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Tax Alert : Exemption from filing of India Tax Return extended to foreign investors earning income from investment fund set up in IFSC

29 July 2019

The Central Board of Direct Taxes (CBDT) has issued a notification[1] exempting following class of Foreign Investors from the requirement of furnishing return of income from Assessment Year 2019-20 onwards, subject to fulfilment of specified conditions.

Class of person

  1. Non-resident, not being a company; or
  2. A foreign company

who have any income chargeable under the IT Act during a previous-year from any investment in an investment fund[2] set up in an International Financial Services Centre (IFSC) located in India

Specified Conditions

For claiming the above exemption, following conditions should be adhered:

  1. any income-tax due on income of the said class of persons has been deducted at source and remitted to the Central Government by the investment fund at the tax-rate in force as per provisions of section 194LBB of the IT Act; and
  2. there is no other income during the previous year for which the said class of persons, is otherwise liable to file the tax-return

Further, it is also clarified that the exemption from filing the India tax return will not be available where a notice for filing tax returns has been issued either under section 142(1) or section 148 or section 153A or section 153C of the IT Act.

A copy of the Notification is attached herewith.

BDO Comments

The Indian Government has undertaken various measures to promote IFSC. With a view to further incentivise the IFSC, the Finance (No. 2) Bill 2019 has proposed to grant benefits such as exemption of interest earned by non-resident lenders from units in IFSC, no additional income tax on income distributed by a Mutual Fund in IFSC etc. The recent notification is a welcome move as it will act as a cushion on tax compliance front.


[1] Notification No. 55/2019 (F.No. 225/79/2019-ITA.II) dated 26 July 2019

[2] “investment fund” means any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);