Draft Income Tax Rule 139: Computation of exempt income of specified fund attributable to units held by nonresident under Schedule VI [Table: Sl. Nos. 1 to 4]
Draft Rule 139 of the Income-tax Rules, 2026 lays down the method for computing exempt income of a specified fund attributable to units held by non-residents (excluding permanent establishments in India) for the purposes of Schedule VI (Table Sl. Nos. 1 to 4). The exemption is calculated using a formula: (A × r1) + (B × r2) + (C × r3) + (D × r4). Here, A represents income from transfer of specified capital assets under section 70(1)(r) on a recognised stock exchange in an International Financial Services Centre (IFSC) where consideration is in convertible foreign exchange; B covers income from transfer of securities other than shares of Indian resident companies; C includes income from securities issued by non-residents that does not accrue or arise in India; and D pertains to income from securitisation trusts chargeable under “Profits and gains of business or profession.” The ratios r1 to r4 determine the proportion of such income attributable to non-resident unit holders based on daily or date-specific “assets under management” (AUM) of the specified fund. The rule mandates electronic filing of an annual statement of exempt income in Form No. 68 under digital signature by the due date under section 263(1)(c). Exemption under section 11(1) read with Schedule VI is available only upon compliance with this filing requirement. The rule also defines “assets under management” as the closing value of assets or investments on a particular date and adopts definitions of related terms from Schedule VI and the Special Economic Zones Act, 2005.
Extract of Rule No. 139 of Draft Income-tax Rules, 2026
Rule 139
Computation of exempt income of specified fund attributable to units held by nonresident under Schedule VI [Table: Sl. Nos. 1 to 4].
(1) For the purpose of Schedule VI [Table: Sl. Nos. 1 to 4], exempt income of specified fund attributable to units held by non-resident (not being the permanent establishment of a nonresident in India) shall be computed in accordance with the following formula, namely: —
(A × r1) + (B × r2) + (C × r3) + (D × r4),
where –
A = any income accrued or arisen to, or received by a specified fund as a result of transfer of capital asset referred to in section 70(1)(r) of the Act, on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in convertible foreign exchange, as referred to in Schedule VI [Table: Sl. No. 1];
B = any income accrued or arisen to, or received by a specified fund as a result of transfer of securities (other than shares in a company resident in India), as referred to in Schedule VI [Table: Sl. No. 2];
C = any income accrued or arisen to, or received by a specified fund from securities issued by a non-resident (not being a permanent establishment of a non-resident in India) and where such income otherwise does not accrue or arise in India, as referred to in Schedule VI [Table: Sl. No. 3];
D = any income accrued or arisen to, or received by a specified fund from a securitisation trust which is chargeable under the head “Profits and gains of business or profession”, as referred to in Schedule VI [Table: Sl. No. 4];
r1 = ratio of the aggregate of daily ‘assets under management’ of the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the aggregate of daily total ‘assets under management’ of the specified fund, from the date of acquisition of the capital asset referred to in section 70(1)(r) of the Act to the date of transfer of such capital asset;
r2 = ratio of the aggregate of daily ‘assets under management’ of the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the aggregate of daily total ‘assets under management’ of the specified fund, from the date of acquisition of the security (other than shares in a company resident in India) to the date of transfer of such security;
r3 = ratio of the ‘assets under management’ in the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the total ‘asset under management’ of the specified fund, as on the date of receipt of such income from securities issued by a non- resident (not being a permanent establishment of a non-resident in India) and where such income otherwise does not accrue or arise in India; and
r4 = ratio of the ‘assets under management’ in the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the total ‘asset under management’ of the specified fund, as on the date of receipt of such income from a securitisation trust which is chargeable under the head “Profits and gains of business or profession”.
(2) The specified fund shall furnish an annual statement of exempt income in Form No. 68 electronically under digital signature on or before the due date specified under section 263(1)(c) and duly verified in the manner indicated therein.
(3) The income attributable to units held by non-resident (not being the permanent establishment of a non-resident in India) in a specified fund shall not be exempt under section 11(1) read with Schedule VI [Table: Sl. Nos. 1 to 4] unless the specified fund complies with sub-rule (2).
(4) For the purpose of this rule, —
(a) “assets under management” means the closing balance of the value of assets or investments of the specified fund as on a particular date;
(b) “permanent establishment”, “securities”, “specified fund” and “unit” shall have the same meaning as assigned to them in Note 1 below Schedule VI;
(c) “International Financial Service Centre” shall have the same meaning as assigned to it in section 2(q) of the Special Economic Zones Act, 2005 (28 of 2005).
