Section 10(23EE) of the Income Tax Act provides a tax exemption for specified income of a Core Settlement Guarantee Fund (CSGF) set up by a recognised clearing corporation, as notified by the Central Government.
What’s Exempt:
The following types of income are exempt if credited to the CSGF:
- Contributions received from specified persons (like clearing members or stock exchanges),
- Penalties imposed by the clearing corporation and credited to the fund,
- Income from investments made by the fund.
Who Qualifies:
- The fund must be set up by a recognised clearing corporation under SEBI’s 2012 regulations.
- The exemption applies only if the fund is notified by the Central Government in the Official Gazette.
Caveat:
If any amount from the fund—previously exempt—is shared with a specified person (like a clearing member or the stock exchange), that amount becomes taxable in the year of sharing.
Example:
Suppose the National Clearing Corporation Ltd. (NCCL) sets up a Core Settlement Guarantee Fund and receives:
- ₹50 crore in contributions from clearing members,
- ₹5 crore in penalties,
- ₹10 crore in interest from investments.
All ₹65 crore is exempt from tax under Section 10(23EE). But if ₹10 crore is later transferred back to a clearing member, that ₹10 crore becomes taxable in that year.
