The Central Board of Direct Taxes (CBDT), Department of Revenue, Ministry of Finance, has issued Notification No. 01/2026 dated 05th January 2026 under the Income-tax Act, 1961, prescribing the conditions and compliances for eligibility of tax exemption under clause (23FE) of section 10 of the Act.
The notification specifies the framework applicable to specified persons, referred to as “assessees”, in respect of eligible investments made in India on or before 31st March 2030, subject to fulfilment of prescribed conditions.
Key Highlights of the Notification
- Filing of Returns: The assessee is required to file returns of income for all relevant previous years from the date of investment until the date on which such investment qualifies under section 139 of the Act.
- Quarterly Reporting: Details of investments made in India during each quarter must be furnished in Form No. 10BBB within one month from the end of the relevant quarter.
- Certification Requirement: A certificate in Form No. 10BBC, duly certified by a Chartered Accountant or Accountant as defined under the Act, must be furnished along with the return of income.
- Segregated Accounts: Separate and segmented accounts of income and expenditure must be maintained in respect of investments qualifying for exemption.
- Regulatory Compliance: The assessee shall continue to be regulated under the laws of the Government of Abu Dhabi, United Arab Emirates, or both.
- Use of Earnings and Assets: Earnings and assets shall be used solely for meeting statutory obligations and for providing retirement, social security, employment, disability, death or similar benefits to participants or beneficiaries. No portion shall be diverted for private benefit, except permitted payments such as loans to depositors.
- Restriction on Borrowings: The assessee shall not have any loans or borrowings, directly or indirectly, for the purpose of making investment in India.
- Non-participation in Management: The assessee shall not participate in the day-to-day operations of the investee entity. Representation on the board or appointment of an executive director solely for investment protection shall not be considered participation in management.
Effect of Non-compliance
Violation of any of the prescribed conditions shall render the assessee ineligible for tax exemption under section 10(23FE) of the Income-tax Act.
Effective Date
The notification shall come into force from the date of its publication in the Official Gazette.
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/01/Notification-us-1023FE-Explanation-1-civ-of-the-Income-Tax-Act-1961.pdf
