The Central Board of Direct Taxes (CBDT) has notified the Income-tax (Second Amendment) Rules, 2026, widening the scope of the term “specified fund” under the Income-tax Rules, 2026.
The amendment is aimed at aligning the Income-tax Rules with the provisions of the Income-tax Act, 2025 and broadening the categories of investment funds eligible under the tax framework.
The amendment has been issued by the CBDT in exercise of powers conferred under Section 533 read with Section 262 of the Income-tax Act, 2025 and came into force immediately upon its publication in the Official Gazette on 21 July 2026.
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The notification substitutes clause (c) of sub-rule (5) of Rule 157 of the Income-tax Rules, 2026, which defines the expression “specified fund.”
Under the revised provision, a “specified fund” now includes any fund established or incorporated in India as a trust, company, limited liability partnership (LLP), or body corporate that has been granted registration as a Category I or Category II Alternative Investment Fund (AIF).
The fund must be regulated either by the SEBI (Alternative Investment Funds) Regulations, 2012, or the International Financial Services Centres Authority (Fund Management) Regulations, 2022, provided the fund is located in an International Financial Services Centre (IFSC).
The amendment further expands the definition by expressly including any fund referred to in Schedule VI [Note 1(g)] of the Income-tax Act, 2025 within the meaning of a “specified fund.” This addition broadens the range of investment vehicles that may qualify under the relevant tax provisions.
The notification appears to harmonize the Income-tax Rules with the newly enacted Income-tax Act, 2025, ensuring that the regulatory treatment of investment funds under the Rules corresponds with the categories recognized under the Act.
The amendment also recognizes funds operating in India’s International Financial Services Centres, reflecting the government’s continued emphasis on promoting IFSCs as globally competitive financial hubs while providing tax certainty to regulated investment structures.
Since the notification specifies that the amendment takes effect from the date of its publication in the Official Gazette, the revised definition of “specified fund” is applicable from 21 July 2026.
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