Draft Income Tax Rule 143 – Determination of income of a specified fund attributable to the investment division of an offshore banking unit under section 210(3) of the Act
Draft Rule 143 of the Income-tax Rules, 2026 provides the method for determining income of a specified fund, being the investment division of an offshore banking unit, for the purposes of section 210(3). The income is computed using the formula A + B + C + D + E. Component A covers income from securities referred to in section 210(1) (Table Sl. No. 1). B and C relate to short-term capital gains arising from transfer of securities, with B covering securities other than those referred to in section 196, and C covering securities referred to in section 196. D and E pertain to long-term capital gains, with D covering securities other than those referred to in section 198, and E covering securities referred to in section 198. The rule expressly provides that any expenditure incurred in relation to income under items A to E shall not be allowed as a deduction against any other income under the Act, even if not allowed against such specified income. The eligible investment division must furnish an annual statement of income eligible for taxation under section 210(3) in Form No. 70 by the due date specified under section 263(1)(c). Failure to comply with this filing requirement renders the income ineligible for concessional tax rates under section 210(1). The rule defines “eligible investment division” as one fulfilling conditions in Schedule VI, adopts the meaning of “securities” from the Securities Contracts (Regulation) Act, 1956, and aligns other expressions with Schedule VI definitions.
Extract of Rule No. 143 of Draft Income-tax Rules, 2026
Rule 143
Determination of income of a specified fund attributable to the investment division of an offshore banking unit under section 210(3) of the Act.
(1) For the purposes of section 210(3) of the Act, income of a specified fund, being the investment division of an offshore banking unit shall be computed in accordance with the following formula, namely: —
A + B + C + D + E
where, —
A = income from securities, held by the eligible investment division, as referred to in section 210(1) [Table: Sl. No. 1];
B = income by way of short-term capital gain referred to in section 210(1)[Table: Sl. No. 2], accrued or arisen to, or received by the eligible investment division as a result of transfer of a security, other than that referred to in section 196 of the Act, and held by such investment division;
C = income by way of short-term capital gain referred to in section 210(1)[Table: Sl. No. 3], accrued or arisen to, or received by the eligible investment division as a result of transfer of security referred to in section 196 of the Act and held by such investment division;
D = income by way of long-term capital gain referred to in section 210(1)[Table: Sl. No. 4], accrued or arisen to, or received by the eligible investment division as a result of transfer of a security, other than that referred to in section 198 of the Act, and held by such investment division;
E = income by way of long-term capital gain referred to in section 210(1)[Table: Sl. No. 5], accrued or arisen to, or received by the eligible investment division, as a result of transfer of a security referred to in section 198 of the Act and held by such investment division.
(2) Any expenditure incurred in relation to income referred to in item A or B or C or D or E shall not be allowed as a deduction from any other income under any provision of the Act, even if such expenditure has not been allowed as a deduction from income referred to in items A or B or C or D or E.
(3) The eligible investment division shall furnish an annual statement of income, eligible for taxation under section 210(3), in Form No. 70 on or before the due date specified under section 263(1)(c) of the Act.
(4) The income of an eligible investment division referred to in section 210(1)[Table: Sl. Nos. 1, 2, 3, 4 and 5] shall not be eligible for tax rates specified therein unless the eligible investment division meets the requirement of sub-rule (3).
(5) For this rule,—
(a) “eligible investment division” shall mean an investment division of an offshore banking unit which fulfils the conditions specified in Schedule VI [Note 1(g)(ii)(A) and (B)];
(b) “investment division of an offshore banking unit” shall have the meaning assigned to it in Schedule VI [Note 1(b)];
(c) “securities” shall have the same meaning as assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956;
(d) “specified fund” shall have the meaning assigned to it in Schedule VI [Note 1(g)(ii)].
