CBDT Notifies Income Tax Exemption On California Public Employees Retirement System

The Central Board of Direct Taxes (CBDT) has allowed the California Public Employees Retirement System a Section 10 (23FE) exemption.

The Central Government has specified that the pension fund, namely, the California Public Employees Retirement System, shall be eligible for income tax exemption in respect of the eligible investment made by it in India on or after January 25, 2023, but on or before March 31, 2024, subject to the fulfilment of the various conditions.

The assessee shall file a return of income for all the relevant previous years falling within the period beginning from the date on which the investment has been made and ending on the date on which the investment is liquidated, on or before the due date specified for furnishing the return of income under Section 139 (1).

The assessee shall furnish and return, during the financial year, a certificate in Form No. 10 BBC in respect of compliance with the provisions of clause (23FE) of Section 10 from an accountant.

The assessee shall intimate the details in respect of each investment made by it in India during the quarter within one month from the end of the quarter in Form No. 10BBB, as required under clause (v) of Rule 2DB of the Income-tax Rules, 1962.

The assessee shall maintain a segmented account of income and expenditure in respect of such investments which qualify for exemption under clause (23FE) of section 10 of the Act;

The assessee shall continue to be regulated under the laws of the Government of the State of California, United States of America.

The assessee shall be responsible for administering or investing the assets for meeting the statutory obligations and defined contributions of one or more funds or plans established for providing retirement, social security, employment, disability, death benefits, or any similar compensation to the participants or beneficiaries of such funds or plans, as the case may be.

The earnings and assets of the assessee should be used only for meeting statutory obligations and making defined contributions to participants or beneficiaries of funds or plans. No portion of the earnings or assets of the pension fund inures any benefit to any other private person. Except for payments made to creditors or depositors for a loan or borrowing taken for purposes other than investing in India,

The assessee shall not have any loans or borrowings, directly or indirectly, for the purposes of making investments in India.

The assessee shall not participate in the day-to-day operations of the investee as defined in clause (i) of Explanation 2 to clause (23FE) of Section 10, but the monitoring mechanism to protect the investment with the investee, including the right to appoint directors or an executive director, shall not be considered as participation in the day-to-day operations of the investee.

The investments of the assessee shall be held for at least three years as required under subclause (ii) of clause (23FE) of Section 10.

Notification No. 02/2023

Date: 25th January 2023

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