Comparison of SCHEDULE I "CONDITIONS FOR CERTAIN ACTIVITIES NOT TO CONSTITUTE BUSINESS CONNECTION IN INDIA." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

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....matters to non-resident funds, their managers, Indian investors, and tax authorities because satisfaction of these conditions removes a key nexus for Indian taxation. Who is affected: eligible investment funds established outside India, eligible fund managers, Indian resident investors and regulatory authorities. Effective date or decision date: Not stated in the document. Background & Scope Statutory hook: Schedule I is framed "See section 9(12)" and supplies conditions under which certain activities shall not constitute a business connection in India. Scope: applies to eligible investment funds established/incorporated/registered outside India that collect funds from members for investment for their benefit and to eligible fund managers....

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....nager must be not less than an amount calculated in a prescribed manner. The Schedule also prescribes conditions for eligible fund managers (not an employee or connected person; registration under specified regulations; ordinary course of business; profit interest cap of 20% for manager and connected persons). Interpretation The text reflects a legislative intent to create a safe harbour for certain foreign investment funds and their managers so that merely soliciting Indian capital or performing limited fund-management services does not constitute a business connection in India, provided objective thresholds and structural safeguards are met. The Schedule uses enumerated quantitative ceilings (5%, 10%, 25%, 50%, INR 100 crore) and qualit....

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....meets the Schedule's conditions and would not be a business connection in India (subject to other facts). (All facts consistent with the text.) * Example 2: A fund where ten members together (with connected persons) hold 52% of corpus - this fails paragraph 1(g) and would not qualify for the safe harbour unless the fund falls within paragraph 2 or the Central Government notifies exemption. (Consistent with the text.) * Example 3: A newly established eligible fund whose monthly average corpus only reaches INR 90 crore within twelve months - the Schedule permits twelve months from the end of the month of establishment to meet the INR 100 crore corpus minimum; if not met after that window, the condition would not be satisfied. (Consist....

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....ore conditions in sub-paragraph (1) (other than paragraph (1)(c)) or (3) for eligible funds with an IFSC-based fund manager commencing operations by 31-03-2030. The Act version removes the specific exclusion of paragraph (1)(c) and instead permits notification to specify that any one or more of the conditions in sub-paragraph (1) or (3) may not apply or may apply with modifications when the fund manager is located in an IFSC and has commenced operations on or before 31-03-2030. * Practical impact: the Act broadens executive flexibility to relax or modify paragraph (1)(c) (the 5% Indian participation test) as well as other conditions for IFSC-located managers, potentially making IFSCs more attractive and enabling policy tailoring to attrac....