The Central Board of Direct Taxes (CBDT) has notified the Income-tax (Second Amendment) Rules, 2026, introducing an important amendment to the definition of "specified fund" under the Income-tax Rules, 2026.
The amendment has been issued through Notification No. G.S.R. 646(E) dated 21 July 2026 by the Ministry of Finance (Department of Revenue) in exercise of the powers conferred under Section 533 read with Section 262 of the Income-tax Act, 2025.
The amended rules came into force immediately upon their publication in the Official Gazette.
What Has Changed?
The notification substitutes clause (c) of sub-rule (5) of Rule 157 of the Income-tax Rules, 2026, thereby revising the definition of a "specified fund."
Under the revised provision, a specified fund will include:
1. SEBI or IFSCA Regulated Alternative Investment Funds
Any fund established or incorporated in India in the form of:
- Trust
- Company
- Limited Liability Partnership (LLP)
- Body Corporate
provided it has obtained registration as a Category I or Category II Alternative Investment Fund (AIF) and is regulated under either:
- SEBI (Alternative Investment Funds) Regulations, 2012, or
- International Financial Services Centres Authority (Fund Management) Regulations, 2022, where the fund is located in an International Financial Services Centre (IFSC).
2. Funds Referred to in Schedule VI
The amended definition also includes any fund referred to in Schedule VI [Note 1(g)] of the Income-tax Act, 2025.
Significance of the Amendment
The amendment aligns the Income-tax Rules with the framework introduced under the Income-tax Act, 2025 by expressly recognizing funds regulated by both SEBI and the International Financial Services Centres Authority (IFSCA).
The inclusion of IFSCA-regulated fund management entities operating in IFSCs, such as GIFT City, provides greater clarity regarding the funds that qualify as "specified funds" for the purposes of the Act.
By also incorporating funds covered under Schedule VI [Note 1(g)], the notification ensures consistency between the Act and the Rules while removing any ambiguity in interpretation.
Effective Date
The Income-tax (Second Amendment) Rules, 2026 became effective from 21 July 2026, the date of their publication in the Official Gazette.
Background
The Income-tax Rules, 2026 were originally notified on 20 March 2026 through Notification No. G.S.R. 198(E) and were last amended on 31 March 2026 vide Notification No. G.S.R. 241(E). The present notification constitutes the second amendment to the Rules during 2026.
Key Highlights
- CBDT notified the Income-tax (Second Amendment) Rules, 2026 on 21 July 2026.
- The amendment revises the definition of "specified fund" under Rule 157.
- Category I and Category II AIFs regulated by SEBI or IFSCA are expressly covered.
- Funds referred to in Schedule VI [Note 1(g)] of the Income-tax Act, 2025 are also included.
- The amendment took effect immediately upon publication in the Official Gazette.
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