I am setting up an India-based manager for an offshore fund. What does the manager himself have to satisfy, and is there a floor on the fee the fund must pay him?
Section 9A(4) defines the eligible fund manager as a person engaged in the activity of fund management who satisfies four conditions: he is not an employee of the fund or a connected person of the fund; he is registered as a fund manager or an investment advisor in accordance with the specified regulations; he is acting in the ordinary course of his business as a fund manager; and he, along with his connected persons, is not entitled, directly or indirectly, to more than twenty per cent of the profits accruing or arising to the fund from the transactions carried out by the fund through him. Separately, condition (m) of section 9A(3) requires the fund's remuneration to him to be not less than a prescribed amount, and rule 10V(12) prescribes that amount.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2025-04-01, reported as Income-tax Act 1961, s.9A(4) and s.9A(3)(m), as printed on the Income-tax Department's section page carrying the year stamp 2025; Income-tax Rules 1962, rule 10V, sub-rules (12) to (15), as printed on the Department's rule page (rule pages carry no year stamp). It bears on section 9A, section 9A(3), section 9A(4), section 9A(9), section Rule 10V, section Rule 10VA, section 92E, section 11UB of the Income Tax Act 1961, in Residence & Treaty Benefit and How Tax Law Is Read matters.
The manager conditions are the ones a commercial deal walks into without noticing. Condition (d) of section 9A(4) is a carried-interest cap in substance: if the manager and his connected persons are entitled to more than twenty per cent of the profits the fund makes on transactions carried out through him, he is not an eligible fund manager and the safe harbour in section 9A(1) is gone for the fund. Rule 10V(15) softens this in one specific way — remuneration in the nature of a FIXED charge, not dependent on the income or profits derived by the fund, is not counted in those profits, provided condition (m) is satisfied and the fixed charge was agreed by the manager IN WRITING at the beginning of the relevant fund management activity. That written-at-the-outset requirement is easy to miss and impossible to cure later. On the fee floor, rule 10V(12) sets 0.10 per cent of assets under management for a fund that is a Category-I foreign portfolio investor of the descriptions listed there, and for other cases offers three alternatives: 0.30 per cent of assets under management; ten per cent of profits derived by the fund in excess of the specified hurdle rate, where the manager is entitled only to income- or profit-linked remuneration; or fifty per cent of the management fee reduced by operational expenses including distribution expenses, that third alternative applying only where the fund is also paying a management fee to another fund manager. Where the actual fee is lower than the figure so arrived at, the fund is not automatically out — the second proviso to rule 10V(12) lets it apply to the Board under rule 10VA for that lower amount to be approved as the amount of remuneration.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Not a case. Section 9A(4) provides that the eligible fund manager, in respect of an eligible investment fund, means any person engaged in the activity of fund management who fulfils four conditions: (a) the person is not an employee of the eligible investment fund or a connected person of the fund; (b) the person is registered as a fund manager or an investment advisor in accordance with the specified regulations; (c) the person is acting in the ordinary course of his business as a fund manager; and (d) the person along with his connected persons shall not be entitled, directly or indirectly, to more than twenty per cent of the profits accruing or arising to the eligible investment fund from the transactions carried out by the fund through the fund manager. Section 9A(3)(m) requires that the remuneration paid by the fund to an eligible fund manager in respect of the fund management activity undertaken by him on its behalf is not less than the amount calculated in such manner as may be prescribed. Rule 10V(12) prescribes that amount: in the case of a fund that is a Category-I foreign portfolio investor referred to in item (i), item (ii) or item (iii), and sub-item (III) of item (iv) of clause (a) of regulation 5 of the SEBI (Foreign Portfolio Investors) Regulations 2019, the amount of remuneration is 0.10 per cent of the asset under management; in other cases it is (a) 0.30 per cent of the asset under management, or (b) ten 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 he is entitled only to remuneration linked to the income or profits derived by the fund, or (c) fifty per cent of the management fee, whether a fixed charge or linked to income or profits, paid by the 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, this last alternative applying only where the fund is also making payment of a management fee to another fund manager. The Explanation to rule 10V defines 'asset under management' as the annual average of the monthly average of the opening and closing balances of the value of such part of the fund which is managed by the fund manager, defines 'management fee' by reference to an accountant's certificate, and defines 'specified hurdle rate' as a pre-defined threshold beyond which the fund agrees to pay a share of the profits earned by the fund from the fund management activity undertaken by the fund manager.
Four conditions define the eligible fund manager under section 9A(4), and all four must be met. Rule 10V(14) provides that, for the purposes of clause (a) of section 9A(4), a fund manager is not to be considered a connected person of the fund merely for the reason that the fund manager is undertaking fund management activity of the said fund. Rule 10V(15) provides that, for the purposes of clause (d) of section 9A(4), remuneration paid to the fund manager by the fund which is in the nature of a fixed charge and not dependent on the income or profits derived by the fund from the fund management activity shall not be included in the profits referred to in that clause, if the conditions in section 9A(3)(m) are satisfied and such fixed charge has been agreed by the fund manager in writing at the beginning of the relevant fund management activity. Rule 10V(12) prescribes the minimum remuneration for the purposes of section 9A(3)(m), on the two bases and three alternatives set out above; its second proviso permits the fund, where the actual amount of remuneration is lower than the amount so arrived at, to apply to the Member, Central Board of Direct Taxes referred to in rule 10VA(2) seeking the Board's approval of that lower amount as the amount of remuneration, and its third proviso applies sub-rules (3) to (12) of rule 10VA to such an application mutatis mutandis. Rule 10V(13) requires the fund manager, in addition to any report required under section 92E, to obtain a report from an accountant in respect of the activity undertaken for the fund and to furnish it on or before the specified date in Form No. 3CEJA.
Not a judicial route. The manager conditions do the work that a transfer-pricing analysis would otherwise have to do. Section 9A takes the fund outside the Indian net; the risk that follows is that profit which economically belongs to activity performed in India is left offshore, either by paying the Indian manager too little or by routing his reward through a profit share that is itself outside the charge. Section 9A(3)(m) with rule 10V(12) meets the first risk by setting a floor on the fee; section 9A(4)(d) meets the second by capping the manager's profit entitlement at twenty per cent, so that a manager who is in substance the principal rather than a service provider falls outside the definition and takes the fund's safe harbour with him. Rule 10V(15) then carves the fixed fee back out of that cap, because a fixed fee is the very thing the floor in condition (m) is designed to secure; the written-at-the-outset requirement is what prevents the carve-out being constructed after the profits are known.
the person along with his connected persons shall not be entitled, directly or indirectly, to more than twenty per cent of the profits accruing or arising to the eligible investment fund from the transactions carried out by the fund through the fund manager.
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Handle my notice → Ask a CA on WhatsAppSection 9A(4) defines the eligible fund manager as a person engaged in the activity of fund management who satisfies four conditions: he is not an employee of the fund or a connected person of the fund; he is registered as a fund manager or an investment advisor in accordance with the specified regulations; he is acting in the ordinary course of his business as a fund manager; and he, along with his connected persons, is not entitled, directly or indirectly, to more than twenty per cent of the profits accruing or arising to the fund from the transactions carried out by the fund through him. Separately, condition (m) of section 9A(3) requires the fund's remuneration to him to be not less than a prescribed amount, and rule 10V(12) prescribes that amount. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 9A, section 9A(3), section 9A(4), section 9A(9), section Rule 10V, section Rule 10VA, section 92E, section 11UB of the Income Tax Act 1961. It is reported as Income-tax Act 1961, s.9A(4) and s.9A(3)(m), as printed on the Income-tax Department's section page carrying the year stamp 2025; Income-tax Rules 1962, rule 10V, sub-rules (12) to (15), as printed on the Department's rule page (rule pages carry no year stamp). The manager conditions are the ones a commercial deal walks into without noticing. Condition (d) of section 9A(4) is a carried-interest cap in substance: if the manager and his connected persons are entitled to more than twenty per cent of the profits the fund makes on transactions carried out through him, he is not an eligible fund manager and the safe harbour in section 9A(1) is gone for the fund. Rule 10V(15) softens this in one specific way — remuneration in the nature of a FIXED charge, not dependent on the income or profits derived by the fund, is not counted in those profits, provided condition (m) is satisfied and the fixed charge was agreed by the manager IN WRITING at the beginning of the relevant fund management activity. That written-at-the-outset requirement is easy to miss and impossible to cure later. On the fee floor, rule 10V(12) sets 0.10 per cent of assets under management for a fund that is a Category-I foreign portfolio investor of the descriptions listed there, and for other cases offers three alternatives: 0.30 per cent of assets under management; ten per cent of profits derived by the fund in excess of the specified hurdle rate, where the manager is entitled only to income- or profit-linked remuneration; or fifty per cent of the management fee reduced by operational expenses including distribution expenses, that third alternative applying only where the fund is also paying a management fee to another fund manager. Where the actual fee is lower than the figure so arrived at, the fund is not automatically out — the second proviso to rule 10V(12) lets it apply to the Board under rule 10VA for that lower amount to be approved as the amount of remuneration. If it applies to you, the first step is this: Check the manager's registration first: section 9A(4)(b) requires registration as a fund manager or investment advisor in accordance with the 'specified regulations', which section 9A(9)(e) defines as the SEBI (Portfolio Managers) Regulations 1993 or the SEBI (Investment Advisers) Regulations 2013 or such other SEBI regulations as may be notified.
Not a case. Section 9A(4) provides that the eligible fund manager, in respect of an eligible investment fund, means any person engaged in the activity of fund management who fulfils four conditions: (a) the person is not an employee of the eligible investment fund or a connected person of the fund; (b) the person is registered as a fund manager or an investment advisor in accordance with the specified regulations; (c) the person is acting in the ordinary course of his business as a fund manager; and (d) the person along with his connected persons shall not be entitled, directly or indirectly, to more than twenty per cent of the profits accruing or arising to the eligible investment fund from the transactions carried out by the fund through the fund manager. Section 9A(3)(m) requires that the remuneration paid by the fund to an eligible fund manager in respect of the fund management activity undertaken by him on its behalf is not less than the amount calculated in such manner as may be prescribed. Rule 10V(12) prescribes that amount: in the case of a fund that is a Category-I foreign portfolio investor referred to in item (i), item (ii) or item (iii), and sub-item (III) of item (iv) of clause (a) of regulation 5 of the SEBI (Foreign Portfolio Investors) Regulations 2019, the amount of remuneration is 0.10 per cent of the asset under management; in other cases it is (a) 0.30 per cent of the asset under management, or (b) ten 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 he is entitled only to remuneration linked to the income or profits derived by the fund, or (c) fifty per cent of the management fee, whether a fixed charge or linked to income or profits, paid by the 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, this last alternative applying only where the fund is also making payment of a management fee to another fund manager. The Explanation to rule 10V defines 'asset under management' as the annual average of the monthly average of the opening and closing balances of the value of such part of the fund which is managed by the fund manager, defines 'management fee' by reference to an accountant's certificate, and defines 'specified hurdle rate' as a pre-defined threshold beyond which the fund agrees to pay a share of the profits earned by the fund from the fund management activity undertaken by the fund manager. The matter was decided on 2025-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Four conditions define the eligible fund manager under section 9A(4), and all four must be met. Rule 10V(14) provides that, for the purposes of clause (a) of section 9A(4), a fund manager is not to be considered a connected person of the fund merely for the reason that the fund manager is undertaking fund management activity of the said fund. Rule 10V(15) provides that, for the purposes of clause (d) of section 9A(4), remuneration paid to the fund manager by the fund which is in the nature of a fixed charge and not dependent on the income or profits derived by the fund from the fund management activity shall not be included in the profits referred to in that clause, if the conditions in section 9A(3)(m) are satisfied and such fixed charge has been agreed by the fund manager in writing at the beginning of the relevant fund management activity. Rule 10V(12) prescribes the minimum remuneration for the purposes of section 9A(3)(m), on the two bases and three alternatives set out above; its second proviso permits the fund, where the actual amount of remuneration is lower than the amount so arrived at, to apply to the Member, Central Board of Direct Taxes referred to in rule 10VA(2) seeking the Board's approval of that lower amount as the amount of remuneration, and its third proviso applies sub-rules (3) to (12) of rule 10VA to such an application mutatis mutandis. Rule 10V(13) requires the fund manager, in addition to any report required under section 92E, to obtain a report from an accountant in respect of the activity undertaken for the fund and to furnish it on or before the specified date in Form No. 3CEJA.
Not a judicial route. The manager conditions do the work that a transfer-pricing analysis would otherwise have to do. Section 9A takes the fund outside the Indian net; the risk that follows is that profit which economically belongs to activity performed in India is left offshore, either by paying the Indian manager too little or by routing his reward through a profit share that is itself outside the charge. Section 9A(3)(m) with rule 10V(12) meets the first risk by setting a floor on the fee; section 9A(4)(d) meets the second by capping the manager's profit entitlement at twenty per cent, so that a manager who is in substance the principal rather than a service provider falls outside the definition and takes the fund's safe harbour with him. Rule 10V(15) then carves the fixed fee back out of that cap, because a fixed fee is the very thing the floor in condition (m) is designed to secure; the written-at-the-outset requirement is what prevents the carve-out being constructed after the profits are known. In the words reproduced by the source cited on this page: "the person along with his connected persons shall not be entitled, directly or indirectly, to more than twenty per cent of the profits accruing or arising to the eligible investment fund from the transactions carried out by the fund through the fund manager."
It was decided by the CBDT Circulars & Instructions on 2025-04-01 and is reported as Income-tax Act 1961, s.9A(4) and s.9A(3)(m), as printed on the Income-tax Department's section page carrying the year stamp 2025; Income-tax Rules 1962, rule 10V, sub-rules (12) to (15), as printed on the Department's rule page (rule pages carry no year stamp). Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 9A, section 9A(3), section 9A(4), section 9A(9), section Rule 10V, section Rule 10VA, section 92E, section 11UB, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Four conditions define the eligible fund manager under section 9A(4), and all four must be met. Rule 10V(14) provides that, for the purposes of clause (a) of section 9A(4), a fund manager is not to be considered a connected person of the fund merely for the reason that the fund manager is undertaking fund management activity of the said fund. Rule 10V(15) provides that, for the purposes of clause (d) of section 9A(4), remuneration paid to the fund manager by the fund which is in the nature of a fixed charge and not dependent on the income or profits derived by the fund from the fund management activity shall not be included in the profits referred to in that clause, if the conditions in section 9A(3)(m) are satisfied and such fixed charge has been agreed by the fund manager in writing at the beginning of the relevant fund management activity. Rule 10V(12) prescribes the minimum remuneration for the purposes of section 9A(3)(m), on the two bases and three alternatives set out above; its second proviso permits the fund, where the actual amount of remuneration is lower than the amount so arrived at, to apply to the Member, Central Board of Direct Taxes referred to in rule 10VA(2) seeking the Board's approval of that lower amount as the amount of remuneration, and its third proviso applies sub-rules (3) to (12) of rule 10VA to such an application mutatis mutandis. Rule 10V(13) requires the fund manager, in addition to any report required under section 92E, to obtain a report from an accountant in respect of the activity undertaken for the fund and to furnish it on or before the specified date in Form No. 3CEJA. It arises in Residence & Treaty Benefit and How Tax Law Is Read matters, on section 9A, section 9A(3), section 9A(4), section 9A(9), section Rule 10V, section Rule 10VA, section 92E, section 11UB of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Model the manager's total economics — fee plus carry, his own and his connected persons' — against the twenty per cent profit entitlement cap in section 9A(4)(d) before the fund documents are signed. If part of the manager's remuneration is a fixed charge, get it agreed in writing at the BEGINNING of the fund management activity, so that rule 10V(15) takes it out of the profit computation under section 9A(4)(d); a fixed fee documented later does not qualify. Work the fee floor under rule 10V(12) on the correct limb — 0.10 per cent of assets under management only where the fund is a Category-I FPI of the descriptions the rule lists, otherwise the three alternatives in clause (ii) — and use the Explanation's definition of assets under management, which is the annual average of the monthly average of the opening and closing balances of the part of the fund the manager actually manages. Where the negotiated fee is below the prescribed figure, apply to the Member, CBDT under the second proviso to rule 10V(12) read with rule 10VA for approval of that lower amount, rather than hoping the point is not taken. Do not assume the manager is disqualified merely because he manages the fund: rule 10V(14) provides in terms that a fund manager is not to be treated as a connected person of the fund merely for the reason that he undertakes the fund management activity of that fund. Furnish the accountant's report the machinery requires: rule 10V(13) requires the fund manager, in addition to any report under section 92E, to obtain and furnish a report from an accountant in Form No. 3CEJA on or before the specified date.
Still good law. Section 9A(4) was read on the Department's section page carrying the year stamp 2025, the highest year stamp located for this section; clause (m) of section 9A(3) was read a second time on the archived page carrying the year stamp 2024 (No. 1) and came back in identical words. Rule 10V was read in full on the Department's rule page; that page carries NO year stamp, so the rule could not be dated and I do not claim to have dated it, nor could I verify from it whether any later amendment to the rule exists. No judicial decision construing section 9A(4) or rule 10V was located: an indiankanoon search on 8 September 2026 for 'section 9A' with 'eligible fund manager' returned only the Rules and SEBI regulations pages and no judgment or Tribunal order. Section 9A(4), clauses (a) to (d), was re-read word-for-word on the indiankanoon bare-Act text of section 9A (doc 143797990) and came back identical, which is a route independent of the Department. Rule 10V(14) and rule 10V(15) were likewise confirmed word-for-word on the indiankanoon bare-rule text of rule 10V (doc 60297115), where they appear as sub-rules (11) and (12) of an earlier consolidation that runs only to sub-rule (12). It follows that the present sub-rules (12) and (13) — the remuneration formula and Form No. 3CEJA — are a later insertion with renumbering, and they could NOT be confirmed on any route other than the Department's own rule page. The internal references in sub-rule (12) (the SEBI (Foreign Portfolio Investors) Regulations 2019, and a fourth proviso keyed to the previous year beginning 1 April 2021 and applications made on or before 1 February 2021) place that insertion no earlier than 2019 and point to early 2021; that is a reading of the text as printed, not a dated notification. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This is a statutory entry, not a decision, and 'decided_on' is not a decision date. It is 1 April 2025, the date from which the version of section 9A read this pass takes effect. The commencement date of section 9A(4) itself, and the commencement date of rule 10V, were NOT established this pass: the Department's rule pages carry no 'Year:' stamp at all, so rule 10V cannot be dated the way a section can, and I do not imply that it has been dated. One conflict inside rule 10V should be understood before the rule is used. Sub-rule (7) requires the fund manager's accountant's report in Form No. 3CEJ, and sub-rule (13) requires it in Form No. 3CEJA; sub-rule (11) provides that 'the provisions of sub-rule (5) to sub-rule (10) shall not apply on or after the 1st day of April, 2019', which on the face of the rule switches off sub-rule (7) — and with it Form 3CEJ — from that date, leaving sub-rule (13) and Form 3CEJA as the live obligation. That is a reading of the rule as printed, not something a court has held. The tier value 'cbdt' is used because the library's fixed tier vocabulary has no value for a statutory entry. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Four conditions define the eligible fund manager under section 9A(4), and all four must be met. Rule 10V(14) provides that, for the purposes of clause (a) of section 9A(4), a fund manager is not to be considered a connected person of the fund merely for the reason that the fund manager is undertaking fund management activity of the said fund. Rule 10V(15) provides that, for the purposes of clause (d) of section 9A(4), remuneration paid to the fund manager by the fund which is in the nature of a fixed charge and not dependent on the income or profits derived by the fund from the fund management activity shall not be included in the profits referred to in that clause, if the conditions in section 9A(3)(m) are satisfied and such fixed charge has been agreed by the fund manager in writing at the beginning of the relevant fund management activity. Rule 10V(12) prescribes the minimum remuneration for the purposes of section 9A(3)(m), on the two bases and three alternatives set out above; its second proviso permits the fund, where the actual amount of remuneration is lower than the amount so arrived at, to apply to the Member, Central Board of Direct Taxes referred to in rule 10VA(2) seeking the Board's approval of that lower amount as the amount of remuneration, and its third proviso applies sub-rules (3) to (12) of rule 10VA to such an application mutatis mutandis. Rule 10V(13) requires the fund manager, in addition to any report required under section 92E, to obtain a report from an accountant in respect of the activity undertaken for the fund and to furnish it on or before the specified date in Form No. 3CEJA.
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