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Amendment of Section 9A towards 'Modification in Conditions for Offshore Funds'

[Applicable from Assessment Year 2020-21

Section 9A of the Act provides for a special regime in respect of Offshore Funds which provides immunity to the funds created outside India from creating a “business connection” in India after fulfilment of certain conditions. The amendment is proposed to section 9A to relax following two conditions for the Offshore Funds:

  1. Aggregate participation of resident person in the offshore funds shall not exceed 5% of the corpus of fund. It has been proposed to amend that to calculate the aggregate participation or investment in the fund, directly or indirectly, by an Indian resident, the contribution of the eligible fund manager during first 3 years up to Rs. 25 crores shall not be accounted for; and

  2. Section prescribes that the average corpus of the fund shall not be less than Rs. 100 Crores however, if the fund has been established or incorporated during the previous year, the condition of a monthly average of the corpus of the fund of Rs. 100 crores should be fulfilled within 6 months from the last day of the month of its establishment or incorporation. The period of 6 months has been proposed to be increased to 12 months.

The condition specified in point no. (b) was also modified by the Finance (No. 2) Act, 2019 to allow the following time limit (whichever is later) to complete the corpus of the fund:

  1. 6 months from the last day of the month of its establishment; or

  2. At the end of the previous year in which such fund was established.

 
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