CBDT Amends Rule 17CB To Replace 'Trust Or Institution' With 'Specified Person': Know More

In a circular, the Central Board of Direct Taxes (CBDT) has amended Rule 17CB of the Income Tax Rules, 1962. This amendment is being made to streamline the process for granting relief under Section 88A and computing cost for computation of gain or loss on the transfer of assets by trust or institution to a specified person.

The term 'specified person' has been introduced in the rule; however, in the past, the term 'trust or institution' was used. The term 'specified person' has been defined under Section 113(n) of the Income Tax Act, 1961 (IT Act).

Rule For Relief Under Section 88A

The rule for relief under section 88A has been changed from the existing rule, which states that for the period of 5 years from the end of the year in which the transfer of assets by trust or institution is made to a specified person, the income of the specified person will not be taxable.

The change in the rule is that for 5 years from the end of the year, when the transfer of assets by trust or institution is made to a specified person, the income of such specified person will not be taxable.

The Rule for Computation of Cost on the Transfer of Assets by Trust or Institution to a 'specified person' has been changed. The existing rule is that the transaction's cost will be the asset's market value at the transfer time. The change in the rule is that the transaction cost will be the asset's market value at the time of transfer.

Consequences Of Filing Return & Paying Tax Under The Rule

A return must be filed in the normal manner by the specified person in whose favour assets were transferred by trust or institution if the specified person is a resident of India for the period for which this rule applies. The tax has to be paid on the total income of the specified person for the assessment year in which assets were transferred by trust or institution if the specified person is a non-resident for the period for which this rule is applicable.

A trust or institution will not be able to avail of the benefit of section 88A if the transfer is made to any relative of the specified person as defined in Section 2(14) of the IT Act. In addition, if the transfer of assets is made to a minor or a person of unsound mind, there will be no relief under section 88A.

The amendments to Rule 17CB have been made to streamline the process for granting relief under Section 88A and computing cost on the transfer of assets by trust or institution to a specified person. The modifications are being made to Rule 17CB of the Income Tax Rules. The change in the rule is being made to make it consistent with the definition of a specified person under Section 113(n) of the IT Act.

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