Relocation of funds refers to transferring assets from an overseas fund or its Special Purpose Vehicle to a new fund in India, under specific conditions. The Finance Bill 2025 has expanded the definition of a “resultant fund” to include retail schemes and Exchange Traded Funds (ETFs), which were previously limited to Category I, II, or III Alternative Investment Funds (AIFs) regulated under SEBI or IFSCA guidelines. This amendment allows for the tax-neutral relocation of these funds, provided the relocation meets the specified criteria. Additionally, partnership firms can now also be considered “resultant funds” if they are set up as trusts, companies, or limited liability partnerships in India. The change is designed to encourage retail schemes and ETFs to relocate to the International Financial Services Centre (IFSC), providing them with a favorable regulatory environment.
Page Contents
- FAQs: Incentives to IFSC- Inclusion of retail schemes and Exchange Traded Funds (ETF)s in existing relocation regime of funds of IFSCA- Budget 2025
- Q.1 What is relocation of funds?
- Q.2 What is a resultant fund?
- Q.3 What are the changes made to the definition of ‘resultant fund’ in section 47(viiad) of the Income tax Act, 1961 and the changes made by Finance Bill 2025?
- Q.4 What is the implication of the amendment made to section 47(viiad)?
- Q.5 Can a partnership firm be treated as a “resultant fund” under this section 47(viiad)?
- Q.6 Who will benefit from the amendment made to section 47(viiad)?
FAQs: Incentives to IFSC- Inclusion of retail schemes and Exchange Traded Funds (ETF)s in existing relocation regime of funds of IFSCA- Budget 2025
Q.1 What is relocation of funds?
Ans. The transfer of assets of a fund (that is the original fund) or of its wholly owned Special Purpose Vehicle that is overseas, to a resultant fund in India is called relocation subject to certain conditions.
Q.2 What is a resultant fund?
Ans. A “resultant fund” means a fund to which the assets of the original fund are transferred, subject to certain conditions and which is established or incorporated in India,
Q.3 What are the changes made to the definition of ‘resultant fund’ in section 47(viiad) of the Income tax Act, 1961 and the changes made by Finance Bill 2025?
Ans. ➣ The ‘resultant fund’ was limited to a fund that had been granted a certificate of registration as a Category I or II or III Alternative Investment Fund (AIF) and is regulated under the SEBI (AIF) Regulations, 2012 or regulated under the IFSCA (Fund Management) Regulations, 2022.
➣With the Finance Bill 2025, the Retail schemes and Exchange Traded Funds (ETFs) that are regulated under the IFSCA (Fund Management) Regulations, 2022 have also been added to the definition of ‘resultant fund’ subject to certain conditions.
Q.4 What is the implication of the amendment made to section 47(viiad)?
Ans. The relocation of an original fund to a resultant fund (being a Retail schemes and Exchange Traded Funds) is now also a tax neutral transaction subject to the conditions mentioned in 47(viiad).
Q.5 Can a partnership firm be treated as a “resultant fund” under this section 47(viiad)?
Ans. The ‘resultant fund’ can be a fund established or incorporated in India in the form of a trust or a company or a limited liability partnership
Q.6 Who will benefit from the amendment made to section 47(viiad)?
Ans. This amendment will encourage more funds, being retails schemes or ETFs to relocate to the IFSC.
