Section 9A Income Tax Act 1961: Offshore Fund Manager Safe Harbour

Section 9A created a safe harbour for qualifying offshore investment funds using an eligible fund manager in India. From 1 April 2026, the current framework is contained in section 9(12) and Schedule I of the Income-tax Act, 2025, while the repealed Income-tax Act, 1961 continues to matter where the statutory savings and transition provisions apply.

What Section 9A of the Income-tax Act, 1961 provided

Section 9A was inserted by the Finance Act, 2015 with effect from 1 April 2016. In substance, it provided that, notwithstanding section 9(1), fund-management activity carried out through an eligible fund manager on behalf of an eligible investment fund would not constitute a business connection in India of that fund, subject to the conditions of the section.

Current law from 1 April 2026

The corresponding rule is now found in section 9(12) of the Income-tax Act, 2025 read with Schedule I. The structure remains a safe harbour for an eligible offshore investment fund and eligible fund manager, but the current conditions should be checked under the 2025 Act and the Income-tax Rules, 2026 rather than relying only on the old Section 9A text.

Conditions for an eligible investment fund under current Schedule I

An eligible investment fund is a fund established, incorporated or registered outside India that collects funds from its members for investment for their benefit and satisfies the prescribed statutory conditions. Important conditions include:

1. The fund must not be a person resident in India.
2. It must have the required connection with a treaty country or specified territory as provided in Schedule I.
3. Aggregate direct participation or investment by persons resident in India must not exceed 5% of the fund corpus on 1 April and 1 October of the tax year, subject to the statutory exclusions and four-month cure mechanism.
4. The fund and its activities must be subject to applicable investor-protection regulation in the relevant country or specified territory.
5. Subject to the statutory exceptions, the fund must have at least 25 members who are, directly or indirectly, not connected persons.
6. A member together with connected persons must not have participation interest exceeding 10%.
7. The aggregate participation interest of ten or fewer members together with their connected persons must be less than 50%.
8. The fund must not invest more than 25% of its corpus in any one entity under the current Schedule I rule.
9. The fund must not invest in its associate entity.
10. The monthly average corpus must generally be at least Rs. 100 crore, subject to the special rule for a newly established or incorporated fund and the rule for a fund wound up during the tax year.
11. The fund must not carry on, control or manage, directly or indirectly, any business in India.
12. Apart from activities of the eligible fund manager, the fund must not itself engage in an activity constituting a business connection in India or have another person acting on its behalf whose activities create such a business connection.
13. Remuneration paid to the eligible fund manager must not be less than the amount calculated in the prescribed manner.

The member-number and concentration conditions have statutory exceptions for specified government, central-bank, sovereign and notified funds.

Who is an eligible fund manager?

Under the current Schedule I framework, an eligible fund manager is a person engaged in fund management who satisfies the prescribed conditions. Broadly, the manager must not be an employee or connected person of the eligible investment fund, must hold the required registration, must act in the ordinary course of the fund-management business, and together with connected persons must not be entitled to more than 20% of the profits accruing or arising to the eligible investment fund from transactions carried out through that manager.

Reporting and compliance

Schedule I requires an eligible investment fund to furnish the prescribed statement within 90 days from the end of the tax year, containing information on fulfilment of the statutory conditions and other prescribed information or documents.

IFSC fund managers

Schedule I authorises the Central Government, by notification, to relax or modify specified conditions for an eligible investment fund and its eligible fund manager where the fund manager is located in an International Financial Services Centre and has commenced operations on or before 31 March 2030, subject to the applicable statutory and notified requirements.

Meaning of important terms

Associate

Under Schedule I, an associate is broadly an entity in which specified persons connected with the investment fund or its fund manager hold, individually or collectively, more than 15% of the share capital or interest.

Connected person

For the current Schedule I framework, the expression takes its meaning from section 184(5) of the Income-tax Act, 2025.

Corpus

Corpus means the total amount of funds raised for investment by the eligible investment fund as on a particular date.

Entity

Entity means an entity in which an eligible investment fund makes an investment.

Specified regulations

The current Schedule I refers to the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020, the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, and such other SEBI regulations as may be notified for this purpose.

How the old Section 9A remains relevant

The repeal of the Income-tax Act, 1961 does not erase its operation for all earlier matters. Section 536 of the Income-tax Act, 2025 preserves, among other things, previous operation of the repealed Act and provides for continuation of specified proceedings relating to tax years beginning before 1 April 2026. Accordingly, the applicable law depends on the tax year, proceeding and transition rule involved.

Official references

For current statutory text and forms, refer to the official Income Tax Department resources:

• Income-tax Act, 2025 and Income-tax Rules, 2026
• Income-tax Act, 2025 - official PDF
• Forms, FAQs and guidance under the Income-tax Rules, 2026
• Income Tax Department - Section 9 reference

Editorial note: This article is a general statutory reference. For a transaction or proceeding spanning the 1961 and 2025 Acts, the repeal and savings provisions and the law applicable to the relevant tax year should be checked before relying on a section number or compliance form.