The Central Board of Direct Taxes (CBDT) allowed asset management companies (AMCs) to become full-fledged managers from mere advisors. They will handle the offshore funds from India. CBDT removed taxation that constrained Indian AMCs from taking up direct fund management activity for the offshore funds.
The board clarified that AMCs, approved by SEBI, will be designated as ‘eligible fund manager’ and be entitled to benefits under Section 9A of the income tax law. This means that the management activities carried out by AMCs will not be regarded as a business connection.
It will also not result in a taxable presence of such offshore funds in India. Even though the overseas fund is managed by AMCs from India, there will be no adverse tax consequences for these funds. Hence, their global incomes will not be subjected to tax in India.
According to an expert, “The extension of the asset management safe harbour to mutual fund management companies is a welcome move. This development is timely in view of recent approvals granted and open opportunities for mutual fund managers to target a different segment. Overseas regulations would also need to be adhered to before going down this route”.