Lower Remuneration paid to Fund Manager for FY 2020-­21 requires no approval but will require approval in FY 2021-22: CBDT [Read Circular]

The Central Board of Direct Taxes (CBDT) announced that the lower remuneration paid to fund managers for Financial Year 2020-­21 requires no approval but it will require approval in Financial Year 2021-22.

The CBDT, has decided to provide that for the financial years 2019-20 and 2020­21 in cases where the remuneration paid to the fund manager is lower than the amount of remuneration prescribed under sub-rule (12) of rule 10V of the Rules, but is at arm’s length, it shall be sufficient compliance to clause (m) of sub-section (3) of section 9A of the Act.

The Board has received the representations expressing inability to comply with the provisions of sub-rule 12 of rule 10V of the Rules regarding the amount of remuneration to be paid by the fund to a fund manager for the financial year 2019-20 as the said Notification No 29/2020 was notified after the financial year got over and the financial year 2020-21 had already commenced.

“Finance (No 2) Act, 2019, inter alia, amended clause (m) of sub-section (3) of section 9A of the Income-tax Act, 1961 w.e.f. April 1, 2019 to provide for payment of remuneration by an eligible investment fund to an eligible fund manager in respect of fund management activity undertaken by him on its behalf to be not less than the amount calculated in such manner as may be prescribed,” the circular said.

Rule 10V of the Income-tax Rules, 1962 (the Rules) has been amended, w.e.f. April 1, 2019, vide Notification No 29/2020 dated May 27, 2020 by way of, inter cilia, insertion of sub-rules (12) and (13) therein.

Sub-rule (12) provides for the amount of remuneration to be paid by the fund to a fund manager. Second provision of the said sub-rule provides that the fund may seek Board’s approval in case where the amount of remuneration is lower than the amount so prescribed.

“The remuneration to be paid to the fund manager, for the financial year 2021-­22, shall be in accordance with sub-rule (12) of rule 10V of the Rules and the application for lower remuneration in terms of 2nd proviso for this year, if any, may he filed not later than 1st February, 2021,” the CBDT said.

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