The Government of India has proposed an amendment to Section 10(4D) of the Income-tax Act, 1961, which provides an income tax exemption to ‘specified funds.’ This move is aimed at further streamlining tax benefits for investment vehicles operating within the International Financial Services Centre (IFSC).
Section 10(4D) currently provides tax exemptions to the income of specified funds, subject to the fulfilment of conditions prescribed under the law. These funds play a crucial role in fostering investment in India’s financial markets, particularly in IFSCs such as GIFT City.
As per the proposed amendment, the exemption will continue to be available to specified funds that have obtained certification as a retail scheme or an Exchange Traded Fund (ETF). However, the exemption will now be contingent on compliance with conditions laid down in the International Financial Services Centres Authority (IFSCA) regulations. This ensures that only funds operating within the regulatory framework of the IFSCA can avail of the tax benefits.
The amendment aligns with the government’s ongoing efforts to boost India’s IFSC ecosystem by providing clarity and certainty to investors. By linking the exemption directly to IFSCA regulations, the proposal seeks to encourage adherence to global best practices while promoting retail participation in IFSC funds.
Industry experts have welcomed the move, stating that it will enhance transparency and regulatory compliance while fostering a robust investment environment in IFSCs. “This amendment provides much-needed clarity to retail and institutional investors looking at India’s IFSC as a viable investment destination,” said a senior tax consultant.
The proposed amendment is expected to be tabled in the upcoming session of Parliament. If enacted, it will strengthen the regulatory framework for specified funds, ensuring a streamlined and transparent tax exemption process.
For investors and fund managers operating within IFSCs, this amendment signals a commitment to regulatory clarity and stability, reinforcing India’s position as a competitive global financial hub.
