Income-tax Rules for Fund Manager Remuneration and Reporting

[भागII—खण् ड 3(i)] भारत का रािपत्र : असाधारण 7 MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION New Delhi, the 27th May, 2020 INCOME-TAX

G.S.R.315(E).—In exercise of the powers conferred by section 295 read with clause (m) of sub-section (3) of section 9A of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (10th Amendment) Rules, 2020. (2) Save as otherwise provided in these rules, they shall come into force on the date of their publication in the Official Gazette.
2. In the Income-tax Rules, 1962 (hereinafter referred to as the principal rules), - (a) in rule 10V,- (i) after sub-rule (10), the following shall be inserted, namely: - “(11) The provisions of sub-rule (5) to sub-rule (10) shall not apply on or after the 1st day of April, 2019. (12) the amount of remuneration to be paid by the fund to a fund manager, referred to in clause (m) of sub-section (3) of section 9A, shall be calculated in the following manner, namely: - (i) In case where the fund is Category-I foreign portfolio investor referred to in item (i), item (ii) or item (iii), and sub- item III of item (iv) of clause (a) of regulation 5 of the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), the amount of remuneration shall be 0.10 per cent of the asset under management. (ii) In other cases, the amount of remuneration shall be, - (a) 0.30 per cent. of the asset under management; or (b) 10 per cent. of profits derived by the fund in excess of the specified hurdle rate from the fund management activity undertaken by the fund manager, where it is entitled only to remuneration linked to the income or profits derived by the fund; or (c) 50 per cent. of the management fee, whether in the nature of fixed charge or linked to the income or profits derived by the fund from the management activity undertaken by the fund manager, paid by such fund in respect of the fund management activity undertaken by the fund manager as reduced by the amount incurred towards operational expenses including distribution expenses, if any: Provided that the provisions of this sub-clause shall apply only in case the fund is also making payment of management fee to any other fund manager : Provided further that in case where the amount of remuneration is lower than the amount arrived at under clause (i) or clause (ii), the fund may, at its option, apply to the Member, Central Board of Direct Taxes referred to in sub-rule (2) of rule 10VA seeking approval of the Board under said rule for that lower amount to be the amount of remuneration, and, on receipt of such application the Board may, after satisfying itself considering the relevant facts, approve such lower amount to be the amount of remuneration. Explanation - Fo he p po e of hi e (a) “a e nde managemen ” mean he ann a ave age of he mon h y ave age of he opening and c o ing ba ance of the value of such part of the fund which is managed by the fund manager; (b) “managemen fee” mean he amo n a men ioned in he ce ifica e ob ained f om an acco n an , a defined in clause (i) of Explanation to rule 11UB, for this purpose; (c) “ pecified h d e a e” mean a p e-defined threshold beyond which the fund agrees to pay a share of the profits earned by the fund from the fund management activity undertaken by the fund manager. (13) The fund manager shall, in addition to any report required to be furnished by it under section 92E, obtain a report from the accountant in respect of activity undertaken for the fund and furnish such report on or before the specified date in the Form No. 3CEJA duly verified by such accountant in the manner indicated therein and all the provisions of the Act shall apply as if it is a report to be furnished under section 92E.”;

8 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)] (ii) sub-rule (11) and sub-rule (12) shall be renumbered as sub-rule (14) and sub- e (15) e pec ive y ”; (b) In the principal rules, in Appendix II, - (i) after Form No 3CEJ, the following shall be inserted, namely: - “FORM No. 3CEJA [See rule 10V (13)] Report from an accountant to be furnished for purpose of section 9A regarding fulfilment of certain conditions by an eligible investment fund *I/We have examined he acco n and eco d of ………………………………………… (name and address of the fund manager with PAN) relating to the fund management activity and other transactions or services rendered by the fund manager to the eligible investment fund/ funds during the previous year ending on 31st March,

1. In*my/our opinion proper information and documents as are prescribed have been kept by the fund manager in respect of fund management activity and other transactions or services rendered by the fund manager to the fund/funds so far as appears from *my/our examination of the records of the fund manager.

2. The particulars required to be furnished for the purpose of section 9A are given in the Annexure to this Form. In*my/our opinion and to the best of my/our information and according to the explanations given to *me/us, the particulars given in the Annexure are true and correct. **Signed: …………………… Name: …………………… Add e : …………………… Membe hip No : …………………… Place: Date: Notes:

3. *Delete whichever is not applicable.

4. **This report has to be signed by an accountant as defined in the Explanation below sub-section (2) of section 288. ANNEXURE TO FORM No. 3CEJA Particulars relating to fund management activity required to be furnished for the purposes of section 9A of the Income-tax Act, 1961

5. Name of the Fund Manager:

6. Address

7. Permanent account number

8. Nature of business or activities of the fund manager

9. Status

10. Residential status

11. Details of SEBI registration: (a) Regulation under which registered (b) Registration number and date (c) Foreign portfolio investor category, if applicable

12. Previous year ended

13. Whether Fund Manager and Fund are related in terms of provision under section 92B. Yes/ No

14. Aggregate value of remuneration received from the eligible fund/ funds as per books of account

15. List of eligible investment funds for whom the fund manager has

[भागII—खण् ड 3(i)] भारत का रािपत्र : असाधारण 9 undertaken the fund management activity, with the following details: (a) Name of the offshore fund. (b) Country of residence of the fund (c) Whether the fund manager is an employee of the fund (d) Whether the fund manager is a connected person of the Fund (e) The amount of profit accruing or arising, during the previous year, to the fund from the activities carried out through the fund manager (f) The amount out of (e) to which the fund manager along with its connected persons is, directly or indirectly, entitled to

Yes/ No

Yes/ No 12. Particulars of remuneration received in respect of each eligible investment fund and each activity undertaken (if such activity is separately remunerated): (a) Name and address of the fund for which the fund management activity has been undertaken. (b) Description of the activity. (c) Total amount received or receivable in respect of the activity- i) as per books of account; i) as computed by the fund manager having regard to the amount prescribed in this behalf.

13. Particulars in respect of any other transaction undertaken by the fund manager with/on behalf of the eligible investment fund: (a) Has the fund manager entered into any other transaction or rendered any other service to the eligible investment fund or on behalf of the fund, but not specifically referred to above? (b) If „ye ‟ p ovide he fo owing de ai in e pec of each f nd and each transaction or service: (i) Name and address of the eligible investment fund with which the transaction has been entered or to whom services have been rendered (ii) Description of the transaction/ nature of service. (iii) Amount paid/ received or payable/ receivable on account of such transaction/ service-

• as per books of account;
• a comp ed by he f nd manage having ega d o he a m‟ length price. (iv) Method used for determining he a m‟ eng h p ice [See ec ion 92C(1)]

Yes/ No

Signed: ………………………… Name: ………………………… Add e : ………………………… Place: Date: Notes: This report has to be signed by an accountant as defined in the Explanation below sub-section (2) of ec ion 288 ”; (ii) For Form No 3CEK, the following Form shall be substituted, namely:-