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INDIA
BUSINESS WORLD -
NOVEMBER 2005
THE MONTH THAT WAS
I-T ACT CHANGES FOR PFS NOTIFIED
The Central Board of Direct Taxes
(CBDT) notified amendments to income tax rules to allow recognised
provident funds, approved superannuating funds and approved
gratuity funds to invest a part of their corpus in equity
shares of companies and equitylinked schemes of mutual funds.
The notification
has also allowed PFs, superannuating and gratuity funds to
invest a part of their corpus in collateral borrowing and
lending obligation (CBLO) issued by Clearing Corporation of
India Ltd and approved by the Reserve Bank of India.
The CBDT notification
formalises the tax exemption status for investments prescribed
by the finance ministry earlier. In January this year, the
government allowed PFs to invest 5% of their incremental deposit
in equity shares of an investment grade company.
The notification, effective from April 1, 2005, has also said
that investment in tradable portfolio of government securities
shall be marked to the market and mutual funds that have been
set up as dedicated funds for investment in government securities.
Further, that the exposure to a mutual fund set up as dedicated
fund for government securities shall not exceed 5% of its
portfolio at any point in time.
The notification
said amount not exceeding 5% of the total amount earmarked
for investment in bonds/securities of public financial institution
or a PSU or a public sector bank or term deposits of up to
three years may be invested in shares of a company which has
investment grade debt rating from at least two credit rating
agencies.
The prescription
for investment pattern otherwise remains unaltered. Money
received on maturity of investments made prior to April 1,
2005 are also required to be invested in the manner specified
in the notification.
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