Draft Income Tax Rule 142 – Conditions referred to in Schedule VI [Note 1(g)(ii)(B)] required to be fulfilled by an investment division of an offshore banking unit
Draft Rule 142 of the Income-tax Rules, 2026 prescribes the conditions that must be fulfilled by an investment division of an offshore banking unit for the purposes of Schedule VI [Note 1(g)(ii)(B)]. The rule mandates that such division maintain separate accounts reflecting true and fair details of all transactions, ensuring proper recording and apportionment of direct and indirect expenses relating to income referred to in Rule 141 and other incomes. The accounts must be audited by an “accountant” before the specified date, and the audit report must be furnished electronically in Form No. 71 under digital signature. The investment division is further required to maintain proper documentation of inbound remittances for buying and selling investments and the utilisation of inward remittances made to India, along with bank statements of all accounts, contract notes for purchase and sale of securities, and statements of securities issued by the custodian. The rule provides that income attributable to an eligible investment division shall not qualify for exemption under section 11(1) read with Schedule VI (Table Sl. Nos. 1 to 4) unless these compliance requirements are met. It also defines key expressions including “accountant,” “registered investment division,” “securities,” and “specified date,” the latter being one month prior to the due date under section 263(1)(b) for the relevant tax year.
Extract of Rule No. 142 of Draft Income-tax Rules, 2026
Rule 142
Conditions referred to in Schedule VI [Note 1(g)(ii)(B)] required to be fulfilled by an investment division of an offshore banking unit.
(1) For the purposes of Schedule VI [Note 1(g)(ii)(B)], an investment division of an offshore banking unit shall fulfil the following conditions, namely: —
(i) it shall maintain separate accounts for the registered investment division reflecting the true and fair accounts of all transactions relating to the investment division and which shall ensure that direct and indirect expenses relating to the incomes referred to in rule 141 and other incomes are properly recorded, accounted for, and apportioned thereto;
(ii) it shall get the accounts, referred to in clause (a), audited by an accountant before the specified date and such accountant shall furnish by that date the report of such audit in Form No. 71 electronically under digital signature, which is duly verified in the manner indicated therein;
(iii) it shall maintain proper documentation in respect of, —
(a) inbound remittance for buying and selling the investments; and
(b) the use of inward remittance made to India;
(iv) it shall maintain bank statement of all accounts of the registered investment division;
(v) it shall maintain contract notes relating to purchase and sale of securities by the registered investment division; and
(vi) it shall maintain a statement of securities issued by the custodian.
(2) The income of a specified fund attributable to an eligible investment division shall not be exempt under section 11(1) read with Schedule VI [Table: Sl. Nos. 1 to 4] unless it complies with sub-rule (3) and (4).
(3) For the purposes of this rule, —
(f) “accountant” shall have the same meaning as assigned to it in section 515(3)(b);
(g) “investment division of an offshore banking unit” shall have the same meaning as assigned to it in Schedule VI [Note 1(b)];
(h) “registered investment division” shall mean an investment division of an offshore banking unit which fulfils the condition specified in Schedule VI [Note 1(g)(ii)(A)];
(i) “securities” shall have the same meaning as assigned to it in Schedule VI [Note (1)(e)];
(j) “specified date”, in relation to the accounts of the registered investment division of any tax year, means a date one month prior to the due date specified under section 263(1)(b) for the said tax year;
