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The Central Board of Direct Taxes amends the Income-tax Rules, 1962 to revise the investment pattern for funds. The manner of investment applies to the aggregate amount of investible moneys with the fund in the previous year. Funds invest their portfolio across government securities, debt instruments, short-term debt instruments, equities, and asset-backed or trust-structured investments according to specified percentage limits and conditions. Fresh accretions to the fund follow specific investment rules. The amendments take effect from the first day of April, 2016.
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MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION New Delhi, the 27th December, 2016 INCOME-TAX
S.O. 4168(E).—In exercise of the powers conferred by sub-section (1) of section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-
(1) These rules may be called the Income-tax (36th Amendment) Rules, 2016. (2) It shall be deemed to have come into force from the 1st day of April, 2016.
In the Income-tax Rules, 1962, in rule 67, for sub-rule (2), the following shall be substituted, namely:-
"(2) The manner of investment referred to in sub-rule (1) shall be in accordance with the following Table, namely:-
TABLE
INVESTMENT PATTERN
| Sl. No. | INVESTMENT | Percentage amount to be invested in items referred to in column(2) |
|---|---|---|
| (1) | (2) | (3) |
| i. | Government Securities and Related Investments: | |
| (a) Government Securities; | ||
| (b) other securities, as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956, the principal whereof and interest whereon is fully and unconditionally guaranteed by the Central Government, or any State Government; and/or | ||
| (c) units of mutual funds set up as dedicated funds for investment in Govt. securities and regulated by the Securities and Exchange Board of India. | Minimum forty-five per cent. and upto fifty per cent. | |
| ii. | Debt Instruments and Related Investments: | |
| (a) Listed (or proposed to be listed in case of fresh issue) debt securities issued by bodies corporate, including banks and public financial institutions, which have a minimum residual maturity period of three years from the date of investment; | ||
| (b) Basel III Tier-I bonds issued by scheduled commercial banks under the guidelines issued by the Reserve Bank of India; | Minimum thirty-five per cent. and upto forty-five per cent. | |
| (c) Rupee Bonds having an outstanding maturity of at least three years issued by institutions of the International Bank for Reconstruction and Development, International Finance Corporation and Asian Development Bank; | ||
| (d) Term Deposit receipts of not less than one year duration issued by scheduled commercial banks, which satisfy the following conditions on the basis of published annual reports for the most recent years, as required to have been published by them under any law for the time being in force: | ||
| (i) having declared profit in the immediately preceding three financial years; | ||
| (ii) maintaining a minimum Capital to Risk Weighted Assets Ratio of nine per cent., or mandated by prevailing norms of Reserve Bank of India, whichever is higher; | ||
| (iii) having net non-performing assets of not more than four per cent. of the net advances; and | ||
| (iv) having a minimum net worth of not less than two hundred crore rupees and/or | ||
| (e) units of debt mutual funds as regulated by Securities and Exchange Board of India; | ||
| (f) The following infrastructure related debt instruments; | ||
| (i) Listed (or proposed to be listed in case of fresh issue) debt securities issued by body corporates engaged mainly in the business of development or operation and maintenance of infrastructure, or development, construction or finance of low cost housing and including securities issued by Indian Railways or any of the body corporates in which it has majority shareholding, or any Authority of the Government which is not a body corporate and has been formed mainly with the purpose of promoting development of infrastructure: | ||
| Provided that any structural obligation undertaken or letter of comfort issued by the Central Government, Indian Railways or any Authority of the Central Government, for any security issued by a body corporate engaged in the business of infrastructure, which notwithstanding the terms in the letter of comfort or the obligation undertaken, fails to enable its inclusion as security covered under sub-clause (b) of clause (i), shall be treated as an eligible security under this sub-category; | ||
| (ii) Infrastructure and affordable housing Bonds issued by any scheduled commercial bank, which meets the conditions specified in sub-clause (d) of clause (ii); | ||
| (iii) Listed (or proposed to be listed in case of fresh issue) securities issued by Infrastructure debt funds operating as a Non-Banking Financial Company and regulated by the Reserve Bank of India; | ||
| (iv) Listed (or proposed to be listed in case of fresh issue) units issued by Infrastructure Debt Funds operating as a Mutual Fund and regulated by Securities and Exchange Board of India. | ||
| iii. | Short-term Debt Instruments and Related Investments | |
| (a) Money market instruments; | ||
| (b) Units of liquid mutual funds regulated by the Securities and Exchange Board of India. | ||
| (c) Term Deposit Receipts of up to one year duration issued by such scheduled commercial banks which satisfy all the conditions mentioned in sub-clause (d) of clause (ii). | Upto five per cent. | |
| iv. | Equities and Related Investments | |
| (a) Shares of body corporates listed on Bombay Stock Exchange or National Stock Exchange, which have,- | ||
| (i) Market capitalization of not less than five thousand crore rupees as on the date of investment; and | ||
| (ii) Derivatives with the shares as underlying, traded in either of the two stock exchanges; and/or | ||
| (b) Units of mutual funds regulated by the Securities and Exchange Board of India, which have minimum sixty five per cent. of their investment in shares of body corporates listed on Bombay Stock Exchange or National Stock Exchange; | Minimum five per cent. and upto fifteen per cent. | |
| (c) Exchange Traded Funds/ Index Funds regulated by the Securities and Exchange Board of India that replicate the portfolio of either Bombay Stock Exchange Sensex Index or National Stock Exchange Nifty fifty Index; | ||
| (d) Exchange Traded Funds issued by Securities and Exchange Board of India regulated mutual funds constructed specifically for disinvestment of shareholding of the Government of India in body corporates; | ||
| (e) Exchange traded derivatives regulated by the Securities and Exchange Board of India having the underlying of any permissible listed stock or any of the permissible indices, with the sole purpose of hedging. | ||
| v. | Asset Backed, Trust Structured and Miscellaneous Investments | |
| (a) mortgage based Securities or Residential mortgage based securities; | ||
| (b) units issued by Real Estate Investment Trusts regulated by the Securities and Exchange Board of India; | ||
| (c) Asset Backed Securities regulated by the Securities and Exchange Board of India. | ||
| (d) Units of Infrastructure Investment Trusts regulated by the Securities and Exchange Board of India. | Upto five per cent. |
Provided that the portfolio invested under sub-clause (b) of clause (i) of the said Table shall not be in excess of ten percent of the total portfolio of the fund:
Provided further that, irrespective of the proportion of investments specified in clause (i) of the said table, exposure of a trust to any Individual Mutual Fund, under sub-clause (c) of the said clause, which has been set up as a dedicated fund for investment in Government Securities, shall not exceed five per cent. of its total portfolio at any point of time and fresh investments made in them shall not exceed five per cent. of the fresh accretions in the year:
Provided also that the investment stated in sub-clause (b) of clause (ii) shall be made only in such Tier-I bonds which are proposed to be listed in case of initial offering of the bonds and if such Tier-I bonds are listed and regularly traded, investment shall be made in such bonds of a Scheduled commercial Bank from the Secondary Market:
