Three Cheers For The CBDT

GLASS HALF-FULL? CBDT CLARIFIES SAFE HARBOUR RULES FOR ELIGIBLE FUNDS HAVING FUND MANAGERS IN INDIA

Recently, the Central Board of Direct Taxes (CBDT) issued a notification¹ (Notification) to clarify the eligibility criteria for offshore funds being managed from India through their managers to the benefit extended by Section 9A of  the Income Tax Act, 1961 (Act). The Finance Act, 2015 had vide Section 9A, introduced an exception to the concept of a 'business connection' whereby, subject to satisfying the eligibility criteria, an offshore fund could be managed from India without attracting Indian taxes. This (welcome) move was implemented to incentivise the migration of fund managers to India. However, the stringent eligibility conditions led to several representations being made by the funds industry to make the provision more inclusive and effective. The recent Finance Bill, 2016 (Bill), therefore relaxed two conditions (as captured below) in order to rationalise