¹[21AIA. Other conditions required to be fulfilled by a specified fund referred to in clause (4D) of section 10 of the Act.—(1) For the purposes of the proviso to item (III) of sub-clause (i) of clause (c) of the Explanation to clause (4D) of section 10 of the Act, the “other conditions” required to be fulfilled by a specified fund shall be that —

(a) the unit holder of the specified fund, other than the sponsor or manager of such fund, who becomes a resident under clause (1) or clause (1A) of section 6 of the Act during any previous year subsequent to the previous year in which such unit or units were issued, shall cease to be a unit holder of such specified fund within a period of three months from the end of the previous year in which he becomes a resident;

 (b) for the purposes of clause (a), the specified fund shall maintain the following documents in respect of its unit holders,—

 i. name of the unit holder;

ii. tax identification number of the unit holder in the country of residence at the time the units were issued;

iii. permanent account number, if available;

iv. total number of units held;

v. total value of units held;

vi. whether unit holder is a sponsor or a manager;

vii. the previous year in which the unit holder became resident and;

viii. date of exit from specified fund.

(2) The specified fund shall certify that it has fulfilled the conditions under sub-rule (1) and furnish information in respect of units held by residents in the annual statement of exempt income in Form No. 10IG

(3) The income attributable to units held by non-resident (not being the permanent establishment of a nonresident in India) in a specified fund shall not be exempt under clause (4D) of section 10 unless the specified fund complies with sub-rule (2).

Explanation.-For the purpose of this rule, “specified fund” shall have the same meaning as assigned to it in sub-clause (i) of clause (c) of the Explanation to clause (4D) of section 10 of the Act.]

²[“(4) For the purposes of sub-item (b) of item (I) of sub-clause (i) of clause (c) of Explanation to clause (4D) of section 10,  (A) the retail scheme shall satisfy the following conditions, namely:-

i.    it shall have at least twenty investors with no single investor investing more than twentyfive per cent. in such scheme;

ii.   it shall not make any investment exceeding twenty-five per cent. of its total assets under management in its associate;

iii.   it shall not make any investment exceeding fifteen per cent. of its total assets under management in unlisted securities; and

iv.   it shall not make any investment exceeding ten per cent. of its total asset under management in a single company.

B.    the Exchange Traded Fund shall satisfy the following conditions, namely:- (i) it shall be mandatorily listed and traded on a recognised stock exchange; and

ii.   it shall comply with the requirements as specified in International Financial Services Centres Authority (Fund Management) Regulations, 2022 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019).”;

ii.   for the Explanation, the following shall be substituted, namely,–

“Explanation.– For the purpose of this rule, the expressions—  

iii.   “associate” shall have the meaning as assigned to it in clause (e) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Fund Management) Regulations, 2022 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019);

iv.   “fund management entity” shall have the same meaning as assigned to it in clause (p) of subregulation (1) of regulation 2 of the International Financial Services Centres Authority (Fund Management) Regulations, 2022 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019);  

v.     "specified fund" shall have the same meaning as assigned to it in sub-clause (i) of clause (c) of the Explanation to clause (4D) of section 10 of the Act.”. ]

Notes:

1. Inserted by the Income-tax (Seventeenth Amendment), Rules, 2022, Notification dated 16.06.2022.

2. . Inserted by the Income-tax (Second Amendment) Rules, 2025 dated 27.01.2025.