Simplified regime for fund managers based in IFSC

The Finance Bill, 2025, proposes several key changes in the Income Tax Act, 1961, to continue reforms in the direct tax system through tax reliefs, removing difficulties faced by taxpayers, and rationalizing¹ various provisions. Here are some of the key changes:

Simplified regime for fund managers based in IFSC
Section 9A inter alia provides that the fund management activity carried out through an eligible
fund manager acting on behalf of eligible investment fund shall not constitute business connection in
India, subject to the conditions mentioned therein.
2. One of the conditions at clause (c) of sub-section (3) of section 9A inter alia provides that the
eligible investment fund shall fulfil the condition that the aggregate participation or investment in the
fund, directly or indirectly, by persons resident in India does not exceed five per cent of the corpus of
the fund.
3. Sub-section (8A) of section 9A inter alia provides that the Central Government may by
notification specify that any one or more of the conditions specified in sub-section (3) or sub-section
(4), shall not apply or shall apply with such modifications, in case of an eligible investment fund and its
eligible fund manager, if such fund manager is located in an IFSC and has commenced its operations on
or before the 31st day of March, 2024.
4. It has been represented that there a need to provide a specific simplified regime for IFSC based
fund managers, managing funds situated in other jurisdiction so that fund managers in IFSC are at par
with the fund management entities in competing foreign jurisdiction.
5. It is proposed to amend the provisions of section 9A so that –
(I) The condition at clause (c) of sub-section (3) of section 9A is rationalised for all the eligible
investment funds whether or not their eligible fund managers are based in IFSC, by determining
the aggregate participation or investment in the fund as on the 1st day of April and the 1st day of
October of the previous year and in case the said condition at clause (c) is not satisfied on either
of the said days, it shall be provided that it will satisfy the same condition within four months of
the said days;
(II) In view of the rationalisation above, the condition at clause (c) of sub-section (3) of section 9A
shall not be modified for any eligible investment fund and its eligible fund manager; and
(III) The other conditions (a) to (m) can be relaxed for a eligible investment fund where the date of
commencement of operations by its eligible fund manager located in IFSC for the purposes of
sub-section (8A) of section 9A is on or before 31st day of March, 2030.
6. These amendments will take effect from the 1st day of April, 2025.
[Clause 5]