The Income Tax Department has clarified important compliance requirements relating to Form 71, a crucial audit reporting form applicable to specified funds claiming tax exemption or concessional taxation benefits for offshore banking investment divisions.
As tax reporting under the new Income Tax framework evolves, Form 71 has emerged as a mandatory compliance requirement for specified funds operating through offshore banking units. The form replaces the earlier Form 10-IL structure under the Income Tax Rules, 1962 and now aligns with the provisions of the Income Tax Rules, 2026.
What is Form 71?
Form 71 is an audit verification form prescribed under Rule 142 of the Income Tax Rules, 2026. It is used for the computation and verification of exempt income attributable to the investment division of an offshore banking unit. The form is linked with Section 11 read with Schedule VI and Section 210(3) of the Income Tax Act, 2025.
The filing of Form 71 is mandatory for specified funds seeking:
- Tax exemption benefits
- Concessional taxation rates
- Compliance recognition for offshore investment divisions
According to the FAQs released in the document, specified funds must maintain separate books of accounts for the registered investment division and get the accounts audited by a qualified accountant before filing the form.
Who is Required to File Form 71?
The form is required to be filed by the accountant who audits the books of accounts of the eligible investment division of the offshore banking unit. The accountant certifies the correctness of the accounts and confirms compliance with all prescribed eligibility conditions under Rule 142.
Additionally, the accountant must provide:
- Membership number
- UDIN of audit report
- Audit firm details
while verifying Form 71 electronically.
How to File Form 71?
Form 71 can only be filed electronically through the Income Tax Department’s e-filing portal. Offline filing is not permitted. The form must be verified using:
- Digital Signature Certificate (DSC), or
- Electronic Verification Code (EVC)
by the accountant responsible for the audit.
The FAQs also clarify that once the form is successfully submitted and an acknowledgement is generated, no editing or revision is allowed.
Form 71 Due Date
The audit report in Form 71 must be filed at least one month before the due date for filing the income tax return under Section 263(1)(c) of the Income Tax Act, 2025.
Failure to file the form within the prescribed timeline may affect the admissibility of tax exemption or concessional tax claims.
Documents Required for Form 71
The Income Tax Department has listed several documents that may be required during filing, including:
- Trust deed or Memorandum of Association
- SEBI Category-I FPI registration certificate
- Annual financial statements
- Audited statements of the eligible investment division
- Bank statements and foreign remittance certificates
- Securities transaction statements
- Unit holder details with residency classification
However, the FAQs also mention that attaching documents with the form is not mandatory during submission.
Mandatory PAN Requirement
The FAQs clearly state that Form 71 cannot be submitted without a valid PAN of the specified fund. PAN details are mandatory and several fields are auto pre-filled during filing.
Why Form 71 is Important
The Income Tax Department has emphasized that filing Form 71 within the prescribed timeline is a mandatory compliance condition for claiming tax exemption or concessional tax benefits under the Income Tax Act, 2025.
The department also clarified that filing the form alone does not automatically guarantee exemption benefits. Funds must additionally satisfy all statutory eligibility conditions prescribed under the law and relevant rules.
Conclusion
Form 71 is becoming a significant compliance document for specified funds operating through offshore banking investment divisions. With mandatory electronic filing, strict timelines, PAN validation, and audit certification requirements, affected entities must ensure timely and accurate compliance to avoid losing tax benefits under the Income Tax Act, 2025.
CAclubindia
