CBDT Notification No.89/2023: Introduction
The Central Board of Direct Taxes (CBDT) vide its Notification No.89/2023 Dated.16th October 2023 has notified some amendments in Rule 37BB of the Income Tax Rules 1962. These Rules may be called the Income Tax (Twenty Fifth Amendment) Rules 2023 and they shall come into force from the date of their publication in the official gazette.
Rule 37BB consists of the rules for furnishing of information for payment to a non-resident, not being a company, or to a foreign company. For more details about Rule 37BB, readers may follow the link given at the end of this article.
Let us now delve into the specific amendments brought under the Rule 37BB through this CBDT Notification No. 89/2023.
Amendments in Rule 37BB vide CBDT Notification 89/2023
Following are the amendments brought under Rule 37BB through the Notification No. 89/2023:
Amendment in sub-rule 3
After clause (i), the following clause shall be inserted, namely: “(ia) the remittance is made by a Unit of an International Financial Services Centre referred to in subsection (1A) of section 80LA; or”;
Amendment in sub-rule 4
(I) in clause (i), after the words and brackets “Principal Director General of Income-tax (Systems)”, the words and brackets “or the Director General of Income-tax (Systems)” shall be inserted;
(II) in clause (ii), after the words and brackets “Principal Director General of Income-tax (Systems)”, the words and brackets “or the Director General of Income-tax (Systems)” shall be inserted;
Amendment in sub-rule 6
After the words and brackets “Principal Director General of Income-tax (Systems)”, the words and brackets “or the Director General of Income-tax (Systems)” shall be inserted;
Amendment in sub-rule 7
The following sub-rule shall be substituted for sub-rule (7), namely:
“(7) A quarterly statement, for each quarter of the financial year shall be furnished in respect of all remittances referred to in sub-rules (1), (2) and sub-rule (3) by,–
(i) the authorized dealer in Form No. 15CC;
(ii) a Unit of an International Financial Services Centre referred to in sub-section (1A) of section 80LA, responsible for paying to a non-resident, not being a company, or to a foreign company, in Form No. 15CD, to the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) or the person authorized by the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) electronically under digital signature within fifteen days from the end of the quarter of the financial year to which such statement relates in accordance with the procedures, formats and standards specified by the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) under sub-rule (8).”
Amendment in sub-rule 8
The following sub-rule shall be substituted for sub-rule 8, namely: “(8) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) shall specify the procedures, formats and standards for the purposes of furnishing and verification of Form No. 15CA, Form No. 15CB, Form No. 15CC and Form No. 15CD and shall be responsible for the day-to-day administration in relation to the furnishing and verification of information, certificate and quarterly statement in accordance with the provisions of sub-rules (4), (6) and sub-rule (7).”
Amendment in the Explanation to Rule 37BB
The following Explanation shall be substituted, namely: “Explanation- For the purposes of this rule–
(i) “authorized dealer” means a person authorized as an authorized dealer under sub-section (1) of section 10 of the Foreign Exchange Management Act, 1999 (42 of 1999);
(ii) “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
(iii) “Unit” shall have the same meaning as assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005).”
Insertion of new Form 15CD
In the principal rule, in Appendix-II, after Form No. 15CC, the Form 15CD shall be inserted. The newly inserted form 15CD is available in the CBDT Notification No.89/2023 given in a link at the end of this article for ready reference of the readers.
Understanding International Financial Services Centres (IFSCs)
Meaning of IFSC
An International Financial Services Centre (IFSC) is a specialized financial hub designed to serve customers outside the domestic economic jurisdiction. Often referred to as offshore financial centres, IFSCs facilitate the seamless flow of finance, financial products, and services across international borders.
Services Offered by IFSCs
Fundraising Services:
IFSCs provide a platform for corporations, individuals, and governments to raise funds internationally.
Wealth Management:
They offer wealth management services catering to a global clientele.
Asset Management and Portfolio Diversification:
IFSCs facilitate global portfolio diversification and asset management, attracting pension funds, mutual funds, and insurance firms.
Global Tax Management:
These centres offer global tax management and assistance in cross-border tax liability optimization, attracting financial intermediaries, law firms, and accountants.
Risk Management:
IFSCs are hubs for insurance and reinsurance operations, enabling effective risk management.
Corporate Treasury Management:
They serve as key centers for global and regional corporate treasury management operations.
Mergers and Acquisitions:
IFSCs facilitate mergers and acquisitions between transnational corporations, fostering international business activities.
Advantages of IFSCs
Attracting Overseas Investment:
IFSCs aim to attract foreign investors by offering financial services that are traditionally carried out outside the home country.
Global Reach and Diverse Services:
In the age of globalization, IFSCs provide diversified services such as fundraising, global tax management, and corporate treasury management.
Financial Services Rerouting:
These centres facilitate the relocation of financial services and transactions currently conducted in offshore financial hubs by Indian corporate entities and overseas branches/subsidiaries of financial institutions to India.
Comparable Business Environment:
IFSCs offer a business and regulatory environment comparable to major global financial centers like London and New York, enticing investors.
Enhanced Market Access:
Indian corporates benefit from increased access to global financial markets through operations within IFSCs.
Tax Benefits:
Establishing entities in IFSCs comes with various tax advantages, encouraging investment and business growth.
Fintech Hub Creation:
IFSCs contribute to the establishment of fintech hubs, capitalizing on India’s fintech talent, both within the country and among the Indian diaspora.
Legal Framework for IFSCs in India
The establishment of IFSCs in India is governed by the Special Economic Zone Act, 2005. This act provides the framework for setting up IFSCs within Special Economic Zones (SEZs), serving as a testing ground for financial sector reforms before nationwide implementation. GIFT City in Gandhinagar is a notable IFSC approved under this Act.
Conclusion
For a clear understanding of these amendments in the rule 37BB brought by this notification, having an idea about the rule existing prior to this amendment will definitely be helpful. So, a Link of the rule 37BB which existed before this amendment has been given below for the ready reference of the readers.
To access the Rule 37BB existing prior to this amendment, CLICK HERE
To access the CBDT Notification 89/2023 along with the newly inserted Form 15CD, CLICK HERE
Readers interested to know about the CBDT Notification No.88/2023, may CLICK HERE
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