Circular No. 1/2021

Amount of remuneration prescribed under section 9A 3 m of the income tax act 1961

What this is

Circular No. 1/2021 was issued by the Central Board of Direct Taxes on 15 January 2021. Its subject is Amount of remuneration prescribed under section 9A 3 m of the income tax act 1961.

What it does

Relieves offshore funds of the prescribed fund-manager remuneration floor for two years. Clause (m) of sub-section (3) of section 9A, as amended with effect from 1 April 2019, requires remuneration to an eligible fund manager to be not less than a prescribed amount, and sub-rule (12) of rule 10V prescribes it. For the financial years 2019-20 and 2020-21, where the remuneration actually paid is lower than the prescribed amount but is at arm's length, the Board directs that this is sufficient compliance with clause (m). For the financial year 2021-22 the prescribed amount applies as it stands, and an application under the second proviso to sub-rule (12) for lower remuneration was to be filed not later than February 2021.

Why it was issued

Representations said compliance for the financial year 2019-20 was impossible because Notification No. 29/2020 dated 27 May 2020, which inserted sub-rules (12) and (13) of rule 10V, came after that financial year had ended and the next one had already begun.

Who it reaches

Eligible investment funds relying on section 9A for the two financial years
Eligible fund managers in India managing such funds
Advisers on the fund-manager safe harbour and on rule 10V applications

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.9A	s.9
s.119	s.239

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it.

F. No. 1370142/2/2021-T PL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(Tax Policy and Legislation Division)
******
Circular No. 1 of 2021
New Delhi,~.January , 2021
Amount of remuneration prescribed under section 9A(3)(m) of the Income-tax Act, 1961
Finance (No 2) Act, 2019, inter alia, amended clause (m) of sub-section (3) of section 9A
of the Income-tax Act, 1961 (the Act) w.e.f. 01.04.2019 to provide for payment of remuneration
by an eligible investment fund to an eligible fund manager in respect of fund management activity
undertaken by him on its behalf to be not less than the amount calculated in such manner as may
be prescribed.

2. Accordingly, rule 10V of the Income-tax Rules, 1962 (the Rules) has been amended, w.e.f.
01.04.2019, vide Notification No 29/2020 dated 27.05.2020 by way of, inter alia, insertion of subrules (12) and (13) therein. Sub-rule (12) provides for the amount of remuneration to be paid by
the fund to a fund manager. 2nd proviso of the said sub-rule provides that the fund may seek
Board's approval in case where the amount of remuneration is lower than the amount so
prescribed.

3. In this regard, representations have been received expressing inability to comply with the
provisions of sub-rule 12 of rule 10V of the Rules regarding the amount of remuneration to be paid
by the fund to a fund manager for the financial year 2019-20 as the said Notification No 29/2020
was notified after the financial year got over and the financial year 2020-21 had already
commenced.

4. In order to avoid genuine hardship in such cases, the Board, in exercise of powers conferred
under section 119 of the Act, has decided to provide that for the financial years 2019-20 and 2020-
21 in cases where the remuneration paid to the fund manager is lower than the amount of
remuneration prescribed under sub-rule (12) of rule lOV of the Rules, but is at arm's length, it
shall be sufficient compliance to clause (m) of sub-section (3) of section 9A of the Act.

5. It is stated that the remuneration to be paid to the fund manager, for the financial year 2021-
22, shall be in accordance with sub-rule (12) of rule 10V of the Rules and the application for lower
remuneration in terms of 2nd proviso for this year, if any, may be filed not later than 15l February, 2021. O~
~\
~
(Vipul Agarwal)
Director (Tax Policy and Division)-l

Copy to the:
1. PSI OSD to FMI PS/OSD to MoS(F).
2. PS to the Finance Secretary.
3. Chairman and Members, CBDT.
4. Joint Secretaries/ CsIT/ Directors/ Deputy Secretaries/ Under Secretaries, CBDT.
5. C&AO of India (30 copies).
6. JS & Legal Adviser, Ministry of Law & Justice. New Delhi.
7. Institute of Chartered Accountants of India.
8. CIT (M&TP). Official Spokesperson of CBDT.
9. Principal DOlT (Systems) for uploading on departmental website.

What to watch

The relaxation is only for the financial years 2019-20 and 2020-21 and only where the lower remuneration is at arm's length — a below-prescribed figure that is not at arm's length gets nothing.
From the financial year 2021-22 the sub-rule (12) amount governs, and the route to a lower figure is the Board's approval under the second proviso, not this circular.
The date given for that application for 2021-22 is garbled in the text as read; check the proviso and the notification before relying on the day.
The circular does not relax any other condition of sub-section (3) of section 9A — only clause (m).

Where you meet it

On an assessment testing whether a fund satisfied the section 9A conditions, or when advising a fund manager's remuneration for a year covered by rule 10V.

What it names

Rules it names. Rule 10V, 12 of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.

It mentions. Circular No. 1/2021

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 59/2022 [F. No. 370142/11/2022-TPL] / S.O. 2602(E) — Ministry of Finance 6 June 2022
Circular No. 12/2021 — Extension of time limits of certain compliances to provide relief to taxpayers in view of the severe pandemic 25 June 2021
Notification No. 13/2021 [F. No. 142/15/2015-TPL]/ GSR No. 162(E) — Ministry of Finance 9 March 2021
Notification No. 41/2020 [F. No. 142/15/2015-TPL- Part (1)] / SO 2148(E) — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 30 June 2020
Circular No. 8/2019 — Clarification regarding definition of fund manager under section 9A 4 b of the income tax act 1961 10 May 2019
Notification No. 27/2019 [F.No. 500/182/2018 -FT&TR - V] /SO 1420(E) — jftLVªh laö Mhö ,yö&33004@99 REGD. NO. D. L.-33004/99 20 March 2019

← Circular No. 2/2021 · Circular No. 21/2020 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.