Clarification regarding taxability of income earned by a non-resident investor from off-shore investments routed through Category I or II AIF

F.No.22SI79/2019-IT A-II Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Circular No. 12 12023 North-Block. New Delhi. dated the 12th July.2023

Subject: Clarification regarding taxability of income earned by a non-resident investor

from off-shore investments in investment fund routed through an AlternatiYe Investment Fund -reg. CBDT Circular NO.14/2019 dated 03.07.2019 was issued to clariJY the taxability of income earned by a non-resident investor from outside India (off-shore investment) routed through investment fund as defined in Explanation 1 (a) to Chapter X11-FB of the Income-tax Act,1961(the Act). This Circular was made applicable to Category I or Category 11 Alternative Investment Funds (AIFs). regulated . under Securities and Exchange Board of India (SEBI) regulations. 2. By Finance Act. 2023. the detinition of 'investment fund' under the Income-tax Act,! 961 was amended to include reference to International Financial Services Centres Authority (Fund Management) Regulations. 2022 under International Financial Services Centres Authority (IFSCA) Act. 2019. 3. In view of the aforesaid amendment in the definition of 'investment fund'. para 3 of the Circular NO.14/2019 dated 03.07.2019 is to be read as under: "3. Chapter XI/-FB contains special provisions relating to tax on income oj"im'estment jilnds and income receivedfi'om suchfilndl·. Under Chapter XII-FB. section 11 5UB o(the Act (Tax on income ofinvestmentfimd and its lInit holders,) is the applicahle provision to determine the income and tax-liability o{investmentfimdl' & their im'estors. In this context.

11 5UB o(the Act (Tax on income ofinvestmentfimd and its lInit holders,) is the applicahle provision to determine the income and tax-liability o{investmentfimdl' & their im'estors. In this context. 'im'estment .{lmd' is defined in Explanation I oj' Chapter XII-FB to mean any fimd estahlished or incorporated in India in the form ofa trust or a company or a limited liability partnership or • a body cOl]Jora/e which has been gran/ed a certificate of regis/ra/ion as a ('a/egor)' 1 or Category II Alterna/ive lnves/ment Fund and is reglliated under /he Securities and Exchange Board of India (Alternative Investmen/ Fund) Regulations. 2012. made under /he Secllrities and Exchange Board of India Act. 1992 (15 oj'1992) or regll/atel/Illlder the Illternatjolllti Page 1 of 2

Fillallcial Services Cel/tres Authority (Ful/d Managemel/t) Regulatiol/s, 2022 made lIIuler the IllteTllatiol/al Fil/allcial Services Cel/tres Authority Act, 2019 (50 of 2019). Thus. provisions of section ll5UB apply only to CategOlJJ 1 or CategOlY II AlFs regulated by Securities and Exchange Board of India (SEBl) qr International Financial Serl'ices Centres Authority (IFSCA) . .. 4. All the other contents of the Circular dated 03.07.2019 remam same. It may be circulated widely for information of all stakeholders and Departmental otlicers. 5. Hindi version to follow. Copy to: i. PS to FM I PS to MoS(F) ii.PS to Secretary (Revenue) ~ iii.Chainnan. CBDT & All Members. CBDT iv.AII Pr.CCsITI Pr.DsGIT v.AII Joint Secretaries/CsIT, CBDT vi.C&AG vii.CIT (M&TP), CBDT /J.---' (Dr.

FM I PS to MoS(F) ii.PS to Secretary (Revenue) ~ iii.Chainnan. CBDT & All Members. CBDT iv.AII Pr.CCsITI Pr.DsGIT v.AII Joint Secretaries/CsIT, CBDT vi.C&AG vii.CIT (M&TP), CBDT /J.---' (Dr. Castro Jayaprakash.T) Under Secretary (IT A.I1), cBln viii. Web Manager. with a request to place the Circular on ofticial Income-tax website ix. JDIT. Data Base Cell for placing it on the website irsofticersonline.gov.in x. The Guard File (D,:;sJf..f.f:.,,,. T) Under Secretary (ITA.IJ), CBDT Page 2 of2