated 16th October, 2023]

2. Premature withdrawal for NRO and NRE Deposits:

RBI has decided that all domestic term deposits accepted from individuals for amounts of Rupees one crore and below shall have a premature withdrawal facility. This amount has been raised from Rs.15 lakh to Rs. 1 crore. These instructions shall also be applicable for Non-Resident (External) Rupee (NRE) Deposit / Ordinary Non-Resident (NRO) Deposits.

[Circular No. DOR.SPE. REC. NO 51/13.03.000/2023-24, dated 26th October, 2023]

3. FATF adds Bulgaria to the list of High-Risk Jurisdictions under Increased Monitoring:

The Financial Action Task Force (FATF) releases documents titled “High-Risk Jurisdictions Subject to a Call for Action” and “Jurisdictions under Increased Monitoring” with respect to jurisdictions that have strategic AML / CFT deficiencies as part of the ongoing efforts to identify and work with jurisdictions with strategic Anti-Money Laundering (AML) / Combating of Financing of Terrorism (CFT) deficiencies. As per the 27th October, 2023, FATF public statement, Bulgaria has been added to this list of Jurisdictions under Increased Monitoring while Albania, the Cayman Islands, Jordan and Panama have been removed from this list based on a review by the FATF. This advice does not preclude the regulated entities from legitimate trade and business transactions with these countries and jurisdictions mentioned there.

[Press Release No. 2023-24/1223, dated 1st November, 2023]

4. Sovereign Green Bonds accessible to non-resident investors too:

Under the RBI’s Fully Accessible Route (FAR) certain specified categories of Central Government securities were opened fully for non-resident investors without any restrictions, apart from being available to domestic investors as well. It has now been decided to also designate all Sovereign Green Bonds issued by the Government in the fiscal year 2023-24 as ‘specified securities’ under the FAR.

[Circular No. FMRD.FMID.NO. 04/14.01.006/2023-24, dated 8th November, 2023]

5. Special current account exclusively for export settlement:

To provide greater operational flexibility to the exporters, RBI has permitted the AD Category-I banks maintaining a ‘Special Rupee Vostro Account’ to open an additional Special Current Account for its exporter constituents. The account is to be maintained exclusively for the settlement of their export transactions.

[FED Circular No. 08, dated 17th November, 2023]

BCAJ Admin

Regulatory Referencer

I. COMPANIES ACT, 2013

1. MCA allows companies to hold AGMs & EGMs via ‘VC & Other Audio-Visual Means’ till 30th September, 2024: MCA has decided to allow companies whose AGMs are due in the year 2023 or 2024 to conduct their AGMs through Video Conference (VC) or Other Audio-Visual Means (OAVM) on or before 30th September, 2024. Also, companies are allowed to conduct their EGMs through VC or OAVM till 30th September, 2024. However, it is clarified that this shall not be treated as any extension of statutory time for holding of AGMs or EGMs. [General Circular No. 09/2023, dated 25th September, 2023]

II. SEBI

2. SEBI mandates listing of subsequent issuances of outstanding non-convertible debt securities: SEBI has notified an amendment to the SEBI (LODR) Regulations, 2015. A new regulation 62A has been inserted. The regulation states that a listed entity whose subsequent issues of unlisted non-convertible debt securities are made on or before 31st December, 2023, and are outstanding, may list such securities on a stock exchange. Further, listed entities whose non-convertible debt securities are listed must list all such securities proposed to be issued on or after 1st January, 2024, on the stock exchanges. [Notification No. SEBI/LAD-NRO/GN/2023/151, dated 19th September, 2023]

3 SEBI extends timeline for trading & demat account holders to submit nominee details by three months: SEBI has extended the timeline for existing trading and demat account holders to provide a choice of nomination or formally opt out of nomination through a declaration form by three months, i.e., by 31st December, 2023. Further, the submission of choice of nomination for trading accounts has been made voluntary by the regulator as a move towards ease of doing business. Earlier, the deadline for existing trading and demat account holders to provide a choice of nomination was on or before 30th September, 2023. [Circular No. SEBI/HO/MIRSD/POD-1/P/CIR/2023/158, dated 26th September, 2023]

4 SEBI issues Master Circular for ‘Merchant Bankers’: SEBI had issued multiple circulars, directions and operating instructions to Merchant Bankers on a regular basis to ensure compliance. In order to enable the stakeholders to have access to all circulars at one place, a Master Circular regarding Merchant Bankers has been issued. This Master Circular is a compilation of all the existing circulars and directions issued by SEBI to Merchant Bankers. [Master Circular No. SEBI/HO/CFD/POD-1/P/CIR/2023/157, dated 26th September, 2023]

5 SEBI extends timeline for nomination of Mutual Fund Unitholders by three months: SEBI has extended the timeline for nomination of mutual fund unit holders either solely or jointly from 30th September, 2023, to 31st December, 2023. Further, non-compliance of it will result in freezing of folios w.e.f. 1st January, 2024. In order to protect the interest of investors and regulate the securities market, AMCs and RTAs must encourage unitholder(s) to fulfill the requirement for nomination / opting out of nomination by sending a communication on a fortnightly basis by way of emails and SMSes to unitholder(s). [Circular No. SEBI/HO/IMD/IMD-I POD1/P/CIR/2023/160, dated 27th September, 2023]

BCAJ Admin

REGULATORY REFERENCER

(BCAJ
earlier carried a feature called SPOTLIGHT for several years. Ever since
updates became nearly instant from several sources, it was stopped. However,
today the problem is of too many regulatory changes too frequently. Keeping
track of important updates is becoming increasingly difficult. This feature, in
this new avatar, seeks to bring a curated set of changes in Tax, Accounting and
Audit, and FEMA at one place every month)

DIRECT TAX

1. Employees, who have donated to PM CARES Fund,
can claim deduction u/s 80G based on the Form 16 issued by employer, since one
consolidated donation receipt will be issued by PM CARES Fund in the name of
the employer [F. No. 178/7/2020 – ITA – 1 dated 9^th April, 2020].

2. Clarification regarding short deduction of TDS
/ TCS due to increase in rates of surcharge by Finance (No. 2) Act, 20l9
[Circular No. 8/2020 dated 13^th April, 2020].

3. Clarification for employers for deduction of
tax from salary paid to employees, in respect of option u/s
115BAC of the Income-tax Act, 1961 [Circular No. C1/2020 dated 13^th
April, 2020].

4. In view of the prevailing situation due to the
Covid-19 pandemic across the country, reporting under clause 30C and
clause 44 of the Tax Audit Report kept in abeyance till 31^st
March, 2021 [Circular No. 10 /2020 dated 24^thApril, 2020].

5. Clarification on provisions of Direct Tax Vivad
se Vishwas Act, 2020 – Circular No. 9/2020 dated 22^ndApril,
2020 [Corrigendum to Circular No. 9/2020 – dated 27^th April,
2020].

6. Clarification in respect of exclusion of
number of days of stay in India for the purpose of determining residency
u/s 6 of the Act [Circular No. 11/2020 dated 8^th May, 2020].

7. The rates of Tax Deduction at Source (TDS) for
the non-salaried specified payments made to residents
have been reduced by 25% for the period from 14^th May, 2020 to 31^st
March, 2021 [Press Release dated 13^th May, 2020].

ACCOUNTS AND AUDIT

A. Extension
of the last date of filing of Form NFRA-2 – The time
limit for filing of Form NFRA-2 for FY 2018-19 will be 210 days from the date
of deployment of the form on the NFRA Website. [MCA General Circular No.
19/2020 dated 30^th April, 2020.]

B.
Communication with Retiring Auditor through E-mail – During
the lockdown period, members may communicate with the retiring auditor vide
e-mail. Acknowledgement must be received from the retiring auditor’s
Institute-registered / official e-mail address in which case the same would be
deemed to be valid evidence of positive delivery of communication. [ICAI’s
Decision dated 1^st May, 2020.]

C. Going
Concern – Key Considerations for Auditors amid Covid-19 – Auditing guidance
that focuses on implications of the pandemic for the auditor’s work related to
going concern and includes specific FAQs to deal with various situations in the
current environment. [ICAI’s Guidance dated 10^thMay, 2020.]

D.
Relaxation from publishing quarterly consolidated financial results under Reg
33(3)(b) of SEBI LODR – Listed entities that are banking
/ insurance companies or having subsidiaries that are banking / insurance
companies may submit consolidated financial results for the quarter ending 30^th
June, 2020 on a voluntary basis. However, they shall continue to submit the
standalone results. If such listed entities choose to publish only standalone
financial results, they shall give reasons for the same. [SEBI Circular No.
SEBI/HO/CFD/CMD1/CIR/P/2020/79 dated 12^th May, 2020.]

E. Physical Inventory Verification – Key Audit
Considerations amid Covid-19 – Auditing guidance covering
alternative audit procedures where it is impracticable for auditors to attend
physical inventory counting and related implications for the Auditor’s Report. [ICAI’s
Guidance dated 13^th May, 2020.]

F. Auditor’s Reporting – Key Audit Considerations
amid Covid-19 – Auditing Guidance covering impact of
Covid-19 pandemic on (i) the auditor’s report, (ii) reporting under CARO 2016,
and (iii) reporting on Internal Financial Controls with reference to Financial
Statements. [ICAI’s Guidance dated 17^th May, 2020.]

G. Advisory on disclosure of material impact of
Covid-19 pandemic on listed entities under SEBI (LODR) Regulations
– Listed entities encouraged to disclose impact of the pandemic on their
business, performance and financials. Illustrative list of disclosures
includes, estimation of the future impact of Covid-19 on operations; details of
impact on capital and financial resources; profitability; liquidity; debt
servicing ability; internal financial reporting and control; etc. [SEBI
Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/84 dated 20^th
May, 2020.]

FEMA

(I) In view of the Covid-19 pandemic, the period
of realisation and repatriation of the full export value of goods or software
or services for exports made up to 31^st July, 2020 has been
increased by the Reserve Bank of India from nine months to 15 months. The
similar period for exports to warehouses, however, remains unchanged at 15
months. [A.P. (DIR Series) Circular No. 27 dated
1^stApril, 2020.] The FEM (Export of Goods and Services)
Amendment Regulations, 2020 enabled the Reserve Bank to specify the period of
realisation and repatriation in the above cases in consultation with the
Government [FEMA 23(R)/(3)/2020-RB dated 31^st March, 2020].

(II) As per the announcement made in Union
Budget 2020-21, certain specified
categories of Central Government Securities (G-Secs) were to be opened up fully
for non-resident investors without any restrictions. RBI has now introduced
a separate route – ‘Fully Accessible Route’ (FAR) for such investment by
non-residents in G-Secs from 1^stApril, 2020. Its main features
are the following:

(a) FAR is available to eligible investors which
are defined as any ‘person resident outside India’ as per section 2(w) of FEMA.

(b) Investment can be made in all securities as
periodically notified by the RBI. The securities covered for this purpose, with
effect from 1^st April, 2020 are notified vide Circular No.
FMRD.FMSD.No.25/14.01.006/2019-20 dated 30^th March, 2020.

(c) There shall be no quantitative limit on
investment. The minimum residual maturity requirement, security-wise limit and
concentration limit would also not apply to investors under FAR.

(d) Existing investments by eligible investors in
specified securities shall be considered under FAR.

(e) FPIs have been provided one year to readjust
their investments to comply with the revised requirements under the Medium Term
Framework (MTF). Further, the MTF itself has been revised for FY 2020-21 vide
A.P. (DIR Series) Circular No. 30 dated 15^th April, 2020.

[FAR
Directions – A.P. (DIR Series) Circular No. 25 dated 30^th March,
2020.]

(III) Existing facilities for
non-residents and residents to hedge their foreign exchange risk on account of
transactions permitted under FEMA have been revised following the
announcement in the Statement on Developmental and Regulatory Policies dated
5^thDecember, 2019. The revised facilities broadly provide for:

(a) A User Classification Framework has now been
provided and authorised dealers shall offer derivative contracts to a user as
this framework. The framework classifies users as retail and non-retail users.
Non-retail users are all entities regulated by a financial sector regulator;
EXIM Bank, NABARD, NHB and SIDBI; companies with minimum net worth of Rs. 500
crores; and persons resident outside India other than individuals. All other users
are classified as retail users. Complex derivative contracts are not available
to retail users.

(b) Amongst other conditions, users may undertake
over the counter (OTC) currency derivative transactions for derivative
contracts involving Indian rupees up to US$ 10 million without the need to
evidence underlying exposure.

(c) Banks shall be provided with the discretion, in
exceptional circumstances, to pass on net gains on hedge transactions booked on
anticipated exposures in case specified conditions are met.

[A.P. (DIR
Series) Circular No. 29 dated 7^th April, 2020.]

The revised
directions were supposed to come into effect from 1^st June, 2020,
but have been postponed to 1^st September, 2020 in view of the
pandemic. Directions on the participation of banks in Offshore Non-deliverable
Rupee Derivative Markets issued vide A.P. (DIR Series) Circular No. 23
dated 27^th March, 2020 will come into effect from 1^stJune,
2020 as hitherto [A.P. (DIR Series) Circular No. 31 dated 18^th
May, 2020].

(IV) To counter opportunistic
takeovers / acquisitions of Indian companies during the current pandemic by
China, Regulation 6(a) of Non-Debt Instrument Rules has been amended to
provide that investment into India under Schedule I (Foreign Direct Investment)
will be allowed only with Government approval in the following cases:

(a) By an entity from a country which shares a land
border with India;

(b) Where the beneficial owner of an investment into
India is situated in a country which shares a land border with India, or is a
citizen of such a country;

(c) By a citizen of Pakistan or an entity
incorporated in Pakistan in sectors or activities other than defence, space,
atomic energy and such other sectors or activities prohibited for foreign
investment;

(d) Where transfer of ownership of any existing or
future FDI in an entity results in beneficial ownership of such entity falling
within restricted categories as per all the provisos mentioned in points
(a) to (c) above.

[Notification No. S.O. 1278 (E)
dated 22^nd April, 2020. Similar
amendment made to Para 3.1.1 of Consolidated FDI Policy 2017 vide Press Note No. 3 dated 17^th
April, 2020.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. CBDT further extends
tax compliance, other due dates under the Taxation and Other Laws
(Relaxation of Certain Provisions) Ordinance, 2020. [Notification No. 35 of 2020
dated 24^th June, 2020.]

2. Income-tax (13th
Amendment) Rules, 2020 – Rule 2BB amended to prescribe exemptions which
can continue to be claimed by an assessee opting for the new taxation regime
prescribed u/s 115BAC of
the Act. [Notification No. 38 of 2020 dated 26^th June, 2020.]

3. Income-tax (16^th
Amendment) Rules, 2020 – Rule 31A amended. It notifies amendments in
TDS statement under Form 26Q with respect to sections 194A, 194J, 194K, 194LBA,
194N, 194-O,
197A and 200. [Notification No. 43 of 2020 dated 3^rd July, 2020.]

4. CBDT further relaxes
the time frame prescribed under second proviso to section 143(1) and
directs that all validly-filed returns up to A.Y. 2017-18 with refund claims,
which could not be processed u/s 143(1) and have become time-barred, subject to
the exceptions, can be processed now with prior administrative approval of Pr.
CCIT/CCIT by 31^st October, 2020.
[F No. 225/98/2020ITA-II dated 10^th July, 2020.]

5. One-time relaxation
granted for verification of returns for A.Ys. 2015-16, 2016-17, 2017-18,
2018-19 and 2019-20, which were uploaded electronically by the taxpayer within
the time allowed u/s 139 of the Act and which have remained incomplete due to
non-submission of ITR-V Form for verification. Such returns can be verified by
sending a duly signed physical copy of ITR-V to CPC, Bengaluru through speed
post or through EVC/OTP modes. Such verification process must be completed by
30^th September, 2020. CBDT further directs that such returns shall
be processed by 31^st December, 2020 and intimation of processing of
such returns shall be sent to the taxpayer. [Circular No. 13/2020 dated 13^th
July, 2020.]

ACCOUNTS AND AUDIT

A. The timeline for
submission of financial results for the quarter / half-year / financial year
ending 31^st March, 2020 by listed entities (Regulation 33 of the
LODR Regulations) has been further extended by a month to 31^st July,
2020 on account of the pandemic. [SEBI Circular No.
SEBI/HO/CFD/CMD1/CIR/P/2020/106 dated 24^thJune, 2020.]

B. Guidance Note on The
Companies (Auditor’s Report) Order, 2020 – The ICAI has issued a Guidance
Note on CARO, 2020 (applicable for audits of F.Y. 2020-21 and onwards) to
enable auditors to comply with its reporting requirements. [ICAI Guidance
Note issued on 1^stJuly, 2020.]

C. Applicability of the
revised edition of Code of Ethics – The following provisions of Volume – I
of Code of Ethics, 2020 is deferred till further notification: (a)
Responding to NOCLAR; (b) Fees – relative size; and (c) Taxation services to
audit clients. [ICAI announcement dated 1^st July, 2020.]

D. Extension of timeline for finalisation of audited accounts by
applicable NBFCs – Applicable
NBFCs shall finalise their balance sheet within a period of three months from
the date to which it pertains, or any date as notified by SEBI for submission
of financial results by listed entities. [RBI Notification No.
RBI/2020-21/11 dated 6^thJuly, 2020.]

E. Guidance on Accounting
for expenditure on CSR Activities – The ICAI has issued a Technical
Guide on Accounting for Expenditure on Corporate Social Responsibility
Activities with the objective of providing guidance on related recognition,
measurement, accounting, presentation and disclosures aspects. [ICAI
Technical Guide issued on 6^th July, 2020.]

F. Extension of the last date of filing Form
NFRA-2 – The time limit for
filing Form NFRA-2 for F.Y. 2018-19 will now be 270 days from the date of
deployment of the form on the NFRA Website. [MCA General Circular No.
26/2020 dated 6^th July, 2020.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Income-tax (9^th Amendment) Rules,
2020 – Amendment to Rules 10TD and 10TE – the ‘Safe
Harbour Rules for International Transactions’ shall apply for A.Y. 2020-21.
[Notification No. 25 of 2020 dated 20^thMay, 2020.]

2. Clarifications in respect of prescribed
electronic modes u/s 269SU of the Act. Provisions
of section 269SU shall not be applicable to a specified person having only B2B
transactions (i.e.. no transaction with retail customer / consumer) if at least
95% of aggregate of all amounts received during the previous year, including
amount received for sales, turnover or gross receipts, are by any mode other
than cash. [Circular No. 12/2020 dated 20^th May, 2020.]

3. Income-tax (11^th Amendment) Rules,
2020 – Insertion of Rule 114I – Format and
procedure for uploading of Annual Information Statement prescribed.
[Notification No. 30 of 2020 dated 28^th May, 2020.]

4. Income-tax (12^th Amendment) Rules,
2020 – Rule 12 amended – Form ITR-1 (SAHAJ), ITR-2,
ITR-3, ITR-4 (SUGAM), ITR-5, ITR-7 for A.Y. 2020-21 prescribed. [Notification
No. 31 of 2020 dated 29^th May, 2020.]

5. Cost Inflation Index for
F.Y. 2020-21 is 301. [Notification No. 32 of 2020 dated 12^th
June, 2020.]

ACCOUNTS AND AUDIT

A. Subsequent Events – Key Audit Considerations
amid Covid-19 – ICAI’s Guidance related to the
auditor’s responsibilities in relation to obtaining sufficient appropriate
audit evidence about subsequent events that is impacted by the Covid-19
pandemic, and how the results of the auditor’s procedures on subsequent events
impact the auditor’s report. The Guidance also provides examples of events or
conditions that may be relevant in the current environment. [ICAI’s Auditing
Guidance dated 23^rd May, 2020.]

B. Advisory for CAs – CSR Provisions (section 135
of the Companies Act) – Companies that undertake
CSR activities through a third party (trust / society / section 8 Company /
NGO) are advised to obtain an Independent Practitioner’s Report on funds
utilisation from the auditor / CA in practice of such third party to whom funds
are provided. The advisory includes a draft format of the Independent
Practitioner’s Report. [ICAI’s Advisory dated 29^th May, 2020.]

FEMA

(I) Foreign
Portfolio Investors (FPIs) have been permitted to invest under the Voluntary
Retention Route (VRR) in Debt Instruments. Investments under VRR are long-term in nature and
stable. Under the VRR, FPIs are required to invest at least 75% of their
Committed Portfolio Size (CPS) within three months from the date of allotment.
In view of the pandemic, it has been decided to allow FPIs that have been
allotted investment limits between 24^th January, 2020 (the date of
reopening of allotment of investment limits) and 30^th April, 2020 an
additional time of three months to invest 75% of their CPS. For FPIs
availing the additional time, the retention period for the investments would be
reset to start from the date that the FPI invests 75% of its CPS. [A.P. (DIR
Series 2019-20) Circular No. 32, dated 22^nd May, 2020.]

(II) In view of the pandemic, it
has been decided to extend the time period for completion of remittances
against normal imports (except in cases where amounts are withheld towards
guarantee of performance, etc.) from the existing period of six months to 12
months from the date of shipment for such imports made on or before 31^stJuly,
2020. Normal imports would not cover import of gold or diamonds and precious
stones or jewellery. [A.P. (DIR Series 2019-20) Circular No. 33, dated 22^nd
May, 2020.]

(III) RBI has enacted regulations for ‘mode of payment’ in case of
investment by various foreign investors. FPIs and FVCIs have been permitted to
open foreign currency account and SNRR account for investments in India. It
provides that the foreign currency account and SNRR account can be used only
for transactions under ‘this schedule’. The regulations on ‘mode of payment’ do
not have any Schedule. It was meant to refer to Schedules under the Non-Debt
Instruments Rules. This was an anomaly. RBI has now amended the Foreign
Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments)
Regulations to specify that a foreign currency or SNRR account used by FPIs
or FVCIs can be used only for transactions under their respective schedules
(Schedules II and VII, respectively, of Non-Debt Instrument Rules). Further, an
FPI and FVCI can pay the consideration for trading in units of an Investment
Vehicle, listed or to be listed on the stock exchanges in India, out of their
SNRR account. [Notification No. FEMA, 395(1)/2020-RB dated 15^th
June, 2020.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. The last date for making a declaration under Vivad Se Vishwas Scheme has been extended to 31st January, 2021 from 31st December, 2020. [Notification No. 92 of 2020 dated 31st December, 2020.]

2. Government notifies extended due dates for issuing Tax Audit Reports, filing of tax returns and VSV Scheme. [Notification No. 93 of 2020 dated 31st December, 2020.]

3. Introduction of Faceless Penalty Scheme, 2021. [Notification No. 2 of 2021 dated 12th January, 2021.]

4. Directions for the Implementation of the Faceless Penalty Scheme, 2021. [Notification No. 3 of 2021 dated 12th January, 2021.]

COMPANY LAW

I. COMPANIES ACT, 2013

(I) MCA enforces certain provisions of Companies (Amendment Act, 2020) w.e.f. 21st December, 2020. MCA has appointed the 21st day of December, 2020 as the date on which certain provisions of the Companies (Amendment) Act, 2020 shall come into force. Accordingly, major defaulting provisions such as defaults related to formation of section 8 companies, non-compliance of provisions related to matters to be stated in the prospectus, transfer and transmission of securities and rectification of register of members, etc., are decriminalised effective from the said date. [MCA Notification S.O. 4646 (E) dated 23rd December, 2020.]

(II) MCA allows ROC to extend timeline for name reservation up to 60 days The MCA has made an amendment to the Companies (Incorporation) Rules, 2014 whereby a new Rule 9A has been inserted. The said rule allows the Registrar to extend the period of a name reserved under rule 9 by using web service SPICe+INC-32, up to 40 days from the date of approval on payment of a fee of Rs. 1,000 before expiry of 20 days under rule 9; 60 days on payment of Rs. 2,000 before expiry of 40 days; and extension up to 60 days on payment of Rs. 3,000 in case of expiry of 20 days from the date of approval. [MCA Notification G.S.R. 795(E) dated 26th December, 2020.]

(III) Companies allowed to conduct board and general meetings virtually till 30th June, 2021 Owing to the Covid-19 outbreak, the MCA has further extended the due date in relation to companies for conducting their meetings virtually from 31st December, 2020 to 30th June, 2021. [MCA Notification G.S.R. 806 (E) dated 2nd January, 2021.]

(IV) MCA clarifies that ‘Spending of CSR funds for awareness campaigns on Covid-19 vaccination programme is an “eligible CSR activity”’ under item Nos. (i), (ii) and (xii) of Schedule VII of the Companies Act, 2013 relating to promotion of healthcare, including preventive healthcare and sanitization, promoting education and, disaster management, respectively. [MCA General Circular 1/2021 dated 13th January, 2021.]

(V) Timeline for companies to hold AGMs through video conferencing extended till 31st December, 2021 In continuation of Circular 20/2020 dated 5th May, 2020, the MCA has decided to allow companies whose AGMs were due to be held in the year 2020, or become due in the year 2021, to conduct their AGMs on or before 31st December, 2021 through video conferencing or other audio visual means. [MCA General Circular 2/2021 dated 13th January, 2021.]

(VI) MCA launches ‘Scheme for condonation of delay for companies restored on the Register of Companies between 1st and 31st December, 2020 under section 252 of the Companies Act, 2013’. The Companies Fresh Start Scheme, 2020 [CFSS-2020] is no longer applicable for various filings done under the provisions of the Companies Act, 2013. The companies restored between 1st and 31st December, 2020 could not avail benefit of CFSS-2020 scheme and as such are liable to pay additional fees on filing overdue e-forms. MCA has accordingly launched the scheme for the purpose of condoning the delay in filing forms with the Registrar, insofar as it relates to charging of additional fees on account of delay in such filings. [MCA General Circular 3/2021 dated 16th January, 2021.]

II. SEBI

(VII) SEBI further extends relaxations for compliance with certain provisions of the SEBI (LODR) Regulations, 2015 due to the Covid-19 pandemic The MCA has further extended relaxations to companies to conduct their Extraordinary General Meetings through video conferencing or through other audio-visual means up to 30th June, 2021. It has also extended these relaxations to Annual General Meetings of the companies due in the year 2021 (i.e. till 31st December, 2021). Accordingly, the relaxations in respect of sending physical copies of annual reports to shareholders and the requirement of proxy for general meetings held through electronic mode are extended for listed entities till 31st December, 2021. [Circular SEBI/HO/CFD/CMD2/CIR/P/2021/11 dated 15th January, 2021.]

(VIII) SEBI extends relaxations for compliance with rights issues In view of the difficulties faced due to the Covid-19 pandemic and the lockdown measures, the SEBI has further extended the relaxations for compliance with rights issues in order to ensure that all eligible shareholders are able to apply to the rights issues during hard times. The validity of relaxations shall be applicable for rights issues opening up to 31st March, 2021. [Circular SEBI/HO/CFD/DIL1/CIR/P/2021/13 dated 20th January, 2021.]

ACCOUNTS AND AUDIT

(A) Risk-Based Internal Audit (RBIA) Framework. The RBI has issued a Notification on the RBIA Framework applicable to Scheduled Commercial Banks (excluding RRBs), Local Area Banks, Small Finance Banks and Payments Banks. Banks are expected to re-orient their approach, in line with evolving best practices, as part of their overall Governance and Internal Control framework. Banks are also encouraged to adopt International Internal Audit Standards. The Notification also contains advisories aimed at bringing uniformity in the approach followed by banks. [Notification No. RBI/2020-21/83 Ref. No. DoS.CO.PPG./SEC.04/11.01.005/2020-21 dated 7th January, 2021.]

FEMA

(i) The DPIIT has, vide a Circular, revised the SOP for seeking approval in FDI Proposals setting down the procedures, timelines and advisories to other Ministries / Departments. Some of the important changes are:
* An inter-Ministerial committee will assess delayed proposals and proposals escalated for quicker disposal.
* A review mechanism has been brought in before rejection of a proposal along with mandatory concurrence of DPIIT before rejection, including detailed guidelines regarding rejection or closure due to incomplete applications, proposals requiring amendments to earlier approvals, requirement of NCLT approval first for M&A applications, and imposition of compounding provisions in case of FEMA violations.
* Applications covered under Press Note 3 will be dealt with by the respective Ministries / Departments and
will also require clearance from the Ministry of Home Affairs.
* Regular review of pending proposals by the DPIIT along with the departments concerned will take place every four to six weeks, instead of the three months earlier.
* DPIIT and each of the Competent Authorities shall maintain a database on the proposals received along with details such as date of receipt, investor and investee company details, volume of foreign investment involved and date of grant of approval / rejection letter.
* The number of mandatory documents to be submitted has been reduced.
* Digitally-signed online submissions are now accepted.
* Overall time limit for processing of applications is set at 10-12 weeks.

The SOP also provides for other important points, advisories and formats for submitting FDI proposals and for Approval letter. [Circular No. 1/8/2016-FDI POLICY dated 9th November, 2020.]

(ii) The Directorate-General of Civil Aviation (DGCA) had, in March, 2019, issued revised SOPs for export of aircraft by companies lending them in case of defaults by companies which have leased such aircraft under the ‘Cape Town Convention’. RBI has now amended the Export of Goods and Services Regulations exempting the furnishing of declaration in case of re-export of leased aircraft / helicopters and / or engines / auxiliary power units (APUs) re-possessed by overseas lessor and duly de-registered by the DGCA on the request of Irrevocable Deregistration and Export Request Authorisation (IDERA) holder, subject to permission by the DGCA / Ministry of Civil Aviation for such exports. [Notification No. FEMA 23 (R )/(4)/2021-RB, dated 8th January, 2021.]

ICAI ADVISORIES AND ANNOUNCEMENTS

* Advisory – ICAI Valuation Standards 2018 to be followed while conducting any type of Valuation Engagement. [21st December, 2020.]
* Announcement – Clarification on Statutory Auditor of a company giving feedback to Credit Rating Agencies about Auditee Client. [5th January, 2021.]

ICAI MATERIAL

* Report on Audit Quality Review 2019-20. [29th December, 2020.]
* Handbook on Audit of CSR Activities. [11th January, 2021.]
* Compendium of Opinions of the Expert Advisory Committee – Volume XXXVII. [12th January, 2021.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Deduction of
tax at source from salaries u/s 192 during the financial year 2020-21. [Circular
No. 20/2020 dated 3^rdDecember, 2020.]

2.
Clarifications on provisions of the Direct Tax Vivad Se
Vishwas Act, 2020. [Circular No. 21/2020 dated 4^th
December, 2020.]

COMPANY LAW

I. COMPANIES
ACT, 2013

(I) Designation
of Special Court for the States of Maharashtra, West Bengal and Tamil Nadu in
connection with trials under Companies Act, 2013 in respect of cases filed by
SEBI. The Central Government has notified the special
courts, as mentioned in the Notification, for the states of Maharashtra,
West Bengal and Tamil Nadu to ensure speedy disposal of trials of offences
punishable under the Companies Act, 2013 in respect of cases filed by SEBI. [MCA
Notification S.O. 4283(E) dated 27^th November, 2020.]

(II) MCA
further extends due date for filing cost audit report. MCA has extended the last date for filing Form CRA-4 (Cost Audit
Report) and relaxed additional fees in view of the large-scale disruption
caused by the Covid-19 pandemic. It has further allowed cost auditors to submit
their report for the F.Y. 2019-20 to the Board of Directors of Companies by 31^st
December, 2020 (earlier, 30^th November). Companies are required to
file Form CRA-4 within 30 days from receipt of a copy of the Cost Audit Report.
[MCA General Circular 38/2020 dated 1^stDecember, 2020.]

(III) MCA
amends provisions with respect to online assessment exams to be cleared by
Independent Directors under the Companies Act, 2013. Through this Amendment, MCA has notified that Independent Directors
(IDs) shall pass an online proficiency self-assessment test conducted by
the Institute, obtaining a minimum of 50% (as against 60%) in aggregate, within
a period of two years (as against one year) from the date of inclusion of their
name in the data bank. MCA has further clarified that IDs are not required to
take the online proficiency self-assessment test when they have served for a
total period of not less than three years (as against ten years) in the
prescribed list of entities as on the date of inclusion of their name in the
data bank. [Companies (Appointment and Qualification of Directors) Fifth
Amendment Rules, 2020 dated 18^th December, 2020.]

II. SEBI

(IV) SEBI
further extends timeline for conducting internal audit and system audit. In view of the prevailing situation due to the pandemic, SEBI has
decided to extend the timelines for compliances by the trading members / clearing
members related to system audit and internal audit, the due date of which
has been extended to 31^st December, 2020. As regards
half-yearly net worth certificate, Cyber Security and Cyber Resilience Audit,
the due date has been extended to 31^stDecember, 2020 and 31^st
January, 2021, respectively. [SEBI/HO/MIRSD/DOP/CIR/P/2020/235 dated 1^stDecember, 2020.]

(V) SEBI issues
operational guidelines for transfer and dematerialisation of re-lodged physical
shares. In continuation of its Circular dated 7^th
September, 2020 fixing 31^st March, 2021 as the cut-off date for
re-lodgement of transfer requests and stipulating that such transferred shares
shall be issued only in demat mode, SEBI has now issued the operational
guidelines in this regard to be followed by the Registrar and Transfer Agents
(RTAs) and Investors and Depository Participants (DPs). As per this guideline,
RTAs, upon receiving the transfer re-lodgement request, are required to issue a
Letter of Confirmation (LoC) to the investor (the transferee) who has to submit
the same along with the Demat Request to the DP within 90 days of receipt of
the LoC. The format of the LoC is annexed to the Circular.
[SEBI/HO/MIRSD/RTAMB/CIR/P/2020/236 dated 2^nd December, 2020.]

(VI) SEBI
issues Circular to increase participation of non-institutional shareholders in
e-voting facility provided by listed entities. In order to
facilitate seamless authentication and to enhance ease and convenience of
participating in the e-voting process, SEBI has come out with the broad
initiatives to be implemented in two phases; the first phase is to be completed
by 9^th June, 2021 and second phase to be completed
within 12 months of the completion of phase 1. With this, SEBI ultimately
intends to eliminate the key challenge of registration on various E-voting
Service Providers and maintenance of multiple user IDs and passwords by the
shareholders and eventually increase the participation. [SEBI/HO/CFD/CMD/CIR/P/2020/242
dated 9^th December, 2020.]

ACCOUNTS AND AUDIT

(A) CARO 2020 now
made applicable from F.Y. 2021-22 – The MCA has extended the
applicability date of the Companies (Auditor’s Report) Order, 2020 for one
more year, i.e., for the financial years commencing on or after 1^st
April, 2021. [MCA order dated 17^th December, 2020.]

FEMA

1.)
Notification amending Regulation on Export and Import of Currency has
been issued whereby a new Regulation 10 has been introduced giving power
to the Reserve Bank to restrict export or import of currency. The
Reserve Bank may now, in public interest and in consultation with the Central
Government, restrict the amount of Indian currency notes of Government
of India and / or of Reserve Bank, and / or foreign currency, on
case-to-case basis that a person may bring into or take outside India and
prescribe such conditions as it may deem necessary. This is in furtherance of
earlier Notification No. FEMA 6(R)/(2)/2020-RB, dated 11^th August,
2020 whereby the provision regarding RBI’s power to allow, on specific
application, import or export of Indian currency in Regulation 3 was replaced
with a new Regulation 9. [Notification No. FEMA 6(R)/(3)/2020-RB, dated 3^rdDecember, 2020.]

2.) The
Government had announced a hike in the limit of FDI in the defence sector from
49% to 74% in May, 2020. The DPIIT had issued Press Note 4 dated 17^thSeptember,
2020 detailing the changes and bringing in some conditions. These changes could
become effective only when necessary amendments are made in the FEMA(NDI)
Rules. A Notification amending the NDI Rules to bring in the changes for FDI
in the Defence Sector has now been issued. The amendments made are in line
with the changes issued vide Press Note 4 earlier. Please refer to BCAJ,
October, 2020 detailing the changes brought in. [Notification No. S.O.
4441 (E) (F. No. 01/05/EM/2019), dated 8^th December, 2020.]

3.) RBI has
issued an important Circular easing several Procedures for Export of Goods and
Services by delegating more powers to AD Banks:

a) Direct
dispatch of shipping documents

AD Banks were
allowed to regularise cases of dispatch of shipping documents by the exporter
directly to the consignee or his agent resident in the country of the final
destination of goods up to USD 1 million or its equivalent per export shipment.
It has now been decided to do away with this limit of USD 1 million subject to
the following conditions:

i) The export
proceeds have been realised in full except for the amount written off, if any,
in line with the provisions for write-off;

ii) The
exporter is a regular customer of AD bank for a period of at least six months;

iii) The
exporter’s account with the AD Bank is fully compliant with RBI’s KYC / AML
guidelines;

iv) The AD bank
is satisfied about the bona fides of the transaction.

b) ‘Write-off’
of unrealised export bills

RBI allowed,
through the AD Banks, exporters to ‘write-off’ unrealised export bills up to
specified limits in enumerated circumstances if all prescribed conditions were
met. To provide greater flexibility to the AD Banks and to reduce the time
taken for according such approvals, the procedure is now revised as under:

The AD bank
may, on request of the exporter, write off unrealised export bills without
any limit in respect of cases falling under categories specified below:

(i) The
overseas buyer has been declared insolvent and a certificate from the official
liquidator, indicating that there is no possibility of recovery of export
proceeds, has been produced;

(ii) The
unrealised amount represents the balance due in a case settled through the
intervention of the Indian Embassy, Foreign Chamber of Commerce or similar
organisation;

(iii) The goods
exported have been auctioned or destroyed by the port / customs / health authorities
in the importing country.

The ‘write-off’ is allowed provided the AD Bank is satisfied with the
documentary evidence produced. Further, in cases falling under the above categories, AD Bank may also permit
write-off of outstanding amount of export bills up to the specified ceilings
where the documents have been directly dispatched by the exporter to the
consignee or his agent resident in the country of final destination of goods.

In all other cases, the erstwhile limits and conditions continue as
currently prevalent. Certain corrections in the terms and forms have also been
made in the provisions.

c) Set-off of export receivables against import payables

There has been a long-standing demand of
importers and exporters to allow set-off of their outstanding export
receivables against outstanding import payables with their overseas group /
associate companies. At present, AD Banks are allowing exporters and importers
to set off only from / to the same overseas buyer / supplier. Accordingly, it
has been decided to delegate powers to AD Banks to also consider such requests
of set-off and a host of revised guidelines / conditions have been issued. The
chief ones among these are those requiring that the arrangement is backed by a
written, legally enforceable agreement / contract in case of set-off among
group / associate companies; not allowing set-off of export receivables for
goods against import payables for services and vice versa; allowing set
off only between the export and import legs taking place during the same
calendar year; and so on.

d) Refund of export proceeds

AD banks, through whom the export proceeds were originally realised,
were allowed to consider requests for refund of export proceeds of goods
exported from India and being re-imported into India on account of poor
quality. However, as per current provisions, the exporter had to provide an
undertaking that such goods will be re-imported within three months from the
date of remittance. The instructions have been reviewed and henceforth AD
Banks, while permitting refund of export proceeds of goods exported from India,
shall not insist on the requirement of re-import of goods, where
exported goods have been auctioned or destroyed by the port or customs or
health authorities or any other accredited agency in the importing country,
subject to submission of satisfactory documentary evidence. In all other cases
AD banks shall ensure that the procedures as applicable to normal imports are
adhered to and that an undertaking from the exporter to re-import the goods
within three months from the date of refund of export proceeds shall be
obtained. [A.P. (DIR Series 2020-21) Circular No. 8, dated 4^thDecember,
2020.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Extension of deadline
for filing declaration and payment of tax under Vivaad Se Vishwas
Scheme. [Notification No. 85 of 2020 dated 27^th October,
2020.]

2. Clarifications in
respect of the Direct Tax Vivaad Se Vishwas Act, 2020. [Circular
No. 18/2020 dated 28^th October, 2020.]

3. CBDT notifies Equalisation
Levy (Amendment) Rules, 2020; revises Forms for filing statements and
appeals. [Notification No. 87 of 2020 dated 28^th October, 2020.]

4. Extension of deadline
for filing Income Tax Return, Tax Audit Report and Transfer Pricing Report. [Notification
No. 88 of 2020 dated 29^th October, 2020.]

5. CBDT authorises CIT to condone the delay in
filing audit report in Form No. 10BB. [Circular
No. 19/2020 dated 3^rd November, 2020.]

COMPANY LAW

I. COMPANIES ACT, 2013

(I) MCA extends minimum residency requirement
relaxation for directors for F.Y. 2020-21 – MCA
relaxes minimum residency requirement of 182 days in a year for resident
directors for F.Y. 2020-21 as well, in view of Covid-19. Clarifies that
‘…non-compliance of minimum residency in India for a period of at least 182
days in a year, by at least one director in every company, under section 149 of
the Companies Act, 2013 shall not be treated as non-compliance for the
financial year 2020-2021 also.’ [MCA General Circular No. 36/2020 dated 20^th
October, 2020.]

(II) MCA extends LLP Settlement Scheme, 2020
applicability to documents having due dates 30^thNovember – MCA extends the date of applicability of the LLP Settlement
Scheme, 2020 to defaulting LLPs to 30^th November, 2020 owing to the
large-scale disruption caused by the pandemic. Accordingly, it states that ‘any
“defaulting LLP” is permitted to file belated documents, which were due for
filing till 30^th November, 2020 in accordance with the provisions of
this Scheme.’ It adds that if a statement of account and solvency for the F.Y.
2019-2020 has been signed beyond the period of six months from the end of the
financial year but not later than 30^th November, 2020, the same
shall not be deemed as non-compliance. [MCA General Circular No. 37/2020
dated 9^th November, 2020.]

II. SEBI

(III) SEBI requires
listed debt security issuers to contribute towards ‘Recovery Expense Fund’ – In order to enable the Debenture Trustee(s) to take prompt action
for enforcement of security in case of ‘default’ in listed debt securities,
SEBI has required the creation of a ‘Recovery Expense Fund’ (REF) by issuers of
debt securities. The REF shall be used in the manner as decided in the meeting
of the holders of debt securities. SEBI has also prescribed the norms for the
manner of creation and operation of REF, utilisation and provision for refund
to the issuer. These provisions shall come into force w.e.f. 1^st
January, 2021. [Circular No. SEBI/HO/MIRSD/CRADT/CIR/P/2020/207, dated
22^nd October, 2020.]

(IV) SEBI
streamlines process for approval of draft Schemes of Arrangement by SEs – SEBI streamlines the processing of draft Schemes of Arrangement
filed by listed entities with stock exchanges (SEs) to ensure that the
recognised SEs refer the draft Schemes to SEBI only upon being fully convinced
that the listed entity is in compliance with the requisite SEBI norms. SEBI
further states that the amended provisions will be applicable for all the
Schemes filed with the stock exchanges after 17^th November, 2020. It
highlights that w.e.f. 3^rd November, 2020 steps for listing and
trading in specified securities in relation to the Scheme of Arrangement must
commence within 60 days of receiving the NCLT order approving the Scheme. SEBI
further requires Audit Committees to comment on the viability of the Scheme
from the company’s perspective. SEBI also requires submission of a report from
the Committee of Independent Directors that the draft Scheme is not detrimental
to the shareholders of the listed entity. [SEBI/HO/CFD/DIL1/CIR/P/2020/215
dated 3^rd November, 2020.]

(V) SEBI issues guidelines for Debenture Trustees
(DTs) to perform due diligence for creation of security – SEBI issues guidelines for
strengthening of DTs’ role to safeguard the interest of investors in debt
securities, for new issues proposed to be listed on or after 1^stJanuary,
2021. SEBI further states that to enable the DTs to exercise due diligence
w.r.t. creation of security, the issuer, at the time of entering into the DT
agreement, shall provide information as prescribed. SEBI has cast the duty for
due diligence on DTs. SEBI provides that the DTs shall maintain records and
documents pertaining to due diligence for a minimum period of five years from
redemption of debt securities. SEBI also requires issuers of debt securities to
create charge in favour of the DTs before making application for listing of
debt securities and specifies, ‘The Stock Exchange(s) shall list the debt
securities only upon receipt of a due diligence certificate… from the Debenture
Trustee confirming creation of charge and execution of Debenture Trust Deed.’ [SEBI/HO/MIRSD/CRADT/CIR/P/2020/218
dated 3^rd November, 2020.]

(VI) SEBI issues
Standard Operating Procedure with respect to imposition of fine and initiation
of action in case of non-compliance of continuous disclosures by issuers of listed
debt securities – In order to align the SOP for
imposition of fine and initiation of action in case of non-compliance of
continuous disclosures by issuers of the listed securities, SEBI has laid down
that the fine is to be levied by the Stock Exchange (SE) for violation of
various regulations as listed in the Circular. The SE shall disclose on their
website the action(s) taken against the entities for non-compliance(s),
including the details of the respective requirement, amount of fine levied /
action taken, etc. The Circular shall come into effect for compliance period
ending on or after 31^st December, 2020. [SEBI/HO/DDHS/DDHS/CIR/P/2020/231
dated 13^th November, 2020.]

ACCOUNTS AND AUDIT

(A) Guidance
Note on Accounting for Share-based Payments (Revised 2020) – This is the Revised Guidance Note (GN) applicable for enterprises
that are not required to follow Indian Accounting Standards. The revised GN
deals with share-based payment transactions with employees as well as
non-employees and deals extensively with group-wide share-based payment
transactions. [ICAI Guidance Note issued on 4^th November, 2020.]

(B) Guidance
Note on Applicability of AS 25 and Measurement of Income Tax Expense for
Interim Financial Reporting (Revised) – The revised
GN incorporates updated references used in earlier GNs and relevant examples.
It also enlightens about the impact of opinions issued by ICAI on the
preparation of interim financial reports. Pursuant to this revision, ‘Guidance
Note on Applicability of AS 25 to Interim Financial Results’ and ‘Guidance
Note on Measurement of Income Tax Expense for Interim Financial Reporting in
the Context of AS 25’ stand withdrawn. [ICAI Guidance Note issued on 4^th
November, 2020.]

FEMA

(i) The FDI Policy Framework is put up periodically by the Government through the Department for
Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce
& Industry. The DPIIT makes these pronouncements on FDI through the
Consolidated FDI Policy Circular. These pronouncements are separately notified
by the Ministry of Finance by amending the FEM(NDI) Rules, 2019 under FEMA. DPIIT
has released a Consolidated FDI Policy which is effective from 15^th
October, 2020. This Policy subsumes and supersedes all past Press Releases
/ Press Notes, Circulars on FDI, Clarifications, etc. In case of any conflict
between the Consolidated FDI Policy and the NDI Rules, the Notifications issued
under FEMA will prevail. [DPIIT File Number 5(2)/2020-FDI Policy dated 15^th
October, 2020.]

(ii) DPIIT had vide ‘Press Note 4’
dated 18^th September, 2019 brought entities engaged in the news
digital media sector under the FDI regime.
Accordingly, entities engaged in uploading or streaming of news and current
affairs through digital media platforms were permitted to receive FDI up to 26%
under the government approval route. This was a new requirement which resulted
in a few concerns among such entities, chief among which were: that no window
was provided to bring the investment as per the FDI regime; and it was not
clear whether or not entities which are digital news aggregators are covered
because ‘digital media’ was not defined.

In response to representations received on these and other concerns,
DPIIT has released a clarification stating that the FDI Policy will apply to
the following Indian entities:

(a) digital media entities streaming /
uploading news and current affairs on websites, apps or other platforms;

(b) news agency which gathers, writes and
distributes / transmits news, directly or indirectly, to digital media entities
and / or news aggregators; and

(c) news aggregator, being an entity which,
using software of web application, aggregates news content from various sources
such as news websites, blogs, podcasts, video blogs, user submitted links,
etc., in one location.

A window is now
provided for entities covered in (a) above of one year from the date of this
clarification to align their FDI to the 26% level with approval of the Central
Government.

The following
additional conditions have been prescribed:

i) The majority of the Directors on the Board of
the investee company shall be Indian citizens;

ii) The CEO shall be an Indian citizen; and

iii) The investee company is
required to obtain security clearance of all foreign personnel likely to be
deployed for more than 60 days in a year by way of appointment, contract or
consultancy or in any other capacity for functioning of the entity prior to
their deployment. In the event of the security clearance of any foreign
personnel being denied or withdrawn for any reasons whatsoever, the investee
entity needs to ensure that the person concerned resigns or his / her services
are terminated forthwith after receiving such directives from the government.

Further, it is also
stated that the investee entities, i.e., the Indian entities receiving FDI,
would be responsible to comply with Press Note 4. [DPIIT File No.
5(4)/2019-FDI Policy dated 16^thOctober, 2020.]

(iii) RBI has
issued a Notification for regulating posting and collection of margin on specified
derivative contracts. By this regulation:

A. RBI has prohibited any person other than
Authorised Dealers (ADs) to post and collect margin and receive and pay
interest on margin, posted and collected on their own account or on behalf of
their customers for permitted derivative contracts entered into with a person
resident outside India.

B. Permitted derivative contracts have been
defined to mean Foreign Exchange Derivative Contracts, Interest Rate Derivative
Contracts and Credit Derivative Contracts undertaken in line with their
respective Regulations / Directions. The definition can also cover any other
derivative contract as specified by RBI.

C. Other important terms including ‘Margin’,
‘Derivative’, etc., have been defined specifically for this Notification. [Foreign
Exchange Management (Margin for Derivative Contracts) Regulations, 2020, No.
FEMA 399/RB-2020, dated 23^rd October, 2020.]

(iv) There are several reports to be filed with RBI under FEMA. RBI
has decided to discontinue 17 returns / reports with a view to improve the ease
of doing business and reduce the cost of compliance. The discontinued
reports are those that are to be submitted periodically by the AD Banks,
Custodians and FFMCs and are listed in the Annexure to the Circular. [A.P. (DIR
Series) Circular No. 05 dated 13^th November, 2020.]

(v) The RBI has now
issued a Circular in respect of Compounding of Contraventions under FEMA
whereby the following changes have been made:

(a) The power to compound certain
contraventions under Notifications dealing with investment in India – FEMA 20
and FEMA 20(R) – was delegated to the Regional Offices / Sub-offices of the
RBI. This delegation of powers was superseded by the introduction of the NDI
Rules in October, 2019. The Circular now updates the reference to various
regulations as per the earlier Notifications to bring it in line with the NDI
Rules.

(b) Contraventions under FEMA are classified
into ‘technical’ or ‘material’ or ‘sensitive / serious in nature’. Technical
contraventions are dealt with by administrative / cautionary advice without
levying of a compounding fee. The Circular now does away with this practice and
will regularise such contraventions by levying a minimum compounding amount as
per the Compounding Matrix.

(c) Compounding Orders
issued by RBI have been made available on its website as a measure of public
disclosure. However, by this Circular, for orders issued after 1^st
March, 2020 only a summary will now be put up on the RBI website in the
prescribed format. Complete orders will no longer be available for downloading
from the RBI website.

(d) Appropriate amendments would also be made in
the Master Direction on Compounding.

[A.P. (DIR
Series) Circular No. 06 dated 17^th November, 2020.]

(vi)
The Hon’ble Supreme Court vide its interim orders dated 4^th
July, 2012 and 14^th September, 2015 passed in the case of the Bar
Council of India vs. A.K. Balaji & Ors. had directed RBI not to
grant any permission to any foreign law firm on or after the date of the said
interim order for opening of Liaison Office (LO) in India. RBI had issued a
Circular to that effect dated 29^th October, 2015. The Supreme Court
has held in the same case that advocates enrolled under the Advocates Act, 1961
alone are entitled to practise law in India and that foreign law firms /
companies or foreign lawyers cannot practise the profession of law in India.
RBI, in line with this decision, has directed AD Banks not to grant any
approval to any branch office, project office, liaison office or other place of
business in India under FEMA for the purpose of practising legal profession in
India. Further, AD Banks have been directed to bring any violation of the
Advocates Act to the notice of the RBI. [A.P. (DIR Series) Circular No. 07
dated 23^rdNovember, 2020.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Income-tax (21^st Amendment) Rules,
2020 – Rule 29B is amended. It now permits an insurer to
apply for certificate u/s 195(3). Form 15C consequently amended. [Notification No. 75 of 2020 dated 22^nd September,
2020.]

2. Faceless Appeal Scheme, 2020 notified.
[Notification Nos. 76 and 77 of 2020 dated 25^th
September, 2020.]

3. Guidelines u/s 194-0(4) and section 206C(1-1)
of the Income-tax Act, 1961. [Circular No. 17/2020 dated
29^th September, 2020.]

4. Income-tax (22^nd Amendment) Rules,
2020 – Rule 5 amended. Rules 21AG and 21AH inserted.
Forms 3CD, 3CEB and ITR 6 amended. Forms 10IE and 10IF inserted – To prescribe
manner relating to option under sections 115BAC and 115BAD, and that of
determination of depreciation under sections 115BAA to 115BAD. [Notification No. 82 of 2020 dated 1^st October, 2020.]

5. Wholesale trading defined
for the purpose of section 92C r/w/r 10CA. [Notification
No. 83 of 2020 dated 19^th October, 2020.]

COMPANY LAW

I. COMPANIES ACT, 2013

(I)
Various reliefs in timelines by MCA due to Covid-19 pandemic

Matter covered in the Circulars referred alongside	Recent Circular/ Notification Reference	Previous General Circular Reference	Previous Timeline	New Timeline
Extension of Companies Fresh Start Scheme, 2020 (CFSS,2020)	General Circular No. 30/2020 dated 28^th September, 2020	No. 12/2020
Extension of LLP Settlement Scheme, 2020	General Circular No. 31/2020 dated 28^th September, 2020	No. 13/2020
Extension of time – Scheme for relaxation of time for filing forms related to creation or modification of charges	General Circular No. 32/2020 dated 28^th September, 2020	No. 23/2020
Clarification on passing of ordinary and special resolutions by companies on account of Covid-19 – Extension of time	General Circular No. 33/2020 dated 28^th September, 2020	Nos. 14/2020, 17/2020 and 22/2020	30^thSeptember, 2020	31^st December, 2020
Last date to enter details in Independent Directors’ data bank	G.S.R. 589(E) dated 28^th September, 2020
MCA allows board meeting to be held via video conference on restricted matters for further three months	G.S.R. 589(E) dated 28^th September, 2020
MCA extends time for creation of DRR	General Circular No. 34/2020 dated 29^th September, 2020	Nos. 11/2020 and 24/2020
Necessary relaxation, insofar as filing of various IEPF e-forms (Consequent to extension of CFSS, 2020)	General Circular No. 35/2020 dated 29^th September, 2020			31^st December, 2020

Matter covered in
the Circulars referred alongside

Recent Circular/
Notification Reference

Previous General
Circular Reference

Previous Timeline

New Timeline

Extension of Companies Fresh Start Scheme,
2020 (CFSS,2020)

General Circular No. 30/2020 dated 28^th
September, 2020

No. 12/2020

Extension of LLP Settlement Scheme,
2020

General Circular No. 31/2020 dated 28^th
September, 2020

No. 13/2020

Extension of time – Scheme for relaxation of
time for filing forms related to creation or modification of charges

General Circular No. 32/2020 dated 28^th
September, 2020

No. 23/2020

Clarification on passing of ordinary and
special resolutions by companies on account of Covid-19 – Extension of
time

General Circular No. 33/2020 dated 28^th
September, 2020

Nos. 14/2020, 17/2020 and 22/2020

30^thSeptember, 2020

31^st December, 2020

Last date to enter details in Independent
Directors’ data bank

G.S.R. 589(E) dated 28^th
September, 2020

MCA allows board meeting to be held via
video conference on restricted matters for further three months

G.S.R. 589(E) dated 28^th
September, 2020

MCA extends time for creation of DRR

General Circular No. 34/2020 dated 29^th
September, 2020

Nos. 11/2020 and 24/2020

Necessary relaxation, insofar as filing of
various IEPF e-forms (Consequent to extension of CFSS, 2020)

General Circular No. 35/2020 dated 29^th
September, 2020

31^st December, 2020

(II)
Companies (Amendment) Bill, 2020 received President’s assent on 28^th
September, 2020 and now has become The Companies Amendment
Act, 2020. [Refer to Regulatory Referencer, page 115, October, 2020 issue of BCAJ
for more details.]

(III)
MCA eases private placement norms for qualified institutional buyers
– The MCA has notified the Companies (Prospectus and Allotment of Securities)
Amendment Rules, 2020 wherein Rule 14 has been amended. Now, a company need not
pass a special resolution again and again in case of offer or invitation of any
securities to qualified institutional buyers. It
shall be sufficient if the company passes a special resolution only once in a
year for all the allotments to such buyers. [Notification
No. G.S.R. 642(E) dated 16^th October, 2020.]

II. SEBI

(IV)
SEBI relaxes provisions relating to rights issue – SEBI
has notified the SEBI (ICDR) (Fourth Amendment) Regulations, 2020. The
amendment aims to relax provisions relating to rights issue to make the raising
of funds through such issues easier and quicker. The amended norms relax eligibility
criteria and disclosure requirements for rights issues. The amended ICDR norms
increase the limit for filing requirement of rights issue draft letter of offer
with SEBI for its observations, from Rs. 10 crores to Rs. 50 crores. [Notification No. SEBI/LAD-NRO/GN/2020/31, dated 28^th
September, 2020.]

(V)
SEBI amends norms relating to Listing Obligations and Disclosure Requirements
(LODR) – SEBI has amended the norms relating to LODR relating to
regulation 54 requiring listed entities to maintain 100%
asset cover. An amendment has also been made to
Regulation 56(1)(d) requiring listed entities to obtain half-yearly certificate
from a statutory auditor along with the half-yearly financial results. However,
the requirement of submission of half-yearly certificate is not applicable
where bonds are secured by a Government guarantee. As per the amended norms,
now listed entities are also required to make disclosure to stock exchanges
with regard to initiation of Forensic audit. Entities shall have to disclose the final forensic audit report
(other than for forensic audit initiated by regulatory / enforcement agencies)
along with comments of the management, if any. [Notification
No. SEBI/LAD-NRO/GN/2020/33, dated 8^th October, 2020.]

(VI) SEBI amends Debenture Trustees Regulations – SEBI has amended the norms relating to Debenture
Trustees whereby Regulation 14 has been amended requiring every debenture
trustee to accept the trust deeds which shall consist of two parts, i.e., Part
A containing statutory information on debt issue, and Part B containing
specific details to the particular debt issue. SEBI has further expanded the
scope of the duties of debenture trustees before creating a charge on the
security and the debenture trustees shall have to exercise due diligence to
ensure that such security is free from any encumbrance, or that it has obtained
the necessary consent from other charge-holders if the security has an existing
charge. [Notification No. SEBI/LAD-NRO/GN/2020/34,
dated 8^th October, 2020.]

(VII)
SEBI issues circular for standardisation of procedure to be followed by
Debenture Trustee(s) in case of ‘Default’ by issuers of listed debt securities
– SEBI, vide its circular dated 13^th October,
2020, has standardised the procedure to be followed by Debenture Trustee(s) in
case of ‘Default’ by issuers of listed debt securities. [Circular No. SEBI/HO/MIRSD/CRADT/CIR/P/2020/203 dated 13^th
October, 2020.]

FEMA

(i) Exporters are added to the Caution List of RBI on an automated
basis since 2016 vide A.P. (DIR Series) Circular No. 74. Barring exceptions
where an extension is granted by the AD Bank, if any shipping bill remains
outstanding for more than two years in the EDPMS system, the exporter would be
put under the caution list of RBI automatically. Once caution-listed, the
exporter would not be granted any extension in realising the export proceeds
against the outstanding bill, amongst other consequences. There was no leeway
for even genuine cases. Considering the hardships faced by exporters, this
system was sought to be discontinued by RBI as per its Statement on
Developmental and Regulatory Policies dated 9^th October, 2020.
Following the same, RBI has
now scrapped the automated caution-listing system altogether.

However,
an exporter would continue to be caution-listed by the RBI based on the
recommendations of the AD Bank and investigative agencies as was the practice
hitherto. Further, the procedures to be followed by AD Bank for such
caution-listed exporters would continue as earlier. [A.P.
(DIR Series) Circular No. 03 dated 9^th October, 2020.]

ICAI ADVISORY

* Advisory on Compliance
with Website Guidelines – Advisory containing a
non-exhaustive list of contents and features on the
websites of members and firms that are prohibited. [14^th
October, 2020.]

ICAI MATERIAL

* Indian Accounting
Standards: An Overview – Revised edition of publication
providing at-a-glance basic aspects of Ind ASs, differences between Ind AS and
AS / IFRS. [6^th October, 2020.]

* Quick Insights on
Professional Opportunities Abroad for Indian CAs –
Guide to members willing to seek opportunities abroad. [14^th
October, 2020.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

Banks are
advised to immediately refund the charges collected, if any, on or after 1^st
January, 2020 on transactions carried out using the electronic modes prescribed
u/s 269SU of the IT Act and not to impose charges on any future transactions
carried out through the said prescribed modes. [Circular No. 16/2020 dated
30^th August, 2020.]

COMPANY LAW

I.
COMPANIES ACT, 2013

(I) Amendments made in Corporate Social
Responsibility Rules – The MCA has issued the
Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020 in
order to amend the Companies (Corporate Social Responsibility Policy) Rules,
2014. Following this Notification, any company engaged in research and
development activity of a new vaccine, drugs and medical devices in their
normal course of business, may undertake research and development activity of
new vaccine, drugs and medical devices related to Covid-19 for the financial
years 2020-21, 2021-22 and 2022-23 subject to the conditions mentioned in the
said Notification. [Notification dated 24^th August, 2020.]

(II) MCA dispenses with the requirement to annex
extract of Annual Return in Form MGT-9 in Board’s Report if web link for Annual
Return is disclosed in the Board’s Report – The MCA
has clarified an amendment in section 92 which now requires companies to place
a copy of the Annual Return on its website and the web-link of the same to be
provided in the Board’s Report. In such cases, companies are not required to
attach Form MGT-9 (Extract of Annual Return) in the Board’s Report. [Notification
dated 28^th August, 2020.]

(III) MCA amends definition of deposits with respect
to convertible notes issued by Startups – In order
to bring the definition of deposit in line with the revised definition of
Startup by the Department for Promotion of Industry and Internal Trade, the MCA
has notified revision to the Companies (Acceptance of Deposits) Rules, 2014.
Now, convertible notes issued by Startups which are convertible into equity
shares or repayable within a period not exceeding ten years (as against the
original tenure of ‘five years’) from the date of issue, shall not be
considered as deposits. Further, the maximum limit in respect of deposits to
be accepted from members shall not apply to a private company which is a
Startup for ten years (as against the original tenure of ‘five years’) from
the date of its incorporation. [Notification dated 7^th September,
2020.]

(IV) MCA
extends due date of filing of Cost Audit Report till 30^th November,
2020 – In view of the
extraordinary disruption caused due to the pandemic, it has been decided that
if cost audit report for the financial year 2019-20 is submitted by 30^th
November, 2020, then the same would not be viewed as violation of Rule 6(5)
of the Companies (Cost Records and Audit) Rules, 2014. Consequently, the cost
audit report for the financial year ended on 31^st March, 2020 shall
be filed in e-form CRA-4 within 30 days from the date of receipt of the copy of
the cost audit report by the company. However, in case a company has availed
extension of time for holding Annual General Meeting, then e-form CRA-4 may be
filed within the timeline provided under the proviso to rule 6(6) of the
Companies (Cost Records and Audit) Rules, 2014. [General Circular No.
29/2020 dated 10^th September, 2020.]

(V) Lok Sabha passes Companies (Amendment) Bill,
2020 on 19^th September, 2020 – The Lok
Sabha has passed the Companies (Amendment) Bill, 2020 to decriminalise several
non-compoundable offences as also to promote ease of doing business. The Bill
will permit direct listing of securities of Indian companies in overseas stock
exchanges without listing them on domestic stock exchanges. The Bill also
stipulates that specified classes of unlisted companies will have to prepare
and file their periodic financial results. The said Bill was introduced in the
Lok Sabha in March this year.

II. SEBI

(VI) SEBI notifies cut-off date for re-lodgement of
transfer deeds to 31^st March, 2021 – As
per SEBI’s Circular No. 12/2019 dated 27^th March, 2019 the Board had
clarified that transfer of securities held in physical mode lodged before the
deadline (1^st April, 2019) but rejected and returned due to
deficiency in the documents, may be re-lodged with requisite documents. SEBI
has now fixed the cut-off date for such re-lodgement as 31^st March,
2021 and shares that are re-lodged for transfer shall be issued only in
DEMAT mode. [Circular SEBI/HO/MIRSD/RTAMB/CIR/P/2020/166 dated 7^th
September, 2020.]

(VII) SEBI extends time to share information towards
Automation of Continual Disclosures under Regulation 7(2) of SEBI (Prohibition
of Insider Trading) Regulations, 2015 to 30^th September, 2020 – SEBI has extended the deadline for submission of required
information as prescribed vide its circular dated 9^th
September, 2020 with the designated depository by the listed companies to 30^th
September, 2020 (as against the previous deadline of 18^th September,
2020).

ACCOUNTS AND AUDIT

(A) Conceptual Framework for Financial Reporting
under Indian Accounting Standards (Ind AS) – The
revised Ind AS Framework, corresponding to IASB’s Conceptual Framework 2018,
is applicable for Standard-setting activity from accounting periods beginning
from 1^stApril, 2020 and for the preparers of financial statements
from a future date. [ICAI Announcement dated 28^th August, 2020.]

(B) Revised Long Form Audit Report (LFAR) – The formats of LFAR for (i) Statutory central auditors, (ii)
Branch auditors, and (iii) Large / irregular / critical accounts for Branch
Auditors have been revised and are required to be put into operation for the
period covering F.Y. 2020-21 and onwards. [RBI Notification No.
RBI/2020-21/33 dated 5^th September, 2020.]

FEMA

The
Government had announced a hike in the limit for investment in the Defence
Sector from 49% to 74% in May, 2020. The DPIIT has now issued a press
release for the same. The changes are:

(a) An industry under the Defence Sector requiring
Industrial and Arms Act Licences can now receive FDI under automatic route up
to 74%, increased from the earlier limit of 49%. However, this relief is
available only to companies seeking new industrial licenses.

(b) FDI beyond 74% can be received under Government
Route, and as at present, where it is likely to result in access to modern
technology or for other reasons to be recorded.

(c) Companies not seeking industrial licence, or
those that have already obtained Government approval, will require Government
approval for raising their FDI beyond 49%. Further, such companies will now
also need to mandatorily submit declaration with the Ministry of Defence (MoD)
in case of change in equity or shareholding pattern or for transfer of stake to
a new foreign investor.

(d) Government has now reserved the right to review
any foreign investment in the Defence Sector as also subject foreign
investments to scrutiny on grounds of national security.

(e) Other conditions related to security clearance
and self-sufficiency remain applicable as at present.

It should be noted that these changes will become
effective only from the date that necessary amendments are made in the FEMA
(NDI) Rules, which have not yet taken place. [Press Note 4 of 2020 dated 17^th
September, 2020.]

ICAI MATERIAL

1. New Compendium of Indian Accounting Standards
(Ind AS) as on 1^st April, 2020 –
Compendium containing updated Ind AS’s applicable for the accounting period
beginning 1^st April, 2020. [25^th August, 2020.]

2. Handbook on Potential for ‘NEO Import
Substituting Industrialisation in India’ – ISI (Covid-19) – Research publication providing guidance in respect of potential
for import substitution industries in India. [3^rdSeptember,
2020.]

3. Relief Measures Introduced
in Insolvency Resolution Process in the Country due to outbreak of Covid-19
Pandemic – Booklet enumerating judicial, legislative and economic measures
initiated on account of the pandemic. [8^th September, 2020.]

Problems are not stop signs, they are
guidelines

—
Robert H. Schuller

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1.
Notifications bearing Nos. 68, 70 and 80 of 2019 issued under clause (v) of the
proviso to section 194N of the Income-tax Act, 1961 prior to its
amendment by the Finance Act, 2020 shall be deemed to be issued under the
fourth proviso to section 194N as amended by the Finance Act, 2020. [Circular
No. 14/2020 dated 20^th July, 2020.]

2. Income-tax
(17th Amendment) Rules, 2020 – Rule 31AA amended. It notifies amendments in
TCS statement being Form 27EQ. [Notification No. 54 of 2020 dated 24^th
July, 2020.]

3. Income-tax
(18^th Amendment) Rules, 2020 – Rule 12CB amended. It notifies amendments
in the procedure of filing of statement of income paid or credited by an
investment fund to its unit holders as well as in Form 64C and 64D. [Notification
No. 55 of 2020 dated 28^th July, 2020.]

4. All those
whose original due date for filing returns was 31^st July, 2020 have
to pay self-assessment tax by 31^st July, 2020. Interest u/s 234A
will not be charged if senior citizens pay part of the tax payable for A.Y.
2020-21 by 31^st July, 2020 and balance tax payable does not exceed
Rs. 1 lakh. Self-assessment tax paid by senior citizens before 31^st
July, 2020 will be deemed to be advance tax paid for the purpose of levy of
interest u/s 234. [Notification No. 56 of 2020 dated 29^th July,
2020.]

5. Introduction of Faceless assessment
scheme. [Notification Nos. 60 and 61 of 2020 dated 13^th
August, 2020.]

COMPANY LAW

I.
COMPANIES ACT, 2013

(I) MCA’s relief on delivery of notice to
shareholders extended for listed companies, for rights issues opening up to 31^st
December, 2020 – In case of listed companies which
comply with the relevant circulars issued by SEBI, inability to dispatch the
relevant notice to shareholders through registered post or speed post or
courier would not be viewed as violation of section 62(2) of the Companies Act,
2013 for rights issues opening up to 31^st December, 2020.
Other requirements provided in the said General Circular 21/2020 dated 11^th
May, 2020 remain unchanged. [General Circular No. 27/2020 (F. No.
2/4/2020-CL-V); Dated 3^rd August, 2020.]

(II) Application for extension of AGM by companies
whose Financial Year ended on 31^st March, 2020 – MCA has clarified that companies whose Financial Year ended on 31^st
March, 2020 and who cannot hold their AGM by 30^th September,
2020 [even with relaxations granted vide Circular No. 20/2020 dated
5^th May, 2020 to conduct AGMs via Other Audio Visual Means (OAVM)],
need to apply in Form GNL-1 to jurisdictional Registrar on or before 29^th
September, 2020 to seek extension of time (for a maximum period of three
months) for holding the same. The Registrar of Companies has been advised
to consider the applications made by companies liberally. [General Circular
No. 28/2020 (F. No. 2/4/2020-CL-V); Dated 17^th August, 2020.]

(III) The Institute of Company Secretaries of
India Centre for Corporate Governance, Research and Training (ICSI-CCGRT) – Under its research initiatives, it has
launched a series on Companies Act Checklists Chapter-wise. Till date Checklists
on Chapter II, Chapter VI and Chapter X are launched and the same are available
on the link https://www.icsi.edu/ccgrt/research-initiatives-2/

II. SEBI

(IV) SEBI
clarifies that investors with physical securities are allowed to tender shares
in buybacks, open offers and delisting of securities – SEBI has clarified that shareholders holding securities in physical
form are allowed to tender shares in open offers, buy-backs through tender
offer route and exit offers in case of voluntary or compulsory delisting and
the restriction under Regulation 40(1) of LODR Regulations shall not apply. [Circular
SEBI/HO/CFD/CMD1/CIR/P/2020/144 dated 31^st July, 2020.]

(V) SEBI
allows extension on use of digital signature certifications for authentication
/ certification of filings / submissions made to Stock Exchanges till 31^st
December, 2020 – SEBI has permitted listed entities
to authenticate / certify any filing / submission made to stock exchanges on or
after 1^st July, 2020 under the LODR Regulations, using digital
signature certificates (DSCs) till 31^stDecember, 2020. Earlier,
SEBI had permitted the same until 30^th June, 2020 vide its
circular dated 17^th April, 2020. [Circular
SEBI/HO/CFD/CMD1/CIR/P/2020/145 dated 31^st July, 2020.]

(VI) Every
listed entity shall maintain public shareholding within a period of three years
instead two years – Now, every listed company which
has public shareholding below 25% on the commencement of the Securities
Contracts (Regulation) (Second Amendment) Rules, 2018, shall increase its
public shareholding to at least 25% within a period of three years from
the date of such commencement, in the manner specified by SEBI. [Notification
G.S.R. 485(E) (F. No. 5/35/CM/2006 Volume- III); dated 31^st July,
2020.]

(VII)
RESOURCES FOR TRUSTEES OF MUTUAL FUNDS – Trustees
shall appoint a dedicated officer having professional qualifications and a
minimum five years of experience in finance and financial services related
field. The officer so appointed shall be an employee of the Trustees and
directly report to them. [Circular SEBI/ HO/IMD/DF4/CIR/P/2020/0000000151
dated 10^th August, 2020.]

ACCOUNTS AND AUDIT

(A)
Companies (Indian Accounting Standards) Amendment Rules, 2020 – Amended standards / topics: (i) Ind AS 103: Definition of a Business,
Optional test to identify concentration of Fair Value, Elements of a Business,
and Assessing whether an acquired process is substantive; (ii) Ind AS 107: Uncertainty
arising from interest rate benchmark reform; (iii) Ind AS 109: Temporary
exceptions from applying specific hedge accounting requirements; (iv) Ind
AS 116: Covid-19-related rent concession for lessees; (v) Ind AS 1, 8,
10 and 34: Materiality; and (vi) Ind AS 37: Restructuring. [MCA
Notification dated 24^th July, 2020.]

(B)
Implementation of Ind AS by NBFCs and ARCs –
Unrealised gain / loss on a derivative transaction undertaken for hedging may
be offset against the unrealised loss / gain recognised in capital (either
through P&L or OCI) on the corresponding underlying hedged instrument for
the purposes of computation of regulatory capital and regulatory ratios. [RBI
Notification No. RBI/2020-21/15 dated 24^th July, 2020.]

(C)
Timeline for submission of financial results by listed entities (under
Regulation 33 of the LODR Regulations) for the quarter / half year / financial
year ended 30^th June, 2020 – extended
from 14^th August to 15^th September, 2020. [SEBI
Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/140 dated 29^th July, 2020.]

(D) Review
Engagements on Interim Financial Information in the Current Evolving
Environment Due to Covid-19 – ICAI’s Guidance
highlighting key areas of focus in the current environment when undertaking a
review of interim financial information in accordance with SRE 2410. [ICAI’s
Auditing Guidance dated 7^thAugust, 2020.]

FEMA

(i) FEMA was
earlier regulated and administered by RBI including with respect to capital
account transactions covered u/s 6. However, with effect from 15^th
October, 2019 this power was shifted to the Central Government for non-debt
capital account transactions including those covered for FDI under the Non-Debt
Instruments (NDI) Rules. Each change in these rules or introduction of an
instruction or circular required a notification by the Ministry of Finance.
This created delays. Further, Master Directions issued by RBI became
inoperative. Now, the powers have again been shifted back from the Central
Government to the RBI, though partly. RBI has now been empowered to:

(a) Administer the NDI Rules and, while
administering them, it may interpret and issue such directions, circulars,
instructions and clarifications as it may deem necessary.

(b) Permit investment into India by a person
resident outside India; or permit an Indian entity prescribed under the NDI
Rules to receive investment without the requirement of a consultation with the
Central Government as was needed previously.

(ii)
Sectoral caps and conditions for FDI in the sector of Air Transport Services as covered in Serial No. 9.3 and Other Conditions as prescribed in
Serial No. 9.5 for the Civil Aviation sector under Schedule I to the NDI Rules
have been amended. The position in the NDI Rules has now been brought in line
with the changes made in the FDI policy as amended by Press Note 2 of 2020
dated 19^th March, 2020. The important changes are:

(a) The benefit to OCIs to invest up to 100% under
the automatic route is now removed. Only NRIs are allowed this benefit.

(b) Further, investment by NRIs up to 100% has been
allowed in M/s Air India Limited.

(c) Foreign airlines are at present allowed to
invest in Indian companies operating scheduled and non-scheduled air transport
services up to a limit of 49% under the Government approval route. It has now
been clarified that this limit will subsume FDI and FII / FPI investment.

(d) Reference to Aircraft Rules, 1937 have been
made where necessary.

[Notification
No. S.O. 2442 (E) dated 27^th July, 2020 – F. No. 01/05/EM/2019.]

ICAI MATERIAL

MSME
Business Continuity Checklist: Rebooting MSMEs in the Covid-19 Era – Checklist that focuses on factors requiring special attention by
MSME managements to guide their initiative to face the ongoing tough times. [25^th
July, 2020.]

FAQs on
the SEBI Settlement Scheme, 2020 – ICAI’s FAQ
Publication on the One-Time Settlement Scheme issued by SEBI on 27^th
July, 2020. [30^th July, 2020.]

Relaxations from Regulatory Compliances Due to Outbreak of Covid-19 Pandemic – Publication that collates various relaxations provided by MCA and
SEBI. [10^th August, 2020.]

Guidance
Note on Report u/s 92E of the Income Tax Act, 1961 (Transfer Pricing) – Revised edition based on the law as amended by the Finance Act,
2020. [20^th August, 2020.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Clarifications on provisions of the Direct Tax Vivad se Vishwas Act, 2020 A ‘search case’ means an assessment or reassessment made under sections 143(3), 144, 147, 153A, 153C, 158BC of the Income-tax Act in the case of a person referred to in section 153A, section 153C, section 158BC or section 158BD of the Act on the basis of a search initiated u/s 132, or requisition made u/s 132A. The FAQ No. 70 of Circular 21/2020 stands modified to this extent [Circular 4 of 2021 dated 23rd March, 2021.]

2. Reporting under clause 30C and clause 44 of Form 3CD shall be kept in abeyance till 31st March, 2022 [Circular 5 of 2021 dated 25th March, 2021.]

3. Income-tax Rules – Income-tax (6th Amendment) Rules, 2021 Procedure and forms for application for the purpose of grant of approval of a fund, trust, institution, university, or hospital or other medical institution under clauses (i), (ii), (iii) or (iv) of the first proviso to clause (23C) of section 10, intimation of registration u/s 35, registration of charitable or religious trusts, approval of institution for the purpose of section 80G [Notification No. 19 of 2021 dated 26th March, 2021.]

4. Income-tax Rules – Income-tax (7th Amendment) Rules, 2021 Substitution of forms Sahaj ITR-1, ITR-2, ITR-3, Sugam ITR-4, ITR-5, ITR-6, ITR-7 and ITR-V [Notification No. 21 of 2021 dated 31st March, 2021.]

5. Insertion of Rule 6G of the Income-tax Rules and Form 3CD – Income-tax (8th Amendment) Rules, 2021 A new sub-rule 3 has been inserted in Rule 6G which permits furnishing of a revised audit report. It provides that if there is payment by a person after furnishing of report which necessitates recalculation of disallowance u/s 40 or section 43B, he may furnish a revised audit report before the end of the relevant assessment year to which the report pertains. Such revised report is to be signed and verified by the accountant.

An Amendment has also been prescribed in clauses 17, 18, 32 and 36 of Form 3CD [Notification No. 28 of 2021 dated 1st April, 2021.]

6. DTAA between India and Iran shall have effect in India in respect of taxes on income arising in any fiscal year beginning on or after 1st April, 2021 [Notification No. 29 of 2021 dated 1st April, 2021.]

7. Format, procedure and guidelines for submission of statement of financial transactions (SFT) for dividend income and interest With the aim to pre-fill the ITR form with dividend and interest income earned by different classes of assessees, Rule 114E has been amended and sub-rule 5A has been added wherein three types of transactions – dividend paid, interest paid and capital gains on transfer of listed securities or units of mutual funds – are required to be reported by certain reporting entities in Form 61A [Notification Nos. 1 and 2 of 2021 dated 21st April, 2021.]

COMPANIES ACT, 2013

(I) Penalty provision on non-compliance of unpaid dividend account enforced w.e.f. 24th March, 2021 The Ministry of Corporate Affairs (MCA) has enforced a penalty provision on non-compliance of unpaid dividend account from the Companies (Amendment) Act, 2020 with effect from 24th March, 2021. [MCA Notification No. S.O. 1303(E), dated 24th March, 2021.]

(II) Companies (Audit and Auditors) Second Amendment Rules, 2021 Rule 11(g) inserted in the Companies (Audit and Auditors) Rules, 2014 vide Notification dated 24th March, 2021 relating to Auditor Reporting (‘Other Matters to be included in Auditor’s Report’) on whether accounting software used for maintaining books of accounts by a company has a feature of recording audit trail facility, has now been made effective in respect of financial years commencing on or after 1st April, 2022. [MCA Notification G.S.R. 248 (E) dated 1st April, 2021.]

(III) Companies (Accounts) Second Amendment Rules, 2021 Sub-rule (1) of Rule 3 inserted in the Companies (Accounts) Rules, 2014 that mandated every company which uses accounting software for maintaining its books of accounts to use only such accounting software which has a feature of recording audit trail for each and every transaction, has now been made effective for financial years commencing on or after 1st April, 2022. [MCA Notification G.S.R. 247 (E) dated 1st April, 2021.]

(IV) Setting up of makeshift hospitals and temporary Covid Care facilities are now eligible as CSR activity MCA has clarified that spending of CSR funds for setting up of makeshift hospitals and temporary Covid Care facilities are eligible as CSR activities under items (i) and (xii) of Schedule VII of the Companies Act, 2013 to promote health care. Companies may spend CSR funds for such specified activities in consultation with the State Government to comply with the Companies (CSR) Rules, 2014. [MCA General Circular No. 5/2021 dated 23rd April, 2021.]

SEBI

(V) SEBI issues registration norms on transfer of business by intermediaries SEBI has issued new registration norms for transferring of business by intermediaries whereby it has been clarified that the transferee shall obtain fresh registration from SEBI in the same capacity before the transfer of business if it is not registered with SEBI in the same capacity. In addition to the above, SEBI will issue a new registration number to the transferee different from the transferor’s registration number in the various scenarios mentioned in the Circular. [Circular No. SEBI/HO/MIRSD/DOR/CIR/P/2021/46, dated 26th March, 2021.]

(VI) SEBI issues guidelines pertaining to surrender of FPI Registration In order to have a uniform market practice for processing of surrender requests, SEBI has revised the guidelines for the surrender of FPI (Foreign Portfolio Investor) registration and directed Designated Depository Participants (’DDPs’) to follow the additional guidelines. [Circular No. SEBI/HO/IMD/FPI&C/CIR/P/2021/045, dated 30th March, 2021.]

(VII) SEBI reduces timelines for refunding investors’ money SEBI has decided to reduce the timelines for refund of investors’ money to four days from seven days in case of non-receipt of minimum subscription and the issuer failing to obtain listing or trading permission from the stock exchanges. [Circular No. SEBI/HO/CFD/DIL1/CIR/P/2021/47 dated 31st March, 2021.]

(VIII) Alternative Investment Funds to submit report on their activity on quarterly basis Based on consultations with various stakeholders and recommendation of the Alternative Investment Policy Advisory Committee, the SEBI has decided that all AIFs shall submit a report on their activity as AIFs to SEBI on a quarterly basis within ten calendar days from the end of each quarter in the revised formats. [Circular No. SEBI/HO/IMD/IMD-I/DOF6/CIR/2021/549, dated 7th April, 2021.]

FEMA

(i) RBI has decided to collect more details of international transactions using credit card / debit card / unified payment interface (UPI) along with their economic classification (merchant category code – MCC) through a new return called ‘FETERS-Cards’. RBI has provided the manner and format in which the details are to be submitted by AD Banks on the web-portal. [A.P. (DIR Series) Circular No.13 dated 25th March, 2021.]

(ii) RBI has stated that the limits for FPI investment in corporate bonds remain unchanged at 15% of outstanding stock of securities for the F.Y. 2021-22 The revised limits for FPI investment in Central Government securities (G-Secs) and State Development Loans (SDLs) for F.Y. 2021-22 will be advised separately. Till such announcement, the current limits shall continue to be applicable. [A.P. (DIR Series 2020-21) Circular No. 14, dated 31st March, 2021.]

(iii) Borrowers availing External Commercial Borrowings (ECBs) are allowed to park ECB proceeds in term deposits with AD Category-I banks in India for a maximum period of 12 months cumulatively With a view to provide relief to the ECB borrowers affected by the Covid-19 pandemic, RBI has decided to relax the above stipulation as a one-time measure. Accordingly, unutilised ECB proceeds drawn down on or before 1st March, 2020 can be parked in term deposits with AD Category-I banks in India prospectively for an additional period up to 1st March, 2022. [A.P. (DIR Series 2021-22) Circular No. 1, dated 7th April, 2021.]

ICAI ANNOUNCEMENTS

Accounts and Audit
(A) Temporary exceptions to hedge accounting prescribed under the Guidance Note on Accounting for Derivative Contracts due to Interest Rate Benchmark Reform The announcement provides temporary relief to entities not following Ind AS and having transactions in financial market products for accounting periods beginning on or after 1st April, 2020 on account of some major interest rate benchmarks ceasing to be published across the globe after December, 2021. [ICAI’s Announcement dated 31st March, 2021.]

(B) Revised criteria for classification of non-company entities for applicability of Accounting Standards (AS) The announcement effective for accounting periods commencing on or after 1st April, 2020 classifies non-company entities into four categories, viz., Level I (Large size entities), Level II (Medium size entities), Level III (Small size entities) and Level IV (Micro entities) based on revised criteria related to turnover and borrowings. Level I entities are required
to comply in full with all Accounting Standards (AS 1 to AS 29), while certain exemptions / relaxations have
been provided to Level II, Level III and Level IV non-company entities. [ICAI’s Announcement dated 31st March, 2021.]

ICAI MATERIAL

Technical Guide on Revised Formats of Long Form Audit Report [22nd March, 2021.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Amendment to Notification No. 85 of 2020 for extension of date in Vivad Se Vishwas Act, 2020. [Notification No. 9 of 2021 dated 26th February, 2021.]

2. Extension of dates specified in Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 for penalty and reassessment proceedings under Income-tax Act and completion of action under Prohibition of Benami Property Transaction Act, 1988. [Notification No. 10 of 2021 dated 27th February, 2021.]

3. When the Designated Authority passes an order under Vivad Se Vishwas Act, the Assessing Officer shall pass consequential order under the Act. [Circular 3 of 2021 dated 4th March, 2021.]

4. Insertion of Rule 3B to compute annual accretion referred to in the sub-clause (viia) of clause (2) of section 17 of the Act – Income-tax (1st Amendment) Rules, 2021. [Notification No. 11 of 2021 dated 5th March, 2021.]

5. CBDT amends Form 12BA, Form 16 and Form 24Q to incorporate changes related to Finance Act, 2020 The CBDT has amended Form 12BA, Form 16 and Form 24Q vide Income-tax (3rd Amendment) Rules, 2021. The Finance Act, 2020 has brought concessional tax regime for individual taxpayers. Further section 17(2) was amended to tax contribution made in excess of Rs. 7.50 lakhs in the hands of employees. The consequential changes related to the above amendments have been incorporated in the forms. [CBDT Notification No. 15/2021 dated 11th March, 2021.]

6. CBDT enhances the scope of Statement of Financial Transactions (SFT) In line with the announcement made in the recent Union Budget, the CBDT has amended Rule 114E. A new sub-rule 5A has been inserted to provide that for the purposes of pre-filling the return of income, an SFT shall be furnished by the specified persons, containing information relating to:

Nature of Transaction

Reporting Entity

Capital gains on transfer of listed
securities or units of Mutual Funds, (Refer Note Below)

Recognised Stock Exchanges, Depository,
Clearing Corporation, Registrars and Transfer Agents

Dividend Income

A Company

Interest Income

Banking Company, Post Master General, NBFCs
holding Certificate of Registration under RBI Act

[CBDT Notification No. 16/2021 dated 12th March, 2021.]

7. Insertion of Rule 29BA and Form 15E being Application for grant of certificate for determination of appropriate proportion of sum (other than salary), payable to non-resident, chargeable in case of the recipients. [Notification No. 18 of 2021 dated 16th March, 2021.]

COMPANIES ACT, 2013

(I) MCA notifies 5th March, 2021 as the effective date for enforcement of amendment to the provisions relating to annual returns MCA has notified amendment to section 92 which relates to Annual Returns. The amendment was introduced vide Companies (Amendment) Act, 2017 and will be effective from 5th March, 2021. Now companies would not be required to provide particulars of their indebtedness in their Annual Returns. Companies are also exempted from providing details pertaining to FIIs, their names and addresses, countries of incorporation, registration and percentage of shareholding held by them, etc. [MCA Notification No. S.O. (E) dated 5th March, 2021.]

(II) MCA introduces new E-form MGT-7A for filing of annual return by OPCs and Small Companies from F.Y. 2020-21 MCA has amended the Companies (Management and Administration) Rules, 2014 requiring every OPC and Small Company to file its annual return from F.Y. 2020-21 in Form No. MGT-7A (Abridged Annual Return). Further, the requirement of filing extract of Annual Return (Form MGT-9) is removed in case of such companies.[MCA Notification No. G.S.R. (E) dated 5th March, 2021.]

(III) MCA notifies amendment relating to remuneration of Independent Directors and Non-Executive Directors MCA has appointed 18th March, 2021 as the date on which provisions relating to remuneration to Independent Directors and Non-Executive Directors would come into force. This amendment was introduced vide Companies (Amendment) Act, 2020. The amendment prescribes the quantum of remuneration payable to an Independent Director in case a company has no profits or its profits are inadequate. [MCA Notification No. S.O. 1255 (E) dated 19th March, 2021.]

(IV) MCA amends schedule V; prescribes limit of remuneration payable to ‘other Directors’ in case of no profits MCA has notified an amendment to Schedule V, wherein a limit of yearly remuneration payable to ‘other Directors’ has been prescribed. The remuneration shall be Rs. 12 lakhs where the effective capital of the company is negative or less than Rs. 5 crores. The remuneration will be Rs. 17 lakhs if the effective capital is Rs. 5 crores or more but less than Rs. 100 crores. In case the effective capital is Rs. 250 crores and above, other Directors’ remuneration per year shall not exceed Rs. 24 lakhs plus 0.01% of the effective capital. [MCA Notification No. S.O. 1256 (E) dated 19th March, 2021.]

(V) Amendment to Schedule III to the Companies Act – The MCA has amended Divisions I (AS), II (Ind AS) and III (NBFCs, Ind AS) of Schedule III that is effective 1st April, 2021. The amendments require incremental disclosures in the financial statements including: a) disclosure of shareholding of promoters; b) current maturities of long-term borrowings; c) ageing schedules of trade payables, trade receivables, and capital work-in-progress; and d) specified Additional Regulatory Information that include: title deeds of immovable property not held in name of the company, details of Benami property held, relationship with struck off companies, ratio analysis, undisclosed income and details of Crypto / Virtual currency traded / invested. [MCA Notification G.S.R._(E ) dated 24th March, 2021.]

(VI) Companies (Accounts) Amendment Rules, 2021 – The MCA has mandated that for financial year commencing on or after 1st April, 2021, every company which uses accounting software for maintaining its books of accounts, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of accounts along with the date when such changes were made and ensuring that the audit trail cannot be disabled. [MCA Notification G.S.R._(E ) dated 24th March, 2021.]

(VII) Companies (Audit and Auditors) Amendment Rules, 2021 – The MCA has amended Rule 11 of the Companies (Audit and Auditors) Rules, 2014 that deals with ‘Other Matters to be included in Auditor’s Report’. The amendment which is effective 1st April, 2021 requires auditors to report on additional matters that include: a) management representation on no funds having been advanced / loaned to other persons / entities (Intermediaries) with the understanding that the intermediary whether directly or indirectly lends or invests in other persons or entities identified in any manner whatsoever by or on behalf of the company; b) whether dividend declared / paid during the year is in compliance with section 123; and c) whether the company has used such accounting software for maintaining its books of accounts which has a feature of recording audit trail facility. [MCA Notification G.S.R._(E ) dated 24th March, 2021.]

SEBI

(VIII) SEBI specifies investment limits for mutual fund schemes w.e.f. 1st April, 2021 SEBI has decided to put investment limits for mutual funds schemes with special features like Additional Tier 1 (AT1) and Additional Tier 2 (AT2) bonds. At present there are no specified investment limits for these instruments with special features and these instruments may be riskier than other debt instruments. Therefore, the prudential investment limits have been decided for such instruments. [Circular No. SEBI/HO/IMD/DF4/CIR/P/2021/032 dated 11th March, 2021.]

(IX) Ministry of Finance notifies new format of ‘Annual Report’ for SEBI The Ministry of Finance has notified the Securities and Exchange Board of India (Annual Report) Rules, 2021 whereby a new format for the Annual Report has been prescribed. Henceforth, such report shall include an analysis of the economic and investment environment in India along with a comparison with developed and peer countries and potential risk factors, stress factors indicated through market signals, etc. The Board shall have to submit a report to the Central Government giving a true and full account of its activities, policies and programmes during the previous financial year in the new format. The report shall be submitted within 90 days after the end of each financial year.[Notification No. G.S.R. 176(E) F. NO. 2/8/2019-RE dated 15th March, 2021.]

FEMA

(i) The Ministry of Home Affairs has issued a Notification superseding many of the earlier Notifications in respect of rights that Overseas Citizens of India (OCIs) enjoy in India. Among other points, the Notification states that:
(a) OCIs would enjoy parity with NRIs for purchase or sale of immovable property other than agricultural land or farmhouse or plantation property; and
(b) In respect of their rights in economic and financial fields not specified in the Notification or those not covered by the Notifications issued by RBI under FEMA, an OCI Cardholder shall have the same rights and privileges as a foreigner.

Kindly refer to the full Notification for other rights and privileges. [Notification – F. No. 26011/CC/05/2018-OCI dated 4th March, 2021.]

(ii) The Government had announced a hike in foreign investment limit for the insurance sector from 49% to 74% during the Budget presented on 1st February, 2021. In line with that, the Government has now introduced and passed into law (both in the Rajya Sabha and the Lok Sabha) the Insurance (Amendment) Bill, 2021 to raise the limit of foreign investment in Indian insurance companies from the existing 49% to 74%. A corresponding amendment in the Non-Debt Instrument Rules, 2019 (NDI Rules) is required. This should be announced soon. [The Insurance (Amendment) Bill, 2021 and news reports.]

(iii) DPIIT has issued a Press Note amending the Consolidated FDI Policy of 2020 by inserting a clause to state that downstream investment made by an Indian entity, which is owned and controlled by NRIs on a non-repatriation basis as per Schedule IV of the NDI Rules, 2019, shall not be considered for calculation of indirect foreign investment. This is because investments made by NRIs on a non-repatriation basis are deemed to be domestic investments at par with investments made by residents. It should be noted that OCIs, who enjoy similar relief, are not mentioned in the Press Note. Further, amendments made by Press Notes are not effective as law until corresponding amendments are made in the NDI Rules, 2019. However, in this case, the current NDI Rules in any case do not count investments made on a non-repatriation basis by both NRIs and OCIs towards indirect foreign investment. [Press Note No. 1 (2021 Series) dated 19th March, 2021.]

ICAI MATERIAL

Accounts and Audit

Educational material on Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations. [25th February, 2021.]

Technical Guide on Audit of Internal Financial Controls in Case of Public Sector Banks. [19th March, 2021.]

Guidance Note on Audit of Banks (2021 Edition). [20th March, 2021.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Faceless Assessment (1st Amendment) Scheme, 2021. [Notification No. 6 of 2021 dated 17th February, 2021.]

COMPANIES ACT, 2013

(I) MCA amends Corporate Social Responsibility (CSR) Rules, 2014 Key amendments include changes in definitions. Terms such as Administrative Overheads, Ongoing Projects are now defined. Every entity undertaking CSR activity is required to register with the Central Government. CFO is required to certify that funds disbursed have been utilised for the purposes approved by the Board. Set-off of excess amount spent permitted subject to certain conditions. Unspent amount is required to be transferred to certain Funds. Revised format is prescribed for Annual Report on CSR activities to be included in Board’s Report. Amendments are effective 1st April, 2021; as such, few of them apply from the financial years commencing on or after 1st April, 2021. [MCA Notification G.S.R. 40 (E) dated 22nd January, 2021.]

(II) MCA notifies the commencement of specified sections in the Companies (Amendment) Act, 2019 and Companies (Amendment) Act, 2020 including provisions related to CSR, definition of listed entities, further issue of share capital, exemption related to any class of persons by the Central Government from complying with the requirements of declaration of beneficial interest if considered necessary in public interest. [MCA Notification S.O. 324 (E) dated 22nd January, 2021.]

(III) MCA amends criteria for a company to be classified as a Small Company w.e.f. 1st April, 2021 – A company other than a public company with paid-up capital and turnover as per profit and loss account for the immediately preceding financial year not greater than Rs. 2 crores (as against earlier threshold of Rs. 50 lakhs) and Rs. 20 crores (as against earlier threshold of Rs. 2 crores), respectively, shall be considered as a Small Company under the Companies Act, 2013 and its Rules. [MCA Notification G.S.R. 92 (E) dated 1st February, 2021.]

(IV) MCA allows merger of startups u/s 233 – MCA now allows a scheme of merger or amalgamation u/s 233 to be entered into between any of the following class of companies, namely:
i) two or more startup companies; or
ii) one or more startup company with one or more small company.

For the purpose of this amendment, ‘startup company’ shall mean a private company incorporated under the Companies Act, 2013 or the Companies Act, 1956 and recognised as such. [MCA Notification G.S.R. 93 (E) dated 1st February, 2021.]

(V) MCA eases norms for One Person Company (OPC) incorporated under the Companies Act, 2013 and its Rules with effect from 1st April, 2021 – Key highlights of the Companies (Incorporation) Second Amendment Rules, 2021 are:
1. Non-resident Indians can also incorporate OPCs and the minimum residency period has been brought down to 120 days from 180 days for Indian citizens.
2. Automatic cessation of the validity of the OPC upon exceeding paid-up capital of Rs. 50 lakhs and average annual turnover (during the relevant period) of Rs. 2 crores has been dispensed with. This implies that it can continue to grow and operate as an OPC forever.
3. An OPC can convert itself into a public or private company at any point of time subject to compliance with prescribed procedure. [MCA Notification G.S.R. 91 (E) dated 1st February, 2021.]

(VI) MCA notifies change in timeline for acceptance of rights issue offer w.e.f. 1st April, 2021 – The Notification clarifies that where rights issue of shares is proposed, the offer shall be made to the existing shareholders by notice specifying the number of shares offered and the time limit [not being less than seven days (as opposed to 15 days) and not exceeding 30 days from the date of the offer] within which the offer, if not accepted, shall be deemed to have been declined. This Notification will be effective from 1st April, 2021. [MCA Notification G.S.R. 113 (E) dated 11th February, 2021.]

(VII) MCA Advises LLPs, Partners and Designated Partners to take note of proposed changes in LLP Act – MCA has advised stakeholders that certain provisions of the Companies Act, 2013 will soon be extended to LLPs with modifications and adaptations. The sections which are to be extended to LLPs include:
* Investigation of beneficial ownership of shares,
* Disqualifications for appointment of directors,
* Provision relating to number of directorships,
* Power to direct inspection of books and papers of a company by an inspector, and
* Provisions which specify that offences under the Act will be non-cognizable. [MCA Notice dated 18th February, 2021.]

SEBI

(VIII) No separate registration is required to render investment advice to general investors under Investment Advisers Regulations (IA) – SEBI in an informal guidance scheme has clarified that no separate registration is required to render investment advice to general investors under IA regulations. In addition, a portfolio manager registered under PMS regulations is also exempted from seeking registration as an investment adviser when it provides any incidental investment advice to its clients. [Circular No. SEBI/HO/IMD/DF1/OW/P/2021/3186/1 dated 6th February, 2021.]

(IX) SEBI notifies revised disclosure formats by specified persons under Regulation 7 of the Prohibition of Insider Trading (PIT) Regulations, 2015 – Further to the amendments made to Regulation 7 of the PIT Regulations, 2015 requiring that a member of the promoter group and designated person (in place of ‘employee’) submit disclosures under the said Regulation, SEBI has prescribed the revised formats for Initial Disclosures, Continual Disclosures and Disclosures by Connected Persons. [Circular No. SEBI/HO/ISD/ISD/CIR/P/2021/19 dated 9th February, 2021.]

ACCOUNTS AND AUDIT

(A) SAE 3410, Assurance Engagements on Greenhouse Gas Statements – The ICAI has issued a Standard on Assurance Engagement (SAE 3410) that deals with assurance engagements to report on an entity’s Greenhouse Gas (GHG) statement. [ICAI Release dated 27th January, 2021.]

(B) Risk-Based Internal Audit (RBIA) Framework for NBFCs and UCBs – The RBI has issued a Notification mandating an RBIA Framework for: (a) all deposit-taking NBFCs, irrespective of their size, (b) all non-deposit-taking NBFCs (including CICs) with asset size of Rs. 5,000 crores and above, and (c) all UCBs having asset size of Rs. 5,000 crores and above. The Framework needs to be implemented by 31st March, 2022 in accordance with the Guidelines framed. [Notification No. RBI/2020-21/88 Ref. No. DoS.CO.PPG./SEC.05/11.01.005/2020-21 dated 3rd February, 2021.]

(C) Guidance Note on Accounting by E-Commerce Entities – The ICAI has revised the ‘Guidance Note on Dot-com Companies’ as the ‘Guidance Note on Accounting by E-Commerce Entities’ applicable to companies preparing financial statements under the Companies (Accounting Standard) Rules, 2006, LLPs and Partnership firms, and deals with accounting by e-commerce entities in respect of certain issues relating to revenue and expense recognition. [ICAI Guidance Note released on 16th February, 2021.]

(D) Guidance Note on Accrual Basis of Accounting – The ICAI has revised this Guidance Note originally issued in 1988 that highlights the need for accrual basis of accounting, provides guidance in respect of transition from cash basis to accrual basis of accounting, and further states the benefits associated with the accrual accounting system. [ICAI Guidance Note released on 16th February, 2021.]

FEMA

(i) RBI had issued a Notification in October, 2020 (please refer to the December, 2020 issue of the BCAJ) allowing only authorised dealers in India to post and collect margins in and outside India on their own and their customers’ behalf, for permitted derivative contracts entered into with a person resident outside India in the form and manner that was to be specified by RBI. RBI has now specified that AD Category I banks can post and collect such margins in India in the form of:
a) Indian currency;
b) Freely convertible foreign currency;
c) Debt securities issued by Indian Central Government and State Governments;
d) Rupee bonds issued by persons resident in India which are:
1. Listed on a recognised stock exchange in India; and
2. Assigned a credit rating of AAA issued by a rating agency registered with the Securities and Exchange Board of India. If different ratings are accorded by two or more credit rating agencies, then the lowest rating shall be reckoned.

AD Cat-I banks shall maintain a separate account in the name of persons resident outside India for the purpose of posting and collecting cash margin in India, and transactions incidental thereto.

Further, AD Category I banks can post and collect such margins outside India in the form of:
a) Freely convertible foreign currency; and
b) Debt securities issued by foreign sovereigns with a credit rating of AA- and above issued by S&P Global Ratings / Fitch Ratings or Aa3 and above issued by Moody’s Investors Service.

AD Cat-I banks may also receive and pay interest on margin posted and collected on their own account or on behalf of their customers for a permitted derivative contract entered into with a person resident outside India. [A.P. (DIR Series 2020-21) Circular No. 10, dated 15th February, 2021.]

(ii) Indian residents are now permitted under LRS to make remittances to IFSCs set up in India for investment purposes. The following conditions have been prescribed:
a) Such investments shall be only in securities other than those issued by entities or companies resident in India (outside the IFSC).
b) Resident individuals can also open a non-interest-bearing Foreign Currency Account (FCA) in IFSCs for making the above permissible investments under LRS. However, any funds lying idle in the account for a period up to 15 days from the date of receipt into the account shall be immediately repatriated to the domestic INR account of the investor in India. Resident individuals cannot settle any domestic transactions with other residents through these FCAs held in IFSC. [A.P. (DIR Series 2020-21) Circular No. 11, dated 16th February, 2021.]

(iii) RBI had broadened the scope of Special Non-Resident Rupee (SNRR) accounts last year by allowing them to be used for specified transactions in trade, foreign investments, ECBs, etc. RBI has now issued FAQs for SNRR Accounts on 19th November, 2020. The FAQs provide clarifications on processes, responsibility for undertaking compliances, reporting, permitted transactions and transfers with respect to SNRR accounts. The FAQs have clarified that remittances or transactions under LRS cannot be routed through the SNRR account. These FAQs would not apply to FPIs, FVCIs and Depository Accounts or FCCB Conversion Accounts which are operated by custodians. The FAQs can be accessed at: https://m.rbi.org.in/Scripts/FAQView.aspx?Id=138.

ICAI MATERIAL

Accounts and Audit
* Educational material on Ind AS 23, Borrowing Costs. [27th January, 2021.]
* Internal Control System in State-Owned Universities: A Study to Formulate Internal Control Manual. [16th February, 2021.]

Valuation
* Technical Guide on Valuation (Revised Edition 2021). [11th February, 2021.]
* Valuation: Professionals’ Insight (Series 5). [11th February, 2021.]
* Educational material: ICAI Valuation Standard 103 – Valuation Approaches and Methods. [11th February, 2021.]
* Educational material: ICAI Valuation Standard 301 – Business Valuation. [18th February, 2021.]

Corporate and Other Laws
* Handbook on Role of Women Directors. [11th February, 2021.]
* FAQs on SEBI (LODR) Regulations, 2015. [11th February, 2021.]
* Background material on Business Responsibility and Sustainability Reporting. [15th February, 2021.]
* Money Laundering and Scams ‘Through’ Multi-State Urban Co-operative Credit Societies in India – Cash Deposits. [16th February, 2021.]
* Money Laundering and Scams ‘Through’ Multi-State Urban Co-operative Credit Societies, Angadias and Banks in India / Abroad – Gems and Jewellery Industry. [16th February, 2021.]

Taxation
* Inching towards Tax Certainty: Neoteric Domestic Dispute Mechanism for Cross-Border Taxation. [16th February, 2021.]

Others
* Analysis and Evaluation of Indian Startups in Non-Metropolitan Areas and Selected Metropolitan Areas – An Untold Story. [16th February, 2021.]
* Impact of Digital Transformation Strategies on Performance of Manufacturing Companies in India. [16th February, 2021.]
* How Indian Companies can play a pivotal role in the Supply Chain to Australia? [16th February, 2021.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. CBDT has further extended due dates expiring on 30th April, 2021 by two months on account of the Covid-19 pandemic The Government has extended the various time-barring dates (which were earlier extended to 30th April, 2021) from 30th April 2021 to 30th June, 2021 in the following cases:
(a) The time limit for passing of any order for assessment or reassessment, the time limit for which is provided u/s 153 or section 153B.
(b) The time limit for passing an order consequent to the direction of DRP u/s 144C(13).
(c) The time limit for issuance of notice u/s 148 for reopening assessment where income has escaped assessment.
(d) The time limit for sending intimation of processing of Equalisation Levy.
(e) The last date for making payment without additional charge under Vivad se Vishwas Act. [Press Release dated 24th April, 2021.]

2. Extension of time-lines related to certain compliances under the Income-tax Act, 1961 In view of the pandemic, CBDT has provided that due dates of the following compliances if falling before 31st May, 2021 shall stand extended to 31st May, 2021:
a. Filing of appeal before CIT(A).
b. Filing of objections to Dispute Resolution Panel (DRP).
c. Filing of return of income in response to reassessment notice u/s 148.
d. Filing of belated or revised return of income for A.Y. 2020-21.
e. Furnishing of challan-cum-statement for tax deducted during the month of March, 2021 for sections 194-IA, 194-IB, and 194M.
f. Filing of declaration in Form No. 61 containing particulars of Form No. 60 received during the period from 1st October, 2020 to 31st March, 2021. [Circular No. 8 of 2021 dated 30th April, 2021.]

3. CBDT notifies threshold limits for Significant Economic Presence u/s 9 Income-tax (13th Amendment) Rules, 2021 Section 9 of the Income-tax Act relates to the incomes which are deemed to accrue or arise in India. Section 9(1)(i) provides that income accruing or arising, whether directly or indirectly, through or from any business connection in India shall be deemed as income accruing or arising in India.

Explanation 2A to Section 9(1)(i) provides that the ‘Significant Economic Presence’ of a non-resident in India shall constitute ‘business connection’.

Rule 11UB was inserted to prescribe the threshold limits for ‘Significant Economic Presence’. Rule 11UD provides that for clause (a) the threshold limit shall be Rs. 2 crores, whereas for clause (b) the threshold limit shall be Rs. 3 lakhs. [Notification No. 41 dated 3rd May, 2021.]

4. Income-tax (14th Amendment) Rules, 2021 A non-resident, being an investor who operates in accordance with the SEBI Circular No. IMD/HO/FPIC/CIR/P/2017/003 dated 4th January, 2017, shall not be required to obtain and quote PAN, subject to fulfilment of certain conditions. [Notification No. 42 dated 4th May, 2021.]

5. Income-tax (16th Amendment) Rules, 2021 Rule 2B is amended to provide that where the employee avails any cash allowance from his employer in lieu of any travel concession or assistance for the assessment year beginning on 1st April, 2021, he shall be eligible to claim an exemption for an amount equal to the lower of the following:
i. Rs. 36,000 per person for the individual and the member of his family; or
ii. One-third of expenditure incurred by an individual or a member of his family.

The exemption will be allowed subject to fulfilment of certain conditions. [Notification No. 50 dated 5th May, 2021.]

6. No penalty on cash receipt of Rs. 2 lakhs or more by hospital providing Covid-19 treatment As provided in section 269ST, no one can receive an amount of Rs. 2 lakhs or more in cash. CBDT has issued a Notification to provide that the provisions of section 269ST shall not apply to hospitals, dispensaries, nursing homes, Covid-care centres or similar other medical facilities providing Covid treatment to patients where payment is received in cash from 1st April, 2021 to 31st May, 2021 on obtaining the PAN or AADHAAR of the patient and the payer, and the relationship between the patient and the payer, by such entities. [Notification No. 56 dated 7th May, 2021.]

7. Extension of time-lines related to certain compliances under the Income-tax Act, 1961 In view of the pandemic, CBDT has extended the due dates of various compliances like filing of return of income for A.Y. 2021-22, furnishing of Tax Audit Report, furnishing of Transfer Pricing Certificate, filing of belated return, filing of TDS return of last quarter, etc. [Circular No. 9 of 2021 dated 20th May, 2021.]

COMPANY LAW

I. COMPANIES ACT, 2013

(I) MCA relaxes levy of additional fees in filing of certain forms under the Companies Act (and LLP Act, 2008) – MCA has notified that no additional fees shall be levied on Companies / LLPs up to 31st July, 2021 for delayed filing of forms (other than charge-related forms, namely, e-Forms CHG-1, CHG-4 and CHG-9), which were / would be due for filing during the period 1st April, 2021 to 31st May, 2021. [General Circular No. 06/2021 dated 3rd May, 2021.]

(II) MCA relaxes timeline for filing forms related to creation or modification of charges – MCA has provided relaxation as indicated in the Table below to companies / charge holder in respect of filing of Forms CHG-1 and CHG-9 (and not CHG-4). This Circular shall not be applicable in cases where the said forms have already been filed before 3rd May, 2021 or the timeline for filing has already expired / expires at a future date (despite exclusions of time period mentioned in the Table below) u/s 77 / 78.

*Criteria*	Relaxation granted by MCA?	*Applicable fees*
Date of creation / modification of charge falling before 1^st April, 2021 but timeline for	For the purpose of counting the number of days under sections 77 and 78, the period 1^st April, 2021 to 31^st May, 2021 shall not be considered. In case the Form is not filed within	If the Form is filed on or before 31^st May, 2021, then fees payable as on 31^st March, 2021 shall be charged If the Form is filed after 31^st May, 2021, then the fees shall be levied by
[Continued] filing such Form has not expired u/s 77	such period, then 1^st June, 2021 shall be considered as the first day after 31^st March, 2021 for the ‘number of days’ calculation under the above-mentioned sections	adding the following: a. No. of days beginning from 1^st June, 2021 to the date of filing of such Form; b. Time period elapsed from the date of creation of charge till 31^st March, 2021
Date of creation / modification of charge falls on any date during the period 1^stApril, 2021 to 31^st May, 2021 (both dates inclusive)	For the purpose of counting the number of days under sections 77 and 78, the period from the date of creation / modification of charge to 31^st May, 2021 shall not be considered. In case the Form is not filed within such period, then 1^st June, 2021 shall be considered as the first day after the date of creation / modification of charge for the ‘number of days’ calculation under the above-mentioned sections	If the Form is filed before 31^st May, 2021, then normal fees shall be payable. If the Form is filed after 31^st May, 2021, then the first day after the date of creation of modification of charge shall be considered as 1^st June, 2021 and the number of days till the date of filing of the Form shall be counted for the purpose of the fees

Criteria

Relaxation granted
by MCA?

Applicable fees

Date of creation / modification of charge falling before 1^st
April, 2021 but timeline for

For the purpose of counting the number of days under sections 77
and 78, the period 1^st April, 2021 to 31^st May, 2021
shall not be considered. In case the Form is not filed within

If the Form is filed on or before 31^st May, 2021,
then fees payable as on 31^st March, 2021 shall be charged
If the Form is filed after 31^st May, 2021, then the fees shall be
levied by

[Continued]

filing such Form has not expired u/s 77

such period, then 1^st June, 2021 shall be considered
as the first day after 31^st March, 2021 for the ‘number of days’
calculation under the above-mentioned sections

adding the following:
a. No. of days beginning from 1^st June, 2021 to the date of filing
of such Form;
b. Time period elapsed from the date of creation of charge till 31^st
March, 2021

Date of creation / modification of charge falls on any date
during the period 1^stApril, 2021 to 31^st May, 2021
(both dates inclusive)

For the purpose of counting the number of days under sections 77
and 78, the period from the date of creation / modification of charge to 31^st
May, 2021 shall not be considered. In case the Form is not filed within such
period, then 1^st June, 2021 shall be considered as the first day
after the date of creation / modification of charge for the ‘number of days’
calculation under the above-mentioned sections

If the Form is filed before 31^st May, 2021, then
normal fees shall be payable. If the Form is filed after 31^st May,
2021, then the first day after the date of creation of modification of charge
shall be considered as 1^st June, 2021 and the number of days till
the date of filing of the Form shall be counted for the purpose of the fees

[General Circular No. 07/2021 dated 3rd May, 2021]

(III) Extension of the maximum gap required between two consecutive Board Meetings – MCA has extended the maximum gap between two consecutive Board Meetings to 180 days (as against 120 days) during the quarters April-June, 2021 and July-September, 2021. [General Circular No. 08/2021 dated 3rd May, 2021.]

(IV) Clarification on eligible CSR activities in light of Covid pandemic – MCA has clarified that creation of health infrastructure for Covid care, establishment of medical oxygen generation and storage plants, manufacturing and supply of Oxygen concentrators, ventilators, cylinders and other medical equipment for countering Covid-19 or similar such activities undertaken by the companies directly by themselves or in collaboration as shared responsibility with other companies, are eligible CSR activities under Schedule VII. [General Circular No. 09/2021 dated 5th May, 2021.]

(V) Clarification on offsetting excess CSR amount spent for F.Y. 2019-20 under the Companies Act, 2013 and its Rules – MCA has clarified that any excess amount or part thereof can be offset against the requirement to spend u/s 135(5) for F.Y. 2020-21 if a company has contributed any amount to ‘PM CARES Fund’ on 31st March, 2020 which is in excess of the mandated amount as prescribed u/s 135(5) for F.Y. 2019-20. The offset shall be subject to the following conditions:
a. the excess amount that is being offset should factor in the unspent CSR amount for previous financial years, if any;
b. the CFO shall certify that the contribution to ‘PM-CARES Fund’ was indeed made on 31st March, 2020 in pursuance of the appeal dated 30th March, 2020, which was sent to MDs / CEOs of top 1,000 companies in terms of market capitalisation and the same shall also be so certified by the statutory auditor of the company; and
c. the details of such contribution shall be disclosed separately in the Annual Report on CSR as well as in the Board’s Report for F.Y. 2020-21 in terms of section 134(3)(o). [Circular dated 20th May, 2021, E File CSR-01/04/2021-CSR-MCA.]

II. SEBI

(VI) Portfolio manager needs to obtain prior approval of Board in case of change in control – SEBI has notified the SEBI (Portfolio Managers) (Second Amendment) Regulations, 2021 whereby it has clarified that the Portfolio Manager will be required to obtain prior approval of the Board in case of change in control. [Notification No. SEBI/LAD-NRO/GN/2021/16, dated 26th April, 2021.]

(VII) Submission of Internal Audit Report (IAR) by Registrar and Transfer Agents (RTAs) extended to 31st July, 2021 in view of the Covid-19 situation – SEBI has decided to extend the timeline for submission of IAR by RTAs for the half-year ended 31st March, 2021 from 15th May, 2021 to 31st July, 2021 in view of the Covid-19 situation. [Circular No. SEBI/HO/MIRSD/RTAMB/P/CIR/2021/558, dated 29th April, 2021.]

(VIII) SEBI relaxes compliance of certain provisions of LODR Regulations due to Covid-19 pandemic – SEBI has decided to grant relaxations from compliance with certain provisions of the LODR Regulations / other applicable Circulars as under:

*Compliance requirement and regulation reference*	*Requirement*	*Due date*	Extended due date for quarter / Half-year ended 31^st March, 2021
Annual Secretarial	Sixty days from end of	30^th May, 2021	30^th June, 2021
[Continued] Compliance report [Regulation 24A read with Circular CIR/CFD/CMD1/27/2019 dated 8^th February, 2019]	the financial year
Quarterly financial results / Annual audited financial results [Regulation 33(3)]	Forty-five days from the end of the quarter / Sixty days from the end of the financial year	15^th May, 2021 / 30^th May, 2021	30^th June, 2021
Statement of deviation or variation in use of funds [Regulation 32(1) read with SEBI Circular CIR/CFD/CMD1/162/2019 dated 24^thDecember, 2019]	Along with the financial results (within 45 days of end of each quarter / 60 days from end of the financial year)	15^th May, 2021 / 30^th May, 2021	30^th June, 2021

Compliance requirement and regulation reference

Requirement

Due date

Extended due date for quarter / Half-year ended
31^st March, 2021

Annual Secretarial

Sixty days from end of

30^th May, 2021

30^th June, 2021

[Continued]

Compliance report

[Regulation 24A read with Circular CIR/CFD/CMD1/27/2019 dated 8^th
February, 2019]

the financial year

Quarterly financial results / Annual audited
financial results

[Regulation 33(3)]

Forty-five days from the end of the quarter / Sixty days from
the end of the financial year

15^th May, 2021 /
30^th May, 2021

30^th June, 2021

Statement of deviation or variation in use of
funds

[Regulation 32(1) read with SEBI Circular CIR/CFD/CMD1/162/2019
dated 24^thDecember, 2019]

Along with the financial results (within 45 days of end of each
quarter / 60 days from end of the financial year)

15^th May, 2021 / 30^th May, 2021

30^th June, 2021

Further, listed entities are permitted to use Digital Signature Certifications for authentication / certification of filings / submissions made to stock exchanges under the SEBI (LODR) Regulations, 2015 for all filings until 31st December, 2021. [Circular No. SEBI/HO/CFD/CMD1/P/CIR/2021/556, dated 29th April, 2021.]

(IX) SEBI unveils format for Business Responsibility and Sustainability Reporting (‘BRSR’) applicable for top 1,000 listed companies – SEBI has prescribed the format for ‘BRSR’ (applicable to top 1,000 listed companies) and the reporting of the same shall be voluntary for F.Y. 2021-22 and mandatory from F.Y. 2022-23. The BRSR is an initiative towards ensuring that investors have access to standardised disclosures on ESG (Environment, Social and Governance) parameters. [Circular No. SEBI/HO/CFD/CMD-2/P/CIR/2021/562, dated 10th May, 2021.]

FEMA

(i) An Indian party acting as a sponsor to an Alternative Investment Fund (AIF) set up in an overseas jurisdiction, including in an IFSC in India, will be treated as Overseas Direct Investment as per FEMA Notification 120/2004-RB (FEMA 120). Accordingly, such Indian party can set up an AIF in these jurisdictions under the Automatic Route provided it complies with Regulation 7 of FEMA 120. [A.P. (DIR Series) Circular No. 4 dated 12th May, 2021.]

IRDAI

Accounts and Audit
(a) IRDAI (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) (First Amendment) Regulations, 2021 – The IRDAI, by substituting extant provisions contained in Paragraph 2 of Part I of Schedule B of the IRDAI (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations, 2002 notified on 30th March, 2002, has now provided a revised manner in which ‘premium’ and ‘unearned premium reserve’ should be recognised by insurers carrying on general insurance business. [Notification F. No. IRDAI/Reg/5/177/2021 dated 5th May, 2021.]

RBI

Accounts and Audit
(b) Guidelines for appointment of Statutory Central Auditors (SCAs) / Statutory Auditors (SAs) of commercial banks (excluding RRBs), UCBs and NBFCs (including HFCs) – The RBI has notified Guidelines applicable for F.Y. 2021-22 and onwards in respect of appointment / reappointment of SCAs / SAs. The guidelines cover the following: prior approval requirements, branch coverage, eligibility criteria of auditors, auditors’ independence, professional standards, tenure and rotation, audit fees and expenses, and statutory audit policy and appointment procedures. [RBI Notification Ref. No. DoS.CO.ARG/SEC.01/08.91.001/2021-22 dated 27th April, 2021.]

ICAI ANNOUNCEMENT

(A) Extension of validity of Peer Review Certificate in wake of Covid-19 spurt – The Peer Review Board has granted extension to the Peer Review Certificates expiring during the period from 1st April, 2021 to 30th June, 2021 up to 31st July, 2021. Accordingly, the validity of such Certificates shall now be treated as 31st July, 2021. [4th May, 2021.]

ICAI MATERIAL

Accounts and Audit

FAQ on Accounting for amounts to be incurred towards Corporate Social Responsibility (CSR) pursuant to the Companies (CSR Policy) Amendment Rules, 2021. [10th May, 2021.]

Company Law

FAQs on Circular on relaxation of time for filing Forms related to creation or modification of charges under the Companies Act, 2013 issued by the MCA on 3rd May, 2021. [4th May, 2021.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Tolerance band for wholesale trading and others: The Central Government has notified the ‘Tolerance Band’ for A.Y. 2021-22 for wholesale trading and others. The Notification provides a tolerance range of one per cent for wholesale trading and three per cent in all other cases. [Notification No. 124 dated 29th October, 2021.]

2. e-Settlement Scheme, 2021: The CBDT has notified ‘e-Settlement Scheme, 2021′ to settle pending income-tax settlement applications transferred to a settlement commission. [Notification No. 129/2021 dated 1st November, 2021.]

COMPANY LAW

I. COMPANIES ACT, 2013

1. Relaxations in paying additional fees in case of delay in filing Form-8 by LLPs: The MCA has extended the deadline for LLPs to file Form 8 (Statement of Accounts and Solvency) for F.Y. 2020-2021 until 30th December, 2021 in response to representations about the challenges faced because of the Covid-19 pandemic. [General Circular No. 16/2021 dated 26th October, 2021.]

2. Relaxation on levy of additional fees in filing of e-forms: MCA has provided relaxation on levy of additional fees for Annual Financial Statement filings required for the F.Y. ended 31st March, 2021. The normal fees are payable up to 31st December, 2021 for filing the annual financial statements in the e-forms such as AOC-4, AOC-4 (CFS), AOC-4 XBRL, and AOC-4 Non-XBRL, and MGT-7 / MGT-7A. [General Circular No. 17/2021 dated 29th October, 2021.]

3. Extension of last date of filing of Cost Audit Report: MCA has extended the due date for filing of Cost Audit Report for F.Y. 2020-21 with the Central Government. As a result, the companies can file a Cost Audit Report by 30th November, 2021 instead of 31st October, 2021. [General Circular No. 18/2021 dated 29th October, 2021.]

4. IEPFA claim settlement process simplified: The MCA has further simplified the claim settlement process by rationalising various requirements under IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016. For claimants, requirement of advance receipt has been waived off and the requirement of Succession Certificate / Probate of Will / Will has been relaxed up to Rs. 5 lakhs both for physical and demat shares. [Press Release dated 12th November, 2021.]

II. SEBI

5. SEBI directs ‘Investment Advisers’ not to deal in unregulated activities: SEBI has directed registered Investment Advisers (IAs) not to deal in unregulated activities, i.e., advisory, distribution and execution / implementation services in digital gold and other unregulated instruments. Any dealing in unregulated activities by IAs may entail action as deemed appropriate under the SEBI Act, 1992 and regulations framed thereunder. [Press Release No. 30/2021, dated 21st October, 2021.]

6. SEBI amends norms for determination of legitimate claims: SEBI has decided to revise the section relevant to the determination of legitimate claims with the goal of aligning them with securities market norms. When a member is designated a defaulter, the claim must be presented to the Member Core Settlement Guarantee Fund Committee (MCSGFC) for penalty and approval. In addition to the foregoing, the MCSGFC’s advice regarding legitimate claims shall be sent to the Investor Protection Fund (IPF) Trust for disbursement of the amount immediately. In case the claim amount is more than the coverage limit under IPF, or the amount sanctioned and ratified by the MCSGFC is less than the claim amount, then the investor will be at liberty to opt for arbitration / any other legal forum outside the exchange mechanism for claim of the balance amount. The provisions of this Circular shall come into effect from 1st January, 2022. [Circular No. SEBI/HO/CDMRD/DoC/P/CIR /2021/651, dated 22nd October, 2021.]

7. SEBI authorises practising Cost Accountants to issue Reconciliation of Share Capital Audit Report: SEBI has amended Regulation 76 of the SEBI (Depositories and Participants) (Second Amendment) Regulations, 2018 authorising practising Cost Accountants to issue Reconciliation of Share Capital Audit Report. [Notification No. SEBI/LAD-NRO/GN /2021/53, dated 26th October, 2021.]

8. Stock brokers should maintain current accounts in multiple banks for holding of client funds: In order to facilitate seamless settlement of funds and for the convenience of investors, the SEBI has clarified that stock brokers should maintain current accounts in appropriate number of banks (subject to the maximum limit prescribed by stock exchanges / SEBI) for holding client funds for settlement purposes and any other accounts mandated by stock exchanges. [Circular No. SEBI/HO/MIRSD/DOP/P/CIR/2021/653, dated 28th october, 2021.]

9. Legal framework governing portfolio managers – can’t provide investing advice on unlisted offshore shares: The SEBI has issued informal guidance whereby it has been clarified that the extant legal framework governing portfolio managers does not envisage investment advice on offshore shares and securities which are neither listed nor intended to be listed in the recognised stock exchanges. [Circular No. SEBI/HO/IMD/DF1/OW/P/2021/31147/1 dated 2nd November, 2021.]

10. SEBI eases norms for processing investor service request by RTAs: As per SEBI’s new framework effective 1st January, 2022, in addition to responding to queries, complaints, and service requests through hard copies, the RTAs shall also process the same received through the registered e-mail address of the holder. Additionally, in the case of service requests, the documents furnished shall have e-sign of the holder(s) / claimant(s). [Circular No. SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/655, dated 3rd November, 2021.]

11. Any person holding more than 10% or more equity shares will be deemed as related party w.e.f. 1st April, 2023: The SEBI has amended the Listing Obligations and Disclosure Requirements Regulations, 2015 whereby the scope and definition of related party has been extended. The amendment states that any person or any entity holding equity shares of 20% or more, or 10% or more in the listed entity at any time during the immediate preceding financial year, shall be deemed to be a related party. [Notification No. SEBI/LAD-NRO/GN/2021/55, dated 9th November, 2021.]

FEMA

1. FPIs allowed to invest in debt instruments issued by REITs and InvITs on repatriation basis: RBI has amended the Foreign Exchange Management (Debt Instruments) Regulations, 2019 to allow FPIs to invest in debt securities issued by REITs and InvITs on repatriation basis by including these securities in Schedule 1 of the said regulations. [Notification No. FEMA. 396(1)/2021-RB, dated 13th October, 2021 notified on 21st October, 2021 and A.P. (DIR Series 2021-22) Circular No. 16, dated 8th November, 2021.]

RBI

1. Clarifications related to Prudential Norms on IRACP Norms: To ensure uniformity in implementing Income Recognition, Asset Classification and Provisioning (IRACP norms) of advances, the RBI has issued clarifications on specific aspects of the extant regulatory guidelines, which applies to all lending institutions. The clarifications relate to: specification of due date / repayment date; classification as SMA and NPA account; definition of ‘out of order’; NPA classification in case of interest payments; upgradation of accounts classified as NPAs; and income recognition policy for loans with moratorium on payment of interest. [Notification No. RBI/2021-22/125. DOR.STR.REC.68/21.04.048/2021-22 dated 12th November, 2021.]

ICAI MATERIAL

Accounts and Audit

1. Report on Audit Quality Review (2020-21): The report highlights key findings observed in Audit Quality Reviews conducted by the Quality Review Board during F.Y. 2020-21. It includes a summary of observations related to Standards on Auditing, AS and Ind AS, other relevant laws and regulations and key takeaways for audit firms.

_________________________________________________________________________

Errata

Article: Auditor’s Evaluation of Going Concern Assessment, published in November 2021
We regret to point out a typographical error on Page 28 where ‘SA 260 Using the Work of an Expert’ should be replaced with ‘SA 620 Using the Work of an Auditor’s Expert’ and to be read accordingly.

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Extension of various due dates: (a) The time limit for linking PAN with Aadhaar has been extended from 30th September, 2021 to 31st March, 2022; (b) The due date for the completion of penalty proceedings under the Income-tax Act has been extended from 30th September, 2021 to 31st March, 2022; (c) The time limit for issuing notice and passing the order by the Adjudicating Authority under the Prohibition of Benami Property Transactions Act, 1988 has been extended to 31st March, 2022. [Notification No. 113 of 2021 dated 17th September, 2021.]

2. Amendment to Rule 10D – Income-tax (30th Amendment) Rules, 2021: Applicability of Safe Harbour Transfer price specified under Rule 10TD extended to A.Y. 2021-22. Earlier, the same was applicable only for A.Y. 2020-21. [Notification No. 117 of 2021 dated 24th September, 2021.]

3. Insertion of Rules 11UE and 11UF – Income-tax (31st Amendment) Rules, 2021: The Taxation Laws (Amendment) Act, 2021 amended the Income-tax Act so as to provide that no tax demand shall be raised in future on the basis of the amendment made to section 9 of the Act by the Finance Act, 2012 for any offshore indirect transfer of Indian assets if the transaction was undertaken before 28th May, 2012 (i.e., the date on which the Finance Bill, 2012 received the assent of the President). It further provided that the demand raised for offshore indirect transfer of Indian assets made before 28th May, 2012 shall be nullified on fulfilment of specified conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking to the effect that no claim for cost, damages, interest, etc., shall be filed and such other conditions as may be prescribed are fulfilled.

Rule 11UE provides for the specified conditions to be eligible to claim relief and Rule 11UF provides the form and manner of furnishing the undertaking for withdrawal of pending litigation, claiming no cost, damages, etc. [Notification No. 118 of 2021 dated 1st October, 2021.]

4. CBDT exempts certain non-resident persons from the requirement of furnishing of return of Income u/s 139 subject to fulfilment of prescribed conditions: The benefit of exemption is available from A.Y. 2021-22 onwards. [Notification No. 119 of 2021 dated 11th October, 2021.]

COMPANY LAW

I. COMPANIES ACT, 2013

1. MCA directs RoCs to extend due date of AGM for F.Y. ending 31st March, 2021 by two months: The Central Government received representations seeking extension of Annual General Meetings (AGM) for F.Y. 2020-21 due to many difficulties faced by stakeholders during the second wave of Covid-19. In view of these hardships, the Central Government advised the Registrars of Companies (RoCs) to accord approval for extension of time for a period of two months beyond the due dates by which companies are required to conduct AGMs for the F.Y. 2020-21 ended on 31st March, 2021. [Office Memorandum issued by Office of the Director-General of Corporate Affairs, Ministry of Corporate Affairs, dated 23rd September, 2021. Pursuant to this Office Memorandum, the respective RoCs have issued orders extending the period of holding of AGM, e.g., RoC, Pune has issued such order for Companies in Maharashtra within its jurisdiction on 23rd September, 2021.]

2. MCA extends due date of filing of cost audit report in e-form CRA-4 for F.Y. 2020-21: MCA has extended the due date for filing of Cost Audit Report for F.Y. 2020-21 with the Central Government. Now, companies can file cost audit report by 30th November, 2021 if the cost audit report is submitted by the Cost Auditor to the Board by 31st October, 2021. In case a company has extended the time for holding its AGM, then e-form CRA-4 may be filed within 30 days of receipt of the cost audit report. [MCA Circular No. 15/2021 F.No.01/40/2013 CL-V (PT-I)], dated 27th September, 2021.]

II. SEBI

3. SEBI amends risk management framework for mutual funds: With the objective of management of key risks involved in mutual fund operations, SEBI has revised the Risk Management Framework (RMF) for mutual funds. The new framework shall provide a set of principles or standards, which inter alia comprise the policies, procedures, risk-management functions and roles and responsibilities of the management, the Board of the AMC and the Board of Trustees. [Circular No. SEBI/HO/IMD/IMD-1 DOF2/P/CIR/2021/630, dated 27th September, 2021.]

4. SEBI extends timelines to conduct annual compliance audit by investment advisers: SEBI has extended the timeline to conduct annual compliance audit by investment advisers (IAs) by three months. SEBI had received representations from IAs seeking extension due to the Covid-19 pandemic. Accordingly, IAs are now required to conduct the annual compliance audit by 31st December, 2021 for the financial year ending 31st March, 2021. Correspondingly, the date for obtaining a certificate from an auditor has been extended till 31st December, 2021. [Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/632, dated 30th September, 2021.]

5. SEBI discontinues usage of pool accounts for mutual fund transactions: With an aim to protect mutual fund investors against misuse of their investments, SEBI has decided to discontinue the usage of pool accounts by all platforms in transactions of mutual fund schemes. In addition, stock brokers / clearing members facilitating mutual fund transactions shall not accept mandates for SIPs or lump sum transactions in their name. [Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2021/635, dated 4th October,2021.]

6. SEBI revises formats for filing ‘Financial Information’: SEBI has decided to revise the formats for reporting of financial information and limited review report. The new format shall contain the items mentioned in the statement of profit and loss (excluding notes and detailed sub-classification) as prescribed in Schedule III of the Companies Act, 2013 and the extent and nature of security created and maintained in case of secured non-convertible debt securities. [Circular No. SEBI/HO/DDHS/CIR/2021/0000000637, dated 5th October, 2021.]

7. Revised Formats for Limited Review / Audit Report for issuers of non-convertible securities: SEBI, vide Notification dated 7th September, 2021, has amended Regulation 52 of the SEBI (LODR) Regulations, 2015, inter alia mandating entities that have listed non-convertible securities to disclose financial results on a quarterly basis, including assets and liabilities and cash flows, as well as requiring certain changes in the line items in the financial results. Accordingly, SEBI has issued a Circular providing the revised formats for limited review report / audit report. [Circular SEBI/HO/DDHS/CIR/2021/0000000638 dated 14th October, 2021.]

FEMA

1. Increase in FDI limit for telecom sector: The Government has increased the FDI limit for the telecom sector from 49% to 100% under automatic route. The FDI in telecom sector shall be subject to para 3.1.1 of the FDI policy which requires prior Government approval in case of investment by any entity from a border-sharing country. The increase in FDI limit will, however, take effect only once appropriate amendments are made under the Exchange Management (Non-Debt Instruments) Rules, 2019. [Press Note No. 4 (2021 Series) dated 6th October, 2021.]

RBI

1. Enhancement in family pension of employees of banks; Treatment of additional liability: The RBI has permitted the following course of action to all member banks of the Indian Banks’ Association (covered under the 11th Bipartite Settlement and Joint Note dated 11th November, 2020) in relation to the increased expenditure resulting from the revision in family pension for employees: (a) The liability for enhancement of family pension shall be fully recognised as per applicable accounting standards; (b) The expenditure may, if not fully charged to the P&L Account during the financial year 2021-22, be amortised over a period not exceeding five years beginning with the financial year ending 31st March, 2022 subject to a minimum of 1/5th of the total amount involved being expensed (spent) every year; and (c) Appropriate disclosures of the accounting policy followed in this regard shall be made in the ‘Notes to Accounts’ along with disclosures of the amount of unamortised expenditure and the consequential net profit if the unamortised expenditure had been fully recognised in the P&L. [Notification No. RBI/2021-22/105 DOR.ACC.REC.57/21.04.018/2021-22 dated 4th October, 2021.]

ICAI ANNOUNCEMENT

1. Time limit of generating UDIN aligned with SQC: With an aim to align the time limit for generating UDIN with the Standards on Auditing and Standard on Quality Control (SQC 1), the ICAI has decided that the time limit of generating UDIN would be 60 days from the date of the signing of certificates / reports / document instead of 15 days henceforth. Further, for the documents where the respective regulator / other stakeholders require UDIN immediately on signing or within a specified period,
the same shall be provided by the member. Also, the UDIN so generated has to be communicated to ‘Management’ / ‘Those Charged with Governance’ for disseminating it to the stakeholders from their end. [17th September, 2021.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Extension of due dates for filing various forms CBDT has extended the time limit for filing applications for registration of trusts u/s 10(23C)/11/80G, electronic filing of Form No. 15CC, Equalization Levy Statement in Form No. 1, Form No. 15CC, uploading of declaration received in Form No. 15G/15H, Form No. 10BBB, Form 3CEAC, Form 3CEAD, Form 3CEAE and Form II SWF due to difficulties faced by the assessees in electronic filing of Forms and non-availability of the utility for e-filing of Forms. [Circular 16 of 2021 dated 29th August, 2021.]

2. CBDT under Direct Tax Vivad se Vishwas Act, 2020 extended the last date of payment of the amount (without any additional amount) to 30th September, 2021. [Notification No. 94 of 2021 dated 31st August, 2021.]

3. Insertion of Rule 9D – Income-tax (25th Amendment) Rules, 2021 The Finance Act, 2021 amended section 10(11) and section 10(12) to provide that exemption shall not be available for the interest income accrued during the previous year on the recognised and statutory provident fund account of the person to the extent it relates to the contribution made by the employee in excess of Rs. 2,50,000 / Rs. 5,00,000 in the previous year.

The CBDT has inserted Rule 9D to calculate the taxable amount of interest relating to the contribution made to a statutory or a recognised provident fund in excess of the threshold limit. [Notification No. 95 of 2021 dated 31st August, 2021.]

4. Insertion of Rule 26D and Form No. 12BBA – Income-tax (26th Amendment) Rules, 2021 – A senior citizen proposing to claim benefit of section 194P shall furnish a declaration in Form No. 12BBA in paper form to the specified bank. On furnishing the declaration, the specified bank will compute the total income of such senior citizen after considering the deduction allowable under Chapter VI-A and rebate allowable u/s 87A. The specified bank will deduct income-tax on the total income so computed at the rates in force. The specified bank shall properly maintain the declaration and the evidence furnished by the senior citizen and shall make available the same to the PCCIT or CCIT as and when required. [Notification No. 99 of 2021 dated 2nd September, 2021.]

5. Insertion of Rule 14C – Income-tax (27th Amendment) Rules, 2021 To ease the process of authentication of electronic records under the Faceless Assessment Regime, CBDT has provided that the persons who are mandatorily required to authenticate electronic records by digital signature shall be deemed to have authenticated the electronic records when they submit the record through their registered account in the Income-tax Department’s portal. [Notification No. 101 of 2021 dated 6th September, 2021.]

6. Extension of due dates for filing Income tax returns and various audit reports for A.Y. 2021-22 The due date of filing return of income, Tax Audit Report, Transfer Pricing Audit Report and filing revised / belated return for A.Y. 2021-22 was extended vide Circular No. 9/2021 dated 20th May, 2021, which is now further extended. [Circular 17 of 2021 dated 9th September, 2021.]

COMPANY LAW

I. COMPANIES ACT, 2013

1. MCA amends norms relating to creation and maintenance of databank of Independent Directors (IDs) MCA has notified the Companies (Creation and Maintenance of databank of Independent Directors) Second Amendment Rules, 2021. A new Rule 6 has been inserted requiring the Institute to submit an annual report on the capacity-building of IDs within 60 days from the end of every financial year to every individual whose name is included in the databank and also to every company in which such individual is appointed as an ID in prescribed format. [Notification No. S.O. 3406(E), dated 19th August, 2021.]

2. MCA issues FAQs on various issues concerning Corporate Social Responsibility The FAQs have been broadly classified into topics such as (a) Applicability of CSR, (b) CSR Framework, (c) CSR Expenditure, (d) CSR Activities, (e) CSR Implementation, (f) Ongoing Project, (g) Treatment of Unspent CSR Amount, (h) CSR Enforcement, (i) Impact Assessment, and (j) CSR Reporting & Disclosure. [General Circular No. 14 /2021, dated 25th August, 2021.]

II. SEBI

3. SEBI revises format for disclosure of shareholding pattern of promoters and promoter group entities In the interest of transparency for investors, SEBI has revised the format for disclosure of shareholding pattern. Consequently, all listed entities shall henceforth provide shareholding, segregated into promoter(s) and promoter group. At present, the shareholdings of promoter(s) and promoter group entities are collectively disclosed showing shareholding pattern of the promoter and promoter group. [Circular No. SEBI/HO/CFD/CMD/CIR/P/2021/616, dated 13th August, 2021.]

4. SEBI asks depositories to create, host, and maintain a system using ‘Distributed Ledger Technology’ In order to strengthen the process of security creation, monitoring of security created, monitoring of asset cover and covenants of the non-convertible securities, SEBI has asked depositories to create, host, and maintain a system using the distributed ledger technology. The new system shall come into effect from 1st April, 2022. However, testing of the system shall start from 1st January, 2022. [Circular No. SEBI/HO/MIRSD/MIRSD_CRADT/CIR/P/2021/618, dated 13th August, 2021.]

5. SEBI notifies single regulations on Share-Based Employee Benefits and Sweat Equity The market regulator, SEBI, has merged SEBI (Issue of Sweat Equity) Regulations, 2002 and SEBI (Share-Based Employee Benefits) Regulations, 2014 into a single regulation called SEBI (Share-Based Employee Benefits and Sweat Equity) Regulations, 2021. The new Regulation has provided flexibility in switching the administration of their schemes from the trust route to the direct route and vice versa. [Notification No. SEBI/LAD-NRO/GN/2021/40, dated 13th August, 2021.]

6. SEBI specifies additional penalty for repeated delivery default In order to put in place a sufficient deterrent mechanism to handle instances of repeated delivery defaults, SEBI has stated that in the case of a ‘Repeated Default’ by a seller or a buyer, an extra penalty of 3% of the total value of the delivery default will be imposed. Here, the term ‘Repeated Default’ shall be defined as an event wherein a default on delivery obligations takes place three times or more during a six-month period on a rolling basis. The penalty levied on ‘Repeated Default’ shall be transferred to the Settlement Guarantee Fund (SGF) of the Clearing Corporation. However, the Circular shall be effective after one month from the date of its issuance. [Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2021/619, dated 17th August, 2021.]

7. SEBI requires depositories to use distributed ledger technology to monitor security creation SEBI has asked depositories to use blockchain technology to record and monitor security creation as well as covenants of non-convertible securities. Distributed ledger technology has the potential to provide a more resilient system than traditional centralised databases. It offers better protection against different types of cyberattacks. The move is aimed at strengthening the process of security creation and monitoring of security created, asset cover and covenants of non-convertible securities. [Press Release No. 26/2021 dated 25th August, 2021.]

8. AMCs must disclose ‘risk-o-meter’ of scheme while disclosing its performance In order to enhance the quality of disclosure w.r.t. risk and performance, SEBI has asked AMCs to disclose the ‘risk-o-meter’ of the scheme wherever the performance of the scheme is disclosed and the ‘risk-o-meter’ of the scheme and benchmark wherever the performance of the scheme vis-a-vis that of the benchmark is disclosed. The provisions of this Circular shall be applicable with effect from 1st October, 2021. However, AMCs may choose to adopt the provisions of this Circular before the effective date. [Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/621, dated 31st August, 2021.]

9. SEBI asks investors to link PAN with Aadhaar before 30th September, 2021 SEBI has asked investors to link their PAN with Aadhaar by 30th September, 2021 for continual and smooth transactions in the securities market. As per CBDT Notification GSR 112(E) dated 13th February, 2020, the PAN of a person allotted as on 1st July, 2017 shall become inoperative if it is not linked with Aadhaar by 30th September, 2021 or any other date specified by CBDT. SEBI has also asked market intermediaries to ensure compliance of the said Notification. [Press Release 27/2021, dated 3rd September, 2021.]

FEMA

(i) Amendment in rate of interest on advance payment under export regulations Where an exporter receives advance payment with interest from a buyer / third party named in the export declaration made by the exporter, outside India, the exporter shall be under an obligation to ensure that the rate of interest payable on the advance payment does not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points. This rate has now been amended to include any other applicable benchmark as may be directed by the RBI. No direction has yet been provided by the RBI in this matter. [Notification F. No. FEMA 23(R)/(5)/2021-RB, dated 8th September, 2021.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. CBDT prescribes procedure for compliance check on sections 206AB and 206CCA – These two sections, effective from 1st July, 2021, provide for deduction or collection of tax at a higher rate in the case of non-filers of return of income. The CBDT has issued a new functionality, ‘Compliance Check for Sections 206AB & 206CCA’. This functionality is made available through the reporting portal of the Income-tax Department. It provides for compliance checks for single PAN or bulk verification. [Circular regarding use of functionality under sections 206AB and 206CCA. Circular 11 of 2021 dated 21st June, 2021; Notification No. 1 of 2021 dated 22nd June, 2021.]

2. Extension of time limits of certain compliances like filing of TDS returns for the last quarter of F.Y. 2020-21, issue of Form 16, filing of return of Equalisation Levy, etc., to provide relief to taxpayers in view of the pandemic. [Circular 12 of 2021 dated 25th June, 2021.]

3. CBDT issues guidelines to clarify provisions related to TDS u/s 194Q on purchase of goods – As per section 194Q, the buyer is responsible for deduction of tax from any sum paid to a resident seller for purchase of any goods, subject to certain threshold. CBDT has issued guidelines to remove the difficulties in implementation of section 194Q and in overlapping situations while implementing 194O and 206C(1H). [Circular 13 of 2021 dated 30th June, 2021.]

4. Guidelines for application of newly-inserted section 9B and amended section 45(4). [Circular 14 of 2021 dated 2nd July, 2021.]

5. Extension of various Income tax due dates including for imposition of penalty under Chapter XXI, linking of Aadhaar with PAN, for assessment or reassessment under the Income-tax Act and the time limit for completion of such action u/s 153 or u/s 153B, etc. [Notification No. 74 of 2021 dated 25th June, 2021.]

6. Last date of payment of amount under Vivad se Vishwas (without additional amount) which was earlier extended to 30th June, 2021 is further extended to 31st August, 2021. The last date of payment of amount under Vivad se Vishwas (with additional amount) has been notified as 31st October, 2021. [Notification No. 75 of 2021 dated 25th June 2021.]

7. Amendment to Rule 8AA and insertion of Rule 8AB – Income-tax (18th Amendment) Rules, 2021 – The Finance Act, 2021 inserted a new section, 9B, to provide that whenever a partner or member (specified person) receives any capital asset or stock-in-trade or both from a firm / AOP / BOI (specified entity), during the previous year in connection with the dissolution or reconstitution of such specified entity, it shall be deemed to be a transfer made by the specified entity to the specified person. Consequently, section 45(4) was amended. Section 48 was also amended to provide that the amount chargeable to income-tax as income of such specified entity u/s 45(4), which is attributable to the capital asset being transferred by the specified entity, shall be reduced from the full value of consideration while computing capital gains. CBDT notifies Rule 8AB for computation of sum attributable to capital asset u/s 48(iii). [Notification No. 76 of 2021 dated 2nd July, 2021.]

8. Insertion of Rule 8AC – Income-tax (19th Amendment) Rules, 2021 – CBDT has introduced Rule 8C to provide for computation of short-term capital gains and written down value of block of assets, where goodwill is a part of such block and depreciation has been obtained. [Notification No. 77 of 2021 dated 7th July, 2021.]

COMPANY LAW

I. COMPANIES ACT, 2013

(I) MCA clarifies that companies can conduct their EGMs via E-mode up to 31st December, 2021 – MCA has issued a clarification to allow companies to conduct their EGMs through VC / OVCM or transact items through postal ballot up to 31st December, 2021 in accordance with the framework provided in the various Circulars and subject to the conditions prescribed therein. [MCA General Circular No. 10/2021 dated 23rd June, 2021.]

(II) Companies (Accounting Standards) Rules, 2021 – The MCA notified the Companies (Accounting Standards) Rules, 2021. It applies to companies other than those preparing their financial statements using Ind AS framework. The Notification, effective 1st April, 2021, redefines a Small and Medium-Sized Company (SMC). The quantitative threshold limits to qualify as an SMC stand amended as follows: (a) turnover does not exceed Rs. 250 crores in the immediately preceding accounting year, and (b) borrowings, at any time during the immediately preceding year, do not exceed Rs. 50 crores. [MCA Notification dated 23rd June, 2021.]

(III) ICSI Guidance Note on CSR – The Institute of Company Secretaries of India has issued Guidance Note on Corporate Social Responsibilities. In this Guidance Note, provisions related to Business Responsibility Reports by Listed Companies, CSR in Insurance Companies, CSR in Banking Companies, CSR and Sustainable Development Goals, CSR and Corporate Governance, etc., have been elaborated in detail. [Published in June, 2021.]

(IV) MCA further extends due date for filing certain forms under the Companies Act and the LLP Act to 31st August, 2021 – Extension granted to companies / LLPs to file forms (other than a CHG-1 Form, CHG-4 Form and CHG-9 Form) which were / are due for filing from 1st April to 31st July, 2021 without any additional fees. [MCA General Circular No. 11/2021 dated 30th June, 2021.]

(V) MCA now allows companies to file charge-related forms without paying an additional fee up to 1st August, 2021 – In view of the Covid-19 pandemic, the MCA has decided to relax the timelines for filing of forms related to the creation / modification of charges. As a result, companies can file charge-related forms without paying an additional fee up to 1st August, 2021. [MCA General Circular No. 12/2021 dated 30th June, 2021.]

II. SEBI

(VI) SEBI introduces cross margin facility on commodity futures – In order to improve the efficiency of the use of the margin capital by market participants, SEBI has decided to introduce cross margin benefit between Commodity Index futures and futures of its underlying constituents or its variants. This shall reduce the cost of trading and may lead to enhanced liquidity in both the Commodity Index futures and its underlying constituent futures or its variants. [Circular No. SEBI/HO/CDMRD/CDMRD_DRM/P/CIR/2021/586, dated 29th June, 2021.]

(VII) SEBI issues SOP for company getting delisted through scheme of arrangement – SEBI has issued the Standard Operating Procedure (SOP) for listed subsidiary company desirous of getting delisted through a Scheme of Arrangement wherein the listed parent holding company and the listed subsidiary are in the same line of business. [Circular No. SEBI/HO/CFD/DIL1/CIR/P/2021/0585, dated 06th July, 2021.]

(VIII) Mutual Funds to provide justification to stakeholders if put option favourable to scheme is not exercised – Based on the recommendation of the Mutual Fund Advisory Committee, the SEBI has decided that, with effect from 1st October, 2021, if put option is not exercised by a Mutual Fund, and if exercising the put option would have been in favour of the scheme, then a justification for not exercising the put option shall be provided by the Mutual Fund to the Valuation Agencies (VA), Board of AMC and Trustees on or before the last date of notice period. [Circular No. SEBI/HO/IMD/DF4/P/CIR/2021/593, dated 09th July, 2021.]

(IX) SEBI reduces advance intimation timeline for modifications in commodity derivative contract – In order to bring in uniformity while giving effect to the contract modifications (so that they have the desired impact) and the modified contract represents a healthy replica of the physical market, SEBI has decided, in consultation with the stock exchanges, to reduce the number of days of advance intimation for all the three categories, i.e., non-material, material and material modifications which can be made only after approval from SEBI, to ten days. [Circular No. SEBI/HO/CDMRD_DOP/P/CIR/2021/592, dated 08th July, 2021.]

FEMA
(i) RBI has decided to collect information about LRS transactions in XBRL format instead of the Online Return Filing System (ORFS). Accordingly, AD Category – I banks shall upload the requisite information on the XBRL system on or before the fifth of the succeeding month from 1st July, 2021 onwards. [A.P. (DIR SERIES 2021-22) Circular No. 7, dated 17th June, 2021.]

(ii) Indian residents are permitted under LRS to make remittances to units set up in IFSCs in India for investment purposes since February 2021. For this purpose, Resident Individuals could also open a non-interest-bearing Foreign Currency Account (FCA) in IFSCs. The International Financial Services Centres Authority (IFSCA) has now amended regulations applicable to Banking Units in such IFSCs. Among other amendments, such Banking Units can now open accounts in a freely convertible foreign currency for individuals and corporate or institutional entities, resident in India or outside India, subject to such conditions as may be specified by the Authority. [Notification No. IFSCA/2021-22/GN/REG013, dated 5th July 2021.]

(iii) The Government had announced a hike in foreign investment limit for the Insurance Sector from 49% to 74% during the Budget on 1st February, 2021 and an appropriate Amendment Bill was passed into law (covered in the April, 2021 issue of this Journal) followed by formally notifying these amendments on 19th May, 2021 with Clarifications on the final rules for increasing the foreign direct investment limit to 74%. The FDI Policy for the same was also amended by the issuance of Press Note 2 of 2021 (covered in the July, 2021 issue of this Journal). The IRDAI has now amended regulations mandating requirement of Resident Indian Citizens at various management posts of Indian Insurance Companies having foreign investment. Further, there are disclosure and compliance requirements stated in respect of these new regulations. Full details are provided in the Notification. It should be noted that a corresponding amendment in the Non-Debt Instrument Rules, 2019 (NDI Rules) is pending after which the FDI amendments will take effect. [Notification No. F. No. IRDAI/REG/6/178/2021, dated 7th July, 2021.]

ICAI ANNOUNCEMENTS

A) Audit Quality Maturity Model – Version 1.0 (AQMM v1.0) – The ICAI has released AQMM v1.0, an evaluation matrix, as part of its capacity-building measure. The Evaluation Matrix is for sole proprietors and audit firms to help them self-evaluate their current level of audit maturity. The same would be recommendatory initially. Firms auditing the following entities are covered in AQMM v1.0: (i) a listed entity; or (ii) banks other than co-operative banks (except multi-state co-operative banks); or (iii) Insurance Companies. Firms doing only branch audits are not covered. [3rd July, 2021.]

ICAI MATERIAL
Accountancy and Audit
• Guidance Note on Accounting for Derivative Contracts (Revised, 2021) [6th July, 2021.]

Corporate Laws

Technical Guide on Incorporation of Foreign Companies in India [3rd July, 2021.]

Handbooks:

Resolution Plan under the Insolvency and Bankruptcy Code, 2016 [10th July, 2021.]

Personal Guarantors to Corporate Debtors under the Insolvency and Bankruptcy Code, 2016 [10th July, 2021.]

Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 [10th July, 2021.]

Moratorium under the Insolvency and Bankruptcy Code, 2016 [10th July, 2021.]

Valuation
Booklets:
•    Disclaimers, Limitations in a Valuation Report – Are they even Real? [3rd July, 2021.]
•    Is DCF the most Popular Method for Valuation under Companies Act? [3rd July, 2021.]
•    Is DCF the only Method for Valuation of Shares under Income-tax Act? [3rd July, 2021.]
•    Minority Holding Valuation: Often Unsatisfactory? [3rd July, 2021.]
•    Valuation Reports – Do’s and Don’ts – To what extent are they Followed? [3rd July, 2021.]
•    Valuation date, Valuation reports date and events between these dates [9th July, 2021.]
•    Valuation: Professional’s Insights (Series-6) [10th July, 2021.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Insertion of Rule 11UAE – Income-tax (16th Amendment) Rules, 2021 – The Finance Act, 2021 has amended section 50B to provide that in case of slump sale, the Fair Market Value (FMV) of the undertaking or division transferred shall be deemed as the full value of the consideration received or accruing as a result of the transfer of such capital asset. Rule 11UAE is now prescribed providing the formula for computation of the FMV of capital assets for the purposes of section 50B. [Notification No. 68 of 2021 dated 24th May, 2021.]

2. Procedure for exercise of option under 245M(1) and intimation thereof by furnishing and upload of Form No. 34BB under Rule 44DA(1) explained. [Notification No. 5 of 2021 dated 24th May, 2021.]

3. Clarification regarding the limitation time for filing of appeals before the CIT (Appeals) – CBDT has issued Circular No. 8 of 2021 providing various relaxations till 31st May, 2021, including extending the time for filing appeals before CIT (Appeals). At the same time, the Supreme Court, vide order dated 27th April, 2021 in suo motu Writ Petition (Civil) No. 3 of 2020, restored the order dated 23rd March, 2020 and in continuation of the order dated 8th March, 2021, directed that the period(s) of limitation, as prescribed under any General or Special Laws in respect of all judicial or quasi-judicial proceedings, whether condonable or not, shall stand extended till further orders. CBDT clarifies that if different relaxations are available to the taxpayers for a particular compliance, the taxpayer is entitled to the relaxation which is more beneficial to her. Hence, limitation for filing of appeals before the CIT (Appeals) under the Act stands extended till further orders as ordered by the Supreme Court. [Circular No. 10 of 2021 dated 25th May, 2021.]

4. Income-tax Rules – Income-tax (17th Amendment) Rules, 2021 – CBDT amends Rule 31A for furnishing particulars of amounts on which tax is not deducted under sections 194A, 194, 196D and 194Q. It has also prescribed a new Annexure under Form 26Q. [Notification No. 71 of 2021 dated 8th June, 2021.]

5. Cost Inflation Index (CII) notified as 317 for F.Y. 2021-22. [Notification No. 73 of 2021 dated 15th June, 2021.]

COMPANY LAW

I. COMPANIES ACT, 2013

(I) MCA brings in new e-form AGILE-PRO-S for effortless incorporation of companies along with various other registrations – The MCA has notified the Companies (Incorporation) Fourth Amendment Rules, 2021 wherein a new e-form AGILE-PRO-S (Application for Registration of GSTIN, ESIC, EPFO, Profession tax registration, opening of bank account, and Shops and Establishment Registration) is introduced. On filing the AGILE-PRO-S form together with the SPICE incorporation form, companies would be enrolled automatically for GST, EPFO, ESIC, Profession tax registration, opening of bank account, and Shops and Establishment Registration in one go. [MCA Notification No. G.S.R. 392(E) F. No. 1/13/2013 CL-V, Vol. IV Dated 7th June, 2021.]

(II) MCA notifies manner of transfer of shares to IEPF – The MCA has notified the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2021. This amendment has inserted Rule 6A providing the manner of transfer of shares to the IEPF authority in a case where a company does not receive information regarding significant beneficial ownership, or the information received is incomplete. [MCA Notification No. G.S.R. 396 (E) F. No. 05/4/2020-IEPF dated 9th June, 2021.]

(III) MCA removes restrictions on matters not to be dealt with in meetings conducted via video conferencing – The MCA has notified the Companies (Meetings of Board and its Powers) Amendment Rules, 2021 which seeks to amend the Companies (Meetings of Board and its Powers) Rules, 2014 wherein restriction on matters not to be dealt with in a meeting through video conferencing as specified in the Act has been dispensed with. As a result, Companies are free to discuss any matter in meetings conducted through video conferencing. [MCA Notification No. G.S.R. 409 dated 15th June, 2021.]

(IV) Companies (Indian Accounting Standards) Amendment Rules, 2021 – The MCA has notified limited amendments to Ind AS 101, Ind AS 102, Ind AS 103, Ind AS 104, Ind AS 105, Ind AS 106, Ind AS 107, Ind AS 109, Ind AS 111, Ind AS 114, Ind AS 115, Ind AS 116, Ind AS 1, Ind AS 8, Ind AS 12, Ind AS 16, Ind AS 27, Ind AS 28, Ind AS 34, Ind AS 37, Ind AS 38 and Ind AS 40. [MCA Notification dated 18th June, 2021.]

II. SEBI

(V) SEBI grants relaxation in compliance with requirements pertaining to AIFS and VCFS – Due to the on-going second wave of the Covid-19 pandemic and restrictions imposed by various state governments, SEBI has decided to extend the due dates for regulatory filings by AIFs and VCFs during the period ending March, 2021 to July, 2021. As a result, AIFs and VCFs may submit regulatory filings for the aforesaid periods, as applicable, on or before 30th September, 2021. [Circular No. SEBI/HO/IMD/IMD-I/DOF6/CIR/2021/568, dated 31st May, 2021.]

(VI) Enhancement of overseas investment limits for Mutual Funds – SEBI has enhanced overseas investments for Mutual Funds. As a result, they can now make overseas investments subject to a maximum of US $1 billion per Mutual Fund, within the overall industry limit of US $7 billion. In addition, Mutual Funds can make investments in overseas Exchange Traded Fund/s subject to a maximum of US $300 million per Mutual Fund, within the overall industry limit of US $1 billion. [Circular No. SEBI/HO/IMD/IMD-II/DOF3/P/CIR/2021/571 dated 3rd June, 2021.]

(VII) SEBI allows Mutual Funds to enter into plain vanilla Interest Rate Swaps (IRS) for hedging purpose – Based on the feedback received from the industry, SEBI has decided to modify the norms for investment and disclosure by Mutual Funds in Derivatives wherein it has specified that Mutual Funds may enter into plain vanilla IRS for hedging purposes. The value of the notional principal in such cases must not exceed the value of the respective existing assets being hedged by the scheme. [Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/580 dated 18th June, 2021.]

FEMA

(i) The Government had announced a hike in foreign investment limit for the insurance sector from 49% to 74% during the Budget announced on 1st February, 2021 and the appropriate Amendment Bill was passed into law (covered in the April, 2021 issue of the BCAJ). The Finance Ministry formally notified these amendments to the Indian Insurance Companies (Foreign Investment) Rules, 2015 on 19th May, 2021 and clarified on the final rules for increasing the foreign direct investment limit to 74%. The FDI Policy for the same has also now been amended by issuance of Press Note 2 of 2021. Certain conditions in relation to management by Resident Indian Citizens have been added. A corresponding amendment in the Non-Debt Instrument Rules, 2019 (NDI Rules) is pending after which the amendments will take effect. [Notification No. G.S.R. 337(E) dated 19th May, 2021 and Press Note No. 2 (2021 Series) dated 14th June, 2021.]

(ii) All transactions in government securities concluded outside the recognised stock exchanges are settled on a guaranteed basis by the Clearing Corporation of India Ltd. (CCIL) which acts as the central counter party. Based on requests received, RBI has decided to allow banks in India having an Authorised Dealer Category-1 licence to lend to Foreign Portfolio Investors (FPIs) in accordance with their credit risk management frameworks for the purpose of placing margins with CCIL in respect of settlement of transactions involving Government Securities (including Treasury Bills and State Development Loans). Changes have also been made by way of Notification to Regulation 7 of FEM (Borrowing and Lending) Regulations. [Notification No. FEMA. 3(R)2/2021-RB, dated 24th May, 2021 and A.P. (DIR SERIES 2021-22) Circular No. 6 dated 4th June, 2021.]

(iii) Certain banks had cautioned their customers against dealing in virtual currencies by making a reference to an RBI circular which was later set aside by the Supreme Court on 4th March, 2020. RBI has clarified that reference made by banks to this Circular is not in order. However, it has pointed out that banks and other entities may continue to carry out customer due diligence processes in line with regulations governing standards for KYC, Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT) and other obligations under PMLA, in addition to ensuring compliance with relevant provisions under FEMA for overseas remittances. [Circular No. DOR. AML.REC 18/14.01.001/2021-22 dated 31st May, 2021.]

(iv) Limits for FPIs to invest in Government Securities have remained unchanged for F.Y. 2021-22. Details are provided in the Circular. [A.P. (DIR SERIES 2021-22) Circular No. 5 dated 31st May, 2021.]

RBI

Accounts and Audit
(A) Risk-Based Internal Audit (RBIA) Framework for HFCs – The RBI had earlier issued a Notification (No. RBI/2020-21/88 Ref. No. DoS.CO.PPG./SEC.05/11.01.005/2020-21 dated 3rd February, 2021) mandating an RBIA Framework for specified NBFCs and UCBs. The aforesaid Circular has now been made applicable to all deposit-taking housing finance companies (HFCs) and non-deposit-taking HFCs with asset size of Rs. 5,000 crores and above. Such HFCs need to put in place an RBIA Framework by 30th June, 2022. [Notification No. RBI/2021-22/53 Ref. No. DoS.CO.PPG.SEC/03/11.01.005/2021-22 dated 11th June, 2021.]

ICAI MATERIAL

Accounts and Audit

Accounting Standards: Quick Referencer for Micro Non-Company Entities. [25th May, 2021.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Extension of due dates for filing various forms – CBDT has extended the time limit for electronic filing of Form No. 15CC, Equalization Levy Statement in Form No. 1, Form No. 64D, Form No. 64C, Form No. 10BBB and Form II SWF due to difficulties faced by assessees in electronic filing of forms and non-availability of the utility for e-filing of forms. [Circular 15 of 2021 dated 3rd August, 2021.]

2. Insertion of Rules 21AI and 21AJ and Forms 10IG and 10IH – Income-tax (21st Amendment) Rules, 2021 – CBDT has inserted Rule 21AI to prescribe the method of calculating exempt income of a specified fund for the purposes of section 10(4D) and Rule 21AJ to determine the income of a specified fund attributable to units held by a non-resident taxable u/s 115AD. [Notification No. 90 of 2021 dated 9th August, 2021.]

3. Insertion of Rule 10RB and Form 3CEEA – Income-tax (23rd Amendment) Rules, 2021 – CBDT has notified new Rule 10RB prescribing the manner for computation of relief in tax payable u/s 115JB(1) due to operation of newly-inserted sub-section (2D) of section 115JB. The assessee is required to make an application in Form 3CEEA electronically to claim relief u/s 115JB(2D). [Notification No. 92 of 2021 dated 10th August, 2021.]

COMPANY LAW

I. COMPANIES ACT, 2013

(I) MCA appoints 1st September, 2021 as the effective date for section 4 of the Companies (Amendment) Act, 2020: Section 4 of the Companies (Amendment) Act, 2020 which amends section 16 of the Companies Act, 2013 shall be effective from 1st September, 2021. As per section 16(3), the Government shall allot a new name to the company as per newly-inserted Rule 33A and the Registrar shall enter the new name in the Register of Companies in place of the old name and issue a fresh certificate of incorporation with the new name which the company shall use thereafter. [Notification No. S.O. 2904(E), dated 22nd July, 2021.]

(II) MCA tweaks norms relating to change in the name of company. Inserts new Rule for allotment of a new name to existing companies u/s 16(3): The MCA has notified the Companies (Incorporation) Fifth Amendment Rules, 2021 whereby a new rule 33A relating to the allotment of a new name to an existing company u/s 16(3) of the Companies Act, 2013 has been inserted. [Notification No. G.S.R. 503(E), dated 22nd July, 2021.]

(III) Government has identified 2,38,223 shell companies between 2018 and 2021: Union Minister of State for Corporate Affairs Rao Inderjit Singh in a written reply to a question in the Rajya Sabha informed that the Government has identified a total of 2,38,223 companies as shell companies between 2018 and 2021. The Minister further stated that the Special Task Force set up to look into the issue of ‘shell companies’ has recommended use of certain red-flag indicators to identify such companies. [Press Release dated 27th July, 2021.]

II. SEBI

(IV) SEBI further extends timelines for compliance with regulatory requirements by Debenture Trustees: In view of the prevailing situation due to the Covid-19 pandemic and representations received from Debenture Trustees, SEBI has decided to further extend the timelines for compliance with the regulatory requirements by them for the quarter / half-year / year ending 31st March, 2021, up to 31st October, 2021. [Circular No. SEBI/HO/MIRSD/CRADT/CIR/P/2021/597, dated 20th July, 2021.]

(V) SEBI issues norms on Mandatory Nomination for Eligible Trading and Demat Accounts: The SEBI has issued norms on Mandatory Nomination for Eligible Trading and Demat Accounts wherein it has specified that the investors opening new trading and / or demat account(s) on or after 1st October, 2021 shall have the choice of providing nomination or opting out of the nomination. In addition, the online nomination and declaration form need to be signed using e-Sign facility. [Circular No. SEBI/HO/MIRSD/RTAMB/CIR/P/2021/601, dated 23rd July, 2021.]

(VI) Top-100 listed entities can have extra time for holding Annual General Meeting: After consideration of the request received from the Institute of Chartered Secretaries of India (ICSI), SEBI has decided to extend the timeline for conduct of AGMs by top-100 listed entities by market capitalisation. Accordingly, such entities can hold their AGMs within a period of six months from the date of closing of the financial year 2020-21. [Circular No. SEBI/HO/CFD/CMD1/P/CIR/2021/602, dated 23rd July, 2021.]

(VII) SEBI asks Registrar and Transfer Agents (RTA) to implement ‘Inter-Operable Platform’ for enhancing investors’ experience in Mutual Fund transactions: In order to make it more convenient for the existing and future investors to transact and avail services while investing in Mutual Funds, SEBI has asked RTA to implement standardised practices and system interoperability amongst themselves to jointly develop a common industry-wide platform that will deliver an integrated, harmonised, elevated experience to the investors across the industry platform. [Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/604, dated 26th July, 2021.]

(VIII) SEBI reduces trading lot size from 100 units to 1 unit in REITs and InvITs: SEBI has notified the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 and the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2021 wherein provisions related to minimum application value and trading lots have been amended. The minimum application value will be in the range of Rs. 10,000 to Rs. 15,000 and the trading lot will be of one unit for REITs and InvITs. [Notification No. SEBI/LAD-NRO/GN/2021/28 and No. SEBI/LAD-NRO/GN/2021/27, dated 30th July, 2021.]

(IX) SEBI allows non-scheduled Payments Banks to register as ‘Bankers to an Issue’: SEBI has permitted non-scheduled Payments Banks to register as ‘Bankers to an Issue’ (BTIs). Now, non-scheduled Payments Banks, which have prior approval from RBI, shall be eligible to act as BTIs subject to fulfilment of the conditions stipulated in the BTI Regulations. In addition, a Payment Banks registered as a BTI shall also be permitted to act as a self-certified syndicate bank. [Circular No. SEBI/HO/MIRSD/MIRSD_DOR/P/CIR/605/2021, dated 3rd August, 2021.]

(X) SEBI amends LODR norms to further strengthen independence of Independent Directors: SEBI has notified the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2021 provision related to Independent Directors (ID) in order to further strengthen the independence of IDs. Now, the appointment, re-appointment or removal of an independent director of a listed entity shall also be subjected to the approval of shareholders by way of a special resolution. [Notification No. SEBI/LAD-NRO/GN/2021/35, dated 3rd August, 2021.]

(XI) Mutual Funds need to maintain current accounts in multiple banks for ease of doing business: SEBI: Based on the request of the Mutual Fund industry, SEBI has clarified that Mutual Funds should maintain current accounts in an appropriate number of banks for the purpose of receiving subscription amounts and for payment of redemption / dividend / brokerage / commission, etc., to facilitate financial inclusion, convenience of investors and ease of doing business. [Circular No. SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/610, dated 4th August, 2021.]

FEMA

(i) The Government has reviewed the FDI policy on the petroleum and natural gas sector and has increased the limit of FDI in PSU oil companies from 49% to 100% under automatic route in cases where ‘in-principle’ approvals for strategic disinvestment of a PSU have been granted by the Government. The changes have been made in the Consolidated FDI Policy Circular of 2020. However, the increase will be effective once corresponding amendments are made in the NDI regulations. [Press Note No. 3 (2021 Series), dated 29th July, 2021.]

(ii) IRDAI had removed the requirement of ‘Indian-owned and controlled’ by way of an Amendment Act from 25th March, 2021. Accordingly, the IRDAI has now withdrawn the guidelines in relation to ‘Indian-owned and controlled’. [Circular No. IRDAI/F&A/CIR/MISC//211/07/2021, dated 30th July, 2021.]

(iii) Overseas investments and acquisition of immovable properties outside India by persons resident in India are still governed by FEMA Regulations 120 and 7(R), respectively. These were under review since quite some time. RBI has now put out drafts for FEM (Non-debt Instruments – Overseas Investment) Rules, 2021 and FEM (Overseas Investment) Regulations, 2021. Comments / feedback on the draft rules / regulations are invited from all stakeholders till 23rd August. There are quite a few important changes proposed in the draft regulations. [Press Release: 2021-2022/661 dated 9th August, 2021.]

ICAI ANNOUNCEMENTS

• Extension of validity of Peer Review Certificate (PRC) having original expiry date falling anytime from 1st to 31st July, 2021 has been extended till 31st August, 2021 in cases where no extension benefit has been availed as per any of the earlier ICAI announcements. [22nd July, 2021.]
• Deferred provisions of Volume-I of Revised Code of Ethics, 2019, namely, ‘Responding to Non-Compliance with Laws and Regulations’ (NOCLAR), fees – relative size and tax services to audit clients is made applicable and effective from 1st April, 2022. [26th July, 2021.]

ICAI MATERIAL

Corporate Laws
• Handbook on Claims under the Insolvency and Bankruptcy Code, 2016. [6th August, 2021.]
• Handbook on Do’s and Don’ts for IPs under the Insolvency and Bankruptcy Code, 2016. [13th August, 2021.]

Valuation
• Booklets on valuation:

Learnings from Judicial Pronouncements on Valuation – How Far the Verdicts and Findings Relevant Now? [13th August, 2021.]

ESOP Valuation – Model and Issues. [13th August, 2021.]

Valuation of Startups. [13th August, 2021.]

Learnings from the Observations of Peer Review of Valuation Reports. [13th August, 2021.]

BCAJ Admin

Regulatory Referencer

DIRECT TAX

1. Condonation of delay in filing Form No.10A: The CBDT has condoned the delay upto 25th November 2022 in filing Form No. 1OA u/s 12A(1)(ac)(i) or first proviso to clause (23C) of section 10 or clause (i) of first proviso to section 80G(5) or fifth proviso to section 35(1), which was required to be filed electronically on or before 31st March, 2022. [Circular No. 22/2022 dated 1st November, 2022.]

2. Explanatory Notes to the Provisions of the Finance Act, 2022: The CBDT has released the explanatory notes to the provisions of the Finance Act, 2022 that describes the substance of the provisions/amendments made by the Finance Act, 2022 relating to Income-taxes. [Circular No. 23/2022 dated 3rd November, 2022.]

COMPANIES ACT

1. Provisions of the Companies Act, which would apply to Financial Products Services Institutions at IFSCs, specified: The Central Government has specified provisions of the Companies Act which shall apply with such exceptions, modifications and adaptations as specified to financial products, financial services or financial institutions in an International Financial Services Centre (IFSC). [Notification No. S.O. 5160E, dated 4th November, 2022.]

SEBI

1. Face value of debt security and non-convertible redeemable preference share reduced from Rs. 10 lakhs to Rs. 1 lakh: Earlier, SEBI had mandated that the face value of each debt security or non-convertible redeemable preference share issued on a private placement basis shall be Rs. 10 lakhs. SEBI received various representations from market participants, requesting a review of the said denominations. Accordingly, SEBI has reduced the face value of debt securities and non-convertible redeemable preference shares from Rs. 10 lakhs to Rs. 1 lakh. The motive is to broad base the investors’ participation in the corporate bond market. [Circular No. SEBI/HO/DDHS/P/CIR/2022/00144, dated 28th October, 2022.]

2. Unlisted INVITs can no longer carry private placement of units: SEBI vide SEBI (INVITs) (Second Amendment) Regulations, 2022 has restricted private placement of units of unlisted INVITs. Earlier, INVITs were eligible to issue units via private placement mode. Now, the Board may grant exemptions to the INVITs which have issued units for the purpose of facilitating listing on a recognised stock exchange. Also, various other changes have been notified through amendments which shall come into force w.e.f. 1st January, 2023. [Notification No. SEBI/LAD-NRO/GN/2022/101, dated 9th November, 2022.]

3. Registration fees for FPI category I & II reduced to USD 2,500 and USD 250: Amendments are done to the SEBI (FPIs) Regulations, 2019, whereby the registration fees have been reduced for FPI category I & II to USD 2,500 and USD 250, respectively. Earlier, it was USD 3,000 and USD 300, respectively. Similarly, application and registration fees have now been reduced from USD 2,500 & USD 10,000 to USD 2,100 and USD 8,500, respectively. [Notification No. SEBI/LAD-NRO/GN/2022/99, dated 9th November, 2022.]

4. SEBI (LODR) (Sixth Amendment) Regulations, 2022: SEBI has notified various amendments in provisions relating to independent directors, financial statements, Draft Scheme of Arrangement, Fee in respect of the draft scheme of arrangement, etc. The amendments are effective from 14th November, 2022. [Notification No. SEBI/LAD-NRO/GN/2022/103, dated 14th November, 2022]

NFRA

1. Auditing and Accounting Standards Circular – Non-accrual of interest on borrowings by companies in violation of Ind AS: The NFRA has advised all companies that are required to follow Ind AS not to discontinue recognition of principal/ interest merely on account of the borrowings being declared NPA by the lenders or the management’s expectation of a likely settlement with the lenders. Discontinuation of interest expense recognition on financial liabilities solely based on the borrower company’s expectation of loan/interest waiver/concession without evidence of legally enforceable contractual documents violates requirements of Ind AS 109, Financial Instruments. Auditors are required to ensure strict compliance with this Circular while performing audits. [Circular No. NF-25011/5/2022-O/o Secy-NFRA dated 20th October, 2022.]

2. Introduction of NFRA Audit Quality Inspections: The NFRA has published its ‘Audit Quality Inspection Guidelines’ to improve the quality of the audit profession further. The objective of inspections is to evaluate compliance of the audit firm/auditor with auditing standards and other regulatory and professional requirements and the sufficiency and effectiveness of the quality control system of the audit firm/auditor. The Guidelines covers the mandate and overall objective, criteria and scope, methodology of selection of audit firms and selection of individual audit assignments and inspection reports. [Guidelines posted by NFRA on its website on 11th November, 2022.]

ICAI ANNOUNCEMENT

1. Certificates issued by the Peer Review Board to Practice Units without an end date: For Peer Review Certificates (PRC) issued till 16th April, 2015, without mention of an end date, the end date shall be 31st December 2022. Practice Units which have been issued a certificate in which the validity of the certificate has not been mentioned, need to get the Peer Review of their firms initiated and completed on or before 31st December, 2022, to maintain the continuity of their existing PRC. [10th November, 2022.]

ICAI MATERIAL

1. Guidance Note on Report Under Section 92E of the Income-Tax Act, 1961 (Transfer Pricing), Revised 2022 Edition. [25th October, 2022.]

2. QRBs Report on Audit Quality Review, 2021-22. [2nd November, 2022.]

3. Indian Accounting Standards (Ind AS): Disclosures Checklist (Revised November, 2022). [2nd November, 2022.]

BCAJ Admin

Regulatory Referencer

DIRECT TAX

1.   Income-tax (31st Amendment) Rules, 2022 – Insertion of Rule 12AD: CBDT has inserted Rule 12AD in the Income-tax Rules which specifies that the modified return of income to be furnished by a successor entity to a business reorganisation, as referred to in section 170A, shall be in Form ITR-A and verified in the manner specified therein. [Notification No. 110/2022 dated 19th September, 2022.]

2.   Income-tax (32nd Amendment) Rules, 2022 – Insertion of Rule 132: The Finance Act, 2022 inserted an Explanation 3 with retrospective effect providing that for Section 40(a)(ii), the term ‘tax’ shall deemed to have always included ‘surcharge’ or ‘cess’. Accordingly, even for the past period, the deduction for ‘cess’ or ‘surcharge’ shall not be available. Newly inserted sub-section (18) to section 155 empowers the AO to re-compute the total income for such previous year in which the assessee claimed deduction of surcharge or cess. The income so computed shall be treated as under-reported income, and subject to levy of penalty. However, if the assessee makes an application to AO, requesting him for recomputation of total income without allowing the claim for deduction of surcharge or cess and pays the tax amount, such claim shall not be deemed to be under-reported income. CBDT has inserted Rule 132 prescribing the manner for making applications before the AO. [Notification No. 111/ 2022 dated 28th September, 2022.]

3.   Extension of timeline for filing of various audit reports and furnishing return of income for A.Y. 2022-23: Due to difficulties faced by taxpayers in electronic filing of audit reports, CBDT has extended the due date of furnishing of report of audit under any provision of the Act for P.Y. 2021-22 (A.Y. 2022-23), from 30th September, 2022 to 7th October, 2022. Further, the CBDT has consequently extended the due date of furnishing of return of income u/s 139 (1) for A.Y. 2022-23 which is 31st October, 2022 in the case of assesses referred in clause (a) of Explanation 2 to subsection (1) of section 139, to 7th November, 2022. [Circular No. 19/2022 dated 30th September, 2022 and Circular No. 20/2022 dated 26th October, 2022.]

4.   Extension of due date of filing Form 26Q for the second quarter of F.Y. 2022-23: Considering the difficulties faced in the timely filing of TDS statement, the CBDT has extended the due date of filing of Form 26Q (TDS return for non-salary transactions) for the second quarter of F.Y.2022-23 from 31st October, 2022 to 30th November, 2022. [Circular No. 21/2022 dated 27th October, 2022.]

COMPANIES ACT

1. Scope of small companies widened: To ensure ease of doing business for corporates, MCA has further revised the definition of ‘Small Companies’ by increasing their maximum threshold for paid up capital from Rs. 2 crores to Rs. 4 crores and turnover from Rs. 20 crores to Rs. 40 crores. As a result, now more companies will be covered under the ambit of small companies. It will further lead to the benefits of a reduction in compliance burden as a result of the revised definition. [Notification No. G.S.R. 700(E) dated 15th September 2022.]

2. Companies having any balance in ‘Unspent CSR Account’ must constitute a CSR Committee: i) MCA has notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022. As per the amended norms, a company having any amount in its ‘Unspent CSR Account’ shall constitute a CSR Committee. ii) Now, companies can also undertake the CSR activity through a registered public trust or a registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 of the Income-tax Act, 1961. The CSR reporting format has also been modified [Notification No. G.S.R. 715(E) dated 20th September, 2022.]

3. Clarification on mandating companies to round off figures appearing in the financial statements: The MCA vide Notification No. GSR 207 (E), dated 24th March, 2021 introduced an amendment in Schedule III, whereby the companies were mandated to round off the figures appearing in the financial statements depending upon their total income. Now, the MCA has clarified that in case the companies provide an absolute figure in e-forms i.e., AOC-4, the same shall not be treated as an incorrect certification by the professionals. [MCA Clarification dated 26th September, 2022.]

4. Due date for filing e-form DIR-3 KYC and web-form DIR-3 KYC WEB without late fees extended till 15th October, 2022: The MCA received a representation requesting for an extension of time beyond 30th September, 2022 for filing e-form DIR-3 KYC and web-form DIR-3 KYC WEB without payment of a fee. Accordingly, the MCA has decided to allow the filing of e-form DIR-3 KYC and web form DIR-3 KYC WEB without any payment of a fee up to 15th October, 2022. [Circular No. 09/2022 dated 28th September, 2022.]

SEBI

1. Depositories to validate transfer instructions before executing actual transfer of securities: In order to further mitigate the risk for client’s securities, SEBI has mandated that prior to executing actual transfer of the securities for Pay-In from client Demat account to TM Pool account, the depository shall validate the transfer instruction received. SEBI has further clarified that for early pay-In transactions, the existing facility of the block mechanism shall continue. It has also prescribed the detailed procedure to be put in place by the depositories to validate the Pay-In Instructions. [Circular No. SEBI/HO/MIRSD/DOP/P/CIR/2022/119 dated 19th September, 2022.]

2. Extension of the ‘Two-Factor Authentication’ for subscription transactions in the units of Mutual Funds: SEBI has decided to extend the Two-Factor Authentication for subscription transactions in the units of Mutual Funds. Accordingly, Two-Factor Authentication (for online transactions) and signature method (for offline transactions) shall be used for authentication in case of subscription and redemption of units. Further, the SEBI clarified that the requirement of two-factor authentication is applicable only at the time of registration of mandate/systematic transactions. [Circular No. SEBI/HO/IMD/IMD-I DOF1/P/CIR/2022/132 dated 30th September, 2022.]

3. The scope of ‘Demat Debit and Pledge Instruction’ (DDPI) widened by including Mutual Fund transactions in its ambit: Earlier, SEBI had issued the guidelines regarding execution of DDPI for transfer of securities towards deliveries / settlement obligations and pledging / re-pledging of securities. Now, SEBI has decided to widen the scope of DDPI to include Mutual Fund transactions executed on Stock Exchange’s order entry platforms and tendering shares in open offers through Stock Exchange platforms in its ambit. This circular shall be applicable from 18th November, 2022. [Circular No. SEBI/HO/MIRSD/MIRSD-POD-1/P/CIR/2022/137 dated 6th October, 2022.]

FEMA

1. Results of the annual census on Foreign Liabilities and Assets of Indian Direct Investment Entities: RBI has released the provisional results of the 2021-22 round of the annual census on foreign liabilities and assets (FLA) covering cross-border liabilities and assets of entities with inward/outward direct investment (DI). These entities include Companies, LLPs, AIFs and Partnership Firms. The census captures detailed information on (a) market value of liabilities and assets of Indian DI entities
arising on account of cross-border direct and other investments; and (b) other business parameters (activity sector, sales, purchase, exports and imports). A few of the findings are:

Nearly 97 per cent of the responding entities were unlisted: they accounted for the bulk of FDI equity capital in India.

Mauritius, USA, Singapore and the UK together accounted for over 60 per cent of FDI in India. In case of ODI, Singapore continued to be the most popular destination followed by the United States and Netherlands.

Overseas subsidiaries of Indian companies recorded over 40 per cent expansion in business during 2021-22 in rupee terms.

RBI has also separately released the data relating to financial performance of foreign direct investment (FDI) companies in India during F.Ys. 2019-20 and 2020-21. Companies with direct investment from Mauritius, Singapore and USA accounted for nearly half of the sample companies; Netherlands, Japan, the UK and Germany were other major direct investment sources. A major chunk of companies belonged to manufacturing, and information and communication sectors. Further details are available in the respective Press Releases. [Press release Nos. 2022-23/909 and 2022-23/912 dated 22nd September, 2022.]

2. Uniformity in imposition of LSF: RBI had introduced Late Submission Fee (LSF) for reporting delays in Foreign Investment (FI), External Commercial Borrowings (ECBs) and Overseas Investment related transactions w.e.f 7th November, 2017, 16th January, 2019 and 22nd August, 2022, respectively. RBI has now decided to bring uniformity in imposition of LSF across these functions. The calculation matrix can be referred to in the Circular. The facility for opting for LSF shall be available up to 3 years from the due date of reporting/ submission. The option of LSF shall also be available for delayed reporting/submissions under Notification No. FEMA 120/2004-RB and earlier corresponding regulations, up to 3 years from the date of notification of Foreign Exchange Management (Overseas Investment) Regulations, 2022. These provisions shall come into effect immediately for the delayed filings made on or after the date of this Circular. [A.P. (DIR SERIES 2021-22) Circular No. 16 dated 30th September, 2022.]

3. Concept note on CBDC: The RBI released a Concept Note on Central Bank Digital Currency (CBDC) for India to create awareness about CBDCs in general and the planned features of the Digital Rupee (eRs.) in particular. It explains the objectives, choices, benefits, and risks of issuing a CBDC in India. It examines the implications of introduction of CBDC on the banking system, monetary policy, financial stability, and analyses privacy issues. RBI will soon commence pilot launches of eRs. for specific use cases. As the extent and scope of such pilot launches expand, RBI will continue to communicate about the specific features and benefits of eRs., from time to time. [Press Release No. 2022-23/1012 dated 7th October, 2022.]

4. SOP for Inter-operable Regulatory Sandbox: To facilitate testing of innovative products or services falling within regulatory ambit of more than one financial sector regulators, namely, RBI, SEBI, IRDAI, IFSCA and PFRDA, a Standard Operating Procedure (SOP) for Inter-operable Regulatory Sandbox (IoRS) has been prepared by the Inter-Regulatory Technical Group on FinTech (IRTG on FinTech), which had been constituted under the aegis of the Financial Stability and Development Council – Sub Committee (FSDC-SC). The RBI placed on its website the SOP for IORS. [Press Release No. 2022-23/1030 dated 12th October, 2022.]

RBI

1. Review of Prudential Norms – Risk weights for exposures to Corporates and NBFCs: The RBI had advised External Credit Assessment Institutions (ECAIs) vide letter dated 4th June, 2021 to disclose the name of the banks and the corresponding credit facilities rated by them in the Press Releases (PRs) issued on rating actions by 31st August, 2021, after obtaining requisite consent from the borrowers. However, on a review, the RBI has observed that the above disclosures are not available in many PRs issued by ECAIs owing to the absence of requisite consent by the borrowers to the ECAIs. The RBI has now advised that a bank loan rating without the above disclosure by the ECAI shall not be eligible for being reckoned for capital computation by banks. Banks shall treat such exposures as unrated and assign applicable risk weights in terms of paragraph 5.8.1 of Master Circular – Basel III Capital Regulations. [Notification No. RBI/2022-23/125 DOR.STR.REC.71/21.06.201/2022-23 dated 10th October, 2022.]

2. RBI (Financial Statements – Presentation and Disclosures) Directions, 2021 – Disclosure of divergence in asset classification and provisioning: At present, commercial banks (excluding RRBs) are required to disclose details of divergence in asset classification and provisioning where such divergence assessed by RBI exceeds certain specified thresholds (paragraph C.4(e) of Annexure III to the Reserve Bank of India (Financial Statements-Presentation and Disclosures) Directions, 2021). To strengthen compliance with IRACP norms, RBI has now introduced similar disclosure requirements for Primary (Urban) Co-operative Banks (UCBs) and revised the specified thresholds for commercial banks. Accordingly, for the financial statements for Y.E. 31st March, 2023, banks shall make suitable disclosures in the manner specified in paragraph C.4(e) of Annex III to the afore-mentioned Directions, if either or both of the following conditions are satisfied: a) the additional provisioning for NPAs assessed by RBI exceeds 10 per cent of the reported profit before provisions and contingencies; and b) the additional Gross NPAs identified by the RBI exceed 10 per cent of the reported incremental Gross NPAs for the reference period. [Notification No. RBI/2022-23/130 DOR.ACC.REC.No.74/21.04.018/2022-23 dated 11th October, 2022.]

ICAI ANNOUNCEMENT

1. Applicable date of certain deferred provisions of Volume-I of Code of Ethics, 2019: The deferred provisions namely, Responding to NOCLAR, Fees-Relative Size and Tax Services to Audit Clients will be applicable from 1st October, 2022 with certain amendments. [29th September, 2022.]

ICAI MATERIAL

1. Technical Guide on Audit of Charitable Institutions under Section 12A of the Income-tax Act, 1961. [22nd September, 2022.]

BCAJ Admin

Regulatory Referencer

DIRECT TAX

1. Income-tax (26th Amendment) Rules, 2022: Rule 40G inserted and Form 29D prescribed for filing refund claim u/s 239A of the tax deducted and paid to the credit of Central Government u/s 195. [Notification No. 98/ 2022 dated 17th August, 2022.]

2.   Applicability of Section 206C (1G): Provisions of section 206C(1G), pertaining to tax collection at source at five per cent of the tour program package, shall not apply to a person (being a buyer) who is a non-resident in India as per section 6 of the Act and who does not have a Permanent Establishment in India. [Notification No. 99/ 2022 dated 17th August, 2022.]

3.   Income-tax (27th Amendment) Rules, 2022: The due date to furnish Form 67 for claiming a foreign tax credit, was on or before the due date for furnishing the original return. The due date is now extended to ‘on or before the end of the assessment year, relevant to the previous year in which the foreign income has been taxed in India and the return for such assessment year has been furnished within the time specified u/s 139(1) or 139(4)’. In the case of an updated return, the time limit to file Form 67 is before filing the return. [Notification No. 100/ 2022 dated 18th August, 2022.]

4.   Additional Guidelines for removal of difficulties under sub-section (2) of section 194R: The Finance Act 2022 inserted a new section 194R w.e.f. 1st July, 2022. The said section requires a person responsible for providing any benefit or perquisite to a resident to deduct tax at source at 10% of the value or aggregate of the value of such benefit or perquisite. The CBDT had issued guidelines for deduction of tax under the said section vide Circular No. 12/2022 dated 16th June, 2022 and has now issued additional guidelines to provide clarification on issues which will help to remove difficulties in implementation of section 194R. [Circular No. 18/2022 dated 13th September, 2022.]

COMPANY LAW

I. COMPANIES ACT

1. Incorporation Rules amended: MCA has notified the Companies (Incorporation) Third Amendment Rules, 2022. A new rule 25B has been inserted prescribing the manner of physical verification of a Company’s registered office. Under this rule, the physical verification of a Company’s registered office shall be conducted by ROC in the presence of two independent witnesses of the locality where the Company’s registered office is situated. Further, if required, ROC can also seek the assistance of the local Police for such verification. [Notification No. G.S.R. 643(E) dated 18th August, 2022.]

2. Forms STK-1, STK-5, and STK-5A amended: MCA has amended Form STK-1, Form STK-5, and Form STK-5A. Now, ROC can issue notice for removal of the name of a Company if it finds that it is not carrying any business or operation from the registered office as revealed during the physical verification of its registered office carried out u/s 12(9). Accordingly, Form STK-5 and Form STK 5A (i.e., Public Notice by ROC) have also been changed. [Notification No. G.S.R. 658(E), dated 24th August, 2022.]

3. E forms DPT-3 and DPT-4 revised seeking enhanced disclosures on acceptance of deposits: The Government has modified the Companies (Acceptance of Deposits) Rules, 2014. As per the amended rules, the auditor must submit a declaration regarding deposits with E-form DPT-3. Further, the formats of DPT-3 and DPT-4 have been revised. The enhanced disclosures are to be made in the revised forms. [Notification dated 24th August, 2022.]

4. Revised forms for Director’s KYC notified: The government has substituted existing DIR-3 KYC and DIR-3-KYC web forms with new DIR-3 KYC and DIR-3-KYC web forms to align the same with MCA’s new portal. A new entry has been inserted in the form capturing the ‘jurisdictional police station’ in the address details of directors. [Notification No. GSR 662(E), dated 29th August, 2022.]

II. SEBI

5. Conditions for investment in overseas investee companies by AIF/VCFs: SEBI has specified various conditions for investment in overseas investee companies by Alternative Investment Funds (AIFs) and Venture Capital Funds (VCFs). The AIFs/VCFs shall file an application to SEBI for allocation of overseas investment limit in the format as specified. The requirement of the overseas investee company to have an Indian connection has been omitted. AIFs/VCFs shall furnish the sale/divestment details to SEBI within 3 working days of the disinvestment. [Circular No. SEBI/HO/AFD-1/POD/CIR/P/2022/108, dated 17th August, 2022.]

6. In case of death of Karta of HUF, his name will be replaced by new Karta in the Beneficial Owner account: SEBI has modified the norms w.r.t opening of Demat account in case of HUF. As per the amended norms in case of death of HUF’s Karta, the name of the deceased Karta in the Beneficial Owner (BO) account shall be replaced by the new Karta of the HUF who shall be the eldest coparcener in the HUF or a coparcener who is appointed as Karta by an agreement entered between all the coparceners of the HUF. Earlier, the new Karta was appointed by HUF’s members who shall be the senior most member of the family. [Circular No. SEBI/HO/MRD/MRD-POD-2/P/CIR/2022/114, dated 26th August, 2022.]

FEMA

1. Restrictions on LRS Funds brought in: The Liberalised Remittance Scheme allows for the remitter to retain and reinvest the income earned on the investments made through the LRS funds. The RBI has amended Master Direction – Liberalised Remittance Scheme (LRS) stating that the received, realised, unspent or unused foreign exchange unless reinvested, shall be repatriated and surrendered to an authorised person within 180 days from the date of such receipt, realisation, purchase or acquisition or date of return to India, as the case may be. RBI has stated that this amendment has been brought in to bring the provisions in accordance with Regulation 7 of ‘Realisation, repatriation and surrender of foreign exchange’ Regulations, 2015 [Notification No. FEMA 9(R)/2015-RB]. It should be noted that the amendment has been directly made in the Master Direction without any notification or circular being issued on the same. This amendment is apart from the changes made on 22nd August, 2022 as a consequence of notification of the new Overseas Investment Rules. [Amendment made on 24th August, 2022 in para 16 of Master Direction – Liberalised Remittance Scheme (LRS) [FED Master Direction No. 7/2015-16]]

2. ‘Alert List’ of entities not authorised to deal in forex: RBI has time and again warned the public not to trade in forex transactions on unauthorised electronic trading platforms (ETPs) or remit money for the same. As queries were being received for specific ETPs, RBI has decided to place an ‘Alert List’ on its website of entities which are neither authorised to deal in forex nor authorised to operate ETPs for forex transactions. RBI has mentioned that the Alert List is not exhaustive; and covers entities and ETPs known to RBI at the time of issuing this Press Release. An entity not appearing in the Alert List should not be assumed to be authorised by the RBI. The authorisation status of any person / ETP can be ascertained from the list of authorised persons and authorised ETPs, which are already made available in the RBI website. RBI has reiterated that residents undertaking forex transactions for purposes other than those permitted under the FEMA or on unauthorised ETPs shall be violating FEMA. [Press Release 2022-23/835, dated 7th September, 2022.]

ICAI ANNOUNCEMENTS

1. External confirmations through third-party vendors: In view of concerns regarding some banks using the services of third-party vendors to provide confirmations on their behalf to auditors that lead to the risk that such information may not be authentic and complete, the ICAI has advised auditors to seek direct confirmation from concerned banks. [7th September, 2022.]

2. Mandatory evaluation of audit quality maturity of firms using AQMM Rev v1.0: Effective 1st April, 2023, firms auditing a listed entity, or a bank other than a co-operative bank (except multi-state co-operative banks), or an insurance company are mandatorily required to undertake an evaluation of their audit quality maturity using the Audit Quality Maturity Model Revised Version 1.0 (AQMM Rev v1.0). Firms conducting only branch audits are excluded from this mandate. [13th September, 2022.]

BCAJ Admin

Regulatory Referencer

Direct Tax

1. Income-tax (22nd Amendment) Rules, 2022: Section 158AA provides that where the Commissioner or Principal Commissioner is of the opinion that any question of law arising in the case of an assessee (relevant case) is identical with a question of law arising in his case for any another assessment year (another case) which is pending in appeal before the Supreme Court against an order of High Court which was in favour of assessee, he may direct the Assessing Officer (AO) to make an application to the Appellate Tribunal in the prescribed form stating that an appeal on the question of law in the relevant case may be filed when the decision on the question of law becomes final in the other case. Form No. 8A is now prescribed in which the AO shall make an application to the Appellate Tribunal. [Notification No. 83/2022 dated 12th July, 2022.]

2. Certain forms, returns, statements etc., prescribed in Appendix II to be furnished electronically: Forms 3CEF, 10F, 10IA, 3BB, 3BC, 10BC, 10FC, 28A, 27C, 58D, 58C and Form 68 are to be filed electronically. [Notification No. 3/2022 dated 16th July, 2022.]

3. Condonation of delay in filing Form No. 10BB for A.Y. 2018-19 and subsequent years: CBDT had, in its earlier circular, authorized the Commissioner of Income Tax to admit applications for condonation of delay in filing Form 10BB for A.Y. 2018-19 and subsequent years where the delay is up to 365 days and decide on merits. Now, the Pr. Chief Commissioners of Income-tax /Chief Commissioners of Income-tax are authorized to admit such applications and decide on merits where there is a delay beyond 365 days upto three years in filing Form No. 10BB for A.Y. 2018-19 or any subsequent assessment years. [Circular No. 15 of 2022 dated 19th July, 2022.]

4. Condonation of delay in filing Form No. 10B for A.Y. 2018-19 and subsequent years: CBDT had, in its earlier circular, authorized the Commissioner of Income Tax to admit applications for condonation of delay in filing Form 10B for A.Y. 2018-19 and subsequent years where the delay is up to 365 days and decide on merits. Now, the Pr. Chief Commissioners of Income-tax /Chief Commissioners of Income-tax are authorized to admit such applications and decide on merits where there is a delay beyond 365 days upto three years in filing Form No. 10B for A.Y. 2018-19 or any subsequent assessment years. [Circular No. 16 of 2022 dated 19th July, 2022.]

5. Condonation of delay in filing Form Nos. 9A and 10: CBDT had, in its earlier circular, authorized the Commissioner of Income Tax to admit applications for condonation of delay in filing Forms 9A and 10 for A.Y. 2018-19 and subsequent years where the delay is upto 365 days. Now, the Pr. Chief Commissioners of Income-tax/Chief Commissioners of Income-tax are authorized to admit such applications of condonation of delay and decide on merits where there is a delay beyond 365 days upto three years in filing such forms for A.Y. 2018-19 or any subsequent assessment years. [Circular No. 17 of 2022 dated 19th July, 2022.]

6. Procedure of PAN application and allotment through Simplified Proforma for incorporating Limited Liability Partnerships (LLPs) electronically (Form: FiLLiP of Ministry of Corporate Affairs). [Notification No. 4/2022 dated 26th July, 2022.]

7. Reduction of time limit for verification of Income Tax Return (ITR) from within 120 days to 30 days of transmitting the data of ITR electronically: The time limit for e-verification or submission of ITR-V shall now be 30 days from the date of transmitting/uploading of any electronic transmission of Income Tax Return data on or after 1st August 2022.

Where ITR data is electronically transmitted and e-verified/ITR-V submitted within 30 days of transmission of data, then in such cases, the date of transmitting the data electronically shall be considered as the date of furnishing the return of income.

Where ITR data is electronically transmitted but e-verified or ITR-V submitted beyond the time limit of 30 days of transmission of data, then in such cases, the date of e-verification/ITR-V submission shall be treated as the date of furnishing the return of income and all consequences of late filing of return under the Act shall follow. [Notification No. 5/2022 dated 29th July, 2022.]

8. Conditions notified for the proviso to section 17(1)(ii): Clause (ii)(c) of the proviso to section 17(1) states that any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family in respect of COVID-19 illness shall not be taxed as a perquisite, subject to such conditions, as may be notified by the Central Government. The CBDT has notified the conditions for the purpose of this section. [Notification No. 90/2022 dated 5th August, 2022.]

9. Conditions notified for proviso to section 56(2)(x): Certain taxpayers have lost their life due to Covid-19. In order to provide relief to the family members of such taxpayer, clause (XIII) of the proviso to section 56(2)(x) provides that ex-gratia payment received by family members of a person from the employer of such person or from another person on the death of that person due to Covid-19 shall be exempt from tax, subject to such conditions as may be notified by the Central Government. The CBDT has notified the conditions for the purpose of this section. [Notification No. 91/2022 and 92/2022 dated 5th August, 2022.]

10. Income-tax (24th Amendment) Rules, 2022: The Finance Act 2022 amended sections 12A and 10(23C) to provide that where the total income of a trust or institution under both regimes, without giving effect to an exemption u/s 10(23C) or sections 11 and 12, exceeds the maximum amount which is not chargeable to tax, such trust or institution shall keep and maintain books of account and other documents as may be prescribed. The CBDT has inserted Rule 17AA prescribing the books of account and other documents to be kept and maintained and the form and manner in which it should be maintained. [Notification No. 94/2022 dated 10th August, 2022.]

11. Income-tax (25th Amendment) Rules, 2022: Institutions exercising option under Explanation 3 to the third proviso to 10(23C) must file Form 10 before the due date of filing the return of income, providing certain details. [Notification No. 96/2022 dated 17th August, 2022.]

COMPANY LAW

I. COMPANIES ACT

1. Spending of CSR funds for activities w.r.t ‘Har Ghar Tiranga’ is an eligible CSR activity: The MCA has clarified that spending of CSR funds for activities of mass scale production and supply of the National Flag, outreach and amplification efforts and other related activities, are eligible CSR activities under item no. (ii) of Schedule VII of the Companies Act related to ‘Promotion of education relating to culture’. ‘Har Ghar Tiranga’, a campaign under the aegis of Azadi Ka Amrit Mahotsav, is aimed to invoke the feeling of patriotism in the hearts of the people. [General Circular No. 08/2022, dated 26th July, 2022.]

2. Companies (Accounts) Fourth Amendment Rules, 2022: The MCA has made the following amendments to the Companies (Accounts) Rules, 2014: 1) The books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India, at all times so as to be usable for subsequent reference. 2) Provided that the back-up of the books of account and other books and papers of the company maintained in electronic mode, including at a place outside India, if any, shall be kept in servers physically located in India on a daily basis. 3) W.r.t. intimation to RoC on an annual basis (when filing financial statements) – where the service provider is located outside India, the name and address of the person in control of the books of account and other books and papers in India.” [MCA Notification G.S.R.624(E) dated 5th August, 2022.]

II. SEBI

3. Govt. declares “zero coupon zero principal instruments” as securities for the purposes of SCRA, 1956: The Central Government has declared “zero coupon zero principal instruments” as securities for the purposes of Securities Contracts (Regulation) Act, 1956. “Zero coupon zero principal instrument” means an instrument issued by a Not-for-Profit Organisation which shall be registered with Social Stock Exchange segment of a recognised Stock Exchange in accordance with the regulations made by SEBI. [Notification No S.O. 3210(E), dated 15th July, 2022.]

4. Fee and other charges payable to SEBI subject to GST @ 18% effective 18th July, 2022: The GST Council, in its meeting held on 28th June, 2022 and 29th June, 2022, recommended withdrawing the GST exemption granted to services by SEBI and the same was notified vide. Notification No. 4/2022 dated 13th July, 2022, Accordingly, the Board has informed all Infrastructure Institutions, Companies who have listed/are intending to list their securities, other intermediaries and persons who are dealing in securities market that fees and other charges payable to SEBI shall be subject to GST. [Circular No. SEBI/HO/GSD/TAD/CIR/P/2022/0097, dated 18th July, 2022.]

5. Amendment in LODR norms, insertion of New CHAPTER IX-A w.r.t obligations of social enterprises: The SEBI has notified the SEBI (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2022. A new CHAPTER IX-A has been inserted, which prescribes the obligations of social enterprises. It is applicable on: a) For Profit Social Enterprise whose designated securities are listed on the applicable segment of the Stock Exchange(s); b) Not for Profit Organization that is registered on the Social Stock Exchange(s). [Notification F No. SEBI/LAD-NRO/GN/2022/88, dated 25th July, 2022.]

6. New guidelines for settlement of running account of client’s Funds lying with Trading Member: Under the new guidelines, the settlement of running account of funds of client shall be done by Trading Member after considering the end of the day obligation of funds as on date of settlement across all Exchanges on first Friday of Quarter for all the clients, i.e., the running account of funds shall be settled on first Friday of Oct 2022, Jan 2023, Apr 2023, Jul 2023 and so on for all the clients. If the first Friday is a trading holiday, then such settlement shall happen on the previous trading day. [Circular No. SEBI/HO/MIRSD/DOP/P/CIR/2022/101, dated 27th July,2022.]

7. Timelines for implementation of mutual funds nomination norms extended to 1st October, 2022: SEBI vide Circular dated 15th June, 2022 mandated submission of nomination details/declaration for opting out of nomination for investors subscribing to mutual fund units on or after 1st August, 2022. Based on the representation received from the Association of Mutual Funds in India (AMFI), SEBI has decided to extend the timelines for implementation of MF nomination norms to 1st October, 2022. [Circular No. SEBI/HO/IMD/IMD-I DOF1/P/CIR/2022/105, dated 29th July, 2022.]

8. Framework for automated deactivation of trading and Demat accounts in cases of inadequate KYCs: SEBI has released a framework for automated deactivation of trading and Demat accounts of investors in case of inadequate KYC details. SEBI observed that in some cases, accurate/updated addresses of clients are not maintained, and any notices served during any enforcement proceedings remain unserved. Under the new framework, the stock exchanges (except commodity derivative exchange and derivatives) shall arrange to physically serve notice to the entities. [Circular No. SEBI/HO/EFD1/EFD1_DRA4/P/CIR/2022/104, dated 29th July, 2022.]

9. Framework to curb inadvertent trades by designated persons by freezing their PAN during trading window closure: SEBI has asked exchanges/depositories to develop a system wherein the PAN of a Company’s designated person (DP) can be frozen for a specific period to curb inadvertent trades during the trading window closure. Now, the designated depository will provide access to a listed Company on a portal specifying the trading window closure period. The portal will auto-populate details of DPs like PAN and name. The listed Companies will update the PAN of DPs to be frozen and the “start and end date” of the trading window closure period. [Circular No. SEBI/HO/ISD/ISD-SEC-4/P/CIR/2022/107, dated 05th August, 2022.]

FEMA

1. Liberalisation of ECB limits legislated: RBI, in consultation with the Central Government, had announced (Refer this feature in August 2022, BCAJ) following ECB liberalisation measures which would be available for ECBs to be raised till 31st December, 2022: (i) To increase the automatic route limit from USD 750 million or equivalent to USD 1.5 billion or equivalent. (ii) To increase the all-in-cost ceiling for ECBs, by 100 bps. These relaxations have now been legislated by making necessary amendments to the relevant regulations. [Notification No. FEMA.3(R)(3)/2022-RB, dated 28th July, 2022 and A.P. (DIR Series 2022-23) Circular No. 11, dated 1st August, 2022.]

2. New Overseas Investment Rules notified: The Finance Ministry, in consultation with RBI, has now framed the revised Rules and Regulations, overhauling outward investment provisions substantially. The new rules supersede the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015. Changes made by the Government and RBI on 22nd August, 2022 in line with the amendment to Section 6 of FEMA in 2015 are as follows:

Title	Dealing with
FEM (Overseas Investment) Rules, 2022	Non-Debt Instruments
FEM (Overseas Investment) Regulations, 2022	Debt Instruments
FEM (Overseas Investment) Directions, 2022	Directions to be followed by Authorised Dealer-Banks

Title

Dealing with

FEM (Overseas Investment) Rules, 2022

Non-Debt Instruments

FEM (Overseas Investment) Regulations, 2022

Debt Instruments

FEM (Overseas Investment) Directions, 2022

Directions to be followed by Authorised Dealer-Banks

Consequential amendments have been made to the ‘Master Direction on Reporting’ and ‘Master Direction on Liberalised Remittance Scheme (LRS)’. Some of the significant changes made compared to the earlier provisions are: New terms introduced with definitions; Clarity provided with respect to various definitions and concepts; Approvals for a few investment options have now been removed; and Liberalisation on certain key fronts of structuring of overseas investments. [Central Government Notification No. G.S.R. 646(E) dated 22nd August, 2022; Notification No. FEMA 400/2022-RB dated 22nd August, 2022; AP DIR Circular No. 12 dated 22nd August, 2022; Amendments to Master Direction no. 18 on ‘Reporting’ and Master Direction No. 7 on ‘Liberalised Remittance Scheme (LRS)’.]

ICAI ANNOUNCEMENT

1. Withdrawal of ‘Guide to Reporting on Proforma Financial Statements (Pursuant to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009): ICAI has withdrawn this Guide since it was based on old SEBI regulations that do not exist at present and since SAE 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus provides sufficient guidance for practitioners. [4th August, 2022.]

ICAI MATERIAL

Valuation

1. Valuation: Professionals’ Insight, Series – 7. [20th July, 2022.]
2. Technical Guide on Valuation of Business in Telecom Tower Industry. [20th July, 2022.]

BCAJ Admin

REGULATORY REFERENCER

1. Income-tax (19th Amendment) Rules, 2022: CBDT amended existing Rules 30, 31 & 31A, annexure to Form no. 26Q, and Form Nos. 26QB, 26QC & 26QD. It has also inserted new Form nos. 26QE and 16E. Tax deducted on VDA is to be deposited in challan-cum-statement in Form 26QE. The certificate of tax deducted at source on VDA must be issued in Form 16E. Separate reporting of tax payments is required to be made in accordance with provisos to Sections 194B, 194R and 194S. [Notification No. 67/ 2022, dated 21st June, 2022.]

2. Format, procedure and guidelines prescribed for submission of Form Nos. 1, 2 and 2A for Securities Transaction Tax. [Notification No. 2 of 2022, dated 24th June, 2022.]

3. Guidelines for removal of difficulties under sub-section (6) of section 194S: The Finance Act, 2022, inserted a new section 194S w.e.f 1st July, 2022. The said section requires a person responsible for paying to any resident any consideration for the transfer of a virtual digital asset (VDA), to deduct tax at 1%. CBDT has issued guidelines to remove difficulties in the implementation of this section. [Circular No. 13/2022 dated 22nd June, 2022 and Circular No. 14/2022, dated 28th June, 2022.]

4. Safe Harbour for Arm’s Length Price: The notification provides for a tolerance range of 1% for wholesale trading and 3% in all other cases for A.Y. 2022-2023. It is also certified that no assessee will be adversely affected by the retrospective effect being given to the notification. [Notification No. 70/ 2022, dated 28th June, 2022.]

5. Income-tax (20th Amendment) Rules, 2022: CBDT has amended Rule 31A of the Income-tax Rules, 1962, notifying Form 26QF for filing of TDS statement in respect of tax deducted u/s 194S by ‘Exchanges’. [Notification No. 73/ 2022, dated 30th June, 2022.]

6. Exclusion from definition of Virtual Digital asset: The following virtual digital assets shall be excluded from the definition of virtual digital asset:

(i) Gift card or vouchers, that may be used to obtain goods or services or a discount on goods or services;

(ii) Mileage points, reward points or loyalty card, given without direct monetary consideration under an award, reward, benefit, loyalty, incentive, rebate or promotional program that may be used or redeemed only to obtain goods or services or a discount on goods or services;

(iii) Subscription to websites or platforms or application. [Notification No. 74/ 2022, dated 30th June, 2022.]

7. A token which qualifies to be a virtual digital asset as non-fungible token shall not include a non-fungible token whose transfer results in a transfer of ownership of the underlying tangible asset, and the transfer of ownership of such underlying tangible asset is legally enforceable. [Notification No. 75/ 2022, dated 30th June, 2022.]

COMPANY LAW

SEBI

1. ICICI bank designated for foreign inward remittance of various payments of SEBI fees in USD: SEBI has modified the operational guidelines for Foreign Portfolio Investors (FPIs), Designated Depository Participants (DDPs) and Eligible Foreign Investors about bank account details. Now, SEBI has specified ICICI bank account details for foreign inward remittance of various payments of various SEBI fees in USD. Earlier, the Bank of India was specified for making remittances of various payments. The Circular shall be effective from 24th June, 2022. [Circular No. SEBI/HO/IMD/FPI&C/CIR/P/2022/84, dated, 21st June, 2022.]

2. Timeline for listing of units of privately placed InvIT reduced to 6 working days: SEBI, in order to streamline the process of allotment and listing of units, has reduced the time taken for the listing of units of privately placed Infrastructure Investment Trust (InvIT) to 6 working days from the date of closure of the issue. Earlier, the timeline for such a listing was 30 working days. [Circular No. SEBI/HO/DDHS/DDHS_DIV3/P/CIR/2022/087, dated 24th June,2022 ]

3. Facility to block funds via UPI in public issues of units of REITs/InvITs: Earlier, SEBI has specified the process for payment for applications in the public issue of units of Real Estate Investment Trust (REITs) & Infrastructure Investment Trusts (InvITs) through the facility of ASBA. Now, SEBI has allowed individual investors to block funds via the Unified Payments Interface (UPI) mechanism for application values up to Rs. 5 Lakhs in public issues of REIT units. It shall apply to the public issue of units of REIT/InvITs, which opens on or after 1st August, 2022. [Circular No. SEBI/HO/DDHS/DDHS_DIV3/P/CIR/2022/085 and 086, dated 24th June, 2022.]

4.   Framework for adjustment in derivative contracts for dividend announcements reviewed: SEBI had laid down a framework for adjustment in derivative contracts (single stock options and futures) post dividend announcements. Now, SEBI has reviewed the framework for adjustment in derivative contracts for dividend announcements. SEBI has clarified that the adjustment in derivative contracts shall be carried out in cases where dividends declared are at or above 2% of the market value of the underlying stock. The circular shall be effective from 29th June, 2022. [Circular No. SEBI/HO/MRD2/MRD2_DCAP/P/CIR/2022/90, dated 28th June, 2022.]

5.   LODR norms w.r.t disclosure of holding of specified securities amended: SEBI has amended regulation 31 of LODR, which deals with disclosure of holding of specified securities in dematerialized form. Hence, in the disclosure of public shareholding, names of the shareholders holding 1%, or more than 1% of shares of the listed entity is to be disclosed. Names of the shareholders who are persons acting in concert, if available, shall be disclosed separately. The circular shall come into force from the quarter ending 30th September, 2022. [Circular No. SEBI/HO/CFD/POD-1/P/CIR/2022/92, dated 30th June, 2022.]

6.   Investors/Public cautioned against fraudulent calls/ e-mails/ messages about refunds: SEBI noticed that unscrupulous individuals are trying to cheat the public by holding out as officials of the Recovery and Refund Department of SEBI and falsely informing them about a refund. Considering this, SEBI has cautioned the public against such false claims of refund and cautions them against parting with any documents/money on such calls/emails/messages etc. SEBI does not seek processing fees or money in any form in cases where money is to be refunded as per court order etc. [Press Release No. 22/2022, dated 07th July, 2022.]

7. Pending QIP issue, its pricing and probable impact on the share capital of the company are UPSI: Shri Arvind Bajpai, CS of Deepak Nitrite Limited (DNL), sought an interpretative letter under the SEBI (Informal Guidance) Scheme, 2003, on the issue that whether pending QIP issue, its pricing and probable impact on the share capital of the company, which is not yet known and shall be determined as per ICD regulations, be considered as Unpublished Price Sensitive Information (UPSI). SEBI clarified that pending QIP issue, its pricing and probable impact on the share capital of the company, is UPSI. [SEBI Informal Guidelines ISD/OW/2022/16109/1, dated 13th April, 2022.]

FEMA

1. Prohibition on investment in Bullion Depository Receipts on IIBX through LRS: RBI had allowed resident individuals to make remittances under LRS to IFSCs in India in 2016 but only for making investments in securities other than those issued by entities/companies resident in India outside the IFSC. IFSC has now clarified that resident individuals are not permitted to transact/invest in Bullion Spot Delivery Contract and Bullion Depository Receipt (BDR) on India International Bullion Exchange (IFSC) Limited (IIBX) through the LRS route. This is without prejudice to the participation of Qualified Jewellers as allowed by RBI and notified by the IFSCA for the purchase of BDRs for the sole purpose of import of gold through IIBX (reported in BCAJ, July 2022). [Circular No. 329/IFSCA/DPM/TS/2022-23/1, dated 17th June, 2022.]

2. Liberalisation of Forex flows: RBI has introduced several measures to liberalise forex flows in view of the global recessionary outlook and flight of capital from India in demand for safe haven in USD:

a. Exemption from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) on Incremental FCNR(B) and NRE Term Deposits: Incremental FCNR(B) and NRE deposits with a reference base date of 1st July, 2022 will be exempt from the maintenance of CRR and SLR. This relaxation will be available for deposits mobilised up to 4th November, 2022. Transfers from Non-Resident (Ordinary) (NRO) accounts to NRE accounts shall not qualify for the relaxation.

b. Ceilings removed on Interest Rates on FCNR(B) and NRE Deposits: It has been decided to temporarily permit banks to raise fresh FCNR(B) and NRE deposits without reference to the extant regulations on interest rates, w.e.f. 7th July, 2022. This relaxation will be available for the period up to 31st October, 2022.

c. FPI Investment in debt: To encourage FPI investment in debt, the following changes to the regulatory regime are being put in place:

– A wider range of central government securities are now available for FPIs to invest in as “specified securities”.

– At present, for FPI investment in government and corporate debt, not more than 30 per cent of investments each in government securities and corporate bonds can have a residual maturity of less than one year. It has been decided that such investments made till 31st October, 2022 will be exempted from this short-term limit till the maturity or sale of such investments.

– FPIs can presently invest only in corporate debt instruments with a residual maturity of at least one year. It has been decided that till 31st October, 2022, FPIs can invest in commercial paper and non-convertible debentures with an original maturity of up to one year.

d. Foreign currency lending by AD Cat-I Banks: It has now been decided that AD Cat-I banks can utilise overseas foreign currency borrowing for lending in foreign currency to entities for a wider set of end-use purposes, subject to the negative list set out for external commercial borrowings (ECBs). This dispensation for raising such borrowings is available till 31st October, 2022.

e. External Commercial Borrowings (ECBs) limits and ceilings: It has been decided to temporarily increase the limit for ECBs under the automatic route from US $ 750 million per financial year to US $ 1.5 billion. The all-in cost ceiling under the ECB framework is also being raised by 100 basis points. These dispensations are available up to 31st December, 2022.

All the above measures have been supplemented with respective Circulars which can be referred to for full details. [Press Release: 2022-2023/481 dated 6th July, 2022; A.P. (DIR Series) Circulars No. 07 and No. 08 both dated 7th July, 2022; FMRD.FMID.No. 04/14.01.006/2022-23 dated 7th July, 2022; DOR.RET.REC.54/12.01.001/2022-23 dated 6th July, 2022 and DOR.SOG (SPE).REC.No 53/13.03.000/2022-23 dated 6th July, 2022.]

3. Trade with Sri Lanka now outside ACU mechanism: Sri Lanka and India are both part of the Asian Clearing Union (ACU) which mandates that trade between both countries should be done under the ACU mechanism. However, due to the situation in Sri Lanka, RBI has decided that all eligible current account transactions, including trade transactions with Sri Lanka, may be settled in any permitted currency outside the ACU mechanism until further notice. [A.P. (DIR Series 2022-23) Circular No. 9, dated 8th July, 2022.]

4. RBI allows international trade settlement in Indian Rupees: In an important development, RBI has decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR. Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller. Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.

The Rupee surplus balance held may be used for permissible capital and current account transactions in accordance with mutual agreement. The balance in Special Vostro Accounts can be used for (a) Payments for projects and investments; (b) Export/Import advance flow management; and (c) Investment in Government Treasury Bills, Government securities, etc. in terms of extant guidelines and prescribed limits, subject to FEMA and similar statutory provisions. Before putting in place this mechanism, AD banks shall require prior approval from RBI. Further details are provided in the Circular. [A.P. (DIR Series) Circular No. 10, dated 11th July, 2022.]

ICAI MATERIAL

Accounts and Audit

1. Technical Guide on Financial Statements of Limited Liability Partnerships. [27th June, 2022.]

2. Educational Material on Ind AS 34, Interim Financial Reporting. [4th July, 2022.]

3. The Emerging Role of Auditors and CFOs in Addressing Risk Management: A New Perspective. [5th July, 2022.]

4. Guidance Note on the Companies (Auditor’s Report) Order, 2020 (Revised 2022 Edition). [14th July, 2022.]

NFRA REPORTS

1. Audit Quality Review (AQR) Report in respect of Statutory Audit done by SRBC & Co LLP of Infrastructure Leasing & Financial Services Limited (IL&FS) for F.Y. 2017-18 [22nd June, 2022.]

2. Financial Reporting Quality Review Report (FRQRR) of ISGEC Heavy Engineering Limited for F.Y. 2019-20 [20th July, 2022.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Circular regarding use of functionality under section 206AB and 206CCA: Finance Act, 2021 had inserted two new sections 206AB and 206CCA w.e.f 1st July, 2021. These sections mandated tax deduction or tax collection at a higher rate for certain non-filers. The Income-tax Department came out with the functionality ‘Compliance Check for Section 206AB & 206CCA’, made available through its reporting portal. Finance Act 2022 brought certain changes in the above mentioned provisions. Accordingly, the logic of the functionality has been amended and circular is issued to explain the amendments made in the functionality. [Circular No. 10/2022 dated 17th May, 2022 and Notification No. 1/2022 dated 9th June, 2022.]

2. Faceless Penalty (Amendment) Scheme, 2022 notified. [Notification No. 54/ 2022 dated 27th May, 2022.]

3. Income-tax (16th Amendment) Rules, 2022: Rule 44FA was inserted to provide Form and manner of filing an appeal to the High Court on a ruling pronounced or order passed by the Board for Advance Rulings under sub-section (1) of section 245W. [Notification No. 57/ 2022 dated 31st May, 2022.]

4. Clarification regarding Form No 10AC issued till the date of Circular: CBDT has clarified that where due to technical glitches, Form No. 10AC has been issued during F.Y. 2021-2022 with the heading ‘Order for provisional registration’ or ‘Order for provisional approval’ instead of ‘Order for registration’ or ‘Order for approval’, then all such Form No. 10AC shall be considered as an ‘Order for registration or approval’ and row no. 5 of Form No. 10AC (issued for all section codes) shall be read as ‘Unique Registration Number’ instead of ‘Provisional Approval/Approval Number’ or ‘Provisional Registration/ Registration Number’. [Circular No. 11/2022 dated 3rd June, 2022.]

5. Cost Inflation Index (CII) for F.Y. 2022-23 notified as 331. [Notification No. 62/2022 dated 14th June, 2022.]

6. Guidelines for removing difficulties under sub-section (2) of Section 194R: Finance Act 2022 inserted a new section 194R w.e.f 1st July 2022. The said section requires a person responsible for providing any benefit or perquisite to a resident, to deduct tax at source at 10% of the value or aggregate of the value of such benefit or perquisite. CBDT has issued guidelines for deduction of tax under the said section. [Circular No. 12/2022 dated 16th June, 2022.]

7. TDS under section 194I from lease rental for an aircraft: No deduction of tax shall be made under section 194-I of the Act by a lessee from lease rent or supplemental lease rent to a lessor, being a Unit located in International Financial Services Center for the lease of an aircraft subject to certain conditions. [Notification No. 65/2022 dated 16th June, 2022.]

8. Income-tax (18th Amendment) Rule, 2022: Safe Margins prescribed under Rule 10 TD for A.Y. 2020-21 and 2021-22 shall also apply for A.Y. 2022-23. [Notification No. 66/2022, dated 17th June, 2022.]

COMPANY LAW

I. COMPANIES ACT

1. LLPs allowed to file their Annual Returns (Form 11) without any additional fee up to 30th June, 2022: Considering the transition from version 2 of MCA-21 to version 3, the MCA has extended timelines for filing of the Annual Return (Form 11) by LLPs without paying additional fee from 30th May, 2022 till 30th June, 2022. [General Circular No. 04/2022, dated 27th May, 2022.]

2. Body corporates from border-sharing countries cannot enter into a compromise/ arrangement/ merger/ demerger without Govt.’s nod: The MCA has notified the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2022. Now, a company/body corporate incorporated in a country sharing a land border with India must submit a declaration in Form CAA-16 when making an application for compromise or arrangement. Also, the company/body corporate is required to state whether they need to obtain prior approval under FEM (Non-Debt Instruments) Rules, 2019 or not. [Notification No. G.S.R. 401(E), dated 30th May, 2022.]

3. MCA cautions Section 8 companies not to carry out any microfinance activity as prohibited by law: MCA has observed that various Section 8 companies are altering their object clause for carrying out the business of microfinance activities. Earlier, MCA vide direction letter No. 05/33/20 dated 10th February, 2020 prohibited the inclusion of microfinance activities in the object clause of Section-8 company unless the Net Owned Fund (NOF) and other requirements as laid down by RBI are complied with. Now, ROCs are immediately directed to prevent such companies from carrying out microfinance activities. [General Circular No. 05/2022, dated 30th May, 2022.]

4. MCA further extends the due date for filing CSR-2 for F.Y. 2020-21 till 30th June, 2022: MCA has notified the Companies (Accounts) Third Amendment Rules, 2022. As per the amended rules, the CSR-2 for F.Y. 2020-21 can be now filed till 30th June, 2022. Earlier, the MCA had provided the extension till 31st May, 2022. Further, Form CSR-2 shall be filed separately for F.Y. 2021-22 on or before 31st March, 2023 after filing Form AOC-4 /AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be. [Notification No. G.S.R. 407(E), dated 31st May, 2022.]

5. Relaxation to pay an additional fee for delayed filing of all event-based LLP E-forms till 30th June, 2022: Considering the transition from version-2 of MCA-21 to version-3, the MCA has extended timelines for filing of the all event-based LLP E-forms without paying an additional fee till 30th June, 2022. The extension is provided for all those forms which are/were due for filing on and after 25th February, 2022 to 31st May, 2022. [General Circular No. 06/2022, dated 31st May, 2022.]

6. Government tweaks norms relating to the removal of names of companies from the registrar of Cos.: MCA has notified the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2022. Amended norms allow the Registrar (if he finds it necessary after examining the application made in form STK-2) to call for further information or direct the applicant to remove the defects and re-submit the complete form within 15 days from the date of such information, failing which the Registrar shall treat the form as invalid in the e-record, and shall inform the applicant. [Notification No. G.S.R. 436(E), dated 9th June, 2022.]

7. Government tweaks norms regarding the appointment of directors; allows restoration of name of independent directors in databank: MCA has notified the Companies (Appointment and Qualification of Directors) Second Amendment, Rules, 2022. As per amended norms, any individual whose name has been removed from the databank may apply for restoration of his name on payment of fees of R1,000, and the institute shall allow such restoration subject to riders. In case he fails to pass the online proficiency self-assessment test within one year from the date of restoration, his name shall be removed from the data bank. [Notification No. G.S.R. 439(E), dated 10th June, 2022.]

II. SEBI

8. Procedure and documentation requirements for the issuance of duplicate securities simplified: SEBI has further simplified the procedure and documentation requirements for issuing duplicate securities. The modified norms include that there shall be no requirement for submission of surety for issuance of duplicate securities. Further, the defaced certificate must be kept in the custody of the Company/RTA and disposed of in the manner as authorised by the Board of the Company. The circular shall come into force with immediate effect. [Circular No. SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/70, dated 25th May, 2022.]

9. Standard Operating Procedure leading to default in repayment of funds to clients by TM/CM modified: SEBI has modified the Standard Operating Procedure in the cases of Trading and Clearing Member leading to default. As per modified norms, the unencumbered deposits available after adjusting the dues of the SE/CC and maintaining the BMC (Base Minimum Capital), shall be utilised for settling the investor’s credit balance. The credit balance up to R25 lakhs shall be paid in full to all investors subject to funds availability. [Circular No. SEBI/HO/MIRSD/DPIEA/P/CIR/2022/72, dated 27th May, 2022.]

10. Detailed norms regarding SOP for dispute resolution under Exchange’s arbitration mechanism prescribed: SEBI has prescribed detailed arbitration mechanisms norms regarding Standard Operating Procedure (SOP) for operationalising the resolution of all disputes pertaining to investor services. Accordingly, the arbitration mechanism shall be initiated after exhausting all actions to resolve complaints, including the SCORES Portal. Further, the norms w.r.t arbitration, appellate arbitration, arbitration award and reporting have also been provided. The circular shall be effective from 1st June, 2022. [Circular No. SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/76, dated 30th May, 2022.]

11. ASBA applications shall be processed only after the application monies are blocked: SEBI has notified that ASBA applications in public issues shall be processed only after the application monies are blocked in the investor’s bank accounts. Accordingly, all intermediaries are advised to ensure appropriate arrangements are made within three months from the date of the circular. Further, it will apply for public issues opening on or after 1st September, 2022. [Circular No. SEBI/HO/CFD/DIL2/P/CIR/2022/75, dated 30th May, 2022.]

12. Facility to conduct annual meetings of unit holders of InvITs/REITs via audio-visual means extended till 31st December, 2022: SEBI has decided to extend the facility to conduct annual meetings of unitholders in terms of Regulation 22(3) of SEBI (REIT) Regulations, 2014 and Regulation 22(3)(a) of SEBI (InvIT) Regulations, 2014 and meetings other than annual meeting, through Video Conferencing (VC) or through Other Audio-Visual Means (OAVM) till 31st December, 2022. Earlier, the VC/OAVM facility for conducting annual and other meetings was extended till 30th June, 2022. [Circular No. SEBI/HO/DDHS/DDHS_DIV2/P/CIR/2022/079, dated 3rd June, 2022.]

FEMA

1. RBI issues guidelines on importing gold by Qualified Jewellers under IFSCA: The Central Government has amended the import policy conditions for gold by Qualified Jewellers (QJ) as notified by the International Financial Services Centers Authority (IFSCA). QJs will be permitted to import gold under specific ITC (HS) Codes through India International Bullion Exchange IFSC Ltd. (IIBX). To enable resident QJs to import gold, directions under FEMA have been issued, including responsibilities on AD Banks, QJs and IFSCA. Guidelines are available in the circular issued by RBI. [A.P. (DIR Series) Circular No. 4, dated 25th May, 2022.]

2. Discontinuation of ‘Guarantee Return’: Regulations Review Authority (RRA 2.0) had proposed discontinuation of the return ‘Details of guarantee availed and invoked from non-resident entities’ in February 2022. The date of discontinuation was to be notified. RBI has now notified that this return would be discontinued with effect from the quarter ending June 2022. [A.P. (DIR Series 2022-23) Circular No. 5, dated 9th June, 2022.]

RBI

1. Reporting of ‘Reverse Repos’ on bank balance sheets: RBI has directed commercial banks that: a) all type of reverse repos with RBI (including those under Liquidity Adjustment Facility) shall be presented under sub-item (ii) ‘In Other Accounts’ of item (II) ‘Balances with Reserve Bank of India’ under Schedule 6 ‘Cash and balances with RBI’; b) Reverse repos with banks and other institutions having original tenors up to and inclusive of 14 days shall be classified under item (ii) ‘Money at call and short notice’ under Schedule 7 ‘Balances with banks and money at call and short notice’; and (c) Reverse repos with banks and other institutions having original tenors more than 14 days shall be classified under Schedule 9 – ‘Advances’. [Notification No. RBI/2022-23/55 DOR.ACC.REC.No.37/21.04.018/2022-23 dated 19th May, 2022.]

2. Provisioning for standard assets by NBFCs-UL: RBI has prescribed the provisions to be maintained in respect of ‘standard assets’ by NBFCs classified as NBFC-UL (Upper Layer). The rates of provision are as follows: individual housing loans and loans to SMEs – 0.25%; housing loans extended at teaser rates – 2.00%; advances to commercial real estate (0.75%/1.00%); and all other loans and advances – 0.40%. The guidelines are effective from 1st October, 2022. [Notification No. RBI/2022-23/61 DOR.STR.REC.40/21.04.048/2022-23 dated 6th June, 2022.]

ICAI MATERIAL

Accounts and Audit
1. Technical Guide on Financial Statements of Non-Corporate Entities. [2nd June, 2022.]

Nothing in the world
is more dangerous than sincere ignorance and conscientious stupidity.

– Martin Luther King Jr.

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Income-tax (6th Amendment) Rules, 2022: Section 89A provides that the income of a resident person from retirement benefits account maintained in a notified country shall be taxed in the manner and the year as prescribed by the Central Government. The CBDT has notified Rule 21AAA prescribing the manner for taxation of income from such accounts. The Rule provides that any income accrued in retirement benefits account shall, at the option of the assessee, be taxed in India in the year in which such income is taxed in the country wherein such account is maintained. The option can be exercised by filing Form No. 10-EE on or before furnishing the return of income. The notified countries are Canada, the UK, Northern Ireland and the USA. [Notification Nos. 24/ 2022 and 25/2022 dated 4th April, 2022.]

2. Income-tax (9th Amendment) Rules, 2022: Rule 12AB is inserted to prescribe additional conditions for furnishing return of income by persons (other than a company or a firm) referred to in section 139 (1)(b). As per the new Rule, if any person falls in any of the following conditions, then he is mandatorily required to file his Income-tax return: a) if total sales, turnover, or gross receipts in the business exceeds Rs. 60 lakh during the previous year; or b) if total gross receipts in profession exceed Rs. 10 lakh during the previous year; or c) if the aggregate of TDS and TCS during the previous year, is Rs 25,000 or more for a person of the age of less than 60 years; or d) if the aggregate of TDS and TCS during the previous year, is Rs. 50,000 or more for a person of the age of 60 years or more; or e) if deposit in one or more savings bank account, in aggregate, is Rs. 50 lakh or more during the previous year. [Notification No. 37/2022 dated 21st April, 2022.]

3. Section 47 – 150 countries notified: Section 47 of the Income-tax Act deals with transfers which are not regarded as transfer. CBDT has notified a list of 150 countries for clauses (viiac) and (viiad) of section 47. [Notification No. 46/2022 dated 27th April, 2022.]

4. Filing of updated tax return – Rule 12AC – Income-tax (11th Amendment) Rules, 2022: Finance Act, 2022 inserted subsection 8(A) to section 139 to provide for filing of updated tax returns. New Rule 12AC has been inserted wherein the form and manner of filing updated returns have been prescribed. The updated return must be filed in form ITR-U from A.Y. 2020-21. [Notification No. 48/2022 dated 29th April, 2022.]

5. Income-tax (14th Amendment) Rules, 2022 amending various forms applicable to trusts and institutions: Form Nos. 3CF, 10A, 10AB, 10BD and 10BE are amended to seek certain additional details from the filers. [Notification No. 51/2022 dated 9th May, 2022.]

6. Income-tax (15th Amendment) Rules, 2022: New Rules 114BA and 114BB are inserted, which provides that for the following transactions, it will be mandatory to quote PAN: a) cash deposit/(s) aggregating to Rs. 20 lakh or more in a financial year, in one or more accounts of a person with a banking company or a co-operative bank or a Post Office; b) cash withdrawal/(s) aggregating to Rs. 20 lakh or more in a financial year, in one or more accounts of a person with a banking company or a co-operative bank or a Post Office; and c) for opening a current account or cash credit account with a bank, co-operative bank, and post office. [Notification No. 53/2022 dated 10th May, 2022.]

COMPANY LAW

I. COMPANIES ACT

1. Registration of charge not to apply to charge created/modified by a banking Company in RBI’s favour: MCA has notified the Companies (Registration of Charges) Amendment Rules, 2022. Amendments have been made in Rule 3 (Registration of creation or modification of charge). Rule 3 shall not apply to any charge required/ to be created or modified by a banking company u/s 77 in favour of the RBI when any loan or advance is made to it u/s 17 (4) (d) of the RBI Act, 1934. [Notification No. G.S.R. 320(E) dated 27th April, 2022.]

2. MCA tweaks Form SH.4 to include a declaration from transferee that no Government approval is required under FEMA (NDI) rules: The MCA has notified the Companies (Share Capital and Debentures) Amendment Rules, 2022, whereby ‘Securities Transfer Form’, i.e. Form SH-4 has been revised to include a declaration from the transferee that “no Government approval is required under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 prior to the transfer of shares or where the transferee is required to obtain the Govt. approval prior to the transfer of shares, the same has been obtained and enclosed herewith the form.” [Notification No. G.S.R 335(E) dated 4th May, 2022.]

3. Companies permitted to conduct EGMs through VC/OAVM till 31st December, 2022: The MCA has allowed companies to conduct their Extra-ordinary General Meetings (EGMs) through VC or other Audio Video Means (OAVM) or to transact items through postal ballot up to 31st December, 2022, in accordance with the framework as provided in earlier Circulars. Earlier, the MCA had permitted companies to conduct EGMs through VC/OAVM till 30th June, 2022. [General Circular No. 03/2022 dated 5th May, 2022.]

4. Companies permitted to conduct General Meetings through VC/OAVM till 31st December, 2022: The MCA vide it’s earlier general circular permitted companies whose AGMs are falling in the year 2022, to conduct their AGMs on or before 31st December, 2022, through VC or OAVMs. Now, the MCA has clarified that this circular shall not be read as allowing any extension of time for holding AGMs by the companies under the Companies Act. Further, the companies which fail to hold AGM within the specified time limit shall be liable for legal action under the Act. [General Circular No. 2/2022 dated 5th May, 2022.]

II. SEBI

5. ICDR norms amended; effective date prescribed w.r.t size of public issue: The SEBI vide Notification dated 14th January, 2022 notified the SEBI (ICDR) (Amendment) Regulations, 2022 (amendments made to Regulation Nos. 32, 49, 129, 145 and Schedules XIII and XIV). Now, SEBI has specified the effective date of these amendments. The amendments will be applicable depending upon the size of a public issue – for public issues of size less than Rs. 10,000 crores will be effective from 1st April, 2022; and for public issues equal to or more than Rs. 10,000 crores will be effective from 1st July, 2022. [Notification F. No. SEBI/LAD-NRO/GN/2022/82 dated 27th April, 2022.]

6. Timelines for listing of units of REITs and InVITs reduced to 6 working days: The SEBI has reduced the timelines for the listing of units of Real Estate Investment Trusts (REITs) and units of Infrastructure Investment Trust (InvIT) to 6 working days to protect investor interests and to promote the development of the securities market. The extant norms mandate all units of REITs and InvITs to get listed on recognised stock exchanges within 12 working days from the date of closure of the offer. [Notification No. SEBI/HO/DDHS_DIV3/P/CIR/2022/54 dated 28th April, 2022.]

7. Guidelines for FPIs, Designated Depository Participants and ‘Eligible Foreign Investors’ modified: SEBI vide Circular No. IMD/FPI&C/CIR/P/2019/124 dated 5th November, 2019, issued operational guidelines for FPI, DDP, and FI whereby the designated depository participant must grant the certificate of registration, bearing the registration number generated by NSDL in a centralised manner. SEBI has decided to modify the operational guidelines. Now, the designated depository participant must grant the certificate of registration, bearing the registration number generated by SEBI. [Circular No. SEBI/HO/IMD/FPI&C/CIR/P/2022/57 dated 29th April, 2022.]

8. Audit framework of MIIs revised; reporting of major non-compliances in system and network audits required: The SEBI vide Circular dated 7th January, 2020, mandated annual system audit by an independent auditor for Market Infrastructure Institutions (MIIs). The SEBI has revised the existing system audit framework to cover the network audit under the ambit of the revised system. Now, MIIs are required to conduct a system and network audit. MIIs are also required to submit information w.r.t exceptional major Non-Compliances (NCs)/ minor NCs observed in System and Network Audit as per the specified format. [Circular No. SEBI/HO/MRD1/MRD1_DTCS/P/CIR/2022/58 dated 2nd May, 2022.]

9. Framework for calculating margin for intra-day snapshots in derivatives segment revised: SEBI had earlier issued a framework to enable verification of upfront collection of margins from clients in the cash and derivatives segments. Based on the representation received, SEBI has decided that margin requirements for intra-day snapshots, in derivatives segments (including commodity derivatives) shall be calculated based on fixed Beginning of Day (BOD) margin parameters. It is clarified that this change is only for the verification purpose of upfront collection of margins from clients in the aforementioned segments. [Circular No. SEBI/HO/MRD2/DCAP/P/CIR/2022/60 dated 10th May, 2022.]

10. Scope of term ‘auditor’ expanded; LLPs allowed to audit books of Companies engaged in CIS: The SEBI has notified the SEBI (Collective Investment Schemes) (Amendment) Regulations, 2022. Amendments have been made in Regulations 2, 9, 9A, 9B, 14, 24, 30, 31, 32, 35 and the Ninth Schedule. Now, an ‘auditor’ means a firm, including an LLP, constituted under the LLP Act, 2008, who is eligible and qualified to audit the accounts of a company u/s 141 of the Companies Act, 2013. Under the extant norms, ‘auditor’ meant only a person qualified to audit the accounts of Companies under the Cos. Act. [Notification No. SEBI/LAD-NRO/GN/2022/84 dated 10th May, 2022.]

11. Listed entities dispensed with the requirement of dispatching hard copies of annual reports to NCD holders up to 31st December, 2022: The SEBI, (considering MCA Circular dated 5th May, 2022, extending the relaxations from dispatching of physical copies of annual report for 2022) has decided to provide relaxation to a listed entity from the requirement of sending a hard copy of its annual report to the holders of non-convertible debt securities under Reg. 58 of LODR who have not registered their email addresses either with the listed entity or with any depository up to 31st December, 2022. [Circular No. SEBI/HO/DDHS/P/CIR/2022/0063 dated 13th May, 2022.]

12. Process for granting NOC for setting up Wholly Owned Subsidiaries (WOS), step-down Subsidiaries, and Joint Ventures (JV) in GIFT IFSC streamlined: In an endeavour to rationalize and streamline the process of application, SEBI has issued guidelines for seeking NOC by Stockbrokers/Clearing Members for setting up WOS, step-down Subsidiaries, and JVs in GIFT IFSC. Accordingly, the format of the application along with the list of supporting documents for seeking NOC have been prescribed. SEBI has directed Exchanges to forward the complete application to SEBI, after verification along with their recommendation. [Circular No. SEBI/HO/MIRSD/DOR/P/CIR/2022/61 dated 13th May, 2022.]

FEMA

1. Settlement in INR for exports to Sri Lanka: Indian exporters are facing difficulties in receipt of export proceeds from Sri Lanka due to its prevailing economic situation. As Sri Lanka is an ACU member country, import/export transactions are allowed to be routed only through the ACU Mechanism. The Indian Government has guaranteed a USD 1,000 million term loan extended by SBI to Sri Lanka for financing purchase of essentials. Under the arrangement, financing of export of eligible goods and services from India would be allowed if specified terms are met. Due to the difficulties faced, it has been decided that such trade transactions with Sri Lanka, falling under this arrangement, may be settled in INR outside the ACU mechanism. [A. P. (DIR Series 2022-23) Circular No. 3, dated 19th May, 2022.]

RBI

1. Disclosure in Financial Statements – Notes to Accounts of NBFCs: The RBI has outlined additional disclosure requirements for NBFCs under the SBR framework (‘Scale Based Regulation (SBR): A Revised Regulatory Framework’, Circular No. DOR.CRE.REC.60/03.10.001/2021-22 dated 22nd October, 2021). The current notification specifies the formats (common templates) for disclosures for all categories of NBFCs (i.e., Investment and Credit Companies, Housing Finance Companies, Core Investment Companies, etc.). The guidelines are effective for annual financial statements for Y.E. 31st March, 2023, and onwards. [Notification No. RBI/2022-23/26 DOR.ACC.REC.No.20/21.04.018/2022-23 dated 19th April, 2022.]

ICAI ANNOUNCEMENTS

1. Effective Date of applicability of Standard on Assurance Engagements (SAE) 3410, Assurance Engagements on Greenhouse Gas (GHG) Statements: The effective date of application of SAE 3410 is as follows – (i) voluntary basis for assurance reports covering periods ending on 31st March, 2023, and (ii) mandatory basis for assurance reports covering periods ending on or after 31st March, 2024. The objective of an engagement under SAE 3410 is to obtain either limited or reasonable assurance, as applicable, about whether the GHG statement is free from material misstatement, whether due to fraud or error. [2nd May, 2022.]

ICAI MATERIAL

Accounts and Audit
Implementation Guide on Reporting under Rule 11(e) and Rule 11(f) of the Companies (Audit and Auditors) Rules, 2014. [26th April, 2022.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Clarification w.r.t relaxation of provisions of rule 114AAA prescribing the manner of making PAN inoperative: Section 139AA(2) makes it mandatory for every person to link their PAN with Aadhaar. If not done by 31st March, 2022, the PAN allotted to the person was to be made inoperative. Considering the taxpayer’s difficulties, the Circular provides that even if PAN is not linked to Aadhar, the adverse consequences of PAN becoming inoperative will not apply till 31st March, 2023. However, a taxpayer will be required to pay a fee of R500 if linking is done up to three months from 1st April, 2022 (on or before 30th June 2022) and R1,000 after that, while intimating their Aadhaar. [Circular No. 7/2022 dated 30th March, 2022 and Notification No. 17/2022 dated 29th March, 2022.]

2. Provision of TCS on remittances made under Liberalized Remittance Scheme (LRS) and remittance made towards Overseas Tour Program Package: The provisions shall not apply to an individual who is not a resident in India in terms of clause (1) and clause (1A) of section 6, and who is visiting India. [Notification No. 20/2022 dated 30th March, 2022.]

3. Amendment to Rule 12 – Income-tax (Fourth Amendment) Rules, 2022: SAHAJ ITR-1, ITR-2, ITR-3, SUGAM ITR4, ITR-5, ITR-6, ITR-V and ITR- Ack notified for A.Y. 2022-23. [Notification No. 21/ 2022 dated 30th March 2022.]

4. Extension of timeline for electronic filing of Form No.10AB for seeking registration or approval u/s 10(23C), 12A or 80G: Considering the difficulties faced in electronic filing of the application for registration or approval u/s 10(23C), 12A or 80G in Form No.10AB, where the last date for filing falls on or before 29th September, 2022, is extended to 30th September, 2022.[Circular No. 8/2022 dated 31st March, 2022.]

5. Income-tax (5th Amendment) Rules, 2022: ITR-7 notified for A.Y. 2022-23. [Notification No. 23/ 2022 dated 1st April, 2022.]

COMPANY LAW

I. COMPANIES ACT, 2013

1. Companies (Indian Accounting Standards) Amendments Rules, 2022: The MCA has notified the following amendments to Ind ASs that are effective for annual reporting periods commencing on or after 1st April, 2022:

a. Ind AS 101, First-time Adoption of Indian Accounting Standards – The voluntary exemption provision relating to ‘cumulative translation differences’ at first-time Ind AS adoption is amended whereby a subsidiary may elect to measure ‘cumulative translation differences’ for all foreign operations at the carrying amount that would be included in the parent’s consolidated financial statements, based on the parent’s date of transition to Ind ASs subject to specified conditions.

b. Ind AS 103, Business Combinations – Liabilities and levies within the scope of Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets have been added to the list of exceptions to the ‘recognition principle’ in a business combination accounting. Further, Ind AS 103 now explicitly states that an acquirer shall not recognise a contingent asset at the acquisition date.

c. Ind AS 109, Financial Instruments – An exchange of debt instruments between an existing borrower and lender with ‘substantially different terms’ is accounted as an extinguishment of the original financial liability and recognition of a new one. Determining whether the terms are substantially different is guided by Appendix B to the standard. The amendment now specifies that in determining ‘fees paid net of fees received’ (a DCF test), a borrower includes only fees paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf.

d. Ind AS 16, Property, Plant and Equipment – Testing costs (net of sales proceeds of items produced in the testing phase) are directly attributable costs for the initial measurement of an item of PPE. The amendment adds a clarification that in computing directly attributable costs, the excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognised in the profit or loss but deducted from the directly attributable costs considered as part of cost of an item of PPE.

e. Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets – An onerous contract is one in which the unavoidable costs of meeting the obligations thereunder exceed its expected economic benefits. The unavoidable costs reflect the least net cost of exiting (lower of ‘cost of fulfilling’ and costs arising from failure to fulfil). The amendment specifies ‘costs of fulfilling’ as comprising the costs that relate directly to the contract. Costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract and an allocation of other costs that relate directly to fulfilling contracts.

f. Ind AS 41, Agriculture – In measuring biological assets at fair value, extant Ind AS 41 requires the exclusion of tax cash flows (in the present value technique used to arrive at fair value). The amendment has removed this requirement. [MCA Notification No. G.S.R 255(E ) dated 23rd March, 2022.]

2. Extension of deadlines for filing CSR-2 and implementation of accounting software with audit trail: MCA has extended the deadline for filing form CSR-2 for the preceding F.Y. ended 31st March, 2021 to 31st May, 2022 (as against the earlier deadline of 31st March, 2022). It has also extended the timeline for implementing accounting software with audit trail feature to 1st April, 2023 (as against the earlier extended deadline of 1st April, 2022). [MCA notification dated 31st March, 2022.]

II. SEBI

3. Automation of disclosure requirements under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 – System Driven Disclosures (SDD): SEBI vide its notification dated 13th August, 2021 amended the Takeover Code doing away with disclosure requirement w.r.t encumbered shares (where such encumbrance was undertaken in a depository). This circular prescribes a list of transactions where manual disclosures shall be filed. The depositories shall also devise an appropriate mechanism to record all types of outstanding encumbrances in the depository system by 30th June, 2022. Further, the market institutions such as Depositories and Stock Exchanges shall co-ordinate for data dissemination w.r.t SDD amongst them. Reconciliation of such data shall be conducted by listed companies, stock exchanges and depositories at least once in a quarter or immediately whenever a discrepancy is noticed. [Circular No. SEBI/HO/CFD/DCR-3/P/CIR/2022/27 dated 7th March, 2022.]

4. Separation of Chairperson and MD/CEO roles is now voluntary under LODR Regulations: SEBI vide its notification dated 1st April, 2019 mandated that the top 500 listed entities shall appoint separate and unrelated persons for the Chairperson and MD/CEO roles from 1st April, 2022. SEBI has made this provision voluntary for the listed entities through this notification. [SEBI Notification dated 22nd March, 2022.]

5. Clarification on the requirement of shareholders’ approval for material RPTs under LODR Regulations, 2015 w.e.f. 1st April, 2022: SEBI vide its notification dated 9th November, 2021 required that w.e.f. 1st April, 2022, all material related party transactions and subsequent material modifications shall require prior shareholders’ approval through resolution. In this connection, SEBI has now clarified that an existing RPT that the audit committee has approved prior to 1st April, 2022 which continues beyond such date and becomes material as per the revised materiality threshold, shall be placed before the shareholders at the first General Meeting held after 1st April, 2022, as per regulation 23(8) of LODR. No fresh approval is required for an RPT that has been approved by the audit committee and shareholders prior to 1st April, 2022. An RPT for which the audit committee has granted omnibus approval shall continue to be placed before the shareholders if it is material in terms of regulation 23(1). [Circular No. SEBI/HO/CFD/CMD1/CIR/P/2022/40 dated 30th March, 2022.]

FEMA

1. Amendment to NDI Rules for allowing FDI in LIC and other matters: Vide Press Note No. 1 (2022 series) dated 14th March, 2022, the Government has modified the FDI policy to permit foreign investment in the upcoming LIC IPO. Further, certain other important amendments were made to the FDI policy regarding definitions of ‘Indian Company’, ‘Subsidiary’, ‘Real estate business’ and amendments to the ESOP Regulations (Explained in detail in the BCAJ April 2022 issue). An amendment needs to be made to the NDI Rules for the changes to become effective. The Finance Ministry has now notified these amendments. [Notification No. S.O. 1802(E) dated 12th April, 2022.]

2. Limits for investment in debt and sale of Credit Default Swaps by FPIs: RBI has issued various limits for investment by Foreign Portfolio Investors for F.Y. 2022-23. Investment limits for Government securities (G-secs), State Development Loans (SDLs) and corporate bonds remain unchanged. Reference to the Circular can be made for complete details. [A.P. (DIR SERIES 2022-23) Circular No. 29, dated 19th April, 2022.]

3. Extension of Legal Entity Identifier (LEI) code: RBI has extended the applicability of LEI to Primary (Urban) Co-operative Banks (UCBs) and NBFCs. Further, non-individual borrowers who enjoy aggregate exposure of Rs. 5 crores and more from banks and financial institutions shall be required to obtain LEI codes, too, as per the specified timelines. Borrowers who fail to obtain LEI codes shall not be sanctioned any new exposure. [DOR.CRE.REC.28/21.04.048/2022-23 dated 21st April, 2022.]

ICAI ANNOUNCEMENTS

1. Deferment of three provisions of Volume-I of Revised Code of Ethics, 2019: The applicability of provisions related to NOCLAR, Fees- relative size and tax services to audit clients that were to come into effect from 1st April, 2022 have been further deferred for six months. [31st March, 2022.]

2. Guidance Note (GN) on CARO 2020: A comprehensive revision of the GN is being initiated due to Schedule III amendments. In the interregnum, ICAI has advised members to read CARO 2020 in conjunction with the corresponding amendments made in Schedule III for presentation and disclosure requirements stated therein and perform the audit procedures accordingly. [2nd April, 2022.]

3. Peer Review mandate – roll-out (revised): The revised Peer Review mandate operative from 1st April, 2022 has been made in four stages. At each phase, before undertaking a statutory audit, the concerned Practice Unit should possess a Peer Review Certificate (PRC). Stage 1 is effective 1st April, 2022 and applies to Practice Units proposing to undertake the statutory audit of enterprises whose equity or debt securities are listed. From 1st April, 2023, there is a pre-requisite of having PRC for undertaking statutory audit of unlisted public companies having paid-up capital of not less than R500 crores or having an annual turnover of not less than R1,000 crores or having, in the aggregate, outstanding loans, debentures and deposits of not less than R500 crores as on the 31st March of immediately preceding financial year. [11th April, 2022.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Deduction of tax at source from Salaries u/s 192 during F.Y. 2021-22: The Ministry of Finance has issued a Circular that contains the rates of deduction of Income-tax from the payment of income chargeable under the head ‘Salaries’ during F.Y. 2021-22 and explains certain related provisions of the Act and Income-tax Rules. [Circular No. 4/2022, dated 15th March, 2022.]

2. Relaxation from the requirement of electronic filing of application in Form No.3CF for seeking approval u/s 35(1)(ii)/(iia)/(iii): Due to the difficulties faced in electronic filing of Form No.3CF, CBDT has permitted filing of physical Form No. 3CF till 30th September, 2022 or till the date of availability of Form No. 3CF for electronic filing on the e-filing website, whichever is earlier. [Circular No. 5/2022, dated 16th March, 2022.]

3. Condonation of delay u/s 119(2)(b) in filing of Form 10-IC for A.Y. 2020-21: As per section 115 BAA r.w. Rule 21 AE, a company is required to submit Form 10-IC electronically on or before the due date of filing of return of income to avail concessional rate of tax of 22%. Many assesses could not file Form 10-IC along with the return of income for A.Y. 2020-21, which was the first year of filing of this form. The delay in filing of Form 10-IC relevant to A.Y. 2020-21 is condoned on fulfilment of certain conditions. Form 10-IC can be filed electronically on or before 30th June, 2022 or 3 months from the end of the month in which this Circular is issued, whichever is later. [Circular No. 6/2022, dated 17th March, 2022.]

COMPANY LAW

I. COMPANIES ACT, 2013

1. More than 3.82 lakh companies struck off in special drives taken by ROCs: The Union Minister of State for Corporate Affairs, in a written reply to question in the Rajya Sabha, stated that the Registrar of Companies struck off 3,82,875 companies u/s 248(1) till F.Y. 2020-21 under a special drive. The Minister specified that the RoC struck those companies after following the due process of law from the Register of companies when it had reasonable cause to believe that those companies were not carrying on any business/operation for a period of two immediately preceding financial years. The RoC also verifies that such a company has not made any application within such period to obtain the status of a dormant company u/s 455. [Press Release dated 15th March, 2022.]

II. SEBI

2. SEBI clarifies on circular dated 4th October, 2021 w.r.t discontinuation of usage of pool account for transactions in units of MFs: SEBI, vide circular dated 4th October, 2021 discontinued intermediate pooling of funds and/or units in Mutual Fund transactions by Mutual Fund Distributors (MFDs), Investment Advisers (IAs), Mutual Fund Utilities (MFU), Channel Partners or any other service providers/ platforms, by whatsoever name called. Similarly, SEBI, vide circular dated 4th October, 2021 discontinued the pooling of funds and/or units by stock brokers/clearing members in any manner for MF transactions on Stock Exchange platforms, permitted vide SEBI circulars, dated 13th November, 2009 and 9th November, 2010. Various other requirements related to the modalities of discontinuation of the pooling, measures to prevent third-party payments and to safeguard the interest of unit holders were also prescribed in the aforesaid Circulars. Both the said circulars come into effect from 1st April, 2022. [Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/29, dated 15th March, 2022.]

3. Large Value Funds for accredited investors of Category-III AIFs may invest upto 20% of ‘Investible Funds’ in Investee Company: The SEBI has notified the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2022. Amended Rule 15(1)(d) provides that Category III AIF shall invest not more than 10% of the investable funds in an Investee Company, directly or through investment in units of other AIF. Large value funds for accredited investors of Category III AIF may invest up to 20% of the investible funds in an Investee Company, directly or through investment in units of other AIFs. [Notification No. SEBI/LAD-NRO/GN/2022/75, dated 17th March, 2022.]

4. SEBI raises the limit for placing orders per second to 120: The SEBI has increased the limit for placing the number of orders per second (OPS) by a user to 120 from the existing limit of 100 for algorithmic trading in Commodity Derivatives. The limit on OPS may be further relaxed by Stock Exchanges based on the increased peak order load observed and corresponding upgrade of infrastructure capacity to ensure that capacity of the trading system of Exchange remains at least four times the peak order load. The circular shall be effective from 1st April, 2022. [Circular No. SEBI/HO/CDMRD/CDMRD_DRM/P/CIR/2022/30, dated 19th March, 2022.]

FEMA

1. Withdrawal of Circulars and conversion of Returns into online returns: The RBI has set up a Regulations Review Authority (RRA 2.0) to reduce the compliance burden on Regulated Entities. In this tranche, RRA has recommended withdrawal of around 100 circulars and around 65 returns that would either be discontinued/merged with other returns or converted into online returns. These include converting several returns into online returns covered under ‘Master Direction – Reporting under FEMA’. The complete list is available in the circular. Further, on RRA’s recommendation, a separate web page, ‘Regulatory Reporting’, has been created on the RBI website to consolidate information relating to regulatory reporting by the regulated entities at a single source. [A.P. (DIR Series) Circular No. 26, dated 18th February, 2022.]

2. Modifications to FDI Policy for allowing FDI in LIC and other matters:

2.1. FDI in LIC: The Government has modified the FDI policy to permit foreign investment in the upcoming Life Insurance Corporation of India (LIC) IPO. Accordingly, the following amendments have been made under the Consolidated FDI Policy Circular of 2020:

a. New Sectoral cap for LIC and related conditions: A new addition has been made by way of clause 5.2.22.1A to the Sector-specific conditions on FDI to allow 20% FDI in LIC under the automatic route. Other conditions which were earlier applicable to Insurance companies and intermediaries have now been demarcated separately for Insurance companies other than LIC and intermediaries, while separate conditions have been provided for investment in LIC.

b. FDI permitted in a body corporate: While the existing policy permits FDI in Insurance Companies subject to conditions, LIC being incorporated under a special act of Parliament was not covered there. The FDI Policy now expands the definition of ‘Indian Company’ to include a body corporate established or constituted by or under any Central or State Act. Consequential changes have been made in definitions of ‘Capital’ and ‘Foreign Investment’. The Press Note also clarifies that ‘Indian Company’ does not include society, trust or any entity which is excluded as an eligible investee entity as per the FDI Policy.

2.2. Other important amendments:

a. Convertible notes issued by Startups: To facilitate investment in Startups, FDI Policy allows Convertible Notes whereby funds can be invested in the form of debt initially, which is repayable at the option of the holder; or convertible into equity shares within 5 years from the date of issue. This period of 5 years has now been extended to 10 years.

b. Definition of Subsidiary: The term subsidiary was not defined in the FDI Policy. It has now been defined under clause 2.1.48A: ‘Subsidiary’ shall have the same meaning as is assigned to it under the Companies Act, 2013, as amended from time to time.

c. Real Estate Business definition: FDI in Real estate business is prohibited. ‘Real Estate business’ was defined differently at two places within Schedule 1 of the FDI Policy dealing with Sectoral Caps. The wording at both places have now been amended to align the definitions.

d. Acquisition of shares under Scheme of Merger/Demerger/Amalgamation: Para 4 of Annexure 3 of the FDI Policy has been amended to include references to reconstruction by means of demerger or otherwise; transfer of an undertaking; or division of a company. Further, approval from ‘court in India’ was mentioned in this clause. This has been updated to approval from NCLT or other competent authority.

e. Issue of ESOPs/Sweat Equity Shares / Share Based Employee Benefits: Para 5 of Annexure 3 of the FDI Policy has been replaced to include reference to issue of Share Based Employee Benefits. The term has also been defined by inserting new Para 2.1.47A to mean any issue of capital instruments to employees, pursuant to Share Based Employee Benefits schemes formulated by a body corporate established or constituted by or under any Central or State Act.

f. ESOP Reporting: As per the present FDI policy, the Indian company issuing ESOP/ sweat equity shares needs to furnish Form-ESOP to RBI’s Regional Office under whose jurisdiction the registered office of the company operates. Instead, now the modified policy provides that the form ‘ESOP Reporting’ is to be filed with RBI’s Foreign Exchange Department. It is stated that form ‘ESOP Reporting’ shall mean the form so named and specified by the RBI for reporting either the statement of shares allotted to Indian employees/directors under ESOP schemes; or the statement of shares repurchased by the issuing foreign company from Indian employees/directors under ESOP schemes, as the case may be.

g. Calculation of total foreign investment i.e. direct and indirect foreign investment: Annexure 4 to the FDI Policy provides guidelines in respect of indirect foreign investment. For this purpose, para 1.2(v) states conditions that are applicable to calculate direct and indirect foreign investment. Clause (e) therein provides that declaration made by any persons as per Companies Acts (1956 and 2013) about beneficial interest held by a non-resident entity, then such investment by a resident would be counted as foreign investment. This clause has now been amended to include reference to any other applicable law apart from the Companies Acts. [Press Note No. 1 (2022 series), dated 14th March, 2022]

3. Financial Action Task Force adds UAE to list of ‘High-Risk and Other Monitored Jurisdictions’: FATF plenary has released a document titled ‘High-Risk jurisdictions subject to a Call for Action’ and ‘Jurisdictions under Increased Monitoring’. These refer to jurisdictions that have strategic Anti-Money Laundering (AML)/Combating of Financing of Terrorism (CFT) deficiencies. FATF had earlier identified the following jurisdictions as having strategic deficiencies which have developed an action plan with the FATF to deal with them: Albania, Barbados, Burkina Faso, Cambodia, Cayman Islands, Haiti, Jamaica, Jordan, Mali, Malta, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Philippines, Senegal, South Sudan, Syria, Turkey, Uganda, Yemen, and Zimbabwe. As per the public statement dated 4th March, 2022, United Arab Emirates has now been added to the list of Jurisdictions under Increased Monitoring, and Zimbabwe has been removed from this list. It should be noted that Notification No. FEMA. 382/2016-RB dated 2nd January, 2017 prohibiting overseas direct investment (ODI) in a JV/ WOS set up/acquired by Indian Party under automatic route in FATF non-cooperative countries and jurisdictions is applicable only on countries identified by FATF as ‘Call for action’ and not ‘Jurisdictions under Increased Monitoring’. [RBI Press Release: 2021-2022/1872, dated 16th March, 2022]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. CBDT notifies E-advance Rulings Scheme, 2022: E-advance Rulings Scheme, 2022 shall apply to the applications of advance rulings made to the Board for Advance Ruling under section 245Q(1) or applications transferred to such Board under section 245Q(4). The applicant shall not be required to appear personally or through an authorised representative before the Board. The proceedings before the Board shall not be open to the public. An appeal against an order for advance ruling passed by the Board for Advance Rulings under this Scheme shall lie before the High Court. [Notification No. 7 of 2022 dated 18th January, 2022.]

2. Insertion of Rule 8AD – Income-tax (2nd Amendment) Rules, 2022: Rule 8AD prescribes computation of capital gains for the purposes of section 45(1)(1B), where any person receives at any time during any previous year any amount under a specified unit-linked insurance policy, including the amount allocated by way of bonus on such policy. [Notification No. 8 of 2022 dated 18th January, 2022.]

3. Guidelines under clause (10D) section 10: Sum received including any sum allocated by way of bonus during the previous year under any one or more ULIPs issued on or after 1st February, 2021 shall be exempt under section 10(10D), subject to satisfaction of other provisions of said clause. The related circular issued explains the same by giving various examples. [Circular 2 of 2022 dated 19th January, 2022.]

4. Clarification regarding the Most-Favoured-Nation (MFN) clause in the Protocol to India’s DTAAs with certain countries: CBDT has issued the following clarifications on the applicability of the MFN clause:
a) To claim the benefits under the MFN clause of DTAA, the third state is to be a member of the OECD both at the time of conclusion of the treaty with India and at the time of applicability of the MFN clause.
b) The unilateral decree of a treaty partner does not represent a shared understanding of the applicability of the MFN clause.
c) Benefit of concessional rates under DTAAs, shall only be available after the date of entry in force with the third state, not from when it became a member of OECD.
d) A separate notification has been issued by India, importing the benefits of the second treaty into the treaty with the First State, as required by the provisions of sub-section (1) of Section 90. [Circular No. 3 of 2022 dated 3rd February, 2022.]

COMPANY LAW

I. COMPANIES ACT, 2013

1. Requirement to file Report on CSR in Form CSR-2 by 31st March, 2022: MCA now requires every Company to which provisions of CSR are applicable u/s 135 to file a report in Form CSR-2 (format is prescribed in the notification), as an addendum to Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be. It is to be noted that for the preceding financial year (2020-2021), Form CSR-2 shall be filed separately on or before 31st March, 2022, after filing Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be. [Notification No. G.S.R. 107 (E) dated 11th February, 2022.]

2. MCA directs that certain provisions of the Companies Act, 2013 shall apply to LLPs, with specified modifications to suit LLPs, w.e.f. 12th February, 2022: The few provisions which are important are enlisted below:

Section	Nature of Provision
90	Companies to maintain a Register of significant beneficial owners in a company
164	Disqualifications for appointment of Director of the Companies Act shall also apply to LLPs
165	No person shall become designated partner in more than 20 LLPs, similar to the cap of 20 companies for Directors under the Companies Act
206(5)	Empowering the Central Govt. to direct inspection of books and papers of LLP
252	Notifying strike off
439	Offences to be non-cognizable

Section

Nature
of Provision

Companies to maintain a Register of
significant beneficial owners in a company

164

Disqualifications for appointment of
Director of the Companies Act shall also apply to LLPs

165

No person shall become designated partner
in more than 20 LLPs, similar to the cap of 20 companies for Directors under
the Companies Act

206(5)

Empowering the Central Govt. to direct
inspection of books and papers of LLP

252

Notifying strike off

439

Offences to be non-cognizable

[Notification No. G.S.R. 110(E) dated 11th February, 2022.]

3. Delegation of certain powers to Regional Directors and appointment of ROCs as adjudicating officers: In line with the amendments in the LLP Rules, MCA has delegated certain powers w.e.f. 1st April, 2022 to the Regional Directors at Mumbai, Kolkata, Chennai, New Delhi, Ahmedabad, Hyderabad and Guwahati namely the powers and functions vested in it u/s 17 of the LLP Act [Change of name of limited liability partnership]. These delegated powers shall be subject to the condition that the Central Govt. may revoke such delegation of powers or may itself exercise the powers under the said section, if in its opinion such a course of action is necessary in the public interest. [Order No S.O. 622 (E) dated 11th February, 2022.]

4. Appointment of Registrar of Companies as adjudicating officers for the purposes of LLP Act: MCA through notification has appointed Registrar of Companies as adjudicating officers for the purposes of LLP Act, while also enlisting their respective jurisdiction. However, the said notification states that appeals, if any, filed before the concerned RD shall be disposed of according to the specific Notifications issued by MCA in this regard from time to time. This notification will be effective from 1st April, 2022. [Notification No. S. O. 623 (E) dated 11th February, 2022.]

5. Further relaxation in additional fees in filing e-forms for F.Y. ended 31st March, 2021: In continuation of Circular dated 29th December, 2021 MCA has granted further relaxation on levy of additional fees for filing following e-forms:

Sr. No.	Forms	Nature of Filing	Nature of Relaxation
1	AOC-4, AOC-4 (CFS), AOC -4 XBRL and AOC-4 Non XBRL	Audited Accounts for the F.Y. ended 31^st March, 2021	No additional fees if forms mentioned in the preceding column are filed on or before 15^th March, 2022
2	MGT 7 and MGT 7-A	Annual Returns	No additional fees if forms mentioned in the preceding column are filed on or before 31^st March, 2022

Sr. No.

Forms

Nature of Filing

Nature of Relaxation

AOC-4, AOC-4

(CFS), AOC -4 XBRL and AOC-4 Non XBRL

Audited Accounts for the F.Y. ended 31^st
March, 2021

No additional fees if forms mentioned in
the preceding column are filed on or before 15^th March, 2022

MGT 7 and MGT 7-A

Annual Returns

No additional fees if forms mentioned in
the preceding column are filed on or before 31^st March, 2022

[Circular 01/2022 dated 14th February, 2022.]

II. SEBI

6. Operational procedure to be followed by Listed Entities/RTA in case of issuance of securities in Demat mode: SEBI vide its notification dated 24th January, 2022 mandated listed entities to issue securities in Demat mode only while processing the investor service requests related to duplicate certificate issuance, subdivision, consolidation, split, transmission etc. In this connection, SEBI has now issued an operational circular prescribing the procedure to be followed by the Listed Entities/RTA in processing such investor requests and issuance of dematerialized securities. [Circular No. SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/8, dated 25th January, 2022.]

7. SEBI prescribes detailed guidelines for preparation of financial statements of Mutual Fund Schemes on Ind AS basis: The SEBI has prescribed that MF Schemes shall prepare opening balance sheet as on transition date and comparative as per Ind AS. SEBI has also specified the format of preparation of financial statement by the AMC as specified in Annexure A of the circular. SEBI clarified that, in order to align with Ind AS, brokerage and transaction cost shall be charged to schemes up to 12 bps and 5 bps for cash market transactions and derivatives transactions. The circular shall be effective from 1st April, 2023. [Circular No SEBI/HO/IMD-II/DOF8/P/CIR/2022/12, dated 4th February, 2022.]

8. SEBI modifies ‘Master Circular for Depositories dated February 05, 2021’ w.r.t. opening of Demat account in case of HUF: SEBI has specified certain modifications to the Master Circular for Depositories issued on 5th February, 2021. SEBI’s earlier circular restricted married daughters from being new Karta of the HUF in case of the death of the Karta. SEBI has now removed that restriction. Further SEBI added one additional guideline to be followed in case of opening of Demat account in case of death of the Karta. All other provisions of the earlier master circular remain the same. [Circular No. SEBI/HO/MRD2/DDAP/CIR/P/2022/20, dated 17th February, 2022.]

FEMA

1. FM proposes the introduction of India’s own digital currency by RBI: In her budget speech, the Finance Minister announced the issuance of a Digital Rupee (using blockchain and other technologies) by the RBI starting 2022-23. Accordingly, a new definition of ‘bank note’ has been proposed in section 2 of the RBI Act, 1934. As per newly inserted Section 2 (aiv), ‘bank note’ means a bank note issued by the Bank, whether in physical or digital form, under section 22. Section 22 of the RBI Act, 1934 gives the RBI sole right to issue bank notes. The amendment is in line with the ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’, which aims to create a framework for the creating the official digital currency to be issued by the RBI. The Bill has, however, not been introduced in Parliament yet. A new section 22A has been proposed to be inserted, which prescribes that certain sections of the RBI Act, 1934, which specifically relate to physical bank notes would not apply to the digital form of the bank notes. [Budget Speech and Finance Bill 2021, dated 1st February, 2022.]

2. RBI Cautions against unauthorised forex trading platforms: RBI has issued a Press Release pointing out that it has noticed misleading advertisements of unauthorised Electronic Trading Platforms (ETPs) offering forex trading facilities to Indian residents, including on social media platforms, search engines, OTT platforms, gaming apps and the like. RBI has clarified that resident persons can undertake forex transactions only with authorised persons and for permitted purposes. RBI has cautioned the public not to undertake forex transactions on unauthorised ETPs or remit/deposit money for such unauthorised transactions. RBI has cautioned that Resident persons undertaking forex transactions for purposes other than those permitted under the FEMA or on ETPs not authorised by the RBI shall render themselves liable for penal action under the FEMA.
A list of authorised persons and authorised ETPs is available on the RBI website, along with a set of FAQs. [Press Release: 2021-2022/1660 dated 3rd February, 2022.]

3. Foreign Currency Settled Overnight Indexed Swaps: RBI had issued the Rupee Interest Rate Derivatives Directions on 26th June, 2019. Following that, it has now allowed banks in India having AD Cat-I license under FEMA to offer Foreign Currency Settled Overnight Indexed Swaps (FCS-OIS) based on the Overnight MIBOR benchmark published by FBIL to persons not resident in India as well as to other AD Cat-I banks. Banks can undertake these transactions through their branches in India, through their International Financial Services Centre (IFSC) Banking Units (IBUs) or their foreign branches (in case of foreign banks operating in India, through any branch of the parent bank). Banks may undertake FCS-OIS transactions beyond onshore market hours. [Circular No. FMRD.DIRD.12/14.03.046/2021-22, dated 10th February, 2022.]

4. Voluntary Retention Route (VRR) for FPIs – enhancement of limits: To simplify stable investments in debt instruments issued in the country, Voluntary Retention Route (VRR) for investment in government and corporate debt securities by Foreign Portfolio Investors (FPIs) was announced on 1st March, 2019. An investment limit of R1,50,000 crore was set for investments under the VRR. Given the encouraging response to the VRR, RBI has increased the investment limit under VRR by R1,00,000 crore, i.e., up to R2,50,000 crore w.e.f. 1st April, 2022. [RBI/2021-22/156 A.P. (DIR Series) Circular No. 22 dated 10th February, 2022.]

RBI

1. Clarifications on IRACP prudential norms on advances: The RBI has issued clarifications in respect of Prudential Norms on Income Recognition, Asset Classification, and Provisioning (IRACP) that include: the definition of ‘out of order’ shall apply to all loan products being offered as an overdraft facility, including those not meant for business purposes and/or which entail interest repayments as the only credits; the ‘previous 90 days period’ for determination of ‘out of order’ status of a CC/OD account shall be inclusive of the day for which the day-end process is being run and; in case of borrowers having more than one credit facility from a lending institution, loan accounts shall be upgraded from NPA to standard asset category only upon repayment of entire arrears of interest and principal pertaining to all the credit facilities. [Notification No. RBI/2021-22/158 DOR.STR.REC.85/21.04.048/2021-22 dated 15th February, 2022.]

ICAI ANNOUNCEMENTS

1. FRN compulsory field for generating UDINs: Firm Registration Number (FRN) has been made a compulsory field for generating UDINs w.e.f. 1st February, 2022 to enable firms to consolidate the total UDINs generated by its partners on its behalf for its clients, prospectively. [31st January, 2022.]

2. Guidelines for conducting distance/remote/online peer review: The Peer Review Board has decided to adopt conducting of distance/remote/online Peer Review. Considerations for Peer Reviewers have been specified that requires the Reviewers to ensure that appropriate audit evidence is available with them based on which they are able to express their opinion. [9th February, 2022.]

ICAI MATERIAL

Accounts and Audit
1. Guidance Note on Division I – Non Ind AS Schedule III to the Companies Act, 2013 (Revised January 2022 Edition). [24th January, 2022.]
2. Guidance Note on Division II – Ind AS Schedule III to the Companies Act, 2013 (Revised January 2022 Edition). [24th January, 2022.]
3. Guidance Note on Division III – Schedule III to the Companies Act, 2013 for NBFC that is Required to Comply with Ind AS. (Revised January 2022 Edition). [24th January, 2022.]
4. Guidance Note on Audit of Banks (2022 Edition). [10th February, 2022.]

Valuation
5. Concept Paper on Estimating Discount Rates in Valuation. [10th February, 2022.]
6. Concept Paper on Inventory Valuation. [10th February, 2022

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. CBDT notifies Faceless Appeal Scheme, 2021: As per the Faceless Appeal Scheme, 2021, an assessee can request CIT (A) for a personal hearing through Video Conference, and upon such request, CIT(A) will have no discretion to refuse it. As per the new scheme, CIT (A) will not prepare a draft order. Instead, he shall prepare an appeal order, sign the same digitally and send it to the National Faceless Appeal Centre (NFAC), which will communicate to the assessee. [Notification No. 139 of 2021 dated 28th December, 2021.]

2. One-time relaxation for verification of all ITRs e-filed for A.Y. 2020-21 which are pending for verification and processing: All ITRs for A.Y. 2020-21 which were uploaded electronically by the taxpayers within the time allowed u/s 139 and which have remained incomplete due to non-submission of ITR-V Form or pending e-Verification, can be verified by one of the prescribed mode before 28th February, 2022.[Circular No. 21 of 2021 dated 28th December, 2021.]

3. Insertion of Rule 16DD and Form 56FF – Income-tax (35th Amendment) Rules, 2021: Form 56FF is to be furnished along with return of income for claiming deduction u/s 10A(1B)(b). [Notification No. 140 of 2021 dated 29th December, 2021.]

4. Extension of timelines for filing of ITRs and various Audit Reports for A.Y. 2021-22: Due to the difficulties reported by taxpayers/stakeholders due to Covid and in e-filing of Audit Reports for A.Y. 2021-22, CBDT has further extended the due dates for filing Audit Reports and ITRs for A.Y. 2021-22. The due dates were earlier extended vide Circular No.9/2021 dated 20th May, 2021 and Circular No.17/2021 dated 9th September, 2021. [Circular No. 1 of 2022 dated 11th January, 2022.]

COMPANY LAW

I. COMPANIES ACT, 2013

1. MCA requires filing of Form IEPF-7 within 30 days of remittance of funds to bank account of IEPF Authority: MCA specifies Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund), Third Amendment, Rules, 2021. As per the amended rules, companies remitting any amount to the Fund must furnish details thereof to the Authority in Form No. IEPF-7 within 30 days from the date of remittance or within 30 days from the commencement date of the IEPF (Accounting, Audit, Transfer and Refund), Third Amendment, Rules, 2021. [Notification No. G.S.R. 888(E), dated 28th December, 2021.]

2. MCA extends the due date for filing of financials and annual return: In view of requests from various stakeholders regarding the levy of additional fees for filing of annual financial statements for the year ended 31st March, 2021, MCA has decided that no additional fees shall be levied for filing of AOC -4, AOC-4 (CFS), AOC- 4 XBRL, AOC – 4 Non-XBRL up to 15th February, 2022 and for MGT – 7, MGT- 7A up to 28th February, 2022. [Circular No. 22/2021, dated 29th December, 2021.]

3. MCA prescribes higher additional fees in certain cases for delayed filing of forms w.e.f. 1st July, 2022: The MCA has notified the Companies (Registration Offices and Fees) Amendment Rules, 2022, w.e.f. 1st July, 2022. The amendment prescribes a table of higher additional fees (in certain cases) which shall be applicable for delay in filing of forms other than for increase in nominal share capital or Forms u/s 92/137 of the Companies Act, 2013 (Annual Return, Financial Statements), or forms for filing charges. [Notification F. No. 01/16/2013CL-V PT -1, dated 11th January, 2022.]

II. SEBI

4. SEBI permits InVITs & REITs to conduct unitholders’ AGM and other meetings virtually till 30th June, 2022: Based on the representations from REITs/InvITs, SEBI has decided to extend the facility to conduct annual meetings and other meetings of unitholders through VC/OAVM till 30th June, 2022. Earlier, SEBI vide circular no. SEBI/HO/DDHS/DDHS/CIR/P/2021/21 dated 26th February, 2021 permitted REITs/InvITs to conduct annual meetings of unitholders through VC/OAVM till 31st December, 2021 and other meetings of unitholders through VC/OAVM till 30th June, 2021.[Circular No. SEBI/HO/DDHS/DDHS_DIV2/P/CIR/2021/697, dated 22nd December, 2021.]

5. SEBI directs exchanges to levy fines and take action for non-compliances by issuers of non-convertible securities: In the interest of investors and the securities market, SEBI has directed the Stock Exchanges to levy fines and take action in case of non-compliance with continuous disclosure requirements by issuers of listed Non-Convertible Securities/ Commercial Paper. SEBI has also prescribed the fines to be levied in case of any non-compliances in an annexure to the said circular. The provisions will be effective in respect of due dates of compliance falling on or after 1st February, 2022. [Circular No. SEBI/HO/DDHS_DIV2/P/CIR/2021/699, dated 29th December, 2021.]

6. SEBI issues framework for operationalizing Gold Exchange in India: SEBI has laid out a framework for operationalizing the Gold Exchange, wherein gold will be traded in the form of Electronic Gold Receipts (EGRs). SEBI specifies that the supply of the physical gold, to be converted into EGR, will be the fresh deposit of gold, coming into the vaults, either through imports or through stock exchange accredited domestic refineries. Vault managers must ensure that ‘gold’ to be converted into EGR meets the criteria. [Circular No. SEBI/HO/CDMRD/DMP/CIR/P/2022/07, dated 10th January, 2022.]

FEMA

1. No permission required by NRIs/OCIs for acquisition/transfer of immovable property: RBI has issued a Press Release stating that NRIs and OCIs do not require prior approval of RBI for acquisition and transfer of immovable property in India other than for agricultural land, farmhouse or plantation property. RBI received many queries based on news reports related to a recent Supreme Court Judgement stating that prior approval of RBI is required for the acquisition/transfer of immovable property in India by OCIs. RBI has clarified that the concerned order related to FERA, which has been repealed on the enactment of FEMA. The position is different under FEMA. [Press Release: 2021-2022/1439 dated 29th December, 2021.]

ICAI MATERIAL

Audit
1. Implementation Guide to Standard on Auditing (SA) 560, Subsequent Events. [15th January, 2022.]

2. Implementation Guide to Standard on Auditing (SA) 210, Agreeing the Terms of Audit Engagements. [15th January, 2022.]

Valuation
1. Booklet on Valuation of Complex Securities. [23rd December, 2021.]

2. Booklet on Fair Value – Purchase Price Allocation. [23rd December, 2021.]

3. Handbook on Best Practices for Registered Valuers. [10th January, 2022.]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Substitution of Form 52A – Income-tax (32nd Amendment) Rules, 2021: CBDT has notified revised Form No. 52A which is a statement to be submitted u/s 285B in respect of production of a cinematograph film. [Notification No. 132 of 2021 dated 23rd November, 2021.]

2. Protocol amending the DTAA between India and Kyrgyz Republic signed: The Central Government notified that all the provisions of the said amending Protocol shall have effect in India. [Notification No. 135 of 2021 dated 8th December, 2021.]

3. Insertion of Rule 21AK – Income-tax (33rd Amendment) Rules, 2021: The Finance Act, 2021 has inserted sub-section (4E) u/s 10 to exempt any income received by a non-resident due to the transfer of non-deliverable forward contracts entered into with an offshore banking unit of IFSC. CBDT has notified Rule 21AK prescribing conditions to be fulfilled to claim an exemption u/s 10(4E). [Notification No. 136 of 2021 dated 10th December, 2021.]

4. CBDT notifies e-Verification Scheme, 2021: The Scheme aims at faceless information collection from assessees and their verification. [Notification No. 137 of 2021 dated 13th December, 2021.]

5. Guidelines under 194O(4), section 194Q(3) and section 206C(1-I): In continuation of Circular No. 17 of 2020 dated 29th September, 2020 and Circular No. 13 of 2021 dated 30th June, 2021, CBDT has issued further guidelines to remove the difficulties in implementation of sections 194O, 194Q and 206C. [Circular No. 20 of 2021 dated 25th November, 2021.]

COMPANY LAW

I. Companies Act, 2013

1. MCA allows companies to conduct EGMs via video conference / other audio-visual means (VC / OAVM) up to 30th June, 2022: The MCA has permitted companies to convene and conduct EGMs through VC / OAVM or transact through postal ballot in accordance with the framework up to 30th June, 2022. Earlier, vide General Circular No. 10/2021 dated 23rd June, 2021, the MCA had allowed companies to conduct the same up to 31st December, 2021. [General Circular No. 20/2021 dated 8th December, 2021.]

2. MCA issues clarification on holding of AGM through VC / OAVM: The MCA has allowed companies to organise the AGMs in 2022 for the financial year ending before / on 31st March, 2022 through VC / OAVM as per respective due dates by 30th June, 2022. It has further clarified that this Circular should not be construed as conferring any extension of time for holding AGMs. In September, 2021, MCA had allowed a two-month extension to the deadline for companies to hold their AGM for the financial year ending 31st March, 2021. [Circular No. 21/2021 dated 14th December, 2021.]

II. SEBI

3. SEBI directs Debenture Trustees (DTs) to publish Investor Charter and disclose data on complaints on their websites: With a view to provide investors with relevant information about various activities where an investor must deal with DTs for availing of various services, SEBI has prepared an Investor Charter for DTs. The Investor Charter details the services provided to investors, timelines for various DT services provided and the Rights and Obligations of Investors. SEBI has also directed all DTs to disclose on their website details of the complaints received latest by the 7th of the succeeding month. [Circular No. SEBI/HO/MIRSD/MIRSD_CRADT/P/CIR/2021/675 dated 30th November, 2021.]

4. SEBI issues new delisting norms through an open offer under takeover regulations: As per amended norms, the option to delist through an open offer is restricted to only new acquirers acquiring fresh control. SEBI has also notified a scale-down option for the acquirer who is expected to cross 75% threshold pursuant to an open offer. [Notification No. SEBI/LAD-NRO/GN/2021/60 dated 6th December, 2021.]

5. SEBI clarifies on framework for processing investors’ service request by RTAs: SEBI, on representations received from the Registrars’ Association of India, has clarified on certain provisions of its Circular No. SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/ 655 dated 3rd November, 2021 whereby it had simplified the norms for processing investors’ service request by RTAs and norms for furnishing PAN, KYC details and nominations. SEBI has clarified with respect to processing of the service request in case of any minor / major mismatch in name or signature of security holder / investor. [Circular No. SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/687 dated 14th December, 2021.]

6. SEBI replies on query relating to approval of material related party transactions under informal guidance scheme: SEBI has clarified that entities that are not able to take shareholders’ approval in material related party transactions due to the embargo that a related party cannot vote to approve such transactions, shall follow the provisions laid down in Explanation 3 to Regulation 16(1A) of LODR Regulation, which states ‘comply or explain reasons for such non-compliance and the steps initiated to achieve full compliance in its quarterly compliance report filed with Stock Exchanges’ [Letter No. SEBI/HO/DDHS/P/OW/2021/37583/1 dated 16th December, 2021.]

FEMA

1. Changes to External Commercial Borrowings (ECBs) & Trade Credits (TCs): In view of the imminent discontinuance of LIBOR as a benchmark rate, RBI has decided to make the following changes to the all-in-cost benchmark and ceiling for Foreign Currency ECBs & TCs:
* The benchmark rate shall now refer to any widely accepted interbank rate or alternative reference rate (ARR) of six-month tenor, applicable to the currency of borrowing, instead of the erstwhile LIBOR.
* The all-in-cost ceiling for new Foreign Currency ECBs and TCs has been increased by 50 bps to 500 bps and 300 bps, respectively, over the benchmark rates to take into account differences in credit risk and term premia between LIBOR and the ARRs.
* One-time adjustment in all-in-cost ceiling for existing ECBs / TCs to enable smooth transition. The all-in cost ceiling for such ECBs / TCs has been revised upwards by 100 basis points to 550 bps and 350 bps, respectively, over the ARR. [A.P. (DIR Series 2021-22) Circular No. 19 dated 8th December, 2021.]

2. Banks can infuse capital in overseas branches without RBI’s prior approval: As per extant practice, banks incorporated in India seek prior RBI approval for (a) infusion of capital in their overseas branches and subsidiaries, and (b) retention of profits in, and transfer or repatriation of profits from, these overseas centres.

RBI has stated now that prior approval for above capital infusion / transfers (including retention / repatriation of profits) shall not be required by banks which meet the regulatory capital requirements (including capital buffers). Instead, the banks shall seek approval of their Boards and report to RBI within 30 days as mandated in the Circular. Only Scheduled Commercial Banks other than foreign banks, Small Finance Banks, Payment Banks and Regional Rural Banks are provided this relaxation. [Circular No. Dor.Cap.Rec.No.72/21-6-201/2021-22 dated 8th December, 2021.]

3. Legal Entity Identifier (LEI) mandatory for cross-border capital account transactions: LEI is a 20-digit number used to uniquely identify parties to financial transactions worldwide to improve the quality and accuracy of financial data systems. RBI has decided that, with effect from 1st October, 2022, AD banks shall obtain the LEI number from resident entities (non-individuals) undertaking capital or current account transactions of Rs. 50 crores and above (per transaction) under FEMA. It has allowed AD banks to process transactions by non-resident counterparts / overseas entities, in case of non-availability of LEI, to avoid disruptions. It has also asked AD banks to encourage the entities concerned to voluntarily furnish LEI while undertaking transactions even before 1st October, 2022. Once an entity has obtained an LEI number, it must be reported in all transactions of that entity, irrespective of transaction size. [A.P. (Dir. Series 2021-22) Circular No. 20 dated 10th December, 2021.]

BCAJ Admin

Regulatory Referencer

DIRECT TAX

Amendment to Rule 12 – Income-tax (Second Amendment) Rules, 2023- Notification No. 5/- 2023 dated 14th February,2023

ITR-7 Form is used by persons including companies who are required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D). Form ITR-7 for A.Y. 2023-24 is now notified.

Amendment to Rule 16CC and 17B – Income-tax (Third Amendment) Rules, 2023- Notification No. 7/ 2023 dated 21st February, 2023

CBDT has notified amended Form 10B and 10BB. These forms are to be submitted by Charitable or religious trusts, organisations, universities or other educational institutions in compliance with section 10(23C) and 12A of the Income-tax Act.

Consequences of PAN becoming inoperative as per the newly substituted rule 114AAA – Circular No. 3/2023 dated 28th March 2023

The Aadhaar is required to be linked with PAN. Even if PAN is not linked to Aadhar, the adverse consequences of PAN becoming inoperative were not to apply till 31st March, 2023. This deadline is extended by three months from 31st March to 30th June, 2023 subject to payment of fee of Rs. 1,000. All unlinked PAN cards will become inoperative as of 1st July, 2023.

II. SEBI

Stockbrokers/Depositories Participants to maintain a designated website to keep the investors informed: SEBI has mandated above intermediaries (SB/DP) to maintain a designated website. The website shall mandatorily display certain information like basic details, contact details of the KMPs/authorized persons, etc. Further, URL to the website of a SB/DP shall be reported to stock exchanges/ depositories within a week of this circular coming into effect and modifications if any shall be reported within 3 days of change. [Circular No. SEBI/HO/MIRSD/MIRSD-POD-1/P/CIR/2023/30, dated 15th February, 2023]

Additional restrictions for Companies undertaking a buy-back via Stock Exchange Route: The SEBI has notified SEBI (Buy-Back of Securities) (Amendment) Regulations, 2023. Some additional restrictions have been introduced for Companies doing buy back of securities through stock exchange route. Now, a company shall not purchase more than 25 per cent of average daily trading volume of its shares in the preceding 10 trading days, etc. Further, the company shall not place bids in the pre-open market, first 30 minutes and the last 30 minutes of regular trading session [Circular No. SEBI/HO/CFD/POD-2/P/CIR/2023/35, dated 08th March, 2023]

BCAJ Admin

Regulatory Referencer

FEMA AND IFSCA REGULATIONS

1. International Credit Card usage brought under LRS:

Rule 5 of the FEM (Current Account Transactions) Rules, 2000 allows for payments to be made for specified purposes as mentioned in Schedule III but within prescribed limits. Liberalised Remittance Scheme of the RBI allows remittance by resident individuals for transactions specified under this Schedule III up to USD 250,000 per financial year. Rule 7 of the FEM (Current Account Transactions) Rules, 2000 exempted payments made through international credit cards while on a visit outside India from Rule 5 and hence effectively they were outside the LRS limits too. However, Rule 7 now stands omitted resulting in transactions made through such use of ICCs to be covered under LRS. Purpose was to bring transactions made through ICCs under the Tax Collected at Source (TCS) net. Immediately, thereafter FAQs were released for both LRS and TCS on LRS through tweets providing clarifications and explanations on LRS and TCS on LRS. Some reliefs are also proposed. Then, a day later, another tweet clarified that payments by an individual using ICC or International Debit Card upto Rs. 7 lakhs per financial year would be excluded from LRS and hence TCS also. Necessary changes to the CAT Rules are proposed to this effect but as of now only tweets are available.

[G.S.R 369(E) dated 16th May, 2023 and tweets by handle @FinMinIndia dated 18th and 19th May, 2023.]

2. NDDCs allowed for trading by resident non-retail users at IFSC IBUs:

AD Cat-I banks operating International Financial Services Centre (IFSC) Banking Units (IBUs) are permitted so far to offer non-deliverable derivative contracts (NDDCs) to persons resident outside India. Such derivatives are cash-settled in foreign currency. With a view to developing the onshore INR NDDC market and providing residents the flexibility to efficiently design their hedging programmes, it has been decided to permit:(a) AD Cat-I banks operating IBUs to offer NDDCs involving INR to resident non-retail users for the purpose of hedging. Such transactions shall be cash settled in INR; and

(b) The flexibility of cash settlement of NDDCs transactions between two AD Cat-I banks, and between an AD Cat-I bank and a person resident outside India in INR or any foreign currency.

[A.P. (DIR series) circular no. 5, dated 6th June, 2023]

3. RBI’s Statement on Development and Regulatory policies:

The Statement sets out various developmental and regulatory policy measures relating to (i) Financial Markets; (ii) Regulation; and (iii) Payment Systems relevant under FEMA is the policy regarding licensing framework for Authorised Persons (APs). This was last reviewed in March 2006. Keeping in view the progressive liberalisation under FEMA over the last two decades, RBI has decided to rationalise and simplify the licensing framework for APs. The objective is to achieve operational efficiency in the delivery of foreign exchange facilities to common persons, tourists and businesses, while maintaining appropriate safeguards. A draft of the revised authorisation framework would be issued for public feedback.

[Press Release No. 2023-2024/365 dated 8th June, 2023]

BCAJ Admin

Regulatory Referencer

DIRECT TAX

The Central Government notifies that
all the provisions of the Agreement and Protocol for the elimination of
double taxation and the prevention of fiscal evasion and avoidance with
respect to taxes on income between India and Chile shall be given effect
to in the Union of India – Notification No. 24/2023 dated 3rd May, 2023

COMPANIES ACT, 2013

1. Establishment of C-PACE to provide hassle-free filing, timely and process-bound striking off companies from MCA Registry: The MCA vide Notification No. S.O. 1269(E) dated
17th March, 2023 has established the Centre for Processing Accelerated
Corporate Exit (C-PACE) to facilitate the quick, transparent and
process-bound exit of companies. With the establishment of C-PACE, the
striking-off process of companies has been centralised, resulting in
reduced stress on the MCA Registry. Also, this initiative is expected to
ensure hassle-free filing and timely striking off names of companies
from the Register. [ Press release dated 13th May. 2023]

2. MCA brings more clarity on filing of overdue financials before applying
for striking-off: The authority has notified an amendment to strike-off
rules. The amendment provides more clarity on filing requirements of
overdue financials before applying for strike-off. As per the amended
norms, all pending and overdue financial statements under section 137
and overdue annual returns under section 92, must be filed up to the end
of the financial year in which the company ceased to carry its business
operations before applying for strike-off. [Notification no. G.S.R.
354(E), dated 10th May, 2023]

SEBI

1 Guidelines issued regarding exclusion of investors from investing in schemes of AIFs:
SEBI has issued guidelines regarding exclusion of an investor from an
investment in an AIF. As per the new norms, an AIF may exclude an
investor from participating in a particular investment if the manager is
satisfied that participation of such an investor in the investment
opportunity would lead to the scheme of AIF being in violation of
applicable law or regulation or would result in material adverse effect
on scheme of an AIF. [Circular No. SEBI/HO/AFD-1/POD/P/CIR/2023/053,
dated 10th April, 2023]

2 Introduction of a direct plan allowing investors to invest in AIFs without distribution fee: With a
view to providing flexibility to investors for investing in AIFs, SEBI
has introduced a direct plan for schemes of AIFs. Such a direct plan
shall not entail any distribution fee/placement fee. Further, SEBI has
prescribed the Trail model for the distribution of commission in AIFs.
They shall disclose the distribution/placement fee, to the investors at
the time of on-boarding. Also, Category III AIFs shall charge
distribution fee/placement fee to investors only on an equal trail
basis. [Circular No. SEBI/HO/AFD/POD/CIR/2023/054, dated 10th April,
2023]

3 Master Circular for “Market Infrastructure Institutions”: The SEBI had issued multiple circulars, directions, and operating instructions for Market Infrastructure Institutions (MIIs) on a
regular basis for necessary compliance. In order to ensure that all
market participants find all provisions at one place, master circular
for MIIs has been prepared. A master circular is a compilation of all
the existing circulars, and directions issued and applicable as on 31st
March of every year, segregated subject-wise. [Circular No.
SEBI/HO/MRD/POD 3/CIR/P/2023/58, dated 20th April, 2023]

4. AMCs to file all final offer documents in digital format: SEBI has
directed all Asset Management Companies (AMCs) to file their final offer
documents in digital form only by emailing the same to a dedicated
email address i.e., imdsidfiling@sebi.gov.in. Further, there will be no
need to file physical copies of the same with SEBI. Also, all new fund
offers (NFOs) must remain open for subscription for at least three
working days. The provisions of this circular shall be applicable from
1st May, 2023 [Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2023/60, dated
25th April, 2023]

5. Stock Brokers/Clearing Members barred from creating bank guarantees on clients’ funds: The SEBI has barred Stock Brokers and Clearing Members from pledging their clients’ funds with
banks. Presently, stock brokers and clearing members pledge their
clients’ funds with banks, which in turn issue bank guarantees (BG) to
clearing corporations for higher amounts. Now, from 1st May, 2023, no
new bank guarantees shall be created out of clients’ funds by stock
brokers. Also, existing BGs created out of clients’ funds must be wound
down by 30th September, 2023 [Circular No. SEBI/HO/MIRSD/MIRSD-POD-1/P/CIR/2023/061, dated 25th April, 2023]

6. Payment for Mutual Funds on behalf of a minor to be made via
Minor/Parent/Legal guardian’s bank account: Earlier, SEBI prescribed a
uniform process to be followed by Asset Management Companies (AMCs)
regarding investments made in the name of a minor through a guardian.
Now, SEBI has directed that payment for investments in mutual funds by
any mode shall be accepted from the minor’s bank account, the parent or
legal guardian of the minor, or from a joint account of the minor with
the parent. Also, all AMCs are required to make changes to facilitate
mutual fund transactions effective 15th June, 2023. [Circular No.
SEBI/HO/IMD/POD-II/CIR/P/2023/0069, dated 12th May, 5-2023]

FEMA AND IFSCA REGULATIONS

1. IFSCA prescribes reporting requirements for IFSC Insurance Offices
IFSCA has issued the IFSCA (Assets, Liabilities, Solvency Margin and Abstract
of Actuarial Report for Life Insurance Business) Regulations, 2023 to
specify the requirements related to capital, solvency and submission of
abstract of actuarial report by an IFSC Insurance Office for undertaking
Life Insurance Business. [Notification No. IFSCA/2022-23/GN/REG039,
dated 19th April, 2023]

2. IFSCA prescribes regulatory framework for IFSC Insurance Offices
IFSCA has prescribed IFSCA (Management Control, Administrative Control and
Market Conduct Of Insurance Business) Regulations, 2023 with the aim to
put in place the regulatory framework related to Management Control,
Administrative Control and Market Conduct of insurance business carried
out by an IIFSC Insurance Office or International Insurance Intermediary
Offices. It also lists several IRDAI regulations, circulars or
guidelines which cease to apply in IFSCs on promulgation of these
Regulations. [Notification F.No. IFSCA/2022-23/GN/REG035 dated 26th
April, 2023]

3. Resident Individuals’ idle funds in Foreign Currency Account in IFSC:
Resident Individuals who have a Foreign Currency Account (FCA) in IFSCs had to
repatriate any funds lying idle in the account for a period up to 15
days from the date of its receipt to their domestic account. On a review
and with an objective to align the LRS for IFSCs vis-à-vis other
foreign jurisdictions, RBI has now withdrawn this condition and the
holding period shall now be governed by the provisions of the scheme as
contained in the Master Direction on LRS. [A.P. (DIR SERIES) Circular
No. 3, dated 26th April, 2023]

4. MoF revises a list of designated officers for adjudication of penalties under FEMA:

The revised list is as under:

Sl. No.	Designation of Officers	Monetary limit
(1)	(2)	(3)
(1)	Special Director of Enforcement	Cases involving amount exceeding rupees twenty five crores.
(2)	Additional Director of Enforcement	Cases involving amount upto rupees twenty five crores but not less than five crores.
(3)	Joint Director of Enforcement	Cases involving amount upto rupees twenty five crores but not less than five crores
(4)	Deputy Director of Enforcement	Cases involving amount upto rupees five crores and not less than two crores
(5)	Assistant Director of Enforcement	Cases involving amount not exceeding rupees two crores.

[Notification No. S.O. 2128(E) [F. NO. K-11022/5/2023-AD.ED], dated 8th May, 2023]

5. Levy of charges on forex prepaid cards, etc.:

RBI has advised that fees/charges levied by Authorised Persons which are payable in India on use of International Debit Cards/Store Value Cards/Charge Cards/Smart Cards have to be denominated and settled in Rupees only and not in foreign currency. [A.P. (DIR SERIES 2023-24) Circular No. 04, dated 9th May, 2023]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX

1. Clarification regarding deduction of TDS under section 192 r.w.s 115BAC(1A) of the Income-tax Act – Circular No. 4/2023 dated 5th April, 2023

Section 115BAC of the Act provides for concessional tax rates subject to the condition that the total income shall be computed without specified exemption or deduction, set off of loss and additional depreciation.

The Finance Act, 2023 has inserted sub-section (6) to make the new tax scheme the default scheme. If the assessee wants to pay tax as per the normal regime, he will have to opt out of the new tax scheme. Employers had expressed concern regarding tax to be deducted at source from salary income as they would not know if the employee would be covered by section 115BAC or he would opt-out.

CBDT has now issued directions for the employers.

2. Partial relaxation with respect to electronic submission of Form lOF by select category of taxpayers – F. No. DGIT(S)-ADG(S)-3/e-Filing Notification/Forms/2023/ 13420 dated 28th March, 2023

Notification No. 03/2022 dated 16th July, 2022 mandated furnishing of Form 10F electronically. Considering the practical challenge faced by non-resident taxpayers not having PAN in compliance as per the above notification, it was provided that the non-resident taxpayers not having, and not required to have, PAN as per relevant provisions of the Act, as being exempted from mandatory electronic filing of Form 10F till 31st March, 2023. The said exemption is now further extended till 30th September, 2023. Suchcategory of taxpayers may make statutory compliance of filing Form 10F till 30th September, 2023 in manual form.

3. Amendment to Rule 114AAA – Income-tax (Fourth Amendment) Rules, 2023- Notification No. 15/ 2023 dated 28th March, 2023

CBDT has extended the last date to link Permanent Account Number (PAN) with Aadhaar to 30th June,2023

4. 348 notified as Cost Inflation Index for F.Y. 2023-24 – Notification No. 21/2023 dated 10th April, 2023.

II. COMPANIES ACT, 2013

1. MCA notifies Companies (Removal of Names of Companies from Register of companies) Amendment Rules, 2023: In order to facilitate quick exit process to companies, MCA has notified Companies (Removal of Names of Companies from Register of companies) Amendment Rules, 2023 with effect from 01st May, 2023. The notification has introduced Centre for Processing Accelerated Corporate Exit. Henceforth, applications for removal of name of a company shall be made to the above-mentioned authority in Form No. STK-2. The forms STK-2, STK-6, STK-7 have been revised. [MCA notification dated 17th April, 2023]

III. SEBI

1. Stock Exchanges to collect 0.5 per cent of debt securities’ issuance value and keep it in an escrow a/c before allotment: SEBI has mandated the stock exchanges to collect an amount of 0.5 per cent of issuance value of debt securities p.a. based on its maturity and place it in an escrow account before allotment of debt securities in case of public issue or private placement. Earlier, such an amount had to be collected upfront prior to listing of debt securities. The circular shall be effective for offer documents filed on or after 1st May, 2023 for private placement/public issues of debt securities. [Circular No. SEBI/HO/DDHS/DDHS-RACPOD1/CIR/P/2023/56, dated 03rd April ,2023]

2. SEBI directs investment advisors and research analysts to display their information prominently in advertisements: SEBI has asked Investment Advisors (IAs) and Research Analysts (RAs) to prominently display information such as the name as registered with SEBI, its logo, its registration number, etc. In addition, they are required to give the disclaimer that “registration granted by SEBI shall in no way guarantee performance of the intermediary or provide any assurance of returns to investors” in their advertisements. [Circular No. SEBI/HO/MIRSD/ MIRSD-POD-2/P/CIR/2023/52, dated 06th April, 2023]

3. SEBI issues Operational Circular for Debenture Trustees: The SEBI had issued multiple circulars over the years, covering the operational and procedural aspects of Debenture Trustees (DTs). In order to enable the industry and other users to access all the applicable circulars at one place, an Operational Circular for DTs has been prepared. An Operational Circular is a compilation of the existing circulars. The Board of the DTs shall be responsible for ensuring compliance with these provisions. The circular shall be effective from 01st April, 2023. [Circular No. SEBI/HO/DDHS/P/CIR/2023/50, dated 31st March, 2023]

FEMA AND IFSCA REGULATIONS

1. RBI RELEASES DATA

RBI releases data on following:

– India’s international investment position for the end of December 2022;

– Relating to financial performance of foreign direct investment (FDI) companies in India during 2021-22;

– Relating to the financial performance of non-government non-financial (NGNF) private limited companies during 2021-22.

Key features are summarised in the respective press releases.

[Press Releases: 2022-2023/1948, 2022-2023/1943, and Press Release all dated 31st March, 2023]

2. ONLINE APPLICATION FOR FFMCS AND NON-BANK AUTHORISED DEALERS CATEGORY-II

A software application called ‘APConnect’ has been developed for processing of application for licensing of Full Fledged Money Changers (FFMCs) and non-bank Authorised Dealers (AD) Category-II, authorisation as MTSS Agent, renewal of existing licence/authorisation, for seeking approval as per the extant instructions and for submission of various statements/returns by FFMCs and non-bank AD Cat II. Existing FFMCs/non-bank AD Category-II shall register themselves on the APConnect application within three months from the date of issue of this circular, through the weblink indicated in para 2.
[A.P. (DIR Series) Circular No.1, dated 6th April, 2023]

3. STATEMENT ON DEVELOPMENTAL AND REGULATORY POLICIESRBI’s

Statement sets out various developmental and regulatory policy measures relating to (i) Financial Markets; (ii) Regulation and Supervision; and (iii) Payment and Settlement Systems. Key developments:

a. With a view to develop the onshore INR Non-deliverable foreign exchange derivative contracts(NDDC) and to provide residents with the flexibility to efficiently design their hedging programs, it has been decided to permit banks with IBUs to offer INR Non-deliverable foreign exchange derivative contracts(NDDCs) to resident users in the onshore market. These banks will have the flexibility of settling their Non-deliverable foreign exchange derivative contracts(NDDC) transactions with non-residents and with each other in foreign currency or in INR while transactions with residents will be mandatorily settled in INR. Related directions are being issued separately.

b. It has been decided to develop a secured web based centralised portal named as ‘PRAVAAH’ (Platform for Regulatory Application, Validation And AutHorisation) which will gradually extend to all types of applications made to RBI across all functions.

There are other measures mentioned in the detailed Statement.

[Press Release No. 2023/2024/23, dated 6th April, 2023]

4. IFSCA SPECIFIES ‘OPERATING LEASE’ AS A FINANCIAL PRODUCT

Section 12 of the International Financial Services Centres Authority Act (IFSCA), 2019 has been amended to include an operating lease, including a hybrid of operating and financial lease, in respect of ‘Aviation training simulation devices’, as a financial product.[Notification No. IFSCA/2022-23/GN/037, dated 11th April, 2023]

5. REINSURANCE STRATEGY PROGRAMME FOR IFSC INSURANCE OFFICES

IFSCA has issued International Financial Services Centre Authority (Re-Insurance) Regulations, 2023 for ‘IFSC Insurance Offices’ to develop their re-insurance strategy program for risk management.[Notification F. No. IFSCA/2022-23/GN/REG036, Dated 11th April, 2023]

6. IFSCA ALLOWS PORTFOLIO MANAGERS TO PARK FUNDS OF CLIENTS IN A SEPARATE BANK ACCOUNT IN INDIA OR ABROAD

IFSCA has amended Regulation 77 of the International Financial Services Centres Authority (Fund Management) Regulations, 2022 to allow portfolio managers to park funds of clients in a separate bank account in India or abroad.

[Notification F. No. IFSCA/2022-23/GN/REG036, dated 11th April, 2023]

7. ONLINE SUBMISSION OF FORM A2 BY AD CATEGORY-II ENTITIES

It has now been decided to permit AD Category-II entities also to allow online submission of Form A2. AD Category-II entities shall frame appropriate guidelines with the approval of their Board within the ambit of extant statutory and regulatory framework.

[A.P. (DIR Series) Circular No. 2, dated 12th April, 2023]

BCAJ Admin

Regulatory Referencer

DIRECT TAX

1. Corrigendum to circular no. 23 of 2022 dated 03rd November, 2022 – explanatory notes to Finance Act, 2022 – Circular No. 2/2023 dated 6th February, 2023

The Explanatory notes to the Finance Act, 2022, explaining the amendments made in direct tax laws vide the Finance Act, 2022 were issued vide Circular no. 23 of 2022 dated 03rd November, 2022 A corrigendum to the said circular is issued.

2. Amendment to Rule 12 – Income-tax (First Amendment) Rules, 2023- Notification No. 4/ 2023 dated 10th February, 2023

SAHAJ ITR-1, ITR-2, ITR-3, SUGAM ITR4, ITR-5, ITR-6, ITR-V and ITR- Acknowledgement notified for A.Y. 2023-24

COMPANIES ACT, 2013

1. MCA revises e-form AOC-5; seeks more disclosures relating to address at which books of accounts are maintained:

MCA has notified the Companies (Accounts) Amendment Rules, 2023. E- form AOC-5 (Notice of address at which books of account are to be Maintained) has been revised. Now, it is mandatory to attach proof of address, copies of the utility bill, and a photograph of the registered office showing at least one director with form AOC-5. Earlier, only board resolution was required to be attached. The changes will be effective 23rd January, 2023 [Notification No. G.S.R. 40(E), dated 20th January, 2023]

2. Now Directors disqualified under section 164 (1) of Companies Act, 2013 are also required to file form DIR 8:

MCA has amended the Companies (Appointment and Qualifications of Directors) Rules, 2014. The amendment requires that directors disqualified under section 164(1) of the Companies Act must also file Form DIR-8 with the company. Earlier, the DIR-8 was required to be filed in case of disqualification under section 164(2). Further, the company is required to file Form DIR-9 with RoC within 30 days of receipt of DIR-8. Various changes in forms are also notified. [Notification dated 20th January, 2023]

3. MCA prescribes detailed disclosures relating to charges/valuations in the revised forms PAS-2, PAS-3, & PAS-6:

MCA has amended the Companies (Prospectus and Allotment of Securities) Rules, 2014. The Ministry has substituted form PAS-2, PAS-3 & PAS-6 with new forms. Now, in form PAS-2, formats of disclosure relating to charges has been amended. In form PAS-3, greater disclosures regarding valuation undertaken is to be given. Further, in form PAS-6, greater disclosure of details of shares as per class is to be given.

[Notification dated 20th January, 2023]

4. MCA grants additional 15 days to file PAS 3 and other newly launched forms on the V3 portal:

MCA has decided to allow an additional 15 days for filing these forms without any additional fees. Form PAS-03 & 45 other forms, whose due dates for filing fall between 20th January, 2023 and 06th February, 2023, can now be filed without payment of additional fees for a period of 15 days. The extension is provided due to change in the manner of filing of Forms in V3, including the fresh process of registration of users on MCA-21

[General Circular No. 03/2023, dated 07th February, 2023]

I. SEBI

1. SEBI amends Stock Brokers Regulations; enhances obligations and responsibilities for qualified stock brokers:

SEBI has notified the SEBI (Stock Brokers) (Amendment) Regulations, 2023. A new regulation 18D has been added which empowers the Board to designate a stockbroker as a “qualified” stockbroker based on the size and scale of operations, its impact on investors and securities market, and governance and service standards. Further, the stockbroker designated as a qualified stockbroker is required to meet enhanced obligations and discharge responsibilities.

[Notification No. SEBI/LAD-NRO/GN/2023/116., dated 17th January, 2023]

2. SEBI widens the definition of ‘Senior Management’ under LODR regulations to include ‘all functional heads’:

SEBI has notified the SEBI (LODR) (Amendment) Regulations, 2023. An amendment has been made to the definition of ‘senior management’ under regulation 16 of LODR. Now, functional heads would also be included in the definition of senior management. Under the extant norms, functional heads were not covered in the definition. Further, a new clause w.r.t details of material subsidiaries of the listed entity including date, place of incorporation etc. has also been inserted.

[Notification No. SEBI/LAD-NRO/GN/2023/117, dated 17th January, 2023]

3. SEBI introduces two new methods to achieve ‘Minimum Public Shareholding’:

SEBI has introduced two new methods to achieve the Minimum Public Shareholding (MPS) by listed Companies. Now, MPS can be achieved by allocating shares to employees through ESOP subject to a maximum of 2 per cent of the paid-up equity share capital of the listed entity. However, no shares will be allotted to the promoters/promoters’ group under this method. Further, MPS can be achieved by transferring shares held by promoters to an exchange-traded fund managed by a SEBI-registered mutual fund.

[Circular No. SEBI/HO/CFD/POD2/P/CIR/2023/18, dated 03rd February, 2023]

4. SEBI puts an end to Buyback via odd lot method; notifies various other amendments in Buyback Regulations;

SEBI has notified an amendment in SEBI (Buy-back of Securities) Regulations 2018. As per the amended norms now Buyback can be carried out via tender offer or open market method only. Also, maximum limits for buyback through open market through stock exchanges have also been changed. Further, it has been clarified that buy-back from the open market through the stock exchange shall not be allowed with effect from 1st April, 2025. Various other amendments have also been notified.

[Notification No. SEBI/LAD-NRO/GN/2023/120, dated 07th February, 2023]

5. First-time issuers of NCDs may alter AoA to appoint a nominee of Debenture Trustee within 6 months from listing date:

SEBI recently mandated the issuer companies to include provisions in their Articles of Association (AoA), with respect to the requirement for the board to appoint a person nominated by the debenture trustee. The regulations also provide a time period till 30th September, 2023 for existing issuers. Consequently, after receiving representations from first time issuers, the SEBI advised exchanges to take an undertaking from first-time issuers that they will ensure that their AoA are amended within 6 months from the listing date.

[Circular No. SEBI/HO/DDHS/DDHS-RACPOD1/CIR/P/2023/028, dated 09th February, 2023]

FEMA AND IFSCA REGULATIONS

1. ECONOMIC SURVEY 2023

The Finance Minister tabled the Economic Survey 2022-23 in Parliament on 31st January, 2023. While providing an overview of the state of the economy, it also includes analysis of the foreign exchange reserves, movement of the currency, etc. in Chapter 11 on External Sector. As part of Chapter 4 on Monetary Management and Financial Intermediation the Survey covers developments in GIFT City-IFSC on page 106.

The Finance Bill 2023 also provides important measures for the GIFT-City IFSC including allowing foreign banks to provide acquisition finance; establishment of a subsidiary of the EXIM Bank in IFSC; recognising offshore derivative instruments as valid contracts; allowing setup of Data Embassies within the IFSC. These measures are apart from the tax incentives introduced in the form of increase in scope of exempted income earned by a non-resident as a result of transfer of offshore derivative contracts, non-deliverable forward contracts or over the counter derivatives with a banking unit of an IFSC; extension of timeline for relocation of a fund to IFSC to 31st March, 2025; extending the definition of “Investment Fund” to include funds, particularly Category I & Category II AIFs, regulated and incorporated under the IFSCA (Fund Management) Regulations, 2022.

[Economic Survey 2022-23 and Budget 2023]

2. SOVEREIGN GREEN BONDS

The RBI has added that all Sovereign Green Bonds issued by the Government in the F.Y. 2022-23 as ‘specified securities’ under the Fully Accessible Route (FAR) introduced by the Reserve Bank earlier. FAR allows investment in certain specified categories of Central Government securities which were opened fully for non-resident investors without any restrictions, apart from being available to domestic investors as well. Sovereign Green Bonds (SGBs) amounting to Rs. 16,000 crore are proposed to be issued in the current financial year for mobilising resources for green infrastructure projects. Rs. 8,000 crore has already been raised in the first tranche of the SGBs. The proceeds will be deployed in public sector projects which help reduce the economy’s carbon intensity, the Minister stated.

[CIRCULAR NO. FMRD. FMID. NO. 07/14.01.006/2022-23, dated 23rd January, 2023 and PRESS RELEASE, dated 6th February, 2023]

BCAJ Admin

REGULATORY REFERENCER

DIRECT TAX

1. Clarification for the purposes of clause (c) of Section 269ST of the Income-tax Act, 1961 in respect of dealership/distributorship contract in case of Co-operative Societies – Circular No. 25/2022 dated 30th December, 2022

In respect of Co-operative Societies, a dealership/ distributorship contract by itself may not constitute an event or occasion for the purposes of Section 269ST(c). Receipt related to such a dealership/distributorship contract by the Co-operative Society on any day in a previous year, which is within ‘the prescribed limit’ and complies with Section 269ST(a) and (b), may not be aggregated across multiple days for purposes of Section 269ST(c) for that previous year.

2. Extension of time limit for compliance to be made for claiming exemption under section 54 to 54GB of the in view of the then-COVID-19 pandemic – Circular No. 1/2023 dated 6th January, 2023

CBDT had vide Circular No. 12/2021 dated 25th June, 2021 provided relaxation in respect of certain compliances to be made by the taxpayers for claiming exemption under section 54 to 54GB of the Act. The said circular provided that compliances for which the last date fell between 1st April, 2021 to 29th September, 2021 (both days inclusive), may be completed on or before 30th September, 2021. In view of the representations received and on further consideration of the then prevailing COVID-19 pandemic and resultant restrictions imposed, causing genuine hardship faced by taxpayers CBDT provided further relaxation. Compliances to be made by the taxpayers such as investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called, for the purpose of claiming any exemption under section 54 to 54 GB of the Act, for which the last date of such compliance falls between 01” April, 2021 to 28th February, 2022 (both days inclusive), may be completed on or before 31st March, 2023.

3. Statement of Financial Transactions (SFT) for Interest income – Notification No. 1/2023 dated 5th January, 2023

CBDT has abolished the limit of interest income exceeding Rs. 5,000 for the purpose of SFT reporting. Now the information in SFT is required to even include details of account holders earning interest income up to Rs. 5000 except for ‘Jan Dhan Account’ holders.

COMPANIES ACT, 2013

1. CA shares the link to take MHA’s security clearance for obtaining DIN by foreign nationals from border-sharing countries: Earlier, the MCA had notified that foreign nationals from border-sharing countries need security clearance from Home Ministry to obtain the Director’s Identification Number (DIN). The said clearance is required to be attached along with the consent to act as a director. Now, the MCA has provided the link to the application for MHA Security Clearance for appointment as director of a country sharing a land border with India. The application can be made by visiting https://esahajmcaservices.nic.in/. [Source based information]1. Companies can hold the AGM for F.Y.‘22-23 till 30th September, 2023 through video conference or other audio-visual means: The MCA has decided to allow the companies whose AGMs are due in the Calendar Year 2023 to conduct their AGMs on or before 30th September, 2023 through video conferencing (VC) or other audio-visual means (OAVM).

[General Circular No. 10/2022, dated 28th December, 2022]

SEBI

1. Corporate governance provisions shall be applicable even if net-worthnet worth is changed due to accounting practice: SEBI through informal guidance has clarified that corporate governance provisions of Listing Regulations shall be applicable even though the increase in net-worthnet worth is only on account of change in the accounting practice. It is further clarified that the same is immaterial in the context of the applicability of the provisions of the LODR Regulations. As and when the net-worthnet worth of the company is above the threshold for corporate governance provisions, the company shall comply with such relevant provisions.

[No.: SEBI/HO/CFD/PoD2/OW/P/2022/62027/1 dated 13th December, 2022]

1. SEBI reduces the timeline for completion of Buyback through Tender Offer Route by 18 days: The existing buyback regulations are amended so as to include the following in the amended regulations:

buyback done through stock exchanges route to be phased out in a gradual manner and increasing minimum utilisation of the amount earmarked for buyback through stock exchange route from existing 50 per cent to 75 per cent
creation of a separate window on stock exchanges for undertaking buyback till the time buyback through stock exchange is permitted
reduction in the timeline for completion of the Buyback through the Tender Offer Route by 18 days. [Press release No. 37/2022 dated 20th December, 2022]

FEMA AND IFSCA REGULATIONS

1. IFSC Authority issues several directions for Insurance:

IFSCA has notified several regulations for the IFSC Insurance Offices (IIOs) and related matters:

a. IFSCA (Preparation and Presentation of Financial Statements of IIO) Regulations, 2022 to put in place the process of preparation and presentation of financial statements of the IIOs.

b. IFSCA (Investment by IFSC Insurance Office) Regulations, 2022 to put in place the regulatory framework and processes related to an investment of assets by an IIO.

c. IFSCA (Insurance Products and Pricing) Regulations, 2022 to provide a framework for designing and pricing of insurance products by IIOs.

d. IFSCA (Manner of Payment and Receipt of Premium) Regulations, 2022 to specify the manner for payment of premiums by a person proposing to take an insurance policy or by a policyholder to an IIO.

e. IFSCA (Maintenance of Insurance Records and Submission of Requisite Information for Investigation and Inspection) Regulations, 2022 to specify the maintenance of records by an IIO or IFSC Insurance Intermediary Office (IIIO).

f. IFSCA (Appointed Actuary) Regulations, 2022 to lay down the regulatory framework for the persons who are engaged by the IIOs to perform the roles and discharge the functions as ‘Appointed Actuary’.

[NOTIFICATION NOs.: IFSCA/2022-23/GN/REG033, IFSCA/2022-23/GN/REG030, IFSCA/2022-23/GN/REG029, IFSCA/2022-23/GN/REG032, IFSCA/2022-23/GN/REG031, and IFSCA/2022-23/GN/REG028]

2. Forms submitted on FIRMS portal for reporting of foreign investment will be auto-acknowledged:

RBI has made changes with respect to reporting of foreign investment in Single Master Form (SMF) on FIRMS portal to allow for:

i) Earlier forms filed on the FIRMS Portal had to be acknowledged separately by the AD Banks resulting in delays. RBI has now amended the procedure whereby the forms submitted on the portal will be auto-acknowledged. The AD banks shall thereafter verify the forms within five working days based on the uploaded documents.

ii) In cases of delayed reporting, the AD banks shall advise the Late Submission Fee (LSF) to the applicants, which will be computed by the system; or shall advise for compounding of contravention, as the case may be.

The Annex to the Circular provides for the steps by which processing will be undertaken on the FIRMS portal now.

[A.P. (DIR SERIES 2022-23) Circular No. 22 dated 4th January, 2023]

BCAJ Admin

Regulatory Referencer

I. DIRECT TAX

1. Extension of time limits for submission of TDS/TCS Statements – Circular No. 9/2023 dated 28th June, 2023.

CBDT has extended the time limits for the submission of Form 26Q, 27Q & 27EQ pertaining to Q1 FY 2023-24 from 31st July, 2023 till 30th September, 2023.

2. Circular to remove difficulty in implementation of changes relating to Tax Collection at Source (TCS) on Liberalized Remittance Scheme (LRS) and on purchase of overseas tour program package – Circular No. 10/2023 dated 30th June, 2023.

CBDT issued guidelines to clarify the implementation of TCS for different foreign remittances made under the LRS.

Transactions through International Credit Cards while being overseas would not be counted as LRS and hence would not be subject to TCS.

Threshold of Rs. 7 lakh per financial year per individual shall be restored for TCS on all categories of LRS payments, through all modes of payment, regardless of the purpose:

Beyond this Rs. 7 lakh threshold, TCS shall be:
a) 0.5 per cent (if remittance for education is financed by education loan);

b) 5 per cent (in case of remittance for education/medical treatment);

c) 20 per cent for others.

Increased TCS rates to apply from 1st October, 2023.

3. CBDT Notifies New Form 10IEA for opting and withdrawing from the New Tax regime for FY 2023-24 – Notification No. 43/ 2023 dated 21st June, 2023.

Following Rules are amended vide the notification:

Rule 2BB: An employee who opts for tax regime prescribed under section 115BAC, shall be entitled to exemption only for specific allowances mentioned in the rule.

Rule 3: The provision regarding free food and non-alcoholic beverages provided by the employer through paid vouchers will not apply to employees whose income is taxable under section 115BAC.

Rule 5: The depreciation allowance for a block of assets shall not exceed 40 per cent of the written down value of such block of assets for individuals, Hindu undivided families, associations of persons, or artificial juridical persons whose income is chargeable to tax under sub-section (1A) of section 115BAC.

Rule 21AGA: The option to exercise under sub-section (6) of section 115BAC for any assessment year beginning on or after 1st April, 2024, shall be made in Form No. 10-IEA. The withdrawal of option under the proviso to sub-section (6) of section 115BAC shall also be done using Form No. 10-IEA.

4. Tolerance range for Transfer pricing Regulations — Notification No. 46/2023 dated 26th June, 2023.

Vide notification no. 124/202, dated 29th October, 2021, the Ministry of Finance had notified the tolerance range of 3 per cent (1 per cent for wholesale trading) for determining the arm’s length price under transfer pricing regulations for AY 2021-22. The applicability was extended to AY 2022-23. The applicability is further extended to AY 2023-24.

I. COMPANIES ACT, 2013

1. Due date for filing Form CSR-2 for FY 2022-23: MCA has notified the Companies (Accounts) Second Amendment Rules, 2023. As per the amended norms, Form CSR-2 for FY 2022-23 shall be filed separately on or before 31st March, 2024. [Notification No. G.S.R. 408(E), dated 30th May, 2023]

2. Revision in form for filing LLP agreement: The MCA has notified the Limited Liability Partnership (Amendment) Rules, 2023. Before this amendment every LLP was required to file information w.r.t LLP agreement in Form No. 3 with the ROC within 30 days of the date of incorporation. Now, the MCA has enhanced the disclosures to be made in Form No. 3. Thus, in case the nominee is a body corporate, additional information relating to types of body corporate and details of LLPIN/CIN/FLLPIN/Other Identification Number is to be given. [Notification No. G.S.R 411(E), dated 2nd June, 2023]

II. SEBI

3. Introduction of a ‘Risk disclosure framework’ for trading by individual traders in equity derivative segment: SEBI has introduced a risk disclosure framework for individual traders for trading in equity Futures & Options (F&O) segment. As per the framework, all stock brokers are required to display risk disclosures on their websites and inform clients in a specified manner. Upon login into their trading accounts, clients may be prompted to read ‘risk disclosures’ appearing as a pop-up window and shall be allowed to proceed after acknowledging the same. The circular shall be effective from 1st July, 2023. [Circular No. SEBI/HO/MIRSD/MIRSD-POD-1/P/CIR/2023/73, dated 19th May, 2023]

4. InvITs & REITs to hold securities of Holding Companies and SPVs in de-mat form only: With a view to promote dematerialisation of securities, encouraging ease of doing business, improve transparency in the dealings of securities of Holding Companies / SPVs, the SEBI has mandated that InvITs & REITs shall hold the securities of Holding Companies and SPVs in dematerialised form only. Further, for existing securities holdings by InvITs & REITs in Holding Companies and SPVs in physical form, the Investment manager of the InvIT & REITs are directed to dematerialise the same on or before 30th June, 2023. [Circular No. SEBI/HO/DDHS-POD-2/P/CIR/2023/75 &76, dated 22nd May, 2023]

5. Changes in ICDR norms: SEBI has notified amendment in SEBI (ICDR) Regulations, 2018. As per the amended norms, if the issuer making an IPO, desires to have the issue underwritten, it shall, prior to the filing of the prospectus, enter into an underwriting agreement with the merchant bankers or stock brokers, indicating the maximum number of specified securities they shall subscribe to, at a predetermined price which shall not be less than the issue price. [Notification No. SEBI/LAD-NRO/GN/2023/130, dated 23rd May, 2023]

6. Conversion of outstanding dues into equity will be subject to a six-month lock in period as per regulation 167(2) of ICDR: A company sought informal guidance from SEBI regarding the conversion of money payables into preferential equity shares. The SEBI clarified that the lock-in period of six months will apply to preferential equity shareholders as per Regulation 167(2) of the ICDR Regulations. [Informal Guidance No. SEBI/HO/CFD/CFD-POD-2/OW/P/2023/20934/1, dated 23rd May, 2023]

7. Model ‘Tripartite Agreement’ between Issuer Company, existing and new Share Transfer Agents (STAs) under LODR norms released: The SEBI has released a model Tripartite Agreement for Share Transfer Agents (STAs). The agreement is in accordance with Regulation 7(4) of SEBI LODR Regulations. The agreement requires listed companies to enter into a tripartite agreement with the existing STAs and the new STAs. Further, the format of the Tripartite Agreement is provided in Annexure-A attached to the circular. [Circular No. SEBI/HO/MIRSD/MIRSD-POD-1/P/CIR/2023/79, dated 25th May, 2023]

8. SEBI notifies guidelines relating to online processing of investor service requests and complaints by RTAs: SEBI has proposed to digitise the process to submit various documents to RTAs by the holders of the physical security certificates. It is proposed to provide a mechanism for investor to lodge service requests and complaints online and thereafter track the status and obtain periodical updates. In Phase I, all RTAs servicing listed companies shall have a functional website & shall contain prescribed information. In Phase 2, common website shall be made and operated by QRTAs from 1st July, 2024. [Circular No. SEBI/HO/MIRSD/MIRSD-POD-1/P/CIR/2023/72, dated 8th June, 2023]

9. LODR amendment requires listed entities to fill position of Compliance Officer within three months of vacancy: The SEBI has notified the SEBI (LODR) (Second Amendment) Regulations, 2023. Now any vacancy in the office of the Compliance Officer must be filled by the listed entity at the earliest and within three months from the date of such vacancy. The notification shall come into force from 14th July, 2023. [Notification No. SEBI/LAD-NRO/GN/2023/131, dated 14th June, 2023]

10. Mutual Funds norms to strengthen transparency and disclosure requirements: SEBI has notified the SEBI (Mutual Funds) (Amendment) Regulations, 2023. As per the amended norms, the definitions of “Liquid net worth” and “Net Asset Value” have been newly introduced. Further, SEBI has introduced a new meeting requirement for the BODs of trustee companies and asset management companies including their committees. They are now required to meet at a frequency determined by the Board. Also, the obligations of the BODs of asset management companies have been inserted. [Notification No. SEBI/LAD-NRO/GN/2023/134, dated 26th June, 2023]

11. Master circular for compliance with the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 by listed entities: SEBI, from time to time, has been issuing circulars pertaining to the compliance requirements specified in the SEBI (LODR) Regulations, 2015. This Master Circular has been prepared in order to enable the users to have access to the provisions of the applicable circulars, issued till 30th June, 2023, at one place. The Master Circular provides a chapter-wise framework for compliance with various obligations under the SEBI (LODR) Regulations, 2015. The circulars issued by SEBI listed out in the Appendix shall stand rescinded with the issuance of this Master Circular. [Master Circular No. SEBI/HO/CFD/PoD2/CIR/P/2023/120 dated 11th July, 2023]

12. Disclosure of material events / information by listed entities under Regulations 30 and 30A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015: SEBI has issued circular which consists of four annexures with respect to disclosure requirements under Regulations 30 and 30A of the SEBI (LODR) Regulations, 2015 which are given below:

Annexure I specifies the details that need to be provided while disclosing events given in Part A of Schedule III.

Annexure II specifies the timeline for disclosing events given in Part A of Schedule III.

Annexure III provides guidance on when an event / information can be said to have occurred.

Annexure IV provides guidance on the criteria for determination of materiality of events / information.

This circular shall come into force from 15th July, 2023. [Circular No. SEBI/HO/CFD/CFD-PoD-1/P/CIR/2023/123 dated 13th July, 2023]

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Regulatory Referencer

I. COMPANIES ACT, 2013

1. Effective date for enforcement of Section 12 of Competition (Amendment) Act, 2023: MCA has notified 18th July, 2023 as the effective date for the enforcement of section 12 of the Competition (Amendment) Act, 2023. Section 12 of the Competition (Amendment) Act deals with the provisions relating to the appointment of the Director General. Now, the Commission may, with the prior approval of the Central Government appoint Director General for the purpose of assisting the CCI in conducting an inquiry into contraventions of the Act. [Notification No. S.O. 3199(E), dated 18th July, 2023]

2. MCA to launch ‘Refund form’ on V3 portal for availing of refunds against forms filed in V2 Portal: MCA has informed the stakeholders that they are launching a refund form on the V3 portal, effective from 4th August, 2023. Refund forms on the V2 portal will continue to be available for availing of refunds against forms filed in V2 Portal. [MCA update dated 1st August, 2023]

3. MCA to launch Beta Version of ‘View Public Documents’ service: MCA has informed the stakeholders that the Beta Version of the View Public Documents (VPD) service in V3 shall be launched on 16th August, 2023 for V3 documents. Till date, VPD Service was not available on the V3 Portal. Also, the existing V2 VPD Service shall remain available for the stakeholders. [MCA update dated 1st August, 2023]

4. Web version of Form No. RD-1 on V3 Portal: MCA has notified the Companies (Incorporation) Second Amendment Rules, 2023. With this amendment, the MCA has introduced Web Form RD-1 i.e., the form used for filing an application to the Central Government (Regional Director) on the V3 Portal. The web form now includes a new purpose, namely the ‘Notice of approval of the scheme of merger in CAA-11’. Further, the form has been updated to include details of the transferor company, specifying the CIN and name of the company. [Notification dated 2nd August, 2023]

II. SEBI

5. Framework to freeze PAN of Designated persons during ‘Trading Window Closure period’ to be extended to all Listed Companies: SEBI has extended the framework to restrict trading by Designated Persons (DPs) during the “trading window closure” by freezing PAN at the security level for all listed companies in a phased manner. Presently, this framework is applicable only to listed companies that are part of benchmark indices like NIFTY 50 & SENSEX. The new framework will be applicable to the top 1000 companies in terms of BSE Market Capitalisation from 1st October 2023, next 1000 companies from 1st January 2024 & remaining companies from 1st April, 2024. [Circular No. SEBI/HO/ISD/ISD-POD-2/P/CIR/2023/124, dated 19th July, 2023]

6. All non-individual FPIs to provide Legal Entity Identifier (LEI) details to designated DPs: SEBI has mandated the requirement of providing Legal Entity Identifier (LEI) details for all non-individual FPIs. Currently, FPIs are required to provide their LEI details in the Common Application Form (CAF), used for registration, KYC and account opening of FPIs on a voluntary basis. Further, all existing FPIs that haven’t provided their LEIs to their DPs must do so within 180 days from the date of issuance of this circular. This circular shall be effective immediately. [Circular No. SEBI/ HO/ AFD/ AFD– POD–2/ CIR/ P/ 2023/ 0127, dated 27th July, 2023]

7. Amendment in Mutual Fund Trustee’s ‘Half-Yearly Report’ format: As per Master Circular on Mutual Funds, the Trustees shall have arrangements with independent firms for special purpose audit and/or to seek legal advice. Accordingly, SEBI has now modified the Half Yearly Trustee Report format, as provided in Master Circular. The modified format includes for ‘Compliance with the requirement of standing arrangements with independent firms for special purpose audit and/or to seek legal advice’. These provisions shall be applicable with immediate effect. [Circular No. SEBI/HO/IMD/IMD-I –POD1/P/CIR/2023/126, dated 26th July, 2023]

8. Master Circular on ‘Alternative Investment Funds’: The SEBI had issued multiple circulars, directions, and operating instructions for Alternative Investment Funds (AIFs) on a regular basis for necessary compliance. In order to ensure that all market participants find all the provisions at one place, Master Circular on AIFs has been issued. This Master Circular is a compilation of all the existing circulars, and directions issued by SEBI up to 31st March, 2023 for AIFs. [Master Circular No. SEBI/HO/AFD/POD1/P/CIR/2023/130, dated 31st July, 2023]

9. Standardized ‘Terms of Reference’ for audit of firm-level performance data of Portfolio Managers: Earlier, SEBI vide Master Circular dated 20th March, 2023, mandated Portfolio Managers to submit audit reports on firm-level performance data to SEBI within 60 days from the end of each financial year Now, the Association of Portfolio Managers in India (APMI), in consultation with SEBI, has specified standardized Terms of Reference (ToR) for the aforesaid audit of firm-level performance data. The standard terms specified by APMI shall be applicable w.e.f. 1st October, 2023. [Circular No. SEBI/HO/IMD/IMD-POD-1/P/CIR/2023/133, dated 2nd August, 2023]

10. ‘Grievance Redressal Mechanism’ for stock market intermediaries: SEBI has notified amendment in various Regulations such as Merchant Bankers Regulations, Debenture Trustees Regulations, Mutual Funds Regulations, Collective Investment Schemes Regulations, AIFs Regulations, etc. Now, the entity shall redress investor grievances promptly but not later than 21 calendar days from the date of receipt of the grievance and in such manner as may be specified. Also, the Board may recognize a body corporate for handling and monitoring the process. [Notification No. SEBI/LAD-NRO/GN/2023/146., dated 16th August, 2023]

11 Unitholders of REITs holding at least 10 per cent of total units to nominate one director on Board: SEBI has notified an amendment to the SEBI (REIT) Regulations, 2014. A new proviso has been inserted to regulation 4, which defines eligibility criteria. It states that unitholders holding at least 10 per cent of total outstanding units of REIT, must be entitled to nominate one director on the BODs. Further, a new sub-regulation has been introduced to regulation 2 defining ‘group entities of the Manager’. Also, the ‘stewardship code’ has been introduced for compliance by unitholders. [Notification No. SEBI/LAD-NRO/GN/2023/144., dated 16th August, 2023]

BCAJ Admin

Regulatory Referencer

I. COMPANIES ACT, 2013

1. One-time relaxation for filing of Forms–3, Form–4 and Form–11 under the LLP Act without any additional fee: MCA has granted one-time relaxation in additional fees for LLPs that are/were unable to file Forms 3, 4 and 11 within due dates. Filing of Forms 3 and 4 without additional fees shall be applicable for event dates from 1st January, 2021 and onwards. The filing of Form 11 without additional fee shall be applicable for F.Y. 2021-22 onwards. Further, these forms shall be available for filing from 1st September, 2023 onwards till 30th November, 2023. [General Circular No. 8/2023, dated 23rd August, 2023]

2. MCA extends the tenure of the Company Law Committee by another one year till 16th September, 2024: The Ministry of Corporate Affairs vide an order dated 18th September, 2019 had constituted the Company Law Committee to examine and recommend various provisions and issues pertaining to the implementation of the Companies Act, 2013 and the LLP Act, 2008. The tenure of the said Company Law Committee was set to expire on 16th September, 2023 which is now extended till 16th September, 2024. [Order No. 2/1/2018-CL-V, dated 13th September, 2023]

II. SEBI

3. Voluntary delisting norms for non-convertible debt securities and non-convertible redeemable preference shares: SEBI (LODR) (3rd Amendment) Regulations, 2023 are notified. As per the amended norms, a new chapter —VI A has been added which prescribes the framework for voluntary delisting of non-convertible debt securities/ non-convertible redeemable preference shares. It shall not be applicable on certain listed entities like a listed entity that has outstanding listed non-convertible debt securities or non-convertible redeemable preference shares issued by way of a public issue etc. [Notification No. SEBI/LAD-NRO/GN/2023/149, dated 23rd August, 2023]

4. Additional disclosures for certain Foreign Portfolio Investors: SEBI has mandated the criteria for submission of additional disclosures by foreign portfolio investors under FPIs norms. As per the criteria, details of all entities holding any ownership, economic interest, or exercising control in the FPIs need to be provided by certain FPIs. These are FPIs that hold more than 50 per cent of their Indian equity Assets Under Management (AUM) in a single Indian corporate group and FPIs that individually, or along with others hold more than R25,000 crore of equity AUM in the Indian markets. [Circular No. SEBI/ HO/ AFD/ AFD — POD — 2/CIR/ P/2023/148, dated 24th August, 2023]

5. Framework for unitholders of REITs and InvITs allowing them to exercise their board nomination rights: SEBI has released a framework for eligible unit holders of Real Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) allowing them to exercise their board nomination rights. As per the framework, the manager of a REIT / InvIT must review whether the eligible unit holders who have exercised their board nomination right, continue to hold the required number of units of REIT / InvIT and make a report on the same. The circular shall be effective immediately. [Circular No: SEBI/HO/DDHS-POD-2/P/CIR/2023/153 & 154, dated 11th September, 2023]

DIRECT TAX: SPOTLIGHT

1. Guidelines under Section 10(10D) of the Income-tax Act, 1961 — Circular No. 15/2023, dated 16th August, 2023:

Finance Act, 2023 made amendments to Section 10(10D). These amendments significantly impact the income-tax exemption eligibility for sums received under life insurance policies.

The circular contains comprehensive guidelines, designed to determine the taxability of consideration received under eligible life insurance policies with the help of a series of detailed scenarios and examples.

2. Extension of timelines for filing Form 10B/10BB and Form ITR 7 for Assessment Year 2023-24 — Circular No. 16/2023, dated 18th September, 2023:

The CBDT has extended the due date for furnishing Audit reports in Form 10B/Form 10BB for A.Y. 2023–24 from 30th September, 2023 to 31st October, 2023.

Consequently, the due date for filing the Return of Income in Form ITR-7 for the A.Y. 2023–24 has also been extended from 31st October, 2023 to 30th November, 2023.

3. Insertion of Rule 11UACA Computation of income chargeable to tax under section 56(2)(xiii)- Income-tax (Sixteenth Amendment) Rules, 2023 – Notification No. 61/ 2023, dated 16th August, 2023:

The Rule provides computation of income chargeable to tax under Section 56(2)(xiii), where any person receives at any time during any previous year any sum under a life insurance policy.

4. Amendment to Rule 26 Rate of Exchange for the purpose of deduction of tax at source on income payable in foreign – Income-tax (Seventeenth Amendment) Rules, 2023 – Notification No. 64/ 2023, dated 17th August 2023.

5. Amendment to Rule 3(1) computation of perquisite value of rent-free accommodation provided by employer — Income-tax (Eighteenth Amendment) Rules, 2023 —Notification No. 65/ 2023, dated 18th August, 2023.

6. Insertion of Rule 134 and Form 71- Application under section 155(20) regarding credit of tax deduction at source – Income-tax (Twentieth Amendment) Rules, 2023 — Notification No. 73/2023, dated 30th August, 2023:

Where any income has been included in the return of income furnished by an assessee for any assessment year and tax on such income has been deducted at source in a subsequent financial year, the assessee can apply to the Assessing Officer in Form 71 to obtain credit of TDS.

FEMA AND IFSCA REGULATIONS

1. RBI allows residents to make study-related remittances in IFSCs under LRS:

Presently, remittances to IFSCs under LRS can be made only for making investments in securities. Resident individuals can now remit payment of fees to foreign universities or foreign institutions in IFSCs for pursuing courses mentioned in the Notification No. S.O. 2374(E), dated 23rd May, 2022 under the purpose ‘studies abroad’ as mentioned in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000. [A.P. (DIR SERIES) Circular No. 6, dated 22nd June, 2023]

2.Discontinuation of MIFOR as a ‘Significant Benchmark’:

RBI has announced that after 30th June, 2023, the Mumbai Interbank Forward Outright Rate (MIFOR) shall cease to be recognised as a ‘significant benchmark’. This decision comes as a result of the cessation of the US Dollar LIBOR. The updated list of significant benchmarks shall come into effect from 1st July, 2023. [Circular No. FMRD.FMSD. 03/03.07.25/2023-24, dated 23rd June, 2023]

3. International Credit Card usage brought under LRS:

On 16th May, the Government omitted Rule 7 of Current Account Transaction Rules resulting in transactions made through the use of ICCs by residents abroad to be covered under LRS. The purpose was to bring transactions made through ICCs under the TCS net. This change was covered in the previous journal. However, after hue and cry, the Government has backtracked and reinstated the rule, w.e.f. 16th May. In effect, the use of ICCs abroad is again outside the LRS limit and the status quo is maintained. However, further changes can be expected by 1st October 2023, the date till when TCS on LRS has been deferred to. [Notification No. G.S.R. 472(E) [F. NO. 1/5/2023-EM], dated 30th June, 2023]

4. IFSCA introduces the definition of ‘distributor’:

IFSCA has introduced the definition of ‘distributor’ in IFSCA (Capital Market Intermediaries) Regulations, 2021 and made related amendments in other regulations. [Notification No. IFSCA/2023-24/GN/REG040, dated 3rd July, 2023]

5. Central Government prescribes the procedure for import, export, procurement and supply of ships by an IFSC Unit:

The Government has amended the SEZ Rules by inserting a new Rule 29B to set the procedures for import or export or procurement from or supply to the Domestic Tariff Area of ships by a Unit in the International Financial Services Centre. [Notification No. G.S.R. 481(E) [F. NO. K-43013(13)/2/2022-SEZ], dated 4th July, 2023]

6. RBI issues report of the IDG on Internationalization of INR:

An Inter-Departmental Group (IDG) of the Reserve Bank of India (RBI) was formed to examine the internationalization of INR. The objective of the IDG was to review the extant position of INR as an international currency and to frame a road map for the internationalization of INR. The IDG has submitted its report containing its final set of recommendations. The recommendations of the report will be examined by RBI for implementation. [Press Release 2023-2024/539, dated 5th July, 2023]

7. IFSCA allows IFSC Banking Companies to set up banking units in IFSC in addition to IFSC banking Units:

IFSCA has amended its Banking Regulations to allow IFSC Banking Companies to set up banking units in IFSC in addition to IFSC banking Units. The amendment allows the establishment of a banking unit in an IFSC as either an IFSC Banking Unit (IBU) or an IFSC Banking Company (IBC). Earlier, this option was not available. The key amendments include the introduction of the terms “IFSC Banking Unit” and “IFSC Banking Company”, along with the criteria for granting a license or permission to set up an IFSC banking company have been prescribed. [Notification No. IFSCA/2023-24/GN/REG041, dated 6th July, 2023]

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