The Finance Bill, 2026 proposes an amendment to clarify and align the definition of “specified fund” under Schedule VI of the Income-tax Act, 2025 with the existing definition contained in section 10(4D) of the Income-tax Act, 1961. Currently, Serial Numbers 1 to 4 of Schedule VI apply to income of a specified fund operating in or earning income from an International Financial Services Centre, with the term defined in Note 1(g) of the Schedule. To remove ambiguity and ensure consistency across the tax framework, Note 1(g) is proposed to be substituted to expressly mirror the section 10(4D) definition. The amendment specifies conditions relating to unit holding patterns, including that all units (other than those held by the sponsor or manager) must be held by non-residents, subject to limited exceptions where a non-resident subsequently becomes a resident and resident holdings remain within a 5% threshold and prescribed conditions. A consequential change extends a related timeline from 2025 to 2030. These amendments take effect from 1 April 2026 and apply from tax year 2026–27 onwards.
Amendment in the definition of the specified fund
Existing provisions of Sl. No.1 to 4 of the Schedule VI applies to any specified fund and “specified fund” has been defined in Note 1(g) to said Schedule.
In order to provide clarity, it is proposed to amend the Note1(g) to said Schedule so as to align the definition of “specified fund” with the definition provided under section 10(4D) of the Income-tax Act, 1961.
These amendments will take effect from the 1st day of April, 2026 and shall accordingly, apply to the tax year 2026-27 and subsequent tax years.
[Clause 110]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 110 of the Bill seeks to amend Schedule VI of the Income-tax Act, 2025 relating to income not to be included in the total income of certain eligible persons in International Financial Services Centre or having income therefrom.
Serial Numbers 1 to 4 of the Table in the said Schedule applies to any specified fund and the expression “specified fund” has been defined in clause (g) of Note 1 of the said Schedule.
It is proposed to amend the said clause so as to align the definition of the expression “specified fund” with the definition provided under clause (4D) of section 10 of the Income-tax Act, 1961 and make a consequential amendment thereto.
These amendments will take effect from 1st April, 2026.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
110. Amendment of Schedule VI.
In Schedule VI to the Income-tax Act, in the Table, in Note 1, in clause (g),––
(a) for the long line, the following item shall be substituted, namely:––
“(C) of which all the units other than the unit held by a sponsor or manager are held by non-residents except,––
(I) where such non-resident becomes resident under section 6(2) or (3) or (4) or (5) or (6) or (7) in any tax year subsequent to that tax year; and
(II) the number of units held by such resident unit holder or holders do not exceed 5% of the total units issued and shall fulfil such other conditions as may be prescribed; or”;
(b) in sub-clause (ii), in item (A), for the figures “2025”, the figures “2030” shall be substituted.
