CBDT Seeks To Provide Minimum Remuneration For Fund Managers

CBDT Seeks To Provide Minimum Remuneration For Fund Managers
Dipen Pradhan - 06 December 2019

New Delhi, December 6: The Central Board of Direct Taxes (CBDT) has sought recommendations with regards to remuneration of India-based fund managers managing overseas fund.

It issued a draft notification on Thursday seeking inputs with respect to ‘fund manager regime’ under Section 9A of the Income-Tax Act, 1961, for a special taxation regime in respect to certain offshore funds in context of their fund managers being located in India.

“It is provided that in case of an eligible investment fund, the fund management activity carried out through an eligible fund manager acting on behalf of such fund shall not constitute business connection in India of the said fund,” the CBDT said.

According to Sahil Arora, Director and Group Head, Investments, Paisabazaar, “The proposed rules seek to provide clarity regarding minimum remuneration for such fund managers. The draft rules, once implemented, will simplify the regulatory environment for such fund managers and incentivise offshore fund managers to manage funds from India."

Citing amended clause (m) of sub-section (5) of section 9A, CBDT said that the remuneration paid by the fund to an eligible fund manager is not less than the amount calculated in such manner as may be prescribed.

“Accordingly, the manner for calculation of the amount, compared to which the remuneration paid to the eligible fund manager should not be less, is required to be prescribed,” it added.

Amit Singhania, partner, Shardul Amarchand Mangaldas, said, “The recent draft proposal elucidates the manner in which the arms length remuneration should be computed. This seems to settle the transfer pricing related ambiguity in meeting the prescribed condition for the purposes of qualifying the eligible fund manager. This is a positive step for the industry.”