Income Tax Form 173: Statement by Eligible Investment Fund to AO

The Income Tax Department has issued guidance on Form 173, which is required to be filed by eligible investment funds under Section 9(12) read with Schedule I of the Income-tax Act, 2025. The form enables the Assessing Officer to verify whether the conditions for claiming that the fund does not have a business connection in India have been fulfilled. Filing of Form 173 is mandatory and must be completed once in a tax year within 90 days from the end of the relevant tax year. The form is to be filed online through the Income Tax e-filing portal and must be digitally signed by an authorised signatory.

Form 173 contains two parts. Part A captures basic details such as address, contact information, country of residence, and tax identification number. Part B requires disclosure of compliance with specified conditions, details of participation interests, remuneration of fund managers, and profits earned from investments. Supporting documents include financial statements, regulatory approvals, and contractual details relating to fund management.

The filing allows the fund to claim that its activities do not constitute a business connection in India, subject to meeting prescribed conditions. If these conditions are not satisfied, the fund may be subject to taxation and required to file returns under applicable provisions. Non-compliance with filing requirements may lead to penalties, cancellation of approval, and further assessment proceedings.

Income Tax Department
Ministry of Finance, Government of India

FAQs on Income Tax Form 173: Statement to be furnished by an eligible investment fund to the Assessing Officer under section 9(12) [Schedule I: Paragraph 1(4)] of Income tax Act 2025

Form 173 – Frequently Asked Questions

Statement to be furnished by an eligible investment fund to the Assessing Officer under section 9(12) [Schedule I: Paragraph 1(4)1

Q1. What is Form 173?

Ans: Form 173 gives details that enables Assessing Offers to verify whether eligibility conditions have been fulfilled or not for an investment fund to claim no business connection in India under Section 9A of the IT Act, 1961(now section 9(12) read with Schedule I of the Income-tax Act, 2025).

Q2. Who should file Form 173?

Ans: Form 173 can be filed by every eligible investment fund, that is, the Fund manager or designated person on behalf of the Fund

Q3. Is Form 173 mandatory?

Ans: Yes, Form 173 is mandatory.

Q4. What is the time limit for filing Form 173?

Ans: Form 173 must be filed within 90 days from the end of the tax year.

Q5. How many times can Form 173 be filed in a year?

Ans: Form 173 must be filed once in a tax year.

Q6. What documents are required to file Form 173?

Ans: Following documents may be required for filing Form 173:

• Communication addresses, emails, phone nos. of the investment fund along with TIN of the country of residence.
• Contact details of representatives in India
• Approval order of the CBDT for the fund, if applicable
• SEBI Registrations of the Fund Manager/s
• Financial statements that summarize the profit and loss of the investments in India
• Contracts specifying the remuneration payable to the fund manager/s

Q7. Can I edit Form 173 after submission?

Ans: No. Once Form 173 is submitted and acknowledgment is generated, it cannot be edited. Ensure all details are correct before submission.

Q8. Do I need to attach proof of tax payment?

Ans: No. Form 173 does not require any proof of tax payment as it is applicable where the income is not chargeable in India owing to no business connection as specified in the Act.

Q9. While filling personal details, can I leave Aadhaar or mobile number blank?

Ans:

• Aadhaar is no longer required in the personal details.
• Mobile number ensures faster communication and verification; it is recommended to provide it.

Q10. What if I do not have a PAN?

Ans: Form 173 cannot be submitted without a valid PAN.

Q11. Can Form 173 be filed offline?

Ans: No. Form 173 can only be submitted online through the Income Tax e-Filing portal.

Q12. What is the process flow of filing Form 173?

Ans: The process flow for filing Form 173 includes following steps

1. Digital Signature Certificate (DSC) is to be registered in the profile of the person who is authorised to sign/verify the form

2. Necessary documents of the fund and fund manager/s are to be gathered

3. The Form is to be filed electronically through the e-filing portal of the Income Tax Department

4. The statement should be digitally signed by the authorized signatory of the non-resident entity.

Q13. Why is Form 173 important?

Ans: Filing Form 173 enables the fund in question to claim its activities are not constituting business connection in India subject to the conditions being fulfilled

In case of not fulfilment of conditions, as noted in the Form, the fund will be subjected to tax as per the other provisions of the Income-tax Act and will have to file necessary return of income and forms

Failure to file Form 173 can lead to:

• Levy of Penalty under Section 456 of the Income-tax Act, 2025.
• Cancellation of approval
• Other proceedings for assessment of income under the Income-tax Act, 2025

Guidance Note on Income Tax Form 173: Statement to be furnished by an eligible investment fund to the Assessing Officer under section 9(12) [Schedule I: Paragraph 1(4)] of Income tax Act 2025

FORM 173- Statement to be furnished by an eligible   investment fund to the Assessing Officer under section 9(12)  ‘Schedule I: Paragraph 1(4)1

A. PURPOSE

This form is to be filed under Rule 276. The Form gives details that enables Assessing Offers to verify whether eligibility conditions have been fulfilled or not for an investment fund to claim no business connection in India under section 9(12) read with Schedule I of the Income-tax Act, 2025.

B. WHO SHOULD FILE

• Every eligible investment fund, that is, the Fund manager or designated person on behalf of the Fund

C. FREQUENCY & DUE DATES

• Form 173 must be filed once in a tax year
• The Form must be filed within 90 days from the end of the tax year.

D. STRUCTURE OF FORM-173

Form 173 is structured into two parts

Part A

1) Details such as communication address, email, phone number etc. which is as per the standard template provided for all forms.

2) Further details such as country of residence, TIN of the fund in the country of residence.

Part B

1) It is to be specified that the conditions given in Schedule I and in case of Approved Fund, conditions subject to which approval was granted, have been fulfilled. If not, reasons to be given.

2) Details of the persons in India had any participation interest directly or indirectly in the fund

3) Remuneration paid to fund manager, basis of the calculation of the fund manager, details of any other activities carried out by the fund manager.

4) Amount of profit made on the investments.

E. WHAT ARE THE DOCUMENTS REQUIRED TO FILE THE FORM 173?

Following documents may be required for filing Form 173:

• Communication addresses, emails, phone nos. of the investment fund along with TIN of the country of residence.
• Contact details of representatives in India
• Approval order of the CBDT for the fund, if applicable
• SEBI Registrations of the Fund Manager/ s
• Financial statements that summarize the profit and loss of the investments in India
• Contracts specifying the remuneration payable to the fund manager/s

F. FILING COUNT

On an average, around 5-6 forms have been filed every year, in the past 5 years.

G. WHAT IS THE PROCESS FLOW OF FILING FORM 173?

The process flow includes following steps

1. Digital Signature Certificate (DSC) is to be registered in the profile of the person who is authorised to sign/verify the form

2. Necessary documents of the fund and fund manager/s are to be gathered

3. The Form is to be filed electronically through the e-filing portal of the Income Tax Department

4. The statement should be digitally signed by the authorized signatory of the non-resident entity.

H. OUTCOME OF PROCESSED FORM 173

For the fund

• • The fund is eligible to claim its activities are not constituting business connection in India subject to the conditions being fulfilled
  • In case of not fulfilment of conditions, as noted in the Form, the fund will be subjected to tax as per the other provisions of the Income-tax Act and will have to file necessary return of income and forms.

For the Department

• • The Form is sent to the Assessing Officer who would have jurisdiction in case the fund was taxable in India and the form can be picked up for verification in the system as per the guidelines.
  • In case of approved fund, the Assessing Office can send feedback to the board if it is found that the specified conditions are not fulfilled.

Consequences of Non-compliance:

Failure to file Form 173 can lead to:

• • Levy of Penalty under Section 456 of the Income-tax Act, 2025.
  • Cancellation of approval
  • Other proceedings for assessment of income under the Income-tax Act, 2025.

I. BRIEF NOTE ON BROAD OR QUALITATIVE CHANGES PROPOSED

Key updates include the following

1. Form is structured into two parts with Part-A being modified from the standard template prescribed in order to capture the unique details of the investment funds not located in India.

2. Sub-tables introduced to present clear picture of the information to be filed by the tax-payer

3. Explanatory note in respect of TIN added.

J. CHALLENGES AND SOLUTIONS

Since the existing notified form is in Row-wise format, to provide clarity on information and all the information that are to gathered to fill the form, tabular structure has been introduced.

K. COMMON CHANGES MADE ACROSS FORMS

1. To make Forms system-friendly and enable e-filing and uploading, certain anomalies found due to grouping of Name, Designation, Address, PAN have been separated into different boxes.

2. Assessment / Financial / Previous year or years have been replaced with Tax year or years, wherever appearing in the Form/Annexure.

3. Sections, Clauses and Schedules changes as per the Income-tax Act, 2025.

4. Common verification statement.