CBDT notifies countries with ‘Original Fund’ eligible for Sec. 47 (viiac)/(viiad) exemption

Notification no. 46/2022, dated 27-04-2022

To promote the establishment of entities in IFSC and make relocation a tax-neutral transfer, the Finance Act, 2021 has inserted clauses (viiac) and (viiad) to section 47 in the Income-tax Act.

Section 47(viiac) provides that any transfer of a capital asset by the original fund to the resultant fund at the time of relocation of the entity to an IFSC shall not be considered as a transfer. Similarly section 47(viiad) provides that any transfer by a shareholder (or unitholder or interest holder) of a capital asset being a share (or unit or interest) held by him in the original fund in consideration for the share (or unit or interest) in the resultant fund shall not be considered as a transfer.

Thus, such a transfer shall not be subject to tax under the head capital gains.
“Original Fund” has been defined to mean a fund established or incorporated or registered outside India, which collects funds from its members for investing for their benefit and fulfills prescribed conditions.

One of such prescribed conditions is that the fund is a resident of a country or a specified territory with which India has entered into DTAA or is established or incorporated or registered in a notified country or specified territory.
The Central Board of Direct Taxes (CBDT) has notified a total of 150 countries and specified territories in which the ‘Original Fund’ should be resident to claim the relief provided by Sections 47(viiac) and 47(viiad).

The notification shall come into force with effect from 27-04-2022.

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