CBDT Classifies NBFCs Into Top, Upper, And Middle Layers

The Central Board of Direct Taxes (CBDT) has classified all the Non-Banking Financial Companies (NBFCs) into top, upper, and middle layers.

The top, upper, and middle layers of the NBFCs will be eligible for provision of the Income Tax Act related to certain deductions to be only on actual payment.

A Non-Banking Financial Corporation (NBFC) is a company that is registered under the Companies Act, of 1956 and is involved in the lending business, hire-purchase, leasing, insurance business, receiving deposits in some cases, chit funds, stocks, and shares acquisition, etc.

Section 43D of the Income Tax Act provides, inter-alia, for special provision in case of income of deposit-taking Non-Banking Financial Companies and Systemically Important Non-Deposit-taking Non-Banking Financial Companies. Interest income in relation to certain categories of bad or doubtful debts received by such deposit-taking Non-Banking Financial Company and Systemically Important Non-Deposit Non-Banking Financial Company shall be chargeable to tax in the previous year in which it is credited to its profit and loss account for that year or actually received, whichever is earlier.

Notification No. 79/2023

Date: 22/09/2023

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