Taxation of Investment Fund - Section 115UB - Income Tax - Ready Reckoner - Income Tax

Taxation of Investment Fund - Section 115UB Investment Fund Investment Fund means Any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or a Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 [regulated under the International Financial Services Centres Authority (Fund Management) Regulations, 2022 made or under the International Financial Services Centres Authority Act, 2019. [ Explanation 1(a) of Section 115UB ] Computation of income of Investment fund In case No Loss Arise: - Net result of income of the investment fund without provided exemption of section 10(23FBA) In case of Loss Arise Net result of income of the investment fund without provided exemption of section 10(23FBA) is a loss under any head of income and such loss cannot be or is not wholly set-off against income under any other head of income of the said previous year, then,- Loss of Investment fund allowed to carried forward in following manner w.e.f. from 1 st April 2019 (i) Loss as a result of the computation under the head Profit and gains of business or profession , if any, shall be, (a) allowed to be carried forward and it shall be set off by the investment fund in accordance with the provisions of Chapter VI; and (b) ignored for the purposes of section 115UB(1); (ii) the loss other than the loss of PGBP [referred to in clause (i)], if any, shall also be ignored for the purposes of section 115UB(1), if such loss has arisen in respect of a unit which has not been held by the unit holder for a period of atleast 12 months. [ Section 115UB(2) ] The loss other than the loss under the head Profit and gains of business or profession , if any, accumulated at the level of investment fund as on the 31st day of March, 2019 , shall be, (i) deemed to be the loss of a unit holder who held the unit on the 31st day of March, 2019 in respect of the investments made by him in the investment fund, in the same manner as provided in section 115UB(1); and (ii) allowed to be carried forward by such unit holder for the remaining period calculated from the year in which the loss had occurred for the first time taking that year as the first year and shall be set off by him in accordance with the provisions of Chapter VI. However, the loss so deemed under this sub-section shall not be available to the investment fund on or after the 1st day of April, 2019. [ Section 115UB(2A) ] Taxability of Income of Investment Fund [ Section 115UB(4) ] The total income of the investment fund shall be charged to tax- (i) at the rate or rates as specified in the Finance Act (i.e. 30%) of the relevant year, where such fund is a company or a firm ; or (ii) at maximum marginal rate in any other case(other than Company or Firm). In other words, t ax Rates for Investment Fund in case of PGBP income- In case of Company/Firm 30% In any other case Maximum Marginal Rate Exemption of provided to Investment fund In computing the total income of a previous year of any person, any income falling within section 10(23FBA) shall not be included if any income of an investment fund other than the income chargeable under the head Profits and gains of business or profession ; Liability of TDS Deduction by the Investment Fund For income distributed by investment fund other then PGBP to Unit Holders , TDS has to be deducted by Investment Fund under section 194LBB (w.e.f. June 01, 2015) Resident Payee 10% Non-Resident or Foreign Company Payee Rate in force Taxability of Unit Holders All incomes received by unit holders from investment fund are taxable in hands of unit holders except PGBP income of investment fund section 115UB If the income accruing/arising/received by fund during PY has not been paid/credited to unit holder, the same shall be deemed to have been credited to the account of Investor on the last day of PY taxable in hands of unit holder. Note: If income already taxed in the year of accrual then not taxable in the year of receipt. [ Section 115UB(6) ] Any income accruing to received by a person being unit holder of an investment fund out of investment made in investment fund, shall be chargeable to income tax in the same manner as if it were the income accruing/received by Unit Holder in the same nature proportion. Clarification regarding taxability of income earned by a non-resident investor from off-shore investments routed through an Alternate Investment Fund. [ Circular no. 14/2019 dated July 3, 2019 ] The provision of dividend distribution tax under section 115-O or tax on distributed income under section 115R shall not apply to the income paid by the investment fund to its unit holder The income received by the investment fund would be exempt from TDS requirement a notification to this effect has been issued under section 197A(1F) . The provisions of Chapter XII-D or Chapter XII-E shall not apply to the income paid by an investment fund under this Chapter. [ Section 115UB(5) ] Filing of Return of Income by Investment Fund Investment Fund compulsory required to file its return of income under section 139(4F) . The person responsible for crediting or making payment of the income on behalf of an investment fund and the investment fund shall furnish, within such time as may be prescribed, to the person who is liable to tax in respect of such income (i.e. unitholder) in form No. 64C should be given on or before 30 th Jun immediately after the end of the financial year; and to the prescribed income-tax authority (i.e. PCIT/CIT) in form No. 64D should be uploaded on or before 30th November immediately after the end of the financial year. [ Section 115UB(7) ]