NATIONAL STOCK EXCHANGE OF INDIA LIMITED

FINANCE & ACCOUNTS DEPARTMENT

CIRCULAR
To all Trading Members in F&O Segment
Circular No: NSE/F&A/7122
2006

Date: 02nd February,

Sub: Notification of NSEIL as a recognized stock exchange under clause

(d) of the proviso to clause (5) of section 43 of the Income-tax Act, 1961
Finance Act, 2005 inter-alia provided for insertion of clause (d) of proviso to
clause (5) of section 43 of the Income-tax Act, 1961 to provide that eligible
transactions in respect of trading in derivatives carried out in a recognized stock
exchange would not be considered speculative transactions if the recognized
stock exchange fulfilled such conditions as prescribed and notified by the Central
Government for the purpose.
Pursuant to the same, Central Government inserted Rule 6DDA in the Incometax Rules, 1962 prescribing conditions to be fulfilled by a stock exchange and
Rule 6DDB in the Income-tax Rules, 1962 providing for making an application
and getting notified as a recognized stock exchange for the purpose of clause
(d) of proviso to clause (5) of section 43 of the Income-tax Act, 1961 by the
Central Government.
Central Board of Direct Taxes has now issued a Notification no. 2/2006 dated 25 th
January, 2006 notifying, inter- alia, National Stock Exchange of India Ltd. as a
recognized stock exchange for the purpose of sub-clause (d) of proviso to
clause (5) of section 43 of the Income-tax Act, 1961 with effect from 25 th
January, 2006. Thus, a transaction in respect of trading in derivatives carried out
on the trading platform of National Stock Exchange with effect from 25 th January,
2006 shall not be deemed to be speculative transaction till such time the
recognition granted to the Exchange is not withdrawn. A copy of the same is
enclosed as Annexure 1.
Trading Members may kindly note the same and pass on the information to their
constituents.
For National Stock Exchange of India Limited

Yatrik Vin
Vice President (Finance & Accounts)

Annexure 1
Notification No. 2/2006, dated 25-1-2006
In exercise of the powers conferred by clause (ii) in the Explanation to clause
(d) of the proviso to clause (5) of section 43 of the Income-tax Act, 1961(43 of
1961) read with sub-rule (4) of rule 6DDB of the Income-tax Rules, 1962, the
Central Government hereby notifies the following stock exchanges as
recognised stock exchanges for the purposes of the said clause with effect from
the date of publication of this notification.in the Official Gazette, namely:(1) National Stock Exchange of India Limited, Mumbai
(2) Bombay Stock Exchange Limited, Mumbai
2. The Central Government may withdraw the recognition granted to the
stock exchange if any of the conditions prescribed in rule 6DDA of the
income-tax Rules, 1962, subject to which the recognition is granted, is violated.
3. This notification shall remain in force until the approval granted by the
Securities and Exchange Board of India is withdrawn or expires, or this
notification is rescinded by the Central Government as provided in sub-rule
(5) of rule 6DDB of the Income-tax Rules, 1962.
[F.No. 142/38/2005-TPL]
Explanatory Memorandum in respect of Notification S. O. 89(E)
Dated 25th January, 2006
The said Notification notifies Bombay Stock Exchange Limited, Mumbai and
National Stock Exchange of India Limited, Mumbai as recognised Stock
Exchanges for the purposes of clause (d) of the proviso to section 43(5) of the
Income-tax Act, 1961. An eligible transaction in respect of trading in derivatives
carried out on these two Stock Exchanges with effect from 25 th January, 2006
shall not be deemed to be speculative transaction. The _expression eligible
transaction is defined in the Explanation appearing after the proviso to section
43(5) of the Income-tax Act, 1961