CHAPTER XII-FB
SPECIAL PROVISIONS RELATING TO TAX ON INCOME OF INVESTMENT FUNDS
AND INCOME RECEIVED FROM SUCH FUNDS
Tax on income of investment fund and its unit holders.
115UB. (1) Notwithstanding anything contained in any other provisions of thisAct and subject to the provisions of this Chapter, any income accruing or arising to, orreceived by, a person, being a unit holder of an investment fund, out of investmentsmade in the investment fund, shall be chargeable to income-tax in the same manner asif it were the income accruing or arising to, or received by, such person had theinvestments made by the investment fund been made directly by him.
(2) Where in any previous year, the net result of computation of total income ofthe investment fund [without giving effect to the provisions of clause (23FBA) ofsection 10] is a loss under any head of income and such loss cannot be or is not whollyset-off against income under any other head of income of the said previous year,then,—
1[(i) out of such loss, the loss arising to the investment fund as a result of the computation under the head “Profit and gains of business or profession”, if any, shall be,––
(a) allowed to be carried forward and it shall be set off by the investment fund in accordance with the provisions of Chapter VI; and
(b) ignored for the purposes of sub-section (1);
(ii) the loss other than the loss referred to in clause (i), if any, shall also be ignored for the purposes of sub-section (1), if such loss has arisen in respect of a unit which has not been held by the unit holder for a period of atleast twelve months.’;]
2[(2A) The loss other than the loss under the head “Profit and gains of business or profession”, if any, accumulated at the level of investment fund as
on the 31st day of March, 2019, shall be,––
(i) deemed to be the loss of a unit holder who held the unit on the 31st day of March, 2019 in respect of the investments made by him in the investment fund, in the same manner as provided in sub-section (1); and
(ii) allowed to be carried forward by such unit holder for the remaining period calculated from the year in which the loss had occurred for the first time taking that year as the first year and shall be set off by him in accordance with the provisions of Chapter VI:
Provided that the loss so deemed under this sub-section shall not be available to the investment fund on or after the 1st day of April, 2019.’]
(3) The income paid or credited by the investment fund shall be deemed to be ofthe same nature and in the same proportion in the hands of the person referred to insub-section (1), as if it had been received by, or had accrued or arisen to, the investmentfund during the previous year subject to the provisions of sub-section (2).
(4) The total income of the investment fund shall be charged to tax—
(i) at the rate or rates as specified in the Finance Act of the relevantyear, where such fund is a company or a firm; or
(ii) at maximum marginal rate in any other case.
(5) The provisions of Chapter XII-D or Chapter XII-E shall not apply to theincome paid by an investment fund under this Chapter.
(6) The income accruing or arising to, or received by, the investment fund,during a previous year, if not paid or credited to the person referred to in sub-section (1),shall subject to the provisions of sub-section (2), be deemed to have been credited tothe account of the said person on the last day of the previous year in the sameproportion in which such person would have been entitled to receive the income hadit been paid in the previous year.
(7) The person responsible for crediting or making payment of the income onbehalf of an investment fund and the investment fund shall furnish, within such timeas may be prescribed, to the person who is liable to tax in respect of such income andto the prescribed income-tax authority, a statement in the prescribed form and verifiedin such manner, giving details of the nature of the income paid or credited during theprevious year and such other relevant details, as may be prescribed.
Explanation 1.—For the purposes of this Chapter,—
(a) “investment fund” means any fund established or incorporated inIndia in the form of a trust or a company or a limited liability partnership or abody corporate which has been granted a certificate of registration as a CategoryI or a Category II Alternative Investment Fund and is regulated under the Securitiesand Exchange Board of India (Alternative Investment Fund) Regulations, 2012,made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);3[regulated under the International Financial Services Centres Authority (Fund Management) Regulations, 2022 made]
(b) “trust” means a trust established under the Indian Trusts Act, 1882 (2 of 1882) orunder any other law for the time being in force;
(c) “unit” means beneficial interest of an investor in the investment fund ora scheme of the investment fund and shall include shares or partnership interests.
Explanation 2.—For the removal of doubts, it is hereby declared that anyincome which has been included in total income of the person referred to insub-section (1) in a previous year, on account of it having accrued or arisen in the saidprevious year, shall not be included in the total income of such person in the previousyear in which such income is actually paid to him by the investment fund.’.
Note-
1. Substituted by the Finance Act, 2019 (w.e.f. 1-4-2020).
For clauses (i) and (ii),
(i) such loss shall be allowed to be carried forward and it shall be set-off bythe investment fund in accordance with the provisions of Chapter VI; and
(ii) such loss shall be ignored for the purposes of sub-section (1).
the following clauses shall be substituted:-
(i) out of such loss, the loss arising to the investment fund as a result of the computation under the head “Profit and gains of business or profession”, if any, shall be,––
(a) allowed to be carried forward and it shall be set off by the investment fund in accordance with the provisions of Chapter VI; and
(b) ignored for the purposes of sub-section (1);
(ii) the loss other than the loss referred to in clause (i), if any, shall also be ignored for the purposes of sub-section (1), if such loss has arisen in respect of a unit which has not been held by the unit holder for a period of atleast twelve months.’;
2. Inserted by theFinance Act, 2019(w.e.f. 1-4-2020).
3. Inserted by the Finance Act, 2023dated 31.03.2023 w.e.f 01.04.2023.