Quick Summary
Key Compliance Framework Introduced for Investment Funds The Draft Income-tax Rules, 2026 have introduced Rule 274, providing detailed guidelines for investment funds seeking tax benefits under Section 9(12) read with Schedule I. The rule aims to bring greater clarity on eligibility conditions, participation thresholds, reporting requirements, and remuneration structures for fund managers. The framework is expected to significantly impact foreign and institutional investment funds operating in
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FAQ :
Rule 274 aims to provide detailed guidelines for investment funds seeking tax benefits under Section 9(12) read with Schedule I, clarifying eligibility, participation thresholds, reporting, and remuneration structures.
The look-through provision allows investments made through an institutional entity to be assessed by looking through that entity, provided it meets specific conditions like satisfying Schedule I criteria and being set up solely for pooling funds.
Yes, funds can retain eligible status if a lapse in certain Schedule I conditions is beyond their control, does not exceed 90 days, and they are making bona fide efforts to comply, among other conditions.
A fund is considered to control or manage a business if it holds more than 26% of the total share capital, voting power, or interest, directly or indirectly.
For certain Category I FPIs, it's 0.10% of AUM. In other cases, it's the higher of 0.30% of AUM, 10% of profits above a hurdle rate, or 50% of the management fee after expenses if multiple managers are involved.
Fund managers must obtain an accountant's report for fund activities and submit it in the prescribed form by the specified date, in addition to existing reporting obligations.
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