Chapter II
Basis of charge
Certain activities not to constitute business connection in India
9A. (1) Notwithstanding anything contained in sub-section (1) of section 9 andsubject to the provisions of this section, in the case of an eligible investment fund, thefund management activity carried out through an eligible fund manager acting onbehalf of such fund shall not constitute business connection in India of the said fund.
(2) Notwithstanding anything contained in section 6, an eligible investmentfund shall not be said to be resident in India for the purpose of that section merelybecause the eligible fund manager, undertaking fund management activities on itsbehalf, is situated in India.
(3) The eligible investment fund referred to in sub-section (1), means a fundestablished or incorporated or registered outside India, which collects funds from itsmembers for investing it for their benefit and fulfils the following conditions, namely:—
(a) the fund is not a person resident in India;
(b) the fund is a resident of a country or a specified territory with which anagreement referred to in sub-section (1) of section 90 or sub-section (1) of section 90A has been entered into or is established or incorporated or registered in a country or a specified territory notified by the Central Government in this behalf.
(c) the aggregate participation or investment in the fund, directly 9[orindirectly,] by persons resident in India does not exceed five per cent. of thecorpus of the fund; 7[as on the first day of April and the first day of October of the previous year]
4Provided that for the purposes of calculation of the said aggregate participation or investment in the fund, any contribution made by the eligible fund manager during the first three years of operation of the fund, not exceeding twenty-five crore rupees, shall not be taken into account;”;
7[Provided further that where the said aggregate participation or investment in the fund exceeds five per cent. on the first day of April or the first day of October of the previous year, the condition mentioned in this clause shall be deemed to be satisfied, if it is satisfied within four months of the first day of April or the first day of October of such previous year, as the case may be]
(d) the fund and its activities are subject to applicable investor protectionregulations in the country or specified territory where it is established orincorporated or is a resident;
(e) the fund has a minimum of twenty-five members who are, directly orindirectly, not connected persons;
(f) any member of the fund along with connected persons shall not haveany participation interest, directly or indirectly, in the fund exceeding ten percent;
(g) the aggregate participation interest, directly or indirectly, of ten or less membersalong with their connected persons in the fund, shall be less than fifty percent;
(h) the fund shall not invest more than twenty per cent. of its corpus in anyentity;
(i) the fund shall not make any investment in its associate entity;
(j) the monthly average of the corpus of the fund shall not be less than onehundred crore rupees:
Provided that if the fund has been established or incorporated in theprevious year, the corpus of fund shall not be less than one hundred crorerupees 2,5[twelve months from the last day of the month of its establishment or incorporation]
1[Provided further that nothing contained in this clause shall apply to a fund which has been wound up in the previous year.
(k) the fund shall not carry on or control and manage, directly or indirectly,any business in India or from India; (Omitted from 1st March, 2017)
(l) the fund is neither engaged in any activity which constitutes a businessconnection in India nor has any person acting on its behalf whose activitiesconstitute a business connection in India other than the activities undertakenby the eligible fund manager on its behalf;
(m) the remuneration paid by the fund to an eligible fund manager inrespect of fund management activity undertaken by him on its behalf is not lessthan 3[the amount calculated in such manner as may be prescribed]:
Provided that the conditions specified in clauses (e), (f) and (g) shall notapply in case of an investment fund set up by the Government or the CentralBank of a foreign State or a sovereign fund, or such other fund as the CentralGovernment may subject to conditions, if any, by notification in the OfficialGazette, specify in this behalf.
(4) The eligible fund manager, in respect of an eligible investment fund, meansany person who is engaged in the activity of fund management and fulfils the followingconditions, namely:—
(a) the person is not an employee of the eligible investment fund or aconnected person of the fund;
(b) the person is registered as a fund manager or an investment advisor inaccordance with the specified regulations;
(c) the person is acting in the ordinary course of his business as a fundmanager;
(d) the person along with his connected persons shall not be entitled,directly or indirectly, to more than twenty per cent. of the profits accruing orarising to the eligible investment fund from the transactions carried out by thefund through the fund manager.
(5) Every eligible investment fund shall, in respect of its activities in a financialyear, furnish within ninety days from the end of the financial year, a statement in theprescribed form, to the prescribed income-tax authority containing information relatingto the fulfilment of the conditions specified in this section and also provide such otherrelevant information or documents as may be prescribed.
(6) Nothing contained in this section shall apply to exclude any income from thetotal income of the eligible investment fund, which would have been so includedirrespective of whether the activity of the eligible fund manager constituted the businessconnection in India of such fund or not.
(7) Nothing contained in this section shall have any effect on the scope of total income or determination of total income in the case of the eligible fund manager.
(8) The provisions of this section shall be applied in accordance with suchguidelines and in such manner as the Board may prescribe in this behalf.
6[(8A) The Central Government may, by notification in the Official Gazette, specify that any one or more of the conditions specified in clauses (a) to (m) 7.[other than clause(c)]of sub-section (3) or clauses (a) to (d) of sub-section (4) shall not apply or shall apply with such modifications, as may be specified in such notification, in case of an eligible investment fund and its eligible fund manager, if such fund manager is located in an International Financial Services Centre, as defined in clause (a) of the Explanation to section 80LA, and has commenced its operations on or before the 31st day of March, 8.[2030].]
(9) For the purposes of this section,—
(a) “associate” means an entity in which a director or a trustee or a partneror a member or a fund manager of the investment fund or a director or a trusteeor a partner or a member of the fund manager of such fund, holds, either individuallyor collectively, share or interest, being more than fifteen per cent. of its sharecapital or interest, as the case may be;
(b) “connected person” shall have the meaning assigned to it in clause (4)of section 102
(c) “corpus” means the total amount of funds raised for the purpose ofinvestment by the eligible investment fund as on a particular date;
(d) “entity” means any entity in which an eligible investment fund makesan investment;
(e) “specified regulations” means the Securities and Exchange Board ofIndia (Portfolio Managers) Regulations, 1993 or the Securities and ExchangeBoard of India (Investment Advisers) Regulations, 2013, or such otherregulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992),which may be notified by the Central Government under this clause.’.
NOTE-
1 . Ins. by the Finance Act, 2017 (w.r.e.f. 1-4-2016).
2.Substituted by the Finance Act,2019 (w.e.f 1-4-2020) .
in sub-section (3), in clause (j),
words “at the end of such previous year”
Following shall be constituted namely,
words “at the end of a period of six months from the last day of the month of its establishment or incorporation, or at the end of such previous year, whichever is later”
3. Substituted by the Finance Act,2019 (w.e.f 1-4-2020) .
in sub-section (3), in clause (m),
words “the arm’s length price of the said activity”,
Following shall be constituted namely,
words “the amount calculated in such manner as may be prescribed”
4. Inserted by the Finance act, 2020 w.e.f 1-4-2020
5. Substituted by theFinance act, 2020w.e.f 1-4-2020
For the words
six months from the last day of the month of its establishment or incorporation, or at the end of such previous year, whichever is later
Following words shall be substituted namely
twelve months from the last day of the month of its establishment or incorporation”
6.Inserted by the Finance Act,2021 dated 28.03.2021 w.e.f. 1-04-2022
7. Inserted by the Finance Act 2025 dated 01.02.2025 w.e.f 01.04.2026
8. Substituted by theFinance Act 2025dated 01.02.2025 w.e.f 01.04.2026
In sub section 8A
for the figures
“2024”
shall be substituted
“2030”
9. Omitted by the Finance Act 2025 dated 29.03.2025 w.e.f 01.04.2026