As per Section 9A
Income of
Certain fund managers in India ( Called Eligible fund manager)
from Certain foreign funds (called Eligible Investment Fund)
shall not constitute business connection in India
and hence not taxable
What is Fund?
Fund is money kept aside for certain purpose is called fund
What is Fund Manager?
A person who manages the funds is called fund manager.
He decides where to invest and when to sell.
These activities of fund manager are called fund management activities
What is exempt?
Income of
Certain fund managers in India ( Called Eligible fund manager)
from Certain foreign funds (called Eligible Investment Fund)
shall not constitute business connection in India
and hence not taxable
Note:-
This section is for determining income of fund manager and not income of eligible fund.
Effect of Amendment
This section was introduced to encourage fund managers to set up offices in India to manage foreign funds,
Earlier their income was taxable in India as it was deemed to accrue or arise in India
Now they have been made exempt by insertion of this new section (Section 9A)
What is an Eligible Investment Fund
View answer
It is a fund which fulfils following conditions
- Fund should be a foreign fund i.e. not a resident of India
- Fund should be resident of country/territory with which India has entered DTAA Agreement (Section 90(1) or section 90A(1)
- Participation by residents in fund should not be more than 5%
- Investment in any entity should not be more than 20%
- Monthly corpus of fund should be atleast 100 crore .if fund established last year,then total corpus should not be less than 100 crore.
- Remuneration to fund manager should not be more than arm's length price (market price)
- No investment by fund in associate entity.
- Fund should not be engaged in activity which constitutes business connection in India.
- Fund should have minimum 25 members
- Individual member should not hold more than 10%
- Combined participation of 10 or less members, should be less than 50%
Note:-
The last 3 conditions are not there in case of
- funds by foreign government
- fund by Central Bank of foreign government
- Sovereign fund or
- Other fund notified by the Central Government:
Who is eligible fund manager?
View answer
He is a fund manager who fulfills following conditons
- Person should not be employee of eligible fund
- Person should be acting in the ordinary course of his business as a fund manager;
- Person should be registered as a fund manager or investment advisor
- Person should not be entitled to 20% or more profits
What are the other conditions to be fulfilled?
View answer
1.Annual Statement to be filed
Eligible Investment fund shall give details of activities within 90 days of end of financial year.
Fund shall have information as may be prescribed including information whether conditions for eligible funds have been fulfilled
2.Other Guidelines prescribed by CBDT also to be fulfilled