The Central Board of Direct Taxes (CBDT) has notified the Core Settlement Guarantee Fund (CSGF) set up by National Commodity Clearing Limited (NCCL) for income tax exemption under Section 10(23EE) of the repealed Income Tax Act, 1961. The notification, issued on Tuesday grants the exemption for assessment years 2019-20 to 2026-27.
The move ensures continuity of tax benefits despite the replacement of the Income Tax Act, 1961 with the Income Tax Act, 2025, which came into effect from April 1, 2026.
What is the Core Settlement Guarantee Fund?
A Core Settlement Guarantee Fund is a reserve maintained by recognised clearing corporations to ensure the successful completion of trades in the event of a member’s default. It serves as a financial safety net that protects the integrity of the settlement system and helps reduce systemic risk in financial markets.
Section 10(23EE) of the Income Tax Act, 1961 exempted specified income earned by such funds, provided they were set up in accordance with regulations notified by the Central Government.
Why was a fresh notification required?
Although the Income Tax Act, 1961 has been repealed, the Income Tax Act, 2025 contains transitional provisions that preserve rights, exemptions and pending proceedings under the old law.
Section 536 of the new Act states that the repealed law will continue to apply for tax years beginning before April 1, 2026, as well as for ongoing assessments, reassessments, appeals, penalties and other proceedings related to those years. Since NCCL’s exemption relates to assessment years from 2019-20 to 2026-27, the government has formally notified the fund under these saving provisions to ensure there is no disruption in its tax treatment.
Conditions for exemption
The exemption is subject to two key conditions:
- The Core Settlement Guarantee Fund must file its income tax return in accordance with Section 139(4C) of the Income Tax Act, 1961.
- National Commodity Clearing Limited must continue to remain recognised as a clearing corporation by the Securities and Exchange Board of India (SEBI).
If either condition is violated, the tax exemption may be withdrawn and proceedings may be initiated under the old Income Tax Act.The explanatory memorandum accompanying the notification states that the retrospective effect of the notification does not adversely affect the interests of any person, as it has been granted from the year in which the application was filed before the CBDT or the Income Tax Department.
