Thursday, December 15, 2016

Revised guidelines for application of Section 9A – Fund Manager

CBDT has amended Rule 10V of the Income Tax Rules which provide guidelines for application
of Section 9A of Income Tax Act. Section 9A was inserted from 1st April, 2016 which defines certain activities not to constitute business connection in India for the purpose of Income Tax Act.
Effects of the amendment under Rule 10V are as follows:
  • Now the institutional entity which is established or incorporated or registered in a country or a specified territory notified by the Central Government in this behalf can also invest directly in the eligible investment fund if it fulfils other conditions prescribed (this is a fund established or incorporated or registered outside India, which collects funds from its members for investing it for their benefit and fulfils the conditions provided in Section 9A).
  • Fund manager shall not be considered to be a connected person of the fund merely for the reason that the fund manager is undertaking fund management activity of the said fund.
  • Any remuneration paid to the fund manager, by the fund, which is in the nature of fixed charge and not dependent on the income or profits derived by the fund from the fund management activity undertaken by the fund manager shall not be included in the profits referred to in the said clause, if the conditions specified under section 9A are satisfied and such fixed charge has been agreed by the fund manager in writing at the beginning of the relevant fund management activity.

Notification No. 106/2016, Dated 21st November, 2016


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