Income Tax Bill, 2025 to replace Income Tax Act, 1961: Key Changes

Finance Minister Nirmala Sitharaman has presented the new Income Tax Bill 2025 in Parliament today, February 13, 2025. This presentation marks a significant step in reforming India’s direct tax system.

Key Features of the Bill

The Income Tax Bill 2025 is designed to replace to the six-decade old Income Tax Act, 1961, with the goal of making direct taxes simpler.

Simplification and Structural Overhaul:

The idea is to get rid of old, confusing parts of the law and make the language easier to understand. Currently, the tax law has 298 sections and 14 schedules, but the new bill aims to shorten this considerably. The new bill is a substantial document at 622 pages, but it’s expected to cut down the number of sections by about 25-30%. This should make it easier for taxpayers to understand the rules and follow them.

Introduction of ‘Tax Year’ Concept:

One key change is the introduction of the term “Tax Year,” replacing “Assessment Year” and “Previous Year.” This aligns India’s tax system with the financial year and international practices.

This change is aimed at simplifying tax compliance and reducing ambiguities in filing returns, aligning with best global practices.

No Change in Tax Rates and Slabs:

The bill does not propose changes to existing tax rates or slabs. The current categories of tax heads including salaries, house property, and capital gains remain unchanged.

Emphasis on Digital Transactions:

The bill strongly promotes digital transactions. It includes provisions for easier electronic record-keeping and tax filing, reflecting the global shift towards digital finance. Virtual Digital Assets (VDAs), such as cryptocurrencies, are now recognized and taxed like other assets.

Residency Criteria with clearer Guidelines:

Under Section 6 of the 1961 Act, an individual was considered a resident of India if they stayed in the country for 182 days in a financial year or 60 days in specific cases. However, Clause 6 of the Bill retains these broad parameters but has brought forth refined provisions for individuals with multiple citizenships or complex residency situations. This change provides greater transparency and eliminates loopholes that were often exploited in international tax planning.

Revised Heads of Income and Deductions

Traditionally, income has been classified into five heads – Salaries, House Property, Business/Profession, Capital Gains, and Other Sources, all of which remains in the new bill. However, Clauses 13 to 59 expand these categories to explicitly include income from virtual assets, digital businesses, and online earnings.

The revisions modernize income classifications while ensuring that new-age revenue streams are properly accounted for under tax laws.

Capital Gains and other deductions Overhaul

The 1961 Act offered various deductions and exemptions under Sections 10 and 80C to 80U, covering investments, donations, and other expenses.

The 2025 Bill, through Clauses 11 to 154, consolidates these deductions and introduces new provisions benefiting startups, digital businesses, and renewable energy investments. Additionally, the standard deduction for salaried individuals has been increased to ₹75,000, providing significant relief to middle-income taxpayers.

The taxation of capital gains, previously covered under Sections 45 to 55A, remains largely intact in the new bill but is dealt with key refinements. Clauses 67 to 91 introduce specific provisions for virtual digital assets (VDAs) and update holding period thresholds for certain asset classes.

Modern investment instruments such as cryptocurrencies and digital securities are also slated to be accommodated within the new provisions by means of these inclusions.

Automation and Faceless Assessments

.Previously, tax administration under Sections 139 to 158 relied heavily on manual processes for return filing, audits, and assessments. The new bill, in Clauses 263 to 389, mandates e-filing, faceless assessments, and automated taxpayer interactions, reducing human intervention and increasing transparency.

Business Thresholds for Presumptive Taxation:

For businesses, the threshold for the presumptive tax scheme is proposed to be increased. Businesses with a turnover of up to ₹3 crore can now opt for this scheme, up from the previous limit of ₹2 crore. The threshold for professionals has also been raised from ₹50 lakh to ₹75 lakh.

Tax Audits and Compliance:

Regarding tax audits, Chartered Accountants (CAs) will continue to be the primary professionals responsible. The bill does not include Company Secretaries (CSs) or Cost Accountants (CMAs) in this role. The emphasis on digital processes and reduced direct interaction aims to improve compliance and lessen the risk of harassment for taxpayers.

Stricter Compliance

The General Anti-Avoidance Rules (GAAR) that had a limited scope under Sections 95 to 102 of the Income Tax Act, 1961 have been significantly strengthened in the new bill. Clauses 178 to 184 provide for broader GAAR coverage, stricter scrutiny of impermissible tax arrangements, transactions lacking commercial substance and enhanced measures against tax evasion.

Non-Profit Organizations

While Sections 11 to 13 of the Income Tax Act, 1961 Act provided tax exemptions for non-profit entities, they lacked detailed compliance measures. Clauses 332 to 355 in the new bill introduce a comprehensive regulatory framework that imposes stricter compliance and reporting requirements to prevent misuse of tax benefits.

Dispute Resolution Mechanism

Under the 1961 Act, taxpayers had access to a Dispute Resolution Panel (DRP ) under Section 144C, mainly for foreign companies. The 2025 Bill, through Clause 275, expands the DRP’s scope and introduces a Dispute Resolution Committee (DRC ) under Clause 379, catering specifically to small and medium taxpayers for quicker and more efficient dispute resolution.

Speedy Redressal

Clauses 268 to 296 of the new bill gives tax officers expanded powers to request asset and liability statements, introduces faceless scrutiny through Clause 273, and shortens reassessment timelines by means of Clauses 279 to 285.

The appellate process has also been streamlined, with first appeals now allowed at the Joint Commissioner level (Clause 356), while the ITAT and High Court procedures (Clauses 362-365) have been simplified for efficiency. A new Board for Advance Rulings has also been introduced through Clause 381 to improve tax predictability for businesses.

Implications for Taxpayers

The immense changes introduced through the Income Tax Bill, 2025 aims to streamline taxation, eliminate ambiguities, and promote compliance through automation, digital inclusion, and modernized tax rules.

The introduction of faceless assessments, expanded digital income classifications, and stricter anti-evasion measures paves the way for India’s tax system to navigate through the next phase of economic growth.

Process and Implementation

After it’s introduced, committees will review it. It will go to the Standing Committee on Finance for their suggestions, and then the cabinet will review it again before it goes back to Parliament for a final vote. The plan is for the new law to take effect on April 1, 2026, which is the beginning of the new financial year.

Major Reform

 This new bill is part of a bigger effort to update tax laws, lessen the amount of legal disputes over taxes, and make the tax rules clearer.

The introduction and later implementation of the 2025 Income Tax Bill is a major change to how taxes work in India. The goal is to make tax laws more transparent and simpler, while also adapting to the current economic situation.

MCA extends deadline for mandatory Demat of Private Company shares until 30th June 2025

In a significant move, the Ministry of Corporate Affairs (MCA) has extended the deadline for mandatory dematerialization of securities for certain private companies until June 30, 2025. This extension, announced through a notification dated February 12, 2025, grants more time for compliance under the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2025, which modifies the existing Companies (Prospectus and Allotment of Securities) Rules, 2014
In a significant move, the Ministry of Corporate Affairs (MCA) has extended the deadline for mandatory dematerialization of securities for certain private companies until June 30, 2025. This extension, announced through a notification dated February 12, 2025, grants more time for compliance under the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2025, which modifies the existing Companies (Prospectus and Allotment of Securities) Rules, 2014

The Ministry of Corporate Affairs (MCA) has officially extended the deadline for the mandatory dematerialization of securities for private companies.

According to the latest notification issued on February 12, 2025, the new compliance deadline has been pushed to June 30, 2025.

This amendment revises the Companies (Prospectus and Allotment of Securities) Rules, 2014, specifically Rule 9B, which mandates dematerialization for specific categories of private companies.

The official Notification is attached here for reference:

Key Highlights of the MCA Notification

Extension until June 30, 2025

  • The deadline for compliance with Rule 9B (2) has been extended from March 31, 2023, to June 30, 2025.
  • This provides private companies (other than small and producer companies) with more time to complete the dematerialisation of securities and obtain ISIN (International Securities Identification Number).

Applicability of the Rule

  • All private companies, excluding small companies and producer companies, are required to comply.
  • Companies that intend to issue new shares, transfer shares, or make any alterations in their capital structure must do so only in dematerialised form.

The objective of the Amendment

  • To ease the transition for private companies that have not yet complied.
  • To ensure greater market transparency and alignment with regulatory frameworks for public companies.
  • To facilitate smooth investor participation and digital securities transactions.

What is the Dematerialization of Shares?

Dematerialization is the process of converting physical share certificates and other securities into an electronic format, eliminating the need for paper-based documents. Once dematerialized, these securities are held in a demat account, which functions like a digital repository for financial instruments.

A depository is an entity that holds securities in an electronic form and facilitates seamless transactions. It ensures security, transparency, and ease of trading. In India, depositories are governed under the Depositories Act of 1996 and regulated by the Securities and Exchange Board of India (SEBI).

The two SEBI-registered depositories in India are:

  • NSDL (National Securities Depository Ltd.) – Primarily linked with the National Stock Exchange (NSE).
  • CDSL (Central Depository Services (India) Ltd.) – Associated with the Bombay Stock Exchange (BSE).

Rule 9B: Mandatory Dematerialization of Securities for Private Companies

In October 2023, the Ministry of Corporate Affairs (MCA) introduced Rule 9B under the Companies (Prospectus and Allotment of Securities) Rules, 2014. This regulation made it mandatory for certain private companies to dematerialize their securities, aligning them with corporate governance standards applicable to public companies.

Applicability of Dematerialization of Shares

The dematerialization of shares applies to various entities within the securities market, ensuring transparency, security, and ease of transactions.

Public Companies

All public companies in India are mandated to hold and transact their securities in dematerialized form.

Private Limited Companies

All private limited companies, except those categorized as small companies, must comply with dematerialization regulations.

Holding and Subsidiary Companies

  • Any private limited company that is a holding company or a subsidiary of another corporate entity must dematerialise its shares.
  • This applies even if the company qualifies as a small company under financial thresholds.

Small Companies – Exception to Dematerialization

A small company is defined as a private limited company that meets the following financial criteria:

  • Paid-up capital: INR4 crore (INR 40,000,000) or less
  • Turnover: INR40 crores (INR 400,000,000) or less in the preceding financial year

Small companies are exempt from mandatory dematerialisation unless they are:

  • A holding company of another entity
  • A subsidiary company of another corporate body

In these cases, they must comply with dematerialisation requirements, irrespective of their financial position.

Last date for Dematerialization of Physical Shares

Considering the challenges faced by companies in executing the dematerialisation process, the Ministry of Corporate Affairs (MCA) has extended the compliance deadline. The new last date for mandatory dematerialisation of shares is June 30, 2025, revised from the earlier deadline of September 30, 2024.

Implications of the Deadline Extension for Private Companies

  • For Non-Compliant Private Companies: Companies that have not obtained their ISIN or completed dematerialisation now have extra time to comply. They must coordinate with depositories (NSDL/CDSL), registrar & transfer agents (RTAs), and professionals to initiate the dematerialisation process.
  • For Companies already in Compliance: Those who have already obtained their ISIN and dematerialised securities will not be affected. However, they should continue ensuring that any new share issuance or transfer occurs only in dematerialised form.

How to Convert Physical Shares into Demat?

Converting physical share certificates into electronic form is a simple and efficient process. Below is a step-by-step guide to help complete the dematerialization process:

Step 1: Open a Demat Account

To begin, you need to open a Demat account with a Depository Participant (DP), such as a bank, stockbroker, or financial institution. This account will hold your shares in electronic form.

You must fill out an account opening form and provide essential details, including:

  • Bank account details (Account number, IFSC code, Bank name, and Branch address)
  • Identity and address proof
  • PAN card

Once your Demat account is successfully set up, you can initiate the dematerialization process.

Step 2: Submit a Demat Request Form (DRF)

Obtain a Demat Request Form (DRF) from your DP, complete it accurately, and sign it. Ensure that the names and signatures on the form match those on the share certificates and the company’s records.

Step 3: Verification and Processing

After submission, the DP will verify your details and issue a Dematerialization Request Number (DRN) to track the status of your request.

Step 4: Forwarding to Registrar and Share Transfer Agent (RTA)

Your DP will forward the dematerialization request along with your physical share certificates to the respective Registrar and Share Transfer Agent (RTA) of the issuing company.

Step 5: Conversion to Electronic Form

Once the RTA verifies and approves the request, your physical share certificates will be cancelled and converted into electronic form to prevent misuse.

Step 6: Credit to Your Demat Account

The dematerialized shares are then credited to your Demat account, allowing you to sell, transfer, or pledge them as needed.

Penalties for Non-Compliance with Dematerialization Requirements

Failure to comply with Rule 9B of the Companies Act, 2013, can result in serious consequences for private companies, including:

  • Restrictions on Securities Transactions: Companies failing to comply will be barred from issuing or allotting any securities, including those related to bonus issues and buybacks.
  • Limitations for Shareholders: Shareholders holding physical shares will be restricted from selling or transferring their securities. They may also lose eligibility for rights issues and dividend benefits.
  • Monetary Penalties for Companies
    • Penalties for Company Officers: Officers in default may face penalties of up to INR 50,000 for non-compliance.
    • Initial penalty: INR 10,000
    • Continuing penalty: INR 1,000 per day until compliance is met, up to a maximum of INR 200,000.

Conclusion

The extension of the dematerialisation deadline to June 30, 2025, provides much-needed relief for private companies, allowing them additional time to comply with Rule 9B of the Companies Act, 2013. Companies should take advantage of this extension to complete the demat process, obtain their ISIN, and ensure compliance to avoid penalties and restrictions on share transactions.  

Frequently Asked Questions (FAQs)

  1. What is the new deadline for the mandatory dematerialisation of private company shares?

The Ministry of Corporate Affairs (MCA) has extended the compliance deadline to June 30, 2025, from the earlier date of September 30, 2024.

  1. Which companies are required to dematerialise their shares?

All private limited companies, except those categorised as small companies, must comply with the dematerialisation requirements under Rule 9B of the Companies Act, 2013. Additionally, holding and subsidiary companies must also dematerialise their shares, regardless of their size.

  1. Are small companies exempt from the dematerialisation requirement?

Yes, small companies (those with a paid-up capital of INR4 crore or less and turnover of INR40 crore or less) are exempt. However, if they are a holding or subsidiary company, they must comply with the dematerialisation mandate.

  1. What happens if a company does not complete the dematerialisation process by the deadline?

Non-compliant companies may face:

  • Restrictions on issuing or allotting securities, including bonus shares and buybacks.
  • Limitations for shareholders, preventing them from selling or transferring physical shares.
  • Monetary fines of INR 10,000, with an additional INR 1,000 per day until compliance is met (up to INR 2,00,000).
  • Penalties for company officers, with fines up to INR 50,000.
  1. How can physical shares be converted into dematerialised form?

The dematerialisation process involves:

  1. Opening a Demat account with a Depository Participant (DP).
  2. Submitting a Demat Request Form (DRF) along with physical share certificates.
  3. Verification and processing by the DP and Registrar & Share Transfer Agent (RTA).
  4. Conversion to electronic format and crediting to your Demat account.
  1. Which depositories handle dematerialisation in India?

The two SEBI-registered depositories in India are:

  • NSDL (National Securities Depository Ltd.)
  • CDSL (Central Depository Services (India) Ltd.)
  1. Is dematerialisation required for new share issuances and transfers?

Yes, as per Rule 9B, all new share issuances and transfers must be conducted in dematerialised form. Companies that have already completed the demat process must ensure ongoing compliance for any future transactions.

  1. How to get help with the dematerialisation process?

You can get help from professional bodies that provide end-to-end assistance for companies looking to dematerialise their shares through NSDL/CDSL. They help in documentation, coordination with depositories, and compliance filing to ensure a seamless transition to electronic shareholding.

MCA Circular dated 2025 02 12

Budget-2025: A Roadmap for economic growth and inclusive development

Mrs. Nirmala Sitharaman, Finance Minister of India, presented the Finance Bill 2025 (Union Budget 2025-26) in Parliament on February 1, 2025. This bill includes budget proposals for financial matters and direct/indirect taxation, primarily related to FY 2025-26/AY 2026-27.
Mrs. Nirmala Sitharaman, Finance Minister of India, presented the Finance Bill 2025 (Union Budget 2025-26) in Parliament on February 1, 2025. This bill includes budget proposals for financial matters and direct/indirect taxation, primarily related to FY 2025-26/AY 2026-27.

As the world continues to navigate post-pandemic recovery, technological advancements, and geopolitical shifts, Budget 2025 emerges as a critical blueprint for India’s economic future. Presented by the Finance Minister, this budget aims to strike a balance between growth, sustainability, and inclusivity. Let’s dive into the key highlights, implications, and potential impact of Budget 2025.

 


 

1. Economic Growth and Infrastructure Development

 

Budget 2025 places a strong emphasis on infrastructure development as a catalyst for economic growth. The government has allocated significant funds to:

    • National Infrastructure Pipeline (NIP): Expanding roads, railways, ports, and airports to improve connectivity and logistics.
    • Green Infrastructure: Investments in renewable energy projects, including solar, wind, and hydrogen energy, to achieve India’s net-zero emissions target by 2070.
    • Smart Cities: Accelerating the Smart Cities Mission with a focus on digital infrastructure and sustainable urban planning.

    These initiatives are expected to create jobs, boost private investment, and enhance India’s global competitiveness.


    2. Agriculture and Rural Economy

    Recognizing the importance of the agricultural sector, Budget 2025 introduces several measures to support farmers and rural development:

      • Doubling Farmers’ Income: Increased allocation for schemes like PM-KISAN and MSP-based procurement.
      • Agri-Tech Integration: Promoting the use of drones, AI, and IoT in farming to improve productivity and reduce losses.
      • Rural Employment: Expanding MGNREGA and introducing skill development programs to empower rural youth.

    These steps aim to ensure food security, reduce agrarian distress, and bridge the urban-rural divide.


    3. Taxation Reforms

    Budget 2025 brings a mix of relief and simplification in the tax regime:

      • Income Tax Slabs: Revised tax slabs to provide relief to middle-class taxpayers, with a focus on increasing disposable income.
      • Corporate Tax: Incentives for MSMEs and startups to encourage innovation and job creation.
      • GST Reforms: Simplification of GST processes and reduction of compliance burdens for small businesses.

    These reforms are expected to boost consumption, investment, and ease of doing business.

    Changes under the Income Tax Law in Union Budget 2025-26: In detail


    4. Digital India and Technology

    Building on the success of Digital India, Budget 2025 focuses on:

      • 5G Rollout: Accelerating the deployment of 5G infrastructure to enable faster internet and digital services.
      • AI and Blockchain: Investments in emerging technologies to drive innovation in sectors like healthcare, education, and finance.
      • Cybersecurity: Strengthening cybersecurity frameworks to protect digital assets and ensure data privacy.

    These initiatives aim to position India as a global leader in the digital economy.


    5. Healthcare and Education

    Budget 2025 prioritizes human capital development through:

      • Healthcare: Increased funding for Ayushman Bharat and the establishment of new medical colleges and hospitals.
      • Education: Focus on digital education, skill development, and research & development to prepare the workforce for future challenges.
      • Mental Health: Launching a national mental health program to address the growing need for psychological support.

    These measures aim to build a healthier, more skilled, and resilient population.


    6. Sustainability and Climate Action

    In line with global climate goals, Budget 2025 introduces:

      • Green Energy Transition: Incentives for electric vehicles, solar panels, and energy-efficient appliances.
      • Waste Management: Investments in waste-to-energy projects and plastic recycling initiatives.
      • Afforestation: Expanding green cover through large-scale afforestation programs.

    These steps underscore India’s commitment to sustainable development and environmental conservation.


    7. Social Welfare and Inclusivity

    Budget 2025 reaffirms the government’s commitment to social justice and inclusivity:

      • Women Empowerment: Increased funding for schemes like Beti Bachao Beti Padhao and maternity benefits.
      • SC/ST/OBC Welfare: Enhanced allocation for scholarships, skill development, and economic empowerment programs.
      • Senior Citizens: Expanding pension schemes and healthcare benefits for the elderly.

    These initiatives aim to create a more equitable and inclusive society.


    8. Defense and National Security

    To safeguard India’s sovereignty, Budget 2025 allocates:

      • Modernization of Armed Forces: Upgrading defense equipment and infrastructure.
      • Indigenous Manufacturing: Promoting “Make in India” in defense production to reduce dependency on imports.
      • Border Infrastructure: Strengthening infrastructure along border areas to enhance security and connectivity.

    Conclusion: A Budget for the Future

    Budget 2025 is a forward-looking document that addresses the needs of a rapidly evolving economy while staying rooted in the principles of sustainability and inclusivity. By focusing on infrastructure, technology, healthcare, and social welfare, it lays the foundation for a resilient and prosperous India.


    Union Budget 2025-26: In detail

    Source: Budget 2025-26

    SEBI tweaks rules for IPOs, buybacks and takeovers

    The Securities and Exchange Board of India (Sebi) on Thursday eased several rules relating to Initial Public Offers (IPO), rights issues, buybacks and takeovers. The regulator’s board approved these changes as also those relating tenures of managing directors of market intermediaries. The capital markets watchdog reduced the time for announcing the price band of initial […]
    The Securities and Exchange Board of India (Sebi) on Thursday eased several rules relating to Initial Public Offers (IPO), rights issues, buybacks and takeovers.

    The regulator’s board approved these changes as also those relating tenures of managing directors of market intermediaries. The capital markets watchdog reduced the time for announcing the price band of initial public offers (IPO) from five working days before the opening of the issue to two working days. This will give companies more time to fix the price band.

     

    Companies now need to provide investors with financial disclosures — for public issues and rights issues — for only three years. Currently, information is provided in the offer documents for five years. Also, companies need to provide only consolidated audited financial disclosures in the IPO offer document; audited standalone financials of the issuer and subsidiaries must be disclosed on the company website.

     

    Following a board meeting on Thursday, the capital markets regulator tweaked the buyback norms. The buyback period has been defined as the time between the board resolution or the date of declaration of results for a special resolution authorizing the buyback of shares and the day on which the shares are paid.

    Also, Sebi has amended the takeover rules. It has given companies additional time to revise the open offer price upwards till one working day before the start the tendering period.

     

    The Sebi board also approved some recommendations of R Gandhi committee on regulations relating to market infrastructure institutions (MIIs). For rights issues the threshold for submission of the draft letter of offer to Sebi has been increased to Rs.10 crore as against the earlier prescribed Rs 50 lakh. The regular also tweaked the rules relating to the underwriting of all non-SME public issues. If 90% of the fresh issue of share is subscribed, the underwriting will be restricted to that portion only. Accordingly, the requirement to underwrite 100% of the issue without regard to the minimum subscription requirements has been deleted.

     

    Sebi also reduced minimum anchor investor size to Rs 2 crore from the existing Rs 10 crore, for SME issuances. This will allow companies to attract more anchor investors for an issue.

     

    The board has permitted eligible domestic and foreign entities to hold up to 15% shareholding in case of Depository and Clearing Corporation. Moreover, multilateral and bilateral financial institutions, as notified by the government, have also been recommended to hold up to 15% in an MII. Moreover, Sebi has decided to limit the tenure of managing directors of an MII for a for a maximum of two terms of up to 5 years each or up to 65 years of age, whichever is earlier. The requirement would also apply to incumbent MDs of MIIs.

     

    The regulator is also looking into the issues regarding IPO ICICI Securities in ICIC AMC bought the large stake.The regulator had sought details of a significant investment made by ICICI Prudential Mutual Fund in the IPO of ICICI Securities. “Yes we are looking into that, and we have sought some information from them, and we are yet to get their replies,” Tyagi said.

     

    Source: Financial Express

    SEBI panel proposes stricter norms for RTAs

    SEBI proposed that the board of RTA should have public interest directors when it becomes a QRTA.

    A Securities and Exchange Board of India (Sebi) panel on Friday proposed tighter ownership and governance norms for registrar and transfer agents (RTAs).

    According to a discussion paper released by Sebi, the panel, headed by former Reserve Bank of India (RBI) deputy governor R. Gandhi, felt that since RTAs manage sensitive investor-related data, there need to be stricter governance rules for them.

    RTAs maintain detailed records of all investor transactions in mutual funds and shares. They also help investors complete their transactions and receive a record of their account statements.

    This is the second discussion paper by the panel after some market participants suggested it should add credit rating agencies (CRAs), RTAs and debenture trustees (DTs) in the list of market infrastructure institutions (MIIs) and frame stricter norms for them, similar to those followed by MIIs such as exchanges, depositories and clearing corporations.

    The panel, however, felt RTAs, CRAs and debenture trustees need not be categorized as MIIs but suggested that RTAs should have tighter norms.

    In September 2017, Sebi had defined qualified RTAs (QRTAs) as “RTAs servicing more than 20 million folios”. The Sebi panel felt that once an RTA becomes a QRTA, enhanced ownership norms should be applied to them.

    In India, there are only two RTAs (Karvy Computershare Pvt. Ltd. and Computer Age Management Services Pvt. Ltd.) which service 90% of the mutual fund folios. Karvy has around 40% market share in corporate folios.

    The Sebi panel said QRTAs should either have a dispersed ownership or be owned by regulated entities or entities in the business of RTA.

    While regulated entities can be allowed to hold 100% in RTAs, unregulated entities should not be allowed to hold more than 49% collectively and 15% individually in RTAs, the panel said. If the QRTA is an in-house entity or one that performs the function exclusively for one entity only, such ownership norms may not be required, the paper said. However, when an RTA becomes a QRTA, it may be given five years to achieve the proposed ownership structure, said the Sebi panel.

    Sebi proposed that the board of RTA should have public interest directors (PIDs) when it becomes a QRTA.

    “If the chairperson is a non-executive director, the QRTA shall have at least one-third of the board of directors as PIDs; and where the QRTA does not have a regular non-executive chairperson, it shall have at least half of the board of directors as PIDs,” according to the Sebi panel.

    With regard to CRAs, the panel said since Sebi has already put in place tighter norms for CRAs, they need not be categorized as MIIs and be subjected to further stringency.

    However, the panel proposed that the so-called “Appeal Committee” in CRAs should be renamed as ‘Review Committee’, as the word appeal has a legal connotation to it. Further, the review committee of CRAs should have independent members, the Sebi panel said.

    On DTs, which act as intermediaries between the issuer of debentures and the holders of debentures, the Sebi panel said there are already quite a few challenges before them in performing their obligations and that the function of DTs is still evolving. “Therefore, the committee is of the view that the review of ownership and governance of DTs is not the immediate priority.”

    Source: Live Mint

    SEBI puts in place new framework to check non-compliance of listing rules

    Sebi has put in place a stronger mechanism to check non-compliance of listing conditions, wherein exchanges will have powers to freeze promoter shareholding and even delist the shares of such defaulting companies.

    The move is aimed at maintaining consistency and adopting a uniform approach in the matter of levy of fines for non-compliance with certain provisions of the listing regulations.

    Under the new framework, exchanges would have the power to freeze the entire shareholding of the promoter and promoter group in non-compliant listed entity also holding in other securities, the Securities and Exchange Board of India (Sebi) said in a circular.

    Besides, exchanges can levy fines on non-compliant company, move the stocks of such firms to restricted trading category and suspend trading in the shares of such entities.

    Further, in case an entity fails to comply with the requirements or pay the applicable fine within six months from the date of suspension, the exchange will need to initiate the process of compulsory delisting.

    The new rules would come into force with effect from compliance periods ending on or after September 30, 2018.

    Grounds for suspension from listing include failure to comply with the board composition including appointment of women director and failure to constitute audit committee for two consecutive quarters; failure to submit information on the reconciliation of shares and capital audit report for two consecutive quarters.

    According to new rules, Sebi has asked stock exchanges to impose penalties ranging from Rs 1,000-5,000 per day on violation of certain clauses of the listing agreement like non-submission or delay in submission of document related to the company’s financial and shareholding details, failure to appoint women director on the board.

    Besides, the exchanges can levy a fine of Rs 10,000 per instance for delay in furnishing prior intimation about the company’s board meeting and delay in non-disclosure of record date or dividend declaration.

    Such fines will continue to accrue till the time of rectification of the non-compliance to the satisfaction of the concerned recognized stock exchange or till the scrip of the listed entity is suspended from trading for non-compliance with the provisions of Listing Regulations.

    Such accrual will be irrespective of any other disciplinary or enforcement action initiated by stock exchanges or Sebi.

    Further, if a non-complaint entity is listed on more than one exchanges, the concerned bourses need to take uniform action in consultation with each other.

    The board of directors need to be informed about the non-compliance and their comments need be made public so that investors can make informed decisions.

    The exchanges would have to disclose on their websites the action taken against the listed entities for non-compliance of the listing conditions, including the details of respective including the details of respective requirement, amount of fine, period of suspension, freezing of shares, among others.

    Every bourse is required to review the compliance status of the listed entities within 15 days from the date of receipt of information. Also, exchanges need to issue notices to the non-compliant listed entities to ensure compliance and pay fine within 15 days from the date of the notice.

    If any non-compliant listed entity fails to pay the fine despite receipt of the notice, the exchange will initiate appropriate enforcement action including prosecution.

    If the non-compliant listed entity complies with the Sebi’s requirement and pays applicable fine within three months from the date of suspension, the exchange will have to revoke the suspension of trading of its shares after seven days of such compliance and trading would be permitted only in ‘trade to trade’ basis for a week from revocation.

    Source: Times of India

    PE fund multiples to raise $1 billion for resurgent India

    India-focused funds together raised about $3.1 billion in 2017, according to Preqin data.

    Multiples Alternate Asset Management, the private equity fund founded by former ICICI Venture CEO Renuka Ramnath, is set to raise as much as $1billion in what could be one of the largest capital-raising plans by a domestic asset manager.

    The programme, which is expected to start in February, will target pension funds, sovereign wealth funds and university endowments in North America, Europe, the Middle East and South East Asia, two people with knowledge of the matter said.

    The proposed fund will be equivalent to almost one-third of the capital raised by 29 India-focused private equity and venture capital funds in 2017.

    The fund is being launched with appetite for long-term capital after a relative lull of almost a decade. Big-ticket asset owners such as pension and sovereign funds have started putting in money since last year, especially after Moody’s Investors Service upgraded India’s sovereign rating outlook, which lifted sentiment towards one of the fastest-growing economies.

    Multiples raised its first fund of $400 million in 2011 and its second fund of $750 million in 2016. It has delivered an average internal rate of return (IRR) of 30% to investors, sources said.

    The average net IRR of India-focused funds was 14% over the past 10 years, according to London-based data tracker Preqin, compared with the median net IRR of 11.9% across all Asia-based private equity funds of all vintages.

    “Yes, we have already started discussions with our existing limited partners and are looking to start marketing roadshows from Febru-ary. We expect the first close by mid of this year and a final close by December,” said one of the two people.

    Founded in 2009 by Ramnath, former managing director and CEO of ICICI Venture, the private equity arm of the country’s biggest private lender, ICICI Bank, Multiples manages close to $1billion assets, its website showed. It counts Canada Pension Plan Investment Board and other North American pension money managers and university endowments as its largest limited partners or investors.

    These investors have already committed to the fresh fundraising. Some of the investments by Multiples include Arvind, Cholamandalam Investment & Finance, Indian Energy Exchange and RBL. Last January, the firm sold its 14% stake in India’s largest movie hall chain PVR to rival private equity fund Warburg Pincus for Rs 820 crore, making a return on more than three times on its four-year-old investment, in constant currency terms.

    India-focused funds together raised about $3.1 billion in 2017, according to Preqin data. This is more than double the money raised by 18 asset managers in 2016. Last year, former Temasek India head Manish Kejriwal’s Kedaara Capital raised about $750 million for its second fund, while IDFC Alternatives raised $350 million.

    PE fundraising slowed soon after the Lehman crisis with asset managers struggling to get out of their investments as valuations were rearranged, said the head of a large US fund in India. “The Moody’s upgrade and related strength seen in the economy and continued strong sentiment are expected to keep the India story intact,” he added.

    Source:Economic Times