The Central Board of Direct Taxes on 9th March, 2021 has issued the Income-tax (2nd Amendment) Rules. The Income Tax Rules, 1962 provides that the amount of remuneration to be paid by an investment fund to a fund manager shall be:
- In case where the fund is Category-I foreign portfolio investor the amount of remuneration shall be 0.10 per cent of the asset under management.
- In other cases, the amount of remuneration shall be, –
- 0.30 per cent of the asset under management; or
- 10 per cent of profits derived by the fund in excess of the specified hurdle rate from the fund management activity undertaken by the fund manager, where it is entitled only to remuneration linked to the income or profits derived by the fund; or
- 50 per cent of the management fee, whether in the nature of fixed charge or linked to the income or profits derived by the fund from the management activity undertaken by the fund manager, paid by such fund in respect of the fund management activity undertaken by the fund manager as reduced by the amount incurred towards operational expenses including distribution expenses, if any:
In case where the amount of remuneration is lower than the amount arrived likewise, the fund may, at its option, apply to the Member, Central Board of Direct Taxes seeking approval of the Board under for that lower amount to be the amount of remuneration, and, on receipt of such application the Board may, after satisfying itself considering the relevant facts, approve such lower amount to be the amount of remuneration.
This amendment provides the procedure to make such application:
- The application shall be made three months before the beginning of the previous year for which the fund seeks the approval.
- A committee as notified by the Board, shall examine the application and submit its recommendations regarding grant of approval or otherwise and the conditions, if any, subject to which such an approval is to be granted.
- The committee shall be headed by a Principal Chief Commissioner or Chief Commissioner, as the case may be, and consist of two other Income-tax authorities not below the rank of Commissioner.
- The committee on behalf of the Board may, before giving its recommendation, call for such documents or information from the investment fund as it may consider necessary and may call for further details or information from the fund as well as from the Income-tax authorities and other Departments or agencies, as it may deem fit.
The Board, on the basis of the recommendations of the committee, shall, within sixty days from the end of the month in which the application has been made,—
- by an order in writing, grant approval to the fund subject to such conditions as it may deem fit; or
- for reasons to be recorded in writing, reject the application.
