¹21AI. Computation of exempt income of specified fund for the purposes of clause (4D) of section 10.-

(1). For the purpose of clause (4D) of section 10, income attributable to units held by non-resident (not being the permanent establishment of a non-resident in India) in a specified fund shall be computed in accordance with the following formula, namely:-

Income exempt under clause (4D) of section 10= A*C1 + B*C2 +D*FI+E*F2, where

A = any income accrued or arisen to, or received by a specified fund as a result of transfer of capital asset referred to in clause (viiab) of section 47 , on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in convertible foreign exchange;

B = any income accrued or arisen to, or received by a specified fund as a result of transfer of securities (other than shares in a company resident in India);

C1 = ratio of the aggregate of daily ‘assets under management’ of the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the aggregate of daily total ‘assets under management’ of the specified fund, from the date of acquisition of the capital asset referred to in clause (viiab) of section 47 to the date of transfer of such capital asset.

C2= ratio of the aggregate of daily ‘assets under management’ of the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the aggregate of daily total ‘assets under management’ of the specified fund, from the date of acquisition of the security (other than shares in a company resident in India) to the date of transfer of such security.

D = any income accrued or arisen to, or received by a specified fund from securities issued by a non-resident (not being a permanent establishment of a non-resident in India) and where such income otherwise does not accrue or arise in India;

E = any income accrued or arisen to, or received by a specified fund from a securitisation trust which is chargeable under the head "profits and gains of business or profession"; and

F1 = ratio of the ‘assets under management’ in the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the total ‘asset under management’ of the specified fund, as on the date of receipt of such income from securities issued by a non-resident(not being a permanent establishment of a non-resident in India) and where such income otherwise does not accrue or arise in India.

F2 = ratio of the ‘assets under management’ in the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the total ‘asset under management’ of the specified fund, as on the date of receipt of such income from a securitisation trust which is chargeable under the head "profits and gains of business or profession".

(2) The specified fund shall furnish an annual statement of exempt income in Form No. 10IG electronically under digital signature on or before the due date, which is duly verified in the manner indicated therein.

²[(2A) The income attributable to units held by non-resident (not being the permanent establishment of a nonresident in India) in a specified fund shall not be exempt under clause (4D) of section 10 of the Act unless the specified fund complies with sub-rule (2)]

³[21AIA. Other conditions required to be fulfilled by a specified fund referred to in clause (4D) of section 10 of the Act.—(1) For the purposes of the proviso to item (III) of sub-clause (i) of clause (c) of the Explanation to clause (4D) of section 10 of the Act, the “other conditions” required to be fulfilled by a specified fund shall be that —

(a) the unit holder of the specified fund, other than the sponsor or manager of such fund, who becomes a resident under clause (1) or clause (1A) of section 6 of the Act during any previous year subsequent to the previous year in which such unit or units were issued, shall cease to be a unit holder of such specified fund within a period of three months from the end of the previous year in which he becomes a resident;

 (b) for the purposes of clause (a), the specified fund shall maintain the following documents in respect of its unit holders,—

 i. name of the unit holder;

ii. tax identification number of the unit holder in the country of residence at the time the units were issued;

iii. permanent account number, if available;

iv. total number of units held;

v. total value of units held;

vi. whether unit holder is a sponsor or a manager;

vii. the previous year in which the unit holder became resident and;

viii. date of exit from specified fund.

(2) The specified fund shall certify that it has fulfilled the conditions under sub-rule (1) and furnish information in respect of units held by residents in the annual statement of exempt income in Form No. 10IG

(3) The income attributable to units held by non-resident (not being the permanent establishment of a nonresident in India) in a specified fund shall not be exempt under clause (4D) of section 10 unless the specified fund complies with sub-rule (2).

Explanation.-For the purpose of this rule, “specified fund” shall have the same meaning as assigned to it in sub-clause (i) of clause (c) of the Explanation to clause (4D) of section 10 of the Act.]

(3) The Principal Director General of Income-tax (Systems) or the Director General of Income tax (Systems), as the case may be, shall specify the procedure for filing of the Form No. 10IG and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the statements so furnished under this rule. Explanation.- For the purpose of this rule, the expressions,- (a) “assets under management” means the closing balance of the value of assets or investments of the specified fund as on a particular date;

(b) "International Financial Services Centre" shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005)

(c) “permanent establishment” shall have the same meaning as assigned to it in clause (iiia) of section 92F;

 (d) "securities" shall have the meaning as assigned to it in clause (bb) of the Explanation to clause (4D) of section 10;

(e) “due date” shall have the same meaning as assigned to it in the Explanation 2 to sub-section (1) of section 139;

(f) "specified fund" shall have the same meaning as assigned to it in sub-clause (i) of clause (c) of the Explanation to clause (4D) of section 10; and

(g) “unit” shall have the same meaning assigned to it in clause (f) of Explanation to clause (4D) of section 10.

Notes:

1. Inserted by Income tax Amendment (22nd Amendment), Rules, 2021 Notification dated 09.08.2021

2. Inserted by the Income-tax (Seventeenth Amendment), Rules, 2022 Notification dated 16.06.2022

3. Inserted by the Income-tax (Seventeenth Amendment), Rules, 2022 Notification dated 16.06.2022