Govt relaxes income tax rule to attract single institutional entities

Many institutional entities had long demanded for a change in the existing Income Tax framework so as to relax the harsh condition imposed on the tax payers The Dollar Business Bureau

Single institutional entities will be eligible for income tax exemption, if the investors meet the minimum criteria of employing at least 25 members

The government has tweaked the existing income tax framework with an aim to extend the exemption of taxes to single institutional entities. The liberalised framework will come into effect on April 1 this year and is envisaged to escalate offshore fund management activities in the domestic market. "The CBDT has issued operating rules governing Section 9A of the I-T Act, which provides for special taxation regime with effect from April 1, 2016 to facilitate location of fund managers of offshore funds in India," CBDT said in a statement. Charting out the guidelines, the body said the members or the participation of their interest will be determined on the basis of their residency, direct or indirect involvement and if they have set up an entity for pooling funds and investments. With the announcement of new rule, the government has tried to simplify the existing rule which was termed complicated by many single institutional entities. They had long demanded for a change in the framework so as to relax the harsh condition imposed on the tax payers. Now, the single institutional entities will be eligible for tax exemption, however, the investors have to meet the minimum criteria of employing at least 25 members, and they should be appropriately regulated by the country’s banking or securities regulator. “For the purposes of determining the arm’s length price in respect of any remuneration, paid by the eligible investment fund to an eligible fund manager,” the CBDT said, adding that the transfer pricing adjustment will be made on such basis.

March 17, 2016 | 02:15pm IST

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The Dollar Business Bureau - Mar 17, 2016 08:52 IST

Govt relaxes income tax rule to attract single institutional entities

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