The Central Board of Direct Taxes (CBDT) on July 12, 2023, issued a notification clarifying the taxability of income earned by a non-resident investor from off-shore investments in an investment fund routed through an Alternative Investment Fund.
The following has been stated namely: -
• CBDT issued Circular No. 14/2019 dated July 03, 2019, to clarify the taxability of income earned by a non-resident investor from outside India (off-shore investment) routed through the investment fund.
• As the definition of 'investment fund' under the Income-tax Act, 1961 was amended to include reference to International Financial Services Centres Authority (Fund Management) Regulations. 2022. The para 3 of the aforesaid circular shall now be read as:
“Chapter XII-FB contains special provisions relating to tax on income of investment funds and income received from such funds·. Under Chapter XII-FB. section 115UB of the Act (Tax on income of investment fund and its unit holders’) is the applicable provision to determine the income and tax-liability of investment funds & their investors. In this context. 'investment fund' is defined in Explanation 1 of Chapter XII-FB to mean any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or Category II Alternative lnvestment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations. 2012. made under the Securities and Exchange Board of India Act. 1992 (15 of 1992) or regulated under the International Financial Services Centres Authority (Fund Management) Regulations, 2022 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019). Thus. provisions of section 115UB apply only to Category I or Category II AlFs regulated by Securities and Exchange Board of India (SEBl) or International Financial Services Centres Authority (IFSCA).”
[Circular No. 12/2023]
