Schedule I — CONDITIONS FOR CERTAIN ACTIVITIES NOT TO CONSTITUTE BUSINESS CONNECTION IN INDIA

[See section 9(12)]
CONDITIONS FOR CERTAIN ACTIVITIES NOT
TO CONSTITUTE BUSINESS CONNECTION IN INDIA
1. (1) The eligible investment fund referred to in section 9(12), means a fund es -
tablished or incorporated or registered outside India, which collects funds from
its members for investing it for their benefit and fulfils the following conditions:––
( a) the fund is not a person resident in India;
( b) the fund is––
( i) a resident of a country or a specified territory with which an agree-
ment referred to in section 159(1) or (2) has been entered into;
or
( ii) established or incorporated or registered in a country or a specified
territory as notified in this behalf;
( c) the aggregate participation or investment in the fund, directly, by persons
resident in India does not exceed 5% of the corpus of the fund as on the
1st April and the 1st October of the tax year, subject to the conditions
that—
( i) for the purposes of calculation of such aggregate participation or
investment in the fund, any contribution made by the eligible fund
manager during the first three years of operation of the fund, not
exceeding twenty-five crore rupees, shall not be taken into account;
( ii) where the aforesaid aggregate participation or investment in the
fund exceeds 5% on the 1st April or the 1st October of the tax year,
the condition mentioned in this clause shall be deemed to be satis-
fied, if it is satisfied within four months of the 1st April or the 1st
October of such tax year;
( d) the fund and its activities are subject to applicable investor protection
regulations in the country or specified territory where such fund is es -
tablished or incorporated or is a resident;
( e) the fund has a minimum of twenty-five members who are, directly or
indirectly, not connected persons;
( f) any member of the fund along with connected persons shall not have any
participation interest, directly or indirectly, in the fund exceeding 10%;
( g) the aggregate participation interest, directly or indirectly, of ten or less
members along with their connected persons in the fund, shall be less
than 50%;
( h) the fund shall not invest more than 25% of its corpus in any entity;
( i) the fund shall not make any investment in its associate entity;
( j) the monthly average of the corpus of the fund shall not be less than one
hundred crore rupees subject to the following:––
( i) if the fund has been established or incorporated in the tax year,
then corpus of fund shall not be less than one hundred crore rupees
at the end of twelve months from the last day of the month of its
establishment or incorporation; and
( ii) this clause shall not apply to a fund which has been wound up in
the tax year;
( k) the fund shall not carry on or control and manage, directly or indirectly,
any business in India;
( l) the fund is neither engaged in any activity which constitutes a business
connection in India nor has any person acting on its behalf whose activ-
ities constitute a business connection in India other than the activities
undertaken by the eligible fund manager on its behalf;
( m) the remuneration paid by the fund to an eligible fund manager in respect
of fund management activity undertaken by him on its behalf is not less
than the amount calculated in such manner, as may be prescribed.
(2) The conditions specified in paragraph (1)(e), (f) and (g) shall not apply, in case of—
( a) an investment fund set up by the Government or the Central Bank of a
foreign State or a sovereign fund; or
( b) such other fund as the Central Government may, by notification, specify
in this behalf, subject to conditions, if any.
(3) The eligible fund manager, referred to in section 9(12), in respect of an eligible
investment fund, means any person who is engaged in the activity of fund manage-
ment and fulfils the following conditions:––
( a) the person is not an employee of the eligible investment fund or a con -
nected person of the fund;
( b) the person is registered as a fund manager or an investment advisor in
accordance with the regulations as specified;
( c) the person is acting in the ordinary course of his business as a fund
manager;
( d) the person along with his connected persons shall not be entitled, directly
or indirectly, to more than 20% of the profits accruing or arising to the
eligible investment fund from the transactions carried out by the fund
through the fund manager.
(4) Every eligible investment fund shall, in respect of its activities in a tax year, fur-
nish within ninety days from the end of the tax year, a statement in the prescribed
form to the prescribed income-tax authority containing information relating to the
fulfilment of the conditions specified in this Schedule, and also provide such other
relevant information or documents, as may be prescribed.
(5) The provisions of this Schedule shall apply as per such guidelines and in such
manner as the Board may prescribe in this behalf.
(6) The Central Government may, by notification, specify that any one or more of
the conditions specified in sub-paragraph (1) or (3) shall not apply or shall apply
with such modifications, as specified in case of an eligible investment fund and its
eligible fund manager, if––
( i) the eligible fund manager is located in an International Financial Services
Centre; and
( ii) has commenced its operations on or before the 31st March, 2030.
2. In this Schedule,—
( a) “associate” means an entity in which a director or a trustee or a partner
or a member or a fund manager of the investment fund, or a director or
a trustee or a partner or a member of the fund manager of such fund,
holds, either individually or collectively, share or interest, being more
than 15% of its share capital or interest, as the case may be;
( b) “connected person” shall have the meaning assigned to it in section
184(5);
( c) “corpus” means the total amount of funds raised for the purpose of in -
vestment by the eligible investment fund as on a particular date;
( d) “entity” means any entity in which an eligible investment fund makes an
investment; and
( e) “specified regulations” means the Securities and Exchange Board of India
(Portfolio Managers) Regulations, 2020 or the Securities and Exchange
Board of India (Investment Advisers) Regulations, 2013, or such other
regulations made under the Securities and Exchange Board of India Act,
1992 (15 of 1992), which may be notified in this regard.