Centre proposes to ease tax relief conditions for offshore funds
Centre proposes to ease tax relief conditions for offshore funds
The Bill, which has been circulated by the Government among the members of Parliament, is expected to be introduced by Finance Minister Nirmala Sitharaman in the Lok Sabha soon.
New Delhi: To strengthen India's position as a global fund management hub, the Government has proposed to substantially relax the eligibility conditions for an Eligible Investment Fund (EIF) managed from India to avail tax exemption on its global income.
As per the Taxation and Other Laws (Amendment) Bill, 2026, to avail tax exemption on global income, offshore funds would no longer be required to satisfy the conditions like minimum investor threshold of 25 members, maximum 10 per cent participation interest for a single investor, restriction on investing more than 25 per cent of the corpus in a single entity, restriction on investments in associate entities and minimum monthly average corpus requirement of Rs 100 crore.
The Bill, which has been circulated by the Government among the members of Parliament, is expected to be introduced by Finance Minister Nirmala Sitharaman in the Lok Sabha soon.
The proposed amendments in the Bill also seek to remove separate exemption conditions for funds operating from the International Financial Services Centre (IFSC).
This would eliminate the existing ambiguity between IFSC and non-IFSC offshore funds, while introducing a uniform eligibility framework, ensuring that the same conditions apply to all eligible investment funds managed from India. “These proposed changes are expected to significantly enhance the attractiveness of India's onshore fund management ecosystem for offshore funds and facilitate greater relocation of offshore fund management activities to India,” said Abheet Sachdeva, Partner- M&A Tax, Nangia Global.
The Bill also seeks to replace the Ordinance promulgated on June 5, which provided tax exemption to income from interest and capital gains made by FPIs from investments in G-Secs.
The Ordinance was promulgated to attract foreign capital to ease pressure on the depreciating rupee due to the West Asia crisis.
The statement of objects and reasons of the Bill said that the Ordinance was promulgated with the objective of mitigating the impact of external economic shocks, ensuring stability in the domestic economy and supporting key sectors affected by the prevailing global conditions by amending certain provisions of the Act.
“Subsequent policy assessment in view of representations received from stakeholders after the enactment of the Finance Act, 2026 has indicated that, while the objective sought to be achieved through the Ordinance continues to remain relevant, additional taxation measures are necessary to comprehensively achieve the same objective.
“Further, having regard to the continuing global developments and the need for a timely and coherent response, it is considered appropriate to incorporate these measures in the present Bill itself,” it said.
